TMI Blog2003 (4) TMI 438X X X X Extracts X X X X X X X X Extracts X X X X ..... ractor liquidated damages as agreed. As it was also explicitly understood that the agreed liquidated damages were genuine pre-estimate of damages & on the request of the respondent to extend the time limit for supply of goods, ONGC informed specifically that time was extended but stipulated liquidated damages as agreed would be recovered,liquidated damages for delay in supply of goods were to be recovered by paying authorities from the bills for payment of cost of material supplied by the contractor there is nothing on record to suggest that stipulation for recovering liquidated damages was by way of penalty or that the said sum was in anyway unreasonable; Thus in certain contracts, it is impossible to assess the damages or prove the same. Such situation is taken care by sections 73 and 74 of the Contract Act and in the present case by specific terms of the contract. - CIVIL APPEAL NO. 7419 OF 2001 - - - Dated:- 17-4-2003 - M.B. SHAH AND ARUN KUMAR, JJ. Ashok H. Desai, Dushyant A. Dave, Sunil Gupta, Ashwani Kumar, Ms. Anuradha Bindra, Kashi Vishweshwaran, Ms. Padmalakshmi Nigam, Vikram Mehta, K.R. Sasiprabhu, A.M. Khattawala, Mahesh Agarwal, Rishi Agarwal, E.C. Aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e; or ( iii )the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or ( iv )the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or ( v )the composition of the arbitral Tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or ( b )the Court finds that ( i )the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force; or ( ii )the arbitral award is in conflict with the public policy of India. Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 mandates that parties to the arbitral proceedings shall be treated with equality and each party shall be given full opportunity to present his case. Section 19 specifically provides that arbitral Tribunal is not bound by the Code of Civil Procedure, 1908 or the Indian Evidence Act, 1872 and parties are free to agree on the procedure to be followed by the arbitral Tribunal in conducting its proceedings. Failing any agreement between the parties subject to other provisions of Part-I, the arbitral Tribunal is to conduct the proceedings in the manner it considers appropriate. This power includes the power to determine the admissibility, relevance, the materiality and weight of any evidence. Sections 20, 21 and 22 deal with place of arbitration, commencement of arbitral proceedings and language respectively. Thereafter, sections 23, 24 and 25 deal with statements of claim and defence, hearings and written proceedings and procedure to be followed in case of default of a party. 7. At this stage, we would refer to section 24 which is as under : " Hearings and written proceedings. (1) Unless otherwise agreed by the parties, the arbitral Tribunal shall decide whether to hold oral ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the transaction. 31. Form and contents of arbitral award (1) An arbitral award shall be made in writing and shall be signed by the members of the arbitral Tribunal. (2) For the purposes of sub-section (1), in arbitral proceedings with more than one arbitrator, the signatures of the majority of all the members of the arbitral Tribunal shall be sufficient so long as the reason for any omitted signature is stated. (3) The arbitral award shall state the reasons upon which it is based, unless ( a )the parties have agreed that no reasons are to be given, or ( b )the award is an arbitral award on agreed terms under section 30. (4) The arbitral award shall state its date and the place of arbitration as determined in accordance with section 20 and the award shall be deemed to have been made at that place. (5) After the arbitral award is made, a signed copy shall be delivered to each party. (6) The arbitral Tribunal may, at any time during the arbitral proceedings, make an interim arbitral award on any matter with respect to which it may make a final arbitral award. (7)( a ) Unless otherwise agreed by the parties, where and insofar as an arbitral award is for the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etween procedure in section 90(2) and powers under section 92 . When the respondent applied to the Tribunal for amendment, he took a procedural step, and that he was clearly entitled to do under section 90(2). The question of power arises only with reference to the order to be passed on the petition by the Tribunal. Is it to be held that the presentation of a petition is competent, but the passing of any order thereon is not? We are of opinion that there is no substance in the contention either." 10. Hence, the jurisdiction or the power of the arbitral Tribunal is prescribed under the Act and if the award is de hors the said provisions, it would be, on the face of it, illegal. The decision of the Tribunal must be within the bounds of its jurisdiction conferred under the Act or the contract. In exercising jurisdiction, the arbitral Tribunal cannot act in breach of some provision of substantive law or the provisions of the Act. 11. The question, therefore, which requires consideration is whether the award could be set aside, if the arbitral Tribunal has not followed the mandatory procedure prescribed under section 24, 28 or 31(3), which affects the rights of the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of law or the provisions of the Act or against the terms of the contract, it would be patently illegal, which could be interfered under section 34. However, such failure of procedure should be patent affecting the rights of the parties. What meaning could be assigned to the phrase Public Policy of India ? 