# BUNGO STEEL FURNITURE PVT. LTD v. UNION OF INDIA

- **Citation:** [1967] 1 S.C.R. 633
- **Court:** Supreme Court of India
- **Decided:** 1966-09-30
- **Bench:** V. Ramaswami, V. Bhargava, Raghubar Dayal
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/bungo-steel-furniture-pvt-ltd-v-union-of-india-3894
- **Pages:** 10

## Headnote

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Arbitration-Award-Party contracting to obtain supply of 61ee/ blMCancellation of contract after part supply-Arbitrator awarding damag1s
for wrongful termination-Reasons or principles not indicated In Award--
If could be set aside on ground of error of law on face oJ the Award •.
The Union of India entered into two contracts in November 1944
and June 1945 with the appellants, which were subsequently modified ID
February 1946, for the supply of 4,700 bins at·an agreed price inclusive
of 'the cost of steel. The Government undertook to make available thf
steel required for the manufacture of the bins and accordingly, supplied
to the appellants steel valued at Rs. 2,53,521 for which amount credit
was lo be given to the Government. After 2,172 bins bad been manufactured and supplied to the Union, the latter cancelled the contract for
the supply of the balance 2,528 bins.
Each of the contracts between the parties contained an arbitration
clause and in accordance with this provision, the dispute arising out of
cancellation of the contracts was referred to an arbitrator. The arlJitra,.
tor found that the contract bad been wrongfully -lied; and that at
the time of the cancellation the component parts of the balance 2,528 biu
were ready but had not been assembled into finished bins. By way ot
compensation for the wrongful termination of the contract by the Government, the Arbitrator awarded damages to the company of the amount
representing the value of steel used up in making the component parts
for bills which· bad not been
assembled into completed binl. Thia
amounted to Rs. 1,65,825.
The Government made· an application to the Calcutta High Court tor
oetting Hide the arbitrator's award on the ground that there wa a mt..
take of law apparent on the face of the award ill the estimation .0t
damages for wrongful termination of the contract. A single Judge of the
High Court Substantially conftrmed the arbitrator's award. The Government took the matter 1n appeal to a Division Bench of the High Ceurt
and the two appeals filed were allowed by that Bench and the award was
set a•ide.
·
It was contended on behalf of the
appellants that the High Court
could not have interfered with the award of the arbitrator as ihere was
no error on the face of the award; that the arbitrator was not bound to
give reasons for .. timating the damages to which the appellant wu entitled and that he had not in fact giveJt anv such reasons.
HELD : Allowing the appeal (per Bbargava and
Raghubar Dayal,
JJ.). The arbitrator in fi•ing the amount of compensation bad not proceeded to follow any principles. the. validity of which could be tested on
the basis of laws applicable to breache• of contract. He awarded the
compen•ation to. the extent that he considered right in his discretion without indicating his reasons.
Such a decioion by an Arbitrator could not
be held to he erroneous on the face of the record. [642 A-:Sl
634
SUP!li!ME COURT lli!POllTS
[1967] l S.C.R.
The consideration that led the arbitrator to consider that the value of
the steel was equal to, and ·not more or 1"'5 than, the amount which he
considered it ri~t to award as compensation, was not indicated by him in
his award. This was, therefore, clearly a case where the arbitrator came
to the conclusion that a certain amount, should be paid by the Government as compensation for wrongful termination of the contract, and in
his discretion be laid down that the amount should be equal to the value
of the steel as it existed after it had been converted into component part!.
1641 F-GJ
It is now a well settled principle that if an arbitrator, in deciding a
dispute before him, does not record his reasons and does not indicate tho
principles of law on which be has proceeded, the award is not on that
account vitiated. It is only when
the arbitrator proceeds to give hil
reasons or to lay down principles on which he has arrived at his decisions
that t)ie court " competent to examine whether he has proceeded or>

## Text

A
BUNGO STEEL FURNITURE PVT. LTD.
v.
