The Bombay High Court has upheld an arbitral award in favour of infrastructure firm Khare and Tarkunde Infrastructure Pvt Ltd (KTIPL), ruling that the Public Works Department (PWD) cannot rely on a contractual cap on damages after failing to fulfil its own obligation of providing land for a highway project.
In a judgment delivered on June 12, Justice Somasekhar Sundaresan observed that a project originally scheduled for completion within 18 months remained stalled for nearly 45 months due to the PWD’s inability to hand over the required land for construction.
The dispute stemmed from three highway infrastructure contracts awarded in December 2014 for bridge construction and associated road works. Under the agreements, the PWD was required to provide at least 90 per cent of the Right of Way (ROW) within 15 days, enabling the contractor to begin work and complete the project within the stipulated timeframe.
However, court records showed that the land was not handed over as envisaged. Correspondence between the parties reflected repeated complaints by the contractor regarding delays in land acquisition and site availability. Although the work was expected to be completed by July 2016, the contractor remained mobilised until October 2018, when the contracts were eventually terminated.
Before the High Court, the PWD argued that a contractual clause limited compensation to 1 per cent of the contract value, regardless of the circumstances. The department contended that the arbitral tribunal exceeded its authority by awarding damages beyond this ceiling.
The court rejected the argument, holding that the limitation clause could not be viewed independently of the PWD’s failure to meet a fundamental contractual obligation. Justice Sundaresan noted that the entire contract was based on timely land handover and that the contractor could not reasonably be expected to complete the work without access to the site.
The court further observed that accepting the PWD’s interpretation would allow the government to keep a contractor deployed for years while restricting compensation to a nominal amount, an outcome it described as “absurd”.
While upholding the damages awarded to KTIPL, the court partly accepted the PWD’s challenge on the issue of interest. The tribunal’s award of 18 per cent annual interest compounded quarterly was set aside and referred for fresh arbitration, while the remainder of the award was allowed to stand.
Source: Mumbai Mirror
