Government of NCT of Delhi v. M/s Harbel Singh & Sons

15.25 of the impugned award to grant compensation to the respondent.

15. In so far as the claim no.5 is concerned, the learned Single Judge has noted the reasoning given by the learned Arbitrator in paragraph no.26 of the impugned judgment to justify the payment of interest to the respondent as under:-

awarded amount within a period of 90 days from the date of award received by the respondent, failing which future interest will be payable @ 11% p.a. from the date of award till the date of actual payment.”

16. Similarly, on the issue of GST, we may refer to the finding of the learned Single Judge in paragraph no.27 of the impugned judgment, to justify the decision to grant the same in favour of the respondent.

17. The learned Single Judge while referring to the judgments of the Supreme Court in the case of Delhi Metro Rail Corporation Limited v. Delhi Airport Metro Express Private Limited: (2024) 6 SCC 357 and also Associate Builders v. Delhi Development Authority: (2015) 3 SCC 49 has concluded as under:

Arbitrator and only if it found that the contract has been construed in a manner that no fair mind or a reasonable person would, then only patent illegality arises. It has to be demonstrated that the view taken by the Arbitrator is not a plausible view in any sense possible. Observations made by the Arbitrator cannot be regarded as a plausible view where the Court is of the opinion that no reasonable person could plausibly have taken it. Further, to set aside an Award, it has to be demonstrated that the findings of the Arbitrator are based on nil evidence, based on irrelevant material or it ignores vital evidence.

30. This Court is of the opinion that the Sole Arbitrator has dealt with and has considered all the material that was placed before him. There is no prescribed format under the Arbitration and Conciliation Act, in which an arbitral award must be made. After going through the award this Court could not find any observation made by the Arbitrator which was devoid of merit or was made without considering the submissions made by the Petitioner or the Respondent/Claimant or was outside the purview of the Agreement entered into between the parties.

31. All the 4 issues laid down by the Sole Arbitrator before getting into the merits of the matter have been dealt with by relying on the material as well as submissions made by the parties before the Sole Arbitrator and this Court is of the opinion that the view taken by the Sole Arbitrator is a plausible one.”

18. The submissions of Ms Kaur, are primarily the following - that the learned Arbitrator has awarded an amount of ₹1.13 Crores to the respondent in violation of the clause No.12.2B of the Agreement by arbitrarily adopting 90% of the contractor’s quoted rate without any verification of the market rates or formal approval by the competent authority, which directly contravenes clause no.12.[2] of the Agreement.

19. Her argument is that the learned Arbitrator acting beyond his jurisdiction in violation of Section 28.[3] of the Act, constitutes patent illegality as laid by the Supreme Court in Associate Builders (supra). Similarly, it is her submission that even granting claim no.2.[3] for ₹20.93 Lakhs under the heading of escalation by arriving at an arbitrary percentage of 70%, even though the contract explicitly excluded its applicability vide the schedule F of the Agreement is also contrary to the provisions of clause no.10CC. According to her, the contract completion period being 135 days, clause no.10CC was explicitly excluded vide Schedule F. She also relied upon the judgment in the case of Ssangyong Engineering & Construction Company Limited v. National Highways Authority of India: (2019) 15 SCC 131. Even, claim no.4 for an amount of ₹21.62 Lakh has been awarded without (i) any documentary evidence of losses or increased cost, (ii)any protest or reservation during the grant of extension of time, and (iii) any objection at the time of final bill.

20. According to her, this violates clause no.5 of the Agreement which, stipulates that the contractor shall not be entitled to any compensation for any loss suffered by him on account of delays in commencement or execution of the work, whatsoever the cause of delay may be. Similarly, she states that same violates clause no.43.[1] of the Agreement which stipulates that the contractor shall be deemed to have waived all claims unless before signing the final bill, he has made a claim in writing.

21. Ms Kaur, further submitted that the learned Arbitrator has also erred in awarding the interest contrary to the contract and legal principles. In this regard, she stated that the learned Arbitrator has awarded an amount of ₹23,47,408/- as pendent lite interest @ 10% per annum and interest @11 % per annum from the due date till the date of the award.

