In the absence of contemporaneous evidence, claims for loss of profit due to contract prolongation are unsustainable, particularly when the agreement contains a specific clause precluding compensation for lost profits or advantages resulting from the foreclosure of the contract.

Bipin Chander Negi, Judge

The present appeal has been preferred against the impugned judgment dated 23.08.2019, whereby objections filed under Section 34 of the Arbitration and Conciliation Act, preferred by the present appellant, have been rejected. Admittedly, in the case at hand, an award with respect to construction of work for bachelor accommodation at Sundarnagar, District Mandi, H.P, for a sum of Rs. 1,96,03,299/- was granted in favour of the present appellant. The work was required to be completed within 18 months. The land whereupon the building was to be constructed was owned by the State Government and possessed by the respondent-Corporation. However, the appurtenant land through which the passage existed to reach the site was owned by the BBMS. Post-award, site development to the tune of Rs. 1,02,654/- before August 2011 had been done by the present appellant. The appellant, right from 31.08.2011 to 23.06.2016, attempted to get delivery of the site, as is evident from letters written by the appellant in this regard (Annexure C-3 with the claim petition filed before the Arbitrator). Similarly, the respondent, in terms of Annexure-III appended with the reply filed to the claim petition, had extended the date of completion of the work till 15.08.2014. The closure of work had taken place on 16.12.2016, vide Annexure C-4 appended with the claim petition filed before the Arbitrator.

In the aforesaid backdrop, taking into account the dilatory conduct of the respondent and the optimistic hope of the present appellant to complete the work, damages to the tune of Rs. 1 lakh were awarded by the Arbitrator on account of the inordinate and delayed closure of the contract on 16.12.2016. Other than the aforesaid, costs of the arbitration proceedings had also been awarded in favour of the appellant. Since the claim for refund of security and earnest money was admitted by the respondent, the same had been granted by the Arbitrator in favour of the present appellant. The aforesaid amount awarded was to carry interest at the rate of 9%. If the same was not paid within one month of the passing of the award, then it was to carry an enhanced rate of interest at the rate of 12%.

The sole contention raised in the objection petition under Section 34 pertained to the non-grant of the claim to the extent of Rs. 29,40,495/- claimed as loss of profit and overhead on account of prolongation of the contract by the appellant. The aforesaid claim had been rejected by the Arbitrator on account of absence of proof and in terms of Clause 36 of the contract entered into inter se the parties. The learned Single Judge, while dismissing the claim, found no fault in the reasoning of the Arbitrator and concurred with the same, while reproducing the said clause and holding as under:-

6(ii) The above Clause empowers the respondent to abandon or reduce the scope of the work for any reason whatsoever. The contractor will have no claim, in terms of this Clause, to any compensation on account of any payment of compensation, on account of any profit or advantage which he might have derived from the execution of the works in full, but which he could not derive on account of fore-closure either of part or whole works.

Clause 36.1, when read in its entirety, though provides that in case of fore-closure of the contract, the contractor has to be paid at the contract rates for full amount of the works executed at the site and in addition, reasonable amount certified by the Engineer-in-Charge for the items, which could not be utilized on the works to full extent because of the fore-closure. The items mentioned in this Clause are in respect of preliminary works, i.e. temporary access roads, temporary labour huts, staff quarters, site office, storage accommodation workshop, installation and dismantling of construction equipment and water storage tanks etc. Clause also provides for materials in similar way.

6(iii) Thus, in terms of Clause 36.1 of the agreement du