M/s C and C Constructions Ltd. v. IRCON International Ltd.
Background
The appellant construction company was contracted by the respondent (IRCON) to build road-over-bridges in Rajasthan, but the work was delayed for reasons the appellant blamed on the respondent. The appellant repeatedly sought and was granted extensions of time, and in doing so gave written undertakings that it would not claim anything beyond price escalation for the delay. Two years after the last such undertaking, the appellant invoked arbitration and claimed roughly Rs. 44 crores in damages; the Arbitral Tribunal rejected all claims based on a contract clause (49.5) barring damages claims for employer-caused delay, and this was upheld by a Single Judge and a Division Bench of the Delhi High Court.
Decision Breakdown
The Supreme Court held that clause 49.5 of the contract clearly barred any damages claim for delay attributable to the employer, entitling the contractor only to a time extension, and that the appellant's own conduct, repeatedly invoking the clause to seek extensions and giving written undertakings not to claim more than escalation, estopped it from later challenging the clause's validity. It also held that new arguments (validity under the Contract Act, and waiver of the clause) raised for the first time before the Supreme Court could not be entertained, and that in any event the respondent's correspondence never amounted to a waiver. Given the narrow scope of judicial review under Sections 34 and 37 of the Arbitration Act, the Court found no ground to interfere and dismissed the appeal.
Lesson Learnt
Parties who repeatedly invoke a contractual clause to their own benefit (e.g., to get extensions) and give written undertakings consistent with that clause cannot later turn around and challenge its validity, and courts reviewing arbitration awards under Sections 34/37 will not re-examine the merits, only whether the tribunal acted within its jurisdiction and the contract's terms.