National Highways Authority of India v. M.G. Contractors P. Ltd- Arvind Techno Engineers P. Ltd. (JV)

(xi) Relief.”

6. Parties thereafter led oral evidence wherein Respondent examined Sh. Navdeep Mahajan as CW-1, who filed his evidence affidavit and was crossexamined by the Petitioner on 14.02.2022. Petitioner produced Mr. Pradeep Atri as RW-1 who filed his evidence affidavit and was cross-examined by the Respondent on 22.03.2022 and 19.04.2022. After hearing final arguments, learned Arbitral Tribunal pronounced the award on 12.04.2023 allowing the claims of the Respondent as follows:-

7. Respondent thereafter filed an application under Section 33 of the 1996 Act for correction of certain typographical errors in the award and vide order dated 08.05.2023, the award was modified accordingly.

CONTENTIONS OF THE PETITIONER

A. CLAIM NO.1

8. Impugned award is illegal and contrary to the contractual understanding of the parties and deserves to be set aside in light of Section 28(3) of the 1996 Act, which mandates the Arbitrator to decide the disputes in terms of the contract between the parties to arbitration. The award is in violation of Clauses 4.1.3, 4.1.5, 8.3.[3] and 9.[2] of the Contract and is thus perverse. Total value of the work under the Contract was Rs.212 crores. Clause 4.1.[5] provided that contractor’s claim cannot exceed 1% of the contract price and therefore, assuming that the Respondent was right, it was at the highest entitled to a sum of Rs.2.12 crores.

9. Learned Arbitral Tribunal failed to appreciate that the delay in completion of the work by the Respondent was not on account of delay solely attributable to the Petitioner in handing over the land by the Petitioner, as alleged. In any event, if Respondent was of the view that delay was being caused in handing over ROW, it had the option to refuse execution of the work under Clause 8.3.3. As a matter of fact, 91% of the land was handed over to the Respondent and this is reflected from the minutes of meeting held on 16.12.2015. Significantly, in the said meeting, Respondent agreed to waive off the three pre-conditions required to be fulfilled by the Petitioner viz. (a) procurement of ROW in accordance with Clause 4.1.3(a); (b) environmental clearances including forest clearance/tree cutting in accordance with Clauses 4.1.3(c) and 9.4; and (c) shifting of obstructing utilities in accordance with Clause 9.2. Appointed Date was declared as 18.12.2015, with the consent of the parties. In light of this express settlement between the parties whereby they agreed to waive off the reciprocal breaches of their obligations without imposition of damages, it was not open to the Respondent to claim compensation on account of overheads, allegedly incurred and this crucial fact is overlooked by the Arbitral Tribunal while awarding compensation in the sum of Rs.3,60,00,000/-.

10. Petitioner was completely mindful that Respondent had completed first three milestones on time and the fourth one was not achieved due to difficulty in acquisition of the land in question and which is why the Authority Engineer (‘AE’) vide letter dated 21.09.2017 recommended extension of time by 104 days from 17.12.2017 to 31.03.2018 for completion of fourth milestone, without penalty or any other action under the Contract.

11. Upto the third milestone, Respondent had completed work worth Rs.187 crores and balance work remaining was worth Rs.25.24 crores. Petitioner had paid Rs.37,50,617/- towards price escalation for completed work and therefore, further demand of Rs.9,76,00,000/- was without any basis and unreasonable. Respondent neither pleaded nor led any evidence for the alleged loss sustained. No notice/letter was ever sent to the AE or the Project Engineer indicating any loss suffered due to delay in execution of the work. It was for the first time on 19.09.2019 that Respondent wrote to the Petitioner stating that in addition to the alleged outstanding payment of Rs.471,46,481/-, Respondent shall file claims relating to prolongation period, idling charges, profit losses in due course of time. Petitioner granted extension of time to the Respondent in view of its own letters dated 01.09.2017 and 06.03.2018, in which no demand was raised claiming loss of overheads/profit.

12. In order to claim expenses on overheads, Respondent was required to give a notice in advance to the AE that on account of happening of such event, there will be a cost overrun as also that on account of delay, Contractor shall be entitled to damages. The Hudson Formula relied upon by the Respondent in its Statement of Claim for award of overhead expenses is outdated as Hudson in 12th Edition himself omitted the formula. Moreover, what the Respondent claimed in the pleadings under Claim 1 was expenses on site overheads whereas Hudson Formula deals with office overheads. In any event, no claim for damages or loss of profit/overheads could be awarded by the Arbitral Tribunal in the absence of the Respondent leading evidence to substantiate the alleged actual loss suffered by it and the award of the Tribunal awarding the compensation for losses due to prolongation of the contract period along with interest is thus clearly contrary to the judgments cited before the Arbitral Tribunal viz. General Manager, Northern Railway and Another v. Sarvesh Chopra, (2002) 4 SCC 45; Edifice Developers and Project Engineers Ltd. v. Essar Projects (India) Ltd., 2013 SCC OnLine Bom 5; Indo Nabin Projects Ltd. v. Powergrid Corporation of India Ltd., 2018 SCC OnLine Del 8405; Union of India v. Om Construction Co, 2019 SCC OnLine Del 9037; and Tarun Mahindroo v. H.P. Power Corporation Limited, ILR 2019 (IV) HP 1219.

13. In Unibros v. All India Radio, 2023 SCC OnLine SC 1366, the Supreme Court has held, albeit in the context of claim for loss of profit arising from a delayed contract or missed opportunities from other available contracts that the contractor could have earned elsewhere, that it is imperative for the contractor to substantiate the presence of a viable opportunity through compelling evidence. The evidence should convincingly demonstrate that had the contract been executed promptly, contractor could have secured supplementary profits utilizing its existing resources elsewhere. While the list is not exhaustive, the evidence may include number of tendering opportunities received by the contractor, financial statements, extension of time. It was also observed that while Hudson Formula is well understood in the trade, however, it cannot apply in a vacuum. While these formulae are helpful where needed, they alone cannot prove contractor’s loss of profit and credible evidence to substantiate the claim of loss must be adduced.

14. In Batliboi Environmental Engineers Limited v. Hindustan Petroleum Corporation Limited and Another, (2024) 2 SCC 375, the Supreme Court held that claim on account of loss of profits and overheads is payable if and when there is an increase in cost of off-site and on-site overheads due to delay in completion of work post the agreed or contractual period, which is caused by the employer. The contractor will have to prove that there was other work available that he would have secured, if not for the delay, by producing invitations to tender, which were declined due to insufficient capacity to undertake the other work. If loss of turnover resulting from delay is not established, it is merely a delay in receipt of money and at best the contractor will be entitled to interest on the capital employed and not profit.

15. Respondent willingly and voluntarily gave 5 undertakings from time to time and in the fourth one dated 03.04.2019, it was categorically stated that it shall not raise any claim pursuant to Clause 8.[3] or any other clause for damages. A similar undertaking was given on 09.05.2019. There was not a whisper in any of these letters that the undertakings were extracted under duress or coercion and this plea is only an afterthought, raised for the first time during arbitration. Therefore, Respondent is estopped from claiming any damages having waived off its right to do so. In Sara International Limited v. Rizhao Steel Holding Group Company Limited, (2013) 201 DLT 262, this Court held that in commercial contracts, principle of economic duress does not apply and more so, when one party does not seek a declaration that the contract was void.

16. The impugned award is patently illegal as the Arbitral Tribunal has relied on the judgment of the Single Judge of this Court in National Highways Authority of India v. IRB Pathankot Amritsar Toll Road, 2022 SCC OnLine Del 682, which has been reversed by the Division Bench in National Highways Authority of India v. IRB Pathankot Amritsar Toll Road, 2023 SCC OnLine Del 3789 and on this ground, the award becomes vulnerable.

B. CLAIMS NO.2 TO 6

17. Claim 2 for Bonus was not pressed by the Respondent before the Arbitral Tribunal.

18. Claim 3 was for Rs.77,94,837/- as interest on delayed payments. The findings of the Arbitral Tribunal under this claim suffer from patent illegality. Arbitral Tribunal failed to consider that payments could be made to the Respondent only after the bills were duly certified by AE. The amount was withheld from certain bills for the reason that issue of Extension of Time (‘EoT’) was pending with the higher authorities. Further, some of the final concrete tests were yet to be carried out. These were in terms of the contract which were binding on the parties and the Arbitral Tribunal.

19. Claim 4 towards electricity bills in the sum of Rs.33,66,233/- was already covered in the maintenance charges under Clause 14.1.[1] of the Contract. It was the duty of the Respondent under Clause 14.[2] to install the electricity meters, for which initially payment was made by the Petitioner albeit required to be paid by the Respondent. As per the said clauses read with Schedule-E, payment of energy charges was the obligation of the Respondent. Petitioner had clearly written to the Respondent vide letters dated 25.05.2019 (Ex.R-25), 30.08.2019 (Ex.R-26), 24.02.2021 (Ex.R-27) and 22.04.2021 (Ex.R-28) that there was no question of reimbursement of payments towards electricity charges as under relevant clauses of the contract and Schedule-E, which made IRC Regulations applicable to the contract, payment of energy charges was the obligation of the Respondent. Claim 5 was for pendente lite and future interest and Claim 6 was for costs, on which no arguments were addressed.

CONTENTIONS OF THE RESPONDENT

20. Work was awarded in favour of the Respondent through LOA dated 24.09.2015 and the Appointed Date was fixed as 18.12.2015, which was the stipulated date of commencement and work was to be completed within 02 years therefrom. The work was completed on 10.08.2018 i.e. with a delay of 236 days. Work could not be completed within the stipulated time on account of various defaults by the Petitioner viz. delay in handing over of the site; delay in shifting of utilities and cutting of trees, etc.

21. Petitioner failed to honour its obligations set out in Clauses 4.1, 8.[1] to 8.[4] of the Contract with regard to handing over ROW. It was stated in the meeting held on 16.12.2015 that 91% of the linear length of ROW had been handed over to the Respondent for carrying out the work i.e. out of total requirement of 75.100 Ha., land available for execution of the work was 68.330 Ha. However, this was factually incorrect as rightly held by the Arbitral Tribunal. Petitioner had contended that the delay in handing over the site was for three reasons, beyond the control of the Petition. Tribunal has disagreed with the Petitioner and given detailed reasons for the same, which are not open to interference by the Court. As for the delay in payment of compensation to the farmers whose lands had been acquired, the Arbitral Tribunal has held that Respondent did face problem in execution of the work due to non-payment of compensation by the Petitioner to the land owners and Petitioner cannot shrug its responsibility by merely stating that the amount was deposited with the Revenue Authority. Since the project was time bound, Petitioner ought to have been pro-active in pursuing with the SDMs for disbursement of compensation. The matter of disbursement of compensation continued with the Revenue Authorities till 05.10.2017 though the stipulated date of completion was 17.12.2017 and therefore, the contention of the Petitioner that 91% of the unencumbered land was handed over to the Respondent on the Appointed Date, cannot be upheld in light of the documentary evidence on record, indicating to the contrary.

22. With regard to non-availability of ROW due to missing plots, Arbitral Tribunal rightly held that as a matter of record, while acquiring the project land, some plots were indeed missed out and as per evidence of CW-1, list of missing plots had been handed over to the Petitioner as early as on 18.12.2015, but prompt action was not initiated by the Petitioner. This issue continued to fester till 07.04.2017 though it was the obligation of the Petitioner to acquire the land before execution of the work. The missing plots constituted more than 9% of the total ROW, which issue was pending even as on the Appointed Date. In regard to hindrances in ROW, the Arbitral Tribunal rendered a finding that as per record, Respondent had addressed several letters to the Petitioner pointing out non-availability of stretches of land due to various reasons but there was silence on the part of the Petitioner. In fact, Petitioner through its letter dated 07.06.2016 (C-33) admitted in unequivocal terms that at least, 1.19 kms stretch out of total length of 7.00 kms was not available due to land constraints. It is thus manifest that Petitioner failed to handover complete ROW even till after the stipulated period of the contract and the detailed findings of the facts by the Arbitral Tribunal do not warrant interference in the present petition by this Court under Section 34 of the 1996 Act, as per settled law.

23. It is wrong for the Petitioner to allege that balance work to the tune of Rs.25.24 crores was remaining on the stipulated date of completion. Based on the evidence on record, Arbitral Tribunal came to a conclusion that work done in the extended period of contract was in the vicinity of Rs.36 crores and this figure was arrived, basis the figures given by the Respondent in the running bills. Total work done as per tabular statement on record from the 20th running bill to the final bill was Rs.45,02,94,402/-. After adjusting half the amount of the 20th running bill for the work done in the original period, the amount of work done in the extended period of contract was approximately Rs.36 crores. Under this head, the Arbitral Tribunal awarded a sum of Rs.3,60,00,000/- taking into account cost of overhead @ 10% as compensation for overstaying at the Project holding that if the Hudson Formula was applied, the compensation would have been on a higher side and this methodology cannot be questioned by the Petitioner, being in the domain of the Arbitral Tribunal.

24. Petitioner repeatedly urges that Respondent has not suffered and/or proved the loss. This is wholly incorrect. It is the matter of common knowledge that if any works contract is prolonged, contractor suffers losses by way of diminished profit and extra overheads, for which he is liable to be compensated. Even otherwise, the Standard Data Book of the Ministry of Road, Transport and Highways, which is the controlling Ministry of the Petitioner, also stipulates percentages of profit and overheads in various contracts, which the Arbitral Tribunal notes in paragraph 108 of the arbitral award. Moreover, Respondent had specifically pleaded in the Statement of Claim that through several communications sent to the Petitioner from time to time, including vide letters dated 20.06.2016 (C-36) and 09.02.2017 (C- 43), Petitioner was apprised of the losses suffered. This fact is duly mentioned and noted by the Arbitral Tribunal in paragraph 113 of the award. Arbitral Tribunal has followed the principles underlying Section 73 of the Indian Contract Act, 1872 for awarding compensation for loss due to breach of contract by the Petitioner and rightly held that it is not necessary that the quantum claimed must be established with absolute certainty. In fact, in its discretion, Arbitral Tribunal has only awarded Rs.3,60,00,000/- crores giving reasons for the same and following a methodology based on Standard Data Book followed by the Petitioner, as against the claimed amount of Rs.9.76 crores and this Court cannot substitute its own view for the plausible and possible view taken by the Arbitral Tribunal.

25. It can be seen from a plain reading of the award that the award is based on evidence led during the arbitral proceedings, both documentary and oral. Respondent produced its witness CW-1, who testified and proved that Petitioner was responsible for delay in completion of the work through various communications exchanged between the Petitioner and the Respondent, including communications from AE in this regard. Petitioner clearly admitted its delay and several documents in this regard, including C- 23, C-33, C-51 and C-62, were placed on record and proved by the Respondent. Admission is the best form of evidence and Petitioner’s admissions weighed with the Arbitral Tribunal to come to a finding that delay was caused by the Petitioner.

26. A bare perusal of the award would show that the Arbitral Tribunal did not award compensation on the basis of Hudson Formula albeit the same was noticed and it was observed that these formulas have withstood the test of judicial scrutiny in several cases. Even otherwise the argument of the Petitioner that 12th Edition of Hudson’s book does not mention the formula and the same stands discarded is not correct, as the same is being adopted till date in several contracts. The Arbitral Tribunal, adopted the correct methodology for computing the compensation by taking only half the period of 20th R.A bill upto the stipulated date of completion, the extended period of 236 days and total value of the contract being Rs.212 crores as also the admission of the Petitioner that on 17.12.2017 the value of work done was Rs.187 crores. On this basis, Tribunal concluded that value of work done during the extended period of contract was Rs. 36 crores and rightly awarded 10% thereof as compensation towards loss of overheads, which was far less than the amount claimed i.e Rs.9,76,88,547/-, or the amount that should have been awarded if the Hudson’s formula was applied. Moreover, paragraph 142 of the award shows that the Arbitral Tribunal only awarded overheads and not loss of profit in favour of the Respondent. It is a standard practice, which is also recognized and adopted by the Petitioner that when percentages are awarded towards compensation for overheads and loss of profit, there can be no insistence on production of evidence.

27. Emphasis of the Petitioner on the alleged undertakings given by the Respondent is misplaced. Arbitral Tribunal has rendered a finding based on pleadings and evidence on record that Respondent was under an economic duress to give the undertakings else the final bill would not have been paid. As observed in paragraph 126 of the award, final bill of the Respondent was settled only after furnishing an undertaking in the language dictated by the officials of the Petitioner. The language of the undertakings is selfexplanatory indicating coercion and this is illustratively demonstrated from the letter dated 08.05.2019, which reads: “This contractor has absolutely no intention to claim any damages due to this EOT in pursuance to any of the provisions/clauses contained in the entire Contract Agreement.”

28. Petitioner’s counsel vehemently argued that the Arbitral Tribunal has relied on the judgment of the Single Judge of this Court in IRB Pathankot Amritsar Toll Road (supra), whereas the same has been reversed by the Division Bench vide judgment dated 03.07.2023. It cannot be disputed that when the award was pronounced, the judgment of the learned Single Judge was holding the field and the reversal of the judgment came subsequently. In any event, Arbitral Tribunal has also referred to numerous other judgments of the Supreme Court and High Courts to arrive at a finding that the undertakings were a result of economic duress and coercion viz: Chairman and MD, NTPC Ltd. v. Reshmi Constructions, Builders & Contractors, (2004) 2 SCC 663; National Insurance Company Limited v. Boghara Polyfab Private Limited, (2009) 1 SCC 267; R.L. Kalathia and Company v. State of Gujarat, (2011) 2 SCC 400; and Puri Construction P. Ltd. and Ors. v. Larsen and Toubro Ltd. and Anr., 2015 SCC OnLine Del 9126. It is not the case of the Petitioner that the other judgments relied upon by the Arbitral Tribunal were either overruled or inapplicable. Arbitral Tribunal has adopted a very fair and reasonable measure for award of compensation, warranting no interference.

