Delhi HC: Arbitrator's refusal of price variation despite the contract's formula is patent illegality; award partly set aside

Court: High Court of Delhi
Date of judgment: 28 September 2026
Case: O.M.P. (COMM)/182/2019
Parties: M/S. DWARIKA PROJECTS LTD. Vs NEW OKHLA INDUSTRIAL DEVELOPMENT AUTHORITY
Bench: Mini Pushkarna
Outcome: Partly allowed

Summary

The Delhi High Court has set aside part of an arbitral award in a road-bridge contract with the New Okhla Industrial Development Authority (NOIDA), holding that the arbitrator's refusal of the contractor's price variation claim was patently illegal because it ignored what the contract itself provides. Justice Mini Pushkarna held that the contract allowed price variation both for the original period and for an extension caused by the contractor's own delay, and that the arbitrator had in effect rewritten the contract. The Court, however, upheld his finding that the delay was the contractor's fault.

Dwarika Projects Ltd. won a tender for the construction of Bridge No. 2 on an irrigation drain between Sectors 78 and 49, Noida, under a contract of 7 December 2009 that required completion within twelve months. The work finished much later, and each side blamed the other. The sole arbitrator's award of 10 December 2018 awarded the contractor Rs 1,02,95,056 on Claims 1, 2 (in part) and 3, with interest and costs, but rejected Claims 4 to 10. The contractor's petition under Section 34 of the Arbitration and Conciliation Act, 1996 was finally confined to Claim 4, its claim of Rs 2,29,43,350 for price variation.

The Court set the award aside to that extent and left the parties free to start fresh arbitration to work out the amount.

The question before the court

Did the arbitrator act against the contract's own terms in rejecting price variation for the original contract period?
Could price variation be refused for the extended period because the delay was the contractor's fault?
Was the arbitrator's finding that the delay was attributable to the contractor a plausible view that a Section 34 court should not disturb?

What each side argued

For the contractor: the arbitrator relied only on the opening words of Clause 50.1 and ignored the words 'barring adjustment (which may be plus or minus)', so he disregarded the price variation formula in Clause 50 of the Special Conditions of Contract. Clause 51, read with Clause 7, allows price variation even where an extension is granted for the contractor's delay, only with a different index. The same clause had been read in the contractor's favour in an award of 28 December 2017 in a parallel contract of the same date.
For NOIDA: the Court cannot reappreciate evidence under Section 34. The rates in the Bill of Quantities were to hold till completion, and any variation needed the Engineer's certification under Clause 50.3. The contractor used the wrong indices. For the extended period, the contractor's only remedy was an extension, and it had not applied for one in time, so the delay was solely its own. NOIDA relied on Supreme Court decisions declining compensation for delay, including Ramnath International.

The court's decision

The Court first set out the limits of Section 34: it is not an appeal, and it does not allow reappreciation of evidence or substitution of a Court's view, but an award can be set aside for patent illegality, including where the arbitrator ignores specific provisions of the contract or takes a view that is not even a possible one.

Original period: the arbitrator had held that Clause 50.1 made the Bill of Quantities rates hold good till completion, so no price variation was available. The Court said he read only the first part of the clause and ignored the qualifying words, even though Clause 50.2 provides a price variation formula for labour, material and fuel, and the tender documents say the quoted prices were subject to adjustment under the Special Conditions. This was not another interpretation but one that made the agreed procedure inoperative, so it was not a possible view.

Extended period: the arbitrator himself noted that Clause 51.2, read with Clause 7.5, allows price variation even where the extension is for the contractor's delay, but then held that the contractor's delay barred it. The Court said the contract distinguishes only how price variation is calculated (the indices on the last date of the original period where the delay is the contractor's), not whether it is payable. Treating delay as a complete bar rewrote the contract and went to the root of the matter. Ramnath International was distinguished, because the contract there expressly barred compensation for extensions, while this one has no such bar.

Delay: the Court upheld the finding that the delay was attributable to the contractor. Electric poles stood on one side of the drain only and were removed on 7 May 2010, with no proof of complete stoppage. No term required SAIL steel, and NOIDA's letter of 21 March 2011 allowed other brands. The arbitrator found no delay in paying bills, and NOIDA's letters from 2010 and 2011 on the slow pace of work were not challenged.

Order: the award was set aside to the extent of Claim 4 for patent illegality, and the parties are at liberty to invoke fresh arbitration to determine the amount of price variation. The petition was partly allowed.

Precedents referred to

OPG Power Generation Private Limited v. Enexio Power Cooling Solutions India Private Limited, (2025) 2 SCC 417
Ssangyong Engineering and Construction Company Limited v. National Highways Authority of India, (2019) 15 SCC 131
PSA Sical Terminals Private Limited v. Board of Trustees of V.O. Chidambranar Port Trust Tuticorin, (2023) 15 SCC 781
Delhi Metro Rail Corporation Limited v. Delhi Airport Metro Express Private Limited, (2024) 6 SCC 357
State of Chhattisgarh v. Sal Udyog Private Limited, (2022) 2 SCC 275
Ramnath International Construction (P) Ltd v. Union of India, (2007) 2 SCC 453 (distinguished)

Provisions referred to

Section 34, Arbitration and Conciliation Act, 1996
Section 34(2-A), Arbitration and Conciliation Act, 1996
Section 28(3), Arbitration and Conciliation Act, 1996

Read the full judgment (PDF) ↗

Official source: High Court of Delhi. The PDF above is a copy from an open dataset of the court's public records.

This summary is prepared for general assistance only. It may contain errors and is not legal advice — rely on the full judgment.

Arbitration Construction Contracts Price Variation Patent Illegality

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