2026:HHC:12741 IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA Arbitration Appeal No. 11 of 2020 Reserved on: 18.04.2026 Decided on : 22.04.2026 Uploaded on: 22.04.2026 Tarun Mahindroo ...appellant Versus H.P. Power Corporation Limited …Respondent. Coram Hon’ble Mr. Justice G.S. Sandhawalia, Chief Justice. Hon’ble Mr. Justice Bipin Chander Negi, Judge. Whether approved for reporting?1 For the petitioner: Mr. Suneet Goel, Sr. Advocate, with Mr. Vishwas Kaushal, Advocate. For the respondent : Mr. Shashi Shirshoo, Central Government Standing Counsel. Bipin Chander Negi, Judge The present appeal has been preferred against the impugned judgment dated 23.08.2019, whereby objections filed under Section 34 of the Arbitration and Conciliation Act, preferred by the present appellant, have been rejected. Admittedly, in the case at hand, an award with respect to construction of work for bachelor accommodation at Sundarnagar, District Mandi, H.P, for a sum of Rs. 1,96,03,299/- was granted in favour of the present appellant. The work was required to be completed within 18 months. The land whereupon the building was to be constructed was owned by the 1Whether the reporters of the local papers may be allowed to see the Judgment? Yes -2- State Government and possessed by the respondent-Corporation. However, the appurtenant land through which the passage existed to reach the site was owned by the BBMS. Post-award, site development to the tune of Rs. 1,02,654/- before August 2011 had been done by the present appellant. The appellant, right from 31.08.2011 to 23.06.2016, attempted to get delivery of the site, as is evident from letters written by the appellant in this regard (Annexure C-3 with the claim petition filed before the Arbitrator). Similarly, the respondent, in terms of Annexure-III appended with the reply filed to the claim petition, had extended the date of completion of the work till 15.08.2014. The closure of work had taken place on 16.12.2016, vide Annexure C-4 appended with the claim petition filed before the Arbitrator. 2. In the aforesaid backdrop, taking into account the dilatory conduct of the respondent and the optimistic hope of the present appellant to complete the work, damages to the tune of Rs. 1 lakh were awarded by the Arbitrator on account of the inordinate and delayed closure of the contract on 16.12.2016. Other than the aforesaid, costs of the arbitration proceedings had also been awarded in favour of the appellant. Since the claim for refund of security and earnest money was admitted by the respondent, the same had been granted by the Arbitrator in favour of the present appellant. The aforesaid amount awarded was to carry interest at the rate of 9%. If -3- the same was not paid within one month of the passing of the award, then it was to carry an enhanced rate of interest at the rate of 12%. 3. The sole contention raised in the objection petition under Section 34 pertained to the non-grant of the claim to the extent of Rs. 29,40,495/- claimed as loss of profit and overhead on account of prolongation of the contract by the appellant. The aforesaid claim had been rejected by the Arbitrator on account of absence of proof and in terms of Clause 36 of the contract entered into inter se the parties. The learned Single Judge, while dismissing the claim, found no fault in the reasoning of the Arbitrator and concurred with the same, while reproducing the said clause and holding as under:- 6(ii) The above Clause empowers the respondent to abandon or reduce the scope of the work for any reason whatsoever. The contractor will have no claim, in terms of this Clause, to any compensation on account of any payment of compensation, on account of any profit or advantage which he might have derived from the execution of the works in full, but which he could not derive on account of fore-closure either of part or whole works. Clause 36.1, when read in its entirety, though provides that in case of fore-closure of the contract, the contractor has to be paid at the contract rates for full amount of the works executed at the site and in addition, reasonable amount certified by the Engineer-in-Charge for the items, which could not be utilized on the works to full extent because of the fore-closure. The items mentioned in this Clause are in respect of preliminary works, i.e. temporary access roads, temporary labour huts, staff quarters, site office, storage accommodation workshop, installation and dismantling of construction equipment and water storage tanks etc. Clause also provides for materials in similar way. 6(iii) Thus, in terms of Clause 36.1 of the agreement duly executed by the parties, claimant cannot have any claim for payment of compensation for any profit which he couldn’t derive because of foreclosure of the work. Claimant is though entitled to amount for works actually carried out at contract rates and for items mentioned therein lying unused and expenditure incurred over them as provided in contract. However, in the instant case, there is no evidence whatsoever available on record that the above said works -4- were actually carried out, which are yet to be paid for. Therefore, claim for loss of profit and over heads on account of prolongation of contract could not be allowed, in view of specific provision of contract agreement. 