M/S Larsen and Toubro Ltd v. Rail Vikas Nigam Limited

14. It was, therefore, contended that Clause 8.[3] was inconsistent, inter alia, with Sections 55 and 73 of the Indian Contract Act, 1872 (‘ICA’), and therefore, contrary to fundamental policy of Indian Law. For this, he relied upon Simplex Concrete Piles (India) Ltd. v. Union of India 2010 SCC OnLine Del 821.

15. Respondent submitted before the Single Judge that this argument was neither canvassed before the AT nor was the judgment of Simplex Concrete (supra) placed before it for consideration, and, therefore, this objection cannot be raised.

16. Moreover, the decision in Simplex Concrete (supra) was challenged by Union of India under Section 37 of A&C Act in Union of India v. Simplex Concrete Piles (1) FAO (OS) No.348/2010 and leave had been granted. The said judgment had also been distinguished by Division Bench in the judgment of PLUS91 Security Solutions v. NEC Corpn. India (P) Ltd. 2024 SCC OnLine Del 5114, where it was clarified that contractual bargains between the parties have to be given effect to.

17. With respect to appellant’s arguments under Section 55 of ICA, respondent contended that the appellant had not intimated its intention to seek compensation; only the letter dated 25th February 2013 was issued by the appellant seeking extension of time. It further contended that clauses similarly worded to Clause 2.[2] and Clause 8.[3] of the GCC were upheld by the Supreme Court in K. Marappan v. TBPHLC (2020) 15 SCC 401. Reliance on PLUS91 Security (supra) and K. Marappan (supra) was contested by appellant before the Single Judge.

18. After assessing these and other contentions made by the parties, the impugned judgment zeroed in on the basic issue of whether the decision of the AT disallowing the claim for idling of men, machinery and resources suffered from shortcomings, which would allow interference under Section 34 of the A&C Act.

19. Impugned judgment, while analysing Clause 2.[2] and Clause 8.[3] of GCC, observed that, as per these provisions, delay in providing the work site to the contractor would trigger a notice by the contractor within 28 days of such failure in delivery of site, leading to only extension of time, barring any corresponding monetary claim. Clause 8.[3] of GCC, which relates to delay on the part of the employer or engineer in handing over the site or providing necessary drawings, etc., stipulated that such delay would neither vitiate the contract nor entitle the contractor to claim damages or/and compensation, but only to an extension of time.

20. The Single Judge in the impugned judgment noted that there was no challenge to the said provisions before the AT or any time prior to the signing of the contract or during its execution or thereafter, and, therefore, it was not open to assail the arbitral award under Section 34 by raising, for the first time, the issue of legality of these provisions. The Single Judge further noted that the appellant was conscious of the absence of its right to claim compensation, which is evident from letter dated 25th February 2013, where the petitioner, while seeking extension of time, attributes the delay to lack of requisite approvals and site availability, but does not seek any compensation.

21. Extension of time was granted by letter dated 21st March 2013, and it was specifically provided that the extension was without any penalty. Compensation was sought only subsequently, on 22nd June 2013, but was denied by respondent on 09th July 2013.

22. The impugned judgment, therefore, notes that the Court cannot be asked to reappreciate evidence, and the AT has the power and authority to interpret the provisions of a contract and give a decision on the basis of the factual matrix. On issues of interpretative differences, the Court was not inclined to interfere under provisions of Section 34 of A&C Act.

23. Single Judge placed reliance on the decision of the Supreme Court in Union of India v. Susaka Pvt. Ltd. (2018) 2 SCC 182, noting that if a plea was not raised before the AT, it amounts to a waiver and/or abandonment of a plea at the initial stage.

24. Appellant had also referred to another dispute between the parties, which culminated in an award dated 30th December 2023, where AT had awarded idling claim on the basis of delay by the respondent in providing drawings.

25. Appellant claimed that this award had been accepted and attained finality. In this respect, reliance on the different award between the parties was rejected by the Single Judge on the ground that each case has to be dealt with as per its own merits.

26. Counsel for appellant, therefore, emphasized that the rejection of their submission that Clause 2.[2] and Clause 8.[3] were unconscionable and that Clause 17.[1] of GCC itself provided additional payment under any clause or otherwise in connection with the contract. It was submitted that any exemption defeating the statutory right to compensation under Section 73 of ICA was contrary to fundamental policy of Indian Law.

