#Damages Cap

Bombay High Court rules that a 1% damages cap in an EPC contract cannot limit liability when the employer fails to provide critical right-of-way, constituting a fundamental breach. The judgment reinforces the business efficacy test and restricts judicial interference under Section 34 to only patent illegality, while setting aside compounded interest for violating contractual terms.

Bombay High Court rules that a 1% contractual damages cap cannot limit liability when a party fails to fulfill foundational obligations, such as providing 90% Right of Way within 15 days. The Court applied the business efficacy test under Section 28(3) of the Arbitration Act, reinforcing that rigid contractual limits do not survive fundamental breaches. However, the 18% compounded interest awarded was set aside as contrary to the contract terms.