29. The award of interest by the Arbitral Tribunal is well justified. The Arbitral Tribunal has referred to Clauses 19.[9] and 19.13 of the Contract which specifically provides for payment of interest at the base rate plus 2% calculated at quarterly rests in case there is any delay in payment of the bills. Parties had submitted detailed respective calculations before the Arbitral Tribunal and in fact, as per Petitioner’s own calculation, an amount of Rs.40,74,859/- is shown as interest payable to the Respondent. This was rightly not accepted by the Arbitral Tribunal because of an inherent flaw in computation wherein Petitioner had computed period of 30 days mentioned in Clause 19.9.[1] of the Contract from the date the bill was forwarded by the Petitioner to the AE after making due checks, whereas 30 days have to be computed from the date of submission of the bill by the Respondent. Arbitral Tribunal having gone through the statements and finding little variation in the two, awarded interest of Rs.73,11,253/-, a finding not open to interference in a petition under Section 34 of the 1996 Act. Likewise, for electricity bills, Arbitral Tribunal has referred to Clause 14.1.[1] to arrive at a considered finding that Respondent was obliged to provide lighting of the project highway within the scope of the work but only limited to the construction period and this obligation did not extend to the maintenance period. The AE also categorically recommended that payment of energy charges was not the obligation of the Respondent during the maintenance period and in the entire objection petition, Petitioner has not pointed out any error in this finding of the Arbitral Tribunal, based on contractual provisions.

ANALYSIS AND FINDINGS

30. Present petition concerns a project for ‘Four-laning of Kharar-Kurali Section of NH-2.[1] from Km 15.765 to km 29.900 (existing chainages) (New NH-205)’ in the State of Punjab. Being a successful bidder, LOA dated 24.09.2015 was issued in favour of the Respondent. Construction period was 730 days from the Appointed Date, which was declared as 18.12.2015, in a meeting held between the parties on 16.12.2015. Parties thereafter executed an EPC Agreement dated 02.11.2015 for carrying out the works, incorporating therein the respective obligations of the parties. As per the Agreement, Stipulated Date of Completion was 17.12.2017 and Stipulated Completion Date/EOT date was 29.07.2018. Petitioner granted extension of time in view of Respondent’s requests made vide letters dated 01.09.2017 and 06.03.2018. Respondent achieved first three milestones on time and admittedly, there was prolongation of contract and some work was executed by the Respondent during the extended period of 236 days.

31. Broadly, the issues arising before the Arbitral Tribunal were delay in handing over the site to the Respondent by the Petitioner and consequent breach of the contract; compensation for delay in completion of work to the Respondent; effect of undertakings given by the Respondent not to claim damages; interest on delayed payments; electricity bills; interest and claim for damages beyond 1%. During the course of hearing before the Court, parties canvassed arguments limited to delay in handing over the site by the Petitioner and compensation awarded on account of expenses on overheads.

32. Before proceeding to examine the rival contentions of the parties, I may allude to the law on scope of judicial interference in an arbitral award under Section 34 of the 1996 Act. Sub-section (2-A) of Section 34 of 1996 Act, inserted by 2015 Amendment provides that an arbitral award not arising out of international commercial arbitration, may be set aside by the Court if the Court finds that the award is patently illegal and the Proviso states that an award shall not be set aside merely on the ground of an erroneous application of law or by reappreciation of evidence. It is settled that ‘patent illegality’ is an illegality which goes to the root of the matter and but which does not amount to mere erroneous application of the law. It is equally wellsettled that the Court does not sit in appeal over the arbitral award and the contours of powers under Section 34 of 1996 Act are circumscribed and limited. As observed by the Supreme Court in K. Sugumar and Another v. Hindustan Petroleum Corporation Limited and Another, (2020) 12 SCC 539, the reason for restricting the Court’s interference is that parties choose an alternate mechanism for dispute resolution and therefore, they must be left to reconcile themselves to the wisdom of the decision of the Arbitrator. In Dyna Technologies Private Limited v. Crompton Greaves Limited, (2019) 20 SCC 1, the Supreme Court held as follows:-

33. In Ssangyong Engineering and Construction Company Limited v. National Highways Authority of India (NHAI), (2019) 15 SCC 131, the Supreme Court held as follows:- “34. What is clear, therefore, is that the expression “public policy of India”, whether contained in Section 34 or in Section 48, would now mean the “fundamental policy of Indian law” as explained in paras 18 and 27 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204] i.e. the fundamental policy of Indian law would be relegated to “Renusagar” understanding of this expression. This would necessarily mean that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263: (2014) 5 SCC (Civ) 12] expansion has been done away with. In short, Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263: (2014) 5 SCC (Civ) 12], as explained in paras 28 and 29 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204], would no longer obtain, as under the guise of interfering with an award on the ground that the arbitrator has not adopted a judicial approach, the Court's intervention would be on the merits of the award, which cannot be permitted post amendment. However, insofar as principles of natural justice are concerned, as contained in Sections 18 and 34(2)(a)(iii) of the 1996 Act, these continue to be grounds of challenge of an award, as is contained in para 30 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204].

35. It is important to notice that the ground for interference insofar as it concerns “interest of India” has since been deleted, and therefore, no longer obtains. Equally, the ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as a conflict with the “most basic notions of morality or justice”. This again would be in line with paras 36 to 39 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204], as it is only such arbitral awards that shock the conscience of the court that can be set aside on this ground.

36. Thus, it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law, as understood in paras 18 and 27 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204], or secondly, that such award is against basic notions of justice or morality as understood in paras 36 to 39 of Associate (Civ) 204]. Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to Section 48(2)(b)(ii) was added by the Amendment Act only so that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263: (2014) 5 SCC (Civ) 12], as understood in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204], and paras 28 and 29 in particular, is now done away with.

37. Insofar as domestic awards made in India are concerned, an additional ground is now available under sub-section (2-A), added by the Amendment Act, 2015, to Section 34. Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within “the fundamental policy of Indian law”, namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality.

38. Secondly, it is also made clear that reappreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.

39. To elucidate, para 42.[1] of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204], namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Para 42.[2] of Associate (Civ) 204], however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award.

40. The change made in Section 28(3) by the Amendment Act really follows what is stated in paras 42.[3] to 45 in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204], namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair-minded or reasonable person would; in short, that the arbitrator's view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2-A).

41. What is important to note is that a decision which is perverse, as understood in paras 31 and 32 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204], while no longer being a ground for challenge under “public policy of India”, would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse.”

34. In OPG Power Generation Private Limited v. Enexio Power Cooling Solutions India Private Limited and Another, 2024 SCC OnLine SC 2600, the Supreme Court while dealing with the concept of ‘patent illegality’ held as follows:-

the 2015 Amendment, it was held that an award can be said to be against justice only when it shocks the conscience of the court [ See Associate Builders case, (2015) 3 SCC 49, para 36: (2015) 2 SCC (Civ) 204]. The Court illustrated by stating that where an arbitral award, without recording reasons, awards an amount much more than what the claim is restricted to, it would certainly shock the conscience of the court and render the award vulnerable and liable to be set aside on the ground that it is contrary to justice.

61. In Ssangyong [Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131: (2020) 2 SCC (Civ) 213], which dealt with post the 2015 Amendment scenario, it was observed that an argument to set aside an award on the ground of being in conflict with “most basic notions of justice”, can be raised only in very exceptional circumstances, that is, when the conscience of the court is shocked by infraction of some fundamental principle of justice. Notably, in that case the majority award created a new contract for the parties by applying a unilateral circular, and by substituting a workable formula under the agreement by another, dehors the agreement. This, in the view of the Court, breached the fundamental principles of justice, namely, that a unilateral addition or alteration of a contract can never be foisted upon an unwilling party, nor can a party to the agreement be liable to perform a bargain not entered with the other party [ See Ssangyong Engg. case, (2019) 15 SCC 131, para 76: (2020) 2 SCC (Civ) 213]. However, a note of caution was expressed in the judgment by observing that this ground is available only in very exceptional circumstances and under no circumstance can any court interfere with an arbitral award on the ground that justice has not been done in the opinion of the court because that would be an entry into the merits of the dispute. xxx xxx xxx

63. As we have already noticed, the object of inserting Explanations 1 and 2 in place of earlier explanation to Section 34(2)(b)(ii) was to limit the scope of interference with an arbitral award, therefore the amendment consciously qualified the term “justice” with “most basic notions” of it. In such circumstances, giving a broad dimension to this category [ In conflict with most basic notions of morality or justice.] would be deviating from the legislative intent. In our view, therefore, considering that the concept of justice is open-textured, and notions of justice could evolve with changing needs of the society, it would not be prudent to cull out “the most basic notions of justice”. Suffice it to observe, they [ Most basic notions of justice.] ought to be such elementary principles of justice that their violation could be figured out by a prudent member of the public who may, or may not, be judicially trained, which means, that their violation would shock the conscience of a legally trained mind. In other words, this ground would be available to set aside an arbitral award, if the award conflicts with such elementary/fundamental principles of justice that it shocks the conscience of the Court. Morality

64. The other ground is of morality. On the question of morality, in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204], this Court, after referring to the provisions of Section 23 of the Contract Act, 1872; earlier decision of this Court in Gherulal [Gherulal Parakh v. Mahadeodas Maiya, 1959 SCC OnLine SC 4: AIR 1959 SC 781]; and Indian Contract Act by Pollock and Mulla, held that judicial precedents have confined morality to sexual morality. And if “morality” were to go beyond sexual morality, it would cover such agreements as are not illegal but would not be enforced given the prevailing mores of the day. The Court also clarified that interference on this ground would be only if something shocks the Court's conscience [ See Associate Builders case, (2015) 3 SCC 49, para 39: (2015) 2 SCC (Civ) 204]. Patent illegality

65. Sub-section (2-A) of Section 34 of the 1996 Act, which was inserted by the 2015 Amendment, provides that an arbitral award not arising out of international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is visited by patent illegality appearing on the face of the award. The proviso to sub-section (2-A) states that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.

66. In Saw Pipes [ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705], while dealing with the phrase “public policy of India” as used in Section 34, this Court took the view that the concept of public policy connotes some matter which concerns public good and public interest. If the award, on the face of it, patently violates statutory provisions, it cannot be said to be in public interest. Thus, an award could also be set aside if it is patently illegal. It was, however, clarified that illegality must go to the root of the matter and if the illegality is of trivial nature, it cannot be held that award is against public policy.

67. In Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204], this Court held that an award would be patently illegal, if it is contrary to: (a) substantive provisions of law of India; (b) provisions of the 1996 Act; and

(c) terms of the contract [ See also three-Judge Bench decision of this

Court in State of Chhattisgarh v. SAL Udyog (P) Ltd., (2022) 2 SCC 275: (2022) 2 SCC (Civ) 776]. The Court clarified that if an award is contrary to the substantive provisions of law of India, in effect, it is in contravention of Section 28(1)(a) [ “28. Rules applicable to substance of dispute.—(1) Where the place of arbitration is situated in India—(a) in an arbitration other than an international commercial arbitration, the Arbitral Tribunal shall decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in India;***(2)***(3) While deciding and making an award, the Arbitral Tribunal shall, in all cases, take into account the terms of the contract and trade usages applicable to the transaction.”(As substituted by Act 3 of 2016 w.e.f. 23-10-2015)Prior to substitution by Act 3 of 2016, sub-section (3) of Section 28 read as under:

”

35. This Court in Rail Land Development Authority v. Parsvanth Developers Limited and Another, 2024 SCC OnLine Del 7031 observed as follows:- “(D) FINDING IN ANALYSIS

50. The scope of the jurisdiction under section 34 of the Arbitration and conciliation act has repeatedly come up for discussion before the Courts.

51. In MMTC Limited v. Vedanta Limited, (2019) 4 SCC 163, it was interalia held that: the reasons for vesting such a limited jurisdiction on the High Court in the exercise of powers under Section 34 of the Arbitration Act has been explained in the following words:” “11. As far as Section 34 is concerned, the position is well-settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii) i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the “fundamental policy of Indian law would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury [Associated Provincial Picture Houses v. Wednesbury Corpn., [1948] 1 K.B. 223 (CA)] reasonableness. Furthermore, “patent illegality itself has been held to mean contravention of the substantive law of India, contravention of the 1996 Act, and contravention of the terms of the contract.”

36. It bears repetition to state that judicial interference in arbitral awards is limited and circumscribed and extends to the grounds mentioned under Section 34 of 1996 Act and where the award suffers from patent illegality, Courts can interfere to avoid miscarriage of justice but the illegality must go to the root of the matter. Where the Court finds that the view taken by the Arbitrator is such that it shocks the conscience of the Court and is not even a possible or plausible view, the Court must interfere in the interest of justice. With this backdrop, I may now examine the objections raised by the Petitioner against the arbitral award and the defence set up by the Respondent.

37. The first issue pertains to delay in handing over the site. Respondent contended before the Arbitral Tribunal that delay in handing over the site was attributable to the Petitioner and was due to three reasons: (a) nonpayment of compensation in respect of the acquired land; (b) nonavailability of land due to missing plots and RE wall portion; and (c) hindrances in providing the ROW. Reliance was placed on Clause 4.1.[3] of the Contract which provided that 90% of the total length of the Project Highway was to be handed over to the Contractor within a period of 15 days from the date of the Agreement. With regard to the acquired land, Respondent urged that even though compensation had been handed over by the Petitioner to the concerned SDMs on 15.04.2015 and 17.04.2015, but due to non-disbursement thereof, land owners did not allow the Respondent to work at the site and this fact was brought to the notice of the Petitioner through various letters, C-13 to C-15, C-19, C-38, C-51 and R-1. With regard to missing plots, Respondent claimed that while acquiring the land, some plots were omitted and since these were coming within the alignment of the Project Highway, land owners did not allow the Petitioner to execute the work and despite sending a list of missing plots, precious little was done by the Petitioner. Respondent alleged that various hindrances at site in the ROW led to delay in completion of work which included receipt and approval for cutting of trees etc.

38. Petitioner, on the other hand, contested that the delay was solely attributable to the Petitioner. It was urged that in the meeting held on 16.12.2015, it was agreed between the parties that Respondent shall waive off the three pre-conditions to be fulfilled by NHAI i.e. procurement of ROW in accordance with Clause 4.1.3(a); environmental clearances including forest clearance; and shifting of obstructing utilities as per Clause

9.2. Respondent agreed not to claim damages from the Petitioner and in view of the waiver of the Respondent, the Appointed Date was declared as 18.12.2015 without imposition of penalties/damages. The argument was that once the parties mutually agreed to waive off reciprocal breach of their reciprocal obligations under the Contract, without imposition of penalties/ damages, Respondent could not agitate the issues of delay and/or compensation. It was also urged that since first three milestones were achieved by the Respondent, it was obvious that there was no difficulty faced with regard to availability of ROW.

39. The Arbitral Tribunal after a detailed analysis of the contractual Clauses 4.1.3, 8.1, 8.2, 8.3, 8.[4] and the documentary evidence on record came to a finding that there was a delay in handing over the site by the Petitioner and Issue No.

(i) was decided in favour of the Respondent. Relevant paragraphs from the award in this context, are as follows:- “66. This issue pertains to fixing of responsibility for handing over site. It was the contention of the claimant that the delay was on the part of the respondent, whereas, the respondent contended that the site had been handed over on time and the work was delayed on account of defaults attributable to the claimant. For appreciating the respective contentions of the parties, it would be apposite to reproduce hereunder the relevant provisions of the contract: “4.[1] Obligations of the Authority 4.1.[3] The Authority shall provide to the Contractor: (a) upon receiving the Performance Security under Clause 7.1.1, the Right of Way in accordance with the provisions of Clause 8.[2] and 8.3, within a period of 15 (fifteen) days from the date of this Agreement, on no less than 90% (ninety per cent) of the total length of the Project Highway; (b) approval of the general arrangement drawings (the “GDA”) from railway authorities to enable the Contractor to construct road over bridges/ under bridges at level crossing on the Project Highway in accordance with the Specifications and Standards, and subject to the terms and conditions specified in such approval, within a period of 60 (sixty) days from the Appointed Date, and reimbursement of all costs and expenses paid by the contractor to the railway authorities for and in respect of the road over bridges/ under bridges; and

(c) all environmental clearances as required under Clause 4.[3]

