Madras High Court
The Chief Engineer vs M/S.Subaya Constructions Company ... on 9 January, 2026
Author: P.Velmurugan
Bench: P.Velmurugan
ARB.APPEAL(MD)No.2/2024 &
CMA(MD)No.859/2019
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
Reserved on 25.10.2025
Pronounced on 09.01.2026
CORAM :
THE HONOURABLE MR. JUSTICE P.VELMURUGAN
and
THE HONOURABLE MRS.JUSTICE L.VICTORIA GOWRI
ARBITRATION APPEAL(MD)No.2 of 2024
and
CIVIL MISCELLANEOUS APPEAL(MD)No.859 of 2019
The Chief Engineer
Tamil Nadu Water and Drainage Board
No.1/1 Sambakulam, Ganesh Nagar,
Madurai -625 007. .... Appellant in both appeals
vs.
1. M/s.Subaya Constructions Company Limited,
New No.21 (Old No.26) Soundarapandian Street,
Ashok Nagar,
Chennai - 600 083.
2. The Presiding Arbitrator,
Er.N.Pitchaimurthi
No.L-6, Block No.2
West Hills No.7 and 8, Reddy Kuppam Road,
Saidapet, Chennai - 600 015.
3. The Co-Arbitrator,
Er.S.Sivaraman
Former Chief Engineer, PWD,
Page No.1 of 34
https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm )
ARB.APPEAL(MD)No.2/2024 &
CMA(MD)No.859/2019
No.5/8, 2nd Street, Marackayar Nagar,
Neelngarai,
Chennai - 600 115.
4. The Co- Arbitrator,
Er.S.Ramakrishnan
Former Superintendent Engineer, PWD
No.51/49, Pulliavillai Street
Vadasery, Nagercoil - 629 001. ... Respondents in both appeals
Prayer in Arb.Appeal(MD)No.2 of 2024 :- Arbitration Appeal
filed under Section 37 of Arbitration and Conciliation Act 1996, to set
aside the order dated 18.06.2024 made in Arb O.P.No.3 of 2019 on the file
of the Principal District and Sessions Court, Sivagangai, by confirming
the Arbitration award dated 10.10.2018 in the matter of dispute between
by M/s.Subaya construction company limited and Tamil Nadu Water
and Drainage Board, Madurai, in the matter of work of providing
underground sewerage scheme to Sivagangai Municipality work of
Collection system package 1 and allow the arbitration appeal.
Prayer in CMA(MD)No.859 of 2019 :- Civil Miscellaneous
Appeal filed under Section 37(1) & (2) of Arbitration and Conciliation
Act 1996, against the fair and decreetal order passed by the Hon'ble
Principal District Judge, Thoothukudi, in Ar.O.P.No.83 of 2019 dated
18.10.2019.
For Appellant : Mr.ARL.Sundaresan,
Additional Solicitor General assisted by
Page No.2 of 34
https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm )
ARB.APPEAL(MD)No.2/2024 &
CMA(MD)No.859/2019
Mr.B.Vijay Karthikeyan
For R1 : Mr.M.S.Krishnan, Senior Counsel
for Mr.B.Natarajan
COMMON JUDGMENT
(Judgment of the Court was made by P.VELMURUAN, J.) Arbitration Appeal has been filed to set aside the order dated 18.06.2024 made in Arb O.P.No.3 of 2019 on the file of the Principal District and Sessions Court, Sivagangai, by confirming the Arbitration award dated 10.10.2018 in the matter of dispute between by M/s.Subaya construction company limited and Tamil Nadu Water and Drainage Board, Madurai, regarding the work of providing under ground sewerage scheme to Sivagangai Municipality work of Collection system package 1.
2. Civil Miscellaneous Appeal has been filed under Section 37(1) & (2) of Arbitration and Conciliation Act 1996, against the fair and decreetal order passed by the learned Principal District Judge, Thoothukudi, in Ar.O.P.No.83 of 2019 dated 18.10.2019. Page No.3 of 34 https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm ) ARB.APPEAL(MD)No.2/2024 & CMA(MD)No.859/2019
3. As pleadings and submissions are identical in both the cases, both the appeals are heard together and disposed of by this common judgment.