27. Moreover, it was argued that the disentitlement to statutory benefits under Sections 54 & 55 of the ICA would be void as being against public policy and violative of Section 23 of the ICA. The interference was, therefore, invited under Section 34(2)(b)(ii) of the A&C Act on grounds of patent illegality, perversity, and conflict with the fundamental policy of Indian law. Analysis

28. This Court, after having assessed the submissions of counsel for appellant, and examining the impugned judgment as well as the impugned award, finds that the appeal under Section 37 of the A&C Act is unmerited for reasons which follow.

29. Firstly, Scope of interference under Section 37 is quite limited, as evident from the provision of Section 34 itself, as well as the determination which has been made by the Supreme Court in Associate Builders v. Delhi Development Authority (2015) 3 SCC 49. The Supreme Court held that the interference under Section 34 is limited and extremely circumscribed and is permissible only when the award is tainted by patent illegality, i.e. illegality going to the root, and not mere erroneous application of law. In Ssangyong Engineering & Construction Co. Ltd. v. National Highways Authority of India (2019) 15 SCC 131, the Supreme Court narrowed the scope of "public policy" under Section 34, observing that it is confined to cases where the award is in conflict with the fundamental policy of Indian law, is patently illegal, or is in conflict with most basic notions of morality or justice. Moreover, in MMTC Ltd. v. Vedanta Ltd. (2019) 4 SCC 163, the Supreme Court reiterated that Section 34 is not a provision for appeal, and courts cannot reappreciate evidence or substitute their view for that of the arbitrator. Interference is permissible only on the limited grounds specified in the Act.

29.1. In fact, under Section 37, the scope of interference is even further circumscribed as articulated by the Supreme Court in Somdatt Builders- NCC-NEC (JV) v. NHAI (2025) 6 SCC 757 and Konkan Railway Corpn. Ltd. v. Chenab Bridge Project (2023) 9 SCC 85.

29.2. In Somdatt Builders-NCC-NEC (JV) v. NHAI (2025) 6 SCC 757, the Supreme Court held that it cannot reopen the merits of a case while hearing a Section 37 appeal and further, cannot interpret contractual clauses. The relevant paragraphs are extracted as under:

circumscribed keeping in view the limited scope of interference with an arbitral award under Section 34 of the 1996 Act. As it is, the jurisdiction conferred on courts under Section 34 of the 1996 Act is fairly narrow. Therefore, when it comes to scope of an appeal under Section 37 of the 1996 Act, jurisdiction of the appellate court in examining an order passed under Section 34, either setting aside or refusing to set aside an arbitral award, is all the more circumscribed”.

29.3. Similarly, in Konkan Railway Corpn. Ltd. v. Chenab Bridge Project (2023) 9 SCC 85, the Supreme Court reiterated that the scope of jurisdiction under Section 34 and Section 37 of the A&C Act is not akin to normal appellate jurisdiction, and interference with an arbitral award should not be done in a casual and cavalier manner. The relevant paragraph is extracted as under:

Section 37 of the Act, the Court is concerned about the jurisdiction that the Section 34 Court exercised while considering the challenge to the arbitral award. The jurisdiction under Section 34 of the Act is exercised only to see if the Arbitral Tribunal's view is perverse or manifestly arbitrary. Accordingly, the question of reinterpreting the contract on an alternative view does not arise. If this is the principle applicable to exercise of jurisdiction under Section 34 of the Act, a Division Bench exercising jurisdiction under Section 37 of the Act cannot reverse an award, much less the decision of a Single Judge, on the ground that they have not given effect and voice to all clauses of the contract. …”

30. Secondly, it is settled law that interpretation of contractual clauses lies within the arbitrator’s jurisdiction, and Courts cannot reappraise evidence or substitute their view.

30.1. In McDermott International Inc. v. Burn Standard Co. Ltd. (2006) 11 SCC 181, it was held that interpreting the terms of a contract, even when it involves legal questions, is a matter for the arbitrator to decide. Relevant paragraphs of the judgment are extracted as under: “112. It is trite that the terms of the contract can be express or implied. The conduct of the parties would also be a relevant factor in the matter of construction of a contract. The construction of the contract agreement is within the jurisdiction of the arbitrators having regard to the wide nature, scope and ambit of the arbitration agreement and they cannot be said to have misdirected themselves in passing the award by taking into consideration the conduct of the parties. It is also trite that correspondences exchanged by the parties are required to be taken into consideration for the purpose of construction of a contract. Interpretation of a contract is a matter for the arbitrator to determine, even if it gives rise to determination of a question of law.