8.[1] The Site The site of the Project Highway (the “Site”) shall comprise the site described in Schedule-A in respect of which the Right of Way shall be provided by the Authority to the Contractor. The Authority shall be responsible for: (a)Acquiring and providing Right of Way on the site in accordance with the alignment finalized by the Authority, free from all encroachments and encumbrances, and free access thereto for the execution of this Agreement; and (b)Obtaining licenses and permits for environment clearances for the Project Highway. 8.[2] Procurement of the Site 8.2.[1] The Authority Representative and the Contractor shall, within 15 (fifteen) days of the date of this agreement, inspect the Site and prepare a memorandum containing an inventory of the site including the vacant and unencumbered land, buildings, structures, road works, trees and any other immovable property on or attached to the Site. Subject to the provisions of Clause 8.2.3, such memorandum shall have appended thereto an appendix (the “Appendix”) specifying in reasonable detail those parts of the Site to which vacant access and Right of Way has not been given to the Contractor. Signing of the memorandum, in two counterparts (each of which shall constitute an original), by the authorized representatives of the Parties shall be deemed to constitute a valid evidence of giving Right of Way to the Contractor for discharging its obligations under and in accordance with the provisions of this Agreement and for no other purpose whatsoever. Whenever the Authority is ready to hand over any part or parts of the site included in Appendix, it shall inform the Contractor, by notice, the proposed date and time such of handing over. The Authority Representative and the Contractor shall, on the date so notified, inspect the specified parts of the Site, and prepare a memorandum, contacting an inventory of the vacant and unencumbered land, buildings, structures, road works, trees and any other immovable property on or attached to the Site so handed over. Signing of the memorandum, in two counterparts (each of which shall constitute an original), by the authorized representatives of the Parties shall be deemed to constitute valid evidence of giving the relevant Right of Way to the Contractor. 8.2.[2] the Authority shall provide the Right of Way to the Contractor in respect of all land included in the Appendix by the date specified in Schedule-A for those parts of the Site referred to therein, or no later than 90 (ninety days) of the Appointed Date for those parts of the Site which have not been specified in Schedule-A, and in the event of delay for any reason other than Force Majeure or breach of this Agreement by the Contractor, it shall pay to the Contractor, Damages in a sum calculated in accordance with Clause 8.3. 8.2.[3] Notwithstanding anything to the contrary contained in this Clause 8.2, the Authority shall specify the parts of the Site, if any, for which Right of Way shall be provided to the Contractor on the dates specified in Schedule-A. Such parts shall also be included in the Appendix prepared in pursuance of Clause 8.2.1. For the avoidance of doubt, the Parties expressly agree that the Appendix shall in no event contain sections of the Project Highway the cumulative length of which exceeds 0% (ten per cent) of the total length of the Project Highway. 8.[3] Damages for delay in handing over the Site 8.3.[1] In the event the Right of Way to any part of the Site is not provided by the Authority on or before the date(s) specified in Clause 8.[2] for any reason other than Force Majeure or breach of this Agreement by the Contractor, the Authority shall pay Damages to the Contractor in a sum calculated in accordance with the following formula for and in respect of those parts of the Site to which the Right of Way has not been provided: Amount of Damages in Rs. per day per metre = 0.05 x C x1/L x 1/N Where C= the Contract Price; L= length of the Project Highway in meters; and N= Completion period in days (Appointed Date to Scheduled Completion Date) In the event that any Damages are due and payable to the Contractor under the provisions of this Clause 8.3.[1] for delay in providing the Right of Way, the Contractor shall, subject to the provisions of Clause 10.5, be entitled to Time Extension equal to the period for which the Damages have become due and payable under this Clause 8.3.1, save and except that: (a) If any delays involve time overlaps, the overlaps shall not be additive; and (b) Such Time Extension shall be restricted only to the Works which are affected by the delay in providing the Right of Way. For the avoidance of doubt, the Parties expressly agree that the Damages specified hereunder and the Time Extension specified in Clause 10.[5] shall be restricted only to failure of the Authority to provide the Right of Way for and in respect of the width of the roadway, its embankment and a parallel working strip at least 3 (three) meters wide. 8.3.[2] Notwithstanding anything to the contrary contained in this Agreement, the Contractor expressly agrees that Works on all parts of the Site for which Right of Way is granted within 90(ninety) days of the Appointed Date, or with respect to the parts of the Site provided in Schedule-A, no later than the date(s) specified therein, as the case may be, shall be completed before the Scheduled Completion Date and shall not qualify for any Time Extension under the provisions of Clause 8.3.1. 8.3.[3] Notwithstanding anything to the contrary contained in this Agreement, the Authority may at any time withdraw any Works forming part of this Agreement, subject to such Works not exceeding an aggregate value, such value to be determined in accordance with Schedule-H, equal to 10(ten) percent of the Contract Price. Provided that if any Works cannot be undertaken within the municipal limits of a town or within any area falling in a reserved forest or wildlife sanctuary, as the case may be, because the requisite clearances or approvals for commencing construction of Works therein have not been given 240 (two hundred and forty) days of the Appointed date, the affected Works shall be deemed to be withdrawn under the provisions of this Clause 8.3.[3] unless the Parties agree to the contrary, and such Works shall not be computed for the purposes of the aforesaid ceiling of 10%(ten per cent) hereunder. 8.3.[4] In the event of withdrawal of Works under Clause 8.3.3, the Contract Price shall be reduced by an amount equal to 90 (ninety) per cent of the values of the Works withdrawn and the Contractor shall not be entitled to any other compensation or Damages for the withdrawal of Works. Provided that if any Works are withdrawn after commencement of the Construction of such works, the Authority shall pay to the Contractor 110% (one hundred and ten per cent) of the fair value of the work done, as assessed by the Authority’s Engineer: 8.[4] Site to be free from Encumbrances Subject to the provisions of Clause 8.2, the Site shall be made available by the Authority to the Contractor pursuant hereto free from all Encumbrances and occupations and without the Contractor being required to make any payment to the Authority on account of any costs, compensation, expenses and charges for the acquisition and use of such Site for the duration of the Project Completion Schedule. For the avoidance of doubt, it is agreed that the existing rights of way, easements, privileges, liberties and appurtenances to the Site shall not be deemed to be Encumbrances. It is further agreed that, unless otherwise specified in this Agreement, the Contractor accepts and undertakes to bear any and all risks arising out of the inadequacy or physical condition of the Site.”

67. Mr. Markanda made his submissions under three heads, viz. (a) nonpayment of compensation for land acquisition; (b) non-availability of land due to missing plots; and (c) other hindrances. In respect of the sub-head (a), it was stated that there was a delay in disbursement of compensation to the farmers, who did not allow the claimant to execute the work. The respondent, on the other hand, stated that the compensation amount had been handed over to the concerned Revenue Authority and if the said Authority did not disburse the amount on time, the respondent cannot be faulted. The claimant referred to Annexure C-13 (28.12.2015) and stated that they had brought to the notice of the respondent at the very initial stage that they were facing difficulty while taking possession from the concerned villagers. Since the letter is of some importance for deciding the issue at hand, the relevant part thereof is reproduced hereunder: “As NHAI has already deposited the compensation amount to SDM Kharar, but SDM Kharar has not distributed the amount to concerned owner of the land as a result we are facing lot of difficulty while taking possession from concerned villagers. It is hampering the progress of work. So kindly instruct to SDM Kharar to expedite the process of distribution of amount as well as help us in taking of possession of land.”

68. The respondent sent a reply on 29.12.2015 (C-14) stating that the matter regarding distribution of compensation was discussed with the concerned SDM in the presence of the claimant, who confirmed that there was no problem in taking possession of the land and that disbursement was in process. The relevant part of the letter is as under: “Regarding possession of ROW, it is intimated that entire compensation as per awards announced by CALAs has already been deposited with concerned CALAs. Therefore, as per award, the land stands transferred and handed over to NHAI which also stands handed over to Contractor on Appointed Date. The details of funds deposited with CALAs were also handed over to your representative. The matter regarding distribution of compensation was also discussed in telecon with SDM Kharar on 28.12.2015 in the presence of Contractor (Sh Lokesh Mittal and Project Manager) who confirmed that there is no problem in taking possession of land and disbursement is in progress. In fact, it was also confirmed by SDM that you have already started work in considerable length in byepass portion. It is therefore advised that you may lodge FIR against the miscreants who are hindering the execution of work at site without delay.”

69. On 04.01.2016 (C-15), the claimant again wrote to the respondent that their representatives were regularly contacting the concerned SDM, who stated that payments were yet to be disbursed to the farmers to get the land from them. The relevant part of the letter is as under: “It is informed, our authorised executives are daily contacting office of SDM/Tehsildar Kharar for transferring the land of kurali Bypass- under acquisition. The revenue authorities have clarified that payment is yet to be disbursed to farmer to get possession from them. Thus the status of possession is same as stood on Appointed Date. Now we are forced to stop earthwork as no land is available to work since yesterday i.e. 03.01.2015.”

70. Mr. Markanda further referred to letter dated 08.02.2016 (C-19) to contend that compensation amount of the second instalment amounting to Rs.140 crores was yet to be disbursed and the farmers were not allowing the claimant to commence work. Reference was made to Annexure-A with the letter wherein a tabular statement was given with regard to nonavailability of various stretches of land. A perusal of the Table would show that the land made available to the claimant was only 16-17%. Annexure- A is as under: Annexure-A Chainage wise detail of encumbrance length (due to nondisbursement of Payment to farmer and Tree cutting) Starting Chainage Ending Chainage Length in mtr. Remark 16+200 22+680 6480 Tree cutting in Process. Therefore work cannot be start in these reaches. 22+680 22+760 80 Payment is not made to farmer till date. 22+770 23+220 450 Payment is not made 23+230 23+400 170 Payment is not made 23+410 25+720 2310 Payment is not made 27+330 28+400 1070 Payment is not made 29+010 29+900 890 Payment is not made Total encumbrance length 11450 Mtr.

71. The claimant further referred to letter dated 28.09.2016 (Annexure C-

38) whereby the non-availability of working front was brought to the notice of the respondent. Reference was also made to the deposition of RW-1 in this connection. It was contended that the witness had wrongly stated that a reply had been given to the letter of the claimant dated 08.02.2016 (C-19). In fact, as per record, the said letter remained unreplied.

72. In response, Dr. Bansal, learned counsel for the respondent stated that they cannot be held responsible for the delay in disbursing compensation by the concerned authorities as the respondent had deposited the amount well in advance with the concerned Revenue Authority. It was further contended that it was the obligation of the claimant to pursue the matter with the concerned SDMs for disbursement of compensation.

73. We have considered the respective submissions of the parties. From the record, it clearly transpires that the claimant did face problems in the execution of work due to non-payment of compensation to the land owners. The respondent cannot shrug off its responsibility by stating that they had fulfilled their obligation by depositing the amount with the Revenue Authority. In fact, since the completion of the Project was time bound, the respondent should have been proactive in pursuing the SDMs for disbursement of compensation. We also find from the record that the letter of the claimant dated 08.02.2016 (C-19) remained unresponded, despite the fact that the claimant had categorically mentioned the fact that they were unable to execute to start the work due to obstruction by the farmers. Annexure-A appended with C-19 gives a clear picture, inasmuch as a large area was not available for execution of work due to non-payment of compensation to the farmers. As mentioned by us above, there was no reply to this letter. It is further seen from letter dated 28.09.2016 (C-38) that under the head ‘Service Roads’, the claimant had categorically mentioned that ‘Non-availability of working front due to hindrances (payment not made by SDM for existing structure). The progress of Service Roads is according to site availability. Payment cannot be made due to payment procedure’. Even this letter did not elicit any response from the respondent.

74. Further reference is also made to letter dated 05.10.2017 (C-51) from the respondent to the SDM, Chamkaur Sahib, wherein it was mentioned as under: “….. it is requested to disburse the compensation already deposited in joint account of SDM-cum-CALA Chamkaur Sahib and Project Director for District Roopnagar without further delay so that construction of subject Project can be completed in time….”

75. A reading of Annexure C-51 clearly establishes that the matter regarding disbursement of compensation continued till 05.10.2017, though the stipulated date of completion was 17.12.2017.

76. From the foregoing, it is apparent that the claimant faced difficulty in execution of work on some stretches due to non-disbursement of compensation to the land owners/farmers, who did not allow execution of work at site. Annexure C-51 (05.10.2017) is a categorical admission of delay on the part of the respondent.

77. A conjoint reading of various documents on record would lead to the obvious inference that work could not be commenced at various stretches (identified in Annexure C-19 dated 08.02.2016). The contention of the respondent that 91% of the unencumbered land had been handed over to the claimant on the Appointed Date (18.12.2015) cannot stand the scrutiny of the evidence on record. Therefore, there is a force in the argument of the claimant that fixing of Appointed Date was notional and not based on actual availability of land.

78. The next sub-head pertains to missing plots, i.e. the area of land which had not been acquired by the respondent. Even before the Appointed Date, the claimant, vide letter dated 11.12.2015 (C-9), informed the respondent that there were some missing Khasra Numbers which had not been included in the land acquisition plan. In fact, working length available was only 25% of the project length. Thereafter, on 18.12.2015 (C-10), the claimant informed the respondent that some missing plots were yet to be acquired by the respondent. The details of the missing plots were intimated to the respondent vide the said communication. As per record, we do not find any response to this letter. However, a perusal of the details attached with the said letter reveals that the total stretch involved was quite substantial, in any case, more than 9%, which was the ROW yet to be provided by the respondent as on the Appointed Date. Further attention was drawn to letter dated 08.03.2016 (C-21) to contend that there were missing plots which were yet to be acquired. The contents of the letter read as under: “It is intimated that the missing plots in alignment of the subject project, which are critical for progress, are being acquired on consent basis by signing mutual agreements as per guidelines of NHAI. However, it has been reported that the land owners are not consenting for the process and asking directions from revenue department. It is therefore requested to direct concerned Kanungo/Patwari for Necessary Corporation and for preparation of required documents (copy enclosed) on priority basis.”

79. The claimant further referred to the letter of the respondent dated 28.03.2016 (C-23) wherein reference had been made to the letter of the SDM, Kharar dated 18.03.2016 (R-3). The SDM clearly mentioned that there were some discrepancies in the draft Notification for acquisition of land. This further proved that no action was taken on acquisition of missing plots.

80. Mr.Bansal contended that the claimant failed to give the list of missing plots to enable the respondent to take further action in the matter. He referred to letters dated 25.04.2016 (R-4) and 09.05.2016 (R-5). He stated that the respondent cannot be held responsible for any delay as the claimant did not fulfil its obligations under the contract.

81. We have carefully considered the respective contentions of the parties. It is on the record that while acquiring the land for the Project, some plots were indeed missed out. It was stated by CW-1 that the list of missing plots had been handed over to the respondent as early as 18.12.2015 (C-10), but prompt action was not initiated by the respondent. The respondent could not show any document on record to rebut the said contention of the claimant. In fact, a perusal of the letter of the SDM, Kharar to the respondent dated 18.03.2016 (R-3) and the letter of the respondent dated 28.03.2016 (C-23) would establish that there was no denying the fact that there had been some mistakes in issuing the Notification for acquisition of land. In this connection, reference can also be made to the letter of the claimant dated 07.04.2017 (C-44), wherein it was categorically mentioned as under: “(a) The 3A of missing plot of Kharar SDM was published on 13.12.2016, but till date 3D of the same has not been processed. (b) The 3G of missing Khasra of SDM Chamkaur Sahib was approved on dated 03.02.2016. But the payment of the same had not been made till yet.”

82. The record clearly reveals that the issue of missing plots continued to fester till 07.04.2017. In fact, it was the obligation of the respondent to acquire the land before the execution of work. Failure on their part to miss out on certain plots while issuing the Notification cannot be foisted on the claimant. From the record it is clear that the missing plots constituted more than 9% of the total ROW, which were said to be pending even as on the Appointed Date.

83. Under the third sub-head, Mr.Markanda has stated that there were other hindrances also, which delayed the completion of work and these have been admitted by the respondent in their letter dated 07.06.2016 (C- 33). It was admitted in the said document that there were many stretches which could not be handed over totalling to 1.19 KM out of the total realignment length of 7.00 KM. Leaving aside the other hindered stretches, this itself amounted to 17% of the total ROW. Therefore, the figure of 91% mentioned in the letter dated 16.12.2015 (C-11) was incorrect. The relevant extract of the letter dated 7.6.2016 (C-33) is as under: Starting Chainage Ending Chainage Total Length (Mtr) Status 22+680 23+230 550 Horticulture & missing plot of Yashpal Singh/ Dahiya Pvt. Ltd. 23+230 24+840 1610 Clear 24+840 24+880 40 11 Kva Electric Line 24+880 25+460 580 Clear 25+460 25+540 80 Portion pending due to decision of PUP 25+490 25+540 25+900 360 Clear 25+900 27+300 1400 RE Wall Portion 27+300 27+430 130 Clear 27+430 27+460 30 Diversion for PUP 27+460 28+140 680 Clear 28+140 28+360 220 Pyara Singh missing plot in Kharar SDM 28+360 28+930 570 Clear 28+930 29+200 270 Missing plot of Bhupinder Singh & popular of Jagmmal Singh & Syam Singh 29+200 29+680 480 Clear Total 7000 Clear wall without RE Wall RE Wall portion 1400 Un-cleared land area 1190 Total Length 7000

84. The claimant further referred to their letter dated 28.09.2016 (C-38, colly) and the Appendix thereto under the head “Details of hindrances at site”. From the said table, it is seen that the total length affected was 1.425 KM. Further, through their letter dated 09.02.2017 (C-43), the claimant once again intimated the hindered stretches of land.

85. Dr. Bansal rebutted the submissions of the claimant. It was argued that having once agreed to fixing of the Appointed Date and also having agreed that 91% ROW was available, the claimant could not be heard to say that the requisite length of land was not available. He emphasized the fact that the claimant had agreed not to claim any damages as per clauses 4.1.4, 8.3, 9.2, 9.[4] or any other clause of the contract pertaining to conditions precedent in lieu of settlement of waiver by both the parties. He further stated that the losses being claimed were not payable as the claimant could not go beyond the Appointed Date to aver anything to the contrary. He contended that having waived off the right to claim damages in the meeting held on 16.12.2015, the claimant could not be heard to say that the requisite length of ROW had not been handed over on time.

86. We have carefully considered the respective submissions of the parties. From the record, it is seen that the claimant had been addressing various letters to the respondent pointing out non-availability of stretches of land due to various reasons, but there was no rebuttal thereto by the respondent. Mere silence does not amount to acquiescence, but in view of the salient nature of the communications, it was expected that the respondent would at least rebut the figures given in the said letters if the same had not been in consonance with the factual position. Another fact which cannot be disregarded that the respondent had itself through letter dated 07.06.2016 (C-33) admitted in unequivocal terms that at least 1.19 KMs out of the total length of 7.00 KMs was not available due to land constraints. The relevant extract of the said letter is as under:

given table and Contractor could not start the earth work in these areas.”

87. It is also relevant to refer to letter dated 06.04.2018 (C-62, colly) from the Authority Engineer to the respondent, wherein it was admitted in clear terms at Serial no 4 that there had been delay in handing over of balance ROW and pending drawings. In the tabular chart where the AE gave his comments/recommendations, it was admitted that the total delay of 225 days was on account of delay in handing over of ROW, delay in pending drawings of ROB and other reasons. In the light of the admissions of the AE and acceptance of the said recommendations by the respondent, there is no doubt left that there was delay in handing over of site. The table being of utmost importance is reproduced hereunder for better appreciation:

88. On a conjoint reading of the evidence on record, Claimant’s stand is established that the ROW was handed over to the claimant in various phases, inasmuch as the same continued to be handed over even after the stipulated date of completion as can be seen from Annexure C-62, colly, the relevant part of which has been reproduced above. In this light of the matter, the reliance of the respondent on the letter dated 16.12.2015 (C-

11) is misplaced as also is their contention that 91% of ROW had been handed over to the claimant as on the Appointed Date (18.12.2015). We, therefore, have no hesitation in concluding that there was delay in handing over of the site by the respondent. Issue No.1 stands decided accordingly.”