4. The Tamil Nadu Water and Drainage Board called for tenders for carrying out the work of providing underground sewerage scheme to Sivagangai Municipality in Zone-1 providing collection system (Package 1) and Ramanathapuram Package-2, in which, the 1st respondent in both the appeals became the successful bidders and the tenders were accepted at the total cost of Rs.12,46,43,802/- and Rs. 9,87,57,743/- respectively, and the work order was issued vide appellant's letter dated 26.12.2006 and 16.06.2006 respectively. However, the 1st respondent had taken over the respective sites only on 09.02.2007 and 01.12.2006 respectively, and commenced the work only on 05.03.2007 and 20.12.2006 respectively, after repeated reminders and instructions by the appellant Board. The period of contract of the said work was extended at the request of the 1st respondent from time to time on condition that there will not be any extra commitment to the appellant. After continuous efforts and instructions, the work was Page No.4 of 34 https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm ) ARB.APPEAL(MD)No.2/2024 & CMA(MD)No.859/2019 completed as per the agreement on 30.03.2011 and 22.09.2011 respectively, and final bill was settled on 12.11.2012 and 15.11.2012 respectively. It is pertinent to note that no protest was made by the 1st respondent at any point of time, as such, the contract agreement was ended without any protest by the 1st respondent and they received the final payment accordingly. While so, the 1st respondent had raised an adjudication before the Adjudicator seeking 60% of the final bill as compensation for the delay in completion of the agreement value and for the delay in completion of the contract work. The 1st respondent filed a claim petition in both the cases before the Adjudicator on 17.05.2013. The Adjudicator did not peruse the materials placed before him and had recommended the employer to make payment of the approved amount. According to the appellant, if at all there has been delay in the execution work attributable to the employer, it should have been referred as a dispute to the Adjudicator concerned within 14 days of such dispute. However, without adhering to the terms of the agreement, the 1st respondent had raised the dispute before the Adjudicator according to his own whims and convenience and the Adjudicator's decision was received by the Engineer in both the cases only on 01.08.2013 and the Page No.5 of 34 https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm ) ARB.APPEAL(MD)No.2/2024 & CMA(MD)No.859/2019 same was not agreed upon by the Engineer. It was communicated to the 1st respondent vide Engineer's letter dated 13.09.2013. As per Clause 24.1 of the agreement, if the contractor believes that the decision taken by the Engineer was either outside the authority given to him or that decision was wrongly taken, the decision shall be referred to the Adjudicator within 14 days of notification of the Engineer's decision. However, the 1st respondent referred the dispute to the Adjudicator only after a period of 6 years. Further the adjudication order was also passed only after a period of 76 days from the date of reference which is against Clause 25.1 of the agreement which states that every dispute referred as a dispute to the Adjudicator should have been completed within 28 days. Thereafter, the 1st respondent had invoked the arbitration clause as per the terms of agreement and accordingly, the present Arbitration Tribunal was appointed. The appellant raised the preliminary objection regarding the jurisdiction of the Arbitration Tribunal, but the same was rejected by the Arbitration Tribunal on 18.02.2016, against which, the appellant filed Original Petition Nos.293 and 292 of 2016 before the Madras High Court and subsequently withdrew the said petitions and hence, the Arbitration Tribunal proceeded with the arbitration. The Arbitration Tribunal Page No.6 of 34 https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm ) ARB.APPEAL(MD)No.2/2024 & CMA(MD)No.859/2019 though consists of respondents 2 to 4, the 4th respondent had given dissenting award vide order dated 17.10.2018 and the other members passed the majority award dated 10.10.2018, directing the appellant to pay the compensation of Rs.4,08,98,970/- and Rs.3,82,11,338/- respectively, to the 1st respondent, against which, the appellant filed Ar.O.P.Nos.3 and 83 of 2019.
5. In the said Ar.O.Ps, the appellant contended that; the delay in execution of work beyond the contractual period was due to reasons attributable to the 1st respondent; there was no document to establish delay on the part of the appellant; the appellant cannot be made liable for the untoward reasons for the delay in collection of raw materials; the methodology adopted by the 1st respondent for the amount of claim is irrational and unjustified; the 1st respondent failed to claim more money in the contract than the mentioned by stating one reason or other which is contrary to the terms and conditions of the contract; the site was fully handed over to the 1st respondent on the starting date and the alleged non handing over of entire site at the inception was not proved by the 1st respondent through documents; the Page No.7 of 34 https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm ) ARB.APPEAL(MD)No.2/2024 & CMA(MD)No.859/2019 Arbitration Tribunal had gone beyond the terms and conditions of the agreement by holding that the diversion of utility is not within the scope of the 1st respondent; the Arbitral Tribunal failed to note that the appellant had extended the contract period without imposing liquidated damages despite the fact that the 1st respondent is responsible for the delay in completion of work; the claim of the 1st respondent is hit by doctrine of estoppel, acquiescence and waiver by accepting the final payment without reserving any rights to dispute the same in future; the 1st respondent had not produced the corresponding invoices/bills for the excess expenditure; even during extension of time, a condition was imposed that no extra financial commitment will be made to the appellant which the Arbitration Tribunal failed to take note of; though the 1st respondent claimed the contract price before the Arbitrator, they claimed amounts before the Arbitration Tribunal under different heads and the Arbitration Tribunal had wrongly invoked the cost index method when there is no price adjustment clause in the agreement which is erroneous and contrary to the agreement clauses.
