Supreme Court of India· 31 January 2025

What conduct estops a contractor from challenging the validity of a clause that bars damages for the employer's delay?

M/s. C & C Constructions Ltd. v. IRCON International Ltd.

2025 INSC 138 · CIVIL APPEAL NO. 6657 OF 2023
Coram: Abhay S. Oka; Ujjal Bhuyan

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Answer

Applying for and obtaining extensions of time under that clause on more than one occasion, giving a solemn undertaking not to make any claim other than escalation on account of the delay, and only thereafter raising monetary claims contrary to those undertakings. By that conduct the contractor is estopped from challenging the validity of the clause.

Headnote

Arbitration and Conciliation Act, 1996 — s.16 — s.34 — s.37 — Indian Contract Act, 1872 — ss.23, 28 — General Conditions of Contract — Clause barring damages for the employer's delay — Estoppel by conduct — New plea in appeal — Scope of interference — General Conditions of Contract — Delay by the employer — Estoppel by conduct — Held: A clause entitling a contractor only to extension of time, and not to damages or compensation, for the employer's delay binds a contractor who acts upon it. Having obtained extensions and undertaken to claim nothing other than escalation, he is estopped by conduct from challenging its validity. (¶19) Indian Contract Act, 1872 — ss.23, 28 — Plea raised for the first time — Held further: A contention that such a clause must be tested against Sections 23 and 28 cannot be raised for the first time in this appeal when it was urged neither in the petition under Section 34 nor in the appeal under Section 37. (¶24) General Conditions of Contract — Waiver — Correspondence on the claim — Held further: A letter requiring the claim for additional financial burden to be dealt with together with the proposal for extension of time is no waiver of the clause, the more so where the detailed claim called for was never submitted. (¶26) Arbitration and Conciliation Act, 1996 — s.37 — Scope of interference — Held further: Interference under Section 37 cannot travel beyond the restrictions laid down under Section 34; the court cannot undertake an independent assessment of the merits of the award. Appeal dismissed. (¶27, 28)

In the Court's own words

Paragraph 17Pursuant to the said letters, by three separate letters dated 14th January, 2015, in respect of the said three LCs, the appellant submitted undertakings in the following terms:

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

Paragraph 19Considering 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 25th January, 2017 was made by the appellant after giving solemn undertaking on 14th 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; 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.

Acts & Sections

s.37 Arbitration and Conciliation Act, 1996s.34 Arbitration and Conciliation Act, 1996s.16 Arbitration and Conciliation Act, 1996s.23 Indian Contract Act, 1872s.28 Indian Contract Act, 1872

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Also decided in this judgment

Is a clause in the General Conditions of Contract providing that the employer's failure or delay shall not entitle the contractor to damages or compensation, but only to a reasonable extension of time, binding on the contractor?Can a party contend for the first time before the Supreme Court that such a contractual clause must be tested against Sections 23 and 28 of the Indian Contract Act, 1872?Under the Arbitration and Conciliation Act, 1996, may a plea that a contractual clause was waived be raised for the first time in an appeal under Section 37?When does an employer's correspondence about a contractor's claim amount to waiver of a clause barring damages for delay?What is the scope of a court's interference in an appeal under Section 37 of the Arbitration and Conciliation Act, 1996?Where claims are barred on the plain reading of a contractual clause, must an Arbitral Tribunal deciding an application under Section 16 of the Arbitration and Conciliation Act, 1996 first permit evidence to be led?

Plain-language answer prepared by the LexStreak Editorial Desk — verify against the judgment. Source: Supreme Court of India. Corrections