Section 73 damages for business loss require proof of actual loss, not speculative estimates.

The Appellant, Wockhardt Hospitals Ltd., engaged the Respondent, Dr Nitish Vyas, as a Senior Consultant in Internal Medicine and Critical Care at its Rajkot unit. The parties’ appointment agreement dated 14 August 2015 permitted either party to terminate the engagement by giving three months’ notice under Clause 11(a). Clause 11(b) also contemplated recovery of any excess minimum-guarantee payments over the actual fee-for-service amount upon premature exit.

The Appellant alleged that the Respondent resigned and ceased attending work after giving only seven days’ notice, thereby breaching the agreement. It claimed amounts towards recovery of minimum-guarantee payments and alleged business losses of Rs. 1,23,79,637, calculated by extrapolating the average fees generated by the Respondent. The Appellant instituted a commercial summary suit seeking Rs. 1,44,67,432, together with interest. The Respondent did not appear, and the suit proceeded ex parte.

The Trial Court dismissed the suit, holding that the Appellant had not produced cogent material proving actual loss caused by the Respondent’s absence and that the agreement contained no liquidated-damages or penalty clause. The Appellant challenged that dismissal in the present appeal.

Whether the Appellant proved that the Respondent’s alleged breach of the three-month notice obligation caused actual and compensable business loss under Section 73 of the Indian Contract Act, 1872?

Whether the Appellant was entitled to recover the quantified amount of Rs. 1,23,79,637 on the basis of an estimate derived from the Respondent’s average monthly fees, without documentary or other substantive evidence establishing the actual loss?

Whether the Trial Court erred in dismissing the ex parte suit for want of proof of loss or damage?

The Court primarily applied Section 73 of the Indian Contract Act, 1872, under which the injured party may recover compensation for loss that naturally arose in the usual course of things from the breach, or which the parties knew was likely to result when they entered into the contract; remote or indirect losses are excluded. The provision also incorporates the duty to mitigate loss by requiring consideration of the means available to remedy the consequences of non-performance.

The Court held that contractual damages must compensate for actual and proved loss, rather than probable, possible, remote or merely estimated loss, and that the claimant must establish causation, loss and the appropriate measure of damages. Since the agreement did not stipulate liquidated damages or a penalty, the claim had to be assessed strictly under Section 73.

The Appellant relied on Construction and Design Services v. Delhi Development Authority, (2015) 14 SCC 263, and Cobra Instalaciones Y Servicios, S.A. v. Shyam Indus Power Solution Pvt. Ltd., 2024 SCC OnLine Del 2755, but the appeal was decided on the basis of the statutory requirement to prove actual loss.

The Court accepted that termination without the stipulated notice could constitute a contractual breach, but held that breach alone did not establish entitlement to the claimed business damages.

The Appellant’s computation merely averaged the fees generated by the Respondent during the preceding three months and projected that figure forward. It did not produce evidence showing that, after the Respondent’s departure, the hospital was unable to secure an alternative doctor, that particular patients who would otherwise have been treated by the Respondent could not be treated, or that corresponding income was actually lost.

The Court further observed that the appointment of a substitute doctor might have resulted in equal or greater earnings, in which event the claimed amount would not represent loss and could amount to unjust enrichment.

In the absence of evidence of actual loss, the Appellant’s calculation remained a paper loss and did not satisfy Section 73. Accordingly, the Trial Court’s refusal to award damages was found to be legally justified.

The Court found no infirmity or illegality in the Trial Court’s dismissal of the suit and rejected the appeal as devoid of merit. The dismissal of Commercial Summary Suit No. 663 of 2024 was therefore affirmed, with no order as to costs.