Delay attributable to employer disentitles imposition of liquidated damages: Delhi high court upholds arbitral award in favour of NH road contractor

Delhi High Court Supports NH Road Contractor: Employer-Caused Delays Prevent Liquidated Damages.

Case Title: Public Works Department, NH Wing and Anr. v. GVR Infra Projects Ltd.

Case Number: O.M.P. (COMM) 236/2026 | Delhi High Court | Justice Subramonium Prasad The Delhi High Court has dismissed a petition filed under Section 34 of the Arbitration and Conciliation Act, 1996, upholding an arbitral award of over Rs. 48.57 crores passed in favour of a road construction contractor, holding that the delay in execution of a national highway project was attributable to the employer and that imposition of liquidated damages and foreclosure of the contract were rightly held illegal by the Arbitral Tribunal.

Justice Subramonium Prasad was considering a challenge by the Ministry of Road Transport and Highways and the Superintending Engineer against an award passed in relation to the Nuapada Bangomunda highway rehabilitation project in Odisha.

Background

GVR Infra Projects Ltd. was awarded the contract in 2014 for rehabilitation and upgradation of a stretch of NH-217, with a scheduled completion date of 11.06.2016. The project faced delays, and the contract was eventually foreclosed by the Ministry with effect from 31.05.2022. The Ministry thereafter imposed liquidated damages and invoked the performance bank guarantee. The contractor invoked arbitration, and the Tribunal allowed nine of its claims, awarding over Rs. 48 crores while dismissing the Ministry's counter claims.

Grounds Of Challenge

The Ministry contended that the Tribunal had erroneously computed limitation, wrongly extended the contract period, and erred in holding the foreclosure and imposition of liquidated damages illegal despite the sub-contractor having abandoned the site. It also challenged the individual claims allowed under the award, including those for overheads, plant and machinery hire charges, bank guarantee costs, and routine maintenance expenses, contending these were either unproved or contractually barred.

Findings Of The Court

The Court reiterated the settled principles governing challenges under Section 34, referring extensively to OPG Power Generation (P) Ltd. v. Enexio Power Cooling Solutions (India) (P) Ltd., and reaffirmed that interference is permissible only where the award is perverse, contravenes the fundamental policy of Indian law, or suffers from patent illegality going to the root of the matter, and not merely on account of an erroneous application of law or reappreciation of evidence.

Examining the Tribunal's findings, the Court held that early and fundamental delays, including discrepancies in TBM values and delay in handing over encumbrance free land, were attributable to the employer under the express terms of the contract. The Court also upheld the Tribunal's finding that the Engineer's grant of extensions of time up to 31.03.2022, without any contractual basis for treating them as merely provisional, disentitled the Ministry from subsequently imposing liquidated damages, relying on NDMC v. IJM Corpn. for the principle that an extension once granted cannot be curtailed retrospectively.

On limitation, the Court upheld the Tribunal's finding that the exclusion of the CIRP moratorium period under Section 60(6) of the Insolvency and Bankruptcy Code, 2016, read with the Supreme Court's order in Cognizance for Extension of Limitation, In re, rendered the claims within time.

The Court further upheld the individual findings on the claims relating to overheads, plant and machinery hire charges, bank guarantee costs, routine maintenance, GST and cost of arbitration, holding that each was based on a plausible interpretation of the contract and the evidence led before the Tribunal, including the clause defining Cost to include overheads, and the applicable data book norms used for computing overhead charges.

Conclusion

Holding that the Tribunal's award reflected a reasoned and structured adjudication within the confines of the contract and the evidence on record, and that no ground under Section 34(2) or 34(2A) was made out, the Court dismissed the petition and upheld the award in its entirety.