Delhi District Court
Mku Ltd vs Ministry Of Home Affairs, Union Of India on 27 April, 2026
IN THE COURT OF SH. PULASTYA PRAMACHALA
DISTRICT JUDGE, (COMMERCIAL COURT)-01,
PATIALA HOUSE COURT, NEW DELHI
INDEX
Sl. HEADINGS Page Nos.
No.
1. Memo of Parties 2
2. Description of case 2
3. Brief Facts of the case 2-4
4. Grounds of challenge 4-5
5. Reply of Respondent 5-6
6. Arguments on behalf of Petitioner 6-8
7. Arguments on behalf of Respondent 8-9
8. Appreciation of Arguments, Facts & Law 9-18
9. Decision 18
Digitally
signed by
PULASTYA
PULASTYA PRAMACHALA
PRAMACHALA Date:
2026.04.27
15:17:32
+0530
OMP (COMM.) No. 206/2024 (Pulastya Pramachala)
District Judge (Commercial Court)-01,
Page No.1 of 18 Patiala House Court, New Delhi
OMP (COMM) No.206/2024
In the matter of: -
M/s. MKU Ltd.
13, Gandhi Gram, G.T Road.
Kanpur- 208007. Uttar Pradesh
Through: Vaibhav Gupta, Director
[email protected]
M.No. 9717495750.
...Petitioner
Versus
Ministry of Home Affairs,
Union Of India
Through:- DIG (CTS) CTS Section,
Provisioning Directorate, Procurement Directorate,
FHQ, Border Security Force,
10, CGO Complex, Lodhi Road,
New Delhi 110003.
[email protected]
...Respondent
Date of Institution : 03.10.2024
Arguments heard on : 16.04.2026
Decided on : 27.04.2026
Decision : Petition is allowed.
JUDGMENT
DESCRIPTION OF THE CASE
1. Petitioner has filed present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act"), assailing the arbitral award dated 04.07.2024 passed by ld. Arbitrator.
BRIEF FACTS OF THE CASE
2. Petitioner was a company engaged in manufacturing and supplying defence equipment to the Indian Armed Forces and OMP (COMM.) No. 206/2024 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.2 of 18 Patiala House Court, New Delhi paramilitary forces. Pursuant to a tender issued by respondent in July 2019, a Purchase Order dated 09.03.2021 was issued to petitioner for supply of 21,300 Ballistic Resistant Helmets, with delivery stipulated by 04.09.2021 in one lot.
3. During execution of the contract, the second wave of COVID-19 and restrictions imposed by the Government of Uttar Pradesh, where petitioner's manufacturing unit was situated, impacted production and movement of goods. Petitioner sought extension of the delivery period under the force majeure clause without levy of LD (hereinafter referred to as "LD"), relying upon government notifications and upon Circular No. 32 of 2021 issued by the Ministry of Defence recognising force majeure for the relevant COVID period. Respondent rejected to consider such requests.
4. Subsequently, delays took place attributable to COVID restrictions, inspection by respondent, and testing-related delays caused by non-availability of NABL accreditation with the designated laboratory. Respondent granted extensions, but simultaneously imposed LD. Ultimately, the delivery was completed of the contracted quantity on 04.03.2022, but the Respondent deducted a sum of Rs. 1,47,03,390/- towards LD from the final payment.
5. Aggrieved by the levy of LD, particularly without issuance of any show cause notice and despite substantial delays being attributable to the respondent's own inaction and external circumstances covered by force majeure, petitioner invoked arbitration. However, vide Award dated 04.07.2024, the Sole OMP (COMM.) No. 206/2024 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.3 of 18 Patiala House Court, New Delhi Arbitrator rejected petitioner's claims. Aggrieved by the said Award, the petitioner has filed the present petition.
GROUNDS OF CHALLENGE
6. Aggrieved by the arbitral award dated 04.07.2024, petitioner has preferred the present objections under Section 34 of the Act, inter alia, on the following relevant grounds: -
i. Whether arbitrator has failed to properly appreciate the documentary evidence establishing that the delay in performance was substantially attributable to force majeure circumstances arising out of the second COVID wave, including lockdown restrictions, curfews, labour shortages, and operational disruptions in Uttar Pradesh, which were liable to be excluded while computing delay under the applicable governmental circulars?
ii. Whether Arbitrator erred in law in misconstruing and misapplying the ratio laid down by the Supreme Court in BSNL v. Motorola India (P) Ltd., (2009) 2 SCC 337, by holding that the levy and quantification of LD was beyond arbitral scrutiny, despite the settled position that the issue of liability for delay remains arbitrable?