6. The 1st respondent filed counter affidavit contending Page No.8 of 34 https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm ) ARB.APPEAL(MD)No.2/2024 & CMA(MD)No.859/2019 that; the appellant failed to hand over the entire site on the starting date and also failed to furnish levels, drawings, specifications or instructions for commencing the work which led to claiming compensation as per Clause 21.1 of the agreement and the appellant is liable to compensate the 1st respondent as per Clauses 44.2 and 44.3 of the agreement; the present claim relates to consequential damages not due to the delay on the part of the 1st respondent; the damages can be quantified only at the time of completion after assessing the final value of the work; the 1st respondent by several letters intimated about the increase in the contract price and additional time incurred for compensation events under Clause 21.1 of the agreement read with 44.1 and the appellant is liable to compensate the 1st respondent as per Clauses 44.2 and 44.3 of the agreement; the appellant is also liable to pay interest at 8% on the delayed payments for the works completed after 28 days from the date of certification of payments by the Engineer as per Clause 43.1 of the agreement which the appellant failed to pay; there was no new claim before the Arbitration Tribunal and it was only the break-up details of the earlier claim made before the Adjudicator; the decision of the Adjudicator is final unless it is referred to the Arbitrator by either party Page No.9 of 34 https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm ) ARB.APPEAL(MD)No.2/2024 & CMA(MD)No.859/2019 to the dispute within 28 days of the Adjudicator's decision; the appellant did not invoke the arbitration proceeding against the Adjudicator's decision, as such, it is final and therefore, the appellant is bound to make payment to the 1st respondent as per the Adjudicator's decision.
7. The Court below after considering the rival submissions and the judgments relied on by both the parties, held that the arbitral proceedings are per se not comparable to the judicial proceedings before the Court and that the arbitration award can be set aside only on the grounds mentioned under Section 34(2) and (3) of the Arbitration and Conciliation Act, 1996, whereas the appellant has not made out any ground mentioned in the said provision and accordingly dismissed the Arbitration Original Petitions filed by the appellant. Challenging the said dismissal, the appellant has filed the Arbitration Appeal and Civil Miscellaneous Appeal.
8. The learned Additional Solicitor General appearing for the appellant in both the cases would submit that the Arbitrators who Page No.10 of 34 https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm ) ARB.APPEAL(MD)No.2/2024 & CMA(MD)No.859/2019 are the creatures under the agreement are bound by the terms of the agreement and cannot travel beyond the scope of the agreement. Further, the Arbitrators do not have the power of a Civil Court or the power to do equity between the parties. In this context, the learned Additional Solicitor General has referred to Section 28(3) of the Arbitration and Conciliation Act, which states that while deciding and making an award, the Arbitral Tribunal shall in all cases take into account the terms of the contract and trade usages applicable to the transaction. In the present case, as per Clause No.42.2, in the event of occurrence of any compensation events, the contractor should inform the Engineer at the time of monthly progress about the occurrence of the compensation event and also inform him about the cost variation that is likely to occur. The Engineer shall thereafter consider the same and accept it or he may on his own decide the amount which will be accepted as enhancement and this is the mandate of Clause Nos.42.2 and 42.5 of the contract between the parties. Admittedly, in the present case whenever extension was granted by the appellant/TWAD Board, it was specifically mentioned that the extension was being granted without any cost implication. Admittedly, the 1st respondent also had not objected to Page No.11 of 34 https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm ) ARB.APPEAL(MD)No.2/2024 & CMA(MD)No.859/2019 the extension granted without cost implication and they had not claimed that they will continue the work only if the cost escalation is given. The 1st respondent contractor without any protest accepted the extension and continued the contract work and also got final bill. Only after receipt of final bill, the 1st respondent contractor raised the issue of price escalation.
