2025:MHC:22661 OP No. 60 of 2018

IN THE HIGH COURT OF JUDICATURE AT MADRAS

RESERVED ON : 19.09.2025

PRONOUNCED ON : 23.09.2025

CORAM

THE HONOURABLE MR.JUSTICE N.ANAND VENKATESH

OP No. 60 of 2018

AND

ARB O.P(COM.DIV.) NO. 77 OF 2021

OP No. 60 of 2018

Chief Engineer

Metropolitan Transport Project

(Railways), Southern Railway, Egmore,

Chennai-600 008.

Petitioner(s)

.Vs.

1. Engineering Products (I)

Limited, 3D, EC Chambers,

No.92, G.N.Chetty Street, T.Nagar,

Chennai-600 017.

2.Mr.S.Balachandran

Chief Electrical Engineer,

Delhi Metro Rail Corporation Limited,

Kochi.

https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

2 OP No. 60 of 2018

3.Mr.A.K.Sinha

Chief Planning and Development

Engineer, Southern Railway

Chennai-600 003.

4.Mr.K.Govindasai Babu

Deputy Financial Adviser and Chief

Accounts Officer,

Headquarters Office, Southern Railway,

Chennai-600 003.

Respondent(s)

PRAYER

Original Petition filed under Section 34 of the Arbitration and

Conciliation Act, 1996, to set aside the arbitral award of respondents 2 to 4

dated 17.11.2014 made in relation to the disputes arising out of Agreement

No.MTP/Civil/ 368/2000 in so far as the award under claims 5,8, and 12 are

concerned and to direct the respondents to pay the cost to the petitioner.

For Petitioner(s):Mr.P.T.Ramkumar

Standing Counsel

For Respondent(s) :

Mr.K.Harishankar

and

Ms.Mithreyi Kasthurirangan https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

3 OP No. 60 of 2018

Arb O.P(COM.DIV.) No. 77 of 2021

M/s. Engineering Projects (i) Ltd

3-D, EC Chmabers, 92 GN Chetty

Street,T.Nagar

Chennai 600 017.

Petitioner

.Vs.

The Chief Engineer

MTP (Railways)

Southern Railways, Egmore,

Chennai 600 008.

Respondent(s)

PRAYER

Petition filed under Section 34 of Arbitration and Conciliation Act, 1996,

that the Award of the Arbitral Tribunal dated 17.11.2014 made by the Arbitrators

in relation to the disputes arising out of the agreement

No.MTP/CIVIL/368/2000 dated 12.09.2000 in so far as disallowing part of the

claim No.1, 2, entire claim No.3, part of claim No.5,6, entire claim No.7, part of

claim No.8. entire claim No.10, part of claim No.12 and entire claim No.13 are

concerned may be set aside.

For Petitioner(s):Mr.K.Harishankar

and

Ms.Mithreyi Kasthurirangan

For Respondent(s) :Mr.P.T.Ramkumar

Standing Counsel for Railways https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

4 OP No. 60 of 2018

COMMON ORDER

These petitions have been filed under Section 34 of the Arbitration and

Conciliation Act, 1996 [for brevity hereinafter referred as 'the Act'] against the

award of the Arbitral Tribunal dated 17.11.2014. Insofar as

Arb.O.P(Com.Div.)No.77 of 2021, disallowing the part of the Claim Nos.1, 2,

5, 6, 8 and 12 and disallowing the entire claim in Claim Nos. 3, 7, 10 and 13 has

been put to challenge. Insofar as OP.No.60 of 2018, the award granting Claim

Nos.5, 8 and 12 has been put to challenge.

2.The respondent invited tenders for execution of MRTS Phase-II

between Thirumalai (LUZ) - Velachery, specifically for Pile Foundation and

RCC works in columns, beams and slabs of the station building at Kotturpuram

adjoining Buckingham Canal.

3.The petitioners bid was accepted by Letter of Acceptance dated

22.5.2000 for a contract value of Rs.5,52,08,490/-. The agreement was

executed on 12.09.2000 with a stipulated completion period of 12 months https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

5 OP No. 60 of 2018

commencing from 22.5.2000 upto 21.5.2001.

4.The completion of work was delayed due to several factors. Extension

of time was granted by the respondents under Clause 17(2) of the General

Conditions of Contract [GCC]. The work was ultimately completed on

10.11.2004 and completion certificate was also issued by the respondents.

5.Disputes arose between the parties and hence an Arbitral Tribunal was

constitued by order dated 29.01.2008. The Tribunal after hearing both sides

passed an award dated 17.11.2014. The same has been put to challenge in these

petitions by both the petitioner and the respondents with respect to certain

claims.

6.Heard the learned counsel for the petitioner and the learned counsel

appearing on behalf of the respondents. https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

6 OP No. 60 of 2018

7.The claim made by the claimant, the substantiation made by the

claimant, the defence taken by the Southern Railways and the findings rendered

by the Arbitral Tribunal are tabulated and extracted hereunder for easy

understanding:

S.No.Description of

Claim

Substantiation

made by the

Claimant

Defence raised

by the

Respondent

Findings

rendered in

the Arbitral

Award

Claim

1

Increase of 30%

on the value of

the work done

during the

extended

The Claimant

submits that

though the

contract

stipulated a

completion

period of 12

months, delays

in drawings and

material supply

on the part of

the Respondent

extended the

work by over 3

years. It is

urged that the

rates quoted

became

unworkable

owing to

inflation and

escalation. The

Claimant

contends that

substantial work

to the value of

₹4,88,50,501/-

was executed

during this

extended

period, for

The

Respondent

has sought

rejection of

the claim,

contending

that the

delays were

occasioned by

the Claimant’s

failure to

mobilize

skilled labour,

machinery and

planning,

including

repeated

failures of the

batching

plant. It is

further

contended

that

extensions

were granted

only upon the

Claimant’s

request and

rider

agreements

were executed

The Tribunal

held that the

original 12-

month

completion

period for the

Rs.

