FAO(OS) (COMM) 156/2024 Page 1 of 40

$~

* IN THE HIGH COURT OF DELHI AT NEW DELHI

Judgment reserved on: 23.03.2026

Judgment pronounced on: 13.04.2026

+ FAO(OS) (COMM) 156/2024, CM APPL. 43047/2024

RADIANCE INFRACON AND

DEVELOPERS PVT LTD .....Appellant

Through: Mr. Jeevesh Nagrath, Sr. Adv.

with Mr. Rupesh Gupta and Ms. Kritika

Tuteja, Advs.

versus

GLS INFRATECH PVT LTD .....Respondent

Through: Mr. Nakul Sachdeva, Mr.

Shreyansh Rathi, Mr. Sagar Arora, Ms.

Shrinkhala Tiwari and Mr. Abhinandan

Sharma, Advs.

CORAM:

HON'BLE MR. JUSTICE C. HARI SHANKAR

HON'BLE MR. JUSTICE OM PRAKASH SHUKLA

JUDGMENT

% 13.04.2026

OM PRAKASH SHUKLA, J.

Introduction

1. The Appellant has filed the present intra-court appeal under

Section 37 of the Arbitration and Conciliation Act, 1996

1

, read with

Section 13 of the Commercial Courts Act, 2015 and Section 151 of

Civil Procedure Code, 1908, assailing the order dated 20.05.2024

2

passed by the learned Single Judge in O.M.P. (COMM) No. 223/2024.

1

“the Act”, hereinafter

2

“Impugned Order” hereinafter

FAO(OS) (COMM) 156/2024 Page 2 of 40

The said order arose from a petition filed by the Respondent under

Section 34 of the Act seeking to set aside the arbitral award dated

27.11.2023

3

, as modified by the order dated 22.02.2024, to the limited

extent of Rs. 15,90,00,000/- awarded as mesne profits from 01.07.2019

to 30.11.2023 and further till actual hand-over of possession of the land

in dispute, in favour of the Appellant.

2. In a nutshell, the present dispute arises out of a Collaboration

Agreement dated 07.06.2016

4

between the Appellant (landowner), and

the Respondent (Collaborator) for commercial development of the

Appellant’s land in Gurugram. The Respondent was required to

complete construction within the stipulated timelines and pay a non-

refundable consideration of Rs. 5.50 crore. Due to delayed payments

and failure to commence the project, the Appellant terminated the

Agreement in June 2019, and subsequently invoked the arbitration

clause.

3. The learned Sole Arbitrator allowed Claim Nos. 1 and 2 of the

Appellant, i.e., (i) handover of possession of the land in dispute and

amount for actual loss of profits, (ii) costs of the proceedings, and

consequently awarded a sum of Rs. 16,27,50,000 to the Appellant,

while rejecting all Counter-Claims except Counter-Claim No. 4, which

was partly allowed for Rs. 7,55,33,437/-. After adjustment, a net sum

of Rs. 8,72,16,563/- was awarded in favour of the Appellant, along with

mesne profits at the rate of Rs. 30,00,000/- per month till actual hand

over of the possession of the land to the Appellant.

3

“Arbitral Award” hereinafter

4

“Agreement” hereinafter

FAO(OS) (COMM) 156/2024 Page 3 of 40

4. Aggrieved by the Arbitral Award, the Respondent herein filed a

petition under Section 34 of the Act before this Court.

5. By the Impugned Order, the learned Single Judge allowed the

petition and set aside the Arbitral Award to the extent of Rs.

15,90,00,000/- towards mesne profits, holding that the quantification of

loss of profit lacked evidentiary support, while granting liberty to the

Appellant to pursue the Claim in accordance with law.

6. The present appeal is confined to examining the correctness of

the quantification of mesne profits by the learned Sole Arbitrator and

the legality of the interference by the learned Single Judge.

Facts

7. The Respondent herein claims to be a company engaged in the

business of development and construction of commercial and

residential properties in Gurugram, Haryana. On the other hand, the

Appellant is the owner of the land located at Sector 16, Mehrauli Road,

Gurugram

5

.

8. Both the parties entered into a Collaboration Agreement dated

07.06.2016 for the commercial development of the subject land, under

which the Respondent undertook to carry out construction and allied

works and was obliged to pay a total consideration of Rs. 5.50 crore in

instalments between June 2016 and December 2016.

9. In addition to the said consideration, the Respondent was

5

“subject land” hereinafter

FAO(OS) (COMM) 156/2024 Page 4 of 40

obligated to develop and construct a building and consequently, upon

completion of the project, the Respondent was entitled to a 54% share

in the build-up area, along with a proportionate share in the land

underneath, while the Appellant was to get 46% share.

10. The scope of work and timelines are set out under Clause 11 of

the Agreement. The same reads as follows:

For preparation of building

plans for submission to

competent authority.

By or before the expiry of 30

days from the date of this

Agreement.

Removal of overhead wire and

laying of underground wire

including approval from

competent authority.

By or before the expiry of 06

months from the date of this

Agreement.

Approval of building plan

from competent authority.

By or before the expiry of 02

months from the date of removal

of overheard wires.

Construction of building as

per approved plan and agreed

specifications.

By or before the expiry of 16

months from the date of sanction

of building plans or any other

extended period as mutually

agreed in writing.

Obtaining of completion

certificate & occupation

certificate.

By or before the expiry of 03

months of completion of

building.

11. It is made out from the record that a 66 kVA

6

overhead

electricity line was passing through the subject land. As per the

Agreement, permission for the removal of overhead wire and laying of

underground cable had already been issued by the Haryana Vidyut

Prasaran Nigam Ltd.

7

vide letter dated 31.01.2014. For the proper

construction and use of the proposed commercial building, it was

6

Kilovolt-ampere

7

“HVPNL” hereinafter

FAO(OS) (COMM) 156/2024 Page 5 of 40

necessary to remove the overhead wire and replace it with an

underground cable.

12. Adverting to the controversy, disputes arose between the parties

regarding compliance with the agreed timelines.

13. By October 2016, the Respondent had paid only about Rs. 1.15

crores, whereas, around Rs. 3.50 crores were due at that time as per the

agreed schedule, out of the total consideration of Rs. 5.50 crores.

14. According to the Appellant, this shortfall constituted a

fundamental breach of the Agreement, especially since time was of the

essence as per Clause 13 of the Agreement. It was further alleged that

the construction schedule was not adhered to and key prerequisites for

construction such as removal of the overhead transmission line and

laying of the underground cable, were not completed within the

stipulated timelines. Consequently, no construction activity took place

on the subject land till 2017.

15. In view of the continuing defaults, the Appellant issued a Notice

of Breach dated 13.02.2017 alleging breach of the Agreement. The

Respondent, in its reply, denied any breach and attributed delays to the

Appellant’s lack of cooperation. The Appellant refuted these allegations

vide reply dated 10.04.2017, but still granted a further grace period of

15 days to the Respondent to pay the outstanding sum of Rs. 4.35 crore.

The Respondent, however, by its subsequent communication dated

29.05.2017, reiterated its earlier stand and disputed the Appellant’s

entitlement to unilaterally enforce the payment schedule.

FAO(OS) (COMM) 156/2024 Page 6 of 40

16. Despite the earlier disputes, the parties executed an Addendum

Agreement dated 15.11.2017

8

, extending the timeline for payment of

Rs. 4.35 crores till 10.02.2018. So far as the schedule of construction

was concerned, the substantive obligations remained the same, but the

timelines for completion of those obligations were extended till

15.02.2020.

17. It is not in dispute that the Respondent eventually paid the entire

balance consideration of Rs. 4.35 crores, albeit belatedly, with the last

payment made on 15.06.2018.

18. According to the Appellant, despite payment, construction did

not commence. The Respondent attributed delays to factors beyond its

control, particularly the requirement for fresh approvals for the

overhead transmission wire as the earlier permission dated 31.01.2014

obtained from HVPNL had become ineffective due to a change in the

concerned authorities.