22. This according to her, is despite there being no contractual provision entitling the respondent to interest. She also highlighted the fact that the contract being governed by the CPWD General Conditions of the Contract, which contains an express bar on interest under clause no.45.[1] and, thus, the award of the interest by the learned Arbitrator is totally untenable and in violation of Section 28(3) of the A&C Act, which requires the arbitral tribunal to decide the disputes in accordance with law and also the contract between the parties.

23. That apart, it is her submission that even awarding interest @ 10% per annum without assigning any reasons is contrary to the position of law settled in the case of Reliance Infrastructure v. State of Goa: (2021) 12 SCC 499 and Delhi Airport Metro Express v. DMRC: (2022) 1 SCC 13.

24. It is her submission that the award of GST amount is also unfounded and speculative under claim no.8. The contract in question was executed prior to the implementation of GST in July 2017 and was governed by the applicable DVAT regime. No evidence was led by the respondent to establish any actual or additional GST liability arising from the award. That apart, the learned Arbitrator did not quantify the GST component or demonstrate how it would become payable under the applicable tax law. She states that the learned Arbitrator has given a blanket declaratory relief exposing the appellant to future indeterminate tax liability, which is contrary to the established principle of law.

25. In substance, it is her submission that there is a violation of fundamental policy of India in award of claim 1.[2] without adherence to the rate determination mechanism under clause 12.2B and the application of excluded clause 10CC to avoid escalation, the grant of prolongation cost without any proof of actual cost or protest and the award of interest and GST.

26. On the other hand, Mr A K Trivedi, learned counsel appearing for the respondent justified the impugned award and the order of the learned Single Judge. He stated that the learned Single Judge has delineated the settled position of law in terms of the decision of the Supreme Court in Associate Builders (supra) and also Delhi Metro Rail Corporation (supra) to hold the contours of the power of the competent Court to set aside an award under Section 34 of the A& C Act, arise only if the Court finds that the award is vitiated by patent illegality and also if the interpretation of contract, has been done in a manner that no fair minded or reasonable person would do. According to him, in the case in hand, the conclusions drawn by the learned Single Judge are justified. In so far as the claim no.1.[2] is concerned, the respondent has submitted the rate analysis of the submitted item no.1, and the appellant was to finalise the rate within sixty days of submission of the rate analysis, but no proof was given by the appellant as to whether such rate was approved within the time prescribed under the agreement or not and as such, learned Arbitrator utilising his experience and expertise in the field of building work, has awarded 90% of the rate claimed by the respondent as a reasonable rate.

27. According to Mr Trivedi, such a conclusion not being perverse was rightly upheld by the learned Single Judge.

28. With regard to claim no.2.3, according to Mr Trivedi, the learned Arbitrator in paragraphs no.15.24 and 15.25 has given cogent reasoning while granting such claims, which also includes the finding that the respondent claimant remained for 42 days more at the site for no fault on its part beyond the stipulated period of contract, which, definitely cannot be ignored by holding that no extra expenses were incurred. He states that what has been awarded under this claim is an amount of ₹21,62,073/- and paragraphs no.17.11 and 17.12 of the impugned award justifies the same and as such no interference is warranted.

29. Similarly, on claim no.5, Mr Trivedi, has drawn our attention to paragraphs no.20.14 to 20.16 in support of his submission that the learned Arbitrator and the learned Single Judge were justified in awarding the amount and upholding the same. Even on GST, the conclusion drawn by the learned Arbitrator has to be read in the context of what has been said by the learned Arbitrator in paragraph no.23.4, that is, in case respondent /appellant has to pay the GST on the award amount, the said amount of GST should be reimbursed by the respondent that is the appellant herein. This according to Mr Trivedi is because of the finding of the learned Arbitrator that if the respondent incurs any liability of GST on the awarded sum and lawfully and properly pays the same to the Government, then the same should be reimbursed by the respondent. Such a conclusion, is appropriate and the learned Single Judge has rightly refrained from interfering with it.