5,52,08,490/

- Crores

contract was

unrealistic

and

unjustified,

given the

difficult site

conditions

(coffer dam

in water,

excavation of

slum).

Relying on

Clause 17(2)

of the GCC,

the Tribunal

found no

delay

attributable

to the

claimant and

upheld the

application of https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

7 OP No. 60 of 2018

which

reimbursement

of escalation at

25% (₹

1,22,12,625/-)

is sought,

placing reliance

on decisions of

the Hon’ble

Supreme Court

permitting

compensation

despite

contractual

prohibitions

when delay is

attributable to

the Respondent.

reaffirming

the original

rates. It is

also the case

of the

Respondent

that the

Claimant

furnished a

“No Claim

Certificate”

before

settlement of

the final bill.

Hence, the

demand for

enhanced

rates is urged

to be an

afterthought

and

untenable.

the Price

Variation

Clause (PVC)

formula as

per Railway

circulars. It

fixed a

reasonable

completion

period of 18

months and

applied PVC

formula to

works

executed

beyond 12

months.

Based on bill-

wise records

from CC Bill

No. 8

onwards, the

Tribunal

calculated

escalation at

Rs.

9,24,035/-

and awarded

this amount

to the

claimant,

ensuring

compensation

while

acknowledgin

g shared

responsibility

of both

parties.

Claim

2

Payment for the

additional

quantity of coffer

dam

arrangements

made.

The Claimant

submits that

though Item 8

of Annexure IVA

referred to

cofferdams in

the Buckingham

The

Respondent

has sought

rejection of

the claim,

contending

that payment

The Tribunal

held that the

Respondent

failed to

prove non-

execution of

coffer dam https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

8 OP No. 60 of 2018

Canal alone,

site conditions

made

cofferdams

necessary for

pile caps and tie

beams across

the site. It is

urged that

execution

extended to

4960 RM as

against 1000

RM stipulated in

the agreement,

and the

Claimant, under

instructions and

supervision of

the Respondent,

carried out such

works. Payment

for the balance

1720 RM,

amounting to

Rs.96,95,000/-,

is therefore

sought.

for cofferdam

works is

governed by

Item 8 of

Annexure IVA

and its

necessity is

determined by

the Engineer-

in-Charge. It

is submitted

that the

Claimant was

duly paid

wherever

cofferdams

were

executed,

even beyond

agreed

quantities,

and that the

Claimant had

signed the

final bill and

variation

statement

without

protest. The

claim is urged

to be an

afterthought

and

unsustainable.

works and

offered no

justification

for

differential

treatment

between

similar pile

rows (Row E

vs. Row F). It

found that

coffer dams

were

technically

necessary for

Rows F, G

and H, given

their cut-off

levels below

MSL.

Rejecting the

claim for full

rates, the

Tribunal

adopted a

reasonable

rate of one-

third

agreement

rate (Rs.

1,875/Rm)

for makeshift

coffer dams,

applying

compensator

y

percentages

—50% (Row

F), 25%

(Row G),

15% (Row H)

—based on

inspection.

The

admissible

perimeter

was fixed at https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

9 OP No. 60 of 2018

858.4389m,

subject to a

4% reduction

for exceeding

the 125%

quantity

limit.

Accordingly,

the Tribunal

awarded Rs.

12,51,604/-

for the

unpaid coffer

dam work.

Claim

3

Compensation for

reduction in scope

work of station

building works.

The Claimant

submits that the

removal of

station building

works, without

any default on

its part,

amounts to

partial

prevention and

breach of

contract. Loss

of profit is

claimed at 10%

of the value of

work worth Rs.

80,00,000/-,

i.e., Rs.

8,00,000/-.

The

Respondent

has sought

rejection of

the claim,

contending

that the

Claimant

executed the

entire scope of

work and, in

fact, exceeded

the agreement

value by

3.73%. It is

submitted that

works worth

Rs.

5,75,89,250.8

0/- Crores

were executed

as against the

agreement

value of Rs.

5,55,20,848.90

/- Crores.

Hence, the

allegation of

reduction of

scope or loss

of profit is

baseless.

The Tribunal

held that the

overall

variation in

execution,

even without

the purported

office

building, was

only 3.73%

above the

agreement

value. It

found that no

agreed work

had been

dropped and

the

Respondent’s

official notes

could not

serve as

proof of any

contractual

obligation to

construct an

office

building.

Accordingly,

the claim was

rejected. https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

10 OP No. 60 of 2018

Claim

4

Payment for

empty boring

The Claimant

submits that

though the

contract

specified no

limit for empty

boring,

abnormal

depths were

encountered,

which could not

have been

anticipated

while quoting

rates. It is

contended that

810m of empty

boring was

carried out

across piles,

incurring Rs.

9,80,726/- and

reimbursement

is sought as the

work was

essential and

unavoidable.

The

Respondent

has sought

rejection of

the claim,

contending

that the

contractor was

required to fix

the working

platform level

to minimize

empty boring,

and that no

extra payment

was

admissible

under the

agreement. It

is further

urged that the

Claimant

failed to set

the platform

optimally,

resulting in

excess empty

boring, and

that the claim

constitutes an

excepted

matter under

the contract.

The Tribunal

noted that

the

Respondent

had not

disputed the

quantum of

empty

boring,

thereby

accepting the

claimant’s

figures. It

held that the

final drawing

was issued

during

execution,

preventing

the claimant

from

foreseeing

and pricing

this work at

the tender

stage.

Rejecting the

allegation of

poor

planning, the

Tribunal

emphasized

that the

claimant, as

an

experienced

contractor

chosen by

the Railways,

could not be

presumed

negligent.

