Court Affirms Tribunal's Decision on Lack of Evidence for Damages and Loss of Profits Claims
In a significant judgment, the Karnataka High Court has upheld the dismissal of M/s. N.N. Constructions' appeal against an arbitral award that rejected their claims for damages, including loss of profits, in a dispute with the Union of India and Others. The court ruled that the findings of the Arbitral Tribunal were not perverse or unreasonable, aligning with the Wednesbury principle, and found no basis to overturn the tribunal's decision.
The appellant, M/s. N.N. Constructions, had challenged the arbitral award under Section 37(1)(c) of the Arbitration and Conciliation Act, 1996, after their petition to set aside the award was dismissed by the Commercial Court. The dispute arose from an agreement for the widening of the Fountain Circle Road Under Bridge in the Bangalore City Station Yard. The Arbitral Tribunal had rejected claims for damages, including loss of profits, stating that the appellant failed to provide substantive evidence and had voluntarily issued a No Claim Certificate (NCC).
The High Court bench, comprising Chief Justice Vibhu Bakhru and Justice K.S. Hemalekha, noted that the Arbitral Tribunal's conclusions were based on the material on record. The tribunal found that the delays in project completion were not solely attributable to the Railways and that the contract foreclosure was mutually agreed upon. The court further emphasized that claims for loss of profits could not be awarded on a presumptive basis without evidence, referencing Supreme Court precedents that mandate substantive evidence for such claims.
Despite contentions from M/s. N.N. Constructions that the No Claim Certificate was issued under duress, the court upheld the tribunal's findings that it was provided voluntarily. The court also highlighted that the contractual clauses explicitly barred claims for damages due to delays caused by the employer and proscribed interest on security deposits.
This judgment reaffirms the principle that arbitral tribunal findings, based on evidence, hold substantial weight and that claims for damages require substantial proof rather than presumptive measures. The decision underscores the judiciary's commitment to upholding tribunal awards unless clear illegality or unreasonableness is demonstrated.
Bottom line:-
Arbitration and Conciliation Act, 1996 - Appeal against dismissal of petition under Section 34 to set aside arbitral award - Claims for damages, including loss of profits, rejected by the Arbitral Tribunal due to lack of evidence - Court upheld findings of fact by the Tribunal, stating they were not perverse or unreasonable under the Wednesbury principle.
Statutory provision(s): Arbitration and Conciliation Act, 1996 - Sections 34, 37(1)(c); Contractual Clauses - Clauses 16(3), 17A(iii) of General Conditions of Contract (GCC).
M/s. N.N. Constructions v. Union of India, (Karnataka)(DB) : Law Finder Doc id # 2934155