UNION OF INDIA
September 30, 1966.
S
(V. RAMASWAMI, V. BHARGAVA AND RAGHUBAR DAYAL, JJ.)
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Arbitration-Award-Party contracting to obtain supply of 61ee/ blMCancellation of contract after part supply-Arbitrator awarding damag1s
for wrongful termination-Reasons or principles not indicated In Award--
If could be set aside on ground of error of law on face oJ the Award •.
The Union of India entered into two contracts in November 1944
and June 1945 with the appellants, which were subsequently modified ID
February 1946, for the supply of 4,700 bins at·an agreed price inclusive
of 'the cost of steel. The Government undertook to make available thf
steel required for the manufacture of the bins and accordingly, supplied
to the appellants steel valued at Rs. 2,53,521 for which amount credit
was lo be given to the Government. After 2,172 bins bad been manufactured and supplied to the Union, the latter cancelled the contract for
the supply of the balance 2,528 bins.
Each of the contracts between the parties contained an arbitration
clause and in accordance with this provision, the dispute arising out of
cancellation of the contracts was referred to an arbitrator. The arlJitra,.
tor found that the contract bad been wrongfully -lied; and that at
the time of the cancellation the component parts of the balance 2,528 biu
were ready but had not been assembled into finished bins. By way ot
compensation for the wrongful termination of the contract by the Government, the Arbitrator awarded damages to the company of the amount
representing the value of steel used up in making the component parts
for bills which· bad not been
assembled into completed binl. Thia
amounted to Rs. 1,65,825.
The Government made· an application to the Calcutta High Court tor
oetting Hide the arbitrator's award on the ground that there wa a mt..
take of law apparent on the face of the award ill the estimation .0t
damages for wrongful termination of the contract. A single Judge of the
High Court Substantially conftrmed the arbitrator's award. The Government took the matter 1n appeal to a Division Bench of the High Ceurt
and the two appeals filed were allowed by that Bench and the award was
set a•ide.
·
It was contended on behalf of the
appellants that the High Court
could not have interfered with the award of the arbitrator as ihere was
no error on the face of the award; that the arbitrator was not bound to
give reasons for .. timating the damages to which the appellant wu entitled and that he had not in fact giveJt anv such reasons.
HELD : Allowing the appeal (per Bbargava and
Raghubar Dayal,
JJ.). The arbitrator in fi•ing the amount of compensation bad not proceeded to follow any principles. the. validity of which could be tested on
the basis of laws applicable to breache• of contract. He awarded the
compen•ation to. the extent that he considered right in his discretion without indicating his reasons.
Such a decioion by an Arbitrator could not
be held to he erroneous on the face of the record. [642 A-:Sl
634
SUP!li!ME COURT lli!POllTS
[1967] l S.C.R.
The consideration that led the arbitrator to consider that the value of
the steel was equal to, and ·not more or 1"'5 than, the amount which he
considered it ri~t to award as compensation, was not indicated by him in
his award. This was, therefore, clearly a case where the arbitrator came
to the conclusion that a certain amount, should be paid by the Government as compensation for wrongful termination of the contract, and in
his discretion be laid down that the amount should be equal to the value
of the steel as it existed after it had been converted into component part!.
1641 F-GJ
It is now a well settled principle that if an arbitrator, in deciding a
dispute before him, does not record his reasons and does not indicate tho
principles of law on which be has proceeded, the award is not on that
account vitiated. It is only when
the arbitrator proceeds to give hil
reasons or to lay down principles on which he has arrived at his decisions
that t)ie court " competent to examine whether he has proceeded or>ntrary to law and is entitled to interfere if such error in law is apparent
on the face of the award i!Self. (640 HJ
(Per Ramaswami J., dissenting)-ln the present case the arbitrator
bad estimated the measure of damages as equivalent to the value of steel
used up in making the component partS. That was the legal proposition
upon which he bad based his award and the question was whether that
legal proposition was correct. The arbitrator had found that the appellant bad produced no evidence with regard to the manufacturing cost ot
the component parts of the 2,528 unfinished bins; he had therefore failed to prove the resultant damage on account of the breach of contract.
