{"id":203559,"date":"1966-09-30T00:00:00","date_gmt":"1966-09-29T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/bungo-steel-furniture-pvt-ltd-vs-union-of-india-on-30-september-1966"},"modified":"2016-01-10T13:47:35","modified_gmt":"2016-01-10T08:17:35","slug":"bungo-steel-furniture-pvt-ltd-vs-union-of-india-on-30-september-1966","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/bungo-steel-furniture-pvt-ltd-vs-union-of-india-on-30-september-1966","title":{"rendered":"Bungo Steel Furniture Pvt. Ltd vs Union Of India on 30 September, 1966"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Bungo Steel Furniture Pvt. Ltd vs Union Of India on 30 September, 1966<\/div>\n
Equivalent citations: 1967 AIR 378, \t\t 1967 SCR (1) 633<\/div>\n
Author: V Ramaswami<\/div>\n
Bench: Ramaswami, V.<\/div>\n
           PETITIONER:\nBUNGO STEEL FURNITURE PVT.  LTD.\n\n\tVs.\n\nRESPONDENT:\nUNION OF INDIA\n\nDATE OF JUDGMENT:\n30\/09\/1966\n\nBENCH:\nRAMASWAMI, V.\nBENCH:\nRAMASWAMI, V.\nBHARGAVA, VISHISHTHA\nDAYAL, RAGHUBAR\n\nCITATION:\n 1967 AIR  378\t\t  1967 SCR  (1) 633\n CITATOR INFO :\n RF\t    1976 SC 425\t (13)\n D\t    1988 SC1166\t (7)\n R\t    1990 SC1426\t (22)\n\n\nACT:\nArbitration-Award-Party\t contracting  to  obtain  supply  of\nsteel  bins-Cancellation  of  contract\tafter  part  supply-\nArbitrator awarding damages for wrongful termination-Reasons\nor principles not indicated in Award- if could be set  aside\non ground of error of law on face of the Award.\n\n\n\nHEADNOTE:\nThe  Union of India entered into two contracts\tin  November\n1944   and  June  1945\twith  the  appellants,\twhich\twere\nsubsequently  modified in February 1946, for the  supply  of\n4,700  bins  at\t an agreed price inclusive of  the  cost  of\nsteel.\tThe Government undertook to make available the steel\nrequired  for the manufacture of the bins and  accordingly,,\nsupplied to the appellants steel valued at Rs. 2,53,521\t for\nwhich  amount  credit  was to be given\tto  the\t Government.\nAfter  2,172 bins had been manufactured and supplied to\t the\nUnion,\tthe latter cancelled the contract for the supply  of\nthe balance 2,528 bins.\nEach  of  the  contracts between the  parties  contained  an\narbitration  clause and in accordance with  this  provision,\nthe dispute arising out of cancellation of the contracts was\nreferred  to an arbitrator.  The arbitrator found  that\t the\ncontract had been wrongfully cancelled; and that at the time\nof the cancellation the component parts of the balance 2,528\nbins  were  ready but had not been assembled  into  finished\nbins.\tBy way of compensation for the wrongful\t termination\nof  the contract by the Government, the\t Arbitrator  awarded\ndamages to the company of the amount representing the  value\nof  steel  used up in making the component  parts  for\tbins\nwhich  had  not been assembled into  completed\tbins.\tThis\namounted to Rs. 1,65,825.\nThe  Government\t made an application to\t the  Calcutta\tHigh\nCourt for setting aside the arbitrator's award on the ground\nthat there was a mistake of law apparent on the face of\t the\naward in the estimation of damages for wrongful\t termination\nof  the\t contract.   A\tsingle\tJudge  of  the\tHigh   Court\nsubstantially confirmed the arbitrator's award.\t The Govern-\nment  took the matter in appeal to a Division Bench  of\t the\nHigh  Court and the two appeals filed were allowed  by\tthat\nBench and the award was set aside.\nIt  was contended on behalf of the appellants that the\tHigh\nCourt  could  not  have interfered with\t the  award  of\t the\narbitrator  as there was no error on the face of the  award;\nthat  the  arbitrator  was not bound to\t give  -reasons\t for\nestimating  the damages to which the appellant was  entitled\nand that he had not in fact given any such reasons.\nHELD : Allowing the appeal (per Bhargava and Raghubar Dayal,\nJJ.).  The arbitrator in fixing the amount  of\tcompensation\nhad  not proceeded to follow any principles, the valdity  of\nwhich  could  be tested on the basis of laws  applicable  to\nbreaches  of contract.