Disposed

The Chief Engineer U.P. PWD World Bank Projects Lko. Thru. Superintending Engineer, P.W.D. Mathura v. M/S D.S. Constructions Ltd., New Delhi

Allahabad HC6 Nov 2025ARPL/50/2025

Case brief

AI extract

What is this about?

Appeal under Section 37 against an arbitration award granting claims based on pre-bid assurances of customs/excise duty exemptions in a State Highway contract. Court held prima facie that legitimate expectation cannot add terms to a contract, admitted the appeal, stayed operation of the award, and directed deposits in FDRs.

What did the court decide?

Appeal admitted; operation of impugned award and judgment stayed till next listing; appellant to deposit Rs.5 crore per appeal in FDRs.

The Chief Engineer U.P. PWD World Bank Projects Lko. Thru… — Arbitration | Allahabad HC (2025)

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HIGH COURT OF JUDICATURE AT ALLAHABAD LUCKNOW

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APPEAL UNDER SECTION 37 OF ARBITRATION AND CONCILIATION ACT 1996 No. - 50 of 2025

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The Chief Engineer U.P. Pwd World Bank Projects Lko. Thru. Superintending Engineer, P.W.D. Mathura

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.....Appellant(s)

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Versus

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M/S D.S. Constructions Ltd., New Delhi

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.....Respondent(s)

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Counsel for Appellant(s) : Pratyush Chaube
Counsel for Respondent(s) : Ankit Yadav

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Court No. - 2

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HON'BLE MRS. SANGEETA CHANDRA, J. HON'BLE AMITABH KUMAR RAI, J.

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Heard Sri Pritish Kumar, learned Additional Advocate General assisted by Sri Pratyush Chaube, for the appellants and Sri Gaurav Mehrotra, learned Senior Advocate assisted by Sri Ankit Yadav, learned counsel for the claimant-respondents.

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Supplementary rejoinder affidavit has been served upon the counsel for the claimant-respondents. Learned counsel for the appellant submits that it shall be filed in the Registry within 24 hours.

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This Court had earlier condoned the delay in filing of the appeal and had granted time to the counsel for the appellant to file a legible typed copy of the award by the arbitrator. A supplementary affidavit has been filed on 24.10.2025 bringing on record the award passed by the Arbitral Tribunal. It has been submitted by the learned counsel for the appellant that the main issue involved in this appeal is as to whether public law principles, for example, 'legitimate expectation' can be relied upon in purely private law disputes, for example, in interpreting the terms of a contract. It has

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ARPL No. 50 of 2025

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been submitted by the learned counsel for the appellant that a notice inviting the tender was issued on 05.02.2001 for major maintenance of State Highway No.47 Meerut to Bijnore section. The claimant-respondent was declared successful and an agreement was signed on 08.03.2002. The stipulated completion date was 10.03.2004. The stretch from Meerut to Bijanaur section was majorly repaired and work completed on 08.05.2004. Certificate of completion was given on 10.07.2004. On 28.03.2005 final payment of Rs.43,15,144/- of the bill raised by the claimantrespondent was also made. However, the claimant-respondent filed an application raising certain disputes and requested for appointment of Arbitral Tribunal in terms of the contract. An Arbitral Tribunal was appointed of three persons.

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The claimant in its Statement of Claim, notified a claim of over 9.27 crores in terms of its letter dated 06.11.2004 referring to various voluminous correspondence as evidence on the basis of which it claimed to be entitled to compensation as per terms of the contract.

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It has been argued by the learned counsel appearing for the appellant for purpose of admission of this appeal that it is evident from paragraph-71 of the Award that the claimant had raised certain claims relating to additional costs incurred by it due to the failure on part of the respondents in issuing Exemption Certificate for exemption from payment of customs and excise duty on machinery and materials required for the project to the tune of Rs.2,40,17,723/-. It also raised a claim of Rs. 59,95,000/-by way of additional rates, the contractual rates having becoming otiose due to multifarious defaults/breaches/ lapses, prevention on the part of the respondents and abnormal variations of contractual quantities. Respondents also claimed Rs.77,28,087/- as amount due for work done but not paid and 18% interest per annum on claims no.1, 2 and 3 as aforesaid, amounting to more than Rs.2 crore, plus interest pendente lite and future interest @ of 18% per annum on

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ARPL No. 50 of 2025

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claims 1,2 & 3 as stated hereinabove. It also prayed for cost of arbritral proceedings.

