Delhi High Court Sets Aside Arbitral Award Pertaining To Damages for Lost Profits

New Delhi, Aug 2 (KNN) In a significant ruling, the High Court has affirmed a Single Judge's decision to set aside an arbitral award in the case of Plus91 Security Solutions vs. NEC Corporation India Private Limited.

The High Court found this award to be vitiated by patent illegality, as it contradicted the clear terms of the agreement.

The court emphasised the importance of maintaining the original bargain between parties, including liability exclusions agreed upon in the contract.

This judgment underscores the courts' approach to upholding contractual terms in arbitration cases and the limits of arbitral tribunals' discretion in interpreting agreements.

The Arbitral Tribunal had initially awarded Plus91 Rs 8.43 crore as damages for lost profits, despite a clause in the MOU excluding liability for such losses.

The High Court ruled that arbitrators lack jurisdiction to award interest if expressly forbidden by the contract.

While the MOU exempted certain damages like loss of profits, it did not preclude compensation for direct costs incurred.

The dispute centered on a Memorandum of Understanding (MOU) between the two companies regarding potential collaboration on biometric boarding systems.

The MOU was interpreted as a preliminary agreement to explore collaborations, not a binding commitment to specific contractual obligations.

The case (FAO (OS)(COMM) 36/2024) was argued by Senior Advocates Jayant Mehta and Ramesh Singh, representing the respective parties.

This ruling may have significant implications for future arbitration cases involving the interpretation of preliminary agreements and liability exclusion clauses.

(KNN Bureau)