1. Contractor disputes DDA's withholding of payments post-completion, seeking arbitration for final bill dues and extra charges under the Arbitration Act, 1940. (Para 1 , 5 , 6 , 7 , 8 , 11 , 12 , 13 )
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2026 Supreme(Online)(Del) 24085
IN THE HIGH COURT OF DELHI AT NEW DELHI
Jasmeet Singh, J
S.R. Ashok & Associates – Appellant
Versus
Delhi Development Authority – Respondent
CS (OS) 361/2008 | CS (OS) 362/2008
Important Points
Courts will not interfere with a reasoned arbitral award under the Arbitration Act, 1940, provided the arbitrator's view is plausible. Mutual consent to extend the time for the award and subsequent participation in proceedings preclude challenges based on Section 28 of the Act.
Subject
Arbitration - Challenge to Arbitral Award
Act Referred
Headnote
(A) Arbitration Act, 1940 - Sections 14, 17, 28, 30 and 33 - Scope of interference with arbitral awards - Court does not sit as a court of appeal; interference is limited to cases of perversity, error of law, or misconduct where no plausible view is possible. (Paras 73, 110) - Limitation and Waiver - If arbitration is invoked within the contractually stipulated period from the date the final bill is ready, the claim is within limitation; right to seek arbitration is paramount and not curtailed by other restrictive clauses regarding the submission of disputed items. (Paras 82, 88) - Section 28 - Power to enlarge time for making the award - While generally reserved for the court, the arbitrator can enlarge time with the mutual consent of parties; subsequent participation and acquiescence preclude a party from challenging the proceedings for want of such enlargement. (Paras 103, 107)
(B) Misconduct of Arbitrator - Legal misconduct includes arriving at an inconsistent conclusion or ignoring material documents that throw light on the controversy; however, a reasoned award based on a plausible interpretation of evidence does not constitute misconduct. (Paras 108, 112)
(C) Contractual Claims - Extra items - If a contractor notifies the employer during the currency of the contract that specific work shall be treated as an extra item and the employer does not object, the claim is maintainable. (Para 121) - Prolongation Damages - Compensation for overheads and salaries during extended periods is maintainable if the contractor puts the employer on notice and the employer accepts performance despite the delay. (Para 135) - Interest - Arbitrators are empowered to grant pre-reference, pendente lite, and post-award interest unless expressly prohibited by the contract. (Para 151)
Facts of the case:
Two construction contracts were executed for housing projects. Completion was delayed and subsequently extended. Following the payment of the final bill, with certain amounts withheld, the contractor invoked arbitration. The proceedings were initially delayed, adjourned sine die, and later revived with a successor arbitrator who passed awards granting claims for extra items (cutting and straightening of steel), prolongation costs, security charges, and interest. The employer challenged these awards on grounds of limitation, breach of the statutory time limit for making awards, and alleged arbitrator misconduct.
Findings of Court:
The court found that the invocation of arbitration was timely as per the contract. The enlargement of time was valid based on mutual consent and the principle of acquiescence. The arbitrator's awards on merits were deemed plausible and supported by record, including internal circulars and contemporaneously sent notifications.
Issues: Whether the claims were barred by limitation or contractual waiver; whether the arbitrator lacked jurisdiction to extend the time for the award under Section 28; and whether the findings on specific claims were perverse or constituted legal misconduct.
Ratio Decidendi: Judicial interference with an arbitral award under the 1940 Act is extremely limited; where an arbitrator has provided reasons and taken a plausible view based on available material, the court will not substitute its own evaluation. Mutual consent to extend time and active participation in proceedings waive the right to subsequently challenge the award for lack of a court-ordered extension.
Result: Objections rejected and awards made Rule of the Court.
