Contractual clauses limiting remedies for delays will become void – High Court of Delhi
MBL Infrastructures Limited vs. Delhi Metro Rail Corporation (12.12.2023 – DELHC) : MANU/DE/8454/2023
👉The High Court of Delhi addressed the dispute between MBL Infrastructures Limited and Delhi Metro Rail Corporation regarding an arbitral award.
👉The core issue was whether the arbitral tribunal erred in not awarding damages to MBL despite acknowledging delays and wrongful contract termination by DMRC.
👉This Court is of the opinion that the clauses which restricts the right of the party in claiming damages is a restrictive clause. Such a clause will defeat the purpose of the Indian Contract Act, 1872. Under section 55 and 73 of the said Act, the aggrieved party is entitled to claim damages, and there cannot be any restriction or prohibition exercised by the other party. It is the right of the aggrieved party to claim such damages.
👉Under section 23 of the Indian Contract Act, 1872, states that such clause is opposed to public policy since it aims at restraining the aggrieved party from claiming its rightful dues.
👉Such kind of clauses are also not in public interest since they hinder the smooth operation of the commercial transaction. Furthermore, they create an environment which is not conducive for the purpose of business transactions. Moreover, the said clauses cannot restrain the Tribunal from awarding damages, which are otherwise payable by the employer on account of its breach of contract
👉The court found the tribunal’s decision flawed, as it failed to award damages for delays caused by DMRC, contrary to the Indian Contract Act’s provisions.
👉The court partially set aside the award, remitting claims for damages and loss of profit back to the tribunal for reconsideration, while upholding the tribunal’s decision on other claims.
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