But if in spite of this finding the arbitrator decided to award damages to
the appellant, the
hi~hest amount which
he could
award would
be
Rs. 1,03,066, which IS the difference between the contract price and the
value of the steel used up in manufacturing their component parts. Tho
estimate of damages at this figure is based on the assumption that tho
appellant had manufactured completely 2,528 bins according to the term•
of the contract. The arbitrator had ignored the provisions of s. 73 of
the Indian Contract Act and bad awarded dama~es to the appellant on a
wrong legal basis. The award was therefore viuated by an error of law
apparent' on the face of it. [639 C, G, HJ
Champsey Bhara a11d Co. v. Jivraj Ba/loo Spinning and Weaving Co.
Ltd. 50 I.A. 324 and James Clark (Brush
Materials) Ltd. v. Carten
(Merchants) Ltd. [1944J I K.B. 566, distinguished.
OVIL i\.PPELLATE JUR1so1cnoN : Civil Appeals Nos. 754 and
755 of 1964.
Appeals from the judgment and order dated August l, 1962 of
the Calcutta High Court in Appeals Nos. 13 and 131 of 1961 respectively.
A. K. Sen, Uma Mehta, P. K. Chatterjee and P. K. Bose, for
the appellant (in both the appeals).
N. S. Bindra and R. N. Sachthey, for the respondent (in both
he appeals).
TI1e Judgment of BHAllGAVA and RAGHUBAR
DAYAL J.J
was delivered by BHAllGAVA J. RAMASWAMI J. delivered a dissenting Orinion.
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BUNGO FURNITURE LTD. v. UNION (Ramaswami, 1.)
635
Ramaswamy, J, These appeals are brought by certificate
from the judgment of the Calcutta High Court dated August I,
1962 by which an award of the arbitrator, Sir R. C. Mitter dated
September 2, 1959 was set aside.
The disputes arise out of two contracts being A. T. 1000 dated
November 30, 1944 and A. T. 1048 dated June 25, 1945 between the
Government of India (hereinafter called the "Government") and
the Bun.llo Steel Furniture Pvt. Ltd. (hereinafter called the "appellant"]. Both the contracts contained the usual arbitration
clause embodied in cl. 21 of the general conditions of contract
in form no. W.S. B. 133 for reference of any question or dispute
arising in connection with the contract or arising under the condition thereof. The claims and the counterclaims of the parties
under the two contracts were referred to the arbitration of Sir
R. C. Mitter. The award of the arbitrator is dated September 2,
1959. The arbitrator found that the contract no. A. T. 1000 was
for the supply of 4700 bins at Rs. 107 /2/6 per bin inclusive of the
price of steel. In respect of the supply of bins under this contract the Government agreed to pay an extra Rs. 4/ 12/6 per bin for
extra partition. The contract no. A. T. 1048 was for the supply
of 2000 steel bins at Rs. 132/8/- per bin inclusive of the price of
steel. The arbitrator found that on February 20, 1946 the parties
agreed to a modification of the contracts and the agreed modification was that the supply under contract no A. T. 1000 would
be reduced to 1805 bins and the supply under contract no. A. T.
1048 would be reduced to 367 bins, so that the total supply under
the two contracts would be, 4700 bins. The arbitrator further
found that only 1805 bins had been manufactured under contract
no. 1000 and 367 bins had been manufactured under contract no.
i048 and that in all 2172 bins were manufactured by the appellant
and were accepted by the Government and the appellant was entitled to the price of 2172 bins so supplied inclusive Or the price
of steel amounting to Rs. 2,42,044/-. The arbitrator held that the
Government wrongfully cancelled the contract with respect to the
balance 2528 bins and that at the time of this. cancellation the
component parts of the balance 2528 bins had not been assembled
into finished bins. The arbitrator found that the appellant was
entitled to a credit for the sum of Rs. 10,385/- on account of the
cost of supply of the extra partitions for 2172 bins. This finding
of the arbitrator was held to be erroneous by Mallick, J. who reduced the amount awarded to .the appellant by a sum of Rs. 10,385/-.
