2025 INSC 138 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

JUDGMENT
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 1st 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

28th 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
Signature Not Verified

Digitally signed by
ASHISH KONDLE
Date: 2025.02.01
11:19:03 IST
Reason:

Civil Appeal No.6657 of 2023 Page 1 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 15th September,
2013. For LC-108, it was 16th July, 2013. As per the completion
certificate dated 22nd March 2016, the work of LC-89 was completed on
8th October 2014, and the work of LC-228 was completed on 21st March
2015. According to the appellant's case, work at LC-108 was completed
on 31st March 2017.

3. On 19th 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
14th 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 30th 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 29th

Civil Appeal No.6657 of 2023 Page 2 of 16

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

LC No. Extension Upto Penalty

228 20th March, 2014 With Penalty
89 28th February, 2014 With Penalty
108 31st March, 2014 Without Penalty

4. On 28th February, 2014, 09th April, 2014 and 19th April, 2014, the
appellant again applied for a grant extension of time regarding LC Nos.
89, 228 and 108, respectively. By a letter dated 24th May, 2014, the
respondent granted an extension of time as follows:

LC No. Extension Upto Penalty

228 31st January, 2015 Without Penalty
89 30th November, 2014 Without Penalty
108 15th December, 2014 Without Penalty

5. By letters dated 03rd 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 14th October,
2014, the respondent rejected the claims. The appellant applied for
further extension of time by letters dated 08th January, 2015. In
response, the respondent addressed a letter dated 09th 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 14th January, 2015 accordingly.

Civil Appeal No.6657 of 2023 Page 3 of 16

 6. The appellant invoked the arbitration clause on 25th 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 25th 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 21st December, 2019 by which all claims were
rejected based on clause 49.5 of GCC.

8. Aggrieved by the impugned award dated 21st 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 14th 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

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 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 Bengal1. 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 5 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 Limited2. 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 6 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 11th February, 2013, the respondent had
imposed a penalty on the appellant for slippage of milestones and non-
deployment of engineers. On 19th 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 30th 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 7 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 29th 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 09th April,
2014, 28th 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 28th February, 2014 to the respondent requesting that an
extension of time be granted till 30th May, 2014, without penalty. Similar
letters were addressed on 9th April, 2014 regarding LC-228 and on 19th
April, 2014 regarding LC-108, wherein a request was made to grant an
extension of time till 31st January, 2015 and 15th 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 28th February, 2014, 9th
April, 2014 and On 19th April, 2014, by separate letters, the appellant
applied for grant of extension of time for all three ROBs without penalty.

14. By letter dated 24th May, 2014, the respondent approved the
extension of time for LC-228, LC-89 and LC-108 up to 31st January,
2015, 30th November, 2014 and 15th 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 03rd September, 2014, the appellant addressed

three separate letters to the respondent raising monetary claims on

Civil Appeal No.6657 of 2023 Page 8 of 16

 account of the delay on the part of the respondent. The respondent
replied on 14th 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 8th 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 9 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 14th
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 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.

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 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;

Civil Appeal No.6657 of 2023 Page 10 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 11 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 12 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 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:

“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 13 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 14th 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 14 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 Undertaking4 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 15 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.

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