A) ABSTRACT / HEADNOTE

The appeal arises from a challenge to an arbitral award rejecting delay-related monetary claims by M/s C & C Constructions Ltd. against IRCON International Ltd. relating to construction of three ROBs (LC-89, LC-228, LC-108). The contract’s General Conditions of Contract (GCC) clause 49.5 provides that delay by the employer/engineer shall not entitle the contractor to damages or compensation but only to reasonable extensions of time. The contractor repeatedly invoked clause 49 to seek extensions; respondent granted extensions (some initially with penalty, later waived) and secured from the contractor three written undertakings that it would not claim anything except escalation for extended periods.

Two years after the last undertaking the contractor invoked arbitration claiming Rs.44.11 crores. The arbitral tribunal, and subsequently the Single Judge and Division Bench of the Delhi High Court, rejected the claims applying clause 49.5.

The Supreme Court affirmed that:

(i) clause 49.5 plainly bars claims for damages arising from employer delay;

(ii) the appellant’s conduct and express undertakings estop it from challenging clause 49.5; and

(iii) an appeal under §37 is confined by the narrow grounds available under §34. The appeal was dismissed.

Keywords: Arbitration and Conciliation Act, 1996; clause 49.5 (GCC); extension of time; estoppel by conduct; limitation of liability clauses.

B) CASE DETAILS

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The dispute arises from a 2012 contract for construction of five Road Over Bridges. Completion dates varied; three ROBs (LC-89, LC-228, LC-108) are central on appeal. The contractor alleged employer-caused delays producing extra establishment, overheads and cost overrun; it sought extensions invoking clause 49 (GCC) and later monetary compensation. The employer (a public sector undertaking) initially imposed liquidated damages for delay but, on representations and subsequent requests invoking clause 49, granted extensions sometimes subject to penalty and subsequently without penalty.

Critical correspondence records the employer’s position that claims for additional financial burden must be filed together with extension requests and that time extensions granted under clause 49 do not, by themselves, create a basis for separate damage claims. Facing rejection of monetary claims, the contractor furnished three written undertakings (14-01-2015) undertaking not to claim anything other than escalation for works completed in extended time. Two years later arbitration was invoked claiming substantial monetary relief; respondent raised a §16(2) jurisdictional plea that clause 49.5 disentitled contractor from demanding damages for employer delay.

The tribunal declined jurisdiction to entertain the claims and dismissed them by an award dated 21-12-2019. The High Court in §34 and later on appeal in §37 upheld the award, finding clause 49.5 valid, operative and accepted by the contractor by express undertakings and by conduct; the Supreme Court considered clause construction, estoppel by conduct, and confined appellate review standard under §37, ultimately dismissing the appeal. The case tests enforceability of specific contractual exclusions of employer liability within public procurement and the interplay of contemporaneous undertakings with later arbitral claims.

D) FACTS OF THE CASE

An agreement dated 28 June 2012 bound the parties to construct five ROBs; scheduled completions differed by LC. The contractor alleged that delays attributable to the respondent caused extended site presence, overheads and cost overruns. On 19 June 2013 the contractor sought 264 days extension for LC-108 and flagged an intention to claim separately for financial burden. On 30 Aug 2013 similar extension requests were made for LC-89 and LC-228 (430 and 437 days). The respondent’s reply (14-10-2013) stated separate claims would not be accepted in isolation; detailed claims should be submitted so extension and monetary aspects could be processed together.

On 29-11-2013 an initial set of extensions was granted (with penalty for some LCs and without penalty for LC-108). Subsequent requests on 28-Feb-2014, 9-Apr-2014, 19-Apr-2014 led to further extensions; by 24-May-2014 respondent approved extended dates without penalty for all three LCs. On 03-Sep-2014 the contractor served monetary claims for delay; respondent rejected them (14-10-2014), reiterating clause 49 governing extension and denying separate monetary entitlement. Contractor requested further extensions (8-Jan-2015); respondent asked for written undertakings not to claim anything other than escalation (9-Jan-2015).

