2025 INSC 138 Civil Appeal No.6657 of 2023 Page 1 of 16

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 6657 OF 2023

M/s. C & C Constructions Ltd. … Appellant

versus

IRCON International Ltd. … Respondent

J U D G M E N T

ABHAY S. OKA, J.

FACTUAL ASPECTS

1. This appeal arises out of the impugned judgment and order of the

Division Bench of the High Court of Delhi dated 1

st March, 2021, which

is passed in an appeal under Section 37 of the Arbitration and

Conciliation Act, 1996 (for short, ‘the Arbitration Act’).

2. We refer to a few factual aspects of the case. An agreement dated

28

th June, 2012 was entered into between the appellant and the

respondent for constructing five Road Over Bridges (for short, ‘ROBs’)

and their approaches at different locations in the State of Rajasthan.

The schedule of completion in respect of each ROB was different. The

locations where ROBs were to be constructed have been described as

LC-200, LC-89, LC-228, LC-233 and LC-108. According to the

appellant's case, the work at the sites was delayed for the reasons

attributable to the respondent. According to the appellant's case, the

Civil Appeal No.6657 of 2023 Page 2 of 16

respondent withdrew the work relating to the construction of two ROBs

(LC-200 and LC-233) from the scope of work and certified the

completion of the remaining work. There is no dispute that we are not

concerned with LC-200 and LC-233 in this appeal. In the case of LC-

89 and LC-228, the scheduled completion date was 15

th September,

2013. For LC-108, it was 16

th July, 2013. As per the completion

certificate dated 22

nd March 2016, the work of LC-89 was completed on

8

th October 2014, and the work of LC-228 was completed on 21

st March

2015. According to the appellant's case, work at LC-108 was completed

on 31

st March 2017.

3. On 19

th June 2013, the appellant addressed a letter to the

respondent's General Manager stating that the construction delay of

ROBs at LC-108 was due to various hindrances at the site. By the said

letter, the appellant requested the respondent to grant an extension of

264 days. The appellant contended that the delay in construction work

has resulted in an additional financial burden on account of the

establishment and overheads, etc., for a longer period than planned, for

which the appellant would be claiming separately. By the reply dated

14

th October 2013, the respondent informed the appellant that the

statement of the appellant that it would be claiming separately for

financial burden was not acceptable. The respondent stated that the

claim would have to be considered along with the prayer for extension.

Therefore, the respondent requested the appellant to submit a detailed

claim immediately so that the prayer for an extension of time could be

considered. Separate letters dated 30

th August, 2013 were addressed by

the appellant to the respondent regarding LC-89 and LC-228 for grant

of extension by 430 and 437 days, respectively. By a letter dated 29

th

Civil Appeal No.6657 of 2023 Page 3 of 16

November, 2013, the respondent granted an extension of time as

follows:

LC No. Extension Upto Penalty

228 20

th March, 2014 With Penalty

89 28

th February, 2014 With Penalty

108 31

st March, 2014 Without Penalty

4. On 28

th February, 2014, 09

th April, 2014 and 19

th April, 2014, the

appellant again applied for a grant extension of time regarding LC Nos.

89, 228 and 108, respectively. By a letter dated 24

th May, 2014, the

respondent granted an extension of time as follows:

LC No. Extension Upto Penalty

228 31

st January, 2015 Without Penalty

89 30

th November, 2014 Without Penalty

108 15

th December, 2014 Without Penalty

5. By letters dated 03

rd September, 2014, the appellant submitted

separate claims concerning the three ROBs for damages on account of

the delay on the part of the respondent. By letters dated 14

th October,

2014, the respondent rejected the claims. The appellant applied for

further extension of time by letters dated 08

th January, 2015. In

response, the respondent addressed a letter dated 09

th January, 2015

by which the appellant was called upon to give undertakings to the

effect that the appellant will not claim anything extra other than

escalation for the work executed. The appellant submitted undertakings

on 14

th January, 2015 accordingly.

Civil Appeal No.6657 of 2023 Page 4 of 16

6. The appellant invoked the arbitration clause on 25

th January

2017. The appellant filed a statement making a claim for Rs. 44.11

crores under 15 substantive heads besides the claim of interest and

costs. The respondent filed its statement of defence on 25

th August,

2017.

7. The respondent filed an application under Section 16(2) of the

Arbitration Act. It was contended in the said application that clause

49.5 of the General Conditions of Contract (for short, ‘GCC’) disentitles

the appellant from raising any claim for damages or compensation for

failure or delay caused by the respondent in fulfilling its obligations

under the contract. The Arbitral Tribunal passed the order in the

respondent’s application under Section 16 of the Arbitration Act in

nature of an award dated 21

st December, 2019 by which all claims were

rejected based on clause 49.5 of GCC.