The finding of Mallick, J. was not challenged by the appellant before
the Division' Bench of the High Court. The arbitrator also found
that the appellant was entitled to credit fot the sum of Rs. 27,969/-
on account of payment made by the appellant towards the cost
of steel on M.R.O. and that the Government was entitled to a
•cross credit for a sum of Rs. 7 ,851 /- on account of payment made
636
SUPllBMB COUllT RBPORTS
[1967] I S.C.R.
by it to the appellant directly. These two findings of the arbiA
trator were not challenged before the Division Bench.
The arbitrator found that the Government was under an
obligation to supply steel for the manufacture of the bins and that
it did supply such steel to the appellant. The arbitrator disbelieved the appellant's case that it had rejected the steel sheets supplied by the Government and had used the steel sheets from their
own stocks and that the steel sheets supplied by the Government
became rusted and were still lying in their factory gcounds as powdered rust. The arbitrator found : (a) that the price of the total
quantity of steel supplied by the Government to the appellant at
basic rates was Rs. 2,53,521/·, (b) that the price of the steel used
for making 2172 finished bins amounted to Rs. 87,696/· and the
Government was entitled to credit for this sum of money, and (c)
that no surplus steel was left after manufacture of 2172 finished
bins and the component parts of the unfinished bins. It followed
from this finding that the price of steel used up in making the component parts of the unfinished bins amounted to Rs. 1,65,825/·.
The arbitrator found that the appellant was entitled to compensation for the wrongful cancellation of the balance 2528 bins.
His findings in the award read as follows :-
"I further hold that the cancellation by Government
for the balance was wrongful. There is however no
evidence relating to the manufacturing cost oftheaforesaid
remaining component parts.
By way of compensatfon
for the wrongful termination of the contract by Government as aforesaid I give the company the amount representing the value of the steel used up in making the said
component parts which had not been assembled into
completed bins. I therefore do not allow the Government credit for the value of the steel used up in manufacturing those component parts."
The Government made an application to the Calcutta High Court
for setting aside the award of Sir R. C. Mitter on the ground that
the arbitrator had failed to apply his mind and there was a mistake of law apparent on the face of the award in the estimation
of damages for wrongful termination of the contract. Mallick,
J. made a minor modification in the award with regard to a sum
of Rs. 10,385/- and on July 27, 1960 the learned Judge pronounced
his judgment in terms of the modified award. The Government
took the matter in appeal before the Division Bench of the High
Court, appeals nos. 13 and 131 of 1961. These appeals were al·
lowed by Bachawat and Laik, JJ. who set aside the award of the
arbitrator in respect of the two contracts.
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BUNGO FURNITURE LTD. v. UNION (Ramaswami, 1.)
631
On behalf of the appellant Mr. A. K. Sen put forward the
argument that there was no error on the face of the award and the
High Court exceeded its jurisdiction in setting aside the award
of the arbitrator, It was contended that the arbitrator is not
bound to give reasons for estimating the damages to which the
appellant was entitled. It was stated that the estimate of the
arbitrator may be arbitrary but he was not bound to give reasons
for the estimate reached by him and that it is not open to the Court
to speculate, when no reasons are given by the arbitrator, as to
what impelled the arbitrator to arrive at his conclusion. In support of this argument Counsel for the appellant relied on the following passage from the judgment of Lord Dunedin in Champasey
Bhara and Company v. Jivraj Ba/loo Spinning and Weaving Company Ltd.(I):
"An error in law on the face of the award means, in
their Lordships' view, that you can find in the award or a
document :ictually incorporated thereto, as for instance
a note appended by the arbitrator stating the reasons for
his judgment, some legal proposition which is the basis·
·of the award and which you can then say is erroneous.