4. With respect to the claim on account of loss of profit and overhead on account of prolongation of contract, it would be appropriate to refer to the pleadings in this respect. The claim in this respect reads as follow:- “Loss of profit and over heads on account of prolongation of contract. Rs 29,40,495/- The work of construction of Bachelor Accommodation at Sunder Nagar, District Mandi (Civil Work, Internal WS, SI and Electrical Installation) was awarded to the claimant vide Annexure C-1 on 25.7.2011 with a completion time of 18 months to be reckoned from 21 days from the issuance of the order to commence the work. The respondent did not perform its part of the reciprocal promises under the contract, the first of which was to provide hindrance free site to the claimant. On the other hand, the claimant with a view to execute the work in time, deployed its entire labour, machinery and resources. Such deployment on the part of the claimant was rendered idle since the respondent failed to perform its part of the promises under the contract. The claimant had taken the contract with a view to earn his livelihood and had legitimate expectation to earn profits from the execution of the work. In any works contract, normally 10% is catered towards profit and 5% towards overheads, which a contractor normally incurs in the execution of the work. The claimant has calculated the amount of Rs 29,40,495/- being 15% of the total contract value awarded to the claimant”. 5. In response thereto, it is stated in the following terms::- “Loss of profit and overheads on account of prolongation of The work of construction of bachelor contract Rs. 29,40,495/- accommodation at Sundernagar, Distt. Mandi (Civil work, Internal WS.S1 and Electrical Installation) was awarded to the claimant vide letter dated 25.07.2011 with a completion time of 18 months. The work except site development work could not be executed due to land dispute. Also no labour and machinery was deployed by the claimant at site after August, 2011 (when the work was stopped due to land dispute) and hence it is denied that the labour and machinery of the claimant had remained idle. The work was foreclosed vide letter dated 16.12.2016 as per clause 36 of the Contract Agreement between HPPCL and the contractor, which stipulates as under:- -5- If at any time after acceptance of the tender the employer decides to abandon or reduce the scope of the works for reason whatsoever and hence does not require the whole or any part of the works to be carried out, the Engineer-in- charge shall give notice in writing to that effect to the contractor, and the contractor shall have no claim to any payment of compensation or otherwise whatsoever, on account of any profit or advantage which he might have derived from the execution of the works in full but which he could not derive in consequence of the foreclosure of the whole or part of the works". Hence the claim of the claimant on account of profits and overheads stands extinguished as per clause 36 of the contract agreement and is liable to be rejected.” 6. Clause 36 of the Contract Agreement entered into between the parties relevant extract whereof has been reproduced in the response to the claim petition filed before the arbitrator, has been correctly appreciated both by the arbitrator and the learned Single Judge while passing the award and exercising power under Section 34 respectively. Other than the aforesaid admittedly, before the arbitrator not an iota of oral or documentary evidence was led by the appellant to substantiate loss of profit and overheads on account of prolongation of the contract. Before the arbitrator on 29.6.2017, the appellant had made a statement, which was duly recorded, that it did not want to lead any documentary evidence in support of his statement of claim. 7. A non-grant of the relief, both by the arbitrator and the learned Single Judge while exercising power under Section 34, in the absence of any material on record/without any evidence, cannot be -6- faulted with. In this respect, reference can be made to the judgment of Civil Arb. Appeal No. 1 of 2023 titled as Himachal Pradesh Road and Other Infrastructure Development Corporation Limited vs. M/s C & C Construction Limited, decided on 31.10.2025. Relevant extract thereof reads as under:- 31.In Bharat Cooking Coal Limited vs. L.K. Ahuja (2004) 5 SCC 109, it was held that there has to be material on record and in absence of the same, arbitrator could not have awarded the same. Relevant para of the said judgment reads as under: “24... It is not unusual for the contractors to claim loss of profit arising out of diminution in turnover on account of delay in the matter of completion of the work. What he should establish in such a situation is that had he received the amount due under the contract, he could have utilised thesame for some other business in which he could have earned profit. Unless such a plea is raised and established, claim for loss of profits could not have been granted. In this case, no such material is available on record. In the absence of any evidence, the arbitrator could not have awarded the same.” (emphasis ours). 