iii. Whether the impugned award is liable to be set aside on account of being founded upon a materially erroneous factual matrix, including incorrect recording of the tender issuance date, date of supply, and chronology of events, thereby vitiating Arbitrator's findings on delay and attribution of liability? iv. Whether the impugned award overlooks and fails to consider respondent's own contribution to the delay, including OMP (COMM.) No. 206/2024 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.4 of 18 Patiala House Court, New Delhi retrospective grant of extensions, belated decision-making, delay in conducting pre-dispatch inspection, and reliance on a testing laboratory with expired accreditation, all of which materially impeded timely performance by petitioner?
v. Whether the levy and recovery of LD, was contrary to Section 73 of the Indian Contract Act in the absence of any pleading, evidence, or proof by the respondent of actual loss or damage suffered on account of the alleged delay, thereby rendering the deduction arbitrary, penal, and legally unsustainable? vi. Whether the deduction of LD at the maximum rate of 10% from the Petitioner's final bill was arbitrary, disproportionate, and contrary to the governing procurement framework, particularly when the effective extension available to the petitioner was substantially limited and did not justify imposition of maximum LD?
vii. Whether the imposition of LD without issuance of a valid show-
cause notice, without affording an adequate opportunity of hearing, and without passing a reasoned determination on liability was violative of principles of natural justice and consequently liable to be declared illegal?
REPLY OF THE RESPONDENT
7. Respondent filed its reply opposing the petition.
Respondent's primary stand is that under the contract, petitioner was obligated to deliver the entire quantity within the stipulated period and in a single lot, and its failure to do so constituted a clear breach of contractual obligations.
8. Petitioner requested extension of the delivery period up to OMP (COMM.) No. 206/2024 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.5 of 18 Patiala House Court, New Delhi 04.12.2021 and also sought permission to supply in lots, which, according to respondent, amounted to an admission that the petitioner was unable to comply with the original delivery schedule.
9. Respondent disputed the petitioner's reliance on COVID restrictions, contending that in Uttar Pradesh there were only limited curfew restrictions, not a complete lockdown, and therefore, the delay does not fall within the scope of Force Majeure.
ARGUMENTS ON BEHALF OF THE PETITIONER
10. Petitioner argued that the second wave of COVID-19 constituted a force majeure event under the contract, as it was unforeseen at the time of issuance of the purchase order and materially disrupted manufacturing operations. Petitioner had promptly notified respondent and sought extension of time without levy of Liqudated Damages. Petitioner has submitted that government- imposed curfews and restrictions in Uttar Pradesh, coupled with widespread COVID infections among factory workers, significantly hampered production and movement of goods, making timely delivery impossible despite reasonable efforts. Petitioner contended that no proper show-cause notice was ever served before deduction of Liquidated Damages. The communication relied upon by respondent merely stated that action may be taken, did not call for a reply, and was issued long before the actual deduction, thereby violating principles of natural justice. Petitioner argued that although two extensions of three months each were granted on paper, both were issued OMP (COMM.) No. 206/2024 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.6 of 18 Patiala House Court, New Delhi retrospectively, effectively giving only about 11 days of actual extension, while still imposing the maximum 10% LD, which was arbitrary and disproportionate. Petitioner has submitted that respondent also contributed to the delay by granting extensions belatedly, conducting inspections late, and delaying coordination with testing laboratories, thereby impeding timely completion of supply. Petitioner has argued that respondent neither pleaded nor proved any actual loss caused by delayed delivery, nor took mitigating steps such as termination of contract or risk purchase, and therefore, deduction of LD was legally unsustainable and amounted to unjust enrichment.
11. In support of the contention, ld. counsel for petition has placed reliance upon certain case laws, which are as under: -
i. Delhi Development Authority v. Swastic Construction Co., FAO(OS)(COMM.) No.179/2021, MANU/DE/0433/2023.
ii. Govt. of NCT of Delhi v. M/s. DSC Limited, OMP (COMM.) No.331/220, decided on 29.05.2024, by Hon'ble High Court of Delhi.
iii. DSIIDC Ltd. v. H.R. Builders, FAO(OS)(COMM.) No.77/2022, MANU/DE/2078/2022.
iv. Konkon Railway Corp. Ltd. v. Rani Construction Pvt. Ltd., 2002 (1) RAJ 165 (SC).
v. Narayan Prasad Lohia v. Nikunj Kumar Lohia, 2002 (1) RAJ 381 (SC).
vi. Municipal Corporation of Greater Mumbai v. M/s. R.V. Anderson Association Ltd., 2026 (1) RAJ 550 (SC).
