Back
2026 Supreme(Del) 1065
IN THE HIGH COURT OF DELHI AT NEW DELHI
AVNEESH JHINGAN, J.
Eco Green Buildtech Pvt Ltd – Petitioner
Versus
Vikartan Infrastructure Pvt Ltd – Respondent
CNR No. DLHC010300652023 O.M.P. (COMM) 293/2023 & I.A. 14489 of 2023
Decided On : 10-09-2026
For the Petitioner: Mr. S K Maniktala, Mr. Udit Maniktala, Mr. Akshay Sharma, Mr. Sanchit Jain, Mr. Vikas Rana, Mr. Shikhar Prakash & Mr. Mohit Sharma, Advs.
For the Respondent: Mr. Somnath Bharti, Sr. Adv. with Mr. Bhupesh Narula, Ms. Rinku Narula, Mr. Anurag Ekka & Mr. Kanishk Taneja, Advs.
Arbitral awards quantifying damages based on the arbitrator's personal experience or trade usage, without evidence of actual loss or providing the opposing party an opportunity to object to reports/documents, are patently illegal and liable to be set aside under Section 34 of the Arbitration and Conciliation Act.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 34, 29A, 24(3), and 18 - Indian Contract Act, 1872 - Sections 55 and 73 - Challenge to arbitral award - Mandate of tribunal - Confidentiality of conciliation proceedings - Quantification of damages - Reliance on personal experience of arbitrator - Hudson's formula - Loss of profit - Evidence of actual loss - Award set aside where damages were awarded based on conjecture, personal experience, or without providing opportunity to object to reports. (Paras 6, 8, 11, 12, 14, 19)
(B) Conciliation Proceedings - Confidentiality - Statements made during conciliation or mediation are confidential and cannot be used as evidence in subsequent adjudicatory proceedings if the settlement fails. (Paras 8, 8.2, 8.3)
(C) Quantification of Damages - Section 73 of the Contract Act - For awarding damages, breach of contract and consequential actual loss or damage must be established - Personal expertise or trade usage of the arbitrator cannot substitute the onus of the claimant to prove actual loss with cogent evidence. (Paras 11, 12, 19)
(D) Natural Justice in Arbitration - Section 24(3) and Section 18 of the Act - Parties must be treated with equality and given a fair opportunity to present their case - Reliance on documents or reports without providing the other party an opportunity to object is patently illegal. (Paras 12, 14)
Facts of the case:
A dispute arose from a construction contract regarding delays, payments, and prolongation of work. The respondent invoked arbitration and claimed amounts for work executed, idling charges, additional overheads, and loss of profit. The tribunal partly allowed these claims, relying on a Local Commissioner's report, records from conciliation attempts, and the arbitrator's personal experience. The petitioner challenged the award and an additional award under Section 34 of the Arbitration and Conciliation Act.
Findings of Court:
The court found that the tribunal erred by relying on confidential conciliation proceedings and the Local Commissioner's report without allowing the petitioner to object. It further held that damages for idling resources, overheads, and loss of profit were awarded based on "personal experience" and "guesswork" rather than evidence of actual loss, which is contrary to Section 73 of the Contract Act and established legal precedents. Reliance on CPWD circulars not confronted to the petitioner was found to be in violation of Section 24(3) of the Act.
Issues: Whether the mandate of the tribunal had expired; whether conciliation proceedings could be relied upon in the final award; and whether damages could be quantified based on the arbitrator's personal experience and trade usage without evidence of actual loss.
Ratio Decidendi: The court ruled that conciliation proceedings are confidential and cannot be used in arbitration. Furthermore, for claims of loss of profit or overheads, the claimant must prove actual loss; the arbitrator's personal expertise cannot replace the requirement for evidence. Reliance on documents not shared with the opposing party violates the principles of natural justice and the Arbitration Act.
Result: Petition allowed, the impugned award and the additional award are set aside.
JUDGMENT
1. The present petition is filed under Section 34 of the Arbitration and Conciliation Act, 1996 (for short ‘the Act’) challenging the award dated 28.02.2023 and the additional award dated 27.03.2023.
2. The dispute arises out of the contract for construction and development of ‘Sikka Kamya Greens, Sector-10, Greater Noida’. The letter of acceptance dated 09.04.2016 was for a contract value of Rs.53,73,50,000/- with a stipulated completion period of thirty-four months i.e. up to 08.02.2019. During the execution of the work dispute arose between the parties concerning inter alia delay in execution, release of payments and party responsible for the prolongation of the contract. The parties thereafter executed a Memorandum of Understanding (MOU) dated 27.09.2018. and effect thereof is contentious. The respondent alleged that the petitioner failed to comply with its obligations under the MOU whereas the petitioner relied upon the MOU for having settled the accounts and claims between the parties.
2.1 The respondent attributed the delay and consequent prolongation of the works to breaches committed by the petitioner, particularly non-release of payments, non-supply of requisite material and failure to remove various hindrances at site. The respondent claimed compensation towards amount due for work executed, escalation, Works Contract Tax (WCT), damages for idling/under- utilisation of plant and machinery, additional overheads, material lying at site, loss of profit/profitability due to non-completion of work consequent to breach attributable to the petitioner (hereinafter ‘claim for loss’), interest and costs. The petitioner disputed the claims and alleged that the delay was attributable to the respondent for failure to deploy adequate manpower and machinery and abandonment of the works.
2.2 Arbitration was invoked by the respondent on 13.07.2020. A sole arbitrator was appointed with the consent of the parties by the Court vide order dated 14.08.2020. During the arbitral proceedings an independent engineer was appointed as the Local Commissioner (hereinafter referred to as ‘LC’) to measure the work executed at site and to prepare an inventory of the material plant, machinery tools and equipment belonging to the respondent. The LC inspected the site between 29.08.2020 and 02.09.2020 and submitted the report dated 31.12.2020 followed by a supplementary report dated 28.02.2021.
2.3 Before the arbitral tribunal (for short ‘the tribunal’) the respondent raised twelve claims aggregating to Rs.15,07,05,796/- apart from interest while the petitioner preferred thirteen counterclaims aggregating to Rs.4,02,71,750/- apart from interest and costs. The principal controversy before the tribunal concerned the party responsible for the delay and the consequences flowing therefrom.
2.4 Upon consideration of the contractual document, correspondence, MOU, LC report and material placed on record the tribunal held petitioner to be responsible for delay and breach of contractual obligations and that no corresponding breach on the part of the respondent was established. The tribunal further held that the MOU was binding upon the parties but did not constitute novation of the original contract. The tribunal partly allowed the claims relating to work executed, WCT, idling/under-utilisation of machinery, additional overhead, material lying at site and loss of profit/profitability and rejected the claims towards escalation and other heads. All the counterclaims of the petitioner were rejected. On an application under Section 33 of the Act, the tribunal passed the additional award dated 27.03.2023 correcting typographical and computational error in the original award. Significantly, the computation under claim no.6 relating to additional overheads was corrected from Rs.2,04,53,218/- to Rs.2,84,53,218/-.
3. Learned counsel for the petitioner submits that the award having passed after expiry of the mandate of the tribunal is liable to be set aside. The conten