9. The learned Additional Solicitor General would further submit that since early warning as contemplated under the agreement and the monthly intimation about the occurrence of the compensation events and also the anticipated enhancement in price were not given to the appellant and further since the 1st respondent also had not objected to the extension granted by the appellant without any cost implication, the 1st respondent is not entitled for any enhancement on any account whatsoever. He would further contend that the Arbitral Tribunal (majority award) has failed to apply the terms and conditions of the agreement between the parties, which is binding on the parties and also on the Arbitral Tribunal. On the other hand, the dissent award has carefully scrutinized the terms and conditions of the agreement and has disallowed the claims by applying the law correctly and Page No.12 of 34 https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm ) ARB.APPEAL(MD)No.2/2024 & CMA(MD)No.859/2019 appreciating the fact that the mandatory conditions in the agreement have not been compiled with the contractor.
10. Adding further, the learned Additional Solicitor General would submit that while deciding a case under Section 34 of the Arbitration and Conciliation Act, the Court is bound to see the terms and conditions of the contract and as to whether the Arbitral Tribunal has gone beyond the terms and conditions of the contract. If the Arbitral Tribunal has gone beyond the terms conditions of the contract, the award itself is perverse and against public policy and even under the limited scope of interference under the Arbitration and Conciliation Act, such an award deserves to be set aside. However, the Court below in both these cases has failed to consider the aspect of the matter and has mechanically confirmed the award as if the award cannot be set aside under any circumstances. There is no consideration of the facts of the case or the law applying to the facts of the case by the Court below, whereas it has dismissed the petitions mechanically observing that the scope of interference under Section 34 is very limited. Page No.13 of 34 https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm ) ARB.APPEAL(MD)No.2/2024 & CMA(MD)No.859/2019
11. The learned Additional Solicitor General would further contend that the scope of appeal under Section 37 before this Court is available to correct the errors in the impugned Awards which were not taken note of while disposing of the petitions under Section 34 and there are cases where even the Hon'ble Supreme Court of India has set aside the award on the merits of the case where the Arbitrators have gone beyond the scope of the contract. He would further submit that the judgments relied upon by the learned Senior Counsel for the 1st respondent though state that the scope of interference under Sections 34 and 37 of the Arbitration and Conciliation Act is limited and that the Court cannot decide the case as if it was a first appeal and re-appreciate the evidence, in all the judgments, it has been stated that the award can be set aside if the Arbitrators have not considered the terms of the contract or they have travelled beyond the terms of the contract. In support of his contentions, the learned Additional Solicitor General would rely on the following judgments:
(i) 2008-4-L.W 401 Delhi Development Authority VS M/s RS Sharma & Co., New Delhi.
(ii) 2010 Supreme (Mad) 3102 Tamil Nadu Electricity Board, rep Page No.14 of 34 https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm ) ARB.APPEAL(MD)No.2/2024 & CMA(MD)No.859/2019 By its Chief Engineer/Projects. Chennai VS M/s. Engineering Projects (India) Limited, (A Govt. Of India Enterprise), New Delhi & Others.
(iii) AIR 1992 SC 232 Associated Engineering Co., -VS-
Government of Andhra Pradesh and another.
(iv) (1996) 1 Supreme Court Cases 18 State Of U.P-VS- Ram Nath International Construction (P) LTD.
The above judgments also reiterate the settled proposition of law that an arbitral award is not immune to challenge under Sections 34 and 37 of the Arbitration and Conciliation Act. Though the scope of interference is limited, yet an award which travels beyond the scope of the agreement and which is based on no evidence, then the said award is liable to be set aside.
12. The learned Additional Solicitor General for the appellant would further contend that the 1st respondent has admittedly not given information about the occurrence of the compensation events as contemplated under Clause 42.2 of the terms of the agreement during the submission of monthly statements and has not given the information about the estimated increase in cost. There is absolutely no Page No.15 of 34 https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm ) ARB.APPEAL(MD)No.2/2024 & CMA(MD)No.859/2019 evidence with regard to the actual increase in price for the actual quantum of work which was done after the date on which the work was contemplated to be completed. Further, a flat rate of 60% increase was sought for by the 1st respondent in both the cases at the time of approaching the Adjudicator that too on 10.07.2013, long after the work was completed. No break of up details as to how the amount was arrived at was given. The break up details was given only in the claim statement in the course of arbitration proceedings that too in the form of flat percentage and the same flat percentage for both the contracts. What was claimed as a blanket 60% before the Adjudicator was divided as 30% for increase in cost of material and labour, 10% for overhead expenses, 10% for plant and machinery remaining idle, 5% for financial charges and 5% for loss of profit. Thus, it is not understandable as to how such a flat percentage can be claimed and awarded by the Tribunal. The actuals have not been pleaded or proved. Hence it is a case of no evidence and a mechanical claim has been mechanically accepted by the majority award.