13. The next clause which requires interpretation is clause ( ii ) of sub-section (2)( b ) of section 34 which inter alia provides that the Court may set aside arbitral award if it is in conflict with the Public Policy of India . The phrase Public Policy of India is not defined under the Act. Hence, the said term is required to be given meaning in context and also considering the purpose of the section and scheme of the Act. It has been repeatedly stated by various authorities that the expression public policy does not admit of precise definition and may vary from generation to generation and from time to time. Hence, the concept public policy is considered to be vague, susceptible to narrow or wider meaning depending upon the context in which it is used. Lacking precedent the Court has to give its meaning in the light and principles underlying the Arbitrati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he young Alexander the Great taming Bucephalus, he said in Enderby town Football Club Ltd. v. Football Assn. Ltd. [1971] Ch. 591, 606; With a good man in the saddle, the unruly horse can be kept in control. It can jump over obstacles . Had the timorous always held the field, not only the doctrine of public policy but even the Common Law or the principles of Equity would never have evolved. Sir William Holdsworth in his History of English Law . Volume III, page 55, has said: In fact, a body of law like the common law, which has grown up gradually with the growth of the nation, necessarily acquires some fixed principles, and if it is to maintain these principles it must be able, on the ground of public policy or some other like ground, to suppress practices which, under ever new disguises, seek to weaken or negative them. It is thus clear that the principles governing public policy must be and are capable, on proper occasion, of expansion or modification. Practices which were considered perfectly normal at one time have today become obnoxious and oppressive to public conscience. If there is no head of public policy which covers a case, then the Court must in consonance with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are tainted with illegality but are contracts which contain terms which are so unfair and unreasonable that they shock the conscience of the Court. They are opposed to public policy and require to be adjudged void." (p. 217) [Emphasis supplied] 15. Further, in Renusagar Power Co. Ltd. v. General Electric Co. [1994] Suppl. (1) SCC 644, this Court considered section 7(1) of the Arbitration (Protocol and Convention) Act, 1937 which inter alia provided that a foreign award may not be enforced under the said Act, if the Court dealing with the case is satisfied that the enforcement of the award will be contrary to the Public Policy. After elaborate discussion, the Court arrived at the conclusion that Public Policy comprehended in section 7(1)( b )( ii ) of the Foreign Awards (Recognition and Enforcement) Act, 1961 is the Public Policy of India and does not cover the public policy of any other country. For giving meaning to the term Public Policy , the Court observed thus: "66. Article V(2)( b ) of the New York Convention of 1958 and section 7(1)( b )( ii ) of the Foreign Awards Act do not postulate refusal of recognition and enforcement of a foreign award on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... moment certainly does not absolve the Judges from the duty of doing so. In conducting an enquiry, as already stated, Judges are not hide-bound by precedent. The Judges must look beyond the narrow field of past precedents, though this still leaves open the question, in which direction they must cast their gaze. The Judges are to base their decision on the opinions of men of the world, as distinguished from opinions based on legal learning. In other words, the Judges will have to look beyond the jurisprudence and that in so doing, they must consult not their own personal standards or predilections but those of the dominant opinion at a given moment, or what has been termed customary morality. The Judges must consider the social consequences of the rule propounded, especially in the light of the factual evidence available as to its probable results.... The point is rather that this power must be lodged somewhere and under our Constitution and laws, it has been lodged in the Judges and if they have to fulfil their function as Judges, it could hardly be lodged elsewhere." (p. 482) [Emphasis supplied] 17. Mr. Desai submitted that the narrow meaning given to the term public policy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late Court or the Court exercising revisional jurisdiction, the jurisdiction of such Court would be wider. Therefore, in a case where the validity of award is challenged there is no necessity of giving a narrower meaning to