Contractor provided three undertakings on 14-Jan-2015 stating “we will not make any claim other than Escalation”. Despite this, on 25-Jan-2017 contractor initiated arbitration claiming Rs.44.11 crores across 15 heads. Respondent raised a §16(2) objection invoking clause 49.5 (which bars damages/compensation for employer delay and limits remedy to extension of time). The tribunal dismissed claims by award (21-12-2019). High Court in §34 and Division Bench in §37 affirmed: clause 49.5 applied; contractor’s undertakings and conduct precluded its claim; clause validity need not be re-examined on appeal where not raised below. The Supreme Court considered clause text, correspondence, undertakings and appellate scope and dismissed the appeal.

E) LEGAL ISSUES RAISED

i. Whether clause 49.5 (GCC) which bars entitlement to damages for employer delay is enforceable or void as against Sections 23/28 of the Indian Contract Act, 1872?
ii. Whether the contractor’s express undertakings and conduct estop it from asserting claims contrary to clause 49.5?
iii. Whether a tribunal may summarily reject claims under §16(2) when clause 49.5 on its face bars monetary relief?
iv. What is the scope of appellate interference under §37 vis-à-vis §34?

F) PETITIONER / APPELLANT’S ARGUMENTS

i. Counsels for the Petitioner submitted that the arbitral award was contrary to public policy and suffered patent illegality; a clause barring payment of damages like clause 49.5 cannot be enforced to deny contractual remedies and cannot circumvent the Indian Contract Act.
ii. They relied on precedent (including Pam Developments v. State of W.B.) and contended tribunal/High Court failed to examine crucial aspects and additional documents that would justify damages.

G) RESPONDENT’S ARGUMENTS

i. Counsels for the Respondent submitted that clause 49.5 (read with clause 12 SCC) are legitimate limitation-of-liability clauses, not in conflict with Sections 23/28; remedies agreed in the contract (extension and escalation formula) exhaust liability for employer delay.
ii. The respondent argued contractor made an irreversible election by accepting extensions and providing undertakings (14-01-2015) thereby forfeiting rights to damages; claims raised two years later are barred.

H) RELATED LEGAL PROVISIONS 

i. Arbitration and Conciliation Act, 1996: §16 (competence-competence), §34 (setting aside award), §37 (appeal against order on §34).
ii. Indian Contract Act, 1872: §23 (illegality of consideration/object), §28 (agreement in restraint of legal proceedings) — raised but not argued below.

I) JUDGEMENT

The Supreme Court analysed clause textually. Clause 49.5 provides that employer/engineer delay shall not entitle contractor to damages or compensation; relief is limited to reasonable extensions of time as granted by the Engineer. The Court traced the correspondence and observed that the contractor repeatedly invoked clause 49 for extensions and accepted extensions (some initially with penalty, later waived). The employer’s letters made clear that monetary claims must be filed together with extension proposals; further detailed claims were not submitted by the contractor. Critically, the contractor gave three written undertakings (14-01-2015) accepting it would not claim anything other than escalation.

Two years later the contractor sought damages contrary to these undertakings and contrary to the plain text of clause 49.5. The Court held that where a clause on its face bars damages, there was no scope for permitting evidence to avoid that bar; therefore the tribunal correctly refused to entertain claims under §16(2). The Court rejected contentions that clause 49.4 applied (it applies where delay is not due to the employer) here delay was conceded employer-caused so clause 49.5 governed. The Court also refused to adjudicate the §23/28 challenge because that argument was not pressed before the Single Judge and was raised belatedly on §37 appeal.

Regarding waiver, the Court held the 14-10-2013 letter did not amount to waiver of clause 49.5 but only required combined processing of extension and monetary claims. Applying estoppel by conduct and the narrow appellate standard under §37 (which mirrors §34), the Court found no ground to interfere and dismissed the appeal.

a. RATIO DECIDENDI 

The core legal ratio is threefold:

(i) contractual exclusion clauses like clause 49.5 that on their plain wording preclude damages for employer delay are enforceable unless impugned lawfully on grounds taken below;

(ii) where a party seeks and accepts contractually defined extensions and further provides express undertakings not to claim beyond agreed heads, that party is estopped by its conduct from later asserting contradictory claims; and

(iii) judicial intervention on appeal under §37 is narrowly circumscribed by §34’s limited grounds courts cannot reassess merits of award beyond those statutory constraints.

