Proof Of Injury Suffered Necessary For Awarding Damages Towards Loss Of Profits In Arbitration Proceedings: Delhi HC [Read Judgment]

The Delhi High Court, on Tuesday, held that it is imperative for the claiming party to submit proof of injury suffered in order to successfully claim damages for loss of profits in an arbitration proceeding.

" That in arbitration proceedings, just as in civil cases, an injured party can claim damages, does not necessarily translate into an award for damages towards loss of profits unless some diligence is exercised by the party (in the present case, Ahluwalia claiming it). In other words, a claim for damages (general or special) in the proceedings, cannot as a matter of course, result in an award, without proof of having suffered injury," the Bench comprising Justice S. Ravindra Bhat and Justice S.P. Garg observed.

The Court was hearing an Appeal filed by Alhuwalia Contract India Ltd. challenging rejection of its plea to set aside an arbitral award under Section 34 of the Arbitration and Conciliation Act. The Appellant had challenged the tribunal's refusal to grant it damages for loss of profits suffered during the extended period of the agreement.

It had contended that the plea of loss of profits has been supported through relevant materials and had relied on the line of questioning adopted during the arbitral proceedings.

The Court, however, did not consider this "worthwhile evidence" opining that " damages claimed cannot be granted as a matter of course; some material evidence is necessary".

Thereafter, rejecting the arguments put forth by the Appellant, the Court observed, "The cumulative effect of the award and the impugned judgment is such that the majority of such heads of claim for extra expenditure, increased salary and other overheads for the additional period have been granted. They are based upon certain formulae under the contract. However, in the case of the claim of general loss of profits, having nexus with the value of the contract, the Court finds that there is no worthwhile evidence – apart from the line of questioning adopted by the claimants."