30. Even on interest, he submits that the learned Arbitrator is within his right under the provisions of the A&C Act to award interest @ 10% per annum as pendente lite interest and @ 11% per annum till the date of actual payment.

31. According to him, the reliance on GCC of CPWD manual is totally misplaced and contrary to the provisions of the A&C Act, as interpreted by this Court in various other Courts. He seeks the dismissal of the appeal.

32. Having heard the learned counsel for the parties, the issue which arises for consideration is whether the learned Arbitrator is justified in passing the impugned award, which has been upheld by the learned Single Judge.

33. At the outset, we may state that the scope of interference of the Court in an appeal under Section 37 of the A & C Act is very limited. We may refer to the decision of the Supreme Court in Punjab State Civil Supplies Corporation Limited v. M/s Sanman Rice Mills & Others: 2024 INSC 742, wherein it was held as under:

interference provided under Section 34 of the Act.

17. xxx xxx xxx

18. Recently a three-Judge Bench in Konkan Railway Corporation Limited v. Chenab Bridge Project Undertaking: (2023) 9 SCC 85 referring to MMTC Limited v. Vedanta Limited: (2019) 4 SCC 163 held that the scope of jurisdiction under Section 34 and Section 37 of the Act is not like a normal appellate jurisdiction and the courts should not interfere with the arbitral award lightly in a casual and a cavalier manner. The mere possibility of an alternative view on facts or interpretation of the contract does not entitle the courts to reverse the findings of the arbitral tribunal.”

34. As noted from the above, the challenge by the Government of NCT of Delhi is with regard to the claim Nos.1.2, 2.3, 4, 5.2, 5.[3] and 8.

35. In so far as the substituted claim no.1.[2] is concerned, the arguments of Ms Kaur, as noted above, is primarily that the learned Arbitrator has awarded the amount of ₹1,13,22,658/- in violation of the clause No.12.2B of the GCC. According to her, the rate of 90% was unilaterally adopted by the learned Arbitrator without following the binding contractual stipulation.

36. We may state that the learned Arbitrator has awarded claim no.1.[2] by stating in paragraphs no.14.30 to 14.33, as under:- “14.30. SUBSTITUTE ITEM: The claimant stated that the rate analysis of the item was submitted to the respondent on 22.02.2017(C-4) before the execution of the item and further reminded vide letter dt 30.03.2017 (C-5 page-78 of SOC) that the rate proposed by the respondent was not acceptable to the claimant. The claimant also pleaded that the respondent neither commented on the rate submitted by the claimant nor the item approved within 60 days as stipulated under clause 12B hence the submitted rate become the rate payable to the claimant. The respondent pleaded that in RA bills provisional rates were allowed as intermediate payments and the rates in final bill were paid as sanctioned by the Competent Authority.

14.31. The record reveals that the claimant has submitted the rate analysis of the substituted item No1l on 22.02.2017 (C-4 page-74 to 77) which is a detailed analysis of rate and arrived at a rate of Rs.3,370/- per sqm. The claimant has further reminded the respondent vide its letter dated 30.03.2017 (C-5 page-78 of SOC) that the rate proposed by the respondent was not acceptable to the claimant. In term of the clause-12B, the respondent was to finalise the rate of SI within 60 days of submission by the claimant i.e. upto 20.04.2017. The respondent did not produced any documentary evidence before this tribunal if any comment on AR submitted by the claimant or the same was approved within the time prescribed under the agreement. Further, the claimant did not agree to the rate as was being proposed by the respondent. The rate submitted by the claimant was on 22.02.2017 i.e. Rs. 3,370/- per sqm however, the claimant is claiming Rs. 3,368/- per sqm in its SOC. The claimant has submitted the respondent's sanctioned SI statement with detailed AR running in 6 pages. This is revised substituted statement No.1 sanctioned vide respondent's No. 453 dt 17.10.2017 with net rate Rs.1,629.90 per sqm. There is no dispute regarding the quantity of 8,080.11 sqm and that the substituted item is to be paid at prevailing market rate in terms of clause-12.2B of the agreement.