the term public policy of India . On the contrary, wider meaning is required to be given so that the patently illegal award passed by the arbitral Tribunal could be set aside. If narrow meaning as contended by the learned senior counsel Mr. Dave is given, some of the provisions of the Arbitration Act would become nugatory. Take for illustration a case wherein there is a specific provision in the contract that for delayed payment of the amount due and payable, no interest would be payable, still however, if the Arbitrator has passed an award granting interest, it would be against the terms of the contract and thereby against the provision of section 28(3) of the Act which specifically provides that "arbitral Tribunal shall decide in accordance with the terms of the contract". Further, where there is a specific usage of the trade that if the payment is made beyond a period of one month, then the party would be required to pay the said amount with interest at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Tribunal to conduct the proceedings in accordance with the procedure agreed by the parties; ( d )failure by the Tribunal to deal with all the issues that were put to it; ( e )any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award exceeding its powers; ( f )uncertainty or ambiguity as to the effect of the award; ( g )the award being obtained by fraud or the award or the way in which it was procured being contrary to public policy; ( h )failure to comply with the requirement as to the form of the award; or ( i )any irregularity in the conduct of the proceedings or in the award which is admitted by the Tribunal or by any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award. (3) If there is shown to be serious irregularity affecting the Tribunal, the proceedings or the award, the court may ( a )remit the award to the Tribunal, in whole or in part, for reconsideration; ( b )set the award aside in whole or in part; or ( c )declare the award to be of no effect, in whole or in part. The Court shall not exercise its power to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o section 34, section 13(5) of the Act also provides that Constitution of the arbitral Tribunal could also be challenged by a party. Similarly, section 16 provides that a party aggrieved by the decision of the arbitral Tribunal with regard to its jurisdiction could challenge such arbitral award under section 34. In any case, it is for the Parliament to provide for limited or wider jurisdiction to the Court in case where award is challenged. But in such cases, there is no reason to give narrower meaning to the term public policy of India as contended by learned senior counsel Mr. Dave. In our view, wider meaning is required to be given so as to prevent frustration of legislation and justice. This Court in Rattan Chand Hira Chand v. Askar Nawaz Jung [1991] 3 SCC 67, this Court observed thus : 17. . . It cannot be disputed that a contract which has a tendency to injure public interest or public welfare is one against public policy. What constitutes an injury to public interests or welfare would depend upon the times and climes.... The Legislature often fails to keep pace with the changing needs and values nor as it realistic to expect that it will have provided for all contin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... award to operate. Patently illegal award is required to be set at naught, otherwise it would promote injustice. 26. Therefore, in our view, the phrase Public Policy of India used in section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term public policy in Renusagar Power Co. Ltd. s case ( supra ), it is required to be held that the award could be set aside if it is patently illegal. Result would be award could be set aside if it is contrary to : ( a )fundamental policy of Indian law; or ( b )the interest of India; or ( c )justice or morality; or ( d )in addition, if it is patently illegal. Ille ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very of the pipes was extended with a specific statement inter alia that the amount equivalent to liquidated damages for delay in supply of pipes would be recovered from the respondent. It is the contention of the respondent that the appellant made payment of the goods supplied after wrongfully deducting an amount of US $ 3,04,970.20 and Rs. 15,75,559 as liquidated damages. That deduction was disputed by the respondent and, therefore, dispute was referred to the arbitral Tribunal. The arbitral Tribunal arrived at the conclusion that strikes affecting the supply of raw material to the claimant are not within the definition of Force Majeure in the contract between the parties, and hence, on that ground, it cannot be said that the amount of liquidated damages was wrongfully withheld by the appellant. With regard to other contention on the basis of customs duty also, the arbitral Tribunal arrived at the conclusion that it would not justify the delay in the supply of goods. Thereafter, the arbitral Tribunal considered various decisions of this Court regarding recovery of liquidated damages and arrived at the conclusion that it was for the appellant to establish that they had suffere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dave submitted that it is settled law