Delhi High Court Upholds ₹25,000 Nominal Damages In IOCL Dispute, Rules Price Difference Not Proof Of Loss

The Delhi High Court on 22 April upheld an arbitral award arising from a supply contract between Indian Oil Corporation Limited (IOCL) and Hazel Mercantile Ltd, where the arbitrator had granted nominal damages of Rs. 25,000.

Justice Avneesh Jhingan held that a mere price difference does not, by itself, establish proof of loss and declined to interfere under Section 34 of the Arbitration and Conciliation Act. He observed:

“The quantification of the nominal damages is a discretion exercised by the arbitrator in the facts and circumstances of the case calling for no interference under Section 34 of the Act.”

IOCL issued a tender in January 2018 for supply of acetic acid. Hazel Mercantile Ltd. emerged as the successful bidder and received a purchase order in May 2018 for supply of 13,000 MT on a staggered basis over one year. Hazel supplied material until February 2019, when IOCL shut its plant due to technical reasons and later discontinued further procurement.

Hazel invoked arbitration alleging breach of contract. The arbitrator held IOCL liable but limited damages to Rs. 25,000 along with 9% interest, rejecting the remaining claims. Hazel then approached the High Court under Section 34 seeking to set aside the award.

Before the Court, Hazel contended that the award suffered from patent illegality and failed to justify rejection of its claimed loss of Rs. 8.58 crore. IOCL countered that the scope of interference under Section 34 was limited and that the contract imposed no obligation to maintain dedicated stock for IOCL supplies.

The Court noted that Hazel's claim was based on alleged loss arising from sale of remaining quantities at a lower price. However, the arbitrator found that Hazel maintained a common pool of inventory and failed to establish segregation of stock exclusively earmarked for IOCL.

It further noted that Hazel did not maintain sufficient stock on several occasions, indicating that it had not procured the entire contracted quantity in advance. The purchase order also did not require maintenance of dedicated stock. Reiterating the evidentiary gap, the Court held:

“Another aspect is that the damages claimed by the petitioner were based on the price difference between the rate agreed with IOCL and the price at which the acid was actually sold. The price difference by itself does not prove the loss suffered. In the absence of the purchase price the claim for damages cannot be sustained on the basis of price difference.”

Upholding the arbitral findings, the Court held that although IOCL's breach stood established, Hazel failed to prove actual loss. It reiterated that under Section 73 of the Contract Act, damages must be proved, and where exact proof is not possible, only nominal damages may be awarded.

Accordingly, the High Court dismissed Hazel's petition.

For Petitioner: Mr. Bishwajit Dubey, Mr. Akshit Awasthi & Mr. Vivek Sharma

For Respondent: Ms. Vineeta Meharia, Senior Adv. with Mr. Amit Meharia, Ms. Tannishtha Singh & Mr. Sambhav