14.32. Perusal of the AR submitted by the claimant and the respondent, it reveals that the work of SI was carried out in the month of March, 2017 onwards during which average wages of Skilled Mason & Beldar/Coolie were Rs. 701.50 & Rs.

529.50 respectively [page-360 & 361 of SOC which are the wages notified by the Chief Labour Commissioner, Ministry of Labour & Employment Govt of India) whereas the wages adopted by the respondent are Rs. 495.0 & 374.0 respectively. The wastage & brokerage adopted by the claimant is 10% whereas the respondent has adopted 5%. The rate of cement adopted by both the parties is same. The market rate of tiles initially adopted by the respondent is Rs. 660.45 per sqm and later reduced to Rs. 544.93 per sqm without any reason against the claimant's adopted rate of tiles as Rs. 756.0 per sqm. Taking into consideration, my expertise in the field of building work where items were taken for quantification of rate, I find that the reasonable rate of this item in question, to my mind, comes to Rs. 3,031.20 per sqm [90% of the rate claimed by the claimant Rs.3,368/-). Accordingly, the claimant is found entitled to rate of Rs. 3,031.20 per sqm for this Substituted Item. The respondent has paid rate of Rs. 1,629.90 per sqm [page-107 of SOD). There is no dispute so far as the quantity of 8,080.11 sqm is concerned. Thus the amount payable on account of substituted item No.1 comes to Rs. 1,13,22,658/- {8,080.11 x (3,031.20 -1,629.90)}.

14.33. TO SUM UP, the claimant is entitled to Rs. 1,15,51,080/-(Rs. 2,28,422+ Rs. 1,13,22,658/-) under Subhead (i).” (Emphasis Supplied)

37. The above reveals the justification for the learned Arbitrator to award the amount. The aforesaid conclusion is on the finding of the fact that in terms of clause 12.B, the appellant was to finalise the rates of substituted items within sixty days from the submission made by the respondent, that is, upto 24.02.2017, which admittedly was not done. The substituted items were to be paid based on market rates. The rates prescribed by the respondent were market rates. The rates prescribed by the appellant were much less than what has been prescribed by the authority (labour rates). That apart there being variance in the rates prescribed by both the appellant and respondent, the Arbitrator confined the claim to 90% of what has been claimed by the respondent. This according to Mr Trivedi is justified, taking into consideration the expertise of the Arbitrator in the field of building work where items are taken on quantification of rate.

38. There is enough justification for the learned Arbitrator to award the amount in favour of the respondent. This conclusion has been upheld by the learned Single Judge keeping in view the settled position of law in the case of Delhi Metro Rail Corporation Limited (supra) of which paragraphs 28 to 31 which we have reproduced above.

39. Even as far as claim No.2.3, awarded by the learned Arbitrator is concerned, the said claim was awarded in favour of the respondent by the learned Arbitrator by stating in paragraphs no.15.24 to 15.25 as under:- “15.24. The pleas taken by the respondent regarding notice u/s 55 and undertaking given have been decided by the Tribunal under para 15.10 herein before and held that claimant is entitled to be compensated.