113. Once, thus, it is held that the arbitrator had the jurisdiction, no further question shall be raised and the court will not exercise its jurisdiction unless it is found that there exists any bar on the face of the award.”

31. Thirdly, appellant’s reliance on the decision in Simplex Concrete (supra) cannot be determinative of the issue. In Simplex Concrete (supra), the Single Judge of this Court dealt with the issue whether contractual clauses would disentitle a person from claiming damages which they were otherwise entitled to under law, and whether the Arbitrator could be prevented from awarding such damages or losses merely because the contract prohibited the same. The discussion involved two judgments of the Supreme Court dealing with the same clauses.

31.1. In Ramnath International Construction (P) Ltd. v Union of India (2007) 2 SCC 453, the Supreme Court held that even if the Union of India/employer was at fault, the contractual bar to the entitlement of the contractor to damages would still operate.

31.2. However, in Asian Techs Ltd. v. Union of India (2009) 10 SCC 354, the Supreme Court held that such clauses merely prevent the department from granting damages but do not prevent the Arbitrator from awarding damages.

31.3. Faced with these two conflicting judgments of the Supreme Court, the Single Judge in Simplex Concrete (supra) relied on precedents that guide High Courts to follow the judgment that more correctly lays down the law. The Single Judge opined that if Sections 73 and 55 of ICA are not allowed to prevail, then parties would in fact not even enter into contracts, which are essentially for the purpose of profit and benefits. This would enable deliberate breaches without consequence.

31.4. That being so, the Single Judge noted that this was clearly a matter of “public policy” and “public interest”, and that the sanctity of contracts must be preserved and any contractual clauses intended to defeat the contract’s own object would violate Section 23 of ICA, and therefore, be void.

31.5. The Supreme Court’s interpretation in Ramnath International Construction (supra) was characterised as literal and strict interpretation of clauses. The Single Judge, therefore, struck down the award which had interpreted the clauses and upheld the same.

31.6. The decision in Simplex Concrete (supra) was subsequently referred to by the Division Bench of this Court in PLUS91 Security Solutions (supra), while dealing with an intra-court appeal under Section 37 of the A&C Act. One of the issues therein related to a clause which excluded liability for any indirect, special or consequential loss or damage due to loss of goodwill or loss of revenue or profit. The AT therein had relied on Simplex Concrete (supra) and held that the appellant/PLUS91 Security Solutions would be entitled to damages notwithstanding the said clause. Respondent/NEC assailed the award, stating that the AT had misinterpreted the MoU and the award of loss or damages was contrary to the terms of the MoU. The Single Judge, while deciding petition under Section 34 of A&C Act, held that the clause had to be read in context of other clauses of the MoU, which was essentially for parties to collaborate with each other, and did not create binding commitments.

31.7. The Single Judge in PLUS91 Security Solutions (supra) held that AT had erred in applying the ratio of Simplex Concrete (supra), as it was rendered in a different context. While dealing with the issue, the Division Bench of this Court noted that it had reservations as to the decision in Simplex Concrete (supra) and stated that the said decision had no application in the present context since the observations made in Simplex Concrete (supra) were in context of specific clauses. In this regard, the Court noted as under:

of the Contract Act. However, the learned Single Judge also observed that “To permit a contractual clause having the object to defeat the very contract itself, is a matter of grave public interest. If such a clause is allowed to stand, then, the same will defeat the basis and existence of the Contract Act.” For the aforesaid reasoning the learned Single Judge held that the contractual clauses such as the Clauses in question in the said case [Clause 11(A) to 11(C)] which disentitle a party to the benefits of Sections 55 and 73 of the Contract Act would be violative of Section 23 of the Contract Act.

66. Clearly, the said decision has no application. The observations were made in the context of the said clauses. More importantly, the observations were based on the assumption that the contractual clauses would defeat the very contract itself. The said reasoning presupposes that a contractual clause is not a part of the contract between the parties. The said assumption is flawed.”