OMP (COMM.) No. 206/2024 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.7 of 18 Patiala House Court, New Delhi vii. Vishal Engineers & Builders v. Indian Oil Corp. Ltd., MANU/DE/6829/2011.
viii. Mahanagar Telephone Nigam Limited v. Finolex Cables, 2018 (1) R.A.J. 660 (Del).
ix. MMTC Ltd. v. M/s. Vedanta Limited, 2019(2) R.A.J. 75(SC).
x. UHL Power Company Ltd. v. State of Himachal Pradesh, 2022 (1) R.A.J. 193 (SC).
ARGUMENTS OF RESPONDENT
12. Per contra, learned counsel for respondent argued that failure of the delivery of equipment, amounted to a clear breach of contractual obligations; that petitioner had itself repeatedly sought extension of delivery period and permission to supply in multiple lots, contrary to terms of contract, thereby admitting its inability to perform within stipulated timeline; that Force Majeure was not applicable, as COVID restrictions in Uttar Pradesh were limited to brief curfews and partial restrictions rather than a complete lockdown, and petitioner still had sufficient time after June 2021 to complete supply by 04.09.2021; that petitioner had adequate production capacity to manufacture contracted quantity within one month and could have completed testing and inspection formalities within remaining delivery period, making delay wholly attributable to petitioner's own inaction; that petitioner intentionally delayed supply, prioritised execution of large orders for Indian Army over BSF contract, and therefore, could not rely on COVID or operational difficulties as justification for delayed delivery; respondent submitted that notices were issued informing OMP (COMM.) No. 206/2024 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.8 of 18 Patiala House Court, New Delhi petitioner that delay would attract LD under contractual terms, extensions were granted on petitioner's own request subject to levy of LD, and petitioner accepted such extensions and ultimately supplied goods accordingly; and respondent contended that delayed supply of Bullet Resistant Helmets adversely affected operational preparedness of Border Security Force personnel deployed in sensitive areas, and therefore, levy of LD was genuine, justified, and necessary in the light of hardship caused by delayed procurement.
13. In support of the contention, ld. counsel for respondent has placed reliance upon the relevant part of Chapter 9 of the Manual for Procurement of Goods 2017.
APPRECIATION OF ARGUMENTS, FACTS & LAW
14. The crux of the legal principles explained by superior courts in respect of ambit of Section 34, is that Arbitrator is a Judge of the choice of the parties and his decision, unless there is an error apparent on the face of the award which makes it unsustainable, is not to be set aside even by the Court, even if the Court of law could come to a different conclusion on the same facts. The Court cannot reappraise the evidence and it is not open to the Court to sit in appeal over the conclusion of the Arbitrator. It is not open to the Court to set aside a finding of fact arrived at by the Arbitrator and only grounds on which the award can be set aside are mentioned in the Arbitration Act. Where the Arbitrator assigns cogent grounds and sufficient reasons and no error of law or misconduct is cited, the award will not call for interference by the Court in exercise of the power vested in it.
OMP (COMM.) No. 206/2024 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.9 of 18 Patiala House Court, New Delhi
15. In Associate Builders vs. Delhi Development Authority, (2015) 3 SCC 49, this Court held that an award could be said to be against the public policy of India in, inter alia, the following circumstances: -
"1. When an award is, on its face, in patent violation of a statutory provision.
2. When the arbitrator/Arbitral Tribunal has failed to adopt a judicial approach in deciding the dispute.
3. When an award is in violation of the principles of natural justice.
4. When an award is unreasonable or perverse.
5. When an award is patently illegal, which would include an award in patent contravention of any substantive law of India or in patent breach of the 1996 Act.
6. When an award is contrary to the interest of India, or against justice or morality, in the sense that it shocks the conscience of the Court.