15.25. The claim is on account of increase in prices of materials which are not covered under clause- 10CA i.e. other than cement & steel. The formula adopted by the claimant is as provided in clause- 10CC of GCC appended with the agreement. It is fact that clause- 10CC is not applicable in the present agreement. However, since this is damage claim and only formula has been adopted to arrive at the amount of compensation due to increase in prices of materials for the work done during prolongation period so is allowed in view of various judgments. The increase in prices are very well established by cost indices issued by the Govt. of India from time to time. The claimant adopted the % component of material as 40% which is very reasonable because if % component of materials under clause-10CA is calculated on actual work done then it comes to 23% (reference clauses 10C & 10CA page-18 of NIT and the quantity of material used as per page-299 to 302 of SOC). Then adding 25% for labour will come to 48 %. Thus, the component for materials other than cement & steel would come to 52% (100-48) whereas the claimant has adopted only 40%. The claimant is found eligible for payment due to increase in rates of materials for the work done from SDOC up to ADOC. Considering 40% component and various price indices at various times, the amount of claim has been worked out as Rs.25,35,193/- for civil portion and Rs.4,55,550/- for electrical portion totalling Rs. 29,90,743/- by adopting base indices for the period under consideration and placed at exhibit C-2.3A of SOC. The data, date & amount of bills, price indices adopted by the claimant and the calculations checked by the respondent and found correct as per joint reconciliation submitted vide letter dated 19.08.2023. However, it is seen that the claimant has adopted base cost index (CI) prevailing as on date of tender in Jan., 2016. Since, clause- 10CC is not applicable so the claimant itself has to absorb the increase in rates of materials under claim upto SDOC that is upto July, 2016 as well as to mitigate the same being the claim u/s 73 of ICA. The claimant has calculated total amount under the claim as Rs.29,90,743/- at page-375 of SOC. However, due to factors of base cost index & mitigation to my mind a reasonable amount can be arrived by allowing 70% of the claimed amount which would meet ends of justice. Accordingly, payable amount comes to Rs. 20,93,520/- (29,90,743 x 70%) and is awarded in favour of claimant under claim No. 2.3.”

40. Similarly, on claim no.4, the learned Arbitrator has awarded an amount of ₹21,62,073/- on the following findings:- “17.[4] The pleas taken by the respondent regarding limitation, undertaking and notice u/s 55 of ICA have already decided by Tribunal under para-12.5, 12.14 &

12.25 herein before and so are not tenable.

17.5. From the perusal of the documents, submissions, arguments advanced by the parties and court judgments relied upon by the parties, it reveals that the work was delayed primarily due to various delays not attributable to the claimant which is further strengthened by the fact that the respondent has granted EOT for the entire delay without levy of any compensation under clause-2 of the agreement and so I hold that the claimant is entitle for the compensation.

17.6. Total delay justified by the respondent as per exhibit C-6, is 532days including 205 days on account of extra work whereas actually extra days on account of extra work comes to 218 day (page-398 of SOC). Thus total justified days comes to 545 days (532- 205+218). It is also revealed from exhibit C-6, based on which EOT was granted, at entry No. 6,[7] & 8 at page-80&81 of SOC, that a delay of 109+9+144 totaling 252 days have been considered which were due to non availability of material and ban on construction activities on account of statutory orders and not On account of respondent. Therefore, I feel it appropriate that for the purpose of damages, justified delays attributable to the respondent be taken by deducting these 252 days from the justified 545 days which comes to 293 days as net delay. Further, on perusal of the pleadings and provisions contained in clause-12.[1] of the agreement, allowable extra days on account of actual extra work done calculated by the claimant as 218 days (page-398 of SOC] which is found correct. These 218 days are due to extra work allowed by the respondent which means claimant's resources were gainfully used during this period and are to be deducted from the net delay. Thus justified delay for purpose of overhead damage is considered as 75 days (293 minus 218) as reasonable therefore I hold that claimant is entitled for a net prolongation of 75 days for compensation on account of delays under this head on account of loss suffered due to additional liability of overheads. It is also hold that such a loss cannot be treated as remote loss in terms of Section-73 of the Indian Contract Act, 1872.

17.7. As per the judgment in the matter of McDermott International Inc. Vs Burn Standard Company Ltd.(supra) wherein it has held by the Apex Court that- „Section 55and 73 of the Indian Contract Act do not lay down the mode and manner as to how and in what manner the computation of damages or compensation has to be made. There is nothing in Indian Law to show that any of the formula adopted in other countries is prohibited in law or same would be inconsistent with the law prevailing in India‟. It was further held that „As computation depends upon circumstances and method to compute damages, how quantum Thereof should be determined in a matter which would fall for the decision of the arbitrator‟.