40. Clause 4.[1] deals with the obligations of the Petitioner and Clause 4.1.[3] provides that the Authority shall provide to the Contractor, upon receiving the Performance Security under Clause 7.1.1, ROW in accordance with Clauses 8.[2] and 8.3, within 15 days from the date of the Agreement, on no less than 90% of the total length of the Project Highway. Clause 8.[2] was for ‘Procurement of the Site’ and Clause 8.2.[1] inter alia provided that Petitioner’s representative and Respondent shall within 15 days from the date of the Agreement inspect the site and prepare a Memorandum containing an inventory of the site including vacant and unencumbered land, buildings, structures, roadworks, trees and any other immovable property on or attached to the site. Clause 8.[4] provides that subject to provisions of Clause 8.2, site shall be made available by the Authority to the Contractor free from all encumbrances and occupations and without the Contractor being required to make any payment on account of any costs, compensation, expenses and charges for acquisition and use of site for duration of the Project Completion Schedule.

41. After noticing these Clauses, the Arbitral Tribunal dealt with each of the three Heads relating to the delay in handing over the site. The Arbitral Tribunal observed that the record revealed that Respondent did face problems in execution of the work due to non-payment of compensation to the land owners. Reference was made to letter dated 28.12.2015 (C-13) sent by the Respondent to the Petitioner bringing forth that concerned villagers were creating difficulties in taking over the possession of the site. Reference was made to reply of the Petitioner dated 29.12.2015 (C-14), whereby Respondent was advised to lodge an FIR against the miscreants who were hindering the execution of the work. On 04.01.2016 (C-15), as noted by the Arbitral Tribunal, Respondent had again written to the Petitioner bringing out that the concerned SDM had confirmed that payment was yet to be disbursed to the farmers, whose lands were acquired. Arbitral Tribunal thereafter took note of Document C-19 which indicated that compensation amount of second installment amounting to Rs.140 crores was yet to be disbursed and farmers were not allowing the Respondent to commence work. Tribunal relied on an uncontroverted tabular statement placed before it showing the non-availability of various stretches of land which depicted that at that stage, only 16 to 17% of the land was available to the Respondent, in addition to the deposition of RW-1 in this regard.

42. Arbitral Tribunal observed that the Document C-19 remained un-responded by the Petitioner despite the fact that Respondent had categorically mentioned therein that it was unable to execute and commence the work due to obstruction by the farmers and consequently, rendered a finding that the clear picture was that a large area was not available for execution of work due to non-payment of compensation to the farmers. It was also held that reading of letter dated 05.10.2017 (C-51) sent by the Petitioner to SDM, Chamkaur Sahib, by which the SDM requested the Petitioner to disburse the compensation deposited in the joint account of the SDM and Project Director without delay so that construction can be completed on time, clearly established that the matter regarding disbursement of compensation continued till 05.10.2017 though the Stipulated Date of Completion was 17.12.2017. Tribunal concluded that conjoint reading of various documents led to an inference that work could not be commenced at various stretches due to delay by the Petitioner and Petitioner’s contention that 91% of the unencumbered land had been handed over to the Respondent on the Appointed Date i.e. 18.12.2015 could not stand the scrutiny of evidence on record.

43. As for the missing plots, Arbitral Tribunal observed that even before the Appointed Date, Respondent had vide letter dated 11.12.2015 (C-9) informed the Petitioner that there were some missing Khasra Numbers which were not included in the land acquisition plan and in fact, the working length available was only 25% of the project length. Details of missing plots were again intimated on 18.12.2015 (C-10) but there was no response. Arbitral Tribunal also referred to letter dated 08.03.2016 (C-21), wherein it was reiterated by the Respondent that though the missing plots, in alignment of the subject project and critical for progress, were acquired with the consent of the land owners, but they were not permitting the Respondent to work and were asking for directions from the Revenue Department. It was thus requested by the Respondent that necessary directions be issued by the Petitioner to the concerned Kanungo/Patwari on priority basis. C-23 was a letter of the Petitioner dated 28.03.2016, wherein reference was made to a letter of the SDM, Kharar dated 18.03.2016 (R-3) stating that there were discrepancies in the draft Notification for acquisition of land, which further proved, according to the Arbitral Tribunal, that no action was taken on acquisition of missing plots. Based on the documents, Arbitral Tribunal concluded that as per record, while acquiring the land for the Project, some plots were indeed missed out and while the list was sent to the Petitioner as early as on 18.12.2015 (C-10), prompt action was not taken by the Petitioner and in fact, Petitioner was unable to show any document on record to rebut this position. Letters of the SDM were pointers to the fact that mistakes were made while issuing the Notification for land acquisition and that the issue of missing plots continued to fester till 07.04.2017. Arbitral Tribunal rendered a finding that it was the obligation of the Petitioner to acquire the land before execution of the work and failure on its part to miss out certain plots cannot be foisted on the Respondent and that these missing plots constituted more than 9% of the total ROW.

44. Under the third sub-Head with regard to hindrances in execution of the work, Arbitral Tribunal referred to letter dated 07.06.2016 (C-33), wherein Petitioner admitted that there were many stretches which could not be handed over, totalling to 1.19KM out of the total re-alignment length of 7.00KM and that leaving aside the other hindered stretches, this itself amounted to 17% of the total ROW. Basis this uncontroverted document, Arbitral Tribunal rendered a finding that the stand of the Petitioner that 91% of the land was handed over taken in its letter dated 16.12.2015 (C-11) was incorrect.

45. The Arbitral Tribunal after careful examination of the documents including letter dated 28.09.2016 [C-38 (colly.)] and Appendix thereto under the Head ‘Details of hindrances at site’ observed that Respondent was addressing several letters to the Petitioner pointing out non-availability of stretches of land due to various reasons, but there was no rebuttal thereto. Another fact, which according to the Arbitral Tribunal, could not be disregarded was that Petitioner itself vide letter dated 07.06.2016 (C-33) admitted in unequivocal terms that at least 1.19 KMs out of total length of 7.00KMs was not available due to land constraints. Arbitral Tribunal significantly, also referred to letter dated 06.04.2018 [C-62 (colly.)] from the AE to the Petitioner admitting in clear terms at serial No. 4 that there had been delay in handing over balance ROW and pending drawings. In the tabular chart, where the AE gave his comments/ recommendations, it was admitted that total delay of 225 days was on account of delay in handing over ROW, pending drawings of ROB and other reasons. Looking at the admissions of the AE and acceptance of the recommendations by the Petitioner, the Tribunal rendered a finding that there was no doubt that there was delay in handing over the site and in fact, the Tribunal took pains to make and refer to a tabular representation to show the period of hindrance; days of hindrance; overlapping period etc. for better appreciation and finally concluded that Respondent’s stand that ROW was handed over in various phases and even beyond the Stipulated Date of Completion, was established. It was also held that reliance of the Petitioner on letter dated 16.12.2015 (C-

11) was misplaced as also their contention that 91% of ROW had been handed over on the Appointed Date. It was observed that there was no hesitation in concluding that there was delay in handing over the site to the Respondent and resultantly Issue No.1 was decided in favour of the Respondent.

46. From a reading of this portion of the arbitral award, it is clear that the Arbitral Tribunal has examined each aspect of the rival contentions as also various documents placed on record along with the contractual clauses enumerating respective obligations of the parties and consequences of breach thereof. Documentary evidence on record including letters reflecting admission of the Petitioner, substantiates that there was delay by the Petitioner in handing over the site, leading to prolongation of contract. The Arbitral Tribunal has meticulously examined each of the three Heads raised by the Respondent to establish that there was delay in handing over the site by the Petitioner and held that: (a) Respondent repeatedly brought to the notice of the Petitioner that the villagers were obstructing the taking over of the possession as compensation was not disbursed post-acquisition of their lands; (b) the concerned SDM informed the Petitioner that the compensation was lying in the joint account but was not disbursed as a result of which possession could not be taken; (c) documents show that compensation amount of the second installment amounting to Rs.140 crores was yet to be disbursed and farmers were not permitting commencement of work; (d) Petitioner was obliged to fulfil the obligation of disbursing the compensation so that acquisition process could be completed and Petitioner cannot shrug its responsibility by merely stating that compensation was deposited with the Revenue Authority; (e) it was evident from the documents on record that Respondent faced difficulty in execution of the work on various stretches due to the non-disbursement of the compensation; (f) 91% of the unencumbered land was not handed over to the Petitioner on the Appointed Date i.e. 18.12.2015; (g) there were some missing plots which were not included in the acquisition plan and working length available was only 25% of the project length; (h) no pro-active steps were taken by the Petitioner to acquire the missing plots despite the Respondent informing the Petitioner before the Appointed Date of the details of the said plots; (i) SDM, Kharar had clearly stated in its communication that there were discrepancies in the draft Notification for acquisition of land pertaining to the missing plots and several plots were indeed missed out; (j) issue of missing plots continued to fester till 07.04.2017 and there was a clear failure of the Petitioner to fulfil its obligation as missing plots constituted more than 9% of the total ROW; and (k) Petitioner admitted in its letter dated 07.06.2016 (C-33) that many stretches of land could not be handed over totalling to 1.19KM out of total realignment length of 7.00KM and leaving aside other hindered stretches, this itself amounted to 17% of the total ROW. Petitioner is unable to demonstrate any patent illegality, meriting interference.

47. Main plank of the argument of the Petitioner, as pleaded in the objection petition is that the Arbitral Tribunal has acted in violation of contractual clauses being 4.1.3, 4.1.4, 8.[3] and 9.[2] as also contrary to the Minutes of the Meeting dated 16.12.2015 recording that 91% of ROW was available and Respondent had agreed to waive off its claim with regard to fulfilment of pre-conditions on behalf of the Petitioner. Arbitral Tribunal has carefully examined these submissions in paragraph 85 onwards of the arbitral award and negated these contentions for reason that while the Respondent addressed several letters to the Petitioner pointing out the nonavailability of stretches of land due to various factors, but there was no rebuttal. Emphasis was laid by the Tribunal on the letter dated 07.06.2016 (C-33), wherein Petitioner admitted in unequivocal terms that at least 1.19KMs of land was not available due to various constraints and even the AE in his letter dated 06.04.2018 [C-62 (colly.)] admitted that there was delay in handing over of balance ROW to the extent of 225 days and this comment by the AE was accepted by the Petitioner. Based on these documents and admissions, Arbitral Tribunal concluded that the contention of the Petitioner that 91% of ROW had been handed over on Appointed Date was misplaced.

48. Insofar as Clauses 4.1.4, 8.3, 9.[2] and 9.[4] are concerned, Arbitral Tribunal notes that reliance of the Petitioner on these Clauses was of no avail since these pertained to waiving off the condition precedent on 16.12.2015 and purported handing over of 91% of ROW on the said date. Waiver, if any, was limited to fixing of the Appointed Date and Respondent had not made any claim for delay in handing over of site within the time stipulated i.e. 15 days from the signing of the contract under Clause 4.1.3(a) upto the fixing of the Appointed Date. It was observed that Clause 4.1.[4] pertained to entitlement of the Contractor to damages in terms of Clause 8.[3] whereas in the present reference, no claim for damages for delay in handing over ROW from date of signing of Agreement upto Appointed Date was made. It was held that Clause 8.[3] would also be irrelevant as there was no claim for damages upto the Appointed Date. Schedule-A assumed significance as the dates on which ROW was to be provided was mentioned therein and record did not indicate that there was any waiver with regard to date in Schedule-A, which provided that ROW was to be handed over within 150 days of date of commencement i.e. 18.05.2016 while there was evidence to show that complete ROW could not be handed over even upto the expiry of stipulated period of contract. Arbitral Tribunal further held that Clauses 9.[2] and 9.[4] did not come into play insofar as fixing of Appointed Date was concerned and even otherwise, delay in handing over of site was overlapping the delay on account of shifting of trees and utilities. The findings are based on appreciation and analysis of the evidence on record and do not suffer from patent illegality thus are not vulnerable to interference by this Court under Section 34 of 1996 Act. During the course of hearing, no arguments were addressed to dent these findings in the award. It needs no reiteration that the Arbitral Tribunal is the final arbiter of facts and evidence and in the narrow window of judicial interference, I am unable to interfere in the findings of fact based on evidence rendered by the Arbitral Tribunal on Issue No. (i), which are upheld.

49. Issue No.

(ii) was whether there was breach of other obligations causing delay in execution of the work. Tribunal has not delved into this issue since delays under this pertained to shifting of trees and utilities and finding to this effect had been rendered by the Arbitral Tribunal under Issue No. 1 and delays on both aspects were overlapping. Accordingly, finding of the Arbitral Tribunal under Issue No.

(ii) also warrants no interference.

50. On the aspect of compensation under Issue no.

(iii) and effect of undertakings, settled as Issue no. (iv), it was urged on behalf of the Petitioner that having given 5 undertakings, that Respondent shall not claim any damage for prolongation of the contract period, it is estopped from claiming damages and the Arbitral Tribunal has thus erred in awarding compensation. Reliance was placed on several judgments in this context. Respondent, on the other hand, had rebutted the contention by firstly arguing that the entire case of the Petitioner in the Statement of Defence was restricted to two undertakings only, given vide letters dated 03.04.2019 (R-

6) and 09.05.2019 (R-7) and the Arbitral Tribunal while settling issues had only settled the issue on the effect of these two undertakings and therefore, during the course of hearing, Petitioner could not refer to the other three undertakings. On merits, it was contended that the undertakings were taken under duress much after the completion of the work and while there was no occasion to give such undertakings, Respondent had no option but to furnish the undertakings since the final bill was not being cleared for payment. Reliance was placed on judgments of the Supreme Court on economic duress.

51. Arbitral Tribunal has referred in detail to each of the 5 undertakings, albeit holding that Petitioner cannot refer to or rely on 3 of these undertakings, being beyond the pleadings in the Statement of Defence and the issues settled. Finding was rendered that each of the undertakings by their nature and content indicate that they were in a language dictated by the officials of the Petitioner and were not out of free volition of the Respondent. It was observed that the first undertaking dated 16.12.2015 (C-11) was limited only to waiving the claim for damages on account of non-fulfilment of conditions precedent for fixing the Appointed Date and even otherwise, there was no claim in the proceedings for damages for the period upto the said date.

52. In respect of the second undertaking dated 16.02.2018 (R-11), Arbitral Tribunal found that Respondent had expressly reserved its right that the contents of the letter were without prejudice to the rights available under the Contract. The third undertaking dated 15.03.2018 (C-58) was held to be of no consequence since it was merely a communication in continuation of R-11 and C-58. Adverting to the fourth undertaking dated 03.04.2019 (R-6), Arbitral Tribunal rendered a finding that it was discernible from a plain reading of the letter, more particularly, first paragraph, that it was given on the asking of the officials of the Petitioner and even otherwise, much credit could not be given to the said letter since by a subsequent letter dated 09.05.2019 (R-7), this letter was superseded. For the fifth undertaking dated 09.05.2019 (R-7), the Arbitral Tribunal held that the said letter was on terms dictated by the officials at the Headquarter of the Petitioner and was not of free volition. The undertaking was given nearly four and a half months after completion of the work and there was no occasion for the Respondent to do so unless the circumstances were such that without furnishing the undertaking, Respondent would have suffered financial losses. Arbitral Tribunal noted the relevant fact that final bill of the Respondent was released only after receipt of the undertaking dated 09.05.2019 and concluded that this was a clear case of economic duress and would not bind the Respondent and in support of the conclusion, relied on the judgments of the Supreme Court in Chairman and MD, NTPC Ltd. (supra), National Insurance Company Limited (supra), R.L. Kalathia (supra) and Puri Construction P. Ltd (supra). Relevant passages from the arbitral award are as follows:- “119. We have considered the respective submissions of the parties and have also perused the evidence on record and the judgments cited by the parties. We find force in the contention of the claimant that the respondent had referred to only two undertakings in the Statement of Defence, i.e. dated 03.04.2019 and 09.05.2019. In fact, on the basis of the said pleadings of the respondent, the Arbitral Tribunal had framed the issue wherein mention had been made to the aforementioned undertakings. If the Respondent was relying on other undertakings, firstly they ought to have been pleaded in the Statement of Defence. Secondly, at the time of framing of points of determination, the Respondent ought to have insisted for inclusion of other three undertakings, which they tried to argue as an afterthought. The respondent cannot be allowed to urge anything against the pleadings. However, being conscious of the fact that the strict rules of CPC are not applicable to the arbitration proceedings, we shall deal with the submissions of Dr. Bansal on merits in the interest of justice.

120. The reference to the letter dated 16.12.2015 (C-11), which is the first undertaking as per the respondent, is misplaced. We have already dealt with in detail the contents of this communication supra and the said findings are also applicable to the present contention of the respondent as well. Suffice to say that the undertaking was limited only to waiving of the claim for damages on account of non-fulfilment of conditions precedent for fixing the Appointed Date. Even otherwise, there is no claim in the present proceedings for damages for the period upto the Appointed Date.

121. The second undertaking referred by the respondent is dated 16.02.2018 (R-11). The contention of the respondent is not well-founded since the claimant had expressly reserved the right to the effect that the contents of the said letter were without prejudice to the rights available to them under the contract. Similarly, the third undertaking dated 15.03.2018 (C-58) is also of no consequence since it was merely in continuation of R-

11. We are also of the considered view that R-11 and C-58 would nullify the effect since there were subsequent letters in the nature of undertakings given by the claimant on the asking of the respondent. We shall deal with these letters hereinafter.