Accordingly,

applying a

reduced rate

to the https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

11 OP No. 60 of 2018

undisputed

extra empty

boring

quantities,

the Tribunal

awarded

Rs.9,17,952/-.

Claim

5

Compensation

towards loss of

profits and

overheads.

The Claimant

submits that the

Respondent

failed to hand

over the site

and drawings as

required under

Section 52 of

the Contract

Act, thereby

committing

breach. Though

the contract

period was 12

months, the

work extended

to 42 months

solely due to

the

Respondent’s

delays. It is

further urged

that schedule

quantities were

misleading,

payments were

delayed, and

the Claimant

suffered heavy

cost escalation.

By applying

Hudson’s

formula, loss of

overheads and

profit is

quantified at Rs.

277,60,000/-.

The

Respondent

has sought

rejection of

the claim,

contending

that the PVC

formula was

inapplicable,

that

extensions

were granted

only at the

Claimant’s

request

through rider

agreements

reaffirming

original rates,

and that

therefore no

escalation or

compensation

was payable.

The claim is

alleged to be

an

afterthought.

The Tribunal

rejected most

of the

claimant’s

contentions

as

unsubstantiat

ed and

abstract

statements,

except the

proven delay

in payment of

CC Bills 26

and 27. It

held that the

claimant was

entitled to

compensation

for the lost

opportunity

of funds

during the

delayed

period.

Accordingly,

the Tribunal

awarded Rs.

21,246/-

towards

interest at

12% p.a. on

the amounts

of the two

bills. https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

12 OP No. 60 of 2018

Claim

6

Payment for the

extra works done

not covered by

the agreement

The Claimant

submits that

under the

instructions and

supervision of

the Respondent,

it executed

additional works

such as

demolition of

abandoned

structures,

cable

protection,

earth cutting,

and formation

of earthen

bunds. It is

urged that the

total value of

such works

comes to Rs.

36,42,025/-, for

which

reimbursement

is claimed.

The

Respondent

has sought

rejection of

the claim,

contending

that

demolition

works were

already settled

under the final

bill and no-

claim

certificate,

that cable

protection was

a contractual

obligation

without any

protest. The

earthwork for

pile caps and

diversions was

incidental to

the contract.

It is

contended

that the

claims are

contrary to

the contract

and

unsupported

by any

records.

The Tribunal

held that the

claimant had

not produced

any proof of

the

Respondent

directing

execution of

the alleged

works and

had never

raised these

claims prior

to arbitration

proceedings.

As the claims

were

unsubstantiat

ed, they were

rejected.

Claim

7

Compensation for

idle labour

The Claimant

submits that it

mobilized

labour,

machinery, and

staff

immediately

after the letter

of acceptance,

The

Respondent

has sought

rejection of

the claim,

contending

that despite

67% of the

site and

The Tribunal

acknowledge

d idling

caused by

shared delay

but found

that the

claimant had

provided no https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

13 OP No. 60 of 2018

but due to the

Respondent’s

failure to issue

drawings, the

workforce

remained idle.

It is contended

that this led to

infructuous

expenditure on

idle labour

quantified at Rs.

18,49,250/-,

which is sought

as

compensation.

drawings

being

available, the

Claimant

failed to make

preliminary

arrangements

such as

winches,

chisels,

bailers, power

supply, and

liner bending

setups. It is

urged that the

delay was due

to poor

planning by

the Claimant,

and the

department

cannot be held

liable.

documentary

proof of

expenditure.

Since

compensation

for delays

was already

considered

under Claims

1 and 5, the

Tribunal

rejected the

claim.

Claim

8

Compensation for

idle Machinery

and Plants - Loss

of productivity

The Claimant

submits that

various

equipment

remained idle

due to the

Respondent’s

defaults and

claimed

compensation

as follows:

1.Rigs and

other machinery

(including

generator, plate

bending, etc.) –

Rs.21,41,750/-.

2.62 KVA

Generator – Rs.

1,35,000/-.

The

Respondent

has sought

rejection of

the claim,

contending

that only two

tripods were

initially

brought, that

essential

machinery

such as liner

bending

machines,

winches, and

batching

plants were

delayed by the

Claimant, and

that no

alternate

arrangements

The Tribunal

partly upheld

the

claimant’s

idling claims

based on

admitted

facts and

reasonable

market rates:

1. Piling Rigs:

Accepted

Respondent’s

own letter

showing

2119 hours

idling;

compensation

awarded at

market rental

rate.

2. Generator:

Rejected for https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

14 OP No. 60 of 2018

3.Plate Bending

Machine – idle

from

01.06.2000 to

16.10.2000, at

Rs. 20,000/-

per month.

4.Batching Plant

– idle from

05.11.2000 to

15.04.2001,

claim of Rs.

5,50,000/-.

5.Welding

Transformer –

idle from

01.06.2000 to

16.10.2000 (Rs.

67,500/-) and

from

16.10.2000 to

01.03.2001 (Rs.

33,750/-).

were made. It

is submitted

that idle

periods were

attributable

solely to the

Claimant’s

poor planning

and failure to

mobilize

resources.

lack of proof.

3. Plate

Bending

Machine

(10hp):

Found 34

days idling,

awarded at

market rate

(lower than

claimant’s

rate).

4. Batching

Plant: Held

Respondent

failed to hand

over land,

causing 5.5

months

delay;

compensation

awarded at

market rate.

5. Concrete

Mixer:

Rejected as

not required

for the

project.

6. Welding

Transformers

: Awarded

partial

compensation

for 3 units at

a

conservative

rate.

Accordingly,

the Tribunal

awarded a

total of Rs.