17.8. It is fact that the claimant did not provide any details/proof of loss as claimed but it is also fact that the claimant has remained for 442 days more at site, for no fault on its part i.e. beyond the stipulated period of contract which definitely cannot be ignored that no extra expenses were not incurred.

17.9. In my view, the compensation for loss of overheads can be reasonably assessed by taking help from Schedule „F‟ of the agreement. In this schedule, percentage on cost of material and labour to cover „all overheads and profit‟ has been mentioned as 15% (Page-18 of agreement) which is evidently based on DGW(CPWD)'s guidelines. CPWD guidelines which are in public domain also state that out of 15%, 7.5% accounts for overheads. Hence, overheads in this case can be taken as 7.5% of tendered cost according to which average overheads per day, for the stipulated period, works out as under:

17.10. xxx xxxx xxxx

17.11. Based on above calculations, average overheads charges per day worked out Rs.41,182.35, the additional overheads charges for 75 days of net prolongation period comes to Rs. 30,88,676/-. This amount however calls for some moderation as the contractor has to mitigate the losses when work is prolonged which however in the nature of the work to my mind cannot be more than 30%.

17.12. Having regard to the facts as stated above, 75 days being considered compensable against total delay of 442 days, in my assessment that it would be just and fair to 30,88,676 X 70 allow 70% of amount as worked out above i.e. = Rs.21,62,073/- as C too compensation on account of additional overheads. Accordingly, considering all the facts, circumstances and the legal position, I award Rs.21,62,073/- in favour of claimant against claim No.49(i)”.

41. Upon perusal of the aforesaid conclusions we find that the learned Arbitrator was justified in awarding the said amount, which is a plausible reasoning and not perverse.

42. In so far as issue nos.5.[2] and 5.[3] are concerned, we have noted the finding of the learned Arbitrator in paragraph 13 above. Though, Ms Kaur has argued before us that clause no.45.[1] of the CPWD GCC which governs the Agreement provides an express bar on interest, the same appears to be an afterthought as this stand was taken neither before the learned Arbitrator nor before the learned Single Judge.

43. We find that the learned Arbitrator has rightly awarded interest claim nos.5.[2] and 5.3.

44. Similarly, claim no.8, has been awarded by the learned Arbitrator by giving findings in paragraphs no.23.[3] to 23.[5] of the impugned award, which we reproduce as under:- “23.3. So far as the Arbitration agreement is concerned, there is no limitation with regard to power for making any declaratory award. Section 7 of the Arbitration & Conciliation Act, 1996 also covers disputes in respect of a defined legal relationship. Section 28(1) of the Arbitration & Conciliation Act mandates the Arbitrator to decide the dispute submitted to Arbitration in accordance with the substantive Law for the time being in force in India. Hence, I do not find any prohibition in law or bar regarding arbitrability for making declaratory awards by the Arbitrators. In fact, it is a practice in most jurisdictions to make declaratory awards, including on interpretation of contracts, by the Arbitral Tribunals.

23.4. In this case, the declaratory award is based on the plea that in case the claimant has to pay GST on award amount, the said amount of GST should be reimbursed by the respondent. I find no reason if the claimant incurs liability of GST on awarded sum and lawfully and properly pays the same to the Government, then the same should be reimbursed by the respondent. This shall be an additional tax burden and is covered under clause 38 of the GCC forming part of the contract.

23.5. In view of above, I make a declaratory award that the claimant shall submit details within 30 days of receipt of award amount, the GST amount actually paid to the Government on the awarded sum which shall be reimbursed by the respondent within 30 days of submission of details of such payment by the claimant failing which a simple interest @ 10% will be payable by the respondent to the claimant till actual date of payment.”

45. The above also depicts that the learned Arbitrator was justified in granting the amount in favour of the respondent herein, and the learned Single Judge has rightly upheld the same.

46. In view of the aforesaid position, we do not find any merit in the appeal. The same is dismissed. The pending application is also dismissed having been rendered infructuous.

V. KAMESWAR RAO, J

SAURABH BANERJEE, J JULY 23, 2025