Delhi HC on CA Certificates Vs Proof of Expenditure in arbitration
The dispute arose out of the contract of construction of various reservoirs. The respondent had consortium agreement with two other companies. The respondent was the Consortium Leader.
The Arbitral Tribunal allowed majority of the claims and rejected claims No.3, 6A, 7, 11 and 14.
Section 34 Court confirmed the Award and dismissed the petition.
In Section 37 appeal, mainly two issues were considered – whether award on financing charges is contrary to the contractual provisions and whether the allowed claims were barred by limitation.
Claims 12A and 12B are in respect of additional expenditure & alleged loss of office site / overheads and profits, both during prolongation period due to project delay.
Claim 12A was appended as Annexure 12A to the Statement of Claims and authenticated by the CA. On that basis, the claim was allowed.
CA certificate cannot be treated as proof of expenditure. In that context, it was held that the grant of compensation in the absence of proof of actual expenditure amounts to reliance on “no evidence” and therefore, squarely attracts the ground of patent illegality.
Claim 12B for loss of office site / head of office overheads & profits was supported only by the statements of Annexures 12B and 12C.
The award proceeds on an erroneous assumption that financing charges were recoverable as matter of course, despite the absence of any express contractual provision permitting such recovery in the circumstances obtaining in the present case. By treating such charges as a natural or consequential component of compensation, the learned Arbitral Tribunal has, in effect, re-written the commercial bargain between the parties, which is impermissible in law. Further, the learned Single Judge, despite recording that financing charges were payable only in respect of admitted or certified amounts, erred in upholding the award of such charges.
Comments on the post of Anjasi Shah and the Judgment dated 12.1.2026 of the High Court of Delhi in FAO (OS) (COMM) 210/2022 of Delhi Jal Board Vs. M/s Mohini Electricals Ltd
