Supreme Court of India· 31 January 2025

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?

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

No. As the claims were hit by the clause on its plain reading, there was no question of allowing the claimant to lead evidence to show that they were not barred.

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 22Now, 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.

Paragraph 23As 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.

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?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?

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