CA-Certified Audited Statements Are Valid Proof Of Actual Expenditure: Delhi High Court Partly Upholds Arbitral Award Against NHAI

Justice Jasmeet Singh held that “the audited statements, duly certified by statutory auditors and submitted by the Claimant, constitute a true and reliable record of the actual expenses, and accordingly, the amounts certified by the auditors were accepted as reflecting the real overhead costs".

Background:

The dispute arose out of a contract executed between NHAI and HCC for four-laning National Highway-28 between Lucknow and Ayodhya. The construction was scheduled to be completed in 2008 but was delayed and completed in 2011. Disputes originated regarding additional costs incurred during the extended period. The Arbitral Tribunal awarded HCC approximately Rs. 53.79 crore with 12% compound interest on a monthly basis. This award had been challenged in the present petition.

The NHAI submitted that the tribunal committed an error by not relying on engineer's contemporaneous reports demonstrating the HCC's failure to mobilise resources instead relied on the report prepared by the HCC itself. It was further submitted that the tribunal rewrote the clauses of the contract by awarding compensation under heads such as retention of machinery, labour, and overheads which were already accounted for in the price adjustment clause.

Relying on New India Civil Erectors Pvt. Ltd., it was contended that the arbitrator cannot go beyond the terms of the contract. Lastly, it was submitted that the extension was granted in public interest and did not imply fault on the petitioner's part. The delays occurred due to HCC's poor planning and mobilisation.

Per contra, the Respondent submitted that the Tribunal had relied Chartered Accountants certified accounts which reflected the actual expenses and on contemporaneous correspondences demonstrating that the time was extended without imposing liquidated damages which indicated that there was no fault on HCC's part.

Lastly, it was argued that the tribunal had distinguished clauses 6.4, 12.2, and 42.2 of General Conditions of Contract (GCC) which deal with compensation for delay caused by the employer and clause 70.3 of the GCC which deals with price escalation. Relying on NHAI v. CEC-HCC Joint Venture, it was argued that the claims for prolongation costs were consistently upheld where the delay was not attributable to the contractor.

Findings:

The court at the outset observed that the interference under section 34 of the Arbitration Act is permissible only when the award is perverse, patently illegal or contrary to fundamental policy of Indian Law. “The Court does not sit in appeal over the Award, nor does it reappreciate evidence. If the Tribunal has adopted a plausible view, the Court is not to interfere merely because another interpretation is possible,” the court held.

On delay, the court upheld the arbitrator's finding that the employer had extended the time period without imposing liquidated damages. Relying on clause 44.1 of the GCC, the court held that the arbitrator was right in opining that such extension could have been granted only when the delay was not attributable to the contractor. “EOT granted by the Engineer/respondent is for delay events other than through a default or breach of Contract by the Claimant,” the tribunal had held.

The court further observed that the engineer's own letters and adjustment of price during the extended period indicated that the delay was attributable to the NHAI, not HCC. The NHAI also relied on clause 110.1 of the Technical Specifications which mandates the contract to coordinate with the authorities for trees cutting and utility shifting. However, the court, while agreeing with the tribunal's view, observed that this clause could not be read in isolation.

“The provisions of Clause 110.1 cannot be interpreted in isolation. Clause 5.2 of the Contract establishes the hierarchy of documents, giving the GCC higher priority over the Technical Specifications. Under Sub-clauses 42.2, 12.2, 51.1(f), and 6.4 of the GCC, the Employer is obliged to provide unencumbered access to the site, and failure to do so gives the Contractor an entitlement to compensation for delays not attributable to it. Any delay arising from the Employer‟s default cannot be excluded by Clause 110.1.,” the court said.

The court held that the contractor's responsibility was limited to coordination, not to ensuring site clearance.

The court also rejected the petitioner's contention that the tribunal had awarded damages beyond price escalation holding that cause 70.3 dealing with price escalation and clauses Clauses 6.4, 12.2, and 42.2 delaying compensation for delay serve distinct purposes. The court held that “While Clause 70.3 provides for formula-based escalation in material and labour costs, the other clauses expressly entitle the contractor to reimbursement of actual costs due to delays attributable to the employer".

On audited CA certificates, the court observed that the tribunal had accepted them as contemporaneous business records admissible under Indian Evidence Act. The Engineer had not disputed these accounts when they were furnished and the tribunal found them to be reflective of overheads expenses incurred during the extended period. The court held that “the audited statements, duly certified by statutory auditors and submitted by the Claimant, constitute a true and reliable record of the actual expenses, and accordingly, the amounts certified by the auditors were accepted as reflecting the real overhead costs".

The court held that “In the present case, the Tribunal has relied not merely on the CA certificates but also on other materials available before it. The certificates were submitted to Engineer vide letters dated 31.01.2012 and dated 09.01.2012. The petitioner showed nothing to demonstrate that the audited certificate should not be relied specifically before an arbitration proceeding. Moreover, the evidentiary value of such certificates has already been judicially considered in prior inter partes disputes, where courts have upheld Tribunal‟s reliance on CA certificates.”

On compound interest, the court held that the rate of interest awarded was consistent with contractual terms and justified under restitution.

However, the court set aside the claim no. 2 for additional costs on account of retention of plant and machinery during the extended period. The court held that the impugned award, insofar as it grants additional costs for extended stay of plant and equipment based solely on the contractor‟s self-serving reports, cannot be sustained in law.

Accordingly, the present petition was partly allowed as the portion of the Award granting additional costs amounting to Rs. 30,20,98,041/- in respect of plant and machinery under Claim No. 2 was set aside. The objections raised to the remaining claims were dismissed.

Case Title: NATIONAL HIGHWAYS AUTHORITY OF INDIA. versus HINDUSTAN CONSTRUCTION CO. LTD

Case Number: O.M.P. (COMM) 99/2017

Judgment Date: 16/10/2025

Click Here To Read/Download The Order