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2025 (2) TMI 252 - SC - Indian LawsEnforceability of clause 49.5 of the General Conditions of Contract (GCC) which prohibits claims for damages due to delays caused by the respondent - 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 - HELD 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. 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 Air Conditioning and Refrigeration Company v. Union of India and Ors. 2023 (8) TMI 985 - SUPREME COURT this court held that 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 In the case of Konkan Railway Corporation Limited v. Chenab Bridge Project Undertaking 2023 (8) TMI 1227 - SUPREME COURT this court held 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. Conclusion - The appellant s claims were found to be barred by clause 49.5 and no grounds existed for judicial interference under Sections 34 and 37 of the Arbitration Act. Considering the limited scope of interference as laid down by this Court there are no merit in the appeal and the same is accordingly dismissed.
ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment were:
ISSUE-WISE DETAILED ANALYSIS Clause 49.5 of the GCC Relevant legal framework and precedents: Clause 49.5 of the GCC states that delays caused by the employer do not entitle the contractor to damages or compensation but allow for a reasonable extension of time. The appellant argued that such a clause is contrary to public policy and the Indian Contract Act, 1872. Court's interpretation and reasoning: The Court held that clause 49.5 is a valid limitation of liability clause and is not in conflict with Sections 23 and 28 of the Indian Contract Act. The Court emphasized that the appellant had accepted extensions of time under this clause without penalty, thereby making an irreversible election. Key evidence and findings: The appellant had repeatedly sought extensions under clause 49.5 and provided undertakings not to claim anything beyond escalation for the delays. Application of law to facts: The Court found that the appellant's conduct in accepting extensions and providing undertakings barred it from challenging the validity of clause 49.5. Treatment of competing arguments: The appellant's argument that the clause was contrary to public policy was rejected. The Court noted that the appellant had not raised the issue of validity under Sections 23 and 28 before the lower courts. Conclusions: The Court concluded that clause 49.5 was valid and enforceable, and the appellant was estopped from challenging it due to its conduct. Rejection of Claims under Section 16 of the Arbitration Act Relevant legal framework and precedents: Section 16 of the Arbitration Act allows the arbitral tribunal to rule on its jurisdiction, including objections to the existence or validity of the arbitration agreement. Court's interpretation and reasoning: The Court upheld the Arbitral Tribunal's decision to reject the appellant's claims based on clause 49.5. It found that the Tribunal acted within its jurisdiction. Key evidence and findings: The appellant's claims were rejected by the Tribunal as they were barred by clause 49.5, which the appellant had accepted. Application of law to facts: The Court found no fault in the Tribunal's reliance on clause 49.5 to dismiss the claims. Treatment of competing arguments: The appellant's argument that it should have been allowed to present evidence was dismissed as the claims were clearly barred by clause 49.5. Conclusions: The Court concluded that the Tribunal correctly rejected the claims under Section 16. Scope of Judicial Interference under Sections 34 and 37 of the Arbitration Act Relevant legal framework and precedents: Sections 34 and 37 of the Arbitration Act limit the scope of judicial interference with arbitral awards and decisions. Court's interpretation and reasoning: The Court reiterated the limited scope of interference, emphasizing that courts should not reassess the merits of the award but only ensure compliance with statutory grounds. Key evidence and findings: The Court found that both the Single Judge and the Division Bench had correctly applied the limited scope of review under Sections 34 and 37. Application of law to facts: The Court found no grounds for interference with the decisions of the lower courts. Treatment of competing arguments: The appellant's arguments for broader judicial review were rejected based on established precedents limiting interference. Conclusions: The Court concluded that the appeal lacked merit and dismissed it. SIGNIFICANT HOLDINGS Core principles established: The Court upheld the enforceability of limitation of liability clauses like clause 49.5 in commercial contracts, provided they do not contravene statutory provisions. It also reinforced the limited scope of judicial review under Sections 34 and 37 of the Arbitration Act. Final determinations on each issue: The Court dismissed the appeal, affirming the decisions of the Arbitral Tribunal and the lower courts, and upheld the validity and applicability of clause 49.5 of the GCC.
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