Supreme Court upholds contract clause barring claim of damages for delays in construction project

The Supreme Court recently upheld Delhi High Court's decision to uphold an arbitral tribunal's rejection of claims for damages over project delays, on the basis of a contract clause [C & C Constructions Ltd Vs IRCON International]..The dispute pertaining to construction of Road Over Bridges (ROBs) in Rajasthan centered around clause 49.5 of the General Conditions of Contract (GCC) between C&C Constructions Limited and IRCON International Limited.Clause 49.5 barred the contractor from making claims on account of delay. A Bench of Justices Abhay S Oka and Ujjal Bhuyan found that C&C Constructions by way of undertaking had agreed not to make a claim contrary to what is provided in clause 49.5."Therefore, by conduct, the appellant was estopped from challenging the validity of clause 49.5," the Bench said..Further, the Court refused to go into the argument that the contract clause itself was against the provisions of Indian Contract Act, observing that it was not raised before the High Court."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.".On June 28, 2012, C&C Constructions and IRCON entered into an agreement for constructing five ROBs in Rajasthan. The project faced significant delays, which C&C Constructions attributed to IRCON. After granting multiple extensions, IRCON rejected the contractor's claim for ₹44.11 crore in damages, citing clause 49.5, which barred compensation for employer-caused delays..C&C Constructions invoked arbitration but the arbitral tribunal ruled against them on the basis of clause 49.5 of the contract. The Delhi High Court later upheld the tribunal decision, leading C&C Constructions to move the Supreme Court..The top court rejected the argument that all 15 monetary claims could not have been summarily rejected by the arbitral tribunal. "As the claims were hit by clause 49.5 on its plain reading, there was no question of allowing the appellant to lead evidence," it said..The Court also turned down the argument that IRCON had waived clause 49.5."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.' .The Court emphasized that under Section 37 of the Arbitration and Conciliation Act, 1996, its power to interfere with arbitral awards is limited. "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," it ordered..C&C Constructions Ltd. was represented by advocates Vikas Goel, Tarun Dua, Ritesh Sharma, Vivek Gupta, Harmanbir Singh Sandhu, Pragun Dua, Rahul Shyam Bhandari, G Priyadharshni, Satyam Pathak, Prabhakar Pahepuri and Harsh Vardhan..Ircon was represented by Senior Advocate Gaurav Pachnanda with advocates Sidhant Goel, Mohit Goel, Shubham S Saxena, Karmanya Dev Sharma, Nikita Jaitly, Avni Sharma and Sahil Tagotra..[Read Judgment]