Contractual bar on interest, unsupported GST differential and unproven prolongation loss led to partial setting aside of award.

An arbitral award was partially set aside where interest on milestone amounts was granted despite an express contractual bar, the three percent GST differential was unsupported by proof of actual payment, and prolongation damages under Section 73 of the Contract Act lacked evidence of actual loss. The final bill figure was corrected for a clerical error, the refund of penalty for delay in completing the sample flat was upheld on the contractual record, and the costs award was left undisturbed as a matter within arbitral discretion. The decision confirms that a Section 34 court may sever invalid parts of an award without disturbing separable and sustainable findings.

---

---

Issues: (i) Whether the award of interest on the amount withheld for non-achievement of milestones was sustainable; (ii) whether the claim for three percent differential amount between the post-GST and pre-GST period was sustainable; (iii) whether the damages awarded for prolongation of the contract under Section 73 of the Contract Act were sustainable; (iv) whether the correction of the final bill amount and the award of refund of penalty for delay in completion of the sample flat could be interfered with; and (v) whether the costs awarded required interference.

Issue (i): Whether the award of interest on the amount withheld for non-achievement of milestones was sustainable.

Analysis: The contract made withholding of amounts for missed milestones automatic, and clause 2 expressly barred payment of any interest on the withheld amount. Since the award gave no reasons for granting interest, the award on this aspect conflicted with the contractual bar. The withholding itself was distinct from any entitlement to interest on the withheld sum.

Conclusion: The award of interest on the withheld amount was set aside.

Issue (ii): Whether the claim for three percent differential amount between the post-GST and pre-GST period was sustainable.

Analysis: The tender conditions distinguished service tax from other taxes and permitted reimbursement only of taxes actually and genuinely paid, or future levies imposed after the tender date. GST was a post-tender levy, but no evidence was produced to show actual payment of the claimed differential amount. The award also proceeded on an impermissible split of GST into a supposed service tax component after service tax had ceased to exist upon implementation of GST.

Conclusion: The award granting the three percent differential amount was set aside.

Issue (iii): Whether the damages awarded for prolongation of the contract under Section 73 of the Contract Act were sustainable.

Analysis: Damages for breach of contract require proof of actual loss unless loss is impossible or difficult to prove. The only material relied upon was a chartered accountant's certificate showing expenses, but it did not establish actual loss caused by prolongation. The quantified award was therefore based on assumptions and lacked an evidentiary foundation.

Conclusion: The award of damages for prolongation of the contract was set aside.

Issue (iv): Whether the correction of the final bill amount and the award of refund of penalty for delay in completion of the sample flat could be interfered with.

Analysis: The final bill component contained a clerical mistake and the admitted payable amount was ascertainable. The refund of penalty for delay in the sample flat was upheld because the delay was considered in the light of the contractual circumstances and the absence of substantiated loss from the breach.

Conclusion: The final bill amount was corrected, and the refund of penalty for delay in completion of the sample flat was upheld.

Issue (v): Whether the costs awarded required interference.

Analysis: Costs were within the arbitrator's discretion under the Act and no ground for interference was established.

Conclusion: The award of costs was upheld.

Final Conclusion: The challenge to the arbitral award succeeded only in part: the interest on the withheld milestone amount, the GST differential claim, and the damages for prolongation were disallowed, while the remaining parts of the award were substantially sustained with a limited correction to the final bill amount.

Ratio Decidendi: In a Section 34 challenge, an arbitral award granting interest contrary to an express contractual bar, or granting damages without proof of actual loss, cannot be sustained, and severable invalid portions of the award may be set aside without disturbing the remainder.

---