Delhi HC – Arbitral Award of Mesne Profits Cannot Rest on Guesswork

Arbitral Award in respect of the disputes arising out of the Collaboration Agreement dated 7.6.2016 between the landowner and the Collaborator for commercial development of the land in Gurugram.

Due to the failure to commence the project and delayed payments, the appellant terminated the agreement in June 2019, asked for possession and invoked arbitration.

The Arbitrator held that the termination notice was legal and that the respondent was required to hand over possession in reasonable time.  Its continued occupation beyond such period would entitle the appellant to mesne profits quantified at Rs.30 lakhs per month till possession to the landowner.

Section 34 Court allowed the petition and set-aside the award to the extent of mesne profits on the ground that there was no evidentiary support for quantification of loss of profit. 

Arbitral Award may be set aside if it is based on “no evidence” because the arbitrator cannot conjure findings out of thin air.

‘Honest guesswork’ or a ‘rough and ready’ approach may be adopted in appropriate cases. However, such estimation must still be based on some material on record or must show a rational nexus. In the present case, the learned Tribunal, after rejecting the valuation reports and recording that there was no evidence, nonetheless proceeded to fix mesne profits without indicating any method, benchmark, or supporting material. Such an approach goes beyond the limits of permissible estimation.

Judgment dated 13.4.2026 of the High Court of Delhi in FAO (OS) (COMM) 156/2024 of Radiance Infracon and Developers Ltd  Vs.  GLS Infratech Pvt Ltd