Delhi High Court Confirms Arbitral Award Favoring Rama Constructions In Jawaharlal Nehru Stadium Dispute

The Delhi High Court on 25 February, upheld an arbitral award granting Rs. 80.05 lakh along with 10% interest to Rama Constructions Company in a dispute arising from civil and electrical works executed at the Jawaharlal Nehru Stadium Complex, New Delhi.

Dismissing the Union of India's challenge, Justice Jasmeet Singh reiterated the limited scope of judicial interference, noting that the Arbitrator's findings were evidence-based and did not warrant interference under Section 34 of the Arbitration and Conciliation Act, 1996.

Justice Singh observed:

“I am of the view, that the contention of the petitioner that the said claim was adjudicated by the Arbitrator in contravention of the Contract Agreement and is consequently perverse, cuts no ice. The Arbitrator has carefully undertaken a fact grounded appreciation of the entire claim and material placed on record. Be that as it may, in proceedings under Section 34 of the Act, such a fact based and evidence driven determination is entitled to be upheld.”

The dispute traces back to a February 2008 tender worth over Rs. 10 crore floated by the Union for the construction of a hostel/media accommodation block at the stadium. The contract was awarded in April 2008 with a nine-month completion period. The work was completed in September 2009, after which payment disputes arose.

The contractor invoked the arbitration clause, alleging that the department reduced agreed rates for excess quantities, denied payment for extra and substituted items, withheld amounts for drawings and defects, and imposed penalties without following the contractual procedure.

On 16 July 2014, the Sole Arbitrator awarded the contractor Rs. 80,05,774 with 10% interest. The Union thereafter moved the High Court under Section 34, challenging the award.

It argued that the Arbitrator exceeded jurisdiction, wrongly allowed bonus and deviation claims, and erred in awarding VAT, labour components, and withheld sums. It maintained that rates could be revised beyond deviation limits and that deductions were justified due to non-submission of drawings, defects, and environmental non-compliance.

The High Court disagreed.

On Rs. 4,13,235 awarded towards rate reduction beyond deviation limits, the Arbitrator had held that “if either party has not demanded revision of rates, then the agreement rate is the only option left to both parties, as there cannot be any fourth rate.”

Upholding this finding, the High Court ruled that the department could not unilaterally reduce agreed rates for excess quantities without first issuing notice under the contract and affording the contractor an opportunity to accept or refuse the revised rate.

On penalties and withheld amounts totalling Rs. 2,45,000 (including Rs. 2 lakh deducted for drawings and testing, Rs. 20,000 for alleged defects, Rs. 10,000 as environmental penalty, and Rs. 15,000 under Clause 8(B)), the Arbitrator held that the Department had failed to justify the deductions under the contract or prove that any expenditure was actually incurred at the contractor's risk and cost.

In particular, the Rs. 15,000 completion penalty could be imposed only by the Superintending Engineer-in-charge, but no such decision was produced. The High Court upheld this reasoning, stating:

“When a penalty is a creature of an agreement, it can only be imposed by the procedure as contemplated within the terms of the agreement and not otherwise.”

Regarding Rs. 22,51,135 awarded for labour coefficients and extra items, the Arbitrator relied on the Delhi Schedule of Rates and industry practice instead of the department's reduced calculations.

The Court refused to interfere, holding that such technical evaluation could not be re-examined under limited judicial review.

It also upheld the 10% interest, observing that in the absence of any contractual cap, the rate could not be termed excessive or unconscionable, and found that the award was based on “careful analysis and cogent reasons.”

Accordingly, the Court dismissed the Union's petition.

Appearances for Petitioner (Union of India): Advocates Pratima N. Lakra (CGSC), Kanchan Shakya, Shailendra Kumar Mishra, Shivansh Bansal.

Appearances for Respondent (M/s Rama Constructions Company): Advocates Avinash Trivedi, Ritika Trivedi, Anurag Kaushik, Rahul Aggarwal.