Contract Law May (2026) Contract Law Updates And Judgments

NOTABLE JUDGMENTS MAY 2026

1. Proof of Actual Loss Essential: Delhi High Court Sets Aside Damages Award Based on Assumptions

Case Title: Union of India vs M/s Anand & Co. CLICK HERE

Citation: O.M.P. (COMM) 289/2023

Court: High Court of Delhi at New Delhi

Decided on: 04 April 2026

FACTS

The petitioner invited an e-tender for the construction of 100 family quarters (Type II, III, and IV), including internal water supply, sanitary installations, and electrical works for the ITBP 22nd Battalion Campus at Chhawla, New Delhi. The respondent’s bid was accepted, and a Letter of Acceptance dated 20.06.2017 was issued, followed by execution of the agreement. The stipulated date of commencement was 11.07.2017, with a completion period of twelve months, i.e., by 10.07.2018. During execution, disputes arose between the parties, and although the respondent approached the Engineer-in-Charge, no resolution was reached. Clause 25 of the General Conditions of Contract was invoked for constitution of a Dispute Resolution Committee, but upon failure to resolve the disputes, the respondent-initiated arbitration proceedings through notice dated 08.04.2021, which culminated in the impugned award.

The petitioner challenged the award on multiple grounds, contending that the arbitrator wrongly granted a three percent differential amount between GST and VAT based on assumptions and in violation of Clause 38 of the contract, which only permitted reimbursement of actual GST paid. It was argued that no proof of such payment was produced. Further, the petitioner assailed the award of interest at the rate of nine percent and litigation costs of Rs. 8,00,000 as excessive and contrary to the contractual provision mandating equal sharing of arbitration costs. In response, the respondent supported the award, submitting that the arbitrator had exercised discretion on sound legal principles and that no interference was warranted within the limited scope of Section 34 of the Arbitration and Conciliation Act, 1996.

ISSUES

1. Whether damages can be awarded without proof of actual loss under Section 73 of the Indian Contract Act, 1872.

2. Whether the arbitral award suffered from patent illegality.

JUDGMENT

The Court observed that under the contractual clause, the contractor was required to notify the Engineer-in-Charge within 30 days of imposition of any additional tax or levy, along with supporting details. It held that the award of simple interest at the rate of 9% by the arbitrator did not warrant interference within the limited scope of Section 34 of the Arbitration and Conciliation Act, 1996, as it was neither excessive nor unreasonable. The Court further held that various components of the award such as denial of interest on withheld amounts, correction of the final bill, rejection of the 3% GST differential, and disallowance of damages under Section 73 were separable and independent of each other. Upon review, the Court upheld the release of amounts withheld for non-achievement of milestones and the refund of penalty for delay, but set aside the award of interest on withheld amounts, the 3% GST differential claim, and damages granted under Section 73. It also corrected the amount payable under the final bill to Rs. 54,44,112. Accordingly, the petition was partly allowed, with the remaining components of interest and costs being upheld.