4,09,659/-. https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

15 OP No. 60 of 2018

Claim

9

Refund of the cost

of empty Gunny

Bags recovered

The Claimant

submits that the

Respondent

recovered Rs.

4,43,946/-

towards the

cost of empty

cement bags

despite there

being no clause

in the contract

authorising such

recovery. It is

urged that since

empty cement

bags are not

the

Respondent’s

property under

Clause 33(3) of

the GCC, the

recovery is

without

contractual

basis and

refund is

sought.

The

Respondent

has sought

rejection of

the claim,

contending

that under

Clause 33(3)

of the GCC

empty cement

bags are

departmental

property and

that the

Claimant

failed to

return them.

Hence,

recovery of

Rs. 2,95,964/-

at Rs. 2 per

bag was

rightly made.

The Tribunal

noted that

the

Respondent

did not

dispute the

claimant’s

contention

that cement

was issued in

HDPE bags

and offered

no evidence

of supply in

gunny bags.

It held that

the recovery

made on this

basis was

unjustified.

Accordingly,

the Tribunal

awarded Rs.

2,95,964/- to

the claimant.

Claim

10

Refund of the

rebate of 19%

offered

The Claimant

submits that it

relied on the

Respondent’s

planning and

cooperation to

complete the

work on time,

but due to

misrepresentati

on, suppression

of facts and

failure of

project

management,

the rebate

granted has no

justification.

Refund of the

The

Respondent

has sought

rejection of

the claim,

contending

that the

quoted rate

was based on

the Claimant’s

own

assessment,

and that

delays arose

from the

Claimant’s

failure to

mobilize rigs,

batching plant

The Tribunal

held that a

negative

percentage

quoted in the

tender

constituted a

firm value

accepted by

the Railways

and could not

be treated as

a rebate.

Since the

claimant had

not attached

any

conditions to

the rate https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

16 OP No. 60 of 2018

rebate of 19%

amounting to

Rs.

1,33,32,164/-

upto Bill No CC-

32 dated

01.02.2006 is

sought for from

the Respondent.

and

manpower,

except for

minor delay in

handing over

encroached

portions for

which

extension was

granted.

offered, the

claim was

found not

maintainable

and was

rejected.

Claim

11

Refund of

recovery towards

cost of excess

consumption of

cement

The Claimant

submits that the

Respondent

recovered Rs.

5,80,422/- for

alleged excess

cement

consumption,

despite the

Claimant

demonstrating

that usage was

within the

supplied

quantities.

Refund of the

recovered sum

is sought.

The

Respondent

has sought

rejection of

the claim,

contending

that excess

cement

consumption

of 2477 bags

arose due to

wastage, pipe

choking, and

finishing

works. It is

further

contended

that recovery,

including

penalty, was

rightly made,

and that the

Claimant had

signed the

material

reconciliation

statements

and furnished

no-claim

certificates.

The Tribunal

found that

wastage for

operational

procedures

like priming

and testing is

an

"indispensabl

e" and

"inevitable"

part of the

work. The

Respondent's

own

admission of

cement use

for "touch up

works" and

"choking of

pipeline"

supported

this.

At the same

time, the

Tribunal

found the

Claimant

partly at fault

for not

keeping

separate

records of

cement used

for priming, https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

17 OP No. 60 of 2018

which led to

confusion.

Considering

this shared

responsibility,

the Tribunal

ordered 50%

reimburseme

nt of the

recovered

amount,

awarding Rs.

2,72,829/-.

Claim

12

Loss of businessThe Claimant

submits that

delay of more

than 30 months

in execution due

to the

Respondent’s

breach caused

late return of

deposits and

guarantees,

resulting in a

loss of potential

profits of Rs.

60,00,000 /-

from alternate

projects.

The

Respondent

has sought

rejection of

the claim,

contending

that delays

were caused

solely by the

Claimant’s

failure to

mobilize

materials,

skilled

manpower and

poor day to

day

management.

The majority

held that the

Respondent’s

withholding

of funds

caused the

claimant a

financial loss

from erosion

of money

value due to

inflation.

Applying an

Annual

Monetary

Appreciation

Rate (AMAR)

of 11.08%

(derived from

the average

SBI lending

rate) to the

withheld

sums, the

majority

calculated

compensation

at Rs.

4,40,370/-.

One

arbitrator https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

18 OP No. 60 of 2018

dissented,

awarding NIL

on the

grounds that

the claim was

speculative,

the contract

barred

interest on

guarantees

and no proof

of potential

profit

existed.

Accordingly,

by majority,

the Tribunal

awarded Rs.

4,40,370/-

for the

money that

was wrongly

withheld.

Claim

13

Interest charges

on the amount of

final bill and

security deposit

The Respondent

unduly delayed

payment of the

final bill and

retention of the

security deposit

and performance

guarantee,

depriving the

Claimant of rightful

funds. The

Respondent is

liable to pay

interest of

Rs.8,13,935/-

(Rs.1,46,227 on

the final bill and

Rs.6,67,708 on

security/guarantee)

at 18% p.a. from

due dates to actual

payment from

10.12.2004 to

03.02.2006.

The

Respondent

has sought

rejection of

the claim,

contending

that delay in

final payment

was solely due

to the

Claimant’s

defaults in

providing a

site engineer,

finalising

measurements

, and scrutiny

of documents.

It is urged

that no

interest is

payable.

The claim for

interest on

delayed

release of

security

deposit

amounts to

double

compensation

and is barred

under Clause

16(3) of the

GCC, which

expressly

prohibits

payment of

interest on

amounts due

to the

contractor.

Since this

clause https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

19 OP No. 60 of 2018

governs the

contract, the

tribunal holds

that the

claimant’s

demand for

interest on

delayed

payment of

the final bill

is untenable

and therefore

rejected.

