No-Claim Certificate and failure to substantiating damages preclude claims for loss of profits.

In brief

The question

1. Whether the Arbitral Tribunal’s finding that the appellant was not entitled to damages due to the issuance of a No Claim Certificate and lack of evidence was patently illegal.

The court held

The Court held that the Arbitral Tribunal’s decision to reject the claims was reasonable and did not suffer from patent illegality

It also directed

The Court affirmed that (i) Clause 17-A(iii) of the GCC expressly barred damages for delays caused by the Railways and (ii) loss of profits cannot be awarded on a presumptive basis in the absence of substantiating evidence. Relief was denied.

The Court dismissed the appeal and upheld the judgment of the Commercial Court

01Facts

The appellant entered into an agreement dated 27.04.2017 with the Railways for the widening of a Road Under Bridge (RUB) for a contract value of ₹12.77 crores

pp. 3-4

Due to site obstructions and underground utilities, the work was delayed, and the contract was extended four times

p. 5

Following joint discussions, the parties decided to foreclose the agreement. The appellant furnished a "No Claim Certificate" (NCC) on 07.04.2021

pp. 10-11

However, the appellant later invoked arbitration, claiming ₹4.38 crores for loss of profits, idling of establishment, and other damages, alleging the NCC was obtained under coercion

pp. 7-8

The Arbitral Tribunal rejected the claims, and the Commercial Court dismissed the subsequent Section 34 petition. The appellant filed this appeal under Section 37 of the Arbitration and Conciliation Act, 1996

p. 3

02Issues

i.1. Whether the Arbitral Tribunal’s finding that the appellant was not entitled to damages due to the issuance of a No Claim Certificate and lack of evidence was patently illegal.

¶ 15, 27

ii.2. Whether a contractor is entitled to loss of profits on a presumptive basis (e.g., 15% of unexecuted work) without leading specific evidence of actual loss.

¶ 34-36

03Law Applied

The court applied Section 37(1)(c) of the Arbitration and Conciliation Act, 1996, regarding the scope of judicial interference in arbitral awards

p. 14

It relied on Clause 17-A(iii) of the General Conditions of Contract (GCC), which provides that extensions granted due to Railway delays do not entitle the contractor to compensation

p. 15

Regarding the measure of damages, the court distinguished M/S. AT Brij Paul Singh v. State of Gujarat [(1984) 4 SCC 59], clarifying that loss of profits cannot be awarded on pure conjecture

pp. 16-17

It further applied the principles from Edifice Developers and Projects Engineers Ltd. v. Essar Projects (India) Ltd. [2013 SCC OnLine Bom 5] and Nandi Infratech Pvt. Ltd. v. R. K. Bararia [2024 SCC OnLine Del 4287], which mandate that claims for overheads and profits must be substantiated by evidence rather than relying solely on mathematical formulas like the Hudson Formula

pp. 19-24

Provisions in the judgment · 4 · Linked ones open on LawLens

Arbitration and Conciliation Act, 1996 Section 11 Section 34 Section 37

Commercial Courts Act, 2015 Section 13

04Reasoning

The Court observed that the Arbitral Tribunal’s finding—that the Railways was not solely responsible for the delay and that the foreclosure was mutual—was a finding of fact based on record

¶ 26-27

The Court highlighted that the appellant had voluntarily submitted a revised NCC in the Railways' format after an initial qualified one, indicating consent

¶ 21

Crucially, the Court determined that the appellant failed to lead any oral or documentary evidence to prove the mobilization of resources or the actual loss suffered due to the foreclosure

¶ 34

It rejected the appellant's reliance on Brij Paul Singh, noting that while loss of profit is a legitimate head of claim, the measure of such profit must be proved and cannot be assumed to be 15% across all cases

¶ 36-37

The Court found that awarding damages without evidence would be "pure conjecture" and would violate Section 28 of the A&C Act

¶ 38, quoting Edifice Developers