13. The learned Additional Solicitor General for the Page No.16 of 34 https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm ) ARB.APPEAL(MD)No.2/2024 & CMA(MD)No.859/2019 appellant also submitted that the appellant being a Government Board, ought not to be compelled to pay such hefty compensation amounts after having paid the agreed amount to the contractor for the work which was completed. When both parties are bound by the terms of the contract and the appellant has fulfilled their part by paying the agreed amount, the appellant ought not to be burdened with any additional amount which has not been claimed in accordance with the terms and conditions of the contract. Further, the dissent award is also passed by the Engineer who is a technical expert and he well considered the clauses of the contractual agreement and hence, the dissent award deserves to be maintained. Thus, the learned Additional Solicitor General would pray for setting aside the impugned orders passed by the Court below.
14. The learned Senior Counsel appearing for the 1st respondent would contend that the jurisdiction of the appellate court under Section 37 is even narrower than that of a court exercising jurisdiction under Section 34. The appellate court cannot act as a court of appeal on facts or merits, nor can it reassess or re-appreciate the evidence. In this context, the learned Senior Counsel relied upon the Page No.17 of 34 https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm ) ARB.APPEAL(MD)No.2/2024 & CMA(MD)No.859/2019 following judgments:
(i) Bombay Slum Redevelopment Corporation (P) Ltd., vs. Samir Narain Bhjojwani (2024) 7 SCC 218 : 2024 SCC Online SC 1656.
(ii) MMTC Ltd., vs. Vedanta Ltd., (2019) 4 SCC 163.
(iii) Dyna Technologies (P) Ltd., vs. Crompton Greaves Ltd., (2019) 20 SCC 1.
(iv) UHL Power Co.Ltd., vs. State of Himachal Pradesh (2022) 4 SCC 116.
(v) Konkan Railway Corporation Ltd., vs. Chenab Bridge Project Undertaking (2024) SCC Online SC 1049.
(vi) Punjab State Civil Supplies Corporation Ltd., vs. Sanman Rice Mills (2024) SCC Online SC 2632.
15. He would further submit that the appellant relied on the dissenting opinion of the expert contending that it represents a more reasoned and persuasive view of the arbitral record. However, such reliance is misconceived. The Apex Court in Hindustan Construction Co. Ltd., vs. NHAI (2024) 2 SCC 613 : (2024) 1 SCC (Civ) 708, has held that a dissenting opinion cannot be treated as award even if the majority Page No.18 of 34 https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm ) ARB.APPEAL(MD)No.2/2024 & CMA(MD)No.859/2019 award is set aside. He would further submit that though the appellant challenged the arbitral award on routine factual and contractual grounds namely, alleged delay in adjudication, variations between adjudication and arbitral claims, attribution of delay to the respondent, insufficiency of documentary evidence, irrational methodology, non-levy of LD / No financial commitment, estoppel by acceptance of final bill and use of cost index method, none of those grounds fall within the statutory parameters of Section 34. They relate purely to findings of fact and contractual interpretation which are within the exclusive domain of the arbitral Tribunal. The Court below has rightly appreciated the narrow limits of interference under Section 34 and dismissed the petition as the grounds raised by the appellant would tantamount to reviewing the case on merits. He would also contend that the appellant having participated in the appointment of the arbitrator through the institution of Engineers is deemed to have waived any procedural objections.
