Summary
The Supreme Court upheld an arbitral award rejecting a contractor's delay-damages claims under clause 49.5 of the General Conditions of Contract, which bars damages for the employer's delay and provides only for extension of time. The contractor had repeatedly sought extensions under that clause and undertook not to claim anything beyond escalation, so it was estopped from challenging the clause; its new challenge under Sections 23 and 28 of the Contract Act could not be raised for the first time, and no ground for interference under Sections 34 and 37 was made out.
Issues
- Whether the contractor's claims for damages on account of the employer's delay were barred by clause 49.5 of the GCC.
- Whether the contractor, having sought extensions under clause 49 and given undertakings not to claim anything beyond escalation, could challenge the validity of clause 49.5.
- Whether the validity of clause 49.5 under Sections 23 and 28 of the Contract Act could be raised for the first time before the Supreme Court.
- Whether the employer had waived clause 49.5.
- The scope of interference with an award in an appeal under Section 37 of the Arbitration and Conciliation Act, 1996.
Provisions considered
- Clause 49.5 (delays due to Employer/Engineer); Clause 49.4, General Conditions of Contract (agreement dated 28.06.2012 between the parties)Clause 49.5 provides that failure or delay by the employer does not entitle the contractor to damages or compensation, the remedy being a reasonable extension of time. Since the delay was admittedly attributable to the employer, clause 49.5 and not clause 49.4 applied, and on its plain reading the claims were barred, so no evidence was needed. (¶¶ 12, 13, 19, 23, 26)
- Section 16, Arbitration and Conciliation Act, 1996The Arbitral Tribunal, on the employer's application under Section 16(2), rejected all claims on the basis of clause 49.5 in an order in the nature of an award; the Court found no error in deciding the claims without evidence since they were barred on the clause's plain terms. (¶¶ 7, 22, 23)
- Sections 34 and 37, Arbitration and Conciliation Act, 1996Following Larsen Air Conditioning and Konkan Railway, the Court reiterated that Section 34 permits interference only on limited grounds such as patent illegality going to the root of the matter, and that the Section 37 appellate jurisdiction cannot travel beyond the Section 34 restrictions or undertake an independent assessment of the merits. (¶¶ 24, 25, 27, 28, 29)
- Sections 23 and 28, Indian Contract Act, 1872The contention that clause 49.5 was invalid under these provisions had not been raised before the Single Judge under Section 34 or before the Division Bench under Section 37, so the Court declined to entertain it for the first time in the appeal and did not decide it. (¶¶ 10, 11, 24)
Held
- By its conduct the contractor acted on clause 49.5, seeking extensions of time under clause 49 on three occasions and then giving written undertakings on 14.01.2015 not to claim anything other than escalation for the delay; its claim made in January 2017 was contrary to those undertakings, and it was estopped from challenging the validity of clause 49.5. (¶¶ 13, 14, 16, 17, 18, 19)
- As the claims were barred on a plain reading of clause 49.5, there was no question of allowing the contractor to lead evidence before the Arbitral Tribunal; clause 49.4 applies only where the delay is not due to the employer and had no application. (¶¶ 22, 23)
- A challenge to the validity of clause 49.5 under Sections 23 and 28 of the Contract Act, not raised in the Section 34 petition or the Section 37 appeal, cannot be raised for the first time before the Supreme Court. (¶ 24)
- The plea of waiver, itself raised for the first time in the Section 37 appeal, failed on merits: the employer's letter insisting that any claim for financial burden be dealt with together with the extension request did not waive clause 49.5, extensions were later granted at the contractor's own request under clause 49, and the contractor never submitted the detailed claim called for. (¶¶ 25, 26)
- Jurisdiction under Section 37 is akin to and no wider than that under Section 34; the court cannot independently reassess the merits of the award. Applying this limited scope, no interference was warranted. (¶¶ 27, 28, 29)
Result
Appeal dismissed; the award rejecting the claims and the High Court's judgments under Sections 34 and 37 upheld.