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IN THE HIGH COURT OF DELHI
Rajiv Shakdher, Tara Vitasta Ganju, JJ.
Hindustan Petroleum Corporation Ltd. - Appellant
Versus
Dhampur Sugar Mills - Respondent
FAO (OS) (COMM) 125 of 2022
Decided On : 18-05-2022
A claimant must sufficiently plead and prove breach, causation, and damage to validate a claim for damages in contract disputes, adhering to established legal standards.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 34 - Appeals against arbitral award - The learned single judge set aside the sole arbitrator’s award regarding damages of Rs.88,14,785/- based on the claimant's failure to supply ethanol as per contractual obligations. The appellant argued the damages were valid under the 'Take or Pay' clause in the contracts. The court found deficiencies in the appellant's pleading of damages, emphasizing the need to establish breach, causation, and resulting damages for a valid claim. (Paras 4, 10.1-10.2, 11.1-11.4)
Facts of the case:
The appellant challenged the single judge's judgment that invalidated the annulling of the award by the sole arbitrator concerning claimed damages for non-supply under the contractual 'Take or Pay' clause. The respondent was obligated to provide supplies, which were not met.
Findings of Court:
The learned single judge's judgment ruling that the appellant’s claims were insufficiently established should not be interfered with, favoring the respondent's legal argument regarding long-standing legal principles.
Issues: The main issues included whether the appellant sufficiently pleaded damages and whether the learned single judge correctly assessed the arbitrator's findings and law application.
Ratio Decidendi: The court ruled that a claim for damages necessitates demonstrating a breach, a direct causal link to an injury, and an ability to quantify loss to uphold the claim.
Result: Appeal dismissed.
| Table of Content |
|---|
| 1. appeal against single judge's judgment (Para 1 , 2 , 3) |
| 2. appellant's claim for damages based on clause 3 (Para 4 , 5) |
| 3. injury pleading concerning supply deficiency (Para 6 , 7) |
| 4. respondent's contention on pleading damages (Para 8) |
| 5. components required for claiming damages (Para 10 , 11) |
| 6. total damages awarded to respondent (Para 12) |
| 7. judgment dismissal and cost allocation (Para 14 , 15 , 16) |
JUDGMENT
Rajiv Shakdher, J. (Oral)
CM APPL. 23414/2022
1. Allowed, subject to just exceptions.
FAO (OS) (COMM) 125/2022 and CM APPL. 23413/2022[Application filed on behalf of the appellant seeking stay on operation/implementation of the order/judgement dated 06.01.2022.]
2. This appeal is directed against the judgment of the learned single judge dated 06.01.2022.
3. The learned single judge, via the impugned judgment, has set aside the award dated 23.08.2012 rendered by the sole arbitrator.
3.1. To be noted, the sole arbitrator was, admittedly, appointed by the appellant.
4. Mr Sunil Dalal, learned senior counsel, who appears on behalf of the appellant, confines his challenge to one issue, which is, that the learned single judge has, according to him, wrongly set aside the award dated 23.08.2012 qua damages claimed by the appellant.
4.1. Insofar as the sole arbitrator is concerned, he had awarded, to the appellant, towards damages Rs.88,14,785/-.
4.2. Pertinently, Mr Dalal pitches the appellant's claim for damages on the applicability of the following clause, which is, found in the five agreements that obtained between the parties i.e., Clause 31 . In particular, our attention has been drawn to sub-clause (vi) of the said clause. For the sake of convenience, Clause 3 is extracted hereafter:
"3. TAKE OR PAY/SUPPLY OR PAY:
The both parties agree to supply/uplift minimum 90% of the supply order quantity. In case of failure from either party, this "Take or Pay/Supply or Pay" clause shall be applicable in addition to the other terms & conditions of the contract. The modalities shall be as under:
i. The purchaser shall issue the supply orders on financial year basis i.e., the first supply order shall be for the period starting from the effective date of contract till end of that financial year and subsequent supply orders shall be for the remaining period of the contract during that financial year and the subsequent supply orders shall be issued 30 days prior to start of the next financial year.
ii. The Location shall place monthly indents/schedule for supplies of ethanol by the Suppliers.
iii The Supplier will make the supplies as per the indents/schedule placed by the purchaser. The Supplier shall strictly adhere to the supply schedule. In case of failure to supply, the committed quantity shall reduce on prorate basis for the period so delayed on weekly basis or part thereof. For the purpose of calculating prorate quantity, date of receipt at location shall be taken as date of supply and scheduled date provided by the location shall be considered as requirement date for this purpose.
iv. The above reconciliation of quantity supplied visa-a-visa indents/schedule will be done on calendar month basis by the indenting locations.
v. The reconciliation and settlement of amounts of the committed quantity for the State(s) will be done on financial year basis.
vi. Amount of Rs.2150/- per KL (Rupees Two Thousand One Hundred and Fifty Only per KL) (equivalent to 10% of the basic rate) shall be payable by the Supplier for the undelivered quantity on financial year basis from minimum quantity of 90% of the order quantity (which according to the party is true estimated value of the damage/loss).
vii. Amount of Rs.2150/- per KL (Rupees Two Thousand One Hundred and Fifty Only per KL) (equivalent to 10% of the basic rate) shall be payable by the Purchaser for the un-indented quantity 7from minimum 90% of the order quantity minus prorate quantity arrived as per clause 3 (iii) above on financial year basis (which according to t
