Jodhpur: The Court has upheld the Commercial Court’s decision to set aside a ₹4.26-crore arbitral award, holding that the tribunal wrongly awarded ₹4.20 crore in future damages despite the contract barring claims for business losses.
The dispute arose from a Letter of Intent, under which Amor Hospitality was to operate the hotel for nine years. Although the company took possession, the formal lease deed was never executed and the arrangement broke down after one year.
The dispute went to arbitration, where the tribunal awarded ₹4.26 crore to Amor Hospitality, including ₹4.20 crore towards future damages. The hotel owner challenged the award, and following which the Commercial Court set it aside in 2021.
A Division Bench of Justice Pushpendra Singh Bhati and Justice Praveer Bhatnagar examined whether the tribunal’s award could stand despite the contractual restrictions and the manner in which the future damages were calculated.
The Court focused on the contractual clause that excluded liability for “business losses” as well as indirect and consequential losses.
Amor Hospitality argued that the future profits awarded by the tribunal were direct damages recoverable under Section 73 of the Contract Act
The Court rejected this argument, holding that although loss of profit may ordinarily be claimed as damages, the parties had specifically excluded business losses under the contract. The tribunal, however, failed to explain why the future profits awarded to Amor were not covered by that exclusion.
The Court also found flaws in the tribunal’s calculation of the ₹4.20-crore future damages.
Court noted that the tribunal had annualised the hotel’s profits despite the seasonal nature of the business, failed to properly account for expenses and did not consider the agreed 10% increase in lease fees every three years.
The Court held that these issues were not mere errors in calculation or a different appreciation of evidence, but went to the root of the award.
The Court also clarified that Section 37 permits only limited interference. An appellate court cannot substitute its view merely because another interpretation is possible.
The Bench therefore upheld the Commercial Court’s decision and dismissed the appeal.