8. Aggrieved by the impugned award dated 21

st December 2019, the

appellant preferred a petition under Section 34 of the Arbitration Act.

The learned Single Judge of the High Court of Delhi dismissed the

petition, holding that a term like clause 49.5 of the GCC would bar the

appellant's claim. Moreover, the appellant had accepted the

communication dated 14

th October 2014, issued by the respondent

dismissing the claim. It was also held that clause 49.5 was valid and,

after the appellant accepted the same, it could not contend to the

contrary.

9. Being aggrieved by the judgment of the learned Single Judge, the

appellant preferred an appeal before the Division Bench of the High

Court of Delhi by invoking Section 37 of the Arbitration Act. While

Civil Appeal No.6657 of 2023 Page 5 of 16

dismissing the appeal, the Division Bench held that the requirement of

clause 49.5 was never waived by the respondent. The Division Bench

held that clause 49.5 was a valid clause. After holding that the powers

of the Court while dealing with an appeal under Section 37 of the

Arbitration Act are limited by Section 34, the Division Bench dismissed

the appeal.

SUBMISSIONS

10. The learned counsel appearing for the appellant has made detailed

submissions. His first submission is that the award of the Arbitral

Tribunal was contrary to public policy and suffered from patent

illegality. The learned counsel also pointed out that the main issue was

whether a clause prohibiting the payment of damages, like clause 49.5,

could be enforced. He submitted that the Arbitral Tribunal and the

learned Single Judge failed to appreciate the crucial aspects striking at

the root of the award. The learned counsel pointed out various

decisions of the Delhi High Court and this Court. After relying upon

several decisions of this Court, he urged that the parties to the contract

cannot contract against the Indian Contract Act, 1872 (for short, ‘the

Contract Act’). He submitted that the finding recorded by the Arbitral

Tribunal that clause 49.5 aims to protect the interests of PSUs and the

Government is illegal. He relied upon the decision of this Court in the

case of Pam Developments Pvt. Ltd. v. State of West Bengal

1. The

learned counsel submitted that the additional documents filed by the

appellant ought to be considered. Therefore, the learned counsel

appearing for the appellant submitted that the impugned judgments

deserve to be set aside.

1

(2019) 8 SCC 112

Civil Appeal No.6657 of 2023 Page 6 of 16

11. Learned counsel for the respondent submitted that clause 49.5

of GCC read with clause 12 of the Special Conditions of Contract (for

short ‘SCC’) are limitation of liability clauses. These clauses are not in

conflict with either Section 23 or Section 28 of the Contract Act. He

submitted that if clause 49.5 of GCC and clause 12 of SCC are read

together, it is apparent that in case of delay or fault on the part of the

employer (respondent), a reasonable extension of time can be granted

and payment of price variation as per the formula agreed between the

parties in the contract itself can be made. Learned counsel submitted

that this Court has consistently upheld the enforceability of limitation

of liability clauses. He relied upon what is held in paragraph 10 of the

decision of this Court in the case of ONGC v. Wig Brothers Builders

and Engineers Private Limited

2. He submitted that the appellant

made an irreversible election to accept the extension of time in terms

of the agreed scheme of the contract between the parties without

payment of liquidated damages. Therefore, the appellant is not entitled

to make any additional claim for compensation and/or damages

beyond the stipulations in the contract and contrary to the express

prohibition in clause 49.5 of GCC. He pointed out the letters addressed

by the respondent by which initially liquidated damages/penalty were

imposed on the appellant for the delay. However, on the request made

by the appellant, the respondent granted an extension of time by

waiving liquidated damages. Therefore, the appellant made an

irreversible election to accept an extension of time under clause 49.5

of GCC. He relied upon three letters addressed by the appellant in

which the appellant agreed not to make any claim other than escalation

against the respondent because of the delay on the part of the

2

(2010) 13 SCC 377

Civil Appeal No.6657 of 2023 Page 7 of 16

respondent for which an extension of time has been sought. He pointed

out that the claim for damages was raised two years after the date of

the last extension. Learned counsel would, thus, submit that the

appellant has lost its right to challenge clause 49.5 and therefore, no

interference is called for with the impugned judgment.