It does not mean that if in narrative a reference is made
to a contention of one party, that opens the door to seeing
first what that contention is, and then going to the con-,
tract on which the parties' rights depend to see if that contention is sound.'' .
It is true that the Court in dealing with an application to set aside
an award has not to consider whether the view of the arbitrator
on the evidence is justified. The arbitrator's adjudication is
generally considered binding between the parties, for he is a tribunal
selected by the parties. and the power of the Court to 'set aside
the award is restricted to cases set out in s. 30 of the Arbitration
Act.
.
An award may be set aside by the court on the ground of an
error of law apparent on the ,face of the award but an award is
riot invalid merely because by a process of inference and argt!-
ment it may be demonstrated that the arbitrator has committed
some mistake in arriving at his conclusion. Mr. A. K. Sen on
behalf of the appellant also referred to the decision of Tucker, J.
in James Clark (Brush Materials) Ltd. v. Carters (Merchants) Ltd.(2)
wherein it is pointed out that in. determining whether the award
of an arbitrator should be remitted or set aside on the ground that
there is aq error of law appearing on the face of it, the court is
not entitled to draw any inference as to the finding by the arbitrator of facts supporting the award, but must take it at its face
(I) 50 I. A. 324, 331.
(2) [1944) I K.B. 566.
638
(1967] I S.C.ll.
value. In my opinion, the principle laid down by the Jqdicial
eo.i..outtce in Chaltipsey Bhara and Company v. Jivqraj lJaJJpo
Spituling and Weaving Company Ltif.(1) and by Tucker, J. in James
Clark (Brush Materials), Ltd. v. Carters (Merch(mts), Ltd.(') has
no application in the present case, for the arbitrator in the present
case has expressly stated the reasons for the estimate of damap
to which the appellant was entitled for the breach of the contract.
The claim of the appellant is stated by the arbitrator in the award
as follows:
"The C-Ompany claims the price of 2528 bins by way
of damages for the wrongful cancellation of the contract.'.'
Sccti9n 73 of the Indian C-Ontract Act provides for the measure
of compensation for loss or damage caused by breach of the contract. Section 73 states :
"73. When a contract has been broken, the party
who suffers by such breach is entitled to receive, from
the party who has broken the contract, compensation
for w Joss or dam~&e caused to him
thereby, which
naturally arose in the 115ual course of things from such
bmich, or whicli the parties k~w. when they made the
contract, to be likely to result from the breach of it.
Such compensation is not to be given for any remote
and indirect loss or damage sustained by reason of the
breach.
Explanation.-In estimating the loss or damage arising
from a breach of contract, the mean& which existed of
rem1:dying the inconvenience caused by the llOll-performance of the contract must be taken into account."
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Secfion 55 of the Sale of Goods Act deals with suits for breach
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of the contract where the buyer refuses to pay for the goods
according to the terms of the contract. Section 55 states :
"55. (I) Where under a contract of sale the property in the goods has passed to the buyer and the buyer
wrongfully neglects or refuses to pay for the goods
accxlf"ding to the terms of the contract, the seller may
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sue him for the price of the goods.
(2) Where under a contract of sale the price is Pi'Yable on a day certain irresl'CCtive of delivery and the buyer
wrongfully neglects or refuses to pay sucli price, the
seller may sue him for the price although the property in
the goods has not passed and the goods have not been
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appropriated to the contract."
---
(I) .SO I.A. 3:U.
(2) (1944) I. K.B. 564
BUNGO PURNITUllJ! LTJ>. v. UNION (~,
/.)
