Contractual bar on delay compensation makes arbitral award beyond jurisdiction and the related interest unsustainable.
An arbitral tribunal cannot award compensation for delay where the contract expressly bars damages or compensation and limits the contractor to extension of time. The arbitrator is bound by the contract, and an award granting prohibited compensation is contrary to the parties' bargain and amounts to an error of jurisdiction. Interest awarded on such a barred claim also cannot survive once the principal award is without jurisdiction. The compensation under claim No. 1 and the pendente lite interest were therefore set aside, while the remaining portions of the award were left undisturbed.
Issues: Whether the arbitrator could award compensation for delay in completion of work when the contract expressly barred any claim for damages or compensation and confined the contractor to extension of time.
Analysis: The contract clause governing delay provided that, even where delay was attributable to the employer or its engineer-in-charge, the contractor would not be entitled to damages or compensation and could only seek extension of time. An arbitrator is bound by the contract and cannot travel outside its express terms. Where the contract prohibits compensation for delay, an award granting such compensation is contrary to the bargain between the parties and constitutes an error of jurisdiction. The award of pendente lite interest on that barred claim could not stand once the principal award itself was without jurisdiction.
Conclusion: The award of Rs. 9.5 lakhs under claim No. 1 and the interest awarded thereon were liable to be set aside; the remaining portions of the award were left undisturbed.
Final Conclusion: The appeal succeeded only to the extent of the compensation and interest awarded for delay, while the balance of the award was upheld.
Ratio Decidendi: An arbitral award that grants compensation expressly prohibited by the contract is beyond jurisdiction and liable to be interfered with under sections 30 and 33 of the Arbitration Act, 1940.
TaxTMI 
AI Drafter ✕
TaxTMI 
TaxTMI 
