A.K.Sinha vs Mahanagar Telephone Nigam Ltd. & ...
2009 Latest Caselaw 2375 Del

*              IN THE HIGH COURT OF DELHI AT NEW DELHI

+                               OMP No.457/2008

                                                        30th October, 2009

A.K.SINHA                                             ...Petitioner
                                Through:    Ms. Kamalakshi Singh, Adocate.


                     VERSUS

MAHANAGAR TELEPHONE NIGAM LTD. & OTHERS        ...Respondents
                      Through: Mr. Dinesh Agnani, Advocate.
CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA

     1. Whether the Reporters of local papers may be allowed to see
        the judgment?

     2.   To be referred to the Reporter or not?

     3. Whether the judgment should be reported in the Digest?

%                               JUDGMENT (ORAL)

VALMIKI J. MEHTA, J.

1. This OMP under Section 34 of the Arbitration and Conciliation Act,

1996 contains the objections to the impugned award dated 16.5.2008

passed by the sole arbitrator. The only issue in this case pertains to the

claim made by the present petitioner for the loss of profits in not

awarding the complete volume of work as envisaged under the contract.

The contract in question was entered into through a letter of award

dated 21.2.2002 of the respondent and six agreements dated 1.3.2002,

were entered into between the parties for laying by the petitioner of

telephone cables by using the trenching method. The case of the

O.M.P. No.457/2008 Page 1 applicant/petitioner was that whereas the petitioner was contracted to do

600 Km of work, but only 40 Km (42 as per the respondent) of work

was awarded against the original contracted length of 600 Km. Before

the arbitrator, the claimant claimed the profit margin of 10% on the

balance portion of the work not allowed to be taken up viz of 560 km .

The claimant claimed a sum of Rs.2,43,36,000/- as loss of profit under

this head.

2. It was very ably argued by the counsel for the petitioner before this

court that once the respondent is held guilty of breach of contract, and

which has been done in this case, the finding arrived at by the arbitrator,

that the petitioner was not entitled to the balance amount of work for

laying of 560 km of cables is clearly incorrect and that the petitioner

ought to be granted profit margin of 10% of the contract. The counsel in

this behalf has relied upon various judgments including of Supreme Court

and which are Mohd Salamatullah Vs. Govt. of A.P. AIR 1977 SC 1481,

A.T.Brij Paul Singh Vs. State of Gujrat AIR 1984 SC 1703 and Ayub Ali Vs.

Union of India 86 (2000) DLT 869. On the strength of these judgments,

the counsel has strenuously contended that it is not necessary to prove

the loss of profits and there can be honest guess work in allowing the

loss of profits.

O.M.P. No.457/2008 Page 2

3. A reference to the aforesaid judgments no doubt shows that in

awarding loss of profits as damages, there is involved an element of

honest guess work, however, I do not find of anything in these judgments

where it is stated that no evidence at all need be led and yet loss of

profits can be awarded. In the case of Mohd. Salamatullah, there is a

specific line in paragraph 2 of the judgement which states that evidence

was led as to the loss of profits per gun and there was no cross

examination on this point. Thus, there was some evidence on the basis

of which further honest guesswork could be made.

4. The arbitrator in this behalf has held as under:-

"1. Claim No.1 As to the deprivation of profit on an amount of Rs.2,43,36,000/-(contract not allotted), the onus is on the claimant to render evidence in support of it. Except for oral assertion no material has been placed on record to show that the claimant would have earned profit on the said amount and that too at 10%. Accordingly, the claim at Rs.24,36,000/- remains unapproved, hence not allowable. As the initial claim at Rs.24,36,000/- is not allowable further profit at 10% on the said amount of Rs.24,36,000/- upto 28.2.2004 and further interest upto 31.5.2004 working at Rs.57,570/- is not allowable. In fact the roll on profit at Rs.33,30,924 on the initial profit of Rs.24,36,000/- and interest thereon is not allowable, hence, claim is rejected."

(Emphasis added)

O.M.P. No.457/2008 Page 3 In any case, I find that this issue would not have much bearing on the

facts of this case as I am more concerned with the two aspects which have

been raised by the respondent before the Arbitrator and one of which

shows that no loss of profits was caused to the petitioner. The first aspect

is that the respondent has stated before the arbitrator by filing its

affidavit by way of evidence that the same petitioner instead of doing the

work in question was awarded work of cable laying by trenchless

technology and if the value of both the works is taken i.e. the work

performed in the contract in question and the new work of cable laying

by trenchless technology, then the value of the work so done by the

petitioner for which it would have earned profit is much more, than the

value of the balance of the work not performed. I may note that the

total value of the work under the subject contract is Rs.2,40,00,000/-.