(B) Misconduct of Arbitrator - Legal misconduct includes arriving at an inconsistent conclusion or ignoring material documents that throw light on the controversy; however, a reasoned award based on a plausible interpretation of evidence does not constitute misconduct. (Paras 108, 112)
(C) Contractual Claims - Extra items - If a contractor notifies the employer during the currency of the contract that specific work shall be treated as an extra item and the employer does not object, the claim is maintainable. (Para 121) - Prolongation Damages - Compensation for overheads and salaries during extended periods is maintainable if the contractor puts the employer on notice and the employer accepts performance despite the delay. (Para 135) - Interest - Arbitrators are empowered to grant pre-reference, pendente lite, and post-award interest unless expressly prohibited by the contract. (Para 151)
Facts of the case:
Two construction contracts were executed for housing projects. Completion was delayed and subsequently extended. Following the payment of the final bill, with certain amounts withheld, the contractor invoked arbitration. The proceedings were initially delayed, adjourned sine die, and later revived with a successor arbitrator who passed awards granting claims for extra items (cutting and straightening of steel), prolongation costs, security charges, and interest. The employer challenged these awards on grounds of limitation, breach of the statutory time limit for making awards, and alleged arbitrator misconduct.
Findings of Court:
The court found that the invocation of arbitration was timely as per the contract. The enlargement of time was valid based on mutual consent and the principle of acquiescence. The arbitrator's awards on merits were deemed plausible and supported by record, including internal circulars and contemporaneously sent notifications.
Issues: Whether the claims were barred by limitation or contractual waiver; whether the arbitrator lacked jurisdiction to extend the time for the award under Section 28; and whether the findings on specific claims were perverse or constituted legal misconduct.
Ratio Decidendi: Judicial interference with an arbitral award under the 1940 Act is extremely limited; where an arbitrator has provided reasons and taken a plausible view based on available material, the court will not substitute its own evaluation. Mutual consent to extend time and active participation in proceedings waive the right to subsequently challenge the award for lack of a court-ordered extension.
Result: Objections rejected and awards made Rule of the Court.
Legal Category Hierarchy
Advocates:
For the Appellants/Petitioners: Akshu Jain, Stuti Jain
For the Respondents: Kritika Gupta, Chand Chopra, Punishk Handa
For the Appellants/Petitioners: Akshu Jain, Stuti Jain
For the Respondents: Kritika Gupta, Chand Chopra, Punishk Handa
Table of Contents
2. DDA challenges awards as time-barred, alleging waiver under contract clauses and procedural misconduct; Contractor asserts timely invocation and ongoing contractual obligations. (Para 22 , 25 , 27 , 29 , 30 , 50 , 52 , 53 , 54 )
3. Court finds arbitration invocation timely, rejecting waiver claims. Arbitrator's findings on limitation, extra items, and quantum are plausible and consistent with contractual terms and evidence. (Para 71 , 73 , 76 , 89 , 90 , 94 , 98 , 111 , 114 , 146 , 161 )
4. Courts will not interfere with an arbitral award under the 1940 Act unless it exhibits total perversity, legal misconduct, or ignores material evidence, upholding plausible interpretations. (Para 73 , 109 , 110 )
5. Court dismisses objections to the Arbitral Awards, confirming them as the Rule of the Court, and directs that decree sheets be drawn up accordingly. (Para 162 , 163 , 164 )
6. Can an arbitrator enlarge the time for making an award under the 1940 Act?
Under Section 28(2) of the 1940 Act, an arbitrator cannot unilaterally enlarge the time for an award. However, enlargement is permissible if all parties to the arbitration agreement expressly consent to such extension after the arbitrator has entered upon the reference. (Para 102 , 103 , 104 , 107 )
7. What is the scope of judicial interference with an arbitral award under the 1940 Act?
Interference is strictly limited to grounds under Sections 30 and 33 of the Act. The court does not sit in appeal, cannot reappraise evidence, and will not set aside an award unless it shows total perversity, legal misconduct, or an error of law apparent on the face of the record. (Para 73 , 109 , 110 , 114 )
8. Does a contractor waive claims if a final bill is submitted after the completion date?
Waiver of claims under an 'accord and satisfaction' or notice period clause does not automatically occur if the employer itself continues to issue payments, withholds amounts, permits extra work, or fails to issue a formal completion certificate. Right to arbitration under Clause 25 is paramount. (Para 77 , 88 , 92 , 94 )
9. Does a party forfeit the right to challenge arbitration proceedings by participating in them?
Yes. A party who participates in arbitration proceedings without protest and avails of the process cannot challenge the award’s validity on grounds of jurisdiction or defect in appointment after the decision is rendered, based on the principles of acquiescence and estoppel. (Para 106 , 107 )
JUDGMENT
1. The present suits have been filed under Sections 14 and 17 of the Arbitration Act, 1940 (“the Act”) on behalf of the plaintiff, seeking to make two Arbitral Awards dated 31.01.2008 and 28.01.2008 (“Impugned Awards”) passed by the Ld. Sole Arbitrator/defendant No.2 (“Arbitrator”) in the matters of arbitration between M/s. S.R. Ashok & Associates v. Executive Engineer, D.D.A., as Rule of the Court.