OUR VIEW

12. We are concerned with three ROBs bearing numbers LC-89, LC-

228 and LC-108. Clause 49.5 of GCC reads thus:

“49.5 Delays due to Employer/Engineer

In the event of any failure or delay by the

Employer/Engineer in fulfilling his obligations

under the contract, then such failure or delay,

shall in no way affect or vitiate the contract or

alter the character thereof; or entitle the

Contractor to damages or compensation thereof

but in any such case, the Engineer shall grant such

extension or extensions of time to complete the work,

as in his opinion is/are reasonable.”

(emphasis added)

13. Initially, by a letter dated 11

th February, 2013, the respondent had

imposed a penalty on the appellant for slippage of milestones and non-

deployment of engineers. On 19

th June, 2013, a letter was addressed by

the appellant to the respondent in respect of LC -108 seeking an

extension of time of 264 days as there were delays on the part of the

respondent. The said letter mentioned that as the delay resulted in an

additional financial burden on the appellant, they would claim it

separately. Similar separate letters in respect of LC-228 and LC-89 were

addressed by the appellant on 30

th August, 2013. In the said three

letters, the appellant invoked clause 49 of GCC for grant of extension of

Civil Appeal No.6657 of 2023 Page 8 of 16

time. Sub-clause No.5 of clause 49 is the only sub-clause in clause 49

which provides for extension of time on account of delay due to the

respondent. By a letter dated 29

th November, 2013, the respondent

communicated to the appellant the decision regarding the grant of

extension of time regarding LC-228, LC-89 and LC-108 till 09

th April,

2014, 28

th February, 2014 and 19th April, 2014 respectively. As stated

in the letter, in the case of LC-89 and LC-228, the extension was granted

subject to penalty. In the case of LC-89, the appellant addressed a letter

dated 28

th February, 2014 to the respondent requesting that an

extension of time be granted till 30

th May, 2014, without penalty. Similar

letters were addressed on 9

th April, 2014 regarding LC-228 and on 19

th

April, 2014 regarding LC-108, wherein a request was made to grant an

extension of time till 31

st January, 2015 and 15

th December, 2014

respectively, without penalty. It is pertinent to note that in these letters,

the appellant did not state that it would be making any claim on account

of the delay on the part of the respondent. On 28

th February, 2014, 9

th

April, 2014 and On 19

th April, 2014, by separate letters, the appellant

applied for grant of extension of time for all three ROBs without penalty.

14. By letter dated 24

th May, 2014, the respondent approved the

extension of time for LC-228, LC-89 and LC-108 up to 31

st January,

2015, 30

th November, 2014 and 15

th December, 2014 respectively. The

extension was granted without penalty. Thus, based on the requests

made by the appellant, while granting further extension, the respondent

waived the penalty.

15. Thereafter, on 03

rd September, 2014, the appellant addressed

three separate letters to the respondent raising monetary claims on

Civil Appeal No.6657 of 2023 Page 9 of 16

account of the delay on the part of the respondent. The respondent

replied on 14

th October, 2014 by separate letters. The letters are

identical. For the sake of convenience, we are referring to the letter of

the respondent in respect of LC-108, which reads thus:

“The claim of Rs. 65696068/- is not at all admissible

and acceptable. The time extension which has been

granted to you without penalty is not at all basis of

any claims as per clause 49 of General Conditions of

Contract. As per clause No. 4.1 of Special Conditions

of Contract your claims is not tenable. The same was

already discussed with you earlier and in

response to that you had removed your lines of

"It is also to mention here that delay in work is

resulting in additional financial burden on us on

account of establishment and over heads and

cost overrun etc., for a lengthier period than

planned, for which we will be claiming

separately” from your request letter for

extension of time. That time you were also agreed

with it and re submitted your request letter

without such lines.

Once again you are requested to complete the

work within the extended period and do not waste

your time as well as our time in writing such type

of false claims.”

(emphasis added)

16. Thereafter, concerning the three LCs, separate letters were

addressed by the appellant on 8

th January, 2015, requesting the

respondent to grant further extension. The respondent sent separate

replies to these three letters on 9th January, 2015. In the said letters,

the respondent informed the appellant as under:

Civil Appeal No.6657 of 2023 Page 10 of 16

“Vide above mentioned letters you have requested for

Extension of Time in respect of ROB in lieu of LC No.

89 (Dadi ka Phatak) up to 30.06.2015. In this

connection you are requested to kindly submit an

undertaking that you will not claim anything

extra other than escalation for work executed in

the extended.”