19. As no progress was made, the Appellant repeatedly raised

concerns with the Respondent. Due to lack of satisfactory response and

the project remaining inchoate, the Appellant issued a Termination

Notice dated 15.06.2019 and called upon the Respondent to hand over

vacant and peaceful possession of the subject land. The Respondent, in

its reply, disputed the validity of the termination, and refused to hand

over possession.

8

“Addendum Agreement” hereinafter

FAO(OS) (COMM) 156/2024 Page 7 of 40

20. Thus, it could be understood that the lis between the parties

centred around the alleged breaches of the Agreement by the

Respondent, particularly its failure to follow the agreed payment

schedule and complete construction within the stipulated timelines. It

also involved the validity of the termination of the Agreement by the

Appellant and the consequences arising from it including the recovery

of possession of the subject land and loss of profits.

21. In view of the Respondent’s non-compliance with the

Termination Notice, the Appellant invoked arbitration under Clause

21(f) of the Agreement by notice dated 04.07.2019.

22. Pursuant thereto, by order dated 27.02.2020, this Court appointed

Justice A.K. Sikri, Supreme Court (Retd.), as the learned Sole

Arbitrator. Before the learned Arbitrator, the Appellant sought

possession of the subject land along with damages for loss of profits on

account of the Respondent's continued possesion. The Respondent

resisted the Claims and filed a Counter-Claims seeking specific

performance of the Agreement, asserting its readiness and willingness

to perform, and in the alternative, sought reimbursement of expenses

allegedly incurred.

Proceedings before the Arbitral Tribunal and Arbitral Award

23. The Appellant raised two Claims before the learned Arbitral

Tribunal

9

and the Respondent raised five Counter-Claims. Upon

consideration of the pleadings, evidence, and submissions, the learned

9

“Tribunal” hereinafter

FAO(OS) (COMM) 156/2024 Page 8 of 40

Tribunal allowed the Appellant’s Claims with certain modifications and

rejected the Respondent’s Counter-Claims, save and except Counter-

Claim No. 4, which was partly allowed. A tabulation of the same is thus:

Sr. No. Particulars Claimed Amount

(Rs.)

Awarded

Amount

(Rs.)

Claim

No.1

Relief for possession and

damages for actual loss

suffered by the Appellant

75.27 crore 15,90,00,000

along with

possession

Claim

No.2

Cost of proceedings

37,50,000/-

Counter

Claim

No.1

Claim for Specific

Performance and direction

to Appellant for

registration of documents

Rejected

Counter

Claim

No.2

Claim for loss of profits

suffered by the

Respondent during the

delayed period

15,40,88,479/- Rejected

Counter

Claim

No.3

Cost of Arbitration

Rejected

Counter

Claim

No.4

Claim for Damages 9,89,85,929/- 7,55,33,437/-

Counter

Claim

No.5

Claim for Loss of Profit 42,80,23,552 Rejected

24. Through Claim No. 1, the Appellant sought (i) peaceful and

vacant possession of the subject land, and (ii) a sum of

Rs. 75,27,00,000/- towards loss of profits for four years, alleging that

the Respondent induced the Appellant to execute the Agreement and

the Addendum Agreement by assurances of timely payment and

construction, but failed to perform its obligations, undertook no

effective construction, retained possession of the land, and thereby,

FAO(OS) (COMM) 156/2024 Page 9 of 40

caused financial loss to the Appellant.

25. Upon consideration of the material on record, the learned

Tribunal noted that removal of the 66 kVA overhead transmission line

was a necessary precondition for development. The learned Tribunal

recorded that under Clause 11, the Respondent was obligated to

complete specified developmental activities within the stipulated

timelines, including preparation of building plans, removal of the

overhead wire, and execution of construction. It was found that none of

these milestones were achieved within the agreed timelines and that

only Rs. 1.15 crore had been paid by December 2016 which is in

contravention of Clause 12.

26. Thereafter, the learned Tribunal examined the effect of the

Addendum Agreement, whereby revised timelines were agreed. While

noting that the Appellant had accepted delayed payments, it held that

even the revised timelines were not adhered to. The removal of the

overhead wire, which was to be completed by 15.05.2018, was in fact

achieved only in 2019, and the building plans were not prepared even

till the date of termination on 15.06.2019. The explanations advanced

by the Respondent, including delays in regulatory approvals, were not

accepted, in view of the fact that the obligation to obtain such approvals

formed part of the Respondent’s contractual responsibilities, and the

Respondent failed to adhere to it.

27. On a cumulative assessment, the learned Tribunal held that the

Respondent had failed to perform its obligations within the stipulated

or even a reasonable time, with no realistic possibility of completion

FAO(OS) (COMM) 156/2024 Page 10 of 40

within the extended period, i.e., by 15.02.2020. It was found that the

Respondent lacked readiness and willingness to perform, and

accordingly, the Termination Notice dated 15.06.2019 was upheld as

valid. Therefore, the Appellant was held entitled to the recovery of

possession.

28. Insofar as the Claim for damages is concerned, the learned

Tribunal distinguished between the pre-termination and post-

termination periods. The claim for loss of profits up to the date of

termination was rejected since the project had not reached a stage where

profits could have been realised. Therefore, the claim for loss of profits

up to 15.06.2019 was rejected.

29. For the period subsequent to termination, the learned Tribunal

held that the Respondent’s continued possession entitled the Appellant

to compensation in the nature of mesne profits. However, the learned

Tribunal rejected the Appellant’s computation at Rs 2.10 crore per

month, based on valuation report dated 27.05.2020 prepared by CBRE

South Asia Pvt. Ltd.

10

as excessive and unsupported. It was further

recorded that no evidence had been led by either party to establish

precise quantification. Thereafter, the learned Tribunal proceeded to

determine the amount on guesswork. It accordingly awarded mesne

profits at Rs 30,00,000/- per month with effect from 01.07.2019,

aggregating to Rs 15,90,00,000/- up to 30.11.2023, with a direction that

the same would continue at the said rate till the delivery of possession.

10

“CBRE report” hereinafter

FAO(OS) (COMM) 156/2024 Page 11 of 40

Claim No. 2, pertaining to the costs of arbitration, was partly allowed,

and 50% of the costs were awarded to the Appellant.

30. The Respondent raised five Counter-Claims before the learned

Tribunal. Insofar as Counter-Claim No. 1, seeking specific performance

of the Agreement, is concerned, the learned Tribunal, while relying

upon its findings recorded in respect of Claim No. 1, held that the

Respondent had failed to establish its continuous readiness and

willingness to perform its contractual obligations. The learned Tribunal

also noted that there were repeated defaults on the part of the

Respondent. In view of the finding that the Termination notice dated

15.06.2019 was valid, the learned Tribunal held that the question of

granting specific performance did not arise. Counter-Claim No. 1 was,

accordingly, rejected.

31. Counter-Claim No. 2, seeking registration of documents and

allied reliefs, along with claims for loss of profits, was rejected since

delays were attributable to the Respondent and not to the Appellant.

Counter-Claim No.3, relating to the cost of Arbitration was also

rejected.

32. Counter-Claim No. 4 was partly allowed. The learned Tribunal

permitted adjustment of the consideration amount of Rs. 5.50 crores

which inured to Appellant’s benefit and allowed reimbursement for

certain expenditures, including removal of the overhead transmission

wire, payments made to contractors, and statutory dues such as property

tax and water charges. However, the claims pertaining to expenditures

FAO(OS) (COMM) 156/2024 Page 12 of 40

that were either unsubstantiated or did not result in any benefit to the

Appellant were rejected.

33. Counter-Claim No. 5, seeking damages towards loss of profits

based on a report of M/s Colliers International (India) Property Services

Pvt. Ltd.

11

, estimating potential revenue, was rejected holding that no

claim for loss of profits could be sustained due to lack of performance

of the agreement and that delay was attributed to the Respondent.