that for the breach of contract provisions of section 74 of the Contract Act would be applicable and compensation/damages could be awarded only if the loss is suffered because of the breach of contract. He submitted that this principle is laid down by the Privy Counsel as early as in 1929 in Bhai Panna Singh v. Bhai Arjun Singh AIR 1929 PC 179, wherein the Privy Council observed thus: "The effect of section 74, Contract Act of 1872, is to disentitle the plaintiffs to recover simplicitor the sum of Rs. 10,000 whether penalty or liquidated damages. The plaintiffs must prove the damages they have suffered...." (p. 180) 32. He submitted that this Court has also held that the plaintiff claiming liquidated damages has to prove the loss suffered by him. In support of this contention, he referred to and relied upon various decisions. In any case, it is his contention that even if there is any error in arriving at the said conclusion, the award cannot be interfered with under section 34 of the Act. 33. At this stage, we would refer to the relevant terms of the contract upon which learned counsel for the appellant has based his submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een supplied within stipulated delivery period. LD will be imposed on the order value of delayed supply(ies). However, where in judgment of ONGC, the supply of partial quantity does not fulfil the operating need, LD will be imposed on full value of the supply order. 34.4 Delay in release of payment : In case where payment is to be made on satisfactory receipt of materials at destination or where payment is to be made after satisfactory commissioning of the equipment as per terms of the supply order. ONGC shall make payment within 60 days of receipt of invoice/claim complete in all respects. Any delay in payment on undisputed claim/amount beyond 60 days of the receipt of invoice claim will attract interest at the rate of 1 per cent per month. No interest will be paid on disputed claims . For interest on delayed payments to small scale and Ancillary Industrial Undertakings, the provisions of the Interest of delayed payments to small scale and Ancillary Industrial Undertakings Act, 1993 will govern ." [Emphasis supplied] 34. Mr. Desai referred to the decision rendered by this Court in Delta International Ltd. v. Shyam Sundar Ganeriwalla [1999] 4 SCC 545 and submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amages were not by way of penalty and it was agreed to be genuine, pre-estimate of damages duly agreed by the parties; ( c )This pre-estimate of liquidated damages is not assailed by the respondent as unreasonable assessment of damages by the parties. Further, at the time when respondent sought extension of time for supply of goods, time was extended by letter dated 4-12-1996 with a specific demand that the clause for liquidated damages would be invoked and appellant would recover the same for such delay. Despite this specific letter written by the appellant, respondent had supplied the goods which would indicate that even at that stage, respondent was agreeable to pay liquidated damages. 38. On this issue, learned counsel for the parties referred to the interpretation given to sections 73 and 74 of the Indian Contract Act in Sir Chunilal V. Mehta Sons Ltd. v. Century Spg. Mfg. Co. Ltd. 1962 Suppl. (3) SCR 549, Fateh Chand v. Balkishan Das [1964] 1 SCR 515 at 526, Maula Bux v. Union of India [1969] 2 SCC 554, Union of India v. Rampur Distillery Chemical Co. Ltd. [1973] 1 SCC 649 and Union of India v. Raman Iron Foundry [1974] 2 SCC 231. 39. Rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntention of the parties was different from the language used therein. In such a case, it is for the party who contends that stipulated amount is not reasonable compensation, to prove the same. 40. Now, we would refer to various decisions on the subject. In Fateh Chand s case ( supra ), the plaintiff made a claim to forfeit a sum of Rs. 25,000 received by him from the defendant. The sum of Rs. 25,000 consisted of two items Rs. 1,000 received as earnest money and Rs. 24,000 agreed to be paid by the defendant as out of sale price against the delivery of possession of the property. With regard to earnest money, the Court held that the plaintiff was entitled to forfeit the same. With regard to claim of remaining sum of Rs. 24,000, the Court referred to section 74 of Indian Contract Act and observed that section 74 deals with the measure of damages in two classes of cases ( i ) where the contract names a sum to be paid in case of breach, and ( ii ) where the contract contains any other stipulation by way of penalty. The Court observed thus: "The measure of damages in the case of breach of a stipulation by way of penalty is by section 74 reasonable compensation not exceeding the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expression whether or not actual damage or loss is proved to have been caused thereby is intended to cover different classes of contracts which come before the Courts. In case of breach of some contracts it may be impossible for the Court to assess compensation arising from breach, while in other cases compensation can be calculated in accordance with established rules. Where the Court is unable to assess the compensation, the sum named