Death Of "Paper Shield": Re-Evaluating CA Certificates In Indian Construction Arbitration

However, a jurisprudential tectonic shift occurring between 2024 and early 2026 has dismantled this practice. The Delhi High Court and Supreme Court of India have effectively pierced this "Paper Shield," establishing that a CA certificate, when divorced from its underlying "root documents," constitutes mere ipse dixit, an unproven assertion that cannot sustain an arbitral award.

This article analyses this evidentiary evolution, contrasting the structure of Delhi Transco Ltd. v. KEC International Ltd. (May 2025) with the tactical "safe harbours" emerging from Orion Conmerx Pvt. Ltd. v. National Insurance Co. Ltd. (Oct 2025) and the recent SNG Developers Limited v. Lord Vardhman Buildtech Private Limited (Feb 2026) rulings.

The "Ipse Dixit" Doctrine: The Delhi Transco Shock

The most critical blow to the "Certificate Culture" was dealt by the Delhi High Court in Delhi Transco Ltd. v. KEC International Ltd. (May 21, 2025). The Division Bench set aside an arbitral award for "Basic Idling Claims" amounting to over ₹3.7 Crores, characterising the reliance on CA certificates as "patent illegality".

The "Related Documents" Fallacy

In Delhi Transco, the Claimant's CA certificate stated it had verified "Audited Books of Accounts" and "related documents." The Court found this wording problematic. It ruled that "related documents" is an unclear term that conceals the source of verification. Since the CA had not investigated the authors of the primary records, such as the Site Manager who noted the idling, the certificate was deemed hearsay.

Key Takeaway: A certificate that summarises "related documents" without specifically listing the primary logs may be considered inadmissible as "no evidence."

The "Two-Factor Test": The End of Formulas

In parallel with the evidentiary strictness on quantum, the Supreme Court in Batliboi Environmental Engineers Ltd. v. HPCL (2024) and Unibros v. All India Radio (2023) has set new standards for Loss of Profit claims.

The Court held that standard formulas like Hudson's or Emden's "cannot apply in a vacuum". A CA certificate that just plugs numbers into the Hudson formula falls flat now; proof must go beyond arithmetic. The Supreme Court gave a new test for proving loss of profit, i.e. the Two Factor test.:

1. Fact of Loss: The contractor needs clear records showing they had a valid chance to earn elsewhere, like tender rejections or formal correspondence proving the opportunity existed.
2. Quantification: Only after setting up that the actual loss happened can a formula be used to calculate damages. Without those foundational documents, using a mathematical approach will not work.

As noted in Unibros, a tribunal accepting a formula-based claim without this foundational evidence is essentially "a shot in the dark".

The "Safe Harbour": Strategic Defences from 2025-2026

While Delhi Transco represents the primary logic, recent judgments from late 2025 and early 2026 have reestablished the same.

1. The "Statutory Document" Defence (Orion Conmerx)

In Orion Conmerx Pvt. Ltd. v. National Insurance Co. Ltd. (October 30, 2025), the Supreme Court held that "contemporaneous business records," such as audited balance sheets and stock registers, possess high probative value. The Court ruled that rejecting claims supported by such statutory documents in favour of arbitrary assessments by surveyors is unsustainable.

Implication: If a CA certificate acts merely as a bridge to the Audited Balance Sheet (a public statutory document), it survives the Delhi Transco test. The Balance Sheet acts as the "Root Document".

2. The "Deemed Admission" Defence (SNG Developers)

In a recent judgment, SNG Developers Limited v. Lord Vardhman Buildtech Private Limited (February 11, 2026), the Delhi High Court provided an important tactical lifeline. The Court stated that if a Respondent does not specifically deny the existence or authenticity of the financial statements or balance sheets during the admission and denial stage, they are considered to be genuine.

Strategy: A Claimant can protect a CA certificate by making sure the underlying Balance Sheets are filed and not effectively challenged by the Respondent. Once the underlying document is seen as accepted, the CA's summary of it serves as strong evidence under Section 60(g) of the Bharatiya Sakshya Adhiniyam, 2023 (previously Section 65(g) of the Indian Evidence Act).

3. Rejection for Lack of Proof (S and S Construction)

Conversely, in S and S Construction Co v. Union of India (January 21, 2026), the Delhi High Court reiterated that the onus of proof lies strictly on the claimant. The Court rejected claims where damages were asserted but not substantiated by primary evidence, reinforcing that the negative onus cannot be cast upon the Respondent.

The "Digital Gatekeeper": Section 63 BSA and New ICAI Standards

The era of informal certification is facing pressure due to stricter regulations.

1. ICAI Handbook (Nov 2025): The Institute of Chartered Accountants of India published a new "Handbook on Certificates by Chartered Accountants" in November 2025. This requires strict adherence to the "Guidance Note on Reports or Certificates for Special Purposes (Revised 2016)." A certificate that does not clearly differentiate between "Reasonable Assurance" and "Limited Assurance," or that lacks a UDIN, is now seen as non-compliant.
2. Electronic Evidence: Electronic Evidence: The Supreme Court has given firm guidelines in the case of Arjun Panditrao Khotkar v. Kailash Kushanrao Gorantyal, the court has said that we need strict compliance with the requirements of Section 63 of the Bharatiya Sakshya Adhiniyam, 2023 (formerly Section 65B under the Indian Evidence Act), to prove a digital record. Moreover, a CA certificate must also be backed by relevant record and that these records must be submitted in court. Section 63 certificate is not for proving how the ERP system or the software to store the documents work, rather it is a certificate to verify the output. Therefore, without such certificate both the CA certificate and the digital records may be deemed inadmissible.

The "Triad of Proof"

Therefore, keeping in mind all the decisions between 2024 and 2026, as discussed above we have got one thing clear that a CA certificate alone is not sufficient anymore. A CA certificate is merely a summary tool to understand the records but without the actual records it is not per se evidence. To prove a claim merely giving CA certificate as a summary will not suffice the projects team need to keep their records straight with the primary paperwork intact so that the primary source can be scrutinized before we believe the validity of the secondary source i.e. the CA certificate.

Especially in construction/infrastructure arbitrations, the CA certificate needs to pass a threefold test:

1. The Root: Backed up by primary records such as Muster Rolls & Labour Attendance, Site Logs & Works Diaries, Measurement Books (M-Books), DPRs (Daily Progress Reports) & MPRs etc. These are the records that are made during the occurrence of the event and are the most important piece of evidence under scrutiny. CA certificate is merely a clean, neat and systematic summary of these documents and not the evidence.
2. The Map: Furthermore, for the primary documents to carry weight they must be verifiable. They must carry a Section 63 certificate (as per Bhartiya Sakshya Adhiniyam) plus a valid Unique Document Identification Number (UDIN) for verification. Even with all this the CA's role is merely to calculate the figure and cross reference them to these documents, CA can still not be a witness.
3. The Corroboration: Since CA has not been a witness of the creation of these documents, the person who created these documents e.g. the site engineer, project manager etc. needs to be cross examined as the primary witness of the trustworthiness of these documents.

The judicial trend for this new era has become clearer, no more certificate culture can be used as a shield to avoid scrutiny of actual records. The claims need to bypass both the documentary and digital verification, practitioners need to move from the certificate of opinion to certificate of facts. The certificate may merely be a representation or summary to understand the computation but cannot be the computation itself.