JUDGMENT :

Context and Factual Background:

1. This is a Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (“the Act”) impugning an arbitral award dated April 14, 2023 (“Arbitral Award”), by which disputes and differences relating to an Engineering Procurement and Construction Contract comprising agreements dated December 17, 2014 and December 24, 2014 (collectively the “Agreement”) executed between the parties came to be adjudicated.

2. The core contention that needs to be dealt with in the challenge is twofold: first, that Clause 4.1.5 specifically and categorically provides that the aggregate damages payable shall not exceed 1% of the contract price, and yet, the Impugned Award has held that such limit would not apply in the peculiar facts of the case; and second, that interest awarded at the rate of 18% per annum compounded with quarterly rests for pre-arbitration, pendente lite and post-arbitration, is contrary to the contract as well as Section 31(7) of the Act.

3. A brief factual overview of facts relevant for purposes of this Petition may be summarised thus:-

A) The Agreement was executed in respect of road infrastructure, broken up into three packages, each of which involved construction of various major and minor bridges of four lanes or two lanes; and two overbridges over land. The three packages were of a value of Rs.53.24 crores; Rs.48.80 crores; and Rs.46.46 crores respectively – aggregating to Rs.148.51 crores;

B) Disputes and differences arose between the Petitioner, the Public Works Department (“PWD”), through the National Highway Division and the Respondent, Khare And Tarkunde Infrastructure Pvt. Ltd. (“KTIPL”) over what caused the delays associated with the project;

C) The Letters of Acceptance for the project were issued in December 2014. PWD communicated that the “Appointed Date” for the Agreement would be January 27, 2015. This date is important inasmuch as the Agreement provides for completion of the project within a period of 18 months from the Appointed Date. The scheduled completion deadline, on the basis of the Appointed Date, would have been July 26, 2016;

D) The Agreement was terminated by PWD on October 25, 2018 — nearly three and a half years after the Appointed Date;

E) The core issue in these proceedings centres around the provision of the Right of Way (“ROW”). Under the Agreement, PWD was to provide KTIPL with ROW to the extent of at least 90%, [Clause 4.1.3(a) read with clause 28.1.] of the total length of the project within a period of 15 days from the date of execution of the Agreement. The balance 10% ,[Clause 8.2] of the ROW was to be handed over within a maximum of 150 days from the Appointed Date;

F) On February 20, 2015, PWD wrote to KTIPL, declaring that January 27, 2015 would be the Appointed Date. It is common ground that 90% of the ROW had not been handed over by this date. The very next day, on February 21, 2015, KTIPL wrote to PWD stating that the ROW had not been handed over, and therefore, the Appointed Date was incorrect;

G) By June 21, 2015, the first milestone under the project was reached;

H) On February 15, 2016, KTIPL wrote to PWD, listing the difficulties faced and highlighting that land and the ROW had not been handed over, requesting that 90% of the ROW be handed over;

I) The parties traded correspondence between March 9, 2015 and August 10, 2016, which would establish that 90% of the ROW had not been handed over. The land necessary for grant of the ROW had not been acquired, which would indicate that handing over the same to KTIPL was impossible;

J) The parties held meetings and eventually it was agreed that a ROW for approaches for five bridges and two road overbridges would be handed over by November 15, 2016;

K) On July 11, 2016, KTIPL requested an extension of time for completion of the project and grant of such request was recommended by PWD;

L) The second milestone was reached only by January 24, 2017. On May 11, 2017, PWD acknowledged the delay and r