Delhi High Court Rejects DDA's Arbitration Appeal, Holds Revaluation Of Evidence Impermissible U/S 37 A&C Act

The Delhi High Court on December 11, 2025 upheld an Arbitral Award that favoured a contractor, M/s Harjinder Brothers, in a dispute over encashment of a bank guarantee and non-payment of "watch and ward" security expenses, dismissing an appeal filed by the Delhi Development Authority (DDA). The Court presided by Hon'ble Justice Chandrasekharan Sudha reaffirmed that the appellate courts are not permitted to re-evaluate evidence under 37, and held that the arbitrator's decision is a "possible and reasonable" interpretation that did not contravene public policy. The dispute arose from a 1994 construction contract for the construction of 103 residential units in Dwarka, New Delhi under and a supplemental agreement covering unfinished items and watch-and-ward commitments that was signed in 2000 following delays. The contractor claimed that despite the completion of the work and maintaining watch and ward till allotment, DDA withheld significant payments, including the security deposit, and later cashed the ₹1,55,829 bank guarantee without notice. The arbitrator on reviewing the submissions, declared the DDA's encashment to be unlawful and granted watch-and-ward charges. DDA challenged this order to be set aside under section of the Arbitration and Conciliation Act which was dismissed. Aggrieved, DDA appealed to the High Court of Delhi under Section 37 challenging this dismissal. Counsel arguing on behalf of DDA contended that the Arbitrator's conclusions were perverse, erroneous and unsupported by materials on record. They argued that the completion certificate was conditional and that watch and ward fees were not due until all errors were rectified and approved in accordance with a circular. The stance of DDA was that it was entitled to reimbursement of ₹1,84,800 that it had unintentionally overpaid the contractor by cashing the bank guarantee in accordance with Clause 29 of the main agreement. The contractor relied on the arbitrator's conclusions, which ruled that DDA was accountable for a "inordinate delay" in assuming possession of the apartments and owing to the act of securing the property that was considered "not a gratuitous act," the contractor was qualified for watch and ward costs. The arbitrator also found that there was no loss and that the bank guarantee was encashed without prior notice. Justice Chandrasekharan Sudha on 11th December 2025 ruled that the Appellate Court's authority is "limited within the domain of Section 34 of the Act" and that the Court is not permitted to "consider the matter in dispute before the arbitral tribunal on merits" or to re-evaluate the evidence, relying on decision in Punjab State Civil Supplies Corpn. Ltd. v. Sanman Rice Mills. Further reliance was placed on Associate Builders v. DDA, which clarified that an arbitral award may be set aside only when it “shocks the conscience,” violates the “fundamental policy of Indian law,” or suffers from patent illegality, and not merely because another interpretation is possible. The judge emphasized that Section 37 Court's “power is more akin to that of superintendence as is vested in civil courts while exercising revisionary powers”. The Court further determined that DDA's reliance on Clause 29 of the agreement was unjustified with regard to the encashed bank guarantee. The right to recover overpayment was only granted under clause 29 in the event that a "audit and technical examination" found that the amount was owed. Hence it ruled that DDA's unilateral action of paying the bank guarantee claiming an unintentional overpayment, was illegal since it had neglected to carry out the contractually required audit . Regarding Watch and Ward Charges, it held that "As long as possession was not taken over by the DDA, it was the responsibility of the claimant to keep the flats safe and secure, for which they are certainly entitled to watch and ward charges," upholding the Arbitrator's decision. Finding no infirmity or illegality in the findings of the arbitrator and holding that the Section 34 court had "rightly confirmed the findings of the arbitrator," the Delhi High Court dismissed the DDA's appeal. Case Title: Delhi Development Authority v. Harjinder BrothersCase No.: FAO 475/2013 & CM Appl. 20058/2013 Coram: Justice Chandrasekharan Sudha Date of Decision: 11 December 2025 For Appellant (DDA): Ms. Chand Chopra; Ms. Anshika Prakash Click Here To Read/Download Order

Delhi High Court Rejects DDA's Arbitration Appeal, Holds Revaluation Of Evidence Impermissible U/S 37 A&C Act

Arpita Pande

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