16. As regards variation in claim before the Adjudicator and Arbitration Tribunal, the learned Senior Counsel for the 1st Page No.19 of 34 https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm ) ARB.APPEAL(MD)No.2/2024 & CMA(MD)No.859/2019 respondent would submit that the respondent sought 60% of the contract value before both forum and it was only a sub-classification before the Tribunal for clarity, as such there is no variation in the claim. The learned Senior Counsel would further submit that the appellant themselves have admitted in their written submissions that ''in view of the compensation events occurring since inception, with a view to compensate the 1st respondent, the appellant had not deducted the liquidated damages, thereby compensated the 1st respondent''. Mere non deduction of liquidated damages will not be the compensation for the delay provided in the compensation events in the contract and the 1st respondent is entitled to the expenses incurred by him for the extended period as per the contract. The Tribunal also rightly held that the appellant was responsible for the delay and the 1st respondent was entitled to compensation under the contract and the governing provisions of law. As regards the contention of application of irrational methodology and cost index, the learned Senior Counsel would submit that the Arbitrator, a technical expert, has quantified compensation using a cost index method based on professional expertise which cannot be questioned unless it discloses patent illegality. Page No.20 of 34 https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm ) ARB.APPEAL(MD)No.2/2024 & CMA(MD)No.859/2019
17. As regards estoppel by acceptance of the final bill, the learned Senior Counsel would submit that mere acceptance of final bill would not preclude a contractor from pursuing further claims unless it is accompanied by an express and unequivocal waiver. In this case, the 1st respondent did not issue any ''no further claim'' declaration and therefore, the doctrine of estoppel, waiver or acquiescence have no application. The 1st respondent never agreed to waive its financial claims. Therefore, mere mention of ''no financial commitment'' endorsement in the extension of time letters, particularly when the delay was admittedly caused by the appellant, cannot defeat the 1st respondent's entitlement to compensation. The Arbitral Tribunal disregarding the said endorsement rightly awarded compensation to the 1st respondent. As regards the contention of non application of mind by the Arbitral Tribunal and that the award is unreasoned, the learned Senior Counsel would submit that the Tribunal under Section 34 examined all the aspects and has rendered a detailed, and reasoned award with due application of mind, analysing every claim namely quantifying escalation, overheads and machinery, under-utilisation with Page No.21 of 34 https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm ) ARB.APPEAL(MD)No.2/2024 & CMA(MD)No.859/2019 technical rationale and explicit reference to the CPWD Index and Hudson's formula. Further, the Arbitrator need not deliver a judgment like a Court and it is sufficient if the reasonings indicate the basis for the conclusion. The present award far exceeds that threshold.
18. The learned Senior Counsel would further contend that the appellant's reliance on the judgment in Ssangyong Engineering & Construction Co. Ltd., vs. NHAI is misconceived. In the said case, the Apex Court exercised its power under Article 142 to mould the relief, however, the said power is prerogative and exclusively available only to the Apex Court and the High Courts exercising appellate jurisdiction under Section 37 have no such power. The appellant's argument that the awards in Sivagangai and Ramanathapuram contracts contain similar wording is equally untenable. Further, the appellant has not produced before this Court a complete set of documents and exhibits which were placed before the Arbitral Tribunal and which were formed the very basis of the impugned award. Such approach renders the appeals unsustainable. It is also submitted that though the appellant raised the plea of limitation in these appeals, neither in the pleadings nor during Page No.22 of 34 https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm ) ARB.APPEAL(MD)No.2/2024 & CMA(MD)No.859/2019 oral arguments, such plea was taken. The appellant has not identified the date of accrual of cause of action, the relevant contractual milestones or the corresponding limitation period. A mere bald assertion that the claims are time barred, without pleading the necessary particulars or demonstrating any factual matrix is untenable in law.
19. Heard both sides and perused the records.
Page No.23 of 34 https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm ) ARB.APPEAL(MD)No.2/2024 & CMA(MD)No.859/2019
20. The Tamil Nadu Water and Drainage Board called for tenders for carrying out the work of providing underground sewerage scheme to Sivagangai Municipality in Zone-1 providing collection system (Package 1) and Ramanathapuram Package-2, in which, the 1st respondent company in both the appeals became the successful bidders and their tenders were accepted at the total cost of Rs.12,46,43,802/- and Rs.9,87,57,743/- respectively, and the work order was issued vide appellant's letter dated 26.12.2006 and 16.06.2006 respectively. However, the 1st respondent commenced the work on 05.03.2007 and 20.12.2006 respectively. The period of contract of the said work was extended at the request of the 1st respondent from time to time on condition that there will not be any extra commitment to the appellant. Ultimately, the work was completed as per the agreement on 30.03.2011 and 22.09.2011 respectively, and final bill was settled on 12.11.2012 and 15.11.2012 respectively and the 1st respondent received the final payment accordingly. Thereafter, the 1st respondent had raised an adjudication before the Adjudicator seeking 60% of the final bill as compensation for Page No.24 of 34 https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm ) ARB.APPEAL(MD)No.2/2024 & CMA(MD)No.859/2019 the delay in completion of the agreement value and for the delay in completion of the contract work. The 1st respondent filed a claim petition in both the cases before the Adjudicator on 17.05.2013. The Adjudicator did not peruse the materials placed before him and had recommended the employer to make payment of the approved amount. Thereafter, the 1st respondent had invoked the arbitration clause as per the terms of agreement and accordingly, the present Arbitration Tribunal was appointed. The appellant raised the preliminary objection regarding the jurisdiction of the Arbitration Tribunal, but the same was rejected by the Arbitration Tribunal. Ultimately, the Arbitration Tribunal though consists of respondents 2 to 4, the 4th respondent had given dissenting award vide order dated 17.10.2018 and the other members passed the majority award dated 10.10.2018, directing the appellant to pay the compensation of Rs.4,08,98,970/- and Rs. 3,82,11,338/- respectively, to the 1st respondent, against which, the appellant filed Ar.O.P.Nos.3 and 83 of 2019, but the same were dismissed. Hence, these appeals have been filed before this Court.