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No counter claim was filed by the appellant. Issues were framed by the Arbitral Tribunal on 28.07.2008. The first issue related to whether the respondent had committed any breaches, compensation events etc. as alleged in the Statement of Claim. It related mostly to additional costs incurred due to the failure of the respondent in issuing Exemption Certificate in time. The claimantrespondent had made out before the Arbitral Tribunal that in the pre-bid meeting held between the appellant and the respondents they had held out an assurance that all benefits/concessions available to the World Bank Project shall be available for the works and may be availed by the contractor. Such concessions related to exemption from payment of customs/excise duty on machinery and materials, required for the project to be bought after the contract was awarded and signed between the parties. It was the claim of the respondents that there arose a "legitimate expectation " that such benefits and concessions, as per various notifications related to World Bank Project would be available to it and, therefore, it agreed to execute the contract at Rs.22 crore as against the estimated tender cost of Rs.28.1 crore. But the department neglected to issue the Exemption Certificate in time to enable to claimant to procure machinery and materials without payment of customs and excise duty. There was detailed correspondence undertaken by the contractor with the department with regard to issuance of Exemption Certificate which was issued later on but with a lot of delay. Since the project had to be completed within time as prescribed in the contract, the contractor had to buy machinery and materials even before the Exemption Certificate could be given and, therefore, had to incur additional costs in terms of payment of customs and excise duty. It had a "legitimate expectation" that the assurance given in the pre-bid meeting by the department would be respected and Exemption Certificate would be given in time which would enable the

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ARPL No. 50 of 2025

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contractor to buy machinery and materials at rates which would be compatible with the agreement it had entered into to execute the contract at Rs.22 crore. Otherwise it would have quoted Rs.28.1 crores, as cost of undertaking the major repairs of State Highway 47 Meerut to Bijnore section.

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The department while resisting the claim had stated clearly that if any representation was made by the department in pre-bid meeting, prior to the signing of the contract and which assurance was not made a part of the terms and conditions of the contract, it could not be relied upon by the contractor to seek damages. It also relied upon by the judgment of Supreme Court relating to nonapplicability of doctrine of "legitimate expectation" which has its genesis in the field of administrative law. Nevertheless, the learned Arbitral Tribunal as relied upon such assurances which were given in the pre-bid meeting and has held that they became a part of the terms and conditions of the contract althogh they were not written in the contract, and has granted claim 1 and 2 on that basis alone.

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Learned counsel for the appellant has also relied upon two judgment viz. 'Board of Control for Cricket In India Vs. Deccan Chronicle Holdings Lts.; 2021 SCC Online Bom 834' which has been relied upon by the High Court of Calcutta in ' Chairman Board of Trustees for Shyama Prasad Mookherjee Port Kolkata Vs. Universal Sea Port Private Limited', decided on 03.11.2022, reported in 2022 LawSuit (Cal) 1313 . Both the judgments of the High Courts of Bombay and Calcutta have placed reliance upon the judgments of the Supreme Court to hold that if any assurance is given which is not actually included in the terms and conditions of the contract it can not be relied upon to claim additional damages/compensation.

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Sri Gaurav Mehrotra, learned Senior Counsel on the other hand has stated before the Court that the Award is of the year 2009 and the department has still not complied with the Award. An execution case was filed during the pendency of the Appeal under Section 34

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ARPL No. 50 of 2025

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of the Arbitration Act and since the executing court was delaying the matter, the respondents had approached this Court under Article 227 of Constitution of India and various orders have been placed before this Court which are part of short counter affidavit filed by the respondents to show that the department has willingly defied the orders of the Court regarding execution proceedings.

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Learned counsel appearing on behalf of the appellant has however pointed out that when the First Appeal was filed against the orders of the execution court, this Court had directed the entire decreetal amount awarded by the District Judge, Muzaffar Nagar in Arbitration Case No.221 of 2009 to be deposited by the appellants out of which 50% would be invested in an interest fetching account/FDR in a nationalized bank and the balance 50% would be released to the claimant-respondents without furnishing any security. In terms of the said interim order dated 16.08.2017, nearly three and a half crores of rupees have been paid to the respondents.