34. After adjustment, the learned Tribunal awarded Rs. 8,72,16,563/-

in favour of the Appellant and against the Respondent, along with

mesne profits at the rate of Rs. 30,00,000/- per month from 01.07.2019

to 30.11.2023 and further till the hand-over of possession of the subject

land.

Impugned Order

35. Aggrieved by the Arbitral Award insofar as it allowed Claim No.

1, particularly the grant of mesne profits, the Respondent filed a petition

under Section 34 of the Act, contending that the quantification suffered

from patent illegality, being based on no cogent evidence and mere

conjecture.

36. Upon examining the Arbitral Award, it was noted by the learned

Single Judge that the Agreement did not provide for pre-estimated

damages. It was further noted that the learned Tribunal itself

categorically recorded that no evidence was led by either party to

substantiate the quantum of damages, and yet proceeded to award

11

“Collier Report” hereinafter

FAO(OS) (COMM) 156/2024 Page 13 of 40

mesne profits at Rs. 30,00,000/- per month by resorting to guesswork,

which was held to be impermissible in law. In this context, reliance was

placed on Airwil JKM Infracon (P) Ltd. v. Cadillac Infotech (P) Ltd.

12

,

wherein it was held that where a claimant fails to establish damages, the

Arbitral Tribunal cannot suo motu determine the quantum on a notional

basis, as it is bound to decide in accordance with law under Section 28

of the Act and cannot resort to equitable considerations unless

authorised. The learned Single Judge also considered the Appellant’s

submission that damages may, in certain circumstances, be assessed on

a reasonable or approximate basis, with reference to decisions such as

Construction & Design Services v. DDA

13

, NHAI v. ITD Cementation

India Ltd.

14

, Mohd. Amin v. Mohd. Iqbal

15

but distinguished them on

the ground that those cases had some evidentiary or contractual basis

for quantification.

37. Further reliance was placed on Edifice Developers & Project

Engineers Ltd. v. Essar Projects (India) Ltd.

16

, wherein the arbitral

award towards overhead losses was set aside on the ground that it lacked

any basis. Accordingly, it was concluded that the grant of mesne profits

at Rs. 30,00,000/- per month, aggregating to Rs. 15,90,00,000/-, was

unsupported by evidence and liable to be set aside. The Arbitral Award

was thus interfered with to this limited extent, while leaving it open to

the Appellant to pursue its Claim in accordance with law.

12

2021 SCC OnLine Del 5126

13

(2015) 14 SCC 263

14

2010:DHC:404

15

2024 SCC OnLine Del 2395

16

2013 SCC OnLine Bom 5

FAO(OS) (COMM) 156/2024 Page 14 of 40

Rival Contentions Before This Court

38. Mr. Jeevesh Nagrath, learned Senior Counsel appearing for the

Appellant, contended that the learned Single Judge erred in setting aside

the Arbitral Award insofar as it granted mesne profits, as the same did

not suffer from any patent illegality. It was submitted that the learned

Tribunal had, upon appreciation of the material on record, returned a

categorical finding that the Respondent remained in illegal possession

of the subject land from 01.07.2019, thereby depriving the Appellant of

its right to commercially exploit the same and entitling it to

compensation in the nature of mesne profits. In these circumstances, it

was argued that, in the absence of any challenge to the finding of

wrongful possession, interference with the Arbitral Award on the

ground of quantification alone was unwarranted.

39. It was contended that the learned Single Judge erred in holding

that the Arbitral Award was based on no evidence, as the learned

Tribunal had considered expert material, including the CBRE report

relied upon by the Appellant, and, upon evaluation, reduced the claim

from Rs. 2.10 crore per month to Rs. 30 lakh per month, thereby

adopting a reasonable approach. It was further submitted that the

learned Single Judge exceeded the limited jurisdiction under Section 34

of the Act by re-appreciating evidence and substituting his own view

on quantification. Reliance was placed on Associate Builders v. DDA

17

,

to contend that interference is not warranted where the Tribunal’s view

is plausible.

17

(2015) 3 SCC 49

FAO(OS) (COMM) 156/2024 Page 15 of 40

40. Learned Senior Counsel also pointed out that the quantification

of mesne profits was, in fact, traceable to the Colliers report relied upon

by the Respondent, which indicated rental values in the range of Rs.

50–80 per sq. ft. for an approximate project area of 60,000 sq. ft.,

yielding a potential monthly income between Rs. 30–48 lakh. Thus, it

was submitted that the learned Tribunal, while adopting a figure of Rs.

30 lakhs per month, had undertaken a reasonable estimation based on

such material, and it could not be characterised as a guesswork being

based on no evidence so as to warrant interference.

41. Learned Senior Counsel further submitted that the learned Single

Judge failed to appreciate the settled principle that in claims for

damages, particularly loss of profits or mesne profits, exact

mathematical precision is not required. Reliance was placed on Cobra

Instalaciones y Servicios S.A. v. Haryana Vidyut Prasaran Nigam

Ltd.

18

, Bharat Heavy Electricals Ltd. v. Delkon India Pvt. Ltd.

19

,

Construction & Design Services v. DDA

20

, A.T. Brij Paul Singh v.

State of Gujarat

21

, Hindustan Petroleum Corporation Ltd. v.

Mohanjit Singh (Deceased) Through Legal Heirs

22

, Krishan Kumar

v. UOI

23

and Mohd. Salamatullah v. State of Andhra Pradesh

24

, to

contend that where breach and resultant loss are established, but precise

quantification is difficult, the Tribunal is entitled to adopt a reasonable

or “rough and ready” method, including honest guesswork. It was

argued that in the present case, the Respondent’s continued occupation

18

2024 SCC OnLine Del 2755

19

2026 SCC OnLine Del 482

20

(2015) 14 SCC 263

21

(1984) 4 SCC 59

22

2019 SCC OnLine Del 9419

23

(2015) 15 SCC 220

24

AIR 1977 SC 1481

FAO(OS) (COMM) 156/2024 Page 16 of 40

and failure to undertake construction for several years clearly

established loss, and in the absence of exact evidence, the learned

Tribunal was justified in awarding reasonable compensation based on

honest guesswork, warranting no interference.

42. In support of methodology for adoption of honest guesswork by

the learned Arbitrator, reliance was also placed on Ramesh Kumar Jain

v Bharat Aluminium Co. Ltd

25

, New Okhla Industrial Development

Authority v. Harnand Singh

26

, Gemini Bay Transcription (P) Ltd. v.

Integrated Sales Service Ltd.

27

, Mahendra Singh Jaggi v. Dataram

Jagnnath

28

, Flovel Hydro Technologies (P) Ltd. v. Mecamidi SA

29

, DDA

v. Anand and Associates

30

and Jaiprakash Associates Ltd. v. Ircon

International Ltd

31

.

43. It was also contended that the Impugned Order suffers from a

patent error, inasmuch as it sets aside the Arbitral Award only to the

extent of the quantification of mesne profits while sustaining the

remaining findings. It was argued that the Arbitral Award was rendered

on a holistic basis, with mutual adjustments between the Claims and

Counter-Claims. Therefore, interference with one component in

isolation without disturbing the corresponding adjustments is legally

unsustainable.

44. It was further submitted that the Appellant was denied a fair

25

2025 SCC OnLine SC 2857

26

2024 SCC OnLine SC 1691

27

2022 1 SCC 753

28

(1998) 9 SCC 28

29

2024 SCC OnLine Del 5039

30

2008 SCC OnLine Del 179

31

2024 SCC OnLine Del 3142

FAO(OS) (COMM) 156/2024 Page 17 of 40

opportunity to address the basis of quantification as no notice was

served in the Section 34 petition, nor was any opportunity granted to

seek recourse under Section 34(4) of the Act, thereby violating the

principles of natural justice. The reliance on Airwil JKM Infracon Pvt.

Ltd. (supra) was also contended to be misplaced.