16. In order to assess the objections of petitioner, it is relevant to refer to relevant part of the observations made by Arbitral Tribunal (herein referred as "A.T.") in the award, which are as follows: -
"34. The Counsel for the respondent has submitted that the claimant was required to supply the Bullet Proof helmet to the force, which is mandatory for the security of the BSF, during operations. It cannot be measured how much loss has financially occurred to the BSF and in fact it was a requirement for the safety measure of the Soldiers of BSF, who are deployed for the safety of the borders and in exceptional circumstances, to civilians also. The use of bulletproof helmets was essential while conducting any operation by the Security Forces. The helmets ordered to be supplied were specific and technical products to save the head from the natural climate as well as any OMP (COMM.) No. 206/2024 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.10 of 18 Patiala House Court, New Delhi external or Bullet injury. So, the Security forces were having their own methods and techniques to assess the damages due to the non-supply of the bulletproof helmets, during the specific time awarded in the contract. The time was the essence of the contract. Supply accepted beyond the time was compulsion of the BSF, and sufficient time was granted to fulfil the requirement and supply to the respondent. The claimant as well as respondent were bound by the terms and conditions of the contract, and as such in view of the specific clause, the respondent could have imposed a levy of liquidated damages. Liquidating the damage is the job of the expert, by using all the possible methods which could be done by experienced persons, having technical knowledge. There cannot be any specific parameter to be demonstrated, however, all the required and legal methods of assessment were adopted. The assessment of liquidated damages in the present case could not be disputed, assessed and quantified by the arbitrator in arbitration proceedings as per the judgment of the Hon'ble Supreme Court in BSNL & Anr. V. Motorola India Pvt. Ltd Civil Appeal No. 5645 of 2008.
35. On the other hand the respondent had categorically argued that the imposition of liquidated damages is the contractual obligation and it could have been imposed by the respondent. He opposed the argument that the claimant cannot ask for the justification for the imposition of the liquidated damages. The Counsel for the respondent referred to the judgment of the Hon'ble Supreme Court in BSNL & Anr. V. Motorola India Pvt. Ltd (supra) Civil Appeal No. 5645 of 2008, in which it has been held that the imposition and quantum of the liquidated damages cannot be the subject matter of dispute of arbitration or to the adjudication by the arbitrator. I am of the considered opinion that the liquidated damages is a comprehensive function, which could have been dealt with and assessed by the person who is suffering the same and imposed the levy as liquidated damages. Thus, the argument of the claimant that the respondent is not justified to impose the liquidated damages, is not legally tenable either on the facts or on the material available on the record. Particularly, when the claimant itself is seeking the exemption.
OMP (COMM.) No. 206/2024 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.11 of 18 Patiala House Court, New Delhi
36. So in light of the detailed discussion made above, this tribunal is of the considered opinion that the claimant could not establish its case for the exemption of liquidated damages as claimed in exhibit C-14. Thus, this tribunal does not see any justification in the claim made by the claimant and the issue is accordingly decided against the claimant and in favor of the respondent."
17. First of all, from the above-mentioned observations, it is well apparent that as reasons for the given findings, though A.T. used the observations that "is not legally tenable either on the facts or on the material available on the record", but as a matter of fact, award does not refer to any particular material on the record, nor does make analysis of any such material to hold the petitioner herein liable for delay and breach of contract.
18. In the case of Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd., (2019) 20 SCC 1, the Apex Court in respect of importance of reasoning made following observations: -
"1. The question involved herein revolves around the requirement of reasoned award and the cautionary tale for the parties and arbitrators to have a clear award, rather than to have an award which is muddled in form and implied in its content, which inevitably leads to wastage of time and resources of the parties to get clarity, and in some cases, frustrate the very reason for going for an arbitration.
24.There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section OMP (COMM.) No. 206/2024 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.12 of 18 Patiala House Court, New Delhi 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated.
25. Moreover, umpteen number of judgments of this Court have categorically held that the courts should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act.
28. Similar to the position under the Model Law, India also adopts a default rule to provide for reasons unless the parties agree otherwise. As with most countries like England, America and Model Law, Indian law recognises enforcement of the reasonless award if it has been so agreed between the parties.
29.There is no gainsaying that arbitration proceedings are not per se comparable to judicial proceedings before the Court. A party under Indian Arbitration Law can opt for an arbitration before any person, even those who do not have prior legal experience as well. In this regard, we need to understand that the intention of the legislature to provide for a default rule, should be given rational meaning in light of commercial wisdom inherent in the choice of arbitration.
