Delhi High Court Upholds Arbitral Award Ordering PVVNL To Refund ₹4.5 Crore Deducted As Delay Damages To IL&FS

The Delhi High Court has recently refused to interfere with an arbitral award directing Paschimanchal Vidyut Vitaran Nigam Limited (PVVNL) to refund Rs. 4.50 crore deducted as liquidated damages from IL&FS Engineering and Construction Company Ltd, holding that recovery without proof of actual loss cannot be sustained.

Dismissing the challenge under Section 34 of the Arbitration and Conciliation Act, 1996, Justice Subramonium Prasad upheld the award of Rs. 4,50,68,820 along with interest at 8% per annum from July 1, 2022. The Court found no patent illegality or perversity in the tribunal's reasoning.

“The conclusion of the Arbitral Tribunal that the delay is attributable on both sides, the unilateral recovery by the Petitioner herein relying on the Clause 21.2 of the GCC at that to without adjudication is not justified and in the opinion of this Court would not come within the parameters of Section 34 of the Act either on the ground of patent illegality or on the ground against the notions of morality or against the public policy of India/country.”

The dispute arose from two contracts executed on March 3, 2015 for rural electrification works in the Amroha district under the Rajiv Gandhi Gramin Vidyutikaran Yojana. The project, awarded in November 2014 with a 24 month completion period, was completed on February 20, 2019. A completion certificate was issued later on April 5, 2022.

Delays were contested. IL&FS pointed to unresolved site hindrances and lack of right of way. PVVNL maintained that such issues were routine in infrastructure projects and that the contractor had failed to adhere to timelines, justifying deductions under Clause 21.2 of the General Conditions of Contract.

Arbitration was invoked in September 2022. By an award dated October 11, 2025, the tribunal rejected most claims but held that the deduction of Rs. 4.50 crore towards liquidated damages was unsustainable and directed its refund with interest.

The tribunal recorded that multiple letters between 2016 and 2019 flagged execution hurdles, yet no decision was taken on extension requests. The work continued without restraint. No contemporaneous step was taken to impose delay damages. The deduction was eventually made in June 2022, nearly three years after completion, without prior notice.

On the question of loss, the tribunal found no supporting material. It observed: “There is no plea either in the Statement of Defence or in the written submissions by the respondent if it had suffered 'actual loss' entitling it to make deductions towards liquidated damages.”

It further held, “The unilateral recovery at one go in June, 2022 after the expiry of around 3 years of the completion of the project, without establishing actual loss to the respondent is untenable and impermissible.”

The High Court declined to revisit these findings. It reiterated that a court exercising jurisdiction under Section 34 cannot reappreciate evidence or substitute its own conclusions merely because another view is possible.

Finding no ground to proceed further, the Court declined to issue notice and dismissed the petition, leaving the award directing refund of Rs. 4.50 crore with interest intact.

For Petitioner (Paschimanchal Vidyut Vitaran Nigam Limited): Advocates Vivek Narayan Sharma, Adhiraj Wadhera, Mahima Bhardwaj, Akash Singh, Palak Kaushik, Annika.

For Respondent (IL&FS Engineering and Construction Company Ltd): Advocates Kaushik Laik, Ashay Kaushik, Shashank Tiwari, H.N. Thangal.