The Supreme Court thus concluded the arbitral tribunal correctly applied clause 49.5 and the procedural history (requests, grants of extension, undertakings) precluded later monetary claims. Precedents cited (e.g., Larsen Air Conditioning, Konkan Railway, ONGC v. Wig Brothers, Pam Developments) support limited review under §34/§37 and enforceability of limitation clauses when not unlawful on raised grounds.

b. OBITER DICTA

The Court observed obiter that an arbitrator may consider de-hors an exclusionary provision only if a party timely raises arguments under statutory or public policy grounds; belated contentions on §23/28 may be procedurally barred if not raised at earlier stages. The judgment emphasises the practical expectation in public procurement that contracts may include regime-specific liability allocations and that a party’s contemporaneous conduct (acceptance of extensions, written undertakings) carries heavy evidentiary weight.

The Court also noted that a letter asking for combined processing of extension and monetary claims cannot reasonably be read as waiver of an express exclusionary provision. Finally, the Court reiterated the need for parties seeking to challenge the validity of contract clauses to raise such challenges at earliest procedural opportunity before tribunal or in §34 proceedings; raising them first in §37 is generally impermissible.

c. GUIDELINES 

i. When a contractual clause on its face excludes damages, tribunals should first examine plain language and contemporaneous documents before admitting claims.
ii. Parties seeking extensions should, if they intend to preserve separate monetary claims, expressly and contemporaneously record that intention in specified claims; otherwise later claims risk estoppel.
iii. Employers/Engineers processing extensions should clearly communicate whether granting extension waives or preserves other remedies; both sides must preserve documentary record.
iv. Courts on §37 appeal must respect §34’s limited grounds; fresh or belated legal attacks (e.g., under §23/28 of the Contract Act) are prone to be held inadmissible if not raised earlier.

J) CONCLUSION & COMMENTS 

The decision underscores contractual certainty in infrastructure procurement: express allocation of risk by GCC clause 49.5 barring damages for employer delay and limiting remedy to time extensions was upheld where the contractor itself sought and accepted extensions and provided explicit undertakings limiting claims. Legally, the judgment reinforces three practical doctrines: textual primacy in clause construction; estoppel by conduct where a party’s contemporaneous written undertakings qualify later demands; and procedural finality under the Arbitration Act that constrains appellate re-evaluation.

Students and practitioners should note the procedural lesson challenges to clause validity under the Contract Act should be timely and specifically ventilated before the arbitral tribunal or in §34 proceedings; raising them for the first time in §37 invites procedural rejection. Substantively, the Court’s approach aligns with precedent upholding limitation and liability allocation clauses where not unlawful provided parties are not deprived of statutory protections and public policy.

The judgment will be cited in future procurement disputes where claimants seek to avoid prior undertakings or to re-litigate contractually confined remedies; it is a cautionary tale to contractors to preserve protest and claims contemporaneously and to avoid remediation through after-the-fact arbitration when prior conduct is inconsistent.

K) REFERENCES 

a) Important Cases Referred

1. M/s C & C Constructions Ltd. v. IRCON International Ltd., [2025] 1 S.C.R. 1413 : 2025 INSC 138.

2. Larsen Air Conditioning & Refrigeration Co. v. Union of India, (2023) 15 SCC 472.

3. Konkan Railway Corporation Ltd. v. Chenab Bridge Project Undertaking, (2023) 9 SCC 85.

4. Pam Developments Pvt. Ltd. v. State of West Bengal, (2019) 8 SCC 112.

5. ONGC v. Wig Brothers Builders & Engineers Pvt. Ltd., (2010) 13 SCC 377.

6. Associate Builders v. DDA, (2015) 3 SCC 49.

7. MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163.

8. Asian Techs Ltd. v. Union of India, MANU/SC/1620/2009 (as cited in judgment).

b) Statutes Referred

1. Arbitration and Conciliation Act, 1996 (India).

2. Indian Contract Act, 1872 (India) — Sections 23, 28 (discussed).