Loss of profits in works contracts is a direct consequence of breach of contract.

AMPL (Petitioner/Claimant) was awarded a coal transportation contract by NTPC (Respondent) on 17.12.2019.

On 13.04.2020, NTPC directed AMPL to suspend work due to lower coal requirements.

AMPL initiated arbitration seeking Rs. 24.20 Crores under four heads: Fixed Costs, Fixed Office Expenses, Retention Money, and Loss of Profit.

The Sole Arbitrator’s award dated 19.12.2024 allowed claims for loss of profit and retention money but rejected fixed costs and office expenses.

Both parties challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996.

1. Whether the rejection of claims for "fixed costs" and "fixed office expenses" was perverse given the finding that such costs were incurred.

2. Whether the award of "loss of profits" was patently illegal for lack of evidence of lost opportunities and failure to account for the contractual 30% deviation limit.

3. Whether the Arbitrator’s exercise of discretion in awarding 50% legal costs and 12% interest was valid.

The Court applied Section 34 of the Arbitration and Conciliation Act, 1996, which limits judicial interference to grounds of patent illegality or contravention of the fundamental policy of Indian law.

It relied on *Associate Builders v. DDA* and *Hindustan Construction Co. Ltd. v. NHAI* to establish that the Arbitrator is the ultimate master of quantity and quality of evidence, and an award cannot be set aside merely because an alternative view is possible.

Regarding damages, the court followed *A.T. Brij Paul Singh v. State of Gujarat*, holding that a reasonable expectation of profit (often 15%) is implicit in works contracts.

Costs were governed by the discretionary regime under Section 31A of the Act.

The Court found that the Arbitrator’s rejection of fixed costs was a "possible view," as the contract price was intended to subsume such expenses; awarding them separately would constitute "double liability."

Regarding the 30% deviation clause, the Court held that the Arbitrator’s decision to calculate profits on the full "fixed quantity" was a reasonable method to avoid speculation on future contingencies.

The Court dismissed the Respondent’s reliance on *Unibros*, noting that the requirement to prove "loss of other opportunities" applies to delay claims in extended periods, not to a breach within the original contract term where profit expectation is direct.

The 15% profit rate was upheld as it was backed by chartered accountant certificates and auditor reports.

Finally, the Court ruled that the 50% legal cost award was a valid exercise of discretion under Section 31A, proportional to the partial success of the claims.

It held that the Arbitrator's findings were neither perverse nor patently illegal under Section 34.

The challenge to the 12% interest rate was rejected as the contract did not expressly prohibit interest, and the Arbitrator possessed statutory discretion under Section 31(7) to award the same.

No order as to costs was made for the present petitions.