45. Per contra, Mr. Nakul Sachdeva, learned Counsel for the

Respondent supported the Impugned Order, contending that the learned

Single Judge rightly set aside the Arbitral Award to the limited extent

of quantification of mesne profits. It was submitted that the learned

Tribunal itself recorded that no evidence had been led to establish the

quantum of damages, and yet proceeded to award mesne profits at Rs.

30,00,000/- per month by resorting to guesswork, which is

impermissible in law.

46. It was further contended that the Appellant’s reliance on the

principle of reasonable estimation is misconceived, as such estimation

is permissible only where some foundational material exists to enable

approximation. In the present case, the learned Tribunal had discarded

the valuation reports and expert evidence and relied on no benchmark,

thereby rendering the determination based on pure conjecture. It was

emphasised that entitlement to compensation and its quantification are

distinct, and even if wrongful possession is assumed, damages cannot

be awarded in the absence of cogent evidence such as market data or

reliable expert material. Reliance was placed on P. Radhakrishna

Murthy v. NBCC Ltd.

32

, Power Grid Corporation of India v. Ranjit

32

(2013) 3 SCC 747

FAO(OS) (COMM) 156/2024 Page 18 of 40

Singh and Co. LLP

33

, Delhi Metro Rail Corporation v. Kone Elevators

India Pvt. Ltd.

34

, Edifice Developers & Project Engineers Ltd. v. Essar

Projects (India) Ltd.

35

, BCCI v. Deccan Chronicle Holding Ltd.

36

, and

M/s SGS India Pvt. Ltd. v. M/s Vedanta Ltd.

37

47. It was also contended that the learned Tribunal acted beyond its

jurisdiction in resorting to “guesswork” in the purported interest of

justice, without any authorisation under Section 28(2) of the Act. In the

absence of such consent, it was submitted that the learned Tribunal was

bound to decide strictly in accordance with law and the evidence on

record and could not invoke equitable considerations to determine the

quantum.

48. Mr. Nakul Sachdeva further contended that the award of mesne

profits cannot be based on conjecture or judicial assumption and must

be supported by cogent evidence demonstrating actual profit that could

have been earned by the Respondent. In the present case, it was

submitted that in the absence of any such evidence having been

accepted by the learned Tribunal, the grant of mesne profits is

unsustainable in law.

49. Lastly, it was contended that the learned Single Judge had not re-

appreciated the evidence but confined scrutiny to the legality of the

Arbitral Award, particularly the absence of reasoning and evidentiary

basis for quantification. It was further submitted that reliance on Airwil

JKM Infracon Pvt. Ltd. (supra) was not determinative, as the

33

O.M.P (COMM.) NO. 134 of 2023

34

2021 SCC Online Del 5048

35

2013 SCC OnLine Bom 5

36

2021 SCC Online Bom 834

37

O.S.A. No. 306 of 2019

FAO(OS) (COMM) 156/2024 Page 19 of 40

impugned order rests on settled principles, and correctly identifies

patent illegality warranting no interference.

Analysis

50. We have heard learned Counsel for both parties and have

undertaken a thorough and comprehensive examination of the entire

record placed before us.

51. Before commencing, it would be apposite to remind ourselves

of the limited scope and ambit of interference under Sections 34 and 37

of the Act, as consistently delineated in a line of decisions of the

Supreme Court and this Court. For this purpose, we find it profitable to

refer the decision in PSA SICAL Terminals Pvt. Ltd. v. Board of

Trustees of V.O. Chidambranar Port Trust, Tuticorin

38

, wherein the

Supreme Court encapsulated the scope of interference under Sections

34 and 37, reiterating its earlier view in MMTC Ltd. v. Vedanta Ltd.

39

,

in the following words:

“38. Before that, it will be apposite to refer to the judgment of this

Court in MMTC Ltd. [MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC

163 : (2019) 2 SCC (Civ) 293] , wherein this Court has revisited the

position of law with regard to scope of interference with an arbitral

award in India. It will be relevant to refer to the following

observations of this Court in MMTC Ltd. [MMTC Ltd. v. Vedanta

Ltd., (2019) 4 SCC 163 : (2019) 2 SCC (Civ) 293] : (SCC pp. 166-

67, paras 11-14)

“11. As far as Section 34 is concerned, the position is

well-settled by now that the Court does not sit in appeal

over the arbitral award and may interfere on merits on the

limited ground provided under Section 34(2)(b)(ii) i.e. if the

award is against the public policy of India. As per the legal

38

2021 SCC OnLine SC 508

39

(2019) 4 SCC 163

FAO(OS) (COMM) 156/2024 Page 20 of 40

position clarified through decisions of this Court prior to

the amendments to the 1996 Act in 2015, a violation of

Indian public policy, in turn, includes a violation of the

fundamental policy of Indian law, a violation of the interest

of India, conflict with justice or morality, and the existence

of patent illegality in the arbitral award. Additionally, the

concept of the “fundamental policy of Indian law” would

cover compliance with statutes and judicial precedents,

adopting a judicial approach, compliance with the

principles of natural justice, and Wednesbury [Associated

Provincial Picture Houses Ltd. v. Wednesbury Corpn.,

(1948) 1 KB 223 (CA)] reasonableness. Furthermore,

“patent illegality” itself has been held to mean

contravention of the substantive law of India, contravention

of the 1996 Act, and contravention of the terms of the

contract.

12. It is only if one of these conditions is met that the

Court may interfere with an arbitral award in terms of

Section 34(2)(b)(ii), but such interference does not entail a

review of the merits of the dispute, and is limited to

situations where the findings of the arbitrator are arbitrary,

capricious or perverse, or when the conscience of the Court

is shocked, or when the illegality is not trivial but goes to

the root of the matter. An arbitral award may not be

interfered with if the view taken by the arbitrator is a

possible view based on facts.

40

13. It is relevant to note that after the 2015 Amendment

to Section 34, the above position stands somewhat modified.

Pursuant to the insertion of Explanation 1 to Section 34(2),

the scope of contravention of Indian public policy has been

modified to the extent that it now means fraud or corruption

in the making of the award, violation of Section 75 or

Section 81 of the Act, contravention of the fundamental

policy of Indian law, and conflict with the most basic

notions of justice or morality. Additionally, sub-section (2-

A) has been inserted in Section 34, which provides that in

case of domestic arbitrations, violation of Indian public

policy also includes patent illegality appearing on the face

of the award. The proviso to the same states that an award

shall not be set aside merely on the ground of an erroneous

application of the law or by reappreciation of evidence.

14. As far as interference with an order made under

Section 34, as per Section 37, is concerned, it cannot be

40

(See Associate Builders v. DDA [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204]

. Also see ONGC Ltd. v. Saw Pipes Ltd. [ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705] ; Hindustan

Zinc Ltd. v. Friends CoalCarbonisation [Hindustan Zinc Ltd. v. Friends Coal Carbonisation, (2006) 4

SCC 445] ; and McDermott International Inc. v. Burn Standard Co. Ltd. [McDermott International

Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181] )

FAO(OS) (COMM) 156/2024 Page 21 of 40

disputed that such interference under Section 37 cannot

travel beyond the restrictions laid down under Section 34.

In other words, the court cannot undertake an independent

assessment of the merits of the award, and must only

ascertain that the exercise of power by the court under

Section 34 has not exceeded the scope of the provision.

Thus, it is evident that in case an arbitral award has been

confirmed by the court under Section 34 and by the court in

an appeal under Section 37, this Court must be extremely

cautious and slow to disturb such concurrent findings.”

52. Recently, this Court, speaking through one of us (Om Prakash

Shukla, J.) in M/s JSW Ispat Steel Limited (now known as JSW Steel

Limited) v. M/s Gas Authority of India Limited

41

, while referring to

Jan De Nul Dredging India Pvt. Ltd. v. Tuticorin Port Trust

42

and M/s

Larsen Air Conditioning and Refrigeration Company v. Union of

India & Ors.

43

, reiterated that the scope of judicial review under

Sections 34 and 37 of the Act is extremely limited, and powers of a

court under Section 37 are circumscribed and extend only to examining

whether the Section 34 Court has acted within its jurisdiction. It was

further reiterated that the appellate court cannot re-appreciate the

evidence or substitute its own view merely because another

interpretation is possible. An interference is permissible only on

grounds, such as patent illegality, or violation of public policy, and only

where such infirmity goes to the root of the matter.

53. Keeping the aforesaid principles in mind, we proceed to deal with

the controversy in the present appeal.

54. It is not in dispute that the Respondent breached the Agreement

41

DHC:1922-DB

42

(2026) 3 SCC 186

43

(2023) 15 SCC 472

FAO(OS) (COMM) 156/2024 Page 22 of 40

by failing to adhere to the timelines stipulated under Clause 11 and the

extended timelines under the Addendum. In view thereof, the Appellant

issued a Termination Notice dated 15.06.2019, and the validity of the

said notice was upheld by the learned Tribunal. The learned Tribunal

further held that upon termination, the Respondent was required to hand

over possession within a reasonable time, and its continued occupation

of the subject land beyond such period would entitle the Appellant to

mesne profits, which were quantified at Rs. 30,00,000/- per month from

01.07.2019 till actual hand over of the possession.

55. The learned Counsel for the Respondent contended that the

award of mesne profits was unsustainable in the absence of evidence

establishing the actual profit derived by the Respondent from its

continued possession, which, according to the Respondent, is a

prerequisite for the grant of mesne profits.

56. It is pertinent to note that the learned Single Judge interfered with

the Arbitral Award only to the limited extent of quantification on the

ground of lack of evidentiary support. Accordingly, our consideration

under Section 37 is confined to examining whether the setting aside of

mesne profits quantified at Rs. 30,00,000/- per month for want of any

evidentiary foundation or reasoning was justified or not. The

Appellant's entitlement to mesne profits, including whether the

Respondent derived actual profit from its continued possession, does

not arise for our consideration in this appeal.

57. The primary reason that weighed with the learned Single Judge

in setting aside the Arbitral Award to the extent of Rs. 15,90,00,000/-

was that the said figure had been arrived at without any evidentiary

FAO(OS) (COMM) 156/2024 Page 23 of 40

basis and without even a semblance of reasoning. The relevant portion

of the Impugned Order is reproduced below:

“21. In the present case also, the learned Arbitrator passed the

award on the basis of stating that, “Unfortunately, no evidence is led

in this behalf by either party and therefore, there is no other

alternative for the Arbitral Tribunal but to award some amount by

making some guesswork.” It is a matter of the fact as recorded in the

impugned award also that the claimant had not produced any

evidence in support to his claim. It is also pertinent to mention here

that learned Arbitrator has not passed an award stating that the figure

has been taken on the basis of the evidence of the respondent. The

perusal of the impugned award indicates that the learned tribunal

awarded the mesne profits @ Rs.30lakhs per month. However, not

even a single reasoning has been given for reaching on this amount.

This court is conscious of the fact that in exercise of jurisdiction

under Section 34 of the Arbitration and Conciliation Act, this court

cannot sit in appeal over the findings of the learned tribunal but at

the same time, within the limited power conferred by the legislation,

the court is required to see whether there is even an iota of reasoning

for reaching the award. Hence, in the circumstances and in view of

there being no evidence to the same, the impugned award to the

extent of grant of Rs.15,90,00,000/- is set aside.”

(emphasis supplied)

58. The learned Senior Counsel for the Appellant sought to assail

the aforesaid finding by contending that the quantification of mesne

profits by the learned Tribunal was not arbitrary, but based on honest

guesswork after duly considering the facts and circumstances of the

case. It was argued that such an approach is legally sustainable where

loss is established but precise quantification is not possible. In this

context, it becomes apposite to examine the reasoning adopted by the

learned Tribunal:

“142. While coming to this conclusion, the Tribunal also finds

force in the submission of the Respondent that the Claimant has not

been able to substantiate this claim. Had the Respondent completed

the Project, it would have got 54% share therein. Now, with the

termination of the is Contract, the Claimant is in a more

FAO(OS) (COMM) 156/2024 Page 24 of 40

advantageous position as it not required io part with the said share.

The Claimant is, therefore, is in a better position than it would have

been in the event the terms of the Contract had been performed.

There is another aspect highlighted by the Respondent which cannot

be ignored. Even as per the Valuation Report relied upon by the

Claimant, the revenue potential of the Subject Land, after all

construction is presumed ta be completed, was to be INR 120.00

crore. The Claimant has admitted that the Claimant would only be

entitled to INR 55.00 crore of the aforesaid alleged amount of INR

120.00 crore had the contract been performed and not terminated.

While the Respondent categorically denies the valuation report

relied upon by the Claimant and all of its findings, if the same is

accepted on a demurrer, the market value of the subject land as on

date is stated to be INR 57.00 crore as per the same, and in the event

the Claimant manages to somehow wriggle out of the Agreement,

he can benefit out of 100% of the sale proceeds. This further

establishes that even as per the best case of the Claimant, the

Claimant has incurred an losses whatsoever. The Tribunal, therefore,

rejects the claim for the period up to 15.06.2019.

143. The Claimant has, however, also raised the claim for the

period from 01.06.2020 as well till the date of actual hand-over of

the Project land by the Respondent to the Claimant. preferred @ INR

2.10 crore. It may be claimed that in the Termination Notice dated

15.06.2019, the Claimant had asked for re-possession of the land of

which the Claimant is the owner. The Respondent, refused to do so

forcing the Claimant to initiate the present arbitration proceeding

where the claim for handing over the possession of land is also made.

The same has been allowed. Since this demand was made in the

Termination Notice and is found to be justified, the Respondent was

supposed to handover the possession within a reasonable period. The

Claimant would be entitled to the loss on this account for the

subsequent period. Giving an allowance of 15 (fifteen) days within

which possession should have been handed over by the Respondent,

the Claimant would be entitled to damages w.e.f. 01.07.2019. INR

2.10 crore per month. The Claimant has calculated losses @ INR

2.10 crore per month. For this purpose, the Claimant has produced

Mr. Pankaj Tekchandani (CW-2) who has given his report about the

land in question and its commercial prospects. As against that, the

Respondent has produced Mr. Amit Chawla, RW-2 who has also

deposed about the commercial viability of the property including its

location, etc. Going by the considerations of location of the property,

the fact that even the Claimant could not develop this property from

2006 to 2014 and ultimately, handed over the same to the

Respondent for development, its marketability and other such

considerations, the Tribunal is of the view that calculations of loss

made by the Claimant for loss @ INR 2.10 crore per month is not

justifiable.

FAO(OS) (COMM) 156/2024 Page 25 of 40

144. As already mentioned above, the Respondent has disputed

the validity of the valuation report (CBRE report) relied upon by the

Claimant. The Respondent has made detailed submissions during

arguments and also in the closing written submissions. The

Respondent has also referred to various questions put to CW-2 and

reply given to those questions. It may not be necessary to produce

the entire discussion in this behalf. It is sufficient to mention that

calculation of INR 2.10 crore per month made in the manner in the

said report and relied upon by the Claimant cannot be accepted. At

the same time, the claim for the period in question cannot be rejected

in toto as the Claimant would be entitled to some claim because of

illegal occupation of the Project land by the Respondent even after

the termination of the Agreements. Unfortunately, no evidence is

led in this behalf by either party and therefore, there is no other

alternative for the Arbitral Tribunal but to award some amount

by making some guesswork.

145. Taking into consideration all the relevant facts and

circumstances of the case, in the opinion of the Tribunal, interest of

justice would be subserved in granting mesne profit for withholding

the possession beyond 01.07.2019 @ INR 30.00 lakh per month

from 01.07.2019 which would come to four years and five months

i.e., 30.00 lakh X 53 = to 15,90,00,000/- till 30.11.2013. The

Claimant shall also be entitled mesne profits at this rate with effect

from 01.12.2023 till the possession of the land is handed over to it.”

(emphasis supplied)

59. Upon a plain reading, it is clear that while the learned Tribunal

acknowledged the absence of evidence on both sides, it nonetheless

proceeded to quantify mesne profits at Rs. 30,00,000/- per month on the

basis of guesswork.

60. Thus, in order to assess whether the reliance on guesswork by the

Arbitrator finding is permissible and consistent with applicable law, it

is necessary to understand the scope of “guesswork” in the context of

arbitral awards.

61. This Court is aware that reliance on a “rough and ready” estimate

FAO(OS) (COMM) 156/2024 Page 26 of 40

or guesswork is not alien to arbitral jurisprudence and has received

recognition from the Supreme Court as well as this Court.

62. In DDA v. Anand and Associates (supra), the methodology of

adopting some degree of guesswork was affirmed. The relevant

observations are as follows:

“6. …It is true that while awarding a sum of Rs. 1,91,659/-

towards increase in the labour charges and Rs. 3,50,000/- on account

of the increase in the price of materials, the arbitrator has observed

that no books of accounts had been produced before him and that he

has determined the amount from whatever is available on record yet

interference with that part of the award would also not be justified

in view of the settled legal positions that the court would not set

aside an award simply because it was to an extent based upon some

guesswork. Reference may in this regard be made to Mohd.

Salamatullah and Ors. v. Government of Andhra Pradesh 1977 SC

1481 where the court has observed:—

“We are not able to discern any tangible material on the

strength of which the High Court reduced the damages from

15% of the contract price to 10% of the contract price. If the

first was a guess, it was at least a better guess than the

second one. We see no justification for the appellate court

to interfere with a finding of fact given by the trial Court

unless some reason, based on some fact, is traceable on the

record. There being none we are constrained to set aside the

judgment of the High Court in regard to the assessment of

damages for breach of contract.”

(emphasis supplied)

63. Similarly, a Division Bench of this Court in Cobra Instalaciones

Y Servicios, S.A. (supra), while considering Construction Design

(supra), observed that such a method is a permissible tool available to

an arbitrator, particularly in a situation where material exists to show

that loss has been suffered, but does not furnish granular details for

precise quantification.

FAO(OS) (COMM) 156/2024 Page 27 of 40

64. More recently, another Division bench of this Court in Bharat

Heavy Electricals Ltd. (supra) taking into account Cobra

Instalaciones Y Servicios (supra), affirmed the adoption of honest

guesswork in the following terms:

35. In our opinion, there may be three situations. First, there is

no evidence of any loss to a party raising a claim. In such situation

arbitrator cannot presume any loss and award compensation.

Second, where there is evidence of loss as well as evidence on

quantum of damages. This would be an ideal situation in awarding

damages and compensation. Third is the situation where there is

evidence of loss but either there is meager evidence or absence of

evidence in support of claim of damages. In such situation the

arbitrator can use rough and ready method by using a practical guess

work to determine the damages and compensation. But such

compensation should be reasonable in the sense that in given

situation no man of prudence would call it excessive. The third

situation occurs in the present case and therefore, while exercising

very limited jurisdiction under Section 37, we have only to see as to

whether the damages/compensation awarded to Delkon is

reasonable or not.

****

39. The counter claim no. 3 is towards cost of pre assembly and

part wielding completed. The Arbitrator had relied upon the report

of Local Commissioner and awarded lesser amount of interest at the

rate of 12% (against 15% as per clause 57.3 (1) (A) (i) of the

contract) of the contract rate as appropriate and reasonable and held

that value for 12.908 MT works out to Rs. 4182/-. In appeal the

appellant submits that clause 57.2 (1A)(i) does not deal with the

breakup of the cost but instead pertains to the payment milestone.

Again in our considered view, even if the aforesaid clause is

misapplied, the awarded amount of Rs. 4182/- is so meager that it

has to be accepted as the cost of pre assembly and part wielding

completed.

****

46. The argument of learned Counsel for the appellant is that

there is no evidence on record to show that value of T&P was Rs. 40

lakhs. Further, no evidence has been led to prove respondent's claim

on damages. Learned counsel for the appellant assailed the method

adopted by the Arbitrator for calculating withholding charges.

***

50. After perusing the material available on record, we are of the

opinion that in respect of the heavy machinery, the Arbitrator has

reached to a plausible conclusion that the value of the withheld

machinery would be about Rs. 40,00,000/- and the depreciation

FAO(OS) (COMM) 156/2024 Page 28 of 40

value to be Rs. 10,00,000/-. We concur with the learned District

Judge on Arbitrator's finding on the computation of 210 days and the

methodology adopted for awarding Rs. 5,75,342/- to the respondent

on account of the appellant's illegal withholding of T&P. In other

words the Arbitrator had some basis for calculating withholding

charges of Rs. 5,75,342/-, which is not at all unreasonable if we

consider the nature of T&P which included heavy

equipments/machinery including two Cranes, one Tractor, two

Trailors and one Metador Pickup Van etc. and the duration of 210

days for which the same were withheld. Hence, we agree with the

view of Arbitrator and learned District Judge on contract clause no.

7 being reasonable and uphold the same.

COUNTER CLAIM NO. 13 AND 15

51. The respondent-Delkon had raised these counter claims

towards cost of mobilization and demobilization of T&P, equipment

and manpower. The appellant has drawn our attention to the

observation of Arbitrator that Delkon has not submitted any

documents for actual expenses incurred by them in mobilization and

demobilization. Therefore, awarding a sum of Rs. 10,52,800/- is

based upon mere surmises and conjectures.

****

53. We are of the opinion that even if no documents were

furnished by respondent-Delkon before the Arbitrator, the

conclusion of the Arbitrator has been arrived at on “the analysis of

unit rates”, which is Annexure -E to Tender No. BHEL:

NR(SCT):RGTTP:BLR:42. This Annexure - E forms the part of the

contract No. 50/96 between the parties. This finding of Arbitrator,

about 65% of the overheads having been consumed in mobilization

and demobilization, is a finding on fact and therefore we are not

inclined to go deeper into it especially when it is based upon Local

Commissioner's report. The Arbitrator has calculated these charges

on the basis of Annexure - E. Therefore, even if no documents were

filed by Delkon to prove expenditure of this overhead, the

calculation by learned Arbitrator is reasonable and justified.

54. Learned District Judge observed that the award of amount

of Rs. 10,52,800/- towards mobilization and demobilization costs

cannot be held to be without reasons or material evidence on record

and held that as long as there is sufficient material available on

record on the basis of which an estimation of loss/expenses/costs

incurred can be drawn, an award of that estimate can be

granted. We are of the opinion that view of learned District

Judge is correct on this issue especially when the Arbitrator had

based his estimation on the basis of Local Commissioner's report

and “analysis of unit rates” which is part of the contract. The

Arbitrator adopted a rough and ready method with reasonable and

FAO(OS) (COMM) 156/2024 Page 29 of 40

honest guess work on this issue. Consequently, we find no infirmity

in the impugned award and the impugned judgment on this issue.

(emphasis supplied)

65. An analysis of the above-mentioned precedents indicates that,

although the adoption of a “rough and ready” method or honest

guesswork has been judicially recognised, the same is not unguided.

66. The decision of the Division Bench in Cobra Instalaciones y

Servicios S.A. (supra) clarifies that such latitude is available in a

situation where there is material on record to establish that loss has

indeed been suffered, but the evidence falls short of providing precise

quantification. We note that the above principle stands further

elucidated in Bharat Heavy Electricals Ltd. (supra) in context of

unliquidated damages, where this Court upheld the award of damages

not merely because guesswork was employed, but because such

determination was founded upon a discernible and rational

methodology traceable to the material on record.

67. In Bharat Heavy Electricals Ltd. (supra), the Court was dealing

with multiple claims where the Arbitrator had awarded compensation

despite absence of strict proof of expenditure under certain heads.

However, in our considered view, what weighed with the Court while

assessing reasonability was that, in each such instance, the Arbitrator

had relied upon some identifiable material such as contractual clauses,

reports of the Local Commissioner, admitted quantities, or standard

rates and had applied a rational method of computation. Most

significantly, while upholding the award relating to claim for

FAO(OS) (COMM) 156/2024 Page 30 of 40

withholding of machinery, the Court expressly noted that “the

Arbitrator had some basis for calculating… which is not at all

unreasonable”. It shows that the existence of a foundational basis,

however limited, is a sine qua non for sustaining such quantification.

68. The same principle is echoed in DDA v. Anand and Associates

(supra), where the Court declined to interfere with an award partly

based on guesswork, as the arbitrator had determined the amount “from

whatever is available on record”. It thus emerges to us that while

exactitude in proof of damages is not insisted upon, the adjudicatory

process must nevertheless disclose a rational nexus between the

material available and the figure ultimately awarded or atleast some line

of reasoning in mind of the learned Arbitrator to justify the reasonability

of the figure.

69. This approach also emerges from Gemini Bay Transcription (P)

Ltd. (supra), wherein, although the guesswork method was allowed, it

was also noted that the Arbitrator had made assessment taking into

account some material on record. The relevant observations are as

follows:

“77. The arbitrator correctly held that as nothing was forthcoming

from any of the appellants, he would have to make a best judgment

assessment for damages. In making that assessment, he took into

account the commission that was being earned by GBT from the two

clients of DMC and arrived at a figure of 100,000 USD per month

and then found, on a reasonable estimate, that they would continue

to be clients for a period of four years, as a result of which the figure

of 6,948,100 USD was reached.

78. That such "guesstimates" are not a stranger to the law of

damages in the US and other common law tradition nations has been

established very early on in a judgment of Asutosh Mookerjee, J.

FAO(OS) (COMM) 156/2024 Page 31 of 40

reported as Frederick Thomas Kingsley v. Secy, of State for India

AIR 1923 Cal 49…”

(emphasis supplied)

70. Thus, what the law countenances is not guesswork in vacuo, but

a reasoned approximation founded on some material, some method, or

at the very least, a discernible line of reasoning.

71. In the present case, the learned Tribunal rejected the CBRE

Report, holding it to be unreliable and proceeded on the premise that

since no evidence was led by either party for quantification of damages,

mesne profits could be discerned by way of guesswork. The Arbitral

Award, however, discloses no discussion or reasoning for arriving at

the figure of Rs. 30,00,000/- per month.

72. On behalf of the Appellant, Mr. Nagrath suggested that the said

figure is traceable to the material on record by relying on the Colliers

Report furnished by the Respondent. However, it does not merit our

acceptance.

73. As per the Appellant, Colliers Report indicates rental values of

Rs. 50–80 per sq. ft. for an approximate built-up area of 60,000 sq. ft.,

yielding a possible range of Rs. 30–48 lakh per month. However, the

Arbitral Award neither records reliance on this Report nor adopts such

a methodology. An Award must stand or fall on the reasons contained

therein, and it is impermissible for a party to supplement or reconstruct

the reasoning by reference to material not relied upon by the learned

Tribunal. Even otherwise, there are multiple outcomes possible based

on Colliers Report, and in the absence of any reasoning by the learned

FAO(OS) (COMM) 156/2024 Page 32 of 40

Arbitrator linking the material to the figure awarded, the quantification

cannot be sustained. Moreover, it is settled law that the Arbitrator is the

master of facts and evidence. Once the learned Arbitrator itself recorded

that no evidence had been led by either party, it necessarily follows that

the quantification was not based on any material such as the Colliers

Report. In such circumstances, this Court cannot attribute a basis to the

Arbitral Award which the learned Tribunal itself has not disclosed, nor

can it hold that the figure is traceable to the record when the learned

Tribunal has expressly found otherwise.

74. It is no doubt true that in cases of unliquidated damages,

particularly those arising from wrongful retention of property, some

degree of estimation is inevitable. However, such estimation must be

reasoned and based on a discernible foundation. In the present case, the

Arbitral Award proceeds merely on the premise that the Appellant is

entitled to compensation on account of wrongful possession of the

subject land by the Respondent, without any analysis of the extent of

loss or any indication of the basis of computation. The absence of such

reasoning renders the determination unsustainable in law.

75. The Supreme Court has consistently emphasised that the latitude

available for ‘honest guesswork’ does not dispense with the

requirement of a reasoned determination. In New Okhla Industrial

Development Authority (supra), the Supreme Court clarified that while

some degree of estimation or “guesstimation” is permissible in

determining compensation, the exercise cannot be speculative or purely

subjective. The discretion to adopt guesswork is not unfettered and must

have a nexus with the material on record and other relevant factors. It

FAO(OS) (COMM) 156/2024 Page 33 of 40

was observed as follows:

“33. Having said that, it is important to clarify that the process of

determining compensation is not entirely subjective. While it may

not be possible to arrive at a definitive figure, the exercise is still

epistemologically objective in so far as it is grounded in evidence

and the consideration of relevant factors. In case the compensation

is fixed agnostically to the factors affecting the valuation of the land,

the resultant figure might be arbitrary and may fail to adequately

compensate the landowner for the expropriated land. Hence, while

some subjectivity may exist in fixing the final figure based on these

factors, the sliding scale of judicial discretion cannot be extended to

mere speculation.

34. Accordingly, while the Court can use the principle of

guesstimation in reasonably estimating the value of land in the

absence of direct evidence, the exercise ought not to be purely

hypothetical. Instead, the Court must embrace a holistic view and

consider all relevant factors and existing evidence, even if not

directly comparable, to arrive at a fair determination of

compensation. Trishala Jain v. State of Uttaranchal,

9

summarizes

these yardsticks as follows:

“65. It will be appropriate for us to state certain

principles controlling the application of “guesstimate”:

(a) Wherever the evidence produced by the parties is not

sufficient to determine the compensation with exactitude,

this principle can be resorted to.

(b) Discretion of the court in applying guesswork to the facts of

a given case is not unfettered but has to be reasonable and

should have a connection to the data on record produced

by the parties by way of evidence. Further, this entire

exercise has to be within the limitations specified under

Sections 23 and 24 of the Act and cannot be made in

detriment thereto.”

(emphasis supplied)

76. Similarly, in Ramesh Kumar Jain (supra), the guesswork by the

arbitrator was upheld since it was based on taking into account some

evidence. In Ramesh Kumar Jain (supra), it was also held that an

Arbitral Award may be interfered with if it is based on “no evidence”

because an arbitrator cannot conjure findings out of thin air. The

FAO(OS) (COMM) 156/2024 Page 34 of 40

relevant excerpt is thus:

“35. Considering the aforesaid precedents, in our considered

view, the said terminology of ‘patent illegality’ indicates more than

one scenario such as the findings of the arbitrator must shock the

judicial conscience or the arbitrator took into account matters he

shouldn't have, or he must have failed to take into account vital

matters, leading to an unjust result; or the decision is so irrational

that no fair or sensible person would have arrived at it given the

same facts. A classic example for the same is when an award is based

on “no evidence” i.e., arbitrators cannot conjure figures or facts out

of thin air to arrive at his findings. If a crucial finding is unsupported

by any evidence or is a result of ignoring vital evidence that was

placed before the arbitrator, it may be a ground the warrants

interference. However, the said parameter must be applied with

caution by keeping in mind that “no evidence” means truly no

relevant evidence, not scant or weak evidence. If there is some

evidence, even a single witness's testimony or a set of documents, on

which the arbitrator could rely upon or has relied upon to arrive at

his conclusions, the court cannot regard the conclusion drawn by

the arbitrator as patently illegal merely because that evidence has

less probative value. This thin line is stood crossed only when the

arbitral tribunal's conclusion cannot be reconciled with any

permissible view of the evidence.”

(emphasis supplied)

77. The Appellant also contended that the Arbitral Award must be

read in its entirety and not by isolating a particular paragraph, and that

the quantification must be understood in the context of the overall

findings recorded by the learned Tribunal.

78. We have, accordingly, perused the Arbitral Award as a whole.

While the learned Tribunal has furnished reasons in respect of the

breach and the validity of termination, it is conspicuously silent on the

aspect of quantification of mesne profits. There is no discussion of

material or any discernible methodology or reasoning for arriving at the

figure awarded. The submission on behalf of the Appellant that such

FAO(OS) (COMM) 156/2024 Page 35 of 40

reasoning can be gathered from the record cannot be accepted, as it is

impermissible for this Court to supply reasons which the Arbitral

Award itself does not disclose.

79. The distinction between an arbitral award where reasons are

either lacking or unintelligible and an award where reasons are explicit

but appear inadequate was carved out by the Supreme Court in OPG

Power Generation (P) Ltd. v. Enexio Power Cooling Solutions (India)

(P) Ltd.

44

. The Court therein held that where reasons are merely

inadequate or insufficient but the underlying basis is understandable on

a holistic reading, the Court may sustain the award by explaining such

reasoning. However, the present case falls in the category of awards

suffering from a complete absence of reasoning for quantification. Any

attempt to justify the reasonableness of the quantification on the basis

of submissions advanced before us by the learned Senior Counsel for

the Appellant would amount to impermissibly supplanting the findings

of the learned Tribunal by this Court, which are based on no evidence

or reasoning, by substituting them with this Court’s own interpretation

of the evidence on record which is impermissible.

80. A mere observation in the Arbitral Award that the determination

is based on the “all the relevant facts and circumstances of the case”

cannot, in our considered view, suffice in a matter of unliquidated

damages. While it may be that the learned Tribunal considered material

such as the CBRE and Colliers reports, along with the testimony of the

expert witnesses, however, the same were ultimately not accepted for

44

(2025) 2 SCC 417

FAO(OS) (COMM) 156/2024 Page 36 of 40

quantification as the learned Tribunal itself recorded that no evidence

had been led by the either party. Once such evidence stood rejected, the

quantification cannot be sustained on the basis of the very same

evidence. Therefore, no linkage can be found between the figure arrived

at and material on record. We may have accepted the linkage between

the said reports and the quantification, had the learned Tribunal not

expressly recorded that there was no evidence. Once such a finding is

returned and the learned Tribunal nevertheless resorts to guesswork, it

was incumbent to disclose some reasoning or basis for the

quantification. In the absence thereof, the figure arrived at remains one

based on mere conjecture and lacks any foundational basis.

81. In the absence of reasons employed by the learned Tribunal, the

contours of patent illegality assume significance. The Supreme Court

in DMRC Ltd. v. Delhi Airport Metro Express (P) Ltd.

45

, explained the

same in the following words:

“39. In essence, the ground of patent illegality is available for

setting aside a domestic award, if the decision of the arbitrator is

found to be perverse, or so irrational that no reasonable person

would have arrived at it; or the construction of the contract is such

that no fair or reasonable person would take; or, that the view of the

arbitrator is not even a possible view. A “finding” based on no

evidence at all or an award which ignores vital evidence in arriving

at its decision would be perverse and liable to be set aside under the

head of “patent illegality”. An Award without reasons would suffer

from patent illegality. The arbitrator commits a patent illegality by

deciding a matter not within his jurisdiction or violating a

fundamental principle of natural justice”.

(emphasis supplied)

45

(2024) 6 SCC 357

FAO(OS) (COMM) 156/2024 Page 37 of 40

82. This principle has also been reiterated in Ssangyong

Engineering & Construction Co. Ltd. v. NHAI

46

and PSA SICAL

Terminals Pvt. Ltd. (supra) wherein it was held that a finding based on

no evidence is perverse and liable to be set aside on account of patent

illegality.

83. On the touchstone of the aforesaid principles, we find that the

Arbitral Award insofar as it quantifies the mesne profits to the extent of

Rs. 30,00,000 per month cannot be sustained. The learned Tribunal,

having discarded the valuation material and not followed any

benchmark or evidentiary basis, nonetheless proceeded to determine a

fixed figure without disclosing any rationale or methodology. As held

in Ramesh Kumar Jain (supra), while sufficiency of evidence is not

for the Court to reappreciate, a finding based on “no evidence” warrants

interference, as an Arbitrator cannot conjure a figure out of thin air

without any supporting basis.

84. The above conclusion is further reinforced by the decisions in

Bharat Heavy Electricals Ltd (supra), Gemini Bay Transcription (P)

Ltd. (supra) and New Okhla Industrial Development Authority

(supra), which clarify that while a degree of approximation is

permissible in assessing damages, such an exercise must be anchored

in some evidence/material on record, method, or identifiable reasoning.

In our view, the latitude for ‘honest guesswork’ is confined to situations

where the record furnishes a foundation, however limited, for a rational

estimation. In the present case, the Arbitral Award discloses no such

46

(2019) 15 SCC 131

FAO(OS) (COMM) 156/2024 Page 38 of 40

foundational basis, nor is there any attempt to identify the parameters

which may guide this determination. The quantification, therefore,

ceases to be an exercise in estimation and instead assumes the character

of an fixation without any basis, thereby attracting the vice of patent

illegality. Therefore, the learned Single Judge was justified in

interfering with the Arbitral Award to this limited extent. Also, reliance

on Flovel Hydro (supra) is misplaced, as the said decision was rendered

in the context of an international commercial arbitration, where the

scope of interference is more circumscribed, and the ground of patent

illegality is not available for interference.

85. Insofar as the submission regarding adjustment of Claims and

Counter-Claims is concerned, we find no merit in the same. The Claims

and Counter-Claims have been adjudicated independently on their

respective merits. The setting aside of the quantification of mesne

profits does not, by itself, warrant reopening of the Counter-Claims or

disturb the findings rendered thereon, unless specifically challenged on

merits in proceedings under Section 34. The adjustment is merely

consequential to the final determination and does not create such

interdependence as to require that the fate of one must necessarily

govern and/or follow the other.

86. The Appellant’s contention that the Impugned Order was

vitiated due to violation of the principles of natural justice is also devoid

of merit. The record shows that the Appellant was duly represented and

participated in the proceedings, and all its submissions were considered

in the Impugned Order. The mere fact that the petition was disposed of

at the initial stage, or that no opportunity was granted to file a written

FAO(OS) (COMM) 156/2024 Page 39 of 40

reply, does not, ipso facto, amount to a violation of principles of natural

justice.

Conclusion

87. Upon a comprehensive consideration of the material on record,

the reasoning of the learned Tribunal, and the settled principles

governing interference under Sections 34 and 37 of the Act, we find no

infirmity in the Impugned Order.

88. ‘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.

89. Thus, the Arbitral Award, to the extent it awarded Rs. 30,00,000

per month towards mesne profits suffers from patent illegality being

both unsupported by evidence and devoid of reasons. The learned

Single Judge has rightly exercised its jurisdiction in setting aside the

quantification of mesne profits. We also find no merit in the Appellant’s

contentions regarding adjustment of Claims and Counter-Claims or

alleged violation of principles of natural justice, as the same do not

disclose any ground warranting interference.

FAO(OS) (COMM) 156/2024 Page 40 of 40

90. We make it clear that the liberty granted by the learned Single

Judge shall remain, and the Appellant shall be at liberty to agitate its

Claim in accordance with law. If such liberty is exercised, the

concerned authority shall endeavour to decide the same expeditiously.

91. In light of the foregoing discussion, we dismiss the present

appeal, along with any pending applications, if any.

92. There shall be no order as to costs.

OM PRAKASH SHUKLA, J.

C.HARI SHANKAR, J.

April 13, 2026/ss/pa