by the parties if it be regarded as a genuine pre-estimate may be taken into consideration as the measure of reasonable compensation, but not if the sum named is in the nature of a penalty. Where loss in terms of money can be determined, the party claiming compensation must prove the loss suffered by him." (p. 559) [Emphasis supplied] 41. In Rampur Distillery Chemical Co. Ltd. s case ( supra ) also, two Judge Bench of this Court referred to Maula Bux s case ( supra ) and observed thus: ". . .It was held by this Court that forfeiture of earnest money under a contract for sale of property does not fall within section 70 of the Contract Act, if the amount is reasonable, because the forfeiture of a reasonable sum paid as earnest mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ages. It stands on the same footing as a claim for unliquidated damages. Now the law is well-settled that a claim for unliquidated damages does not give rise to a debt until the liability is adjudicated and damages assessed by a decree or order of a Court or other adjudicatory authority. When there is a breach of contract, the party who commits the breach does not eo instanti incur any pecuniary obligation, nor does the party complaining of the breach becomes entitled to a debt due from the other party. The only right which the party aggrieved by the breach of the contract has is the right to sue for damages. . . ." (p. 243) 43. Firstly, it is to be stated that in the aforesaid case Court has not referred to earlier decision rendered by the five Judge Bench in Fateh Chand s case ( supra ) or the decision rendered by the three Judge Bench in Maula Bux s case ( supra ). Further, in H.M. Kamaluddin Ansari Co. v. Union of India [1983] 4 SCC 417, three Judge Bench of this Court has overruled the decision in Raman Iron Foundry s case ( supra ) and the Court while interpreting similar term of the contract observed that it gives wider power to Union of India to recover th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sons Ltd. v. Union of India [1960] 2 SCR 793 observed that the extent of jurisdiction of the Court to set aside the award on the ground of an error in making the award is well defined and held thus : "The award of an arbitrator may be set aside on the ground of an error on the face thereof only when in the award or in any document incorporated with it, as for instance, a note appended by the arbitrators, stating the reasons for his decision, there is found some legal proposition which is the basis of the award and which is erroneous Champsey Bhara Company v. Jivaraj Balloo Spinning and Weaving Company Limited [L.R. 50 IA 324]. If however, a specific question is submitted to the arbitrator and he answers it, the fact that the answer involves an erroneous decision in point of law, does not make the award bad on its face so as to permit of its being set aside - In the matter of an arbitration between King and Duveen and others [LR (1913) 2 KBD 32] and Government of Kelantan v. Duff Development Company Limited [LR 1923 AC 395]." Thereafter, the Court held that if there was a general reference and not a specific reference on any question of law then the award can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eafter referred to the decision rendered in Seth Thawardas Pherumal v. Union of India [1955] 2 SCR 48 wherein Bose, J. delivering the judgment of the Court had observed : "Therefore, when a question of law is the point at issue, unless both sides specifically agree to refer it and agree to be bound by the arbitrator s decision, the jurisdiction of the Courts to set an arbitration right when the error is apparent on the face of the award is not ousted. The mere fact that both parties submit incidental arguments about point of law in the course of the proceedings is not enough." The learned Judge also observed at p. 59 after referring to F.R. Absalom Ltd. v. Great Western (London) Garden Village Society [1933] AC 592, 616: Simply because the matter was referred to incidentally in the pleadings and arguments in support of, or against, the general issue about liability for damages, that is not enough to clothe the arbitrator with exclusive jurisdiction on a point of law ." [Emphasis supplied] The Court also referred to the test indicated by Lord Russell of Killowen in F.R. Absalom Ltd. v. Great Western (London) Garden Village Society [1933] AC 592, and observed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the interference in the award based on an erroneous finding of fact is permissible and similarly, if an award is based by applying a principle of law which is patently erroneous, and but for such erroneous application of legal principle, the award could not have been made, such award is liable to be set aside by holding that there has been a legal misconduct on the part of the arbitrator." (p. 486) Next question is - whether the legal proposition which is the basis of the award for arriving at the conclusion that ONGC was not entitled to recover the stipulated liquidated damages as it has failed to establish that it has suffered any loss is erroneous on the face of it ? The arbitral Tribunal after considering the decisions rendered by this Court in the cases of Fateh Chand ( supra ), Maula Bux ( supra ) and Rampur Distillery