Delhi High Court: Actual Loss Must Be Proven for Liquidated Damages Recovery

The Delhi High Court has held that a liquidated damages clause does not imply that the entire amount in a contract can be recovered automatically.

The party claiming liquidated damages must establish actual loss or damage on account of breach of contract; mere reference to a stipulated amount would not do.

The Court clarified that liquidated damages were a genuine estimate of loss, rather than punishment, and payment was restricted to the proved loss.

The decision reiterates that reasonable compensation rather than unexpected profits is the objective, and claimants have to establish their losses in order to receive damages.