122. Now adverting to the fourth undertaking dated 03.04.2019 (R-6). From the language of this letter, it is easily discernible that the same has been given on the asking of the respondent, which is clear from the first para of the letter, which reads as under: “In response to your office letter vide No. 158 dated 02.04.2019, a clarification has been sought from us regarding any claims under clause 8.[3] or any other clause of the contract agreement.”

123. In any case, not much credence can be given to R-6 since a reading of a subsequent letter dated 09.05.2019 (R-7) would make it apparent that this letter had been superseded. In the letter dated 09.05.2019 (R-7), the claimant referred to a letter of the respondent of the same date, wherein it has been stated as under: “In response to your office letter vide no NHAI/PIU/MHL/Conc./161 Dated 09th May 2019, a clarification has been sought from us regarding any claims under clause 8.[3] or any other clause of the contract agreement. In this regard, we would like to confirm you that we have absolutely no intension to claim any damages due to this EOT in pursuance to any of the provisions/ clauses contained in entire Contract Agreement.”

124. The respondent had made a reference in their letter dated 09.05.2019 to a letter dated 08.05.2019 from the HQ of the respondent asking for certain clarifications and for giving an undertaking in the language specified therein. The letter dated 08.05.2019 being of relevance, the contents thereof are reproduced hereunder: “Please refer to above cited subject and reference letter vide which you have submitted EOT proposal duly recommended for approval of Competent Authority stating that the contractor vide letter no. MGCPL-ATEPL/HO/2019-20/06 dated 03.04.2019 has stated that "we don't have any claims in respect of clause 8.[3] or any other clause as provisioned in the agreement". The same was recommended by PD PIU Mohali vide letter NHAI/PIU/MHL/11182/Conc./159 dated 03.04.2019.

2. Competent Authority has instructed that the letter written by Contractor may be vetted by Legal Advisor Also. Accordingly, matter was forwarded to Legal Division. In the matter, Legal Advisor submitted that 'we are of the view that Letter no. MGCPL- ATEPL/HO/2019-20/06 dated 03.04.2019, addressed by the Contractor to PD Mohali is a counter offer and conditional. Suffice it would be to state, that the contractor should have been confined to the proposal submitted by the PD Mohali to the effect that if Contractor has any intension for claiming any damages due to this EOT in pursuance to provisions/clauses mentioned in entire agreement. Vide his letter no. NHAI/PIU/MHL/11182/Conc./158 dated 02.04.2019 and his reply should have been "This Contractor has absolutely No intension to claim any damages due to this EOT in pursuance to any of the provisions/clauses contained in entire Contract Agreement." Letter is vetted accordingly.”

125. From a perusal of the letters dated 08.05.2019 and the two letters dated 09.05.2019, the irresistible conclusion is that the undertaking dated 09.05.2019 submitted by the claimant was on the terms dictated by the HQ of the respondent and could not be said to be of free volition by the claimant. This letter also reveals that the language of the earlier undertaking dated 03.04.2019 (R-6) was not to the liking of the HQ. Therefore, a fresh undertaking was sought instead of the undertaking dated 03.04.2019. Therefore, we have no hesitation in holding that the undertaking dated 03.04.2019 was obliterated by subsequent events.

126. Now adverting to the undertaking dated 09.05.2019, as held by us above, it was not a voluntary act on the part of the claimant as it was the requirement of the respondent to furnish the undertaking. It is also seen from record that this undertaking had been given nearly 4½ months after the completion of work. There was no occasion for the claimant to do so, unless the circumstances were such that without furnishing the undertaking, the claimant would have suffered financial losses. Record reveals that the final bill of the claimant was released only after receipt of the undertaking dated 09.05.2019. This is a clear case of economic duress and thee undertaking furnished by the claimant cannot be said to be a voluntary act so as to be binding on them. Accordingly, the judgments relied upon by the learned counsel for the respondent are not applicable to the facts and circumstances of the present case.

127. In Chairman and MD, NTPC Ltd. Versus Reshmi Constructions, Builders and Contractors, (2004)2 SCC 663, it was held by the Supreme Court as under:

stronger position”

128. In National Insurance Co. Ltd. Versus Boghara Polyfab Pvt. Ltd., (2009)1 SCC 267, the Supreme Court held in para 52 as under: “52. Some illustrations (not exhaustive) as to when claims are arbitrable and when they are not, when discharge of contract by accord and satisfaction are disputed, to round up the discussion on this subject are:

(i) A claim is referred to a conciliation or a pre-litigation Lok Adalat.

The parties negotiate and arrive at a settlement. The terms of settlement are drawn up and signed by both the parties and attested by the conciliator or the members of the Lok Adalat. After settlement by way of accord and satisfaction, there can be no reference to arbitration.

(ii) A claimant makes several claims. The admitted or undisputed claims are paid. Thereafter negotiations are held for settlement of the disputed claims resulting in an agreement in writing settling all the pending claims and disputes. On such settlement, the amount agreed is paid and the contractor also issues a discharge voucher/no-claim certificate/full and final receipt. After the contract is discharged by such accord and satisfaction, neither the contract nor any dispute survives for consideration. There cannot be any reference of any dispute to arbitration thereafter.

(iii) A contractor executes the work and claims payment of say rupees ten lakhs as due in terms of the contract. The employer admits the claim only for rupees six lakhs and informs the contractor either in writing or orally that unless the contractor gives a discharge voucher in the prescribed format acknowledging receipt of rupees six lakhs in full and final satisfaction of the contract, payment of the admitted amount will not be released. The contractor who is hardpressed for funds and keen to get the admitted amount released, signs on the dotted line either in a printed form or otherwise, stating that the amount is received in full and final settlement. In such a case, the discharge is under economic duress on account of coercion employed by the employer. Obviously, the discharge voucher cannot be considered to be voluntary or as having resulted in discharge of the contract by accord and satisfaction. It will not be a bar to arbitration.

(iv) An insured makes a claim for loss suffered. The claim is neither admitted nor rejected. But the insured is informed during discussions that unless the claimant gives a full and final voucher for a specified amount (far lesser than the amount claimed by the insured), the entire claim will be rejected. Being in financial difficulties, the claimant agrees to the demand and issues an undated discharge voucher in full and final settlement. Only a few days thereafter, the admitted amount mentioned in the voucher is paid. The accord and satisfaction in such a case is not voluntary but under duress, compulsion and coercion. The coercion is subtle, but very much real. The “accord” is not by free consent. The arbitration agreement can thus be invoked to refer the disputes to arbitration.

(v) A claimant makes a claim for a huge sum, by way of damages. The respondent disputes the claim. The claimant who is keen to have a settlement and avoid litigation, voluntarily reduces the claim and requests for settlement. The respondent agrees and settles the claim and obtains a full and final discharge voucher. Here even if the claimant might have agreed for settlement due to financial compulsions and commercial pressure or economic duress, the decision was his free choice. There was no threat, coercion or compulsion by the respondent. Therefore, the accord and satisfaction is binding and valid and there cannot be any subsequent claim or reference to arbitration.”

129. In R.L. Kalathia and Co. versus State of Gujarat, (2011)2 SCC 400, it was held as under:

130. The judgment of a Division Bench of the Delhi High Court in Puri Construction Pvt. Ltd. Versus Larsen and Toubro Ltd., 2015 SCC OnLine Del 9126, is relevant in this regard and the relevant paras are reproduced hereunder: “76. The Tribunal had found that materials on the record and the overall facts of the case as revealed in the proceeding, established the exercise of coercion upon PCL and that consequently, it was entitled to avoid the Supplementary Agreement. L&T's objection to this is three fold: first, that the plea of coercion was not taken; secondly, that on merits the findings are unwarranted given that PCL entered into the agreement with open eyes and even welcomed its implementation it could have avoided the agreement, which at best was voidable at its option and thirdly that the Tribunal's finding about the Supplementary Agreement not binding on PCL is contrary to its reliance on the Tripartite Agreement.

78. Pao On v. Lau Yiu 1979 (3) All ER 65 (PC), Universe Tankships Inc of Monrovia v. International Transport Workers Federation, (1983) 1 AC 366 and Atlas Express v. Kafco (Importers & Distributors) Ltd. 1989 (1) All ER 641 are decisions where the Courts in United Kingdom (UK) have recognized and applied the concept of “economic duress” as a factor which can successfully avoid a commercial contract. In Universe Tankships Inc (supra) it was held that:- “The classic case of duress is not the lack of will to submit but the victim's intentional submission arising from the realisation that there is no practical choice open to him…..The absence of choice can be proved in various ways, e.g. by protest, by the absence of independent advice, or by a declaration of intention to go to law to recover the money paid or the property transferred…..But none of these evidential matters goes to the essence of duress. The victim's silence will not assist the bully, if the lack of any practicable choice but to submit is proved. The present case is an excellent illustration. There was no protest at the time, but only a determination to do whatever was needed as rapidly as possible to release the ship. Yet nobody challenges the judge's finding that the owner acted under compulsion.”

79. Dimskal Shipping Co. v. International Transport Workers' Federation [1992] 2 AC 152 confirmed that economic pressure may be sufficient to amount to duress. The Court observed that the economic pressure must be “a significant cause” inducing the threatened party to enter into the contract. Huyton v. Cremer [1999] 1 Lloyds Rep 620, upheld an award which found that an impugned agreement was entered into as a consequence of economic duress. The two elements which went to establish that were, first, “illegitimate pressure by one party”, and second that (such pressure) should be “a significant cause inducing the other party to act as he did”, “the critical enquiry” as being “not whether the conduct is lawful but whether it is morally or socially unacceptable”. Yet a note of caution was added that the Court should not set its sights too high and it might be relatively rare to have cases in which “lawful act duress” in a commercial context. The most recent English decision on economic duress vitiating a contract was Progress Bulk Carriers Ltd. v. Tube City IMS LLC 2012 (2) All ER (Comm) 855, where an arbitration award which upheld the plea of economic duress-raised by the charterer of a vessel against the vessel owner was confirmed. It was held that: “illegitimate pressure can involve the doing of acts which are not unlawful in themselves, albeit unusually in commercial cases, but in any event, the refusal to substitute the Agia for the Cenk K unless the Charterers agreed to waive their prior breach, has to be seen both in the light of that prior repudiatory breach which was unlawful and the Owner's subsequent attempts to take advantage of the position created by that unlawfulness.”

80. CTN Cash and Carry Ltd. v. Gallaher Ltd. [1994] 4 All ER 714 and DSND Subsea Ltd. v. Petroleum Geo Services ASA 2000 WL 1741490 are UK cases where the courts refused to apply the doctrine of economic duress. In DSND Subsea (suprea) the Court observed that “Illegitimate pressure must be distinguished from the rough and tumble of the pressures of normal commercial bargaining.”

81. Chitty on Contract (30th Edition by Hugh Beale, 2008) discusses the subject of contracts vitiated by economic duress. The relevant discussion is extracted below: “7-006…Further, because duress does not truly deprive a party of all choice, but only presents him with a choice between evils, it is not possible to inquire simply whether the party relying on duress had “no choice”; the inquiry must necessarily be as to the nature of the choices he was presented with. ****************** ******************** 7-008. Legitimacy of the pressure or threat. Once it is accepted that the basis of duress does not depend upon the absence of consent, but on the combination of pressure and absence of practical choice, it follows that two questions become allimportant. The first is whether the pressure or the threat is legitimate; the second, its effect on the victim. Clearly, not all pressure is illegitimate, nor even are all threats illegitimate. In ordinary commercial activity, pressure and even threats are both commonplace and often perfectly proper…. 7-012..It has been said that a threat to destroy or damage property may amount to duress. It is now accepted that the same is true of a true of a threat to seize or detain goods wrongfully… 7-024 Causation in general. In all cases of duress it is necessary that the victim's agreement was caused by the duress. However, it appears that the nature of the causation required differs according the nature of the duress. 7-026 “Causation in duress to goods….It seems likely that the victim must show that, “but for” the threat, he would not have entered the contract. We will see that if has been said that this is the appropriate test of causation in economic duress and given the similarity of duress of goods and economic duress, the same test of causation seems appropriate. 7-027 Adopting a “but for” test would place cases of economic duress on par with cases of negligent or non-negligent misrepresentation. This seems appropriate. 7-031 Reasonable alternative. It is certainly relevant whether or not the victim had a reasonable alternative. The victim's lack of choice was emphasised by Lord Scarman in the Pao On and Universe Sentinel cases and has clearly been an important factor in those cases in which relief has been given.. 7-034. Protest: In the Pao On case it was said that it was relevant whether or not the victim protested. This again seems to be a question of evidence as whether or not the threat had a coercive effect. It has been accepted for many years that when a payment is made in order to avoid the wrongful seizure of goods, protest “affords some evidence…that the payment was not voluntarily made”, but that the fact that the payment was made without protest does not necessarily mean that the payment was voluntary. 7-035. Independent advice. Likewise in the Pao On case it was said that it is relevant whether or not the victim had independent advice. The relevance of this is perhaps less obvious: access to legal advice, for example, will not increase the range of options available to the victim, and lack of advice therefore cannot be an absolute requirement. However, whether or not the victim appreciated that he had an alternative remedy and what the practical implications of following it would be are relevant to the question of causation.”

82. Double Dot Finance Limited v. Goyal MG Gases Limited, 2005 (117) DLT 330, Goyal MG Gases Limited v. Double Dot Finance Limited, 2009 (2) Arb LR, 655 and Unikol Bottlers Ltd. v. Dhillon Kool Drinks AIR 1995 Delhi 25 are instances where this Court considered, but did not uphold the plea of economic duress. Unikol Bottlers (supra) attempted to explain economic duress in the commercial context. The court however, did not find any economic duress. The learned Single Judge held: “……while dealing with the question of duress/coercion and unequal bargaining power one is really concerned with the question of free will, i.e. did not parties enter into the agreement with a free will? It is the plaintiff who has raised the question of its will being dominated by the defendants and, therefore, not being a free agent. Therefore, the plaintiff is on test. It has to be ascertained whether the plaintiff exercised a free will or not while entering into the Supplemental Agreement. For this purpose there are several factors which need to be looked into. They are-

1. Did the plaintiff protest before or soon after the agreement?

2. Did the plaintiff take any steps to avoid the contract?

3. Did the plaintiff have an alternative course of action or remedy? If so, did the plaintiff pursue or attempt to pursue the same?

4. Did the plaintiff convey benefit of independent advice?”

88. The authorities discussed previously, especially recent judgments of the Supreme Court have dwelt upon circumstances where the parties are allowed to contend or take a position which is seemingly contradictory or in conflict with the earlier position if it can establish or prove that it was not a free agent. In other words, economic duress is now a recognized head answering the description of “coercion” entitling the contracting party to avoid the contract or some of its terms. This head of “economic coercion” would fall within the meaning of Section 16 of the Indian Contract Act, 1872 which defines “undue influence” as one where the relation subsisting between the parties is such that one of them is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other. Section 16(3) states that, where a person in a position to dominate the will of the other enters into a contract with him and the transaction appears on the face of it or on the evidence of it to be unconscionable, the burden of proving that there was no undue influence is on the person who is able to dominate the will of the other. Illustrations (c) and (d) particularly deal with cases of economic duress or undue influence. Given the nature of evidence, which was on the record before the Tribunal and the legal position as to economic duress being one of the factors that can successfully avoid a contract, there is no patent illegality in the findings recorded in the award. Likewise, it cannot be said that the Tribunal arrived at a finding which is contrary to the substantive law of the country or contrary to justice and morality. As a result, the findings of the learned Single Judge that Supplementary Agreement could not be characterized as the product of undue influence and economic duress, because both parties were corporate entities is unsustainable, is, therefore, set aside.

100. The overall conspectus of facts paints a picture whereby L&T's position and continued inaction, led to PCL being forced into a desperate corner and ultimately succumbing to the economic pressure to agree to the Supplementary Agreement. L&T appears to have resorted to various stratagem such as adverse market conditions, inability to pay EDC (for reasons not connected with PCL's conduct) and fallen back on a diverse litany of complaints that forced a dénouement in the form of PCL's letter of termination of contract. The conditions which were to be fulfilled by L&T for bringing into force that Supplementary Agreement however were not fulfilled. L&T's defaults - in not paying the interest free deposit, defaulting in paying EDC, defaulting for considerable period in substituting the bank guarantees to DTCP and not taking any concrete steps for development of the site, therefore justifies the conclusion of the Tribunal that L&T had committed a fundamental breach of the conditions in the Development Agreement which resulted in PCL calling off the bargain altogether and seeking arbitration. This finding cannot be faulted as patently erroneous on the face of the record or contrary to substantive law or public policy, in any manner whatsoever. The findings in the impugned judgment, therefore, are liable to be set aside on this score.

119. In the circumstances, the Court concludes as follows: a. The finding of the Tribunal that the Development Agreement was not novated by the Supplementary Agreement is upheld; similarly the Tribunal's findings that the conditions which were to be fulfilled by L&T subject to which the said Supplementary Agreement was to come into force (but were not fulfilled) are upheld; b. The finding of the Tribunal that the Supplementary Agreement was a non-starter as it was vitiated by economic duress is upheld. The impugned judgment's ruling to the contrary is set aside. c. The finding of the Tribunal that L&T committed fundamental breach of the Development Agreement is upheld. The impugned judgment's ruling to the contrary is set aside. d. The Tribunal's dismissal of L&T's counterclaim is upheld. e. The Tribunal's quantification of damages for breach of contract (Rs. 35 crores), compensation in lieu of securing title deeds with respect to 15 acres of land (Rs. 75 crores) and compensation for default in returning licences and other permits is set aside (Rs. 5 crores). The permanent injunction granted in favour of PCL restraining L&T from interfering with PCL's development of Schedule A property of the Development Agreement is upheld. The relief granting indemnification in favour of PCL for ITCREF's claims is set aside. It is clarified that this is without prejudice to the indemnification for ITCREF's claims relating to the transfer of 2,20,416 sq. ft. of land to the extent envisaged under the Development Agreement. The Tribunal's order to the extent that it awards costs of arbitration to PCL is upheld. f. Title deeds deposited with the are directed to be released to PCL.” xxxx xxxx xxxx

133. In the light of our foregoing findings and the law on the subject, we hold that the undertaking given by the Claimant is no undertaking in the eye of law and cannot bind the Claimant. The evidence on record clearly points to the fact that the Claimant did not do so voluntarily. The judgements cited by us above lay down the law clearly on the subject and the said judgements are squarely applicable to the facts of the present case.”