2. It is clarified that even though the plaints in the two suits in their respective prayer clauses have interchanged the dates of the Impugned Awards, the awards are substantially the same in both except for one claim and therefore, my reasoning will remain the same.
3. The defendant No. 1/DDA has filed objections under Sections 30 & 33 of the Act, against the Impugned Awards vide applications bearing IA No. 4749 of 2008 in CS (OS) 361/2008 in respect of Claim No. 1(4) and Additional Claim Nos. 1, 2, 3 & 4 and IA No. 4753 of 2008 in CS (OS) 362/2008 in respect of Claim No. 1(4) and Additional Claim Nos. 1, 2, 3, 4 & 6.
4. The plaintiff namely M/s. S.R. Ashok & Associates, a partnership firm, duly registered under the Partnership Act, was the claimant in both the arbitral proceedings and defendant No. 1 namely Delhi Development Authority (“DDA”) was the respondent in both the proceedings. The defendant No. 2 is the Arbitrator in both the arbitration proceedings.
FACTUAL BACKGROUND
CS (OS) 361/2008 (arising out of Arbitral Award dated 31.01.2008)
5. The defendant No. 1/DDA had issued a notice inviting tenders for execution of work for construction of Lower MIG Houses at Kondli Gharoli Complex, SH: 256 Lower MIG Houses, Group III. In response to the said notice inviting tender, the plaintiff/claimant submitted its tender, which was accepted by the concerned division of the defendant No. 1. The said tender was on the basis of Delhi Schedule of Rates, 1981.
6. An agreement bearing No. 29/EE/HD-23/1/85-86 dated 21.10.1985 was executed with regard to the said work between the plaintiff and the defendant No. 1. As per the said Agreement, the date of commencing the work was 24.10.1985, and the scheduled date for completion of the said work was to be 23.10.1986.
7. The case of the plaintiff is that the plaintiff had made all arrangements with respect to the required labour and machinery. However, due to consequent amendments to the specifics of the construction work, lapses and delays on the part of the defendant No. 1, the date for completion of work was subsequently extended up to 20.10.1990, without levy of any compensation.
8. Thereafter, disputes and differences arose between the parties with regard to the final account due and payable to the plaintiff by the defendant No. 1, which led to the plaintiff invoking arbitration vide its letter dated 22.08.1995, under Clause 25 of the Agreement, for settlement of disputes.
9. Thereafter, the Engineer Member, DDA, vide letter bearing No. CE 28(72)EZ/JLO/Arbn./98/62 dated 24.02.2000 appointed Sh. N. K. Sharma, Superintending Engineer (Arbitration)-I as Sole Arbitrator to decide the disputes and make his award regarding the claims/disputes.
10. However, the arbitration proceedings were adjourned sine die by the said arbitrator vide letter dated 10.07.2000, as both the plaintiff and defendant No.1 did not seek enlargement of time.
CS (OS) 362/2008 (arising out of Arbitral Award dated 28.01.2008)
11. The defendant No. 1/DDA had issued another notice inviting tenders for execution of work of construction of Lower MIG Houses at Kondli Gharoli Complex, SH: 256 Lower MIG Houses, Group IV, for which the bid of the plaintiff was accepted by the concerned division of the defendant No. 1.
12. An Agreement bearing No. 30/EE/HD-23/1/85-86 dated 21.10.1985 was executed with regard to the said work between the plaintiff and the defendant No. 1. As per the said Agreement, the date of commencing the work was 24.10.1985, and the date scheduled for completion of the said work was to be 23.10.1986. Similarly, the date