\tHe awarded the compensation  to\t the\nextent\tthat he considered right in his\t discretion  without\nindicating  his reasons.  Such a decision by  an  Arbitrator\ncould not be held to be erroneous on the face of the record.\n[642 A-B]\n634\nThe  consideration that led the arbitrator to consider\tthat\nthe  value of the steel was equal to, and not more  or\tless\nthan,  the amount which he considered it right to  award  as\ncompensation,  was not indicated by him in his award.\tThis\nwas, therefore, clearly a case where the arbitrator came  to\nthe conclusion that a certain amount, should be paid by\t the\nGovernment  as compensation for wrongful termination of\t the\ncontract, and in his discretion-he laid down that the amount\nshould\tbe  equal to the value of the steel  as\t it  existed\nafter it had been converted into component parts. [641 F-G]\nIt is now a well settled principle that if an arbitrator, in\ndeciding  a dispute before him, does not record his  reasons\nand does not indicate the principles of law on which he\t has\nproceeded, the award is not on that account vitiated.  It is\nonly when the arbitrator proceeds to give his reasons or  to\nlay down principles on which he has arrived at his decisions\nthat the court is competent   to  examine  whether  he\t has\nproceeded contrary to law and is entitled    to interfere if\nsuch  error  in\t law is apparent on the face  of  the  award\nitself. [640 H]\n(Per  Ramaswami\t J.,  dissenting)-In the  present  case\t the\narbitrator   had  estimated  the  measure  of\tdamages\t  as\nequivalent  to\tthe  value of steel used up  in\t making\t the\ncomponent parts.  That was the legal proposition upon  which\nhe  had\t based his award and the question was  whether\tthat\nlegal  proposition  was correct.  The arbitrator  had  found\nthat  the appellant had produced no evidence with regard  to\nthe  manufacturing cost of the component parts of the  2,528\nunfinished  bins;  he  had therefore  failed  to  prove\t the\nresultant damage on account of the breach of contract.\t But\nif in spite of this finding the arbitrator decided to  award\ndamages to the appellant, the highest amount which he  could\naward would be Rs. 1,03,066, which is the difference between\nthe  contract  price and the value of the steel used  up  in\nmanufacturing  their  component\t parts.\t  The  estimate\t  of\ndamages at this figure is based, on the assumption that\t the\nappellant  had manufactured completely 2,528 bins  according\nto  the terms of the contract.\tThe arbitrator\thad  ignored\nthe  provisions of s. 73 of the Indian Contract Act and\t had\nawarded\t damages  to the appellant on a wrong  legal  basis.\nThe award was therefore vitiated by an error of law apparent\non the face of it. [639 C, G, H] .\nChampsey Bhara and Co. v. Jivraj Balloo Spinning and Weaving\nCo. Ltd. 50 I.A. 324 and James Clark (Brush Materials)\tLtd.\nv.   -Carters\t(Merchants)   Ltd.  [1944]   1\t K.B.\t566,\ndistinguished.\n\n\n\nJUDGMENT:\n<\/pre>\n
CIVIL  APPELLATE JURISDICTION : Civil Appeals Nos.  754\t and
\n755 of 1964.\n<\/p>\n
Appeals from the judgment and order dated August 1, 1962  of
\nthe  Calcutta High Court in Appeals Nos. 13 and 131 of\t1961
\nrespectively.\n<\/p>\n
A.   K. Sen, Uma Mehta, P. K. Chatterjee and P. K. Bose, for
\nthe appellant (in both the appeals).\n<\/p>\n
N.   S.\t Bindra and R. N. Sachthey, for the  respondent\t (in
\nboth he appeals).\n<\/p>\n
The  Judgment  of  BHARGAVA  and  RAGHUBAR  DAYAL  J.J\t was
\ndelivered by BHARGAVA J. RAmAswAmi J. delivered a dissenting
\nOpinion.\n<\/p>\n
Ramaswamy, J. These appeals are brought by certificate’ from
\nthe judgment of the Calcutta High Court dated August 1, 1962
\nby which an award of the arbitrator, Sir R. C. Mitter  dated
\nSeptember 2, 1959 was set aside.\n<\/p>\n
The  disputes  arise out of two contracts being A.  T.\t1000
\ndated  November 30, 1944 and A. T. 1048 dated June 25,\t1945
\nbetween\t the  Government of India  (hereinafter\t called\t the
\n“Government”)  and  the\t Bungo Steel  Furniture\t Pvt.\tLtd.
