One arbitrator would have given the contractor ₹6.22 crore and two gave him nothing, and Section 34 does not let a court pick
Justice Subramonium Prasad dismissed a challenge to a majority award on a highway maintenance contract, holding the Tribunal's reading of the security deposit clauses was a plausible view.
A three-member arbitral tribunal split. The majority rejected every claim the contractor had raised and passed a nil award against him. The minority would have directed the National Highways Authority of India to pay him ₹6,22,16,346 within ninety days, failing which interest at 9 per cent per annum from the date of the award until payment.
The contractor challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996. On 13 October 2026 the Delhi High Court dismissed the petition, and the reasoning is a clean illustration of what a Section 34 court can and cannot do with a divided tribunal.
A four-month contract
The Authority invited bids for short-term maintenance contracts on sections of the national highways. The contractor bid in November 2005 for the repair and maintenance of a stretch of NH-34 between Baharampore and Farakka, and the bid was accepted in December 2005. He furnished a bank guarantee of ₹43,74,450 as performance security, and an agreement for ₹4,37,44,478 was executed on 21 December 2005.
The work was to be completed in four months, from 27 December 2005 to 27 April 2006. It was completed on 31 July 2006, on the execution of a revised quantity of work directed by a memo of April 2006. The contractor then says he carried out rectification work during the defect liability period, running from July 2006 to January 2007.
The bank guarantee was valid only until November 2006, and on the Authority's request he extended it to 28 February 2007 and furnished a further guarantee of ₹6,05,500 with the same validity. During the defect liability period the Authority invoked the first guarantee of ₹43,74,450.
The disputes that followed — about dues, about what the contractor called the unilateral encashment of the bank guarantee, about non-payment of the security deposit and about fulfilment of the agreement — went to a three-member tribunal constituted under the arbitration clause in the General Conditions of Contract.
The contractor's case before the tribunal
His case was that he had carried out additional and extra items of work beyond the scope of the contract on the Authority's instructions, that such maintenance had become necessary because incessant rainfall damaged work he had already executed, and that the Authority had illegally encashed the bank guarantee even before the defect liability period expired.
Clause 44.3, and why the money stayed where it was
The claim that occupies most of the judgment is the security deposit. Clause 44.3 of the agreement provides that if the contractor so desires, the security deposit or retention money can be released earlier, at interest of 6 per cent per annum, on submission of an unconditional bank guarantee, at three specified stages: after the progress of work in financial terms has reached 25 per cent of the contract amount, after it has reached 35 per cent, and after the retention money has been deducted to its full value.
The tribunal read the clause as meaning that the deposit could have been refunded with interest subject to the contractor submitting an unconditional bank guarantee — and found nothing on record to show that he had complied with that requirement. Since he did not opt for the conditions in Clause 44.3, the deposit could not be refunded.
On the performance security the tribunal held it could not be released either, because the work remained incomplete, and Clause 44.2 gives the Authority power to forfeit the performance security in that situation.
The Court's response to both findings is the standard one, and it is stated without embellishment: it cannot be said that the view taken is so perverse or contrary to the stipulation in the agreement as to require interference under Section 34. The Court was therefore inclined to accept the view taken by the tribunal, which is a plausible view on the facts of the case.
The claims that fell with it
Claims 5, 6 and 7 — loss of goodwill, compensation for business loss, and breach of contract — all proceeded on the premise that the Authority had not made timely payments and had breached the agreement.
That premise did not survive the findings the Court had just upheld. Since the Court had upheld the tribunal's conclusions that the alleged extra work and the damage repairs fell within the scope of the contractor's own work, and that the Authority had rightfully encashed the bank guarantee in view of the breach committed by the contractor, the challenge to those three claims was held to hold no water. Claim 8, for interest, fell with them, having nothing left to attach to.
The petition, along with pending applications, was accordingly dismissed.
The minority award
Nothing in the judgment suggests the minority arbitrator's view was unreasonable; it is simply not the one a Section 34 court may prefer. Where two readings of a contract are each available, the Act gives the choice between them to the tribunal and not to the court supervising it, and a dissent of ₹6.22 crore is evidence that the question was arguable rather than evidence that the majority got it wrong.
The contract in question ran for four months in 2006. The award came in November 2022 and the challenge to it was decided in October 2026.
Mr Anantaprasad Mishra appeared for the petitioner; Mr Abhay Gupta and Ms Simran Goel for the respondents.