Arbitral tribunal must give reasons to deny liquidated damages: Bombay High Court

The Bombay High Court has ruled that an arbitral tribunal must give reasons to deny liquidated damages. This significant decision reinforces the principle of transparency and accountability in arbitration awards. Liquidated damages clauses pre-determine compensation for breach of contract. If a tribunal decides against awarding such damages, it must provide clear and cogent reasons for its decision. This ensures that parties understand the basis of the award, facilitates judicial review, and upholds the integrity of the arbitration process, preventing arbitrary denials of contractually agreed-upon compensation.