TaxTMI 
TaxTMI 
2023 (10) TMI 951
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....work contract by the respondent to carry out construction of Delhi Doordarshan Bhawan, Mandi House, Phase-II, New Delhi. The work was scheduled to commence on 12th April, 1990 and reach completion on 11th April, 1991; however, it suffered a delay of roughly 42½ months and was finally completed on 30th October, 1994. Disputes and differences emerged between the parties owing to such delay, which were subsequently referred to an Arbitrator ("Arbitrator", hereafter) for resolution. 4. The trajectory of the case, leading to the present stage, is set out hereunder: a) Arbitration proceedings having been initiated, the Arbitrator vide award dated 11th February, 1999 ("First Award", hereafter) decided various claims and counter-claims filed by the parties. Claim Nos. 10, 11, and 12 were collectively addressed under section 73 of the Indian Contract Act, 1872 ("Contract Act"), as they all centred around the issue of delay and the resultant losses. Vide Claim No. 10, the appellant claimed a sum of Rs. 50,00,000.00 (Rupees fifty lakh) owing to the marked escalation in prices/rates for the work executed beyond the stipulated contract period. Vide Claim No. 11, the appellant....
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....rd. The operative part of the judgment passed by the learned Single Judge reads thus: "24. *** Except for placing on record the Hudson's formula and a passage from the book law (sic, Law) on Building and Engineering Contracts, no other evidence is placed on record by the respondent to show that the profit percentage as claimed towards loss of profit was a realistic one at that times and consequently there was no change in the market and also that the work of at least the same general level of profitability would have been available to the respondent at the end of the stipulated contract period. Therefore, evidence in respect of the said claim appears to be definitely not available on record. In absence of any credible evidence and when claims under Claim Nos. 10 & 11 were rejected on the ground that no sufficient evidence had been placed on record by the respondent indicating increase in the prices/rates for the work executed after the stipulated contract period and also on account of establishment, machinery, centering/shuttering etc., Claim No.12 was allowed by the arbitration (sic, arbitrator) without even considering whether the respondent has placed credible and relia....
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....to set aside the Second Award. The learned Single Judge of the High Court vide judgment and final order dated 25th February 2010 allowed the objection under Section 34 and rejected the appellant's claim under Claim No. 12 with an observation that there was no sufficient evidence presented by the appellant to establish the claimed loss of profit; the lack of records regarding the alleged utilization of men, material, machinery, overheads, and other resources in the contract performance that could have otherwise been used for other profitable contracts raised doubts about the legitimacy of the claimed losses under Claim No. 12. With an observation that the Union of India was forced into litigation due to the appellant's misconceived claim, the Single Judge awarded costs of Rs. 50,000.00 (Rupees fifty thousand) in favour of the respondent, payable within four weeks from the date of the final order and interest of 9% per annum in case of non-compliance. Findings returned by the learned Single Judge are extracted below: "4. I have gone through the entire Award. The Award ... as a loss under this Claim 12. 5. In this view of the ... in the arbitration proceeding....
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....ore him and the terms of the contract, there is no scope for the court to reappraise the matter as if this were an appeal and even if two views are possible, the view taken by the arbitrator would prevail. So long as an award made by an arbitrator can be said to be one by a reasonable person no interference is called for. However, in cases where an arbitrator exceeds the terms of the agreement or passes an award in the absence of any evidence, which is apparent on the face of the award, the same could be set aside." c) According to Section 34, an award cannot be modified but can only be set aside under specific grounds outlined in the provision. Unlike the Arbitration Act of 1940, which explicitly allowed for modification, the Act of 1996, modelled on the UNCITRAL Model Law on International Commercial Arbitration 1985, does not grant the court the power to modify awards under Section 34. This aligns with the legislative intent of minimizing judicial intervention in arbitral awards. Reliance in support of the said contention was placed on The Project Director, NHAI vs. M. Hakeem and Another (2021) 9 SCC 1; d) M/s AT Brij Paul Singh & Ors. vs. State of Gujarat (1984....
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.... c) It was further submitted that to fulfil the aforesaid conditions, satisfactory and cogent evidence is a sine qua non even if the loss is not of a remote or imaginary nature. In the absence of cogent evidence substantiating a genuine loss of profit or opportunity, it would be unjustifiable to permit the contractor to capitalize solely on the application of a formula. d) In the present case, the ASG submitted, no evidence was led by the appellant, far less, any credible or cogent evidence, to prove that it was capable of earning such price elsewhere by way of any other contract that was available to it at that time, which it could not execute due to prolongation of the contract; such an award, being perverse, conflicts with the public policy of India under Section 34(2)(b)(ii) of the Act. e) The Arbitrator's actions present a perplexing situation: while dismissing Claim Nos. 10 (compensation for increased prices/rates after the contract period) and 11 (compensation for the establishment, machinery, centring/shuttering, etc.) due to the absence of credible evidence, the Arbitrator, on the other hand, proceeded to grant damages for loss of profit under Claim ....
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....d the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice." 12. Subsequent decisions of this Court have interpreted "public policy of India" to include, among others, compliance with fundamental policy of Indian law, statutes and judicial precedents, need for judicial approach, compliance with natural justice, Wednesbury unreasonableness and patent illegality. We may refer to the decision in Associated Builders (supra) in this behalf. 13. Having read the Second Award, we have no hesitation to hold that it fares no better than the First Award, for, it is equally in conflict with the public policy of India. We have noticed from the order dated 20th May, 2002 of the learned Single Judge that while remitting Claim No.12 for reconsideration, the Arbitrator was warned not to be influenced by the factors that weighed in his mind while making the Fi....
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....of delay in the matter of completion of the work. What he should establish in such a situation is that had he received the amount due under the contract, he could have utilised the same for some other business in which he could have earned profit. Unless such a plea is raised and established, claim for loss of profits could not have been granted. In this case, no such material is available on record. In the absence of any evidence, the arbitrator could not have awarded the same." (emphasis ours) 16. To support a claim for loss of profit arising from a delayed contract or missed opportunities from other available contracts that the appellant could have earned elsewhere by taking up any, it becomes imperative for the claimant to substantiate the presence of a viable opportunity through compelling evidence. This evidence should convincingly demonstrate that had the contract been executed promptly, the contractor could have secured supplementary profits utilizing its existing resources elsewhere. 17. One might ask, what would be the nature and quality of such evidence? In our opinion, it will be contingent upon the facts and circumstances of each case. However, it may ge....