Bombay HC – Arbitration – No damages without Proof of Loss
Judgment dated 14.10.2025 of the Bombay High Court in Commercial Arbitration Petition No.166 of 2022 of Bhartiya Samruddhi Finance Ltd Vs. The State of Maharashtra and another with connected matter
As per the Master Service Agreement dated 18.1.2011, for a tenure of 60 months, Samruddhi was expected to operationalise 1362 Common Service Centres through village level entrepreneurs.
The issue was whether the State could withhold or deduct from amounts owed to Samruddhi towards the viability gap funding, on the ground of liquidated damages being owed to the State by Samruddhi.
The Arbitral Award was in favour of Samruddhi for Rs.7.66 crores but without interest. However, costs of Rs.20 lakhs and post-award interest was granted.
HELD that the Arbitral Tribunal has rightly held that the State has not been able to prove that it suffered loss or damage to be entitled, to routinely and as a matter of course, to deduct liquidated damages.
The contention of the State that a private entity should be able to ensure telecom service provision without regard to whether licensed telecom service providers even have coverage of the areas involved, is perverse and incapable of acceptance.
The Arbitral Tribunal has chosen its own means of adjusting of equities by not granting pre-award and pendente lite interest. The AT, as the mater of the evidence, has appreciated the evidence and has been satisfied that to adjust equities, interest need not be paid, one must give the AT a reasonable play in the joints to take that view. AT has found that the parties were diligent and did not protract the arbitration proceedings and concluded that pendente lite interest was not necessary.
