Absence of credible evidence for actual loss precludes award of damages for prolongation based on guesswork.

The Petitioner (MMRDA) and Respondent (MMOPL) entered into a Concession Agreement (CA) on March 7, 2007, to implement Mumbai Metro Line 1

MMOPL claimed that MMRDA failed to provide unencumbered Right of Way (ROW) within the stipulated 180 days, leading to project delays and cost escalation from ₹2356 crores to over ₹4000 crores

A three-member Arbitral Tribunal delivered a majority award on August 29, 2023, granting MMOPL approximately ₹496.48 crores for various claims, including increased project costs

MMRDA challenged this under Section 34 of the Arbitration and Conciliation Act, 1996, alleging patent illegality and perversity in the majority's reasoning

The court primarily applied Section 34 of the Arbitration and Conciliation Act, 1996, which limits judicial interference to cases of "patent illegality" and "perversity"

It relied on the principle from *Associate Builders v. DDA* that a court cannot reappreciate evidence or substitute the arbitrator's interpretation of a contract unless it is implausible

Regarding damages, the court applied Section 73 of the Indian Contract Act, 1872, emphasizing that compensation requires proof of actual loss

Precedents like *Unibros v. All India Radio* and *Batliboi Environmental Engineers Ltd. v. HPCL* were utilized to distinguish between "loss of profit" and "loss of profitability," requiring "compelling evidence" for the latter

The Court upheld the Tribunal’s finding that MMRDA was responsible for ROW delays, noting that interpretation of Article 13.4 of the CA fell within the arbitrator’s exclusive domain

However, the Court found the award of ₹100 crores for overheads, ₹125 crores for interest, and ₹23.47 crores for opportunity costs to be "patently illegal" because they were based on "zero evidence"

The Court observed that MMOPL's witness (C.W.2) admitted to having no personal knowledge of the underlying financial data and failed to produce essential documents like SAP reports, ledgers, or the IDBI Information Memorandum

Applying the "loss of profitability" standards from *Unibros*, the Court held that the Tribunal could not use "guesswork" to award substantial sums when the claimant failed to produce evidence that was within its power to provide

Conversely, claims related to the Andheri bridge and foreign exchange fluctuations were sustained as they were supported by some documentary evidence and board approvals

The Court upheld the awards for: (i) VGF deductions (₹35Cr + interest), (ii) Wadala land rent (₹13.16Cr), (iii) Andheri steel bridge (₹30.48Cr), and (iv) foreign exchange cost increase (₹163.22Cr)

The Court set aside the awards for: (i) additional overheads (₹100Cr), (ii) additional interest/financing (₹125Cr), and (iii) opportunity costs (₹23.47Cr), citing a total lack of supporting evidence

The arbitration costs were reduced to ₹50 lakhs

MMRDA was directed to remit the modified awarded sum to the Escrow Account assigned to NARCL