53. I may note that neither are there any pleadings in the petition filed by the Petitioner to contest these findings of the Arbitral Tribunal nor much was argued during the hearing. The only argument that was pressed on behalf of the Petitioner was that Arbitral Tribunal has relied on a judgment of the learned Single Judge of this Court in IRB Pathankot Amritsar Toll Road (supra), which was overruled by the Division Bench. It is true that the Arbitral Tribunal had relied on the judgment of the learned Single Judge which was subsequently overruled by the Division Bench. This argument, however, is of no avail to the Petitioner inasmuch as firstly, when the judgment was relied upon by the Arbitral Tribunal, the same held the field as the judgment of the Division Bench was delivered only on 03.07.2023 i.e. after the award was pronounced. Secondly, as rightly flagged by the Respondent, this is not the only judgment on which the Arbitral Tribunal had placed reliance to come to a finding of economic duress as can be seen from the relevant paragraphs of the award. In my view, the finding of the Arbitral Tribunal that the undertakings were under economic duress and were not given out of free volition so that the bills could be released on time, calls for no interference being a finding based on facts and evidence on record and importantly, Petitioner is unable to demolish this finding before the Court by pointing to any pleading in the petition and/or any material on record, to the contrary. Award on Issue no.

(iv) is accordingly upheld.

54. The only other question that needs to be decided is with respect to Issue No. (iii) ‘whether the claimant is entitled to compensation for delay in completion of work? If so, the quantum thereof.’ It is on this issue that extensive arguments were raised by the parties during the course of hearing.

55. The claim for compensation as put forth by the Respondent before the Arbitral Tribunal needs to be captured first. In the Statement of Claim, Respondent under Claim No. 1 sought ‘Compensation for losses sustained due to prolongation of the contract period (Rs.9,76,88,547/-) along with interest @ 18% from the due date till actual payment’. It was pleaded that the works contract is a contract of reciprocal promises and timely fulfilment of respective obligations of the parties and thus Sections 51 to 54 of 1872 Act are attracted. Respondent was not responsible for delay in completion of the work and the fact that Petitioner did not levy liquidated damages till the actual completion of work also establishes this fact. Respondent thus sought compensation in terms of Section 73 of the 1872 Act on account of prolongation of the contract period. As can be discerned from the Statement of Claim, Petitioner claimed Rs.9,76,88,547/- towards compensation for breach of contract and sought computation as per Hudson’s Formula. It was further pleaded that Respondent undertook the work in its right earnest with intent to complete the work within stipulated time limit, if not earlier but right from the start, Petitioner was delaying handing over of the site and the work, which was scheduled to be completed on or before 17.12.2017, got prolonged upto 10.08.2018 i.e. delay of 236 days in addition to the stipulated period of 730 days. Respondent had to deploy resources on-site and off-site including men, machinery, T&P, key personnel for additional period of 08 months and due to prolongation of contract period, it suffered huge financial loss. Relevant paragraphs of the Statement of Claim are as follows:-

into account, amongst other factors, inputs in terms of labour, plant and machinery and cash flow requirements for successful completion of the project. It is also conventional that the lowest bidder gets the contract in the face of stiff competition with narrow margins and in order to reap the maximum benefit under the contract, plant and machinery, labour and other resources have to be fully utilized, failing which it would result in lower productivity and reduces the amount of billing due to underachievements, which can also consequentially result in suffering of losses. 1.[5] That the well-settled legal position with regard to award of compensation on account of breaches of contract on the part of the defaulting party is enshrined in Section 73 of the Contract Act, which is reproduced hereunder for ready reference:-

1.[6] That the Courts have, over the years, laid down salient principles with respect to award of compensation. It has been proved beyond even a shadow of doubt that the Respondent was wholly and exclusively responsible for breach of contract, which necessitated prolongation of the contract period. The well-settled legal position with regard to award of compensation for breach of contract is enumerated hereunder, a perusal of which would lead to the obvious inference that the Claimant is liable to be compensated for the losses and damages suffered due to abnormal prolongation of the contract period. Suffice to say that over a period of years, the Courts have consistently held that the · guilty party is liable to compensate the injured party for the breach of contract in terms of money as if the breach had not occurred. 1.[7] With the aforesaid in the background, the Claimant states hereunder the well-settled legal position with regard to award of compensation for breach of contract: (A) If the breach was committed prior to commencement of the work, the measure of damages would be the amount of profit which the contractor would have earned if he had been permitted to do the work. (B) The objective of award of compensation for breach of contract is to put the contractor in a position in which he would have been had the contract been performed. The contractor can recover compensation from the defaulting party due to the losses sustained as a breach of the contract, but the amount cannot exceed the quantum of loss suffered.

(C) The measure of damages should be reasonable, which implies that the discretion must be exercised with care, caution and on sound principles.

(D) Even if assessment of damages 1s difficult to estimate or cannot be assessed with certainty or precision, that cannot relieve the wrongdoer of the obligation to pay damages for breach of duty. In fact, this is no ground for awarding nominal damages. (E) Where, however, it is impossible to assess damages or in situations where the extent of loss is dependent on too many contingencies, then in such circumstances, nominal damages can be awarded. However, if the breach is clearly established, all possible endeavors should be made to compensate the contractor with reasonable compensation. (F) In order to compensate the contractor for breach of contract, the injury for which the compensation is assessed should be one that may fairly have been contemplated by the parties to be a possible result of the breach of contract. (G) The amount of compensation recoverable is governed by the extent of actual loss suffered as a consequence of the default. However, it does not mean that the amount has to be established with absolute certainty or there has to be direct evidence to this effect. It would be appropriate if the amount is established with reasonable certainty. (H) Certainty of compensation amount is necessary to a reasonable extent and the loss for damages must be so far removed from speculation or doubt to create in the minds of intelligent and reasonable men the belief that it was most likely to follow from the breach of contract and was a probable and direct result thereof.

(I) Where some part of the work under the contract has been carried out, the contractor will be entitled to the value of work done and assessed at the contract rates plus profit on the remaining work. (J) Generally speaking, the breach on the part of the employer is of two kinds dependent upon whether they have the effect of bringing the work to an end or preventing its starting, in which case the contractor will be deprived of the right to his profits upon the work never carried out or whether on the other hand, they have the effect of merely reducing the profits of the work actually carried out. Such breaches are described as preventions and partial preventions by the Employer, which would entitle the contractor to claim damages. (K) In case of partial prevention, i.e. where the breach is not of fundamental nature and the contractor continues with the work, the measure of damages is the loss of profit arising from reduced profitability or added expenses of the work carried out and completed by the contractor.

(L) An allowance of 15% of the contract value would be adequate for the expenditure incurred on supervisory establishment, on site and of site overheads etc. In addition, the contractor would also be entitled to 15% of the contract price towards loss of profit. 1.[7] That the Claimant relies on the Hudson's formula for computation of the claim for compensation for prolongation of the contract period. It is submitted that computation of recompense as per Hudson's formula has been upheld by the Hon'ble Supreme Court and hence, the same can be relied upon for the present case as well. The details are as under: Profit Percentage x Contract sum x Period of delay 100 Contract period 15 x 212,24,00,000 x 236 = 9,76,88,547/- 100 730 1.[8] That it is further submitted that the Claimant undertook the work in right earnest with the intention to attain the completion within the stipulated time limit, if not earlier. Right from the start of the work the Respondent had been delaying the handing over of the possession of working site on one pretext or the other. The work, which was scheduled to be completed on or before 17.12.2017, got prolonged up to 10.08.2018, i.e. delay of 236 days in addition to the stipulated period of 730 days. The Claimant had to deploy resources on-site as well as off-site, including men, machinery, T&P and other requisite equipment and key personals, on the project for an additional period of nearly 8 months. Due to prolongation of the contract period, the Claimant suffered huge financial losses, which are liable to be awarded in their favour in view of settled principles of law laid down by Hon'ble Supreme Court from time to time.”

56. Petitioner, on the other hand, contested the claim for compensation on multiple grounds. It was urged that Respondent had completed upto third milestone i.e. work worth Rs.187 crores out of the total value of the contract being Rs.212.24 crores and therefore, the amount of work remaining after scheduled completion date was Rs.25.24 crores. It was also stated that Rs.37,50,617/- had been paid to the Respondent towards price escalation upto completion of the work and therefore, claim of Rs.9,76,88,547/- was imaginary and unreasonable. It was also contended that Respondent had neither pleaded nor led any evidence for the loss sustained. No notice was issued to the AE or Project Engineer of any loss suffered due to delay in execution of the work. Petitioner also urged that in none of the letters seeking extension of time, Respondent ever raised any demand for damages. On the aspect of Hudson’s Formula, it was contended that the said Formula was outdated as Hudson in 12th Edition itself had omitted the formula and also that the Respondent in its pleadings under Claim No. 1 sought site overheads whereas Hudson’s formula applies in respect of office overheads. It was urged that Respondent claimed compensation as 15% on loss of profit but there was no whisper of the loss of profit actually suffered and the entire ground in the Statement of Claim is predicated on site overheads. Reliance was placed on several judgments holding that for claiming loss of profit and overheads on account of prolongation of contract, party must prove and establish actual loss.

57. The Arbitral Tribunal rendered a finding in favour of the Respondent and awarded a sum of Rs.3,60,00,000/- calculated at 10% of Rs.36 crores, the value of work done in the extended period of contract. The methodology adopted by the Arbitral Tribunal was to take into account the total value of the work under the contract i.e. Rs.212 crores and from this figure, the Arbitral Tribunal deducted Rs.187 crores as the value of the work done upto 17.12.2017 and arrived at a figure of Rs.45 crores. Thereafter, the Arbitral Tribunal referred to the RA Bills from 20th to 25th Bill. The RA 20th Bill covered the period 01.12.2017 to 03.01.2018 out of which the period from 01.12.2017 to 17.12.2017 was the period upto intended Date of Completion and the remaining period was the extended time. Since there was no evidence of the exact work done in the first period and the second period, the Arbitral Tribunal took half the amount of 20th RA Bill, which was worth Rs.16,64,58,705/- and taking half of this amount deducted the said sum from Rs.45 crores and taking 10% on the balance of Rs.36 crores, awarded a sum of Rs.3,60,00,000/- towards compensation towards cost of overheads. In calculating the said compensation, the Arbitral Tribunal relied on Standard Data Book of the Petitioner wherein percentages for calculating loss of profit and loss of overheads have been specified and more particularly, on paragraph 3.[1] which provides 8% as compensation towards overhead charges in case of projects above Rs.50 crores. It was observed that amount of compensation is governed by the extent of actual loss suffered as a consequence of the default, however, it does not mean that the amount has to be established with absolute certainty or there has to be direct evidence to this effect and it is enough if the amount is established with reasonable certainty. Relevant paragraphs from the award are as follows:- “137. Having settled the factual matrix as above, we now advert to the quantum aspect with regard to the amount to be awarded to the claimant under this claim. The claimant has claimed damages based on Hudson’s formula. The Hudson Formula has been upheld by the Supreme Court in McDermott’s case and reiterated in Associate Builders, case as one of the basis on which the Tribunal may rely. In para 1.[7] of the Statement of Claim, the claimant has given the computation by taking profit percentage/OH as 15%. The Claimant also relied on the Standard Data Book which recognises 10% as profit and 8% as overheads for road works costing above Rs.50 crores.

138. We will now deal with regard to the quantum of compensation to be awarded to the Claimant for delayed period from the intended date of completion of work. The intended date of completion was 17.12.2017. Admittedly the Claimant worked for 236 days after intended date of completion. There was divergence of opinion as to what was the total amount and the quantum of work carried out by the Claimant during the extended period. It was contended on behalf of the Respondent that total contractual price was Rs 212 crores and upto the third milestone the work worth Rs 187 crores was done by the Claimant and the amount of work remaining after the scheduled completion date was only 25.24 crores. The Respondent also contended that the Hudson Formula which has been relied by the Claimant is outdated as Hudson in his 12th Edition itself had omitted the said formula. The Respondent tried to argue that the Claimant has claimed in its pleadings under Claim no 1 that it amounts to site overheads whereas, Hudson Formula deals with office overheads. The contention of the Respondent was that out of the total work of Rs 212 crores, most of the work was done and during the extended period only, work amounting to Rs 25.24 crores was left. Therefore, the claim of 9,76,88,547 is loaded and without any basis.

139. We have perused the record carefully, The 18th Running Bill was from a period of 3,10.2017 to 2.11.2017, which was checked by the Authority Engineer vide letter dated 8.11.2017. The total amount of bill was Rs 161 crores. There was no explanation on record that as per the bill till 17.12.2017, which was the intended date of completion, if the work done by the Claimant amounted to Rs 161 crores, then on what basis it was argued that in the extended period of 236 days, the work done amounted to Rs 25.24 crore. Even if the Tribunal takes the explanation of the Respondent, taken in the letter of Project Engineer of Respondent dated 14.1.2020 to the Regional Office, that on 17.12.2017, work amounting to Rs 187 crores was done, the amount of work done by the Claimant till the completion of project would be Rs 45 crores.

140. The following chart of the Running Bills will demonstrate the date of submission of R.A Bill and the amount:

141. The 20th R.A Bill covers the period from 1.12.2017 to 3.1.2018. Out of it, from 1.12.2017 to 17.12.2017, is the period upto intended date of completion. After 17.12.17, rest of the period is of extended time. There is no evidence on record as to how much amount of work was done from 1.12.2017 till 17.12.2017 and how much thereafter.

142. Therefore, the 20th R.A Bill contains only half the period of Bill as intended date of completion of contract. The other half period from 20th R.A Bill onwards and other R.A Bills like 21st to 25th R.A Bill and then the final bill show the work done during the extended period of 236 days. Admitted facts are that the work which was done was more than the contract amount i.e Rs 212 crores. Therefore, in our considered opinion even if we take half the amount of 20th R.A Bill as work done during the extended period, the amount would come to approximately over Rs 36 crores. Therefore, under this head we grant a sum of Rs 3,60,00000, taking into account cost of overheads @ 10%,as compensation for overstaying at the project site as compensation to the Claimant. Even if we apply Hudson Formula the amount of compensation is on the higher side. Therefore, in our considered opinion we allow 10% of the total cost which was incurred by the Claimant in the extended period of contract amounting to Rs 3,60,00,000.”

58. The question that begs an answer is whether the Arbitral Tribunal has rightly awarded a sum of Rs.3,60,00,000/- in favour of the Respondent calculated at 10% of the value of work done in the extended period of contract. At the outset, it be noted that in the Statement of Claim as also during the course of argument before the Arbitral Tribunal, as evident from the reading of the award, Respondent had predicated its case for compensation on account of loss of profit and loss of overheads on calculation as per Hudson’s formula and substantial part of the findings in this part of the award are on the applicability of the said formula. However, admittedly while awarding compensation, the Arbitral Tribunal did not adopt the Hudson’s formula for computation of compensation and therefore, this Court need not detain itself with regard to the applicability of the formula and/or its omission in the 12th Edition of Hudson or on the judgments wherein applicability of this formula was upheld and/or later doubted.

59. Broadly, the Arbitral Tribunal has allowed the claim for compensation towards expenses on overheads on the ground that Petitioner was responsible for delay in handing over site and/or other hindrances and consequently guilty of breach of the contract and therefore, Respondent is liable to be compensated for the work completed in the extended period of the contract. Reference is also made to paragraphs 1.[6] and 1.[8] of the Statement of Claim wherein Respondent averred that it had suffered losses on account of expenses on overheads. As noted above, Arbitral Tribunal proceeded on the presumption that the loss need not be established with absolute certainty or direct evidence.

60. It is clear from reading of the award that the entire finding of the Arbitral Tribunal on the issue of compensation is premised on breach by the Petitioner and claim of the Respondent that it is entitled to overheads as stated in the correspondence exchanged and the Statement of Claim. Arbitral Tribunal has apparently proceeded on the basis that mere claim for loss predicated on breach of contract would suffice and there is no requirement of proving actual loss. Standard Data Book prescribing a percentage of loss of overheads has been used as a benchmark to award the compensation. This, in my considered view, is an illegality which goes to the root of the matter in light of the well-settled law that compensation can be awarded for the actual damage or loss suffered and cannot come to the aggrieved party as a windfall. Section 73 of the 1872 Act makes it clear that party who has suffered on account of breach is entitled to compensation for any loss or damage caused but this provision does not visualise pre-estimated or prefixed damages and therefore, unlike under Section 74 of the 1872 Act, while claiming compensation under Section 73, a party will be required to prove actual loss or damage. In this context, I may first allude to the judgment of the Supreme Court in Fateh Chand v. Balkishan Dass, 1963 SCC OnLine SC 49, as follows:-

refinements made under the English common law in distinguishing between stipulations providing for payment of liquidated damages and stipulations in the nature of penalty. Under the common law a genuine pre-estimate of damages by mutual agreement is regarded as a stipulation naming liquidated damages and binding between the parties: a stipulation in a contract in terrorem is a penalty and the Court refuses to enforce it, awarding to the aggrieved party only reasonable compensation. The Indian Legislature has sought to cut across the web of rules and presumptions under the English common law, by enacting a uniform principle applicable to all stipulations naming amounts to be paid in case of breach, and stipulations by way of penalty.

9. The second clause of the contract provides that if for any reason the vendee fails to get the sale-deed registered by the date stipulated, the amount of Rs 25,000 (Rs 1000 paid as earnest money and Rs 24,000 paid out of the price, on delivery of possession) shall stand forfeited and the agreement shall be deemed cancelled. The covenant for forfeiture of Rs 24,000 is manifestly a stipulation by way of penalty.