8.The learned counsel for the claimant submitted that the findings that

were rendered by the Arbitral Tribunal insofar as Claim Nos.1, 2, 3, 5, 6 and 7

are concerned, it is unintelligible and it suffers from perversity and the same is

liable to be interfered by this Court. The learned counsel in order to substantiate

his submission, relied upon the following judgments:

a) Associate Builders .Vs. Delhi Development

Authority reported in (2015) 3 SCC 49

b) Ssangyong Engineering & Construction Company

Limited Vs. National Highways Authority of India (NHAI)

reported in (2019) 15 SCC 131

c) Dyna Technologies (P) Ltd. v. Crompton Greaves

Ltd., reported in (2019) 20 SCC 1

d) Gayatri Balasamy v. ISG Novasoft Technologies

Ltd., reported in (2025) 7 SCC 1 https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

20 OP No. 60 of 2018

9.Per contra, the learned Standing Counsel appearing on behalf of the

Southern Railways justified the findings rendered by the Arbitral Tribunal

insofar as all the claims are concerned except Claim Nos.5, 8 and 12 are

concerned. The learned Standing Counsel further submitted that out of the total

claim amount of Rs.45,33,700/-, already the Southern Railways has paid a sum

of Rs.36,00,000/- to the claimant.

10.This Court has carefully considered the submissions made on either

side and the materials available on record.

11.Insofar as the Judicial approach that is expected while dealing with a

petition under Section 34, it will be relevant to take note of the judgment of the

Apex Court in Associate Builders case referred supra and the relevant portion

is extracted hereunder:

28. In a recent judgment, ONGC Ltd. v. Western Geco

International Ltd. [(2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] ,

this Court added three other distinct and fundamental juristic https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

21 OP No. 60 of 2018

principles which must be understood as a part and parcel of the

fundamental policy of Indian law. The Court held : (SCC pp. 278-

80, paras 35 & 38-40)

“35. What then would constitute the ‘fundamental policy of

Indian law’ is the question. The decision in ONGC [(2003) 5 SCC

705 : AIR 2003 SC 2629] does not elaborate that aspect. Even

so, the expression must, in our opinion, include all such

fundamental principles as providing a basis for administration of

justice and enforcement of law in this country. Without meaning

to exhaustively enumerate the purport of the expression

‘fundamental policy of Indian law’, we may refer to three distinct

and fundamental juristic principles that must necessarily be

understood as a part and parcel of the fundamental policy of

Indian law. The first and foremost is the principle that in every

determination whether by a court or other authority that affects

the rights of a citizen or leads to any civil consequences, the

court or authority concerned is bound to adopt what is in legal

parlance called a ‘judicial approach’ in the matter. The duty to

adopt a judicial approach arises from the very nature of the

power exercised by the court or the authority does not have to be

separately or additionally enjoined upon the fora concerned.

What must be remembered is that the importance of a judicial

approach in judicial and quasi-judicial determination lies in the

fact that so long as the court, tribunal or the authority exercising

powers that affect the rights or obligations of the parties before

them shows fidelity to judicial approach, they cannot act in an

arbitrary, capricious or whimsical manner. Judicial approach

ensures that the authority acts bona fide and deals with the

subject in a fair, reasonable and objective manner and that its

decision is not actuated by any extraneous consideration. Judicial

approach in that sense acts as a check against flaws and faults https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

22 OP No. 60 of 2018

that can render the decision of a court, tribunal or authority

vulnerable to challenge.

***

38. Equally important and indeed fundamental to the policy

of Indian law is the principle that a court and so also a quasi-

judicial authority must, while determining the rights and

obligations of parties before it, do so in accordance with the

principles of natural justice. Besides the celebrated audi alteram

partem rule one of the facets of the principles of natural justice is

that the court/authority deciding the matter must apply its mind to

the attendant facts and circumstances while taking a view one

way or the other. Non-application of mind is a defect that is fatal

to any adjudication. Application of mind is best demonstrated by

disclosure of the mind and disclosure of mind is best done by

recording reasons in support of the decision which the court or

authority is taking. The requirement that an adjudicatory authority

must apply its mind is, in that view, so deeply embedded in our

jurisprudence that it can be described as a fundamental policy of

Indian law.

39. No less important is the principle now recognised as a

salutary juristic fundamental in administrative law that a decision

which is perverse or so irrational that no reasonable person

would have arrived at the same will not be sustained in a court of

law. Perversity or irrationality of decisions is tested on the

touchstone of Wednesbury [Associated Provincial Picture Houses

Ltd. v. Wednesbury Corpn., (1948) 1 KB 223 : (1947) 2 All ER

680 (CA)] principle of reasonableness. Decisions that fall short of

the standards of reasonableness are open to challenge in a court

of law often in writ jurisdiction of the superior courts but no less in

statutory processes wherever the same are available.

40. It is neither necessary nor proper for us to attempt an

exhaustive enumeration of what would constitute the fundamental

policy of Indian law nor is it possible to place the expression in https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

23 OP No. 60 of 2018

the straitjacket of a definition. What is important in the context of

the case at hand is that if on facts proved before them the

arbitrators fail to draw an inference which ought to have been

drawn or if they have drawn an inference which is on the face of

it, untenable resulting in miscarriage of justice, the adjudication

even when made by an Arbitral Tribunal that enjoys considerable

latitude and play at the joints in making awards will be open to

challenge and may be cast away or modified depending upon

whether the offending part is or is not severable from the rest.”

