Delhi Transport Corporation vs M/S Deeksha Security Services
2017 Latest Caselaw 2321 Del

*            IN THE HIGH COURT OF DELHI AT NEW DELHI

+                         FAO No. 453/2016

%                                                        9th May, 2017

DELHI TRANSPORT CORPORATION              ..... Appellant
                 Through: Mr.  Sarfaraz     Khan      and
                          Md.Khairul Hussain, Advocates.

                          versus

M/S DEEKSHA SECURITY SERVICES              ..... Respondent

Through: Mr. Vikas Tiwari, Advocate.

CORAM:

HON'BLE MR. JUSTICE VALMIKI J.MEHTA

To be referred to the Reporter or not?

VALMIKI J. MEHTA, J (ORAL)

1. This first appeal under Section 37 of the Arbitration and

Conciliation Act, 1996 ( hereinafter referred to as 'the Act') is filed by

the appellant against the judgment of the court below dated 2.4.2016

by which objections filed by the appellant under Section 34 of the Act

were dismissed. By the Award of the arbitrator dated 16.11.2013 the

claim filed by the appellant/objector for a sum of Rs.6,00,000/- was

rejected.

2. The facts of the case are that admittedly there was an

agreement dated 14.5.2009 entered into between the parties whereby

the respondent was to supply to the appellant one hundred security

guards for security for various premises of the appellant. Since the

respondent failed to supply the security guards, appellant sought to

forfeit the security amount of Rs.6,00,000/- and which was in the form

of bank guarantee given by the respondent to the appellant under the

subject agreement. The bank guarantee, however, in the meanwhile

had expired and therefore the appellant could not encash the bank

guarantee. Appellant, therefore, filed the subject arbitration

proceedings for recovery of the amount of Rs.6,00,000/-.

3. The court below has dismissed the objections by its

detailed judgment by observing that the claim of the appellant was a

claim for liquidated damages under Section 74 of the Indian Contract

Act, 1872 and since under Section 74 of the Indian Contract Act proof

of actual damage or loss caused is a sine qua non for applicability of

the Section, and, since the appellant had failed to prove any case of

having suffered any actual damages on account of the breach, the

Arbitrator was hence justified in dismissing the claim petition by the

Award dated 16.11.2013.

4. I, completely agree with the conclusions of the court

below as also the Arbitrator, inasmuch as, there are three types of

contracts. One type of contracts are those type of contracts where there

is no clause of liquidated damages and therefore in such a case the

aggrieved party files a suit for recovery of damages on account of

losses suffered by it under Section 73 of the Indian Contract Act. The

second type of contracts/cases are those cases where on account of

breach of contract on account of there being a clause of liquidated

damages under the contract the same is sought to be enforced because

there is no method of calculating the damages or loss suffered by the

breach of contract. The third type of contract/cases are those cases

where though the contract provides for liquidated damages the amount

of loss caused by the breach can be calculated and thus, the nature of

the contract is such that losses can be calculated, and therefore in these

third type of contracts/cases though there is only a clause of liquidated

damages, the clause of liquidated damages is in the nature of upper

limit of damages which can be awarded for breach of the contract

provided also that the liquidated damages amount is not in the nature

of penalty. That there are these three types of contracts in law is now

well established in view of the judgments of the Supreme Court in the

cases of Fateh Chand Vs. Balkishan Das, AIR 1963 SC 1405, Oil &

Natural Gas Corporation Ltd. Vs. SAW Pipes Ltd. (2003) 5 SCC 705,

and Kailash Nath Associates Vs. Delhi Development Authority and

Another, (2015) 4 SCC 136.

5. In the present case, the nature of contract is such that the

damages could always have been calculated because if the respondent

did not supply the security guards then the appellant could have

engaged security guards from another agency and if for getting security

guards engaged from another agency the appellant would have had to

pay a higher cost than the cost of security guards provided by the

respondent, then in such a case the appellant would have suffered

monetary loss and hence would have been entitled to claim damages

with the fixed liquated damages being the upper limit of damages

which could be awarded. In the present case, there is no pleading or

evidence led in the arbitration proceedings on behalf of the appellant

pleading that the appellant had to engage alternative security guards at

a higher cost and since therefore loss was suffered by the higher costs,

hence the security deposited in the form of bank guarantee given by the

respondent was sought to be forfeited. Therefore, once there is no

pleading at all of the appellant having suffered losses on account of

engaging guards from another security agency at a higher cost, and the

amount of contract being such that the nature of loss could not have

been calculated, appellant therefore could not have maintained the

claim petition in the absence of pleadings and proof of the loss

suffered, and which is a sine qua non, as rightly held by the court

below, for enforcing the claim of damages.

6. Dismissed.

MAY, 09 2017                                 VALMIKI J. MEHTA, J
AK