31.8. The Division Bench of this Court in PLUS91 Security Solutions (supra) further analysed the decisions in Ramnath International Construction (supra) and Asian Techs Ltd. (supra) in the following manner:

69. The decision in the case of Asian Techs Ltd. v. Union of India is not an authority for the proposition that a clause which barred claims for damages of a particular nature would be inoperative as opposed to public policy. As noted above, the Supreme Court had interpreted Clause 11(C) as not debarring a contractor from making a claim for compensation before an Arbitral Tribunal. However, the decision in the case of Ch. Ramalinga Reddy v. Superintending Engineer is a binding authority on a proposition that if a contractual clause bars certain claim of damages, the same would be binding on the parties.”

31.9. The Division Bench of this Court further relied on several decisions of the Supreme Court and the High Courts, where it was held that the integrity of the contract could not be interfered with, even if an absolute power has been granted in favour of another party in the contract. The decisions adverted to by the Division Bench were Oil & Natural Gas Corporation v Wig Brothers Builders & Engineers Pvt. Ltd. (2010) 13 SCC 377, Her Highness Maharani Shantidevi P. Gaikwad vs. Savjibhai Haribhai Patel (2001) 5 SCC 101, Indian Oil Corporation Ltd. v. Amritsar Gas Services (1991) 1 SCC 533, Union of India v. Manraj Enterprises (2022) 2 SCC 331 and Bharathi Knitting Co. v. DHL Worldwide Express Courier Division of Airfreight Ltd. (1996) 4 SCC

704.

31.10. Upon assessment of these decisions, the Division Bench opined as under:

required to be implemented. In terms of Section 28(3) of the A&C Act, the Arbitral Tribunal is required to render a decision having regard to the terms of the contract.”

31.11. In these circumstances, appellant’s reliance on Simplex Concrete (supra) simpliciter may not be tenable, considering that not only are there different views before the Supreme Court, but also the principle enunciated in Simplex Concrete (supra) has been diverted from in PLUS91 Security Solutions (supra).

32. Fourthly, in K. Marappan (supra), issue concerned appeals arising out of arbitration conducted under the A&C Act. The High Court recorded that the arbitration awards were unsustainable in view of Clause 59 of the Agreement, which denied any claim for compensation on account of delays or hindrances to the work from any cause whatsoever. The Court upheld the principle of the clause and its applicability and stated as under:

employer. There may be natural causes such as natural calamities which may cause delay in carrying out the work. Even in such cases, in our view, Clause 59 would cast an embargo against a claim by the contractor. This interpretation gives full play to the words “delays from any cause whatsoever”. Equally, if there is hindrance to the work from any cause whatever, a claim for compensation would not lie.”

32.1. While dealing with the specific claim of the contractor for compensation for collected materials lying on the site, and for enhanced compensation, the Court endorsed Clause 59, which barred compensation for delay regardless of the cause. The Court, in relation to the claim, held as under:

cost. Correspondence was exchanged with the Executive Engineer and the Superintending Engineer, the Superintending Engineer and the Chief Engineer and finally between the Chief Engineer and the Government. It appears that at that stage, the appellant invoked the arbitration clause and a panel of arbitrators gave their award. In fact, the work itself was stopped. Clause 59 prevents the court from awarding compensation on account of any factor relating to the delay which may be due to any cause whatsoever. In such circumstances, we are of the view that the appellant has also not made out any cause for compensation in regard to this claim.”

32.2. References in these decisions have also been made to Section 28(3) of the A&C Act, which states as under: “Section 28 *** (3) The Arbitral Tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction.”

33. Lastly, reliance of the respondent on Susaka Pvt. Ltd. (supra) is also merited as the Supreme Court has clearly held that if a plea is available, whether on facts or law, it must be raised by party at an appropriate stage, and if not, the party would be precluded from raising it at a later/belated stage. The Supreme Court opined as under:

waiver. If permitted to raise, it causes prejudice to other party. In our opinion, this principle applies to this case. ***