12.It is also relevant to take note of the judgment of the Apex Court in

Ssangyong Engineering & Construction Company case referred supra and

the relevant portion is extracted hereunder:

76. However, when it comes to the public policy of India,

argument based upon "most basic notions of justice", it is clear

that this ground can be attracted only in very exceptional

circumstances when the conscience of the Court is shocked by

infraction of fundamental notions or principles of justice. It can be

seen that the formula that was applied by the agreement

continued to be applied till February 2013 - in short, it is not

correct to say that the formula under the agreement could not be

applied in view of the Ministry's change in the base indices from

1993-1994 to 2004-2005. Further, in order to apply a linking

factor, a Circular, unilaterally issued by one party, cannot possibly https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

24 OP No. 60 of 2018

bind the other party to the agreement without that other party's

consent. Indeed, the Circular itself expressly stipulates that it

cannot apply unless the contractors furnish an

undertaking/affidavit that the price adjustment under the Circular

is acceptable to them. We have seen how the appellant gave

such undertaking only conditionally and without prejudice to its

argument that the Circular does not and cannot apply. This being

the case, it is clear that the majority award has created a new

contract for the parties by applying the said unilateral Circular and

by substituting a workable formula under the agreement by

another formula dehors the agreement. This being the case, a

fundamental principle of justice has been breached, namely, that

a unilateral addition or alteration of a contract can never be

foisted upon an unwilling party, nor can a party to the agreement

be liable to perform a bargain not entered into with the other

party. Clearly, such a course of conduct would be contrary to

fundamental principles of justice as followed in this country, and

shocks the conscience of this Court. However, we repeat that this

ground is available only in very exceptional circumstances, such

as the fact situation in the present case. Under no circumstance

can any court interfere with an arbitral award on the ground that

justice has not been done in the opinion of the Court. That would

be an entry into the merits of the dispute which, as we have seen,

is contrary to the ethos of Section 34 of the 1996 Act, as has

been noted earlier in this judgment. https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

25 OP No. 60 of 2018

13.Insofar as the scope of Section 31 and the triple test applied in Dyna

Technologies case referred supra, the relevant portions are extracted hereunder:

34.The mandate under Section 31(3) of the Arbitration Act is to

have reasoning which is intelligible and adequate and, which can in

appropriate cases be even implied by the courts from a fair reading of

the award and documents referred to thereunder, if the need be. The

aforesaid provision does not require an elaborate judgment to be

passed by the arbitrators having regard to the speedy resolution of

dispute.

35. When we consider the requirement of a reasoned order,

three characteristics of a reasoned order can be fathomed. They are:

proper, intelligible and adequate. If the reasonings in the order are

improper, they reveal a flaw in the decision-making process. If the

challenge to an award is based on impropriety or perversity in the

reasoning, then it can be challenged strictly on the grounds provided

under Section 34 of the Arbitration Act. If the challenge to an award is

based on the ground that the same is unintelligible, the same would be

equivalent of providing no reasons at all. Coming to the last aspect

concerning the challenge on adequacy of reasons, the Court while

exercising jurisdiction under Section 34 has to adjudicate the validity of

such an award based on the degree of particularity of reasoning

required having regard to the nature of issues falling for consideration.

The degree of particularity cannot be stated in a precise manner as the

same would depend on the complexity of the issue. Even if the Court

comes to a conclusion that there were gaps in the reasoning for the

conclusions reached by the Tribunal, the Court needs to have regard to

the documents submitted by the parties and the contentions raised

before the Tribunal so that awards with inadequate reasons are not set

aside in casual and cavalier manner. On the other hand, ordinarily

unintelligible awards are to be set aside, subject to party autonomy to

do away with the reasoned award. Therefore, the courts are required to https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

26 OP No. 60 of 2018

be careful while distinguishing between inadequacy of reasons in an

award and unintelligible awards.

14.Keeping the above principles in mind, this Court will test the

reasoning given by the Arbitral Tribunal and the decision arrived at for each

claim.

15.Insofar as the first claim is concerned, it is basically a claim made for

escalation in cost due to the delay in the completion of the work.

16.The Arbitral Tribunal came to a categorical conclusion that the nature

of work was such that it was highly unlikely that the work could have been

completed in 12 months. However, a time frame of 12 months was fixed under

the contract. The time was not the essence of the contract since the Southern

Railways was granting several time extensions under Clause 17(2) of GCC.

The Tribunal found that it is the Southern Railways which was responsible for

the delay. Having rendered such a finding, the Tribunal went on to apply, Price https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

27 OP No. 60 of 2018

Variation Clause [PVC] formula for calculating the compensation for escalation

in cost.

17.In the considered view of this Court, the contract is of the year 2000

and the work was completed in the year 2004 and at that point of time, this PVC

formula was not even in force. This came into existence only in the year 2011.

Hence, as a fundamental principle, the Tribunal ought not to have applied the

PVC formula for a contract which came into existence much before the coming

into force of this formula. The error in applying this formula further gets even

more bad since both the parties were not put on notice and were not heard on

the application of the PVC formula. Therefore, it clearly amounts to violation

of principles of natural justice. If the claimant had been informed that the PVC

formula is going to be applied, atleast the claimant would have the opportunity

to oppose the same and the Tribunal should have considered the said objection.

Since this basic procedure was not followed, the Tribunal fell in error by

applying PVC formula for calculating the escalation in cost. https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

28 OP No. 60 of 2018

18.Yet another error that was committed by the Tribunal is that the

Tribunal unilaterally without any basis fixed a period of 18 months as a

reasonable completion period. After doing so, the Tribunal took into

consideration only the period from 18.6.2001 for computation of escalation

cost.

