The legal principle established is that a contract deemed to have been foreclosed entitles the party to compensation at the rate of 2% of the cost of unexecuted works, and the burden of proof lies with the claimant to substantiate claims for damages.

VIBHU BAKHRU, J.

1. The petitioner has filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter 'the Act'), inter alia, impugning the arbitral award dated 22.04.2016 (hereafter 'the impugned award') delivered by the Arbitral Tribunal constituted of a sole arbitrator, namely, Sh. Bharat Bhushan (Retired) (hereafter 'the Arbitral Tribunal'). The impugned award was rendered in the context of disputes that had arisen between the parties with respect to the Work Order dated 24.01.2007.

2. By the impugned award, the Arbitral Tribunal has awarded an aggregate sum of Rs. 11,88,600/- in favour of the petitioner. The said amount comprises of (i) Rs. 3,30,878/- on account of the work done as per the contract (Claim No. 1); (ii) Rs. 3,72,050/- towards the refund of the security deposit (Claim No.2); and (iii) Rs. 4,85,672/- as compensation for termination of the contract (Claim No. 6).

3. The principal controversy involved in the present case relates to compensation for termination of the contract calculated at the rate of 2% of the balance unexecuted work as provided for in case of foreclosure of the contract. The petitioner claims that this was a case of wrongful termination and the same entitled the petitioner to claim damages on account of loss of profits, which the petitioner had computed at the rate of 10% of the work that remained to be executed.

Factual Context

4. On 24.01.2007, the Municipal Corporation of Delhi (hereafter 'MCD') invited tender for the work of construction of Road Under Bridge (RUB) at the level crossing at Sarai Kale Khan, Nizamuddin SH. Construction of retaining walls along with approaches on either sides of proposed RUB.

5. The petitioner submitted his bids pursuant to the said invitation, which was accepted. MCD issued a Work Order dated 24.01.2007 for execution of the works at a value of Rs. 2,46,14,495/-. The works were to commence on 03.02.2007 and were to be completed within eighteen months, that is, by 02.08.2008.

6. There was an inordinate delay in commencing execution of the works, which the petitioner claims were for reasons either attributable to the respondent or otherwise beyond his control and admittedly, the petitioner could only execute works of the value of Rs. 3,30,878/-. MCD rescinded the contract on 03.10.2008. MCD also issued an order dated 07.10.2008, blacklisting the petitioner from participating in future contracts with MCD for a period of five years. The petitioner challenged the aforesaid order by way of a writ petition (being W.P.(C) 7538/2008 captioned “Shri Rajesh Gutpa v Municipal Corporation of Delhi”). The said petition was disposed of by an order dated 22.01.2009, whereby the impugned order dated 07.10.2008 was set aside. However, it was clarified that the said order would not preclude MCD to blacklist the petitioner provided the petitioner is afforded sufficient opportunity to be heard before passing any adverse order. MCD issued another order dated 06.05.2009 removing the petitioner from the MCD panel of contractors. This too was challenged by the petitioner before this Court by way of a writ petition - W.P.(C) 9236/2009 – which was allowed and by an order dated 10.08.2009, the order dated 06.05.2009 was set aside.

7. The petitioner invoked the arbitration clause and the Arbitral Tribunal was constituted by an order dated 22.09.2009 passed by this Court.

Arbitral Proceedings

8. The petitioner filed his statement of claims before the Arbitral Tribunal, inter alia, claiming that the works could not be executed at the site for the following reasons :-

(a) Non-removal of Jhuggies on the site: the petitioner claimed that there were 129 Jhuggies at the site, which were removed on 14.05.2007 and, therefore, no work could be commenced before that date;

(b) Non-shifting of the overhead tank: the petitioner claimed that there was an overhead tank constructed by the Railways towards eastern side of the site and unless an alternative overhead tank