In a recent ruling, the Supreme Court emphasized the essential requirement of credible evidence in loss of profit claims, setting a precedent for rigorous standards in such legal matters.
- M/S Unibros (“Unibros”) was awarded a work contract by All India Radio (“AIR”) to carry out construction of Delhi Doordarshan Bhawan. The project was delayed by almost 43 months beyond the stipulated contract period due to reasons attributable to AIR.
- Unibros claimed compensation for loss of profits due to escalation in prices and its extended retention on the contract without any corresponding increase in monetary benefits. The disputes between the parties were subsequently referred to an arbitrator.
- The arbitrator issued an award in favor of Unibros, awarding a sum inclusive of loss of profit incurred due to the prolonged contract period (“First Award”). The arbitrator determined the loss of profit using Hudson’s formula, considering the delay and the contract’s value.
- AIR referred the award before the High Court of Delhi, wherein the court set aside the First Award and referred the First Award back to the arbitrator directing the arbitrator to only consider factual evidence and not consider Hudson’s formula while determining the loss of profits.
- The arbitrator subsequently issued a Second Award, upholding the First Award. AIR appealed by filing a petition in court to set aside the Second Award. The Single Judge nullified the Second Award, emphasizing the absence of credible evidence supporting the claim of loss of profit.
- Unibros contested the Single Judge’s decision at the Supreme Court. The Apex Court emphasized the need for credible evidence in loss of profit claims. In this case, the absence of such evidence meant damages couldn’t be awarded without proof of actual losses.
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M/S UNIBROS VS. ALL INDIA RADIO CIVIL APPEAL NO(S). 006895-006895 OF 2023