19.There is yet another error committed by the Tribunal by apportioning a

delay of five months on the claimant. There was absolutely no scientific basis

for attributing this delay on the claimant and it was done merely on conjectures

and surmises. In the light of the above discussion, the compensation that was

computed under the heading escalation of cost suffers from patent illegality and

the reasoning is also unintelligible. Thus, there was no justification in limiting

the compensation amount to Rs.9,24,035/- under this head and the claimant will

be entitled for 30% increase in the rates by restricting the same to the quantum

of work done during the extended period and the amount claimed by the

claimant has to be necessarily awarded. https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

29 OP No. 60 of 2018

20. The next claim pertains to the payment for the additional quantity of

coffer dam arrangements made by the claimant. Under this claim, the claimant

had provided necessary coffer dams in certain locations when the piles and tie

beams came within the close proximity to the canal necessitating creation of

working space by means of temporary coffer dams to arrest the flow of running

water as well as heavy seepage.

21.While deciding this issue, the Arbitral Tribunal has taken into

consideration an enquiry that was made from some persons who were residents

living adjacent to the site. If the Tribunal makes any such enquiry and relies

upon the statements made by those persons, obviously the claimant must be put

on notice and such statements cannot be recorded behind the back of the

claimant. This will clearly tantamount to violation of principles of natural

justice. When the claimant had made a claim for 1720 meters by providing all

the particulars, the Tribunal has restricted to 858.4389 meters and such

reduction has been made on mere conjectures and even the rates have been

reduced on ad hoc basis. This procedure followed by the Tribunal is in violation https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

30 OP No. 60 of 2018

of Section 28(2) of the Act, which provides as follows:

28(2)

Th

e

arbitr a l t r i b u n a l sh a l l d e c i d e ex aequo e t b o n o or as am i a b le c o m p o s i t e u r

only if the parties have expressly authorised it to do so.

22.Even in technical arbitrations, the arbitrators cannot render findings on

mere conjectures and on ad hoc basis. There must be some scientific basis for

rendering findings. If that is done, the Court cannot sit over such findings of a

specialist. In this case, the findings that have been rendered for Claim No.2 and

the final compensation arrived at clearly suffers from non compliance of Section

28(2) of the Act, violation of principles of natural justice, patent illegality and it

is also unintelligible. Therefore, the compensation that was claimed by the

claimant under this head has to be granted.

23.Insofar as the third claim is concerned, the claimant claimed

compensation for removal of station building works. This claim was made with

the support of the letter dated 22.02.2001 [Ex.P.14] entrusting station building https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

31 OP No. 60 of 2018

works to the claimant. Despite this exhibit, the Tribunal without any reason

concluded that there is no reduction in scope merely because the over all

executed value exceeded 3.73 %. The Tribunal has gone to the extent of

holding that since there was no agreement for carrying out this work, there is no

justification for making the claim. This finding disregards the evidence

available and also it violates principles of natural justice. Moreover, the

findings of the Tribunal insofar as Claim No.3 is concerned suffers from patent

illegality due to ignorance of vital evidence. Accordingly, the claimant has

sought for 10% of the excluded work value of Rs.80,00,000/- amounting to

Rs.8,00,000/-. The quantum of compensation claimed by the claimant is

reasonable and it has some basis and it ought to have been granted by the

Tribunal.

24.The next issue pertains to Claim No.5 which has been put to challenge

both by the claimant as well as the Southern Railways. Claim No.5 pertains to

loss of profits and overheads. This claim was made due to prolongation and

variation in work. While discussing this claim, the entire finding has been https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

32 OP No. 60 of 2018

rendered in favour of the claimant and the Tribunal also holds that the claimant

deserves to be compensated for the lost opportunity by way of reasonable

compensation. The compensation that has been arrived at for Claim No.5 is

reasonable and the view taken by the Tribunal is probable and plausible view.

Hence, no interference is warranted.

25.Insofar as Claim No.6 is concerned, it pertains to payments for other

works done not covered by the agreement. The Tribunal has rejected this claim

on the ground that till the final bill was submitted, the claimant did not even

make any claim under this head.

26.Clause 43(1) of GCC provides that the contractor shall prepare and

furnish the engineers once in every month an account giving full and detailed

particulars of all claims for any additional expenses to which the contractor may

consider himself entitled to and all the extra and additional works ordered by

the engineer. Since this condition was not complied with, this claim has been https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

33 OP No. 60 of 2018

rejected. The view taken by the Tribunal is a possible and plausible view and

just because another view is possible for this Court, that is not a ground to

interfere under Section 34 of the Act.

27.Insofar as the Claim No.7 is concerned, it deals with compensation for

idle labour. The Tribunal has rendered a finding that since compensation has

been granted for Claim Nos.1 and 5, no separate compensation can be granted

for idle labour. Under this claim, the Tribunal ignored documentary evidence

on variation and prolongation which resulted in the machinery and labour being

kept idle due to respondent's failure to issue drawings. This Court must only

examine as to whether ignoring such evidence had any impact on the final

conclusion arrived at by the Tribunal. Claim No.1 pertained to escalation cost

and Claim No.5 pertained to loss of profits and overheads. The Tribunal felt

that since compensation is given under these heads, no separate compensation is

required under this head. This view taken by the Tribunal is a plausible view

which does not require the interference of this Court. https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

34 OP No. 60 of 2018

28.Insofar as the findings rendered by the Tribunal for Claim Nos.8 - 13,

this Court finds that the reasoning given by the Tribunal does not suffer from

any perversity and the compensation that was fixed under Claim Nos.8, 9, 11

and 12 are reasonable. Therefore, the same does not warrant the interference of

this Court.

29.The upshot of the above discussion is that except Claim Nos.1, 2 and 3

where this Court has interfered with the award passed by the Arbitral Tribunal,

the findings rendered with respect to the other claims are hereby sustained.

30.The next issue is as to whether the invalid portion of the award is

severable from the valid portion of the award and the award can be modified.

Useful reference can be made to the judgment of the Apex Court in Gayatri

Balasamy v. ISG Novasoft Technologies Ltd reported in (2025) 7 SCC 1.

