SC RULING ON ENFORCEABILITY OF LIABILITY LIMITATION CLAUSES IN CONSTRUCTION CONTRACTS

ASPECTS	DETAILS
Case Title	M/s. C & C Constructions Ltd. vs. IRCON International Ltd. (2025 INSC 138, Civil Appeal No. 6657 of 2023)
Introduction	The case concerns a dispute between M/s. C & C Constructions Ltd. and IRCON International Ltd. over a contract for constructing five Road Over Bridges (ROBs) in Rajasthan. The appellant sought compensation for delays allegedly caused by the respondent, while the respondent relied on Clause 49.5 of the General Conditions of Contract (GCC) to deny liability.
Factual Background	A contract was signed on June 28, 2012, for constructing five ROBs. The appellant claimed the respondent caused delays, leading to financial burdens. Time extensions were granted, and the appellant provided undertakings not to claim extra compensation. The arbitration tribunal rejected the claims based on Clause 49.5 of GCC, which barred compensation for employer-caused delays. The appellant challenged this decision before the Delhi High Court, which upheld the rejection. The matter was further appealed to the Supreme Court.
Legal Issues	Whether Clause 49.5 of the GCC, which bars compensation for delays caused by the employer, is legally enforceable. Whether the arbitration tribunal erred in summarily rejecting the claims without allowing evidence. Whether the appellant’s undertakings not to claim extra compensation estopped them from seeking damages. Whether Clause 49.5 violates Sections 23 and 28 of the Indian Contract Act, 1872.
Applicable Law	Arbitration and Conciliation Act, 1996 (Sections 16, 34, and 37). Indian Contract Act, 1872 (Sections 23 and 28). Judicial Precedents: Pam Developments Pvt. Ltd. vs. State of West Bengal (2019) 8 SCC 112. ONGC vs. Wig Brothers Builders & Engineers Pvt. Ltd. (2010) 13 SCC 377.
Analysis	The Supreme Court examined whether Clause 49.5 barred compensation claims and found that the appellant had repeatedly sought time extensions under this clause without reserving rights to compensation.The appellant’s explicit undertakings in 2015 to not claim compensation beyond escalation costs estopped them from later making claims.The court rejected the argument that the respondent waived Clause 49.5, emphasizing that contract terms were followed, and no contrary conduct was shown.The Delhi High Court correctly applied the limited review powers under Sections 34 and 37 of the Arbitration Act.
Conclusion	The Supreme Court upheld the rejection of the appellant’s claims, ruling that Clause 49.5 was enforceable and that the appellant was bound by its undertakings. The appeal was dismissed.
Current Scenario	The Supreme Court’s ruling reinforces the enforceability of liability limitation clauses in contracts and upholds arbitral autonomy, restricting judicial interference under Sections 34 and 37 of the Arbitration Act. It sets a precedent on contractual estoppel in arbitration cases.

ASPECTS

DETAILS

Case Title

M/s. C & C Constructions Ltd. vs. IRCON International Ltd. (2025 INSC 138, Civil Appeal No. 6657 of 2023)

Introduction

The case concerns a dispute between M/s. C & C Constructions Ltd. and IRCON International Ltd. over a contract for constructing five Road Over Bridges (ROBs) in Rajasthan. The appellant sought compensation for delays allegedly caused by the respondent, while the respondent relied on Clause 49.5 of the General Conditions of Contract (GCC) to deny liability.

Factual Background

A contract was signed on June 28, 2012, for constructing five ROBs. The appellant claimed the respondent caused delays, leading to financial burdens. Time extensions were granted, and the appellant provided undertakings not to claim extra compensation. The arbitration tribunal rejected the claims based on Clause 49.5 of GCC, which barred compensation for employer-caused delays. The appellant challenged this decision before the Delhi High Court, which upheld the rejection. The matter was further appealed to the Supreme Court.

Legal Issues

Whether Clause 49.5 of the GCC, which bars compensation for delays caused by the employer, is legally enforceable.
Whether the arbitration tribunal erred in summarily rejecting the claims without allowing evidence.
Whether the appellant’s undertakings not to claim extra compensation estopped them from seeking damages.
Whether Clause 49.5 violates Sections 23 and 28 of the Indian Contract Act, 1872.

Applicable Law

Arbitration and Conciliation Act, 1996 (Sections 16, 34, and 37).
Indian Contract Act, 1872 (Sections 23 and 28).
Judicial Precedents:

Pam Developments Pvt. Ltd. vs. State of West Bengal (2019) 8 SCC 112.
ONGC vs. Wig Brothers Builders & Engineers Pvt. Ltd. (2010) 13 SCC 377.

Analysis

The Supreme Court examined whether Clause 49.5 barred compensation claims and found that the appellant had repeatedly sought time extensions under this clause without reserving rights to compensation.The appellant’s explicit undertakings in 2015 to not claim compensation beyond escalation costs estopped them from later making claims.The court rejected the argument that the respondent waived Clause 49.5, emphasizing that contract terms were followed, and no contrary conduct was shown.The Delhi High Court correctly applied the limited review powers under Sections 34 and 37 of the Arbitration Act.

Conclusion

The Supreme Court upheld the rejection of the appellant’s claims, ruling that Clause 49.5 was enforceable and that the appellant was bound by its undertakings. The appeal was dismissed.

Current Scenario

The Supreme Court’s ruling reinforces the enforceability of liability limitation clauses in contracts and upholds arbitral autonomy, restricting judicial interference under Sections 34 and 37 of the Arbitration Act. It sets a precedent on contractual estoppel in arbitration cases.