Whether Arbitrator can allow damages for delay in completion of project when parties have agreed otherwise in the agreement?

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SHUBHAM BUDHIRAJA[1]

 

A and B enter into a contract whereby A agreed to complete the project within the timeline, the parties also agreed on a clause that in case there is any delay in completion then other party will not be entitled to any damages. A delayed in completing the project by 3 years. The arbitral tribunal awarded in favor of B including the claim of damages for delay. The Delhi High Court confirmed the arbitrator reasoning that the said clause would not be applicable where the delay is unreasonable and of a long duration. This exclusionary clause would not preclude the B from raising a claim for compensation. The ‘Business Efficacy Test’ is required to be applied while considering the exclusionary clause[2].

 

(I)                 It is well settled that the question as to interpretation of a clause of a contract falls within the jurisdiction of an arbitral tribunal. The decision of the arbitral tribunal cannot be interfered with unless the same is found to be patently illegal or in conflict with the Public Policy of India.

 

(II)               The contention that the impugned award is vitiated by patent illegality as it is based on no evidence is also unmerited. It is necessary to bear in mind that the Indian Evidence Act, 1872 and the strict rules of evidence are inapplicable to arbitral proceedings. The Arbitral Tribunal is required to render a decision after evaluating the material placed before it.

 

(III)             The Arbitral Tribunal had accepted the CA Certificate. Although, he was not examined, the concerned officer had produced the said Certificate and duly affirmed the quantification. The strict rules of evidence do not apply to arbitral proceedings and there is considerable discretion available with the Arbitral Tribunal to take a view on the quality and the sufficiency of evidence.


[1] (ACS, LLB, BCOM (H))

Shubhambudhiraja02@gmail.com

[2] O.M.P. (COMM) 273/2021

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