30. A five-Judge Constitution Bench of this Court in Raipur Development Authority v. Chokhamal Contractors [Raipur Development Authority v. Chokhamal Contractors, (1989) 2 SCC 721 : AIR 1990 SC 1426] , considered the scope of Section 30 of the Arbitration Act, 1940 and held as under: (SCC p. 736, para 19)
"19. It is now well settled that an award can neither be remitted nor set aside merely on the ground that it does not contain reasons in support of the conclusion or decisions reached in it except where the arbitration agreement or the OMP (COMM.) No. 206/2024 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.13 of 18 Patiala House Court, New Delhi deed of submission requires him to give reasons. The arbitrator or umpire is under no obligation to give reasons in support of the decision reached by him unless under the arbitration agreement or in the deed of submission he is required to give such reasons and if the arbitrator or umpire chooses to give reasons in support of his decision it is open to the court to set aside the award if it finds that an error of law has been committed by the arbitrator or umpire on the face of the record on going through such reasons. The arbitrator or umpire shall have to give reasons also where the court has directed in any order such as the one made under Section 20 or Section 21 or Section 34 of the Act that reasons should be given or where the statute which governs an arbitration requires him to do so."
31. A three-Judge Bench of this Court in another case of S. Harcharan Singh v. Union of India [S. Harcharan Singh v. Union of India, (1990) 4 SCC 647] , reiterated its earlier view that the arbitrator's adjudication is generally considered binding between the parties for he is a Tribunal selected by the parties and the power of the Court to set aside the award is restricted to cases set out in Section 30 of the Arbitration Act, 1940.
32. However, the ratio of Chokhamal case [Raipur Development Authority v. Chokhamal Contractors, (1989) 2 SCC 721 : AIR 1990 SC 1426] has not found favour of the legislature, and accordingly Section 31(3) has been enacted in the Arbitration Act. This Court in Som Datt Builders Ltd. v. State of Kerala [Som Datt Builders Ltd. v. State of Kerala, (2009) 10 SCC 259 :
(2009) 4 SCC (Civ) 153 : (2009) 4 Arb LR 13] , a Division Bench of this Court has indicated that passing of a reasoned award is not an empty formulation under the Arbitration Act.
33. It may be relevant to note Russell on Arbitration, 23rd Edn. (2007), wherein he notes that:
"If the Court can deduce from the award and the materials before it, which may include extracts from evidence and the transcript of hearing, the thrust of the tribunal's reasoning then no irregularity will be found....Equally, the court should bear in mind that when considering awards produced by non-lawyer arbitrators, the court should look at the substance of such OMP (COMM.) No. 206/2024 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.14 of 18 Patiala House Court, New Delhi findings, rather than their form, and that one should approach a reading of the award in a fair, and not in an unduly literal way."
(emphasis supplied)
34.The mandate under Section 31(3) of the Arbitration Act is to have reasoning which is intelligible and adequate and, which can in appropriate cases be even implied by the courts from a fair reading of the award and documents referred to thereunder, if the need be. The aforesaid provision does not require an elaborate judgment to be passed by the arbitrators having regard to the speedy resolution of dispute.
35.When we consider the requirement of a reasoned order, three characteristics of a reasoned order can be fathomed. They are:
proper, intelligible and adequate. If the reasonings in the order are improper, they reveal a flaw in the decision-making process. If the challenge to an award is based on impropriety or perversity in the reasoning, then it can be challenged strictly on the grounds provided under Section 34 of the Arbitration Act. If the challenge to an award is based on the ground that the same is unintelligible, the same would be equivalent of providing no reasons at all. Coming to the last aspect concerning the challenge on adequacy of reasons, the Court while exercising jurisdiction under Section 34 has to adjudicate the validity of such an award based on the degree of particularity of reasoning required having regard to the nature of issues falling for consideration. The degree of particularity cannot be stated in a precise manner as the same would depend on the complexity of the issue. Even if the Court comes to a conclusion that there were gaps in the reasoning for the conclusions reached by the Tribunal, the Court needs to have regard to the documents submitted by the parties and the contentions raised before the Tribunal so that awards with inadequate reasons are not set aside in casual and cavalier manner. On the other hand, ordinarily unintelligible awards are to be set aside, subject to party autonomy to do away with the reasoned award. Therefore, the courts are required to be careful while distinguishing between inadequacy of reasons in an award and unintelligible awards."
