Introduction
This case had originated from a petition presented by the National Highways Authority of India (NHAI) under Section 34 of the Arbitration and Conciliation Act, 1996, against an arbitral award of 14 October 2016 made in favour of Hindustan Construction Company Ltd. (HCC). The case was related to a road project for the four-laning of National Highway No. 28 (Lucknow–Ayodhya Section) from Km 45.00 to Km 92.00. The arbitral tribunal had permitted claims under "Dispute No. 6" relating to additional costs and prolongation expenses incurred during the prolonged period of the project. NHAI attempted to set aside this portion of the award based on patent illegality, excess of jurisdiction, and breach of contract terms.
Facts of the case
NHAI signed a contract with HCC on 5th October 2005 for an overall price of ?212.33 crore. Completion of the project was within 36 months, with the work starting on 13th October 2005 and finishing on 12th October 2008. Road, bridge, culvert, and other structure construction were part of the work. The contract was item-rate in nature, subject to the General Conditions of Contract, Conditions of Particular Application, and Technical Specifications. Owing to delays at various instances, the Engineer extended time, and NHAI approved the same. The works were finally taken over on 12th September 2011, and a Taking Over Certificate was given on 29th September 2011. Disputes also cropped up during execution, which were referred to arbitration under Clause 67 of the agreement.
Contentions of the parties
HCC pleaded two significant disputes against the Tribunal: Dispute No. 5, regarding variation rates under Clause 52.2, and Dispute No. 6, on additional costs and losses for the extended period (13.10.2008 to 12.09.2011). Although NHAI accepted the award on Dispute No. 5, it objected to the findings on Dispute No. 6, for which the Tribunal awarded ?53.79 crores, including overheads, plant and machinery retention costs, and unrecovered price variations, along with a 12% compound rate of interest.
NHAI argued that the Tribunal had gone beyond the contract's terms, basically rewriting it. NHAI argued that the delays were due to HCC's substandard mobilisation, manpower shortage, aged equipment, and inefficient planning, but the Tribunal erred in attributing them to NHAI.
It was argued that extensions of time were granted in the public interest and not as admissions of fault. The finding that the absence of liquidated damages implied NHAI’s default was, according to the petitioner, untenable. The Tribunal had also erred in relying solely on HCC’s CA certificates while disregarding the Engineer’s records, which were based on actual data.
NHAI also argued that the award was a non-speaking award without valid reasoning.
The Tribunal adopted HCC's overheads and retention cost claims without evidencing whether such costs were indeed incurred over the extended period. It selectively accepted and rejected CA certificates without justification. NHAI claimed that prolonged cost claims and equipment retention were barred by the contract.
Court’s decision
It was highlighted that where both sides were responsible for the delay and the contractor asked for extensions of time, no further compensation could be awarded except the EOT that had been given.
Having received extensions without demur, HCC was not in a position to claim further damages.
The Award, it asserted, was vitiated by patent illegality, lack of application of mind, and violation of the contractual paradigm, thus requiring interference under Section 34 of the Arbitration Act.
Case Reference: National Highways Authority of India Versus Hindustan Construction Co. Ltd. O.M.P. (Comm) 99/2017) Decided on October 16, 2025, [Judgment reserved on: 31.07.2025]
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