The main legal point established in the judgment is the requirement for evidence to support escalation and loss of profit claims in construction contracts, as well as the application of relevant legal principles to interpret and uphold the arbitral award.

JUDGMENT

(Prayer: Original Petition filed under Section 34 of Arbitration and Conciliation Act, 1996, pleased to set aside the award in so far as Claim Nos.11, 14 and 17 and direct the respondent to pay Rs.8,27,278/- towards the said claims with interest at 18% from 04.11.2015 till date of realization.)

1.The dispute relates to and arises out of a contract awarded by the respondent to the petitioner for the construction of a dispensary. The contract was required to be executed in ten months and the contract price was Rs.52,53,399.55/-. The execution of work was delayed on account of multiple reasons, including re-location of the site. Eventually, after issuing a show cause notice, the respondent terminated the contract by communication dated 24.05.2011, which was received by the petitioner on 31.05.2011. In these circumstances, the petitioner raised a dispute and, upon constitution of an arbitral tribunal, submitted a claim statement in which about 26 claims were made. Out of the 26 claims, about 14 claims were allowed in part by the arbitral award dated 25.02.2017 (the Award). The petitioner has challenged the Award only in respect of three disallowed claims. Out of the three disallowed claims, one claim, namely, the claim pertaining to refund of security deposit was settled while this petition was pending adjudication. As a result, this petition survives only in respect of two claims, namely, the claims for escalation and loss of profit.

2. Learned counsel for the petitioner challenged the Award in relation to the escalation claim on the ground that the contract does not contain a clause prohibiting the grant of escalation and, therefore, the refusal of the arbitral tribunal to grant escalation calls for interference. After referring to the petitioner's pleadings in relation to escalation, whereby the basis of claim was communicated, he pointed out that the only response of the respondent to such claim was that the contract does not contain a clause for escalation. He contended that the ten month contract could not be executed as per schedule on account of various reasons attributable to the respondent, and turned to the findings of the arbitral tribunal with regard to attribution of responsibility for delay. With specific reference to paragraphs 4.15, 4.20 and 4.26 of the Award, learned counsel pointed out that the arbitral tribunal concluded that the delay was not attributable to the claimant, and that, therefore, the respondent had no right to terminate the contract on the ground of delay by the claimant. After recording such findings, learned counsel submitted that the conclusions at paragraphs 15.3 to 15.5 of the Award are patently illegal. By drawing reference to the judgment of the Hon'ble Supreme Court in P.M.Paul v. Union of India (P.M.Paul), AIR 1989 SC 1034, learned counsel submitted that escalation is the natural consequence of passage of time and that an escalation claim may be awarded unless prohibited by the relevant contract. By relying on the judgment in K.N.Sathyapalan v. State of Kerala (Sathyapalan), (2007) 13 SCC 43, he submitted that escalation should have been awarded once the arbitral tribunal concluded that the respondent was responsible for delay. In the context of the findings on delay and termination, learned counsel contended that the findings of the arbitral tribunal on escalation warrant interference in as much as such findings are directly contrary to the law laid down in P.M.Paul and Sathyapalan.

3. Learned counsel dealt with the loss of profit claim next. By referring to the pleadings in relation thereto, he submitted that loss of profit was claimed at 20% of the incomplete contract value. By turning to the counter statement of the respondent, he stated that the respondent did not deal with the claim for loss of profit. With reference to paragraph 18.4 of the Award, learned counsel submitted that the conclusion arrived at by the arbitral tribunal is not a plausible conclusion in as much as the t