(emphasis added)

17. Pursuant to the said letters, by three separate letters dated 14

th

January, 2015, in respect of the said three LCs, the appellant submitted

undertakings in the following terms:

“We, therefore, undertake that we will not make any

claim other than Escalation against the IRCON

because of the delay in completion of which

extension of time has been sought by us.”

(emphasis added)

18. After giving the said undertakings, two years thereafter, on 25

th

January, 2017, the appellant made claims on account of delay on the

part of the respondent, for which an extension was granted. The

appellant invoked the arbitration clause on the basis of the said claims.

19. Considering the conduct of the appellant , the following

conclusions can be drawn:

a) The appellant acted upon clause 49.5 and sought an

extension of time on three occasions;

b) The claim in the letter dated 25

th January, 2017 was made

by the appellant after giving solemn undertaking on 14

th January,

2015 not to make any claim other than escalation in respect of

delays in the completion of work. The claim made was contrary to

the undertakings;

Civil Appeal No.6657 of 2023 Page 11 of 16

c) By the undertakings, the appellant agreed not to make a

claim contrary to what is provided in clause 49.5; and

d) Therefore, by conduct, the appellant was estopped from

challenging the validity of clause 49.5.

20. At this stage, we must refer to the decision of the learned Single

Judge in the petition under Section 34 filed by the appellant. The

contentions raised by the appellant have been reproduced by the learned

Single Judge of Delhi High Court in paragraphs 12 and 13 of the

Judgment. Paragraphs 12 and 13 read thus:

“12. Mr. Naveen Kumar, learned counsel for the

petitioner has primarily submitted that the Tribunal

has clearly erred in accepting the application of the

respondent under Section 16 of the Act of 1996. The

Tribunal should have allowed the petitioner to

produce evidence that the delay in discharging

the obligations under the contract was clearly

on the respondent and as such, the petitioner

was entitled to the claims, which were in the

nature of damages.

13. That apart, he has drawn my attention to

various documents to contend that the

respondent had by its own conduct, not adhered

to Clause 49.5 of the GCC . In support of his

submission, he has drawn my attention to page 670

of the documents, wherein the respondent in its

communication to the petitioner has stated for

grant of extension of time, the petitioner's claims for

additional financial burden has to be dealt together.

In other words, the respondent has agreed with the

claim of the petitioner for additional financial

burden. Mr. Kumar has relied upon the judgment

reported in MANU/SC/1620/2009, Asian Techs

Civil Appeal No.6657 of 2023 Page 12 of 16

Ltd. v. Union of India , in support of his

submission that de-hors a stipulation which bars a

claim, still the Arbitrator can consider the aspect of

delay and award the claim, if justified.”

(emphasis added)

21. No other submission made by the appellant has been noted in the

judgment. The learned Single Judge firstly held that on the plain reading

of clause 49.5 of the GCC, the claims made by the appellant before the

Arbitrator were barred. Learned Single Judge held that having accepted

the stipulation in clause 49.5, the appellant could not have contended

otherwise.

22. Now, we turn to the impugned judgment of the Division Bench.

The first contention raised by the appellant was that all 15 monetary

claims could not have been summarily rejected by the Arbitral Tribunal

exercising jurisdiction under Section 16 of the Arbitration Act, without

giving an opportunity to the appellant to lead evidence and to prove that

the claims were not barred by clause 49.5. Secondly, the appellant

sought to rely upon clause 49.4. Another contention raised on behalf of

the appellant was that clause 49.5 was waived by the respondent.

23. As the claims were hit by Clause 49.5 on its plain reading, there

was no question of allowing the appellant to lead evidence. Clause 49.4

will apply when the delay is not due to the respondent. Admittedly, in

this case, the delay was on the part of the respondent. Hence, clause

49.5 will apply and not clause 49.4.

Civil Appeal No.6657 of 2023 Page 13 of 16

24. Now, in this appeal, a contention has been raised that the validity

of clause 49.5 ought to have been examined in the light of Sections 23

and 28 of the Contract Act, but the High Court has not examined the

said issue. Careful perusal of the judgment of the learned Single Judge

shows that the contention that the validity of clause 49.5 ought to be

decided in the light of Sections 23 and 28 of the Contract Act was not

raised before the learned Single Judge in a petition under Section 34.

The said contention was not raised even before the Division Bench in

appeal under Section 37. Therefore, it is not open to the appellant to

raise the said contention in this appeal for the first time.

