Breach Without a Remedy? Damages for Employer Caused Delay in Indian Construction Arbitration
Introduction
A finding that the employer caused the delay does not automatically entitle the contractor to damages. But a tribunal that refuses them needs a sound legal reason: a valid contractual bar, or a reasoned finding that loss was not proved on the evidence actually on record.
Indian construction arbitration keeps producing the same uneasy result. The tribunal finds that the site was handed over late, drawings arrived piecemeal and other agencies occupied the work fronts. It then rejects every claim for prolongation costs.
The rejection usually rests on one of two grounds. Either a clause is read as confining the contractor to an extension of time, or the loss is held unproved. This article examines both routes, and asks when such a "breach without remedy" award survives a challenge under Section 34 of the Arbitration and Conciliation Act, 1996.
The statutory entitlement
The right to damages for employer-caused delay comes from the Contract Act, not from a damages clause. Section 73 compensates loss that naturally arises from a breach. Section 53 goes further: where one party prevents the other from performing, the prevented party is entitled to compensation. Section 55 preserves compensation where time is not of the essence, subject to a notice requirement discussed below.¹
The Supreme Court has long applied these provisions to arbitral awards. In P.M. Paul, it held that once the delay was attributable to the employer, the employer was liable for its consequences, including the rise in prices.² K.N. Sathyapalan held that where one party's failure directly affects the other's work, the arbitrator may compensate the extra cost, even without an escalation clause.³
Assam State Electricity Board v. Buildworth restated both decisions. It also upheld an award of idling charges for labour and machinery kept at site because work fronts were not released.⁴
Contractual bars: enforced or void?
Whether a "no damages for delay" clause defeats the claim remains contested. In Sarvesh Chopra, the Supreme Court treated claims caught by such clauses as excepted from arbitration.⁵ It noted, citing Hudson, that American courts allow recovery despite these clauses for delay of a kind not contemplated, extreme delay, active interference by the owner, and bad faith. It also held that a contractor who accepts belated performance must give notice of its intention to claim compensation, as Section 55 requires.
Later decisions enforced express bars. Ramnath International and ONGC v. Wig Bros held that a contractor who accepts extensions under such a clause cannot claim damages for the delay.⁶ In C & C Constructions v. IRCON, the Court enforced a clause barring delay damages where the contractor had sought extensions under it and undertaken not to claim more.⁷
The Delhi High Court has taken a sharper line. In Simplex Concrete Piles, it held that clauses which, as interpreted, take away the benefit of Sections 55 and 73 are void under Section 23.⁸ That reasoning was accepted as a plausible view in DMRC v. J. Kumar-CRTG JV, which upheld compensation for idle resources after a delay of over 28 months in handing over the site.⁹ The tension between these lines of authority is real, and it is resolved case by case.
MBL v. DMRC: delay found, damages refused
MBL Infrastructures v. DMRC is the clearest recent example of a court intervening where a tribunal found employer delay but awarded nothing. The tribunal held the delay attributable to DMRC and the termination wrongful. It still rejected the claims for idle machinery, overheads and loss of profit, relying on Clause 8.3 of the GCC, which confined the contractor to an extension of time.¹⁰
The High Court set those findings aside. It held that clauses restricting the right to damages defeat Sections 55 and 73 and are opposed to public policy under Section 23.¹¹ The tribunal had erred in denying damages despite holding the delay attributable to DMRC, leaving the contractor "remediless".¹² The award was patently illegal on that ground, and the claims were remitted for fresh adjudication.¹³
Two features limit the decision's reach. First, the rejection rested on a contract clause, not on a failure of proof. Second, the court upheld the rejection of a separate claim for loss of reputation because no evidence of actual loss was produced.¹⁴ MBL therefore does not hold that a finding of breach compels an award of damages. It holds that a clause cannot be used to deny damages the record supports.¹⁵
The proof problem
Breach and loss are separate elements, and the second must be proved. In Bharat Coking Coal v. L.K. Ahuja, the Supreme Court refused a claim for loss of profit that rested on assumption rather than evidence.¹⁶
Unibros v. All India Radio set four conditions for claims of lost profit or opportunity: delay; delay not attributable to the claimant; the claimant's standing as an established contractor; and credible evidence of the loss.¹⁷ Batliboi v. HPCL applied the same discipline to overheads and profit computed by formula.¹⁸
Formulae remain admissible. In McDermott International, the Court accepted that the choice of method lies with the tribunal and upheld an award using the Emden formula.¹⁹ But a formula quantifies a proved loss; it does not prove it. A tribunal that rejects a claim built on a formula alone, without project records, is unlikely to be faulted under Section 34.
