DELHI HIGH COURT: TO CLAIM LIQUIDATED DAMAGES, PARTY SHOULD ESTABLISH IT HAD SUFFERED LEGAL INJURY AS RESULT OF BREACH COMMITTED BY OTHER PARTY - ARBITRATION ACT

The Delhi High Court in the case Bharat Heavy Electricals Limited Vs Kanohar Electricals Limited observed and has held Liquidated damages, in law, are no different from unliquidated damages that an aggrieved party may claim.

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The court stated that the aggrieved party is required to demonstrate legal injury.

The Division bench comprising of Justice Rajiv Shakdher and Justice Amit Bansal was hearing the present matter.

The court observed that the Liquidated damages, as agreed to between the disputants, represents the maximum amount that can be paid to an aggrieved party and since the damages for breach of contract is paid as compensation, the law requires the defaulting party to pay, even under Section 74 of the Contract Act, reasonable compensation. It is only where, for instance, the contract obtaining between the party is inveigled in complexity, that the law dispenses proof of actual loss or damage.

The court does not relieve the aggrieved party from establishing that it had suffered legal injury as a result of the breach committed by the defaulting party.

Facts of the Case;