19 March 2024 Arbitration Law >> Business & Commercial Law   |   Contract Law >> Corporate Law   |   Property Law >> Personal Law  

A recent court case in New Delhi sheds light on the complexities of construction contract disputes and the burden of proof in seeking additional compensation for project delays. Dharamvir & Company (Dharamvir), a contractor involved in repairing quarters for the Delhi Development Authority (DDA), faced an uphill battle in its appeal against an arbitral award. While the project completion ran past the deadline, Dharamvir's attempt to claim higher compensation based on market rates ultimately fell short.

Background:

Dharamvir was awarded a contract to repair quarters for the DDA. However, the project faced delays. Dharamvir sought additional compensation based on prevailing market rates due to the extended timeline and claimed reimbursement for a sum allegedly withheld by the DDA.

Arbitration and Appeal:

The disagreement went to arbitration. The arbitral tribunal sided with Dharamvir on the withheld amount but rejected the claim for extra compensation. Dharamvir appealed this decision, arguing that a previous order by the first arbitrator established they had a valid cause of action, and the substituted arbitrator could not reach a different conclusion.

Court's Reasoning for Dismissal:

The court dismissed the appeal. While acknowledging the delay caused by DDA, the court found that Dharamvir failed to demonstrate any financial losses resulting from it. Additionally, the court clarified that the previous order by the first arbitrator only addressed a procedural issue and did not predetermine the merits of the claim.

Key Takeaways:

This case highlights the importance of establishing financial losses in construction disputes. Even if a party is responsible for delays, the contractor must prove they suffered harm to receive additional compensation. The case also clarifies that procedural orders during arbitration do not necessarily bind subsequent arbitrators on the substance of the case.

  Arbitration and Conciliation Act, 1996