87. Accordingly, the questions of law referred to

by Gayatri Balasamy [Gayatri Balasamy v. ISG Novasoft https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

35 OP No. 60 of 2018

Technologies Ltd., 2024 SCC OnLine SC 1681] are

answered by stating that the Court has a limited power

under Sections 34 and 37 of the 1996 Act to modify the

arbitral award. This limited power may be exercised under

the following circumstances:

87.1. When the award is severable, by severing the

“invalid” portion from the “valid” portion of the award, as held

in Part II of our Analysis;

87.2. By correcting any clerical, computational or

typographical errors which appear erroneous on the face of

the record, as held in Parts IV and V of our Analysis;

87.3. Post-award interest may be modified in some

circumstances as held in Part IX of our Analysis; and/or

87.4. Article 142 of the Constitution applies, albeit, the

power must be exercised with great care and caution and

within the limits of the constitutional power as outlined in

Part XII of our Analysis.

"5. Extent of judicial intervention.-Notwithstanding

anything contained in any other law for the time being in

force, in matters governed by this Part, no judicial authority

shall intervene except where so provided in this Part. https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

36 OP No. 60 of 2018

31. Form and contents of arbitral award.-(1) An arbitral

award shall be made in writing and shall be signed by the

members of the Arbitral Tribunal.

(2) For the purposes of sub-section (1), in arbitral

proceedings with more than one arbitrator, the signatures of

the majority of all the members of the Arbitral Tribunal shall

be sufficient so long as the reason for any omitted signature

is stated.

(3) The arbitral award shall state the reasons upon

which it is based, unless-

(a) the parties have agreed that no reasons are to be given;

or

(b) the award is an arbitral award on agreed terms under

Section 30.

(4) The arbitral award shall state its date and the

place of arbitration as determined in accordance with

Section 20 and the award shall be deemed to have been

made at that place.

(5) After the arbitral award is made, a signed copy

shall be delivered to each party.

(6) The Arbitral Tribunal may, at any time during the

arbitral proceedings, make an interim arbitral award on any

matter with respect to which it may make a final arbitral https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

37 OP No. 60 of 2018

award.

(7)(a) Unless otherwise agreed by the parties, where

and insofar as an arbitral award is for the payment of money,

the Arbitral Tribunal may include in the sum for which the

award is made interest, at such rate as it deems reasonable,

on the whole or any part of the money, for the whole or any

part of the period between the date on which the cause of

action arose and the date on which the award is made.

(b) A sum directed to be paid by an arbitral award

shall, unless the award otherwise directs, carry interest at

the rate of two per cent higher than the current rate of

interest prevalent on the date of award, from the date of

award to the date of payment.

Explanation.-The expression "current rate of interest" shall

have the same meaning as assigned to it under clause (b) of

Section 2 of the Interest Act, 1978 (14 of 1978).

(8) The costs of an arbitration shall be fixed by the

Arbitral Tribunal in accordance with Section 31-A.

31.The interference into Claim Nos.1, 2 and 3 are certainly a severable

part and the award passed by the Arbitral Tribunal can be modified insofar as

Claim Nos.1, 2 and 3 are concerned. https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

38 OP No. 60 of 2018

32.In the light of the above findings, insofar Claim No.1 is concerned,

the entire compensation sought for by the claimant with respect to increase of

30% of value of work done during the extended period for the quantum of work

done during the extended period is granted. Accordingly, compensation of

Rs.1,22,12,625/- has to be paid by the Southern Railways to the claimant under

this head.

33.Insofar as Claim No.2 is concerned, for payment of additional quantity

of coffer dam arrangements made, the claimant is entitled to be paid a total

compensation of Rs.96,95,000/- as claimed by the claimant.

34.Insofar as Claim No.3 is concerned, for payment towards removal of

station building works, the claimant is entitled to be paid a total compensation

of Rs.8,00,000/- as claimed by the claimant. https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

39 OP No. 60 of 2018

35.In the result, OP.No.60 of 2018, filed by the Southern Railways is

dismissed. Arb.OP(Com.Div.).No.77 of 2021, filed by the claimant is partly

allowed and the decision arrived at by the Tribunal insofar as Claim Nos.1, 2

and 3 are concerned stands modified and there shall be a direction to the

Southern Railways to pay a compensation of Rs.1,22,12,625/- for

Claim No.1, a compensation of Rs.96,95,000/- for Claim No.2 and a

compensation of Rs.8,00,000/- for Claim No.3 and it shall be paid along with

interest at the rate of 18% p.a., from the date of filing of the petition i.e., from

10.8.2021 till the date of actual payment. These amounts shall be paid by the

Southern Railways to the Claimant within a period of eight (8) weeks from the

date of receipt of the order with interest. No costs.

23-09-2025

Index:Yes

Speaking

Neutral Citation:Yes

KP https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

40 OP No. 60 of 2018

To

1.Engineering Products (I)

Limited, 3D, EC Chambers, No.92,

G.N.Chetty Street, T.Nagar,

Chennai-600 017.

2.Mr.S.Balachandran

Chief Electrical Engineer, Delhi Metro

Rail Corporation Limited, Kochi.

3.Mr.A.K.Sinha

Chief Palnning and Development

Engineer, Chennai-600 003.

4.Mr.K.Govindasai Babu

Deputy Financial Adviser and Chief

Accounts Officer, Headquarters Office,

Southern Railway, Chennai-600 003.

5.The Chief Engineer, Mtp (railways)

Southern Railways, Egmore,

Chennai 600 008 https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )

41 OP No. 60 of 2018

N.ANAND VENKATESH J.

kp

OP No. 60 of 2018

AND

ARB O.P(COM.DIV.) NO. 77 OF 2021

...

23-09-2025 https://www.mhc.tn.gov.in/judis ( Uploaded on: 18/11/2025 08:39:29 pm )