Chemical Co. Ltd. ( supra ) arrived at the conclusion that "in view of these three decisions of the Supreme Court, it is clear that it was for the respondents to establish that they had suffered any loss because of the breach committed by the claimant in the supply of goods under the contract between the parties after 14th November, 1996. In the wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is unqualified except as to the maximum stipulated; and compensation has to be reasonable. Under section 73, when a contract has been broken, the party who suffers by such breach is entitled to receive compensation for any loss caused to him which the parties knew when they made the contract to be likely to result from the breach of it. This section is to be read with section 74, which deals with penalty stipulated in the contract, inter alia [relevant for the present case] provides that when a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, the party complaining of breach is entitled, whether or not actual loss is proved to have been caused, thereby to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named. Section 74 emphasizes that in case of breach of contract, the party complaining of the breach is entitled to receive reasonable compensation whether or not actual loss is proved to have been caused by such breach. Therefore, the emphasis is on reasonable compensation. If the compensation named in the contract is by way of penalty, consideration would be different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so the other incidental charges incurred by them in procuring the goods contracted for. But no such attempt was made. Hence, claim for damages was not granted. 54. In Maula Bux s case ( supra ), the Court has specifically held that it is true that in every case of breach of contract the person aggrieved by the breach is not required to prove actual loss or damage suffered by him before he can claim a decree and the Court is competent to award reasonable compensation in a case of breach even if no actual damage is proved to have been suffered in consequence of the breach of contract. The Court has also specifically held that in case of breach of some contracts it may be impossible for the Court to assess compensation arising from breach. Take for illustration construction of a road or a bridge. If there is delay in completing the construction of road or bridge within stipulated time, then it would be difficult to prove how much loss is suffered by the Society/State. Similarly, in the present case, delay took place in deployment of rigs and on that basis actual production of gas from platform B-121 had to be changed. It is undoubtedly true that the witness has stated that red ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead along with section 73 and, therefore, in every case of breach of contract, the person aggrieved by the breach is not required to prove actual loss or damage suffered by him before he can claim a decree. The Court is competent to award reasonable compensation in case of breach even if no actual damage is proved to have been suffered in consequences of the breach of a contract. (4)In some contracts, it would be impossible for the Court to assess the compensation arising from breach and if the compensation contemplated is not by way of penalty or unreasonable, Court can award the same if it is genuine pre-estimate by the parties as the measure of reasonable compensation. For the reasons stated above, the impugned award directing the appellant to refund the amount deducted for the breach as per contractual terms requires to be set aside and is hereby set aside. Whether the claim of refund of the amount deducted by the appellant from the bills is disputed or undisputed claim ? 56. As the award directing the appellant to refund the amount deducted is set aside, question of granting interest on the same would not arise. Still however, to demonstrate that the award passed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led to withhold these two payments from the invoice raised by the respondent and hence directed that the appellant was liable to pay interest on wrongful deductions at the rate of 12 per cent per annum from 1-4-1997 till the date of filing of the statement of claim and thereafter having regard to the commercial nature of the transaction at the rate of 18 per cent per annum pendente lite till payment. 59. It is to be reiterated that it is the primary duty of the arbitrators to enforce a promise which the parties have made and to uphold the sanctity of the contract which forms the basis of the civilized society and also the jurisdiction of the arbitrators. Hence, this part of the award passed by the arbitral Tribunal granting interest on the amount deducted by the appellant from the bills payable to the respondent is against the terms of the contract and is, therefore, violative of section 28(3) of the Act. Conclusions 60. In the result, it is held that : A . (1) The Court can set aside the arbitral award under section 34(2) of the Act if the party making the application furnishes proof that : ( i )a party was under some incapacity, or ( ii )the arbitration agr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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