LexM/S. CONSTRUCTION & DESIGN SERVICES versus DELHI DEVELOPMENT AUTHORITY
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[2015] 2 S.C.R. 341 M/S. CONSTRUCTION & DESIGN SERVICES A V. DELHI DEVELOPMENT AUTHORITY (Civil Appeal Nos. 1440-1441 OF 2015) FEBRUARY 04, 2015 B [T.S. THAKUR AND ADARSH KUMAR GOEL, JJ.) Contract Act, 1872 - ss. 73, 7 4 - Breach of contract C - Extent of allowing stipulated liquidated damages by way of penalty in absence of actual loss -Failure of the appellant to execute work of public utility-construction of sewerage pumping station, within stipulated time - Termination of contract by respondent-DOA due to delay D in execution of the project - Levy of compensation by order of penalty - Suit for recovery of the said amount by respondent - Dismissed by the Single Judge of the High Court, however, decreed in favour of respondent by the Division Bench - Dismissal of review petition - E On appeal, held: Section 7 4 emphasizes that the party complaining of the breach of contract is entitled to receive reasonable compensation whether or not actual loss is proved to have been caused by such breach - If the compensation named in the contract is by way of F penalty, the party is only entitled to reasonable compensation for the loss suffered - However, if the compensation named in the contract for such breach is genuine pre-estimate of loss, the actual loss need not be proved - Burden to prove that no loss was likely to G be suffered is on the party committing breach - Thus, it can be presumed that delay in executing the work resulted in loss in the form of environmental degradation 341 H 342 SUPREME COURT REPORTS [2015] 2 S.C.R. A and loss of interest on the capital for which the respondent was entitled to reasonable compensation - Evidence of precise amount of Joss may not be possible but in absence of any evidence by the party committing breach that no loss was suffered by the party 8 complaining of breach, the court has to proceed on guess work as to the quantum of compensation to be allowed in the given circumstances - Since the respondent neither showed the extent of higher amount paid for the work got done nor produced any other C specific material, respondent to be awarded half of the amount claimed as reasonable compensation. D Oil and Natural Gas Corporation Ltd. v. Saw Pipes Ltd. 2003 (3) SCR 691: (2003) 5 SCC 705 - relied on. Mis. Arosan Enterprises Ltd. v. Union of India and another1999 (2) Suppl. SCR 621: (1999) 9 SCC 449; Fateh Chand v. Bal Kishan Das (1964) 1 SCR 515; Mau/a Bux v. Union of India 1970 (1) SCR 928: (1969) 2 SCC 554; M.L. Devendra Singh v. Syed Khaja 1974 (1) SCR 312: (1973) 2 E SCC 515; P D'Souza v. Shondri!o Naidu 2004 (3) Suppl. SCR 186: (2004) 6 SCC 649- referred to. Case Law Reference F 1999 (2) Suppl. SCR 621 Referred to. Para 6 (1964) 1SCR515 Referred to. Para 6 1970 (1) SCR 928 Referred to. Para 6 1974 (1) SCR 312 Referred to. Para 6 G 2004 (3) Suppl. SCR 186 Referred to. Para 6 2003 (3) SCR 691 Relied on. Para18 CIVIL APPELLATE JURISDICTION: Civil Appeal H Nos. 1440-1441 of2015 CONSTRUCTION & DESIGN SERVICES v. D. D. A. 343 From the Judgment and Order dated 10.02.2012 and A 01.06.2012 of the Division Bench of the Delhi High Court in RFA (OS) No. 35 of 2010 and Review Petition No. 369 of 2012 in RFA (OS) No. 35 of 2010 respectively. C. S. Parashar, Saurabh, Rajiv Mishra, Arvind Kumar 8 Garg, Kundan Kumar Mishra for the Appellant. Dhruv Tamta, Binu Tamta for the Respondent. The Judgment of the Court was delivered by ADARSH KUMAR GOEL, J. 1. Leave granted. c 2. These appeals have been preferred against final judgment and order dated 10th February, 2012 in RFA(OS) No.35 of 2010 and dated 1st June, 2012 in R.P. No.369 of 2012 in RFA (OS) No.35 of 2010 passed by the High Court D of Delhi at New Delhi. 3. The question raised for our consideration is when and to what extent can the stipulated liquidated damages for breach of a contract be held to be in the nature of penalty E in absence of evidence of actual loss and to what extent the stipulation be taken to be the measure of compensation for the loss suffered even in absence of specific evidence. Further question is whether burden of proving that the amount stipulated as damages for breach of contract was penalty is F on the person committing breach. 4. The respondent - Delhi Development Authority awarded a contract vide agreement dated 4th October, 1995 to the appellant for constructing a sewerage pumping station G at CGHS area at K
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