TaxTMI 
TaxTMI 
2026 (4) TMI 424
X X X X Extracts X X X X
X X X X Extracts X X X X
.... twelve months i.e. 10.07.2018. 2.1 During execution of the contract, disputes arose between the parties. The respondent approached the Engineer-in-Charge of CPWD (hereinafter 'EE') but the disputes were not resolved. Clause 25 of the General Conditions of Contract (hereinafter 'contract') was invoked for forming a Dispute Resolution Committee (for short 'DRC'). On failure to do the needful the respondent by notice dated 08.04.2021 initiated arbitration proceedings which culminated in the impugned award. 3. Learned counsel for the petitioner contends that the arbitrator erred in directing the release of Rs. 35,12,328/- withheld for failure of the respondent to achieve the milestones. The submission is that extension of time and rescheduling of milestones are two distinct aspects. Moreover, extension of time is to be granted by the EE whereas rescheduling of milestones is to be done by the Superintending Engineer, CPWD (for short 'SE'). The respondent failed to apply for rescheduling of the milestones under clause 5.3 of the contract and in case of non-achievement of the milestones the petitioner was entitled to withhold the amount to the extent of ten percent of the tender va....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to the facts of the case. 4.1 It is argued that from 01.07.2017, GST was levied and service tax thereafter is included in GST. Submission is that clauses 37 and 38 of the contract provided that service tax shall be reimbursed and the arbitrator rightly awarded the service tax portion of the contract covered by GST. 4.2 The contention is that the sample flat was to be completed after two months of casting of first floor slab and the delay in completion was due to repeated revisions suggested by the petitioner. Moreover, the petitioner failed to prove the actual loss or injury suffered due to delay in completion of the sample flat and the arbitrator rightly relied upon the decisions of the Supreme Court in Kailash Nath Associates (supra) and Fateh Chand v. Balkishan Dass, 1963 SCC OnLine SC 49 to allow the claim. 4.3 The grant of damages for prolongation of the contract is defended as having been granted relying upon a certificate issued by the CA. Contention is that it is admitted position that the work which was to be completed by 10.07.2018 was actually completed on 05.10.2019 i.e. after delay of 452 days. The submission is that a reasonable amount in accordance with the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that the respondent had not applied for rescheduling of milestones is factually wrong. The respondent vide letter dated 23.03.2018 applied for rescheduling of the milestones to the EE and this letter was forwarded to the SE but was not decided. Be that as it may, clause 5.4 of the contract provides that non-filing of an application by the contractor for rescheduling of milestones shall not be a bar for rescheduling the milestones. The view taken by the arbitrator that once time was extended from time to time, the milestones should have been rescheduled is a plausible and calls for no interference. 8. So far as the grant of interest on the amount withheld for non-achievement of the milestones is concerned there is no discussion in the award and is bereft of reasons. Clause 2 of the contract provides for withholding of amount on failure of the contractor to achieve milestones mentioned in schedule 'F' or the rescheduled milestones in terms of clause 5.4 of the contract. This amount is to be adjusted against compensation levied at the time of final grant of extension of time. The withholding is automatic without notice and in case the contractor catches up with the progress the amo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wever, if any further tax or levy or cess is imposed by Statute, after the last stipulated date for the receipt of tender including extensions if any and the contractor thereupon necessarily and properly pays such taxes/levies/cess, the contractor shall be reimbursed the amount so paid, provided such payments, if any, is not, in the opinion of the Superintending engineer (whose decision shall be final and binding on the contractor) attributable to delay in execution of work within the control of the contractor. (ii) The contractor shall keep necessary books of accounts and other documents for the purpose of this condition as may be necessary and shall allow inspection of the same by a duly authorized representative of the Government and/or the Engineer-in-Charge and shall also furnish such other information/document as the Engineer-in-Charge may require from time to time. (iii) The contractor shall within a period of 30 days of the imposition of any such further tax or levy or cess, give a written notice thereof to the Engineer-in-Charge that the same is given pursuant to this condition, together with all necessary information relating thereto." 11. Clause 37 o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Contract Act claimed loss of on-site and off-site expenses incurred due to prolongation of the contract period. The law is well settled that for claiming damages under Section 73 of the Contract Act the claimant has to prove the actual loss suffered and in case it is not possible to prove loss, a reasonable amount of damages is to be assessed. Reference is made to the following judgments: 13.1 The Supreme Court in Unibros (supra) while dealing with a claim for redressal of loss of profit made under Section 73 of the CA arising from prolongation of the contract held: "19. The law, as it should stand thus, is that for claims related to loss of profit, profitability or opportunities to succeed, one would be required to establish the following conditions : first, there was a delay in the completion of the contract; second, such delay is not attributable to the claimant; third, the claimant's status as an established contractor, handling substantial projects; and fourth, credible evidence to substantiate the claim of loss of profitability. On perusal of the records, we are satisfied that the fourth condition, namely, the evidence to substantiate the claim of loss of prof....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uffered. When there is a breach of contract, the party who commits the breach does not eo instanti, i.e., at the instant incur any pecuniary obligation, nor does the party complaining of the breach becomes entitled to a debt due from the other party. The only right which the party aggrieved by the breach of the contract has is the right to sue for damages. No pecuniary liability thus arises till the court has determined that the party complaining of the breach is entitled to damages. The court in the first place must decide that the defendant is liable and then it should proceed to assess what the liability is. But, till that determination, there is no liability at all upon the defendant. The courts will give damages for breach of contract only by way of compensation for loss suffered and not by way of punishment. The rule applicable for determining the amount of damages for the breach of contract to perform a specified work is that the damages are to be assessed at the pecuniary amount of difference between the state of the plaintiff upon the breach of the contract and what it would have been if the contract had been performed and not the sum which it would cost to perform the con....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onsidering the facts and circumstances of the case. A reasonable figure has been quantified by the arbitrator taking into consideration the various factors calling for no interference. 17. The Supreme Court in Gayatri Balasamy v. ISG Novasoft Technologies Ltd., (2025) 7 SCC 1 held that while an arbitral award cannot be modified under Section 34 of the Act, a severable part of the award may be set aside. The relevant paragraphs are quoted below: "32. In the present controversy, the proviso to Section 34(2)(a)(iv) is particularly relevant. It states that if the decisions on matters submitted to arbitration can be separated from those not submitted, only that part of the arbitral award which contains decisions on matters non-submitted may be set aside. The proviso, therefore, permits courts to sever the non-arbitrable portions of an award from arbitrable ones. This serves a twofold purpose. First, it aligns with Section 16 of the 1996 Act, which affirms the principle of kompetenz-kompetenz, that is, the arbitrators' competence to determine their own jurisdiction. Secondly, it enables the Court to sever and preserve the "valid" part(s) of the award while setting aside t....