21. It is the consistent case of the 1st respondent that there was delay on the part of the appellant in each and every stage as such Page No.25 of 34 https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm ) ARB.APPEAL(MD)No.2/2024 & CMA(MD)No.859/2019 the work could not be completed in time and taking note of the delay caused on their side, the appellant extended the period of contract and because of the delay caused by the appellant, the 1st respondent is liable to be compensated. The Adjudicator as well as the Arbitration Tribunal rightly finding that the delay was on the part of the appellant, allowed the claim of the 1st respondent. Further, this Court while dealing with the present appeals arose out of the orders passed under Section 34 of the Arbitration and Conciliation Act, cannot act as a court of appeal on facts or merits, nor can it reassess or re-appreciate the evidence by exercising its jurisdiction under Section 37, since Section 37 is even narrower than that of the jurisdiction under Section 34 exercised by the Tribunal. Therefore the present appeals are to be dismissed in limine.
22. Assailing the impugned orders, though several grounds have been raised by the learned Additional Solicitor General, the primordial contention to be into consideration to decide the issue is that as per Clause No.42.2 of the contract between the parties, in the event of occurrence of any compensation events, the contractor should inform the Engineer at the time of monthly progress about the occurrence of the compensation event and also inform them about the Page No.26 of 34 https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm ) ARB.APPEAL(MD)No.2/2024 & CMA(MD)No.859/2019 cost variation that is likely to occur. The Engineer shall thereafter consider the same and accept it or he may on his own decide the amount which will be accepted as enhancement and this is the mandate of Clause Nos.42.2 and 42.5 of the contract between the parties. As rightly contended by the learned Additional Solicitor General, whenever extension was granted by the appellant, it was specifically mentioned that the extension was being granted without any cost implication and admittedly, the 1st respondent had not objected to such extension granted without cost implication and had also not claimed that they will continue the work only if the cost escalation is given. When such being the case, only after receipt of final bill, the 1st respondent contractor raised the issue of price escalation and consequential damages. Admittedly, the 1st respondent has not given information about the occurrence of the compensation events namely, estimated increase in cost, as contemplated under Clause 42.2 of the terms of the agreement during the submission of monthly statements. Thus it is seen that Clause 42.2 has not been complied with by the 1st respondent.