839
4
this ~n
does ~ot apply to the present caso· bec:ause the bUis
wero not manufactured aDd the property could not ha:ve passed to
the Oovernment. But the appellant was entitled to claim damages
for the wrongful cancellation of the balance 2528 bins by the
~t
and for non
~tance of the 2528 bins under
s. 56 of the indian Sllle of Goo!ls Act which provides :
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"56. Where the buyer wrongfully .neglects or refuses
to accept and pay for the goods, the seller may sue 1Wn
for damages for non-acceptance."
In the present case, the B£bitrator has estimated the measure of
ciamal!'IS as equivalent to the value of the steel used 11P in mal!;jng
the componeat parts. That is the legal proposition upon wt.ich
the arbitrator has based his award and the question is whcth!ll'
that legal proposition is correct. Now the amount representing
the value of the steel used up i11 makilig the component parts of
the unfinished 2528 bins could not be the true measure of 4amap
for their non-acceptance. The normal rille for comp~ tile
damages for non-acceptance of 2528 unfinished bins would be the
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dilference between the contract price and the market price of such
goads at the time when the contract is broken. If the.re is no
available market at the place of delivery, the market price of the
nearest place or the prioe prevailing in the controlling market
may be taken into consideration. It was argued for th.e appellant
that this rule may not apply because the bins we.re not completely
fabricated, but, in that case the measure of damages ;.vould be
the difference between the contract price on the one hand, and the
cost of labour and material required for the manufacture of the
CQlllPOnent parts of the 2528 unfinished bins on the other. In
this case, the arbitrator fo11nd that the appellant produced no
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evidence with regard to the manufacturing cost of the component parts of the 2528 unfinished bins. In other words, the appellant failed to· prove the resultant damage on a:ccciunt of breach
of contract, but if in spite of this finding the arbitrator decided
to awB£d damages to the appellant the highest amount which he
could award for non-acceptance would be Rs. 1,03,066/- which is
the difference between the contract price at Rs. 107/2!6 ~
bin
including the price for extra partition amounting to Rs. 2,118,891/-
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and the value of the steel used up in manufacturing their. COJl\W·
nent parts amounting to Rs. l,65,825/-. The estimate of damases
at this figure is based on the assumption that the appellant had
manufactured completely 2528 bins according to the terms of the
contract. It is therefore manifest that. on no conecivable legal basis
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whatever could the arbitrator pronounce an aw!ll'd for a ·silm of
Rs. l,65,825/- which represents the value of the steel used up in
ma:king the component parts as the compensation to be awarded
to the appellant. In other words, the arbitrator has i~ored the
provisions of s. 73 of the Indian Contract Act and has awarded
640
SUPR.BME COUR.T R.BPOR.TS
[1967] I S.C.R.
damages to the appellant on a wrong legal basis. The award of
the arbitrator therefore is vitiated by an error of law apparent
on the face of it.
For these reasons I hold that the judgment of the Division
Bench of the High Court dated August I, 1962 is right and these
appeals must be dismissed with costs.
Blwgava, J. The facts in these two appeals have been given
in the judgment of Ramaswami, J ., and hence, they need not be
·repeated by us. The award was set aside by the High Court,
in appeal from the judgment of the learned single Judge passing
a decree on its basis, on tho- ground that the award of the 1Jmpire
with regard to the compensation for the wrongful cancellation
of the contract was erroneous in law and the error appeared on
the face of the award. In the award, the arbitrator held that under
Contract No. A. T. 1000, only 1805 bins had been manufactured
and under the second Contract No. A. T. 1048, 367 bins had been
manufactured. These bins were accepted and the remaining component parts ,had not been assembled into more finished bins by
the time when the contract was cancelled. He further held that the
cancellation by the Government for the balance was wrongful.
There was, however, no evidence relating to the manufacturing
cost of the aforesaid remaining component parts. Thereupon,
he proceeded
to award, by way of
compensation for the
wrongful termination
of the contract
by the
Government
as aforesaid, to the company the amount representing the value
of the steel used up in making the said component parts which
had not been assembled into completed bins, and, therefore, he
did not allow the Government credit for the value of the steel used
up in manufacturing those component parts. He further held
that after manufacturing the finished bins and component parts
and unfinished bins, no surplus steel was left.
