Authority: High Court of Meghalaya at Shillong

Order Date: 15.07.2026

Case Overview

  • Parties: Union of India (through Engineer‑in‑Charge, Meghalaya‑II, CPWD, Shillong) as appellant vs. Rajnish Infratech OPC Pvt. Ltd, New Delhi as respondent.
  • Contract Background: Tender NIT No. 25/NIT/CE/EE/MEGH‑II/2023‑24 issued for construction of the Administrative Building at NEIAH, New Shillong, estimated cost ₹24,94,17,881. Rajnish Infratech emerged as lowest bidder (L‑1) and received Letter of Acceptance on 23.02.2024, furnishing a Performance Guarantee of ₹1,18,00,587 in the form of an FDR.
  • Award & Agreement: Letter of Award dated 06.03.2024; Contract Agreement No. 21/CE/EE/Megh‑II/2023‑24 signed for total contract value ₹23,60,11,736. Contract start date 04.03.2024; scheduled completion 03.09.2025.
  • Compliance Requirement: Clause X of the NIT required submission of a Trading Licence issued by the Khasi Hills Autonomous District Council (KHADC) within one month of contract receipt. Failure to obtain the licence would attract action by CPWD or KHADC.
  • Default: Respondent failed to submit the Trading Licence. CPWD issued letters on 12.04.2024 and 25.04.2024 demanding progress and documents. Respondent replied on 30.04.2024, stating that the licence application was made but the Model Code of Conduct prevented issuance of a fresh licence.
  • Show‑Cause & Forfeiture: Show‑cause notice dated 09.05.2024 invoked Clause 5 of the Agreement. Respondent’s reply on 15.05.2024 explained inability to obtain GST registration without the licence. On 24.06.2024, CPWD determined the contract and forfeited the Performance Guarantee.
  • Arbitration: Respondent initiated arbitration; Shri Sudhir Kumar (Former ADG, CPWD) appointed Sole Arbitrator. Respondent raised six claims; appellant raised one counter‑claim (cost of arbitration ₹7,80,000).
  • Claim 1: Nullify action under Clause 3.
  • Claim 2: Recovery of forfeited PG ₹1,18,00,587.
  • Claim 3: Losses ₹25,00,000.
  • Claim 4: Loss of profit @7.5% of tender value ₹1,77,00,880.
  • Claim 5: Interest @18% from cause of action.
  • Claim 6: Expenses incurred.
  • Claim 7: Cost of litigation.
  • Counter‑Claim: Cost of arbitration ₹7,80,000.
  • Arbitral Award (26.12.2024):
  • Claim 2 – PG of ₹1,18,00,587 ordered to be released.
  • Claim 3 – Losses of ₹25,00,000 awarded.
  • Claim 4 – Loss of profit of ₹1,77,00,880 awarded.
  • Claim 5 – Interest @18% awarded (amount not quantified).
  • Claim 6 – Expenses of ₹3,00,000 awarded.
  • Counter‑Claim – Denied.
  • Post‑award interest: No pre‑award interest; if PG not released by 25.01.2025, simple interest @2% p.a. from 27.12.2024 until actual payment.
  • Section 34 Challenge: Appellant challenged the award before the Commercial Court, Shillong (Commercial Arbitration No. 13 of 2025). The Commercial Court dismissed the challenge on 03.02.2026, upholding the award.
  • Section 37 Appeal: Appellant filed appeal before this High Court under Section 37 of the Arbitration and Conciliation Act, 1996, seeking to set aside the Commercial Court’s order.
  • Arguments:
  • Appellant (Dr. N. Mozika, DSGI): Asserted that Clause 5 (amended on 08.12.2023) mandates default → forfeiture → termination, and that the arbitrator was not informed of the amendment, leading to erroneous conclusion.
  • Respondent (Mr. S. Yadav, counsel): Contended that Clause 3 governs termination and that the Engineer wrongly invoked Clause 5; the amendment was never before the arbitrator; the award and Commercial Court’s decision were correct.
  • Both sides cited precedents (MMTC Ltd. v. Vedanta Ltd., Haryana Tourism Ltd. v. Kandhari Beverages Ltd., Punjab State Civil Supplies Corp. Ltd. v. Sanman Rice Mills) emphasizing limited scope of Section 37 review.

Final Outcome

  • The High Court held that the Commercial Court’s judgment could not be faulted and upheld it.
  • It affirmed that the Engineer incorrectly invoked Clause 5 to determine the contract, a factual finding that the Court cannot re‑evaluate under Section 37.
  • The appellant was directed to satisfy the arbitral award, specifically Claim 2 (PG release) and Claim 6 (expenses), within four weeks.
  • The appeal was dismissed as devoid of merit; no costs were awarded.

Topics: Arbitration, Contract Law