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

For decades, the Indian construction arbitration landscape has been dominated by a convenient fiction: the "Certificate Culture." Claimants, faced with the daunting task of proving voluminous damages for idling, overheads, or loss of profit, have historically relied on a single sheet of paper, a Chartered Accountant (CA) certificate, as a proxy for thousands of pages of primary evidence.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 ShockThe 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" FallacyIn 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 FormulasIn 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.: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.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 2025-2026While 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 ...

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

Prakhar Suryawanshi

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