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TMI Blog1966 (9) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 Bungo 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 modif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 com- pensation 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 of the aforesaid remaining component parts. By way of compensation 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icted 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 not invalid merely because by a process of inference and argument 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. ([1944] 1 K.B. 566.) 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 an 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 value. In my opinion,, the principle laid down by the Judicial Committee in Champsey Bhara and Company v. Jivaraj Balloo Spinning and Weaving Company Ltd.(50 I.A. 324.) and by Tucker, J. in James -Clark (Brush Materials), Ltd. v. Carters (Merchants), Ltd.([1944] 1. K.B. 566) has no application in the present case, for the arbitrator in the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the seller may sue him for damages for non-acceptance." In the present case, the arbitrator has estimated the measure of damages as equivalent to the value of the steel used up in making the component parts. That is the legal proposition upon which the arbitrator has based his award and the question is whether that legal proposition is correct. Now the amount representing the value of the steel used up in making the component parts of the unfinished 2528 bins could not be the true measure of damages for their non- acceptance. The normal rule for computing the damages for non-acceptance of 2528 unfinished bins would be the difference between the contract price and the market price of such goods at the time when the contract is broken. If there is no available market at the place of delivery, the market price of the nearest place or the price prevailing in the controlling market may be taken into consideration. It was argued for the appellant that this rule may not apply because the bins were not completely fabricated, but, in that case the measure of damages would be the difference between the contract price on the one hand, and the cost of labour and material required for the man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 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 our view, considering the principles which apply to the exercise 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-sett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard as compensation, was not indicated by him in his award. This is, 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, he laid down that that amount is equal to the value of the steel as it existed after it had been con- verted 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 compensation 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, in fixing the amount of compensation, had not proceeded to follow any principles, the validity of which could be tested on the basis of laws applicable to breaches of contract. He awarded the compensation to the extent that he considered right in his d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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