\n(hereinafter  called the “appellant”).\tBoth  the  contracts
\ncontained the usual arbitration clause embodied in cl. 21 of
\nthe  general conditions of contract in form no.\t W.S.B.\t 133
\nfor  reference\tof  any\t question  or  dispute\tarising\t  in
\nconnection with the contract or arising under the  condition
\nthereof.   The claims and the counterclaims of\tthe  parties
\nunder the two contracts were referred to the arbitration  of
\nSir  R.\t C. Mitter.  The award of the  arbitrator  is  dated
\nSeptember  2, 1959.  The arbitrator found that the  contract
\nno.   A.  T.  1000 was for the supply of 4700  bins  at\t Rs.
\n107\/2\/6 per bin inclusive of the price of steel.  In respect
\nof  the\t supply of bins under this contract  the  Government
\nagreed\tto  pay\t an  extra Rs.\t4\/12\/6\tper  bin  for  extra
\npartition.  The contract no.  A. T. 1048 was for the  supply
\nof  2000 steel bins at Rs. 132\/8\/- per bin inclusive of\t the
\nprice  of steel.  The arbitrator found that on February\t 20,
\n1946  the parties agreed to a modification of the  contracts
\nand  the  agreed  modification was  that  the  supply  under
\ncontract no A. T. 1000 would be reduced to 1805 bins and the
\nsupply\tunder contract no.  A. T. 1048 would be\t reduced  to
\n367  bins, so that the total supply under the two  contracts
\nwould be 4700 bins.  The arbitrator further found that\tonly
\n1805 bins had been manufactured under contract no. 1000\t and
\n367  bins had been manufactured under contract no. 1048\t and
\nthat in all 2172 bins were manufactured by the appellant and
\nwere  accepted by the Government and the appellant  was\t en-
\ntitled\tto the price of 2172 bins so supplied  inclusive  of
\nthe  price  of\tsteel  amounting  to  Rs.  2,42,044\/-.\t The
\narbitrator held that the Government wrongfully cancelled the
\ncontract  with respect to the balance 2528 bins and that  at
\nthe  time  of this cancellation the component parts  of\t the
\nbalance 2528 bins had not been assembled into finished bins.
\nThe  arbitrator found that the appellant was entitled  to  a
\ncredit for the sum of Rs. 10,385\/- on account of the cost of
\nsupply of the extra partitions for 2172 bins.  This  finding
\nof  the arbitrator was held to be erroneous by\tMallick,  J.
\nwho reduced the amount awarded to the appellant by a sum  of
\nRs. 10,385\/-.  The finding of Mallick, J. was not challenged
\nby  the\t appellant  before the Division Bench  of  the\tHigh
\nCourt.\t The  arbitrator also found that the  appellant\t was
\nentitled  to credit for the sum of Rs. 27,969\/on account  of
\npayment\t made by the appellant towards the cost of steel  on
\nM.R.O.\tand  that  the Government was entitled\tto  a  cross
\ncredit for a sum of Rs. 7,851\/- on account of payment made
\n636<\/span>
\nby it to the appellant directly.  These two findings of\t the
\narbitrator were not challenged before the Division Bench.
