Supreme Court of India· 31 January 2025

When does an employer's correspondence about a contractor's claim amount to waiver of a clause barring damages for 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

A letter stating that the claim for additional financial burden has to be dealt with together with the proposal for extension of time, and cannot be processed separately, does not by any stretch amount to waiver of the clause. That is especially so where extensions were thereafter granted on the contractor's own applications invoking the clause and the detailed claim called for was never submitted.

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 25A 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 14th 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 14th October, 2013, the respondent stated:

Paragraph 26By 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 14th October, 2013 was not submitted by the appellant. Therefore, the Division Bench rightly found no merit in the said contention.

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