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Delhi Jal Board vs. Digvijay Sanitations

First Appeal from Order · 2026:DHC:7947Decided 15 Sept 2026New Delhi Bench
FAO 187/2019CNR: DLHC010206872019
Justice Manoj Kumar Ohri

Background

Delhi Jal Board (DJB) hired a contractor to lay an internal sewer line across several Delhi colonies, with a 15-month deadline; the work actually took about 11 months longer than planned. The contractor claimed this delay was caused by DJB's own failures, including missing municipal permits, unremoved encroachments blocking the pipeline route, and delayed utility relocations, and sought compensation for the extra costs of keeping staff and equipment on site longer, plus price increases during the extended period, plus interest on delayed final payments. An arbitrator awarded the contractor roughly Rs. 17 lakh in damages, escalation, and costs, largely based on DJB's own official "Hindrance Register," which had itself already attributed 312 of the 334 delay days to departmental causes. A District Judge upheld this award, and DJB appealed.

Decision Breakdown

The High Court held that appellate review of an arbitration award is narrow: courts cannot re-examine the case as if hearing it fresh, and can only intervene for serious legal errors, not just because another view of the facts is possible. It found the arbitrator's finding that the delay was DJB's fault was well-supported by DJB's own records and not an unreasonable reading of the contract's delay-related clauses. It also upheld using a standard price-escalation formula (although not itself part of this contract) as simply a convenient way to calculate ordinary contract-law damages, following an existing Delhi High Court precedent permitting exactly that approach, and upheld the arbitrator's discretion to award interest on delayed payments under arbitration law. The appeal was dismissed and the award upheld.

Lesson Learnt

When a government agency's own internal records already document that a contractor's delay was substantially caused by the agency's own failures (like unremoved encroachments or slow permits), courts will not second-guess an arbitrator's reasonable award of compensation built on those same records, and using a standard cost-escalation formula to calculate ordinary contract damages is legally permissible even if that formula wasn't a clause written into this particular contract.

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