23. Though the 1st respondent contended that the present Page No.27 of 34 https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm ) ARB.APPEAL(MD)No.2/2024 & CMA(MD)No.859/2019 claim relates to consequential damages and not due to the delay on the part of the 1st respondent and that the damages can be quantified only at the time of completion after assessing the final value of the work, as stated supra, the 1st respondent has neither stated the same during submission of monthly statements nor objected to the extension granted without cost implication. Further, they accepted the final bill without any protest or objection. Thus, the contention of the 1st respondent in this regard that mere acceptance of final bill would not preclude a contractor from pursuing further claims unless it is accompanied by an express and unequivocal waiver by way of issuing ''no further claim'' declaration, does not merit acceptance. As regards the contention of the 1st respondent that this Court under Section 37 of the Arbitration and Conciliation Act, has no power to set aside or modify the arbitral award of the Arbitrators who are the technical expert, it is to be noted that the Arbitrators who are the creatures under the agreement, are bound by the terms of the agreement and cannot travel beyond the scope of the agreement. Further, the Arbitrators do not have the power of a Civil Court or the power to do equity between the parties. While deciding and making an award, the Arbitrators shall take into account the terms Page No.28 of 34 https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm ) ARB.APPEAL(MD)No.2/2024 & CMA(MD)No.859/2019 of the contract and trade usages applicable to the transaction. Whereas, in this case, the Arbitrators have not taken note of the violation of Clause 42.2 of the contract between the parties and simply accepting the contention of the 1st respondent that there was a delay on the part of the appellant, passed an award granting compensation. The Arbitral Tribunal also while exercising power under Section 34 has not considered the same and has erroneously dismissed the appeals. It is also to be noted that Section 37 does not impose absolute fetter on the appellate Court either to quash or modify the arbitral award. Even in the judgments relied upon by the learned Additional Solicitor General, it has been categorically held that the arbitral award can be set aside if the Arbitrators have not considered the terms of the contract or they have travelled beyond the terms of the contract. Here it is a clear case of violation of Clause 42.2 of the contract between the parties. Even assuming for the sake of argument that there was a delay on the part of the appellant, nothing prevented the 1st respondent from bringing it to the notice of the appellant regarding the delay and the compensation events likely to occur in view thereof, whereas, the 1st respondent in this case had kept silence till they accept final payment and only then raised Page No.29 of 34 https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm ) ARB.APPEAL(MD)No.2/2024 & CMA(MD)No.859/2019 the dispute. Even it is the admitted fact that the contract period has been extended periodically either at the instance of the 1st respondent or the appellant. However, even during such extensions also, the 1st respondent did not intimate about the compensation events in compliance of Clause 42.2 of the contract between the parties.
24. Though this Court is not a technical expert as that of the Arbitrators, that would not absolve this Court from exercising its jurisdiction under Section 37 which gives power to this Court to set aside the arbitral award in case where the Arbitrators have travelled beyond the terms of the contract. In this case, the Arbitrators without taking note of the violation of Clause 42.2 have erroneously passed the majority award. Even the Arbitral Tribunal also on appeal, shut its eyes and ignored the blatant violation of the terms of the contract and has mechanically dismissed the appeals by holding that the appellant has not made any case for interference. Thus, by taking note of such violation of Clause 42.2 of the contract between the parties, this Court is inclined to set aside the impugned awards.
Page No.30 of 34 https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm ) ARB.APPEAL(MD)No.2/2024 & CMA(MD)No.859/2019
25. Accordingly, the award dated 18.06.2024 made in Arb O.P.No.3 of 2019 on the file of the Principal District and Sessions Court, Sivagangai, confirming the Arbitration award dated 10.10.2018 and also the impugned award dated 18.10.2019 made in Ar.O.P.No.83 of 2019 on the file of the Principal District Judge, Thoothukudi, confirming the award dated 10.10.2018, are set aside.
26. In the result, the Arbitration Appeal and the Civil Miscellaneous Appeal are allowed. No costs. Consequently, connected miscellaneous petition is closed.
[P.V, J.] [L.V.G, J.]
09.01.2026
Index : Yes / No
Neutral Citation : Yes / No
bala
To
1. The Chief Engineer
Tamil Nadu Water and Drainage Board
No.1/1 Sambakulam, Ganesh Nagar,
Madurai -625 007.
2. The Presiding Arbitrator,
Page No.31 of 34
https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm )
ARB.APPEAL(MD)No.2/2024 &
CMA(MD)No.859/2019
Er.N.Pitchaimurthi
No.L-6, Block No.2
West Hills No.7 and 8, Reddy Kuppam Road,
Saidapet, Chennai - 600 015.
Page No.32 of 34
https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm )
ARB.APPEAL(MD)No.2/2024 &
CMA(MD)No.859/2019
3. The Co-Arbitrator,
Er.S.Sivaraman
Former Chief Engineer, PWD,
No.5/8, 2nd Street, Marackayar Nagar,
Neelngarai,
Chennai - 600 115.
4. The Co- Arbitrator,
Er.S.Ramakrishnan
Former Superintendent Engineer, PWD
No.51/49, Pulliavillai Street
Vadasery, Nagercoil - 629 001.
Page No.33 of 34
https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm )
ARB.APPEAL(MD)No.2/2024 &
CMA(MD)No.859/2019
P.VELMURUGAN, J.
AND
L.VICTORIA GOWRI, J.
bala
PRE-DELIVERY COMMON
JUDGMENT MADE IN
Arb.A(MD)No.2 of 2024
and
CMA(MD)No.859 of 2019
DATED :09.01.2026
Page No.34 of 34
https://www.mhc.tn.gov.in/judis ( Uploaded on: 20/01/2026 06:40:36 pm )