Contractor Entitled to Damages Beyond 1% cap for PWD Default
Judgment dated 12.6.2026 of the High Court of Bombay in Arbitration Petition NO.262 of 2024 of Public Works Department Got of Maharashtra National Highways Vs. Khare and Tarkunde Infrastructure Pvt Ltd with connected matters.
The limit of damages to 1% irrespective of the nature, extent and quantum of the breach by the counterparty would be contrary to the provisions of Sections 23, 28, 54, 55 and 73 of the Contract Act.
To my mind the serious deep limit placed under Clause 4.1.5 would be applicable only if there had been a reasonable delay in handing over the ROW. I am afraid that the contention that even if the Agreement had been terminated only another decade later, with ROW not having been given, the cap on damages would still be 1%, would lead to an absurd outcome and make a mockery of contract law. The delay in this case is abnormal and the exclusionary clause cannot be blindly applied. This is where the business efficacy test would have to be applied to make sense of the Agreement.
If PWD’s contention were to be accepted, it would follow that PWD would be entitled to keep KTIPL deployed for an infinite time or even for another five years or 10 years for that matter, and take its own time to provide the ROW with no scope for damages for such delay ever crossing 1% of the contract value.
In December, 2014, the Letter of Acceptance for the project was given to the respondent for completion in 18 months.
