Delhi High Court upholds arbitral award granting 484-day extension and dismisses challenge to liquidated damages deductions

A single-Judge bench of Justice Amit Bansal heard the challenge under Section 34 of the Arbitration and Conciliation Act, 1996 to an arbitral award dated 5 March 2019 arising out of a turnkey tunnelling contract, where IRCON (petitioner) contested the Arbitral Tribunal’s grant of extension of time and directions to refund liquidated damages in favour of AFCONS (respondent).

The Court dismissed the petition and upheld the Impugned Award, holding that the Arbitral Tribunal’s findings were a plausible appreciation of evidence and did not suffer from patent illegality. The judge observed that interference under Section 34 was limited and the court could not sit as an appellate fact‑finder. The Court, in its reasoning, observed: “The aforesaid judicial precedents make it clear that while exercising power under Section 34 of the 1996 Act the Court does not sit in appeal over the arbitral award. Interference with an arbitral award is only on limited grounds as set out in Section 34 of the 1996 Act. A possible view by the arbitrator on facts is to be respected as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon. It is only when an arbitral award could be categorized as perverse, that on an error of fact an arbitral award may be set aside. Further, a mere erroneous application of the law or wrong appreciation of evidence by itself is not a ground to set aside an award as is clear from the provisions of sub‑section (2‑A) of Section 34 of the 1996 Act.” The Court also noted the Arbitral Tribunal’s finding that “the levy of liquidated damages and its deductions were therefore prima facie illegal and not in accordance with the contract.”

Background
The dispute arose from a Contract dated 14 March 2014 under which AFCONS was engaged as subcontractor for tunnelling works on the Udhampur–Srinagar–Baramulla project. The Contract contained 17 milestone “key dates” (Appendix XV) and Clause 27 dealt with delay, extensions and liquidated damages (LD). AFCONS sought extensions totalling 504 days up to 15 September 2016 for events including adverse geology, law and order disturbances and exceptional rainfall. IRCON granted limited extensions (21 days) but also deducted LDs aggregating several crores. AFCONS invoked arbitration on 19 November 2016.

The Arbitral Tribunal allowed AFCONS’ claims in part, granted an overall extension of 484 days to 15 September 2016 (holding main tunnel Banihal was on the project’s “critical path”), declared IRCON’s imposition of LDs illegal and directed release/refund of bank guarantees and sums withheld. The Tribunal explained that due to changed rock mass, inclement weather and law and order issues AFCONS was entitled to time under Clause 27. The Tribunal also recorded that IRCON had deducted LDs without a proper delay analysis and described such levy as prima facie illegal.

IRCON filed OMP (COMM) 279/2019 under Section 34 challenging the award. A predecessor bench dismissed the petition in April 2023; on appeal the Division Bench set aside that order and remanded the matter to the single Judge for rehearing. After hearings on multiple dates the present judgment was reserved and pronounced on 13 February 2026.

The Court applied Supreme Court precedents (Associate Builders, Ssangyong, DMRC, OPG Power and others) on the narrow scope of interference under Section 34 and held that the Arbitral Tribunal’s technical and factual findings — including its determination of the project’s critical path and its delay analysis — were supported by evidence and constituted a plausible view. The Court found no perversity in the Tribunal’s approach to contract interpretation or to the finding that IRCON had not demonstrated quantifiable loss, and therefore declined to disturb the award. The petition was dismissed and all pending applications were disposed of.

Case Details:
Case No.: O.M.P. (COMM) 279/2019
Case Title: IRCON INTERNATIONAL LTD. v. AFCONS INFRASTRUCTURE LTD.
Appearances:
For the Petitioner(s): Mr. Gaurav Pachnanda, Senior Advocate with Mr. Siddhant Goel, Mr. Mohit Goel, Mr. Karmanaya Dev Sharma, Ms. Aishna Jain and Mr. Shashwat, Advocates
For the Respondent(s): Mr. Manu Seshadri, Mr. Sahil Manganani, Ms. Prachi Jain and Mr. Siddharth Shekhar, Advocates