Bombay HC: courts can award reasonable compensation for breach of contract without proof of actual loss

The Bombay High Court dismissed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 by a developer, Kumar Urban Development Pvt Ltd, challenging an arbitral award that had gone against it in a long-running dispute with a cooperative housing society over a redevelopment agreement. Justice Aarti Sathe reiterated the settled position on Sections 73 and 74 of the Indian Contract Act, 1872: Section 74 must be read together with Section 73, so that in every case of breach, the aggrieved party is not required to prove actual loss or damage before a court (or arbitrator) can award a decree, and reasonable compensation can be granted even where no actual damage is proved, provided the sum is not a penalty but a genuine pre-estimate of loss, particularly where damage from the breach would otherwise be impossible to assess precisely.

Applying this to the sole arbitrator's detailed findings on the facts and evidence before him, the Court held that the arbitrator had taken a possible view which the Court, exercising the narrow supervisory jurisdiction under Section 34, was not entitled to re-appreciate or substitute with its own view. The award directing Kumar Urban Development to pay the society simple interest at the contractually agreed rate, rather than a higher rate under the Maharashtra RERA Rules which the Court found inapplicable to this claim, was accordingly upheld and the petition dismissed.