The need for evidence to justify the award of compensation, especially for overheads and loss of profits, and the burden of proof for claiming such damages.

1. Both these petitions under Section 34 of the Arbitration and Conciliation Act, 1996 (‘Act’) raise limited challenge to an Award dated 4th December 2012 passed by the Arbitral Tribunal (‘AT’) in the disputes between the parties i.e. the National Highways Authority of India (NHAI) and Bhumi Hiway (M) SDN BHD ('BHSB') arising out of a contract agreement dated 14th June 2001 for the Four-Laning of Km 4.23 to 26.00 of Jalandhar Pathankot Section of NH-1A in the State of Punjab.

2. The start date was 30th August 2001. The scheduled date of completion was 29th August 2003. The date up to which the extension was granted was 30th September 2004. In terms of the report of the Engineer the date of substantial completion was 1st October 2004 and the date of completion was 16th October 2004.

3. The disputes between the parties were referred to a three-Member AT. The following claims of BHSB were rejected by the AT:

(ii) Claim No.1 in for a sum of Rs.48,46,316.40 for recoupment of premium paid on additional insurance covers apart from the stipulation of the contract agreement.

(ii) Claim No. 2 for a sum of Rs.1,37,71,418 for breach in compliance with the provisions of construction methodology as per contract agreement and the consequential loss suffered by the claimant.

(iii) Claim No.3 for sum of Rs.30,46,496 on account of the loss caused to the contractor for preparation of construction drawings for permanent works which was primarily the obligation of the Engineer/employer.

(iv) Claim No. 4 for a sum of Rs.58,47,103 for laying DBM in two layers instead of a single layer.

(v) Claim No.5 for a sum of Rs.1.19 crores for loss of estimated profit in respect of abnormal reduction in the scope of work.

4. Claim No. 6 was for a sum of Rs.8.64 crores for losses on account of overheads and for loss by way of profit. The AT applied the MOST Data Book and also the Hudson’s formula and determined that BHSB would be entitled to Rs.1,88,70,000.

5. Claim No. 7 was for interest on the above claims @ 12% per annum pendente lite. The AT determined that no pre-suit or pendente lite interest was payable since Claims 1 to 5 had already been rejected. However, under Claim No. 8 i.e. future interest @ 12% per annum on the awarded amount against Claim No. 6 from the date of the Award till the receipt of payment was granted.

6. OMP No. 249/2013 has been filed by the NHAI challenging the above Award primarily on the ground that no material was placed by BHSB on record to prove that it had incurred any overheads or suffered any losses. Having acknowledged this, the AT could not have applied the formula and estimated the overhead charges and loss of profit.

7. On its part BHSB has filed OMP No. 274/2013 to the limited extent that in the impugned Award the AT declined to grant it pendente lite interest.

8. It was submitted by Mr. Rajiv Kapoor, learned counsel for NHAI, that the AT erred in holding that NHAI was responsible for the delay of 38 weeks of the total delay of 59 weeks because liquidated damages (‘LD’) were levied only for 16 days. Secondly, it was submitted that in assessing the loss of the overheads to be 4%, the AT proceeded on surmises and conjectures. No amount towards overheads or the loss of profit could have been awarded unless BHSB proved that there was some actual loss and that it had done all that was required to mitigate the loss. NHAI had already paid BHSB escalation up to 30th September 2004 by which time the work had been substantially completed. Therefore, awarding 6% on account of loss of profit had no reasonable basis. Mr. Kapoor accordingly submitted that the impugned Award was against public policy and wholly unsustainable.

9. Mr. D. Moitra, learned counsel appearing for BHSB, submitted that the scope of interference by the Court in the impugned Award was extremely limited. The AT had only applied Hudson’s formula which had been approved by the Supreme Court in McDermott International Inc. v. Burn Standard Co. Ltd. (2006) 11 S