Liquidated Damages Over & Above Actual Damages Cannot Be Awarded By Sole Arbitrator: Delhi High Court

The Delhi High Court observed that in breach of a contract, if the actual damages have been ascertained then the sole arbitrator is not justified in granting liquidated damages over and above such actual damages.The Bench comprising of Justice Navin Chawla and Justice Manmohan observed,"In the present case as the actual damages suffered by the respondent were proven and accepted by the learned Sole Arbitrator, liquidated damages over and above such actual damages could not have been awarded. Accordingly, the Arbitral Award insofar as it grants Rs.8,38,656/- in favour of the respondent is set aside."The Bench relied on the Supreme Court's decision in Kailash Nath Associates v. DDA & Anr., (2015) 4 SCC 136, which interpreted Section 74 of the Indian Contract Act, 1872 pertaining to Compensation for breach of contract where penalty is stipulated for.In this case, the Top Court had opined that it is only in cases where damage or loss is difficult or impossible to prove that the liquidated amount named in the contract, if a genuine pre-estimate of damage or loss, can be awarded.The contract executed between the parties for milling operation went south, where after Arbitration proceedings were instituted.The appellant had filed an appeal challenging an order of a single judge dismissing the objections filed by the appellant against the Arbitral Award passed by a Sole Arbitrator. It was contended that the respondent had stated that it is willing to settle the disputes if the appellant makes a payment of Rs.37,215/- (Rupees thirty-seven thousand two hundred fifteen only) to it. Inspite of the said offer, the learned Arbitrator had gone ahead and passed the impugned Arbitral Award allowing Rs.13,36,120.31/- in favour of the respondent.Further, the award of liquidated damages can not sustained in view of actual damages also being awarded and there is no basis disclosed in the Arbitral Award for allowing the claim of interest from 03.01.1980 to 28.07.1980 and the quantification thereof.Finding merit in the submission, the Court ordered,"the Arbitral Award dated 12.08.2008 is set aside to the limited extent of Rs.8,38,656/- being awarded by the learned Sole Arbitrator in favour of the respondent as Liquidated Damages. The remaining Award is made Rule of the Court."Case Title: Bhopal Dal Udyog v. Food Corporation of India, FAO (OS) 415/2011Citation: 2022 LiveLaw (Del) 63Click Here To Read/Download Judgment

Liquidated Damages Over & Above Actual Damages Cannot Be Awarded By Sole Arbitrator: Delhi High Court

Suhavi Arya

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