The evidence has been filed on behalf of the respondent before the

Arbitrator that the present petitioner has in fact done work of the value

of Rs.8,28,85,648/-. The relevant paragraph 10 of the affidavit by way

of evidence dated 6.11.2007 of one Sh.S.K.Kapadia reads as under:

"10. I say that in the tender for open trench method he was awarded cable laying work for 600 kms cables length for a total value of Rs.24000000/-. I say that out of this, the claimant executed cable laying and other allied works work for a value of Rs.56,75,128/-. I

O.M.P. No.457/2008 Page 4 further say that in the tender for trench less method the claimant was awarded cable laying work for 57.25 kms cable length for a total value of Rs.25565560/-. I say that the claimant was given additional wok and thus executed cable laying work by trenchless method for 178.689 kms cable length for a value of Rs.7,72,10,520/-. I say that in terms of value combined in both methods of work, the claimant was entitled to work of value of Rs.49565560/- only whereas work of value of Rs.8,28,85,648/- was given to the claimant, which is much more than the entitlement of the claimant under both the tenders."

5. At this stage, it is necessary to refer to Section 73 of the Contract

Act and which reads as under:

73. Compensation for loss or damage caused by breach of contract--- When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused t him thereby, which naturally arose in the usual course to things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.

Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.

Compensation for failure to discharge obligation resembling those created by contract---- When an obligation resembling those created by contract has been incurred and has not been discharged , any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if

O.M.P. No.457/2008 Page 5 such person had contracted to discharge it and had broken his contract.

Explanation---- In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by non-

performance of the contract must be taken into account."

6. The explanation to Section 73 is relevant and as per which merely

because there is a breach of contract the aggrieved party is not entitled to

damages unless it actually suffers loss. In the present case, it is clear that

the petitioner was awarded work of much more value than the balance

work which was not performed under the original contracts dated

1.3.2002. That being the position, the petitioner would have earned

profit for the portion of the work done under the contracts dated

1.3.2002 and also for the new cable laying by trenchless technology. If

that be so profits would have been in fact earned by the petitioner

disentitling it to claim any compensation as loss of profits. I may note

that of course, the petitioner could have led evidence before the

Arbitrator to say that it could have performed both the contracts

simultaneously and it had the necessary wherewithal in the form of

labour and material etc. but it is not disputed by the counsel for the

petitioner that no such evidence has been led before the Arbitrator to this

effect.

O.M.P. No.457/2008 Page 6

7. The second aspect is that the counsel for the respondent has relied

upon para 13 of Section III of the contract and also para 1.4 of the

Instruction to the Bidders portion of the contract and both of which

clauses clearly specify that though the work awarded is of a particular

length for cable laying, however, it was always open to the respondent

whereby it could require a particular work not to be performed and in

fact the respondent had the right to make alteration, addition and

subtraction of any item of work at any stage of the contract and it is

specifically mentioned in the aforementioned para 13 and clause 1.4 of

the instructions to bidders that the contractor shall not have any

claim/compensation on account of alteration of the contract. In terms of

these clauses on showing of reasons and facts necessitating the alteration

amendments can be done and which would be a reasonable

interpretation of the clauses inasmuch as reasonableness in action will

have to be read into such clauses. The counsel for respondent has

contended that this clause was inserted in the contract because there were

taking place fast changes in technology of cable laying and which became

evident in this case itself when the trenchless technology replaced the

trenching technology of cable laying being a valid and reasonable reason

for amendment in the contract. That being so, on both the grounds,

whether the petitioner has at all suffered a loss and has failed to prove

O.M.P. No.457/2008 Page 7 the same before the Arbitrator or that there was no obligation on the

respondent to necessarily award the entire volume of work under the

contracts, cannot be held in favour of the petitioner/claimant.

8. Accordingly, I do not find that the award in question calls for any

interference by this Court because it does not violate either any law or

any contractual provisions or can be said to be perverse in any manner

whatsoever and I do not find any merit in this objection petition.

Ordinarily, I would have imposed costs because this Court has been

consistently following the practice of awarding actual costs to the

successful party, however, Mr. Dinesh Agnani ,Advocate appearing for

the respondent, has at this stage, very fairly waived costs.

9. With these observations, the present petition is dismissed.

OCTOBER 30, 2009                                    VALMIKI J. MEHTA, J
ib




O.M.P. No.457/2008                                                    Page 8