\nThe  arbitrator\t found\tthat the  Government  was  under  an
\nobligation  to supply steel for the manufacture of the\tbins
\nand  that  it did supply such steel to the  appellant.\t The
\narbitrator  disbelieved\t the appellant’s case  that  it\t had
\nrejected the steel sheets supplied by the Government and had
\nused  the  steel sheets from their own stocks and  that\t the
\nsteel  sheets supplied by the Government became\t rusted\t and
\nwere still lying in their factory grounds as powdered  rust.
\nThe  arbitrator\t found\t: (a) that the price  of  the  total
\nquantity  of  steel  supplied  by  the\tGovernment  to\t the
\nappellant  at basic rates was Rs. 2,53,521\/-, (b)  that\t the
\nprice  of  the\tsteel used for\tmaking\t2172  finished\tbins
\namounted to Rs. 87,696\/- and the Government was entitled  to
\ncredit for this sum of money, and (c) that no surplus  steel
\nwas  left  after manufacture of 2172 finished bins  and\t the
\ncomponent  parts of the unfinished bins.  It  followed\tfrom
\nthis  finding that the price of steel used up in making\t the
\ncomponent  parts  of  the unfinished bins  amounted  to\t Rs.
\n1,65,825\/-.\n<\/p>\n
The arbitrator found that the appellant was entitled to com-
\npensation for the wrongful cancellation of the balance\t2528
\nbins.  His findings in the award read as follows :-
\n“I further hold that the cancellation by Government for\t the
\nbalance was wrongful.  There is however no evidence relating
\nto  the\t manufacturing\tcost  of  the  aforesaid   remaining
\ncomponent  parts.  By way of compensation for  the  wrongful
\ntermination  of\t the contract by Government as\taforesaid  I
\ngive  the company the amount representing the value  of\t the
\nsteel  used up in making the said component parts which\t had
\nnot been assembled into completed bins.\t I therefore do\t not
\nallow the Government credit for the value of the steel\tused
\nup in manufacturing those component parts.”
\nThe  Government\t made an application to\t the  Calcutta\tHigh
\nCourt for setting aside the award of Sir R. C. Mitter on the
\nground that the arbitrator had failed to apply his mind\t and
\nthere was a mistake of law apparent on the face of the award
\nin the estimation of\t damages for wrongful termination of
\nthe contract.  Mallick, J.    made  a minor modification  in
\nthe award with regard to a sum of  Rs. 10,385\/- and on\tJuly
\n27, 1960 the learned Judge pronounced his judgment in  terms
\nof  the modified award.\t The Government look the  matter  in
\nappeal before the Division Bench of the High Court,  appeals
\nnos.  13  and 131 of 1961.  These appeals  were\t allowed  by
\nBachawat  and  Laik,  JJ. who set a-side the  award  of\t the
\narbitrator in respect of the two contracts.\n<\/p>\n
637<\/span><\/p>\n
On  behalf  of the appellant Mr. A. K. Sen put\tforward\t the
\nargument  that there was no error on the face of  the  award
\nand  the  High Court exceeded its  jurisdiction\t in  setting
\naside  the award of the arbitrator.  It was  contended\tthat
\nthe  arbitrator is not bound to give reasons for  estimating
\nthe  damages  to which the appellant was entitled.   It\t was
\nstated that the estimate of the: arbitrator may be arbitrary
\nbut  he\t was  not bound to give\t reasons  for  the  estimate
\nreached\t by  him ‘and that it is not open to  the  Court  lo
\nspeculate,  when no reasons are given by the arbitrator,  as
\nto what impelled the arbitrator to arrive at his  conclusion
\nIn support of this argument Counsel for the appellant relied
\non  the following passage from the judgment of Lord  Dunedin
\nin Champasey Bhara and Company v. Jivraj Balloo Spinning and
\nWeaving Company Ltd.(1):\n<\/p>\n