15. Section 74 declares the law as to liability upon breach of contract where compensation is by agreement of the parties pre-determined, or where there is a stipulation by way of penalty. But the application of the enactment is not restricted to cases where the aggrieved party claims relief as a plaintiff. The section does not confer a special benefit upon any party; it merely declares the law that notwithstanding any term in the contract predetermining damages or providing for forfeiture of any property by way of penalty, the court will award to the party aggrieved only reasonable compensation not exceeding the amount named or penalty stipulated. The jurisdiction of the court is not determined by the accidental circumstance of the party in default being a plaintiff or a defendant in a suit. Use of the expression “to receive from the party who has broken the contract” does not predicate that the jurisdiction of the court to adjust amounts which have been paid by the party in default cannot be exercised in dealing with the claim of the party complaining of breach of contract. The court has to adjudge in every case reasonable compensation to which the plaintiff is entitled from the defendant on breach of the contract. Such compensation has to be ascertained having regard to the conditions existing on the date of the breach.”

61. In Maula Bux v. Union of India, (1969) 2 SCC 554, the Supreme Court held as follows:- “6.......... It is true that in every case of breach of contract the person aggrieved by the breach is not required to prove actual loss or damage suffered by him before he can claim a decree, and the Court is competent to award reasonable compensation in case of breach even if no actual damage is proved to have been suffered in consequence of the breach of contract. But the expression “whether or not actual damage or loss is proved to have been caused thereby” is intended to cover different classes of contracts which come before the Courts. In case of breach of some contracts it may be impossible for the Court to assess compensation arising from breach, while in other cases compensation can be calculated in accordance with established rules. Where the Court is unable to assess the compensation, the sum named by the parties if it be regarded as a genuine pre-estimate may be taken into consideration as the measure of reasonable compensation, but not if the sum named is in the nature of a penalty. Where loss in terms of money can be determined, the party claiming compensation must prove the loss suffered by him.”

62. In Indo Nabin (supra), the argument of the Petitioner challenging the award was that the Arbitral Tribunal having decided that the Respondent was in breach of the contract had not awarded any sum on account of overhead charges and loss of profit during the extended period on ground of lack of evidence, which was unsustainable. It was urged that it was wellestablished that such claims can be awarded on the basis of standard formulae and Courts have accepted the use of these formulas for awarding damages. Court negated this contention and declined to interfere in the award observing that admittedly Petitioner had not furnished any evidence or material to establish that it had incurred additional expenditure on account of overheads during the extended period and/or produced any material to establish the quantum of profit that it expected to earn during the said period. It was held by the Court that standard formulae adopted for computing loss of profits or overheads are essentially tools used for computing the extent of overheads in profits. Undoubtedly, in a given set of facts, the said formula may be effectively used, however, that cannot lead to the conclusion that in all cases Arbitral Tribunal will be bound to accept computation of overheads/loss of profits based on these formulas and Claimant cannot be absolved of producing any other material to establish its claims of loss of profits/overheads. Claimant would necessarily be required to produce some material to justify the norms adopted even when using the standard formula as also to establish as a matter of fact that it had incurred expenditure on overheads attributable to the works executed during the extended period. Relevant passages are as follows:- “10. Admittedly, the petitioner had not furnished any evidence or material to establish that it had incurred additional expenditure on account of overheads during the extended period. The petitioner had also not produced any material to establish the quantum of profit that it expected to earn during the said period. The Arbitral Tribunal had not accepted the aforesaid claim on account of charges and loss of profits solely on the ground that the petitioner had not produced any material and evidence to establish the same. The contention that such damages could be awarded on the basis of standard formulae was also not accepted by the Arbitral Tribunal. The relevant extract of the impugned award is set out below:— “(8). It is our view that in order to make any claim under Section 55 read with Section 73 towards the overhead expenses during the extended period, the claimants should have led some evidence by oral or documentary to prove that certain expenses were actually required and made in order to keep the site establishment running throughout the extended period. It is other matter for the arbitrators to either adopt Hudson or any other formula as may be considered appropriate by them. (9). The claimants further state that they had actually submitted the audited Balance Sheets for eight years to support their claim for overheads. It is to be noted that the above was sought by the Arbitration Tribunal to understand the computation and adoption of rate of 10% for the overheads and 5% for computing the loss and was submitted by way of proof of their incurring the overhead expenses. Even otherwise the evidence required to prove overhead costs would have to be related to the project under question and not the overall company particulars. (10). Hence we are of the opinion that the claimants are not entitled to any compensation for loss on account of additional overheads incurred in keeping their establishment up and running during the extended period and hence the claim for Rs. 1,50,13,698 towards site and head office overheads is rejected.”

14. Although, Mr. Nandrajog had referred to the decision of the Supreme Court in A.T. Brij Paul Singh and Bros. (supra) in support of his contention. He is unable to dispute that there are several decisions where the courts have disallowed claim of damages, which are based only on standard formulae without adducing any further evidence to establish the expenditure/loss. The Arbitral Tribunal had taken note of a view of those decisions as well. It is also clear that the impugned award cannot be assailed to be perverse or contrary to the public policy.

15. As explained above, the scope of judicial review in these proceedings is limited and an arbitral award cannot be set aside except on the grounds as stated in Section 34 of the Act. Plainly, the impugned award cannot be accepted as perverse or in conflict with the fundamental policy of Indian law.”

63. In Essar Procurement Services Ltd. (formerly known as Essar Projects Limited) v. Paramount Constructions, 2016 SCC OnLine Bom 9697, the Bombay High Court after referring to several decisions observed that a claim based even on Hudson’s formula but without any evidence of actual loss cannot be sustained. In the said case, one of the questions that arose for consideration before the Bombay High Court was whether the Respondent had proved its entitlement as well as computation of the claim for compensation made before the Arbitral Tribunal and more particularly, claims of overheads and loss of profit. On behalf of the Respondent, defending the award whereby compensation was allowed, it was urged that it was within the domain of the Arbitral Tribunal to apply any formula such as Hudson/EMDN etc. which were considered by the Supreme Court in the case of McDermott International Inc v. Burn Standard Co. Ltd. and Others, (2006) 11 SCC 181 and once the Arbitral Tribunal had rendered a finding that Respondent suffered damages due to breaches committed by the Petitioner, it was not required to give any reason as to why it applied the Hudson’s formula. Petitioner, on the other hand, challenging the award contended that the onus was on the Respondent to prove that it had suffered any loss due to the breach and once this onus was not discharged by leading evidence of actual loss, Arbitral Tribunal erred in applying the Hudson’s formula simplicitor and awarding compensation without any evidence. Examining the rival contentions of the parties on this aspect, the Bombay High Court held as follows:- “99. Insofar as claim for overhead is concerned, from the statement of claim filed by the respondent, it is clear that it was the case of the respondent themselves that at the time of finalization of contract, the respondent had considered 10% towards overhead of the work in question to be completed within the stipulated time period and were incurring overhead expenditure based on the formula alleged to have been adopted under constructed formula. It was pleaded that they were incurring overhead expenditure per month at Rs. 38,888/- upto 28th February, 1999. It was also alleged that the respondent was also incurring expenditure towards overhead which was computed at the rate of 1% instead of 10% during the period 28th February, 1999 till 18th July, 2005. The petitioner had specifically denied the entitlement as well as the computation made by the respondent. The petitioner had also disputed the applicability of the formula sought to be referred upon by the respondent. Both the parties also placed reliance on the judgments of Supreme Court and of this court in respect of the claim for overhead and loss of profit.

100. A perusal of the arbitral award indicates that the arbitral tribunal recorded the fact that the respondent had not produced the books of account for perusal of the arbitral tribunal and also did not lead any oral evidence in support of any of the claims made before the arbitral tribunal. The arbitral tribunal also did not consider and deal with the submissions of the petitioner that the claim for overhead and loss of profit was not proved or that the same was based on no evidence. The arbitral tribunal also did not consider and deal with the objection that the claim for overhead and loss of profit was overlapping.

101. The question that arises for consideration of this court is whether the respondent who had made claim for overhead on the basis that the respondent had considered 10% towards overhead for the work in question at the time of finalization of the contract and had incurred such amount during the contractual period ought to have proved the said claim by leading evidence including oral evidence or could have simplicitor rely upon the Hudson formula and whether in absence of any evidence of the actual expenditure incurred by the respondent, the arbitral tribunal could have allowed the claim for overhead by considering the claim on rough and ready basis by applying Hudson formula by dispensing with the proof of the overhead expenditure or not.

102. Learned counsel for both the parties have heavily placed reliance on the judgment of Supreme Court in case of McDermott International INC. (supra). A perusal of the judgment of the Supreme Court in case of McDermott International INC. (supra) indicates that in that matter, the contractor had examined a witnesses to prove the claim for compensation who had calculated the increased overhead and loss of profit on the basis of the formula laid down in a manual published by the Mechanical Contractors Association of America entitled “Change Orders, Overtime, Productivity” commonly known as the Emden Formula. The said witness had brought out the additional project management cost at US$ 1,109,500. The Supreme Court adverted to an earlier judgment in case of M.N. Gangappa v. Atmakur Nagabhushanam Shetty, (1973) 3 SCC 406 in which it was held that the method used for computation of damages will depend upon the facts and circumstances of each case. Supreme Court also noticed different formulas such as Hudson Formula, Emden Formula and Eichleay Formula in the said judgment.

103. It is held that the different formulae can be applied in different circumstances and the question as to whether damages should be computed by taking recourse to one or the other formula, having regard to the facts and circumstances of a particular case, would eminently fall within the domain of the arbitrator. Supreme Court noticed that the witness examined by the contractor had applied the Emden Formula while calculating the amount of damages having regard to the books of account and other documents maintained by the contractor. The learned arbitrator did not insist that sufferance of actual damages must be proved by bringing on record books of account and other relevant documents. In these circumstances, Supreme Court held that if the learned arbitrator applied the Emden Formula in assessing the amount of damages, he could not be said to have committed an error warranting interference by this Court. The learned arbitrator had also referred to other formulae but opined that the Emden Formula was widely accepted one.

104. Supreme Court also observed that in the Hudson Formula, the head office overhead percentage is taken from the contract. It is observed that although the Hudson formula has received judicial support in many cases, it has been criticized principally because it adopts the head office overhead percentage from the contract as the factor for calculating the costs, and this may bear little or no relation to the actual head office costs of the contractor. Admittedly, in this case though the respondent made a claim on the premise that the respondent had considered 10% overhead while finalization of bid and had incurred overhead expenditure at that rate, the respondent did not produce any books of account or any other evidence in support of such claim. The judgment of Supreme Court in case of McDermott International INC. (supra) is thus clearly distinguishable in the facts of this case and would not assist the case of the respondent.

105. Division Bench of this court in case of Edifice Developers and Project Engineers Ltd. (supra) after adverting to the judgment of Supreme Court in case of McDermott International INC. (supra) and in case of A.T. Brij Paul Singh and Bros. v. State of Gujarat, AIR 1984 SC 1703 which judgments were relied upon by the arbitral tribunal has held that the appellant in that case had produced no evidence in support of the claim for loss of overhead and profit and award of claim was on the misconceived basis that Hudson Formula must be applied despite there being no evidence. The Division Bench also held that no material was produced before the arbitral tribunal on the nature of the practice in the trade and claim for loss of profits was based on pure conjecture and in the absence of any evidence and was thus rightly set aside by the learned Single Judge. The Division Bench upheld the conclusion drawn by the learned Single Judge that the award of arbitrator proceeded on the manifestly misconceived notion that a contractor is entitled to claim overhead losses even in the absence of evidence on the basis of Hudson's Formula.

106. In my view the impugned award rendered by the arbitral tribunal allowing the claim for overhead merely on the basis of the Hudson Formula and not based on any evidence is contrary to the principles of law laid down by this court in case of Edifice Developers and Project Engineers Ltd. (supra) and shows patent illegality and is in conflict with public policy.

107. Supreme Court in case of Kailash Nath Associates (supra) has laid down the principles to be followed by the court or by the arbitrator while considering the claim for compensation under sections 73 and 74 of the Contract Act, 1872. It is held that where it is possible to prove actual damage or loss, such proof is not dispensed with. It is held that compensation can only be given for damage or loss suffered. If damage or loss is not suffered, the law does not provide for a windfall.

108. This court in case of Ajay Singh (Sunny Deol) (supra) has after adverting to the judgment of Supreme Court in case of Kailash Nath Associates (supra), judgment of this court in case of Maharashtra State Electricity Board v. Sterlite Industries (India) Ltd., 2000 (3) Bom.C.R. 347, judgment of Division Bench of this court in case of Edifice Developers and Project Engineers Ltd. (supra) has held that if a party has not suffered any losses, even if the respondent has committed breaches, such party cannot be awarded any compensation under section 73 of the Contract Act. When loss in terms of money is prayed, the party claiming compensation has to prove such loss or damages suffered by him. It is held that unless and until the damages or loss was actually suffered, damages cannot be awarded, otherwise section 73 of the Contract Act would become nugatory and the party would be penalised though the other party suffered no loss. In my view the party who has not suffered any loss or damages cannot be awarded any compensation or damages, otherwise it would amount to unjust enrichment in favour of such party.

109. In my view, the principles laid down by the Supreme Court in case of McDermott International INC. (supra), in case of Kailash Nath Associates (supra) and judgment of this court in case of Ajay Singh (Sunny Deol) (supra) squarely applies to the facts of this case. The impugned award rendered by the arbitral tribunal is contrary to and in violation of the principles of law laid down by the Supreme Court and this court and thus deserves to be set aside on that ground alone.

110. Insofar as judgment of this court in case of Associate Builders (supra) relied upon by Mr. Cooper, learned senior counsel for the respondent is concerned, a perusal of the said judgment clearly indicates that in the said matter also the contractor had produced evidence before the arbitrator and had setout the establishment expenses in great detail before the learned arbitrator and it was only on that evidence, the learned arbitrator ultimately had awarded those claims. In my view the judgment of Supreme Court in case of Associate Builders (supra) thus does not assist the case of the respondent and is clearly distinguishable in the facts of this case.

111. Insofar as submission of the learned senior counsel for the respondent that the respondent had though not led oral evidence to prove the claim for damages, had led documentary evidence and thus award of claim for loss of profit could not be challenged on the ground that the award was based on no evidence is concerned, a perusal of the arbitral award indicates that the arbitral tribunal has not allowed the claim for overhead and loss of profit by relying upon any documentary evidence placed on record by the respondent. In my view the respondent thus cannot be allowed to rely upon any such alleged documentary evidence with a view to supplement the reasons recorded by the arbitral tribunal in the impugned award at this stage in this petition under section 34 of the Arbitration Act.

112. In my view, the arbitral award itself shall indicate the evidence referred to, relied upon by the arbitral tribunal while allowing or rejecting the claims made by the parties. This court cannot probe into the mind of the arbitral tribunal and come to the conclusion by considering the evidence produced by the parties which were though on record before the arbitral tribunal but were not referred to and considered by the arbitral tribunal by drawing an inference that such evidence must have been considered by the arbitral tribunal while allowing or rejecting the claim while deciding petition under section 34 of the Arbitration Act. This view is supported by the judgment of this court in case of Bombay Intelligence Security (India) Ltd. v. Oil & Natural Gas Corporation Limited delivered on 21st August, 2015 in Arbitration Petition No. 822 of 2012 which is adverted by this court in case of Oil and Natural Gas Corporation Ltd. v. Essar Oil Limited (supra) relied upon by the learned senior counsel for the respondent.

113. The principles laid down by the Supreme Court and this court in the judgments referred to aforesaid while dealing with the claim for loss of overhead would also apply to the claim for loss of profit. A perusal of the impugned award indicates that the claim for loss of profit is also allowed by the arbitral tribunal simplicitor based on the Hudson Formula and not based on any evidence and thus the same also deserves to be set aside.

114. A perusal of the impugned award indicates that though the petitioner had raised an objection that the claim for overheads and loss of profit were overlapping with each other, the arbitral tribunal has not considered this plea of the petitioner in the impugned award at all. In my view, the profit can be earned only if expenditure on various heads including overhead are incurred. The learned arbitrator thus could not have allowed both the claims i.e. claim for loss of overhead and also claim for loss of profit simultaneously which were overlapping with each other. Both the claims thus deserves to be set aside on this ground also.

115. Insofar as claim for interest and claim for arbitration cost awarded by the arbitral tribunal is concerned, since this court has set aside the claim under claim no. 1 and claim no. 3 in toto, the claim for interest and cost also deserves to be set aside and are accordingly set aside.”

64. In Om Construction Co (supra), this Court again delved into the same issue and while dealing with a claim for loss of profit made by the Contractor due to prolongation of contract on account of delay by Union of India and referring to the judgment of the Supreme Court in Kailash Nath Associates v. Delhi Development Authority, (2015) 4 SCC 136 and judgment of the Bombay High Court in Essar Procurement Services (supra), held that mere execution of the work beyond the stipulated date of completion cannot be a ground to award loss of profits until evidence is led to establish actual loss. The Arbitrator must consider whether there is an evidence on record to support the claim and the damages or compensation cannot be awarded by merely an ipse dixit of calculations without any foundational events and the Court set aside the award of loss of profits.

65. In Unibros (supra), the Supreme Court held that formulas such as Hudson’s Formula has attained acceptability and is well understood in trade but it cannot apply in a vacuum. Any such standard method to calculate claims for loss of off-site overheads and profit do not directly measure contractor’s exact costs and while they may be helpful when needed, they alone cannot prove the loss of profit and these formulas will be useful in assessing losses but only if the contractor shows with evidence the loss of profits.