When a finding of "no proof" becomes perverse
A rejection for want of proof is a finding of fact, and Section 34 does not permit the court to re-appreciate evidence. But the finding must engage with the evidence actually on record. Associate Builders identified a finding based on no evidence, or one that ignores vital evidence, as perverse.²⁰ Ssangyong carried that test into "patent illegality" after the 2015 amendment.²¹
A three-judge bench restated the test in OPG Power Generation.²² In DMRC v. Delhi Airport Metro Express, the Court held that an award which ignores vital evidence is liable to be set aside.²³
The distinction matters in practice. An award that weighs the contractor's accounts, expert evidence and correspondence and finds them insufficient is ordinarily beyond review. An award that says no documents were produced when they were, or never mentions an expert who was cross-examined, is vulnerable.
The standard of proof can also be misapplied. In Buildworth, idling charges were upheld on the contractor's letters about work fronts not being released and the employer's own admissions. The High Court had rejected the argument that idleness was unproved, and the Supreme Court affirmed.²⁴ A tribunal that demands idle logs while ignoring such correspondence may be applying a test the law does not require.
Direct prolongation costs should also be kept distinct from lost profit. Site establishment, idle plant and bank guarantee charges are actual expenditure. The stricter Unibros conditions are aimed at lost opportunity, not at money already spent.
The remedy: partial setting aside and a fresh hearing
A successful challenge does not produce a decree for damages. The court under Section 34 cannot reassess the evidence and fix the quantum itself. In Gayatri Balasamy v. ISG Novasoft, a Constitution Bench recognised a limited power to modify awards, such as severing an invalid portion, but not a power to review the merits.²⁵
MBL shows the practical course. The court set aside only the affected claims, left the rest of the award intact, and treated this as partial setting aside rather than modification.²⁶ The contractor returns to arbitration on quantum, with the findings on liability undisturbed.
Conclusion: building a claim that survives
A finding of employer-caused delay is necessary but not sufficient. Contractors should treat entitlement and quantum as two separate battles, and prepare for both from the first month of the project.
Four practices follow from the cases:
Plead Sections 53, 55 and 73 together, and confront any "no damages" clause directly rather than hoping the tribunal reads it down.
Reserve the right to compensation in every extension request. Ircon International v. DMRC turned on exactly that: compensation was allowed only for the period in which the contractor had reserved its right.²⁷
Keep project-specific records of idle resources, site overheads and guarantee charges, and support them with accounts and, where useful, expert evidence.
Separate direct prolongation costs from lost profit, so that a weak profit claim does not sink the rest.
Where the tribunal still awards nothing, the Section 34 challenge is best framed around evidence ignored, not around the bare finding of breach. That is the line between a plausible view the court must respect and a perverse one it cannot let stand.
Footnotes
Indian Contract Act, 1872, ss. 53, 55 and 73.
P.M. Paul v. Union of India, 1989 Supp (1) SCC 368, paras 12–14.
K.N. Sathyapalan v. State of Kerala, (2007) 13 SCC 43, paras 31–32.
Assam State Electricity Board v. Buildworth (P) Ltd., (2017) 8 SCC 146, paras 13–18.
General Manager, Northern Railway v. Sarvesh Chopra, (2002) 4 SCC 45.
Ramnath International Construction (P) Ltd. v. Union of India, (2007) 2 SCC 453; ONGC Ltd. v. Wig Brothers Builders & Engineers (P) Ltd., (2010) 13 SCC 377.
C & C Constructions Ltd. v. IRCON International Ltd., (2025) 4 SCC 234.
Simplex Concrete Piles (India) Ltd. v. Union of India, 2010 SCC OnLine Del 821.
DMRC Ltd. v. J. Kumar-CRTG JV, 2022 SCC OnLine Del 1210, paras 30–35 (as extracted in MBL, infra note 10, para 52).
MBL Infrastructures Ltd. v. Delhi Metro Rail Corporation, O.M.P. (COMM) 311/2021, Delhi High Court, decided 12 December 2023 (2023 SCC OnLine Del 8044), paras 35–39.
Ibid., paras 43–45.
Ibid., para 60.
Ibid., paras 105–106 and 110–111.
Ibid., paras 77–80.
Ibid., paras 62 and 71.
Bharat Coking Coal Ltd. v. L.K. Ahuja, (2004) 5 SCC 109.
Unibros v. All India Radio, 2023 INSC 931 : 2023 SCC OnLine SC 1366, para 19.
Batliboi Environmental Engineers Ltd. v. Hindustan Petroleum Corporation Ltd., 2023 INSC 850.
McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181.
Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49, para 31.
Ssangyong Engineering & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131.
OPG Power Generation (P) Ltd. v. Enexio Power Cooling Solutions India (P) Ltd., (2025) 2 SCC 417, para 70.
DMRC Ltd. v. Delhi Airport Metro Express (P) Ltd., (2024) 6 SCC 357, para 39.
Buildworth, supra note 4, paras 17–18.
Gayatri Balasamy v. ISG Novasoft Technologies Ltd., 2025 INSC 605 (Constitution Bench).
MBL, supra note 10, paras 93–95 and 101–103.
Ircon International Ltd. v. DMRC, 2023 SCC OnLine Del 6368, paras 16–21 (as extracted in MBL, supra note 10, para 51).
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