ALL INDIA RADIO Vs. UNIBROS

JUDGEMENT

(1.) This petition under Section 34 of the Arbitration Act, 1996 challenges the Award dated 15.7.2002 passed by the sole Arbitrator. The Award deals with only one claim i.e. Claim No. 12. Claim No. 12 was the claim of the respondent/contractor for loss of profits. The Arbitrator has awarded loss of profits to the contractor after holding that the petitioner was guilty of causing prolongation of the contract from 11.4.1991 to 30.10.1994. The Award decides the disputes which arose out of the contract awarded to the respondent for additional construction of Doordarshan Branch at Mandi House substructure including the double basement.

(2.) The issue is that, if it is the petitioner who is guilty of delay in causing prolongation of the contract from 11.4.1991 to 30.10.1994, what is the consequence thereof. In consequence of prolongation of time in the performance of the contract, a loss of profit may be payable under Section 73, or it can only be that escalation is payable under Section 55 of the Contract Act. It depends on the facts of each case as to whether a contractor is entitled to loss of profits under Section 73 because of prolongation of the contract by the department. Prolongation of a contract no doubt causes the immediate consequences provided under Section 55 of the Contract Act, 1872, (provided the ingredients therein are complied with) however, loss of profit is not an automatic consequence of extension /prolongation in the performance of the contract, even assuming that the same is on account of fault of the petitioner/employer/Union of India.

(3.) When a contract is performed during a prolonged period, instead of the originally contracted period, in certain cases, loss of profit does take place to the contractor, however, to get such loss of profit, it is necessary for the contractor to prove before the Arbitrator that in the period of performance of the contract in the extended/prolonged period, the contractor has been forced to utilize men, machinery, material, overheads etc. which could have been utilized elsewhere in any other contract. Merely because there is a prolongation of the contract, as stated above, loss of profit is not a natural consequence. The ingredient of profit is very much inbuilt in the performance of a particular contract and the contractor does get that ingredient of profit while performing the contract in the extended period. If, however, the contractor claims extra profit, than as already inbuilt in performance of the contract, it is incumbent upon the contractor/respondents to establish and prove before the Arbitrator that at the site in question it had used more men, machinery, overheads and so on which could have been utilized in some other contract to earn profit and therefore, the contractor is caused loss of profit in not executing the other contract. I am supported in the view I am taking by a judgment of a learned Single Judge of this Court (Pradeep Nandrajog, J) in the judgment reported as Bharat Engg. Enterprises v. DDA, 2006 Supp Arb. LR 129 wherein it was held as under: