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36 Nat'l L. Sch. India Rev. 1 (2025)

handle is hein.journals/nlsind36 and id is 1 raw text is: Peer-reviewed and edited Pending layout and pagination DELAYS, DISRUPTIONS, AND DIMINISHED MARGINS: REASSESSING LOSS CLAIMS IN INDIAN CONSTRUCTION LAW - Gautam Mohanty' and Gaurav Rai2 ABSTRACT Loss of Profit claims by a contractor are premised on the assertion that the contractor has incurred financial losses due to the act of illegal and premature termination of the contract by the employer Loss of profitability, on the other hand, is a claim made by the contractor of a decrease in the profit percentage in a contract on account of delays and disruptions in the work due to the actions attributable to the employer Due to the homonymic nature of the terms, several judgments in India confuse one with the other and misunderstand the underlying principles of law applicable to grant such claims. The confusion could also have arisen from the fact that the seminal judgments in the UK on this topic do not make separate rules or guidelines for making such claims, but base them on the fundamental principles of foreseeability and remoteness. This article reassesses the principles underpinning the calculation for both and aims to clear the confusion. This article also deep dives into the well- known formulae for claiming losses on account of delays and disruptions such as the Hudson, Emden, and Eichleay formulae, which have also been recognised by the Supreme Court in Mcdermott International v Burn Standard. Additionally, this article also discusses the additional criterion developed by courts for applying the above formulae, i.e., providing some form of documentary proof of loss. Part I delves into the historical evolution of, and the distinction between Loss of Profit, Loss of Profitability and Loss of Chance Loss of Opportunity claims. Part II discusses and critiques the prevailing formulae for loss of profitability. Part III proposes suggestions and the way forward for using the formulae and a suggestion for a new formula more suited to India and small contractors. CONTENTS INTRODUCTION .....................................................................................................................2 Part I. LOSS OF PROFIT, LOSS OF PROFITABILITY AND LOSS OF OPPORTUNITY - FUNDAMENTALS, QUANTIFICATION AND PROOF ................................................ 5 A. Drawing the Line: Differentiating Loss of Profitability from Loss of Profits ..........5 B. LOSS OF PROFIT .........................................................................................................7 B l. Introduction to loss of profits......................................................................... . 7 B2. Evidentiary Standard for Breach and Quantification........................................ 8 Gautam Mohanty is an Of-Counsel at GESSEL in Warsaw, Poland, and a PhD student at Kozminski University in Warsaw, Poland. He is also a law practitioner enrolled as an advocate in India. He can be contacted at gtamo nty1414,&malcom. The authors would like to thank the reviewers whose comments helped shaped the final article and also Mr. Jugaad Singh for his research and editorial assistance. 2 Gaurav Rai is an Advocate practicing in Delhi and specialises in Arbitrations. He can be contacted at Oaurav@thearbitrationconsultant.in 1