32. In Ferro Concrete Construction’s case (supra), while allowing the appeal and modifying the judgment of the High Court, the Apex Court came to the conclusion that if the arbitrator makes an award on the basis of the amount claimed in the claim statement without any evidence, the same would be invalid under the said head and wholly illegal and unsustainable. Relevant portion of the said judgment reads as under: 55. While the quantum of evidence required to accept a claim, may be a matter within the exclusive jurisdiction of the arbitrator to decide, if there was no evidence at all and if the arbitrator makes an award of the amount claimed in the claim statement, merely on the basis of the claim statement without anything more, it has to be held that the award on that account would be invalid. Suffice it to say that the entire award under this head is wholly illegal and beyond the jurisdiction of the arbitrator, and wholly unsustainable.” 33. In Parsa Kente Collieries Ltd. (supra), it was noticed that except the Chartered Accountants certificate, no further evidence had been led with respect to actual loss for which 78 crores have been claimed under claim No. 2 and had been set aside by the High Court. On the said basis, it was heldthat the award was contrary to the evidence on record. The relevant portion of the judgment reads as under: -7- “11.2 Now so far as claim no.2- "fixed costs" and an amount of Rs.78 crores awarded by the learned arbitrator with respect to compensation of loss is concerned, having gone through the relevant material on record, we are of the opinion that the High Court has rightly set aside the award passed by the learned arbitrator with respect to claim no.2. Except the CA's certificate, no further evidence had been led with respect to actual loss. Considering the material on record, it is on the contrary found that in the relevant year the quantity of the coal lifted by the respondent was much above the fixed quantity. Thus, the award passed by the learned arbitrator with respect to claim no.2 was contrary to the evidence on record and therefore is rightly set aside by the High Court.” 34. In Batliboi Environmental Engineers Limited, (supra), it was held that the contractor has to prove from the books of account to demonstrate a drop in turnover, result was from the particular delay and the findings of the award was bereft of analysis and examination of facts and contentions and conclusion arrived without any discussion and reasons, it would violate the mandate of sub- Section 3 of Section 31 of the Arbitration and Conciliation Act. In those circumstances, the order of the Division Bench of the High Court was upheld which had set aside the award to be unsustainable, while exercising the powers under Section 37 read with Section 34 of the said Act. Relevant paras of the said judgment read as under:- 7.We have intentionally quoted the entire findings and reasoning accorded by the learned arbitrator, while allowing the Claim Nos. 1,2 and 4 of BEEL. The first egregious and obvious flaw in the award is, the omnibus finding and conclusion that HPCL (referred to as the owner and the respondent in the quoted portion of the award) was fully responsible for the inordinate delay that had occurred by not taking proper and timely action in removal of various impediments and obstacles that stood in the way of completing the project within the stipulated period of 18 months. This finding, in our opinion, is bereft of analysis and examination of facts and contentions. The relevant and material facts and the respective stances of the parties are neither decipherable nor evaluated and no reason has been given for arriving at the conclusion. A conclusion without any discussion and reasons, is non-compliant and violates the mandate of sub - section (3) of Section 31 of the A& C Act, an aspect we would examine subsequently. 