Loss Of Profit In Works Contracts Can Be Awarded Upon Illegal Termination, Even In Absence Of Direct Proof: Calcutta High Court

The Calcutta High Court division bench of Justice Soumen Sen and Justice Biswaroop Chowdhury has held that once a contractor establishes an illegal and unjustified termination of the contract by the employer, there is no need to prove the actual loss suffered. The court held that while claims for 'loss of profitability' generally require evidence, 'loss of profit' from unexecuted works does not require proof of actual loss. The court observed: “To support a claim for loss of profit arising from a delayed contract or missed opportunities from other available contracts that the appellant could have earned elsewhere by taking up any, it becomes imperative for the claimant to substantiate the presence of a viable opportunity through compelling evidence.”“However, if the contract is delayed due to breaches on the part of the employer the contractor would be entitled to recover his profit on the basis of reasonable expectation of profits which could be earned if not for the illegal termination of the contract”, the court stated. In MSK Projects India Ltd. v. State of Rajasthan, Apex Court stated that a claim of expected profits is legally admissible on proof of the breach of contract by the erring party, as a reasonable expectation of profit is implicit in a works contract and its loss has to be compensated by way of damages once the breach on part of the other party is established and no other proof of loss shall be required. The court held that the respondent contractor was entitled to loss of profit at the rate of 10% as awarded by the sole arbitrator.