19. A.T relied upon judgment passed in BSNL v. Motorola India (P) OMP (COMM.) No. 206/2024 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.15 of 18 Patiala House Court, New Delhi Ltd., (2009) 2 SCC 337, to say that it was held therein that the imposition and quantum of the liquidated damages cannot be the subject matter of dispute of arbitration or to the adjudication by the arbitrator. Relevant part of observations made by Hon'ble Supreme Court in BSNL (supra), are as under: -
"26. Quantification of liquidated damages may be an excepted matter as argued by the appellants, under Clause 16.2, but for the levy of liquidated damages, there has to be a delay in the first place. In the present case, there is a clear dispute as to the fact that whether there was any delay on the part of the respondent. For this reason, it cannot be accepted that the appointment of the arbitrator by the High Court was unwarranted in this case. Even if the quantification was excepted as argued by the appellants under Clause 16.2, this will only have effect when the dispute as to the delay is ascertained. Clause 16.2 cannot be treated as an excepted matter because of the fact that it does not provide for any adjudicatory process for decision on a question, dispute or difference, which is the condition precedent to lead to the stage of quantification of damages.
27.The abovestated position can be ascertained through the judgment of this Court in State of Karnataka v. Shree Rameshwara Rice Mills [(1987) 2 SCC 160]. This Court in the said case, made a clear distinction between adjudicating upon an issue relating to a breach of condition of contract and the right to assess damages arising from a breach of condition. It was held that the right conferred to assess damages arising from a breach of condition does not include a right to adjudicate upon a dispute relating to the very breach of conditions and that the power to assess damages is a subsidiary and consequential power and not the primary power.
34.The appellants contended that they have the unilateral right to determine the liquidated damages under Clause 16.2 and that the quantum of liquidated damages decided by the appellants, even if it is exorbitant, would be final and cannot be challenged. We find the contention of the respondent that if the said contention of the appellants is supported, it would mean that a party would be held OMP (COMM.) No. 206/2024 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.16 of 18 Patiala House Court, New Delhi liable to damages of whatever amount the other party demands without recourse to a remedy, to be relevant and should be given due importance. Such a contention by the appellants would be in violation of Section 28 and Section 74 of the Contract Act."
20. It is well apparent from the above-mentioned observations given by Supreme Court that the court not only distinguished right to fix liability for breach from the right to determine quantum of liquidated damages, but also held that reserving such right to unilaterally decide quantum of LD, was to be looked into as it could be in the teeth of S. 28 & 74 of the Contract Act. Hon'ble Supreme Court also held the dispute regarding liability of breach of contract, as arbitrable. Thus, A.T. clearly committed grave error in misreading the ratio of aforesaid judgment as well. The decision was given by A.T. on the basis of such misinterpretation of law, which has to be held as perverse.
21. Thus, I find that A.T. failed to enter into the merits of the disputes raised and did not undertake a proper adjudication process of the foundational issues concerning attribution of delay, applicability of Force Majeure, legality of levy of LD, and alleged contributory acts on the part of respondent, which allegedly impeded timely performance. A.T. proceeded on an erroneous understanding that once contract contained a clause permitting imposition of LD, scope of arbitral scrutiny stood substantially curtailed, and in doing so placed reliance upon BSNL v. Motorola India Pvt. Ltd. (Supra), while misreading ratio of said decision completely. Dispute before A.T. was not confined to mere quantification of damages, but it also involved issue that whether petitioner was at all liable for delay; whether delay arose from unforeseen COVID-related disruptions; whether OMP (COMM.) No. 206/2024 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.17 of 18 Patiala House Court, New Delhi retrospective extensions and administrative lapses on the part of respondent materially contributed to delay; whether any actual loss had been suffered, and whether deduction of maximum LD without adequate notice or proof was legally sustainable? Instead of examining these substantive contentions on evidence led, A.T. simplicitor accepted position advanced by respondent at its face value and failed to give any reasons. Thus, findings returned by A.T. did not address core issues raised by petitioner, in their true perspective, nor did A.T. apply correct and settled legal principles governing LD, and Force Majeure. As a result, I find that award in question is not based on adjudication of factual dispute between the parties, after due appreciation of evidence and against sufficient reasoning. Rather, it is an instance of incorrect application of law and a failure to determine material factual contentions on the basis of evidence appreciation, which makes the award perverse.
DECISION
22. In view of my foregoing discussions, observations and findings, I do find that award in question suffers from virus of perversity. Hence, petition is allowed and award in question is set aside.
File be consigned to record room after due compliance.
Digitally signed by PULASTYAPULASTYA PRAMACHALA PRAMACHALA Date:
2026.04.27 15:17:48 +0530 Pronounced in the (PULASTYA PRAMACHALA) Open Court on this District Judge (Commercial Court)-01, 27th Day of April, 2026 Patiala House Court, New Delhi OMP (COMM.) No. 206/2024 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.18 of 18 Patiala House Court, New Delhi