8 to 22. xxx xxxxxx 23. Ordinarily, when the completion of a contract is delayed and the contractor claims that s/he has suffered a loss arising from depletion of her/his income from the job and hence turnover of her/his business, and also for the overheads in the form of workforce expenses which could -8- have been deployed in other contracts, the claims to bear any persuasion before the arbitrator or a court of law, the builder/contractor has to prove that there was other work available that he would have secured if not for the delay, by producing invitations to tender which was declined due to insufficient capacity to undertake other work. The same may also be proven from the books of accounts to demonstrate a drop in turnover and establish that this result is from the particular delay rather than from extraneous causes. If loss of turnover resulting from delay is not established, it is merely a delay in receipt of money, and as such, the builder/ contractor is only entitled to interest on the capital employed and not the profit, which should be paid.” 35. Lastly, on this point in M/s Unibros vs. All India Radio Civil Appeal arising out of SLP (Civil) No. 8791/2020, the appeal filed was dismissed against setting aside of the Arbitral award regarding loss of profits on the ground that the appellant/claimant No. 12 lacked sufficient evidence and it was held that contemporaneous evidence as such would have to be produced which could demonstrate that if there was loss of profit and the contractor would have secured supplementary profits utilizing his existing resources elsewhere and credible evidence has to be led to satisfy the said claim. In the absence of the same, the interference in the award as such was held to be justified. Relevant paras of the said judgment reads as under: “16. To support a claim for loss of profit arising from a delayed contract or missed opportunities from other available contracts that the appellant could have earned elsewhere by taking up any, it becomes imperative for the claimant to substantiate the presence of a viable opportunity through compelling evidence. This evidence should convincingly demonstrate that had the contract been executed promptly, the contractor could have secured supplementary profits utilizing its existing resources elsewhere. 17. One might ask, what would be the nature and quality of such evidence? In our opinion, it will be contingent upon the facts and circumstances of each case. However, it may generally include independent contemporaneous evidence such as other potential projects that the contractor had in the pipeline that could have been undertaken if not for the delays, the total number of tendering opportunities that the contractorreceived and declined owing to the prolongation of the contract, financial statements, or any clauses in the contract related to delays, extensions of time, and compensation for loss of profit. While this list is not exhaustive and may include any other piece of evidence that the court may find relevant, what is cut and dried is that in adjudging a claim towards loss of profits, the court may not make a guess in the dark; the credibility of the evidence, therefore, is the evidence of the credibility of such claim.” -9- 36. In such circumstances, we are of the considered opinion that the said amount awarded under the Head Office expenses and the lease money would fall within the provisions as such of Section 34 of the Arbitration Act, where the interference could have been done by the learned Single Judge as apparently, the Award being in- conflict with the Public Policy of India as the amount has to be covered as per judicial approach in compliance with natural justice and the fundamental policy of Indian Law Statutes and Judicial precedents, and cannot be against public interest. Reliance can be placed upon the judgment of Apex Court in Oil & Natural Gas Corporation Ltd. Vs. Saw Pipes Ltd (2003) 5 SCC 705, wherein the definition of Public Policy of India has been elaborated as a claim which has not been proved as such and the evidence has not been led by the party. Thus, a party would have to suffer and it is against the basic notions of justice or morality, which is a valid ground to set aside the same as it suffers from patent illegality from the bare reading the Award.A bald averment having been made and accepted in the manner which the Tribunal had done. So all the amounts and the consequential fact of the interest on the same has a cascading effect on the appellant-Corporation. In the format of claim as such the Contractor cannot take an advantage and claim an amount on his asking without producing a semblance of evidence to substantiate his claim. As noticed firstly the specific pleadings should have been in place regarding the overhead costs and the number of persons who had been recruited to look after the project or and above the regular staff and how extra lease money had been paid in question. The Claimant company as such in the statement of claim having failed to put forth the said material on record cannot thus justify the amount which has been awarded therefore, we are not in a position as such to approve the award of the said amount. Resultantly, the said amount awarded under claim No.2 for Head Office expenses and lease money is not sustainable.” 