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It has been submitted that such payment has been made during Execution proceedings even when the appeal under Section 34 was pending before the Commercial Court, the appeal has now been decided against the department and, therefore, this appeal under Section 37 has been filed challenging the Award itself.

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Learned counsel for the respondents at this stage has pointed out the limited jurisdiction i.e. exercised by this Court under Section 37 by referring to a judgment rendered in 'MMTC Limited Vs. Vedanta Limited', reported in (2019) 4 SCC 163 . He has referred to paragraphs 11, 14, 16, 17 and 26 and has also argued that correspondence undertaken between the parties can be seen by the Arbitral Tribunal while interpreting the terms of the contract.

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We are prima facie of the opinion that only the terms of the contract can be interpreted on the basis of correspondence carried out between the parties to the said contract. Nothing can be added into the terms of the contract on the basis of a presumption as to

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ARPL No. 50 of 2025

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"legitimate expectation" which admittedly is one of the principles related to public law disputes. Question of fairness, respecting of oral assurances or even written assurance given during pre-bid meeting prima facie which do not form part of terms of the contract would not bind the department.

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Learned counsel for the respondent has argued that the Award has been granted not only on the basis of legitimate expectation but also on the basis of other materials placed before the Arbitral Tribunal.

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Prima facie we are of the opinion that claim no.1 as stated by the respondents before the Arbitral Tribunal mainly relied upon the assurances as given in the pre-bid meeting which do not form part of terms of contract. Only on the basis of such assurances if the respondents had quoted a lower price for doing the work, it had signed the contract with its open eyes. We admit the appeal and stay the further operation of impugned Award and judgment of Commercial Tribunal impugned in this appeal till the next date of listing.

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List this matter after four weeks on 10.02.2026.

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Meanwhile, counter affidavit/objections may be filed on the merits of the case.

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The Commercial Courts records as well as Arbitral Tribunal records be summoned for which necessary steps shall be taken by the appellant within one week.

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Learned counsel for the respondents has also argued that on the basis of Section 36 of Arbitration and Conciliation Act that the condition of pre-deposit must be respected and he has also placed reliance upon the paragraph-10 to 17 of the judgment rendered in International Seaport Dredging Pvt. Ltd. Vs. Kamarajar Port Limited; 2024 SCC Onlne Supreme Court 3112. However, we are of the opinion that at the time when orders in execution proceedings were challenged before this Court in terms of interim

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ARPL No. 50 of 2025

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order dated 16.08.2017 more than Rs.3,00,00,000/- (Rs. Three Crores) has already been given to the respondent.

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We have yet to adjudicate the claim of the respondent as we have admitted the appeal. We therefore, reject this argument made by the learned counsel for respondents.

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Learned counsel for appellant has also stated before this Court that there are two payments relating to Arbitral Award which challenged in two appeals which are connected. The claimantrespondents has been released Rs.3,37,65,015/- in one appeal and Rs.3,27,26,828/- has been released in the other appeal. It has also been argued by learned counsel for the appellant that rest of the amount relating to the Award has been deposited in FDRs. However, learned counsel for the respondent has pointed out that 'decreetal amount' as mentioned in the interim order dated 16.08.2017 has not been deposited, only the amount as given in the Arbitral Award has been deposited without there being any responsibility taken for the interest pendente lite and future interest as given by the Abritral Tribunal.

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Taking into the account the liability of interest that will ultimately fall on the public exchequer in case an order is passed against the appellants, we direct the appellant to deposit Rs.5 crore in each of the appeals in separate accounts in form of FDRs in a nationalised bank which shall be subject to final order passed in the appeal.

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(Amitabh Kumar Rai,J.) (Mrs. Sangeeta Chandra,J.) January 13, 2026 Arti/-

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Digitally signed by :- ARTI MAURYA High Court of Judicature at Allahabad, Lucknow Bench

The Chief Engineer U.P. PWD World Bank Projects Lko. Thru. Superintending Engineer, P.W.D. Mathura v. M/S D.S. Constructions Ltd., New Delhi

Case brief

What is this about?

What did the court decide?

The Chief Engineer U.P. PWD World Bank Projects Lko. Thru. Superintending Engineer, P.W.D. Mathura v. M/S D.S. Constructions Ltd., New Delhi

Case brief

What is this about?

What did the court decide?

What the court decided

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Issues for consideration

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Statutes considered

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