Single Judge Rightly Upheld Arbitrator’s order to refund Damages As No Legal Injury Occurred Despite Late Supply | HC

Case Details: Bharat Heavy Electricals Ltd. v. Kanohar Electricals Ltd. - [2024] 160 taxmann.com 473 (HC-Delhi)

Judiciary and Counsel Details

• • Rajiv Shakdher & Amit Bansal, JJ.
  • Neeraj Malhotra, Sr. Adv. Sarojanand Jha, Rajreeta Ghosh, Rahul Kumar & Nimish Gupta, Advs. for the Appellant.
  • Raman Kapur, Sr. Adv. & Varun Kapur, Adv. for the Respondent.

Facts of the Case

In the instant case, the appellant filed an appeal against the judgement rendered by the learned Single Judge. The Single Judge dismissed the appellant’s petition under section 34 of the Arbitration and Conciliation Act, 1996.

In a tender floated by the appellant for the supply of 46 transformers, an offer made by the respondent was accepted. Out of the 46 transformers, 42 transformers were delivered within the timeframe agreed to between the parties. It was a delay in delivering 4 transformers that propelled the appellant to levy liquidated damages on the entire contract value.

The appellant did not adjust the proportionate reduction in liquidated damages concerning 42 transformers which had been delivered by the due date. This led the respondent to invoke an arbitration agreement arrived at between the parties.

Consequently, with the mutual consent of the parties, a sole arbitrator was appointed. The arbitrator directed a refund of the amount retained towards liquidated damages inter alia on the ground that out of 46 transformers supplied by the respondent, only 20 transformers had been installed and of which, only 8 had been commissioned.

It was noted that the delay between the supply of transformers and their commissioning, at the very least, was 27 months, when 8 out of 46 transformers supplied were commissioned. Thus, the appellant did not suffer any loss/injury due to the delay in the supply of transformers.

The Single Judge while dismissing the petition u/s 34 of the Arbitration and Conciliation Act, 1996 arrived at the same conclusion. Subsequently, an appeal was made before the High Court.

High Court Held

The High Court held that since the pleadings concerning injury/loss on account of delay in the supply of transformers were vague lacking specific details on how and in what manner the loss was suffered, no interference was called for with the judgment of the Single Judge. Therefore, the instant appeal against the same was to be dismissed.