8. In support of his contention the appellant has placed reliance on Construction & Design Services v. DDA, (2015) 14 SCC 263 wherein the question which arose for consideration was as to what extent can the stipulated liquidated damages for breach of a contract be held to be in the nature of penalty in the absence of evidence of actual loss and to what extent the stipulation be taken to be the measure of compensation for the loss suffered even in the absence of specific evidence. The further question considered therein was whether burden of proving that the amount -10- stipulated as damages for breach of contract was penalty is on the person committing breach. The amount stipulated as damages for breach of contract was contained in Clause 2 therein in the agreement entered into between the parties in the following terms: “The contractor shall comply with the said time schedule. In the event of the contractor failing to comply with this condition, he shall be liable to pay as compensation an amount equal to one per cent or such smaller amount as the Superintending Engineer, Delhi Development Authority (whose decision shall be final) may decide on the said estimated cost of the whole work for everyday that the due quantity of work remains incomplete; provided always that the entire amount of compensation to be paid under the provisions of this clause shall not exceed ten per cent of the estimated cost of work as shown in the tender.” 9. Since the work proceeded at a slow pace and the appellant therein failed to complete the same, the contract was terminated. Under Clause 2 of the agreement, the Superintending Engineer of the respondent levied compensation of Rs 20,86,446/- for delay in execution of the project by an order of penalty. 10. In the aforesaid backdrop the respondent therein filed a suit for recovery of the compensation levied by the the Superintending Engineer of the respondent. The learned Single Judge dismissed the suit by holding that in the absence of proof of damages, compensation levied under Clause 2 cannot be recovered. On appeal the Division Bench set aside the judgement of the learned Single Judge in view of the law laid down by the Apex court in ONGC Ltd. v. Saw Pipes Ltd (2003) 5 SCC 705, relevant extract whereof reads as follows:- -11- 64………………………Under Section 73, when a contract has been broken, the party who suffers by such breach is entitled to receive compensation for any loss caused to him which the parties knew when they made the contract to be likely to result from the breach of it. This section is to be read with Section 74, which deals with penalty stipulated in the contract, inter alia (relevant for the present case) provides that when a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, the party complaining of breach is entitled, whether or not actual loss is proved to have been caused, thereby to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named. Section 74 emphasises that in case of breach of contract, the party complaining of the breach is entitled to receive reasonable compensation whether or not actual loss is proved to have been caused by such breach. Therefore, the emphasis is on reasonable compensation. If the compensation named in the contract is by way of penalty, consideration would be different and the party is only entitled to reasonable compensation for the loss suffered. But if the compensation named in the contract for such breach is genuine pre-estimate of loss which the parties knew when they made the contract to be likely to result from the breach of it, there is no question of proving such loss or such party is not required to lead evidence to prove actual loss suffered by him. Burden is on the other party to lead evidence for proving that no loss is likely to occur by such breach. 11. Applying the above principle the apex court was of the view that it could certainly be presumed that delay in executing the work resulted in loss for which the respondent was entitled to reasonable compensation. In the absence of evidence the apex court proceeded on guesswork as to the quantum of compensation to be allowed in the given circumstances. 12. The judgement is clearly distinguishable on facts. In the -12- case at hand there exists no provision similar to clause 2 as contained in the cited judgement. Other than the aforesaid in the present appeal pending consideration before us there exists a specific clause 36 whereby the contractor shall have no claim to any payment of compensation or otherwise whatsoever, on account of any profit or advantage which he might have derived from the execution of the works in full but which he could not derive in consequence of the foreclosure of the whole or part of the works. Accordingly, the present appeal, being devoid of any merit, is dismissed. Pending application(s), if any, also stand disposed of. (G.S. Sandhawalia) (Bipin Chander Negi) Chief Justice Judge 22nd April, 2026 (Tarun Singh)