25. A contention was raised for the first time in appeal under Section

37 that clause 49.5 was waived by the respondent. Apart from the fact

that said contention could not have been raised for the first time in

appeal under Section 37 of the Arbitration Act, on the applications made

by the appellant specifically invoking clause 49, the respondent granted

an extension of time on more than one occasion. On this behalf, much

capital was sought to be made about what is stated by the respondent

in its letter dated 14

th October, 2013. Though the said contention could

not have been raised in an appeal under Section 37 still, we are

examining the same. In the letter dated 14

th October, 2013, the

respondent stated:

“Vide above mentioned letter, you have requested

for extension of time for a total of 264 days.

However, in, your letter you have mentioned as

under:

"it is also mentioned here that delay in work in

resulting in additional financial burden on us

Civil Appeal No.6657 of 2023 Page 14 of 16

on account of establishment and over heads

etc., for a longer period than planned, for

which we will be claiming separately"

For grant of extension of time, your claim for

additional financial burden has to be dealt together

with the proposal of extension of time. Hence, your

statement that you will be claiming separately for

additional financial burden is not acceptable.

Hence, you are requested to submit your

detailed claim immediately so that your request

for extension of time can be processed early.”

26. By no stretch of imagination, after reading the said letter it can be

inferred that clause 49.5 was waived by the respondent. In fact, the

respondent stated that the claim for financial burden would have to be

dealt with together with the proposal for an extension of time, and the

said claim cannot be processed separately. Thereafter, on two occasions,

on specific requests made by the appellant under clause 49 of the GCC,

the extension of time was granted by the respondent. Except sub-clause

5 of clause 49, there is no other sub-clause which provides for grant of

extension when the delay was attributable to the respondent. The

extensions were granted at the instance of the appellant by invoking

clause 49. Hence, the argument of waiver of Clause 49.5 by the

respondent deserves to be rejected. Moreover, detailed claim, as stated

in the letter dated 14

th October, 2013 was not submitted by the

appellant. Therefore, the Division Bench rightly found no merit in the

said contention.

27. As far as scope of interference in an appeal under Section 37 of

Arbitration Act is concerned, the law is well settled. In the case of Larsen

Civil Appeal No.6657 of 2023 Page 15 of 16

Air Conditioning and Refrigeration Company v. Union of India and

Ors.

3 in paragraph 15, this court held thus:

“15. The limited and extremely circumscribed

jurisdiction of the court under Section 34 of the Act,

permits the court to interfere with an award, sans the

grounds of patent illegality i.e. that “illegality must go

to the root of the matter and cannot be of a trivial

nature”; and that the Tribunal “must decide in

accordance with the terms of the contract, but if an

arbitrator construes a term of the contract in a

reasonable manner, it will not mean that the award

can be set aside on this ground” [ref : Associate

Builders [Associate Builders v. DDA, (2015) 3 SCC 49

: (2015) 2 SCC (Civ) 204] , SCC p. 81, para 42]. The

other ground would be denial of natural justice. In

appeal, Section 37 of the Act grants narrower

scope to the appellate court to review the

findings in an award, if it has been upheld, or

substantially upheld under Section 34.”

(emphasis added)

28. In the case of Konkan Railway Corporation Limited v. Chenab

Bridge Project Undertaking

4 in paragraph 18, this court held thus:

“18. At the outset, we may state that the

jurisdiction of the court under Section 37 of the

Act, as clarified by this Court in MMTC

Ltd. v. Vedanta Ltd. [MMTC Ltd. v. Vedanta Ltd.,

(2019) 4 SCC 163 : (2019) 2 SCC (Civ) 293] , is akin

to the jurisdiction of the court under Section 34 of

the Act. [Id, SCC p. 167, para 14:“14. As far as

interference with an order made under Section 34,

as per Section 37, is concerned, it cannot be

disputed that such interference under Section 37

3

(2023) 15 SCC 472

4

(2023) 9 SCC 85

Civil Appeal No.6657 of 2023 Page 16 of 16

cannot travel beyond the restrictions laid down

under Section 34. In other words, the court cannot

undertake an independent assessment of the

merits of the award, and must only ascertain that

the exercise of power by the court under Section

34 has not exceeded the scope of the provision.”]

Scope of interference by a court in an appeal under

Section 37 of the Act, in examining an order,

setting aside or refusing to set aside an award, is

restricted and subject to the same grounds as the

challenge under Section 34 of the Act.”

29. Considering the limited scope of interference, as laid down by this

Court, we find absolutely no merit in the appeal and the same is

accordingly dismissed.

..…………………...J.

(Abhay S. Oka)

..…………………... J.

(Ujjal Bhuyan)

New Delhi;

January 31, 2025.