Delhi HC Upholds ₹7.14 Crore Arbitral Award In Favour Of Corporate Infotech Against NTRO

The Delhi High Court on 1 April, held that Corporate Infotech Private Limited (CIPL) is entitled to the balance payment of Rs. 7,14,61,511 from the National Technical Research Organisation (NTRO) and upheld the arbitral award in its favour in a dispute over a secure intranet network project.

A Bench of Justice Harish Vaidyanathan Shankar observed that liquidated damages could not be imposed and final payments could not be withheld where delays were attributable to both parties and the system had already been taken over for operational use. He observed:

“Having rejected the claim for levy of LD and having found no established loss or subsisting breach, justifying retention of the said amount, the learned Tribunal concluded that the Respondent was entitled to the release of the withheld balance consideration. The direction for payment thus flows as a natural consequence of the rejection of LD and the determination of completion of contractual milestones.”

The dispute arose from a contract executed on 10 August 2018, following a limited tender enquiry by NTRO for the supply, installation, and integration of a secure intranet infrastructure across twenty-three locations in India. CIPL was tasked with establishing a wide area network (WAN) and local area networks (LAN), including training and support, within a twenty-eight-week timeline ending on 20 February 2019.

While CIPL completed the equipment supply with a delay of twenty-four weeks, NTRO initially released 70% of the payment. During the COVID-19 pandemic, the remaining 30% payment terms were amended, and 20% was subsequently released, leaving a 10% balance.

Disputes then arose regarding the On-Site Acceptance Tests (OSAT), the commencement of the three-year warranty period, and attribution of delays. NTRO withheld the final 10% payment, refused to release the Performance Bank Guarantee (PBG), and sought to levy liquidated damages. Following a legal notice issued by NTRO on 8 July 2022, the matter was referred to arbitration.

By award dated 2 April 2024, the sole arbitrator held that delays were attributable to both parties, rejected NTRO's claim for liquidated damages, and directed release of Rs. 7,14,61,511 to CIPL along with other consequential reliefs.

NTRO challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, arguing that delays were solely due to CIPL's failure to supply critical equipment and that the absence of a formal OSAT completion certificate meant the warranty had not commenced, justifying liquidated damages.

CIPL countered that delays were caused by NTRO's failure to provide site readiness and infrastructure, and that NTRO's takeover of system access on 17 March 2020 effectively marked project completion and waived further testing.

The Court observed that the arbitrator had conducted a holistic appreciation of evidence, finding that while CIPL was delayed in supply, NTRO was equally in default for not handing over sites and connectivity. Justice Shankar noted that NTRO's takeover of credentials on 17 March 2020 was crucial, as it was accompanied by a command for CIPL personnel to stay away, making further formal tests impossible.

Regarding liquidated damages, the Court held that NTRO failed to lead independent evidence of actual loss, and since the delay was shared, the arbitrator's rejection of the levy was a plausible finding. The Court emphasised that findings on shared delay and project completion, being based on appreciation of evidence, cannot be re-evaluated under the limited scope of Section 34.

The Court further added:

“The Impugned Award, in directing release of the balance amount, does not rewrite the contract but gives effect to the reciprocal obligations of the parties upon completion of performance. Such a finding, being founded on an appreciation of facts and an interpretation of contractual provisions, does not suffer from patent illegality or perversity warranting interference under Section 34 of the Act.”

Accordingly, the Court confirmed CIPL's entitlement to the balance 10% payment of Rs. 7,14,61,511 and the release of the Performance Bank Guarantee.

Appearances for petitioner (National Technical Research Organisation): Advocates Vikramjit Banerjee, Arunima Dwivedi, Pinki Pawar, Himanshi Singh, Abhishek.

Appearances for respondent (M/s Corporate Infotech Private Limited): Advocates Amit Sibal, Bharat Arora, Gourav Arora.