The court upheld the arbitral award for loss of profits, affirming that failure to notify a contract's termination constituted a material breach, justifying compensation under the Indian Contract Act.

JUDGMENT :

(Moushumi Bhattacharya, J.)

1. The Appeal, filed under section 37(1)(b) of The Arbitration and Conciliation Act, 1996, assails an order passed by the learned Commercial Court on 30.03.2022 in Commercial Original Petition No.79 of 2017. By the impugned order, the Commercial Court dismissed the appellant’s petition filed under section 34 of the 1996 Act for setting aside an Award dated 17.12.2016.

2. The appellant was the respondent in the arbitration. The respondent No.1 was the claimant. The arbitration culminated in the Award dated 17.12.2016 passed by a Tribunal consisting of three learned Arbitrators. Apart from challenging the impugned order dated 30.03.2022 passed by the Commercial Court, the appellant also seeks to set aside the Award dated 17.12.2016. The appellant however restricts the scope of the Appeal to the extent of the loss of profit awarded by the Arbitral Tribunal in favour of the respondent No.1/claimant.

3. But first, a brief narration of the relevant facts leading to the Award and the impugned order.

4. In June, 2012, M/s. Gayathri Projects Limited (GPL)/Principal Employer issued a Tender Notification inviting bids for designs, engineering, supplies, erection, testing and commissioning of 4,000 TPH External Coal Handling Plant for construction of 2X660 MW Thermal Power Plant developed by NCC Power Projects Limited at Krishnapatnam. The appellant (M/s.NCC Limited) and GPL were partners in a Joint Venture for development of the said power plant. The appellant and the respondent No.1/claimant (M/s. Elecon EPC Projects Limited) entered into a Consortium Agreement dated 27.08.2012 with the appellant as the lead partner. On 29.08.2012, the appellant submitted its bid to GPL on an individual basis with the understanding that upon securing the contract, the appellant would enter into a back-to-back contract with the respondent No.1 except for the construction of civil works. Before finalizing the contract with GPL, the appellant issued a Letter of Intent (LOI) dated 19.12.2012 to the respondent No.1 with a contract value of Rs.183 Crores and a contract period of 22 months from the date of the LOI. On 09.02.2013 and 11.02.2023, GPL issued Letters of Award (LOAs) to the appellant and the appellant issued 2 LOAs to the respondent No.1 on 02.03.2013. The respondent No.1 submitted an Advance Bank Guarantee of Rs.15,48,56,900/- and a Performance Bank Guarantee of Rs.16,49,89,400/- in terms of the Agreement. The respondent No.1 also issued a LOA to the M/s. CKIT Conveyor Engineers of South Africa for availing of Professional Services for the 7.5 KM Pipe Conveyor Installation.

5. On 03.05.2013, the appellant released Rs.12 Crores as advance and thereafter the balance of Rs.3,48,56,900/-, against which the respondent No.1 submitted a Bank Guarantee for Rs.15.48 Crores. The respondent No.1 started the work on 17.05.2013, as per the LOI. On 27.08.2013, the appellant communicated the approval of the respondent No.1’s designs and other permissions between August 2013 and October 2013. In October 2013, there was a change in the management of the appellant-Company. In December 2013, GPL instructed the respondent No.1 to proceed with the critical engineering works.

6. On 19.04.2014, GPL awarded the same scope of work to M/s.Macmet India Limited although the contract awarded to the respondent No.1 was not expressly terminated. On 05.06.2014, the appellant invoked the Advance Bank Guarantee of Rs.15,48,56,900/- which led the respondent No.1 to file petitions under section 9 of the 1996 Act before the District Court at Ranga Reddy, Hyderabad. The respondent No.1 filed O.P.Nos.342 and 364 of 2014 for injunction on the invocation of the Bank Guarantee and Performance Bank Guarantee and also issued a notice for invocation of arbitration to the appellant on 05.07.2014. The respondent No.1 claimed Rs.101,68,18,000/- from the appellant.

7. The Award was passed on 17.12.2016 in favour of the respondent No.1 for an amount of Rs.5,09,49,62