66. In Batliboi Environmental Engineers Limited (supra), the Supreme Court has recently reiterated and reaffirmed that ordinarily when completion of a contract is delayed and contractor claims that it has suffered a loss arising from depletion of income and/or loss of overheads in the form of workforce expenses, which could have been deployed in other contracts, for the claims to bear any persuasion before the Arbitrator or Court of law, the builder/contractor must prove through actual evidence in relation to cost of overheads that it was unable to deploy resources elsewhere and had no possibility of recovering cost of the overheads from other sources even if formula such as Hudson are applied which are also in turn based on various assumptions. Relevant paragraphs are as follows:- “19.2. The figure of Rs 90,47,871 would have been relevant, in absence of work done and in fact payments post 1-9-1993. However, it is an accepted and admitted position that payment of Rs 2,92,07,619.13p was made on different dates between 1-9-1993 till 30-3-1996 upon completion of the proportionate value of the work. Claim on account of loss of profits/profitability and overheads, as has been explained above and also elucidated hereinafter with reference to several judgments and treatise, is payable if and when there is an increase in cost of off-site and on-site overheads due to delay in completion of work post the agreed or contractual period which is caused by the employer. [ In this case, as noticed, the contract bars claims for compensation for losses due to enhancement/escalation of costs, etc. We make no comments in this regard. Interpretation and validity of such clauses is not subject-matter of this appeal. When such clauses, which are apparently one-sided and absolve breach with immunity, are subjected to judicial scrutiny, the courts/tribunals invariably tend to interpret the clauses in a restrictive manner to grant just and fair relief. Courts should be slow to interfere, unless the award falls within the ambit of the parameters set out in Section 34 of the A&C Act.] Further, loss on account of profit earning capacity is paid when the contractor's profit earning capacity is affected due to it being retained longer in the contract in question, without corresponding increase in the monetary benefit earned and without being free to move elsewhere to earn profit which it might otherwise be able to do. It is not the case of BEEL that they are entitled to enhance or increase in cost on account of delay in execution of the work. Pertinently, Claim 3 for compensation of losses incurred due to increase in cost of material and labour has been specifically rejected, as escalation in prices/costs are barred by the terms of the contract.

20. We have briefly referred to the principle applicable for computing the claim for compensation/damages in case of partial prevention i.e. where the breach by the employer is not fundamental and does not entitle the builder/contractor to cease the work, or, being fundamental, is not treated as repudiation by the builder/contractor. Measure of compensation/damages in such cases is the loss of profit arising from reduced profitability or added expense of the work carried out. [ See Hudson's Building and Engineering Contracts (10th Edn.) pp. 450, 596.] In a given case, where there is a fundamental breach by the employer, albeit, the builder/contractor does not immediately elect to treat the contract as repudiated, he may still be entitled to raise a claim for loss of profit on the uncompleted work. Offsite expenses or overheads are all administrative or executive costs incidental to the management supervision or capital outlay as distinguished from operating charges. These charges cannot be fairly charged to one stream of work or job, and rather be distributed as they relate to the general business or the work of the contractor/builder being undertaken or to be undertaken, as the overheads are relatable to the builder/contractor's business in entirety.

21. The usage of formulae such as Hudson's, Emden's, or Eichleay's formulae to ascertain the loss of overheads and profits has been judicially approved in the English cases of Peak Construction (Liverpool) Ltd. v. McKinney Foundations Ltd. [Peak Construction (Liverpool) Ltd. v. McKinney Foundations Ltd., (1970) 1 BLR 114], Whittall Builders v. Chester-le-Street District Council [Whittall Builders v. Chester-le-Street District Council, (1987) 40 BLR 82] and JF Finnegan v. Sheffield City Council [JF Finnegan v. Sheffield City Council, (1988) 43 BLR 124] and in the Canadian case of Ellis-Don Ltd. v. Parking Authority of Toronto [Ellis-Don Ltd. v. Parking Authority of Toronto, (1978) 28 BLR 98]. The three formulae deal with theoretical mathematical equations, but are based on factual assumptions, and therefore can produce three different and unrelated compensation/damages. Therefore, while applying a particular equation or method, the assumptions should be examined, and the satisfaction of the assumption(s) ascertained in the facts and circumstances.

22. The formula suggested by Hudson in his 10th edition of the book Building and Engineering Contracts for the computation of damages takes the head office and profit percentage as a proportion of the contract value. The formula assumes that the profit judged by the builder/contractor is in fact capable of being earned by her/him elsewhere had the builder/contractor been free to leave the contract at the proper time. The formula is couched on three assumptions. First, that the contractor is not habitually or otherwise underestimating the cost when pricing; secondly the profit element was realistic at that time; and lastly, there was no fluctuation in the market conditions and the work of the same general level of profitability would be available to her/him at the end of the contract period. Satisfaction of these assumptions should be ascertained when we apply Hudson's formula for computing the damages. Material should be furnished by the claimant to justify and assure that the assumptions for applying Hudson's formula are met.

23. Ordinarily, when the completion of a contract is delayed and the contractor claims that s/he has suffered a loss arising from depletion of her/his income from the job and hence turnover of her/his business, and also for the overheads in the form of workforce expenses which could have been deployed in other contracts, the claims to bear any persuasion before the arbitrator or a court of law, the builder/contractor has to prove that there was other work available that he would have secured if not for the delay, by producing invitations to tender which was declined due to insufficient capacity to undertake other work. The same may also be proven from the books of accounts to demonstrate a drop in turnover and establish that this result is from the particular delay rather than from extraneous causes. If loss of turnover resulting from delay is not established, it is merely a delay in receipt of money, and as such, the builder/contractor is only entitled to interest on the capital employed and not the profit, which should be paid.

26. Hudson's formula might result in double recovery as the profit being added to the profit is already subsumed within the “contract sum”. To avert this double-recovery, it has been suggested that the formula should be modified to “contract sum less overhead and profit” [ The formula borrows the name from the Armed Services Board of Contract Appeals decision in Eichleay Corporation case, ASBCA No. 5183, 60-2 BCA: 1960 WL 538]. Any increase in the value of the final account for extra works such as variations contain their own element of overheads and profits. Therefore, Hudson's formula like other formulae, which are only rough approximations of the cost impact of unabsorbed overhead, should be applied with great care and caution to ensure fair and just computation. [Claims for Head Office Overheads — Alternatives to Formulae, John W. Pettet, 1999.]”

67. In Union of India v. Ahluwalia Contracts (India) Ltd., 2025 SCC OnLine Del 4066, Division Bench of this Court emphasized that to claim loss of profits/overheads on account of prolongation of contract, evidence must be led to prove the loss. Relevant passages are as follows:- “43. We may refer to the decision of the Coordinate Bench of this Court in Union of India v. Ahluwalia Contractors (India) Limited. The said decision was rendered in the appeal under Section 37(1)(c) of the A&C Act preferred by the appellant against the order of the learned Single Judge partly allowing the petition filed by the respondent under Section 34 of the A&C Act.

44. In the said case, the respondent had impugned the arbitral award, which was rendered in connection with disputes that had arisen between the parties with respect to the contract for Package III of Electrical Services at AIIMS, Raipur entered into between the parties on 11.08.2011. The terms of the said contract are materially similar to the Contract in the present case. And, somewhat similar claims were raised before the arbitral tribunal constituted qua the disputes relating to the said contract. The arbitral tribunal had rejected the claims, which are similar to the subject claims in the present appeal, essentially, on the similar reasoning as noted in the impugned award.

45. The Single Judge had allowed the respondent's challenge to the arbitral award to the extent of rejection of certain claims relating to the expenses incurred by the respondent during the extended period of the contract. Accordingly, the impugned award in the said petition was set aside to the aforesaid extent.

53. As noted above, the respondent has not led any evidence to establish that it had suffered any loss of profits on account of prolongation of works. As noted above, it merely imputed the monthly profits that it would have earned from the Contract in question and assumed that it would have earned similar monthly profits during the period for which the Contract was performed.

54. We consider it relevant to refer to the decision of the Supreme Court in Bharat Coking Coal Ltd. v. L.K. Ahuja. The Supreme Court had in the context of a claim for loss of profits during prolongation of the works, held as under:

55. In Batliboi Environmental Engineers Limited v. Hindustan Petroleum Corporation Limited, the Supreme Court had explained as under:

for which s/he is getting compensated. [See - Robinson v. Harman, (1848) 1 Ex 850 at 855 and Livingstone v. Rawyards Coal Co., (1879-

80) L.R. 5880]

17. We shall subsequently catechise the Hudson's formula, suffice at this stage is to notice that the learned arbitrator does not specifically refer to any formula or the method, and the figures to compute damages under the head of loss on account of overheads and profits/profitability. The award, as quoted above, does refer to Sections 55 and 73 of the Contract Act. ** ** ** **

20. We have briefly referred to the principle applicable for computing the claim for compensation/damages in case of partial prevention, i.e., where the breach by the employer is not fundamental and does not entitle the builder/contractor to cease the work, or, being fundamental, is not treated as repudiation by the builder/contractor. Measure of compensation/damages in such cases is the loss of profit arising from reduced profitability or added expense of the work carried out.14 In a given case, where there is a fundamental breach by the employer, albeit, the builder/contractor does not immediately elect to treat the contract as repudiated, he may still be entitled to raise a claim for loss of profit on the uncompleted work. Offsite expenses or overheads are all administrative or executive costs incidental to the management supervision or capital outlay as distinguished from operating charges. These charges cannot be fairly charged to one stream of work or job, and rather be distributed as they relate to the general business or the work of the contractor/builder being undertaken or to be undertaken, as the overheads are relatable to the builder/contractor's business in entirety.

21. The usage of formulae such as Hudson's, Emden's, or Eichleay's formulae to ascertain the loss of overheads and profits has been judicially approved in the English cases of Peak Construction (Liverpool) Ltd. v. McKinney Foundations Limited15, Whittal Builders v. Chesterle-Street District Council16, and JF Finnegan Ltd. v. Sheffield City Council17 and in the Canadian case of EllisDon v. Parking Authority of Toronto18. The three formulae deal with theoretical mathematical equations, but are based on factual assumptions, and therefore can produce three different and unrelated compensation/damages. Therefore, while applying a particular equation or method, the assumptions should be examined, and the satisfaction of the assumption(s) ascertained in the facts and circumstances.

22. The formula suggested by Hudson in his 10th edition of the book Building and Engineering Contracts for the computation of damages takes the head office and profit percentage as a proportion of the contract value. The formula assumes that the profit judged by the builder/contractor is in fact capable of being earned by her/him elsewhere had the builder/contractor been free to leave the contract at the proper time. The formula is couched on three assumptions. First, that the contractor is not habitually or otherwise underestimating the cost when pricing; secondly the profit element was realistic at that time; and lastly, there was no fluctuation in the market conditions and the work of the same general level of profitability would be available to her/him at the end of the contract period. Satisfaction of these assumptions should be ascertained when we apply Hudson's formula for computing the damages. Material should be furnished by the claimant to justify and assure that the assumptions for applying Hudson's formula are met.

23. Ordinarily, when the completion of a contract is delayed and the contractor claims that s/he has suffered a loss arising from depletion of her/his income from the job and hence turnover of her/his business, and also for the overheads in the form of workforce expenses which could have been deployed in other contracts, the claims to bear any persuasion before the arbitrator or a court of law, the builder/contractor has to prove that there was other work available that he would have secured if not for the delay, by producing invitations to tender which was declined due to insufficient capacity to undertake other work. The same may also be proven from the books of accounts to demonstrate a drop in turnover and establish that this result is from the particular delay rather than from extraneous causes. If loss of turnover resulting from delay is not established, it is merely a delay in receipt of money, and as such, the builder/contractor is only entitled to interest on the capital employed and not the profit, which should be paid. The High Court of Justice Queen's Bench Division in the case of Property and Land Contractors Ltd. v. Alfred McAlpine Homes North Ltd.19 succinctly points the inexactitude of Hudson's formulae, by observing: “Furthermore, the Emden formula, in common with the Hudson formula (see Hudson on Building Contracts, (11th edn, 1995) paras 8-182 et seq) and with its American counterpart the Eichleay formula, is dependent on various assumptions which are not always present and which, if not present, will not justify the use of a formula. For example, the Hudson formula makes it clear that an element of constraint is required (see Hudson para 8.185) ie in relation to profit, that there was profit capable of being earned elsewhere and there was no change in the market thereafter affecting profitability of the work. It must also be established that the contractor was unable to deploy resources elsewhere and had no possibility of recovering cost of the overheads from other sources, eg from an increased volume of the work. Thus, such formulae are likely only to be of value if the event causing delay is (or has the characteristics of) a breach of contract.”

24. As mentioned in McDermott International Inc., Hudson's 11th Edition has referred to Eichleay formula, which gives the resultant figures with greater precision and accuracy. This formula, which emerged in 1960s20, is far more nuanced and rigorous, as it requires the builder/contractor to itemise and quantify the total fixed overheads during the contract period. It takes into consideration all the contracts of the contractor/builder during the contract period with those of the individually delayed contract to determine the proportionate faction of the total fixed overheads. However, in both Hudson's and Eichleay's formulae, the amount to be recovered is determined weekly or monthly, which the delay in the contract completion is expected to earn.

27. Arbitral tribunal in the present case has given complete go by to these principles well in place, overlooked care and caution required and taken a onesided view grossly and abnormally inflated the damages. The figures quoted in paragraph 11 supra show the overstatement and aggrandizement in awarding Rs. 1,57,37,666/-, towards loss of overheads and loss of profits/profitability, in a contract of Rs. 5,74,35,213/-. Rs. 1,21,95,859.68/- was paid for the work done within the term. Rs. 2,92,07,619.13 was paid for the work done post the term. Thus, Rs. 4,14,03,478.81/- was paid for 80% of the work. The balance was Rs. 1,14,87,042.00/. The amount awarded towards loss of overheads and profits/profitability is Rs. 1,57,37,666/-. No justification for computation of the loss is elucidated or can be expounded. Even if one were to rely upon the chart given by the BEEL, and ignore the contradictions in findings, the amount awarded is highly disproportionate and exorbitant. It is clearly a case of overlapping or at least a part doubling of the loss/damages.

28. The arbitral tribunal has accepted that principle of mitigation is applicable but observes that the only way BEEL could have abased the loss, was to work on Sundays or holidays. This reasoning is again ex facie fallacious and wrong. The principle of mitigation with regard to overhead expenses does not mandate working on Sundays or holidays.”

68. In Union of India through Executive Engineer Lucknow Central Division No. 2 v. ANS Construction Ltd., 2024 SCC OnLine Del 4754, the Co-ordinate Bench of this Court held as follows:-

69. In M/s. Behl Associates v. Union of India & Ors., 2016 SCC OnLine Del 98, the relevant observations of the Court are as under:-

70. In Satluj Jal Vidyut Nigam Ltd. v. Jaiprakash Hyundai Consortium and Others, 2023 SCC OnLine Del 4039, the Court observed:-

71. In Govt. of NCT of Delhi v. M/s. Hurryson Enterprises, 2018 SCC OnLine Del 13105, this Court observed:-

2, 6, 13 and 9 is not being interfered with, the award of this amount on account of infrastructure expenses incurred, payments to staff, additional labour, idle staff, could not have been awarded without any evidence. The award is accordingly set aside.”

72. From the conspectus of the aforementioned judgments, it clearly emerges that even if there is a finding of breach of the contract by one party to the contract, the other party seeking damages resulting from the breach, must prove actual loss caused, whether by way of loss of profit or overheads, by leading cogent evidence. The standard formulas such as Hudson are essentially tools for computing the extent of overheads/profit, but even while using these formulas, the Arbitral Tribunal or the Courts must ensure that as a matter of fact, the party suffering from the breach has incurred expenditure on overheads attributable to the works executed during the extended period. In other words, the party must lead credible evidence to prove the loss and the standard formulas cannot be applied in vacuum.

73. In the present case, Respondent did not lead evidence to prove loss on account of overhead expenses to claim compensation. Arbitral Tribunal came to a conclusion that work done in the extended period of contract was in the vicinity of Rs.36 crores, basis the figures given by the Respondent in the running bills. Tribunal rendered a finding in favour of the Respondent and awarded a sum of Rs.3,60,00,000/- calculated at 10% of Rs.36 crores, the value of work done in the extended period of contract. The methodology adopted by the Arbitral Tribunal was to take into account the total value of the work under the contract i.e. Rs.212 crores and from this figure, the Arbitral Tribunal deducted Rs.187 crores as the value of the work done upto 17.12.2017 and arrived at a figure of Rs.45 crores. Thereafter, the Arbitral Tribunal referred to the RA Bills from 20th to 25th Bill. The RA 20th covered the period 01.12.2017 to 03.01.2018 out of which the period from 01.12.2017 to 17.12.2017 was the period upto intended Date of Completion and the remaining period was the extended time. Since there was no evidence of the exact work done in the first period and the second period, the Arbitral Tribunal took half the amount of 20th RA Bill, which was worth Rs.16,64,58,705/- and taking half of this amount deducted the said sum from Rs.45 crores and taking 10% on the balance of Rs.36 crores, awarded a sum of Rs.3,60,00,000/- towards compensation towards cost of overheads. In calculating the said compensation, the Arbitral Tribunal relied on Standard Data Book of the Petitioner wherein percentages for calculating loss of profit and loss of overheads have been specified and more particularly, on paragraph 3.[1] which provides 8% as compensation towards overhead charges in case of projects above Rs.50 crores, contrary to the law that standard formulas cannot be applied in a vacuum.

74. Clearly, the claim for compensation has been awarded without the Respondent substantiating and proving any loss suffered by the Respondent due to prolongation of contract and sans any evidence, in light of the settled law, this part of the award cannot be sustained being patently illegal. Accordingly, the impugned award dated 12.04.2023 is set aside to the extent of award of compensation in the sum of Rs.3,60,00,000/- and interest thereon. Award is upheld with respect to claims of payment of interest on delayed payments due, to the tune of Rs.73,11,253/- and electricity charges of Rs.63,36,232/- as also costs.

75. Petition is disposed of in the aforesaid terms along with pending application.

76. Interim order dated 12.09.2023 is vacated. The amount deposited by the Petitioner in this Court, pursuant to the said order will be released to the Petitioner along with interest accrued thereon, upto the date of release.