J U D G M E N T

YASHWANT VARMA, J.

1. The appellant / claimant assails the judgment and orders dated 12 December 2018 and 08 August 2019 passed by the learned Single Judge on the Section 34 petition instituted by the respondent under the Arbitration & Conciliation Act, 19961.

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2. It would appear from the record that in terms of the judgment which was rendered on 12 December 2018, the learned Single Judge while partly allowing the Section 34 petition had reduced the rate of interest awarded in favour of the appellant / claimant passed by the Arbitral Tribunal2 from 18% to 12% and further restricting the application of interest from the date of accrual of cause of action, namely, 08 March 2004 and providing it to commence from the date of invocation of arbitration, namely, 06 July 2008.

3. After the Section 34 petition had been finally disposed of on 12 December 2018, an application for modification came to be moved by the respondent and which was accepted and disposed of in terms of the order dated 08 August 2019. Dealing with the issues which appear to arise on the appeal and on hearing learned counsel for respective parties, we had, on 15 September 2023, passed the following order:

1. The instant appeal questions the judgment and order dated 08 August 2019 and 12 December 2018 passed by the learned Single Judge on a petition preferred under Section 34 of the Arbitration and Conciliation Act, 1996 [“the Act”].

2. As would be manifest from the record, the Section 34 petition came to be disposed of on 12 December 2018 in the following operative terms: -

“14. The stand that extension of time was not granted is not correct. Thus as per Clause 10CC, escalation is liable to be granted in any contract even during the extended period and the contractor is entitled to escalation. Coming to the question as to whether any evidence was lead on payments made under Clause 10CC – it is the settled position that 10 CC prescribes a formula for calculation of escalation. It stipulates the manner in which escalation is calculated. Once the escalation is awarded, the manner of calculation is done as per the said Clause itself. In any case, during the

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period during which escalation was claimed, the work was under progress. The fact that the work was continuing and was also completed itself is proof of material, labour etc., being employed. Thus, the award of escalation under Clause

10CC is not liable to be interfered with.

15. Para 20 and 21 of Municipal Corporation of Delhi v. Rakesh Brothers 2005(2) Arb. LR 257 (Delhi) are apt and are set out herein below:

“20. Claim No.5 in sum of Rs.1.35 lacs was based on Clause 10(CC) of the contract provided for escalation as per formula provided therein. Clause 10(CC) has been incorporated in the contract at Serial No. 26 of the general conditions of the contract. Submission of the MCD before the learned arbitrator was that compensation under Clause 10(CC) had to be paid on the basis of actual occurrence of the escalation with return proof. Learned arbitrator has rejected the same by bolding that this would defeat the mandatory provision of the agreement.

21. Two Division Benches of this Court in the decisions reported as 1998 (VII) AD (Delhi) 300=1999(1) Arb. LR 88(Del.) (DB) – DDA vs. U. Kashyap and 2001 (II) AD (Delhi) 116 – DDA vs. K.C. Goyal, have held that where a clause in a contract provides a formula to give escalation, award of escalation on the basis of actual increase in price of material would be impermissible. Opposition before the learned arbitrator to Claim No.5 is based on a wrong notion of law and the learned arbitrator has rightly held that escalation has to be as per statutory formula. Decision of the learned arbitrator is in complete harmony with decisions of this Court. Learned arbitrator has awarded a lessor sum on the basis of the final calculations as per formula provided. I accordingly uphold the award pertaining to Claim No.5.”

Thus, the award of escalation under Clause 10CC is ba