The High Court, in setting aside the award, was of the view
that in this part dealing with compensation payable by the Government to the appellant, the learned Umpire had acted contrary to
the principles recognised in law for assessing compensation. In
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our view, considering the principles which apply to the exercise
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of the power of a Court to set aside an award of an arbitrator, this
order by the High Court was not justified.
It is now a well-settled principle that if an arbitrator, in deciding a dispute before him, does n.ot record his reasons and does
not indicate the principles of law on which he has proceeded, the
award is not on that account vitiated. It is only when the arbitrator proceeds to give his reasons or to lay down principles on which
he has arrived at his decisions that the Court is competent to examine
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BUNGO FURNITURE LTD. v. UNION
(B~rgava, /.)
60
whether he has proceeded contrary to law and is entiUed to interfere·
if such error in law is apparent on the face of the award itself.
In the present case, the Umpire held that the cancellation of
the conttl),ct by the· Government for the balance of the bins was
wrongful. He was, therefore, fully entitled to award compensation for that breach of contract to the appellant. He, however,
found that there was no evidence relating to the manufacturing
cost of the aforesaid remaining component parts which, on principles applicable to breaches of contract, would ordinarily have
been the amount awarded as compensation. Having no such
evidence, the Umpire, it appears, proceedi;d to use his discretion
to determine the compensation which he thought should be equitably
made payable by the Government to the appellant. He
had already arrived at th~ finding that the steel supplied by the Government, which had not been used up in completed bins, had
already been consumed in making component parts. In these
circumstances, having decided that compensation should be paid
by the Government to the appellant, he fixed the amount of compensation at the value represented by the steel used up in making
those component parts. This award is not to be interpreted as
proceeding on any basis that the value of the steel used up in making the component parts was held by him on some principle to
be the compensation . payable by the Government. What he
actually meant was that having mentally decided on the amount
that was to be awarded as compensation, he came to the vi~w
that that amount cai;i equitably be treated as being equal to the
value of the steel used up in making the component parts. What
the value of ·that steel in the component parts was at that stage
was not computed by him. . May be, the steel had become less
serviceable· and deteriorated in value. What was the consideration
that led him to consider that the value of the steel was equal to, ·
and not more or less than, the amount which he considered it
right to award as compensation, was not indicated by him in
his award. This is, therefore, clearly a case where the arbitrator
came to the conclusion that :1 certain amount should be paid by
the Government as compensation for wrongful termination
of
the contract, and in his discretion, he laid down that that amount
is equal to the value of the steel as it existed after it had been converted into component parts. He did not hold that the Government was not entitled to the return of the unused steel. What
he actually held was that the Government being entitled to the
value of the unused ·steel, · no . separate direction in respect of it
need be made, because the value 'of that steel was equal to the
amount of comp~nsation which he was awarding to the appellant;
and thus, the two liabilities of the appellant to the Government
and of the Government to the appellant were set off against each
other. In the circumstances, it has to be held that the Umpire,.
SUPIU!IOI OOURT JlBPORTS
(1967) 1 S.CJL
in fixing the amount of compensation, had not proceeded to fol•
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low any principles, the validity of which could be tested on the
buiB of laws applicable to breaches of contract.
He awarded
the componsation to the extent that he considered right in his
discretion without indicating his reasons. Such a decision by
an Umpire or an Arbitrator cannot be held to be erroneous on
the face of the record. We, therefore, allow the appeal$ with
B
costs, set aside the appellant order of the High Court, and restore
that of the learned single Judge.
ORDER
In view of the majority Judgment, the appeal$ are allowed with
-costs, tbi: appellate order of the High Court is set aside and that
C
.of the learned single Judge, is restored.
Jl.K.P.S.