31 Jan

Kinds of Damages in India

Decoding Damages

Damages refers to the compensation that one receives on account of a breach, loss or injury. According to Fuller and Perdue, damages seek protection of expectation interest, reliance interest or restitution of damage that has not occurred in the first place. Although the term has been used synonymously with compensation, it is not to be confused with one another. The term ‘compensation’ is a broader concept encompassing payments made to a person in respect of some kind of loss or damage suffered due to reasons like acquisition of property by another party, or statutory violations, termination of employments etc. whereas damages arises from actionable wrongs.

The Kinds of Damages 

Following are different kinds of damages:

  • General and Special Damages

Damages which arise in the normal course of events are known as general damages whereas special damages refer to those that arise out of circumstances that are reasonably anticipated by parties when they enter into a contract.

  • Nominal Damages

Nominal Damages act as a cushion for parties merely being at the receiving end of a breach. This may be awarded even when there is no actual loss or injury caused to a party against whom a breach has been proved. Nominal damages can also be awarded when there has been a breach of contract for reasons not attributable to the defendant

  • Substantial Damages

Substantial damages are provided when there are uncertainties with regard to the calculation of damages.

  • Aggravated and exemplary damages

In certain cases, the extent of damages awarded to the plaintiffs exceed the damages ascertained from the conduct of the defendant. In certain cases, the plaintiff’s feelings and dignity are adversely affected due to the manner of inflicting injury. The objective of aggravated damages is to compensate the plaintiff as opposed to exemplary damages that is put in place as a punitive measure. Since contractual breaches are not governed by motive, aggravated and exemplary damages are mostly covered under tortious law.

  • Liquidated and Unliquidated damages

When parties agree on pay a certain sum on the breach of contract they are known as liquidated damages. However, courts may award further damages after an assessment of loss or injury caused to the party suffering such breach of contract. This may be termed as unliquidated damages

Now that we have looked at the various kinds of damages, we must delve into the damages themselves

Quantum of damages awarded in India as opposed to the United States

Hence, it is clear that very idea of damages is for it to be used as a deterrent to prevent defendants from committing further acts of breach. This is where the issue arises. It has been observed that the damages awarded by Indian Courts are far lower than its American counterparts thereby weakening the deterrent effect.

For eg; BNP Paribas was recently ordered to pay a penalty of $8.9 billion after it pleaded guilty of skirting US Sanctions against Sudan, Iran and Cuba thereby violating US sanctions in the process. The idea of such punitive fines is to discourage companies from behaving in a manner that adversely impacts other party to the contract or in general the public. In the 1996 Judgement of (BMW of North America v Gore), the US Supreme Court laid down guidelines for assessing punitive damages holding that the “degree of reprehensibility of defendant’s conduct”. The situation in India is different as the level of damages awarded by the Courts does not suffice the damage caused. For instance, the Supreme Court passed an order in 2013 against a copper smelting plant, awarding damages of Rs 100 Crore for polluting the environment around its plant in Tuticorin. However, this amount is all but meagre in relation to the steady degradation of the environment. Although, there has been an increase in the quantum of damages awarded in recent times, Courts must assess the harm caused while determining the quantum of damages.

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