33. It is a well-settled principle in Arbitration Law that the award of an Arbitral Tribunal once passed is binding on the parties. The reason being that the parties having chosen their own arbitrator and given him an authority to decide the specific disputes arising between them must respect his decision as far as possible and should not make any attempt to find fault in each issue decided by him only because it is decided against one party. It is only when the issue decided is found to be bad in law in the light of any of the specified grounds set out in Section 34 of the Act, the Court may consider it appropriate to interfere in the award else not. The case at hand falls in the former category.” 33.[1] It is quite clear from the pleadings before the Arbitral Tribunal, in particular the statement of claim, reply by respondent and rejoinder thereto, that no plea was taken that Clause 2.[2] and 8.[3] were unconscionable, against the grain of Section 55 and 73 of the ICA, or void on the basis of Section 23 of the ICA. Perusal of the pleadings before the AT bear out that this issue was never placed before the AT. This is also evident from the impugned award itself where this aspect does not come up for discussion. The AT simply went into the reasons for the delay and applied Clause 2.[2] and Clause 8.[3] to state that appellant would not be entitled to monetary claim, damages, or compensation. The Single Judge was, therefore, not amiss in recognising this and dismissing the petition under Section 34.

33.2. A perusal of the statement of defence filed by the respondent before the AT bears out that specific defence was taken to the claim filed by the appellant/claimant that there was no idling of resources as was being claimed. Moreover, it was contended that the entitlement was merely to extension of time period for completion of contract, and not as such to vitiate the contract, alter its character thereof, or entitle the appellant/claimant to damages or compensation. These defences, in particular, were taken in paragraphs nos.15-18 of the statement of defence.

33.3. In rejoinder as filed by the appellant/claimant thereto, a simple denial has been made, and the appellant has not chosen to raise the issue of Clauses 2.[2] and 8.[3] being disharmonious with principles enshrined in Sections 55 and 73 of the ICA, or being void on the basis of Section 23 thereof. It is quite clear that these aspects were not pleaded in any manner whatsoever before the AT, and, therefore, appellant cannot raise the issues at a belated stage before the Court under Section 34 or 37, contending that the AT ought to have considered the same.

33.4. For ready reference, paragraph 11 of the rejoinder, which rejoins to paragraph nos.15-18 of the statement of defence, is extracted as under:

was the obligation of the respondent to furnish such drawings in a systematic manner in order to the claimant to execute the work in a planned manner. Admittedly, the respondent had failed to make available the GFC drawings for certain stretches. It is an elementary principle of law that a party in default cannot escape its liability by resorting to an exemption clause. The defaulting party is bound to compensate the innocent party for any damages.”

33.5. Even otherwise, the Single Judge has relied upon the decision in Susaka Pvt. Ltd. (supra) to buttress the reasoning that new aspects cannot be taken up at the stage of Section 34 petitions, considering that they would be deemed to have been waived if not taken up before the AT.

33.6. What is important is to appreciate that in all the correspondence prior to 22nd June 2013, when the appellant was complaining about delays on various accounts and blaming it on the employer/respondent, no specific claim for compensation was ever made. Only an extension of time was sought, as is evident from the communication dated 25th February 2013 and communications prior to that, inter alia, 31st August 2012, 17th May 2012, 22nd June 2012, 9th August 2012, and 22nd November 2012. Failure of the appellant to notify the respondent of a claim for compensation can be considered as waiver and abandonment of the same. A conscious choice was made by the appellant, for reasons best known to them, not to raise a claim of compensation.

34. The Arbitral Tribunal, being a creature of the contract, is, therefore, confined to the four corners of the contract and expected to uphold its sanctity, and not provide a supervening interpretation. In the spirit of this provision, the rejection of the objections to the award vide impugned judgment is, therefore, fully merited. The AT has dismissed the claim for idling of resources, taking note of Clause 2.[2] and Clause 8.3, and, therefore, has respected the express terms of the contract, which were binding and sacrosanct between the parties.

35. The AT, after having considered the facts of the matter, particularly on the issue of reasons for the delay, appreciated the evidence in its own right, and did not consider it necessary to entertain the claim of compensation. The AT also noted that during the extended period, compensation for price variation has also been made to the claimant.

36. For these reasons, the Court is not inclined to allow this appeal and, therefore, appeal stands dismissed along with the pending applications.

37. Judgment be uploaded on the website of this Court.

ANISH DAYAL (JUDGE)

NITIN WASUDEO SAMBRE (JUDGE) SEPTEMBER 22, 2025/ak/bp