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Unibros Vs. Respondent: All India Radio - (Supreme Court) (19 Oct 2023)

Principle, ex proprio vigore, would be applicable to arbitrator and multi-member arbitral tribunal as well, particularly when it is faced with a judicial decision ordering a limited remand

MANU/SC/1176/2023

Arbitration

Present appeal, at the instance of Appellant, registers a challenge to the judgment passed by the High Court dismissing an appeal carried by the Appellant under Section 37 of the Arbitration and Conciliation Act, 1996. Vide the impugned judgment, a Division Bench affirmed the judgment and order of a learned Single Judge whereby an objection of the All India Radio ("Respondent") under Section 34 of the Act was allowed resulting in setting aside of an arbitral Award dated 15th July, 2002 to the extent it awarded loss of profit to the Appellant.

The appeal is directed towards dismissal of the Appellant's claim for compensation relating to loss of profits (Claim No. 12). It is undeniably established that the Appellant's claim for loss of profit stems from the delay attributed to the Respondent in completing the project. It is further evident that the loss of profit sought in the present case is primarily based on the grounds that the Appellant, having been retained longer than the period stipulated in the contract and its resources being blocked for execution of the work relatable to the contract in question, it could have taken up any other work order and earned profit elsewhere.

A judicial decision of a superior court, which is binding on an inferior court, has to be accepted with grace by the inferior court notwithstanding that the decision of the superior court may not be palatable to the inferior court. This principle, ex proprio vigore, would be applicable to an arbitrator and a multi-member arbitral tribunal as well, particularly when it is faced with a judicial decision (either Under Section 34 or Section 37 of the Act) ordering a limited remand. In the wake of authority of judicial determination made by the Courts of law, any award of an arbitrator or a tribunal that seeks to overreach a binding judicial decisiondoes conflict with the fundamental public policy and cannot, therefore, sustain.

To support a claim for loss of profit arising from a delayed contract or missed opportunities from other available contracts that the Appellant could have earned elsewhere by taking up any, it becomes imperative for the claimant to substantiate the presence of a viable opportunity through compelling evidence. This evidence should convincingly demonstrate that had the contract been executed promptly, the contractor could have secured supplementary profits utilizing its existing resources elsewhere.

The law, as it should stand thus, is that for claims related to loss of profit, profitability or opportunities to succeed, one would be required to establish the following conditions: first, there was a delay in the completion of the contract; second, such delay is not attributable to the claimant; third, the claimant's status as an established contractor, handling substantial projects; and fourth, credible evidence to substantiate the claim of loss of profitability. On perusal of the records, present Court is satisfied that the fourth condition, namely, the evidence to substantiate the claim of loss of profitability remains unfulfilled in the present case.

The First Award was interfered with by the High Court. The Arbitrator, in view of such previous determination made by the High Court, could have granted damages to the Appellant based on the evidence on record. A claim for damages, whether general or special, cannot as a matter of course result in an award without proof of the claimant having suffered injury. The arbitral award in question, is patently illegal in that it is based on no evidence and is, thus, outrightly perverse; therefore, again, it is in conflict with the "public policy of India" as contemplated by Section 34(2)(b) of the Act. There is no merit in this appeal. Appeal dismissed.

Tags : ARBITRAL AWARD   QUASHING OF   VALIDITY  

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