“An  error in law on the face of the award means,  in  their
\nLordships’  view,  that\t you  can find in  the\taward  or  a
\ndocument  actually incorporated thereto, as for\t instance  a
\nnote appended by the arbitrator stating the reasons for\t his
\njudgment,  some legal proposition which is the basis of\t the
\naward and which you can then say is erroneous.\tIt does\t not
\nmean  that  if\tin  narrative  a  reference  is\t made  to  a
\ncontention  of\tone party, that opens the  door\t to,  seeing
\nfirst  what that contention is, and then going to  the\tcon-
\ntract  on  which the parties’ rights depend to see  if\tthat
\ncontention is sound.”\n<\/p>\n
It is true that the Court in dealing with an application  to
\nset  aside an award has not to consider whether the view  of
\nthe   arbitrator   on  the  evidence  is   justified.\t The
\narbitrator’s  adjudication is generally\t considered  binding
\nbetween\t the  parties, for he is a tribunal elected  by\t the
\nparties and the power of the Court to set aside the award is
\nrestricted  to\t‘cases set out in s. 30 of  the\t Arbitration
\nAct.\n<\/p>\n
An  award may be set aside by the court on the ground of  an
\nerror of law apparent on the face of the award but an  award
\nis not invalid merely because by a process of inference\t and
\nargument  it  may be demonstrated that\tthe  arbitrator\t has
\ncommitted  some mistake in arriving at his conclusion.\t Mr.
\nA.  K. Sen on behalf of the appellant also, referred to\t the
\ndecision of Tucker, J. in James Clark (Brush Materials) Ltd.
\nv.  Carters (Merchants), Ltd. (2) Wherein it is pointed\t out
\nthat  in  determining  whether the award  of  an  arbitrator
\nshould be remitted or set aside on the ground that there  is
\nan  error of law appearing on the face of it, the  court  is
\nnot entitled to draw any inference as to the finding by\t the
\narbitrator  of facts supporting the award, but must take  it
\nat its face
\n(1) 50 1. A. 324, 331.\n<\/p>\n
(2) [1944] 1 K.B. 566.\n<\/p>\n
638<\/span><\/p>\n
value.\t In  my\t opinion,, the principle laid  down  by\t the
\nJudicial Committee in Champsey Bhara and Company v.  Jivaraj
\nBalloo\tSpinning and Weaving Company Ltd.(‘) and by  Tucker,
\nJ.  in\tJames  -Clark (Brush  Materials),  Ltd.\t v.  Carters
\n(Merchants), Ltd.(2) has no application in the present case,
\nfor the arbitrator in the present case has expressly  stated
\nthe  reasons  for  the estimate of  damages  -to  which\t the
\nappellant was entitled for the breach of the contract.\t The
\nclaim  of the appellant is stated by the arbitrator  in\t the
\naward -as follows :\n<\/p>\n
“the Company claims the price of 2528 bins by way of damages
\nfor the wrongful cancellation of the contract.”
\nSection\t 73  of\t the Indian Contract Act  provides  for\t the
\nmeasure of compensation for loss or damage caused by  breach
\nof the contract.  Section 73 states :\n<\/p>\n
“73.  When a contract has been broken, the party who suffers
\nby  such breach is entitled to receive, from the  party\t who
\nhas broken the contract, compensation for any loss or damage
\ncaused\tto him thereby, which naturally arose in  the  usual
\ncourse\tof  things from such breach, or\t which\tthe  parties
\nknew,  when they made the contract, to be likely  to  result
\nfrom the breach of it.\n<\/p>\n
Such  compensation  is not to be given for  any\t remote\t and
\nindirect loss or damage sustained by reason of the breach.
\nExplanation.-In estimating the loss or damage arising from a
\nbreach of contract, the means which existed of remedying the
\ninconvenience caused by the non-performance of the  contract
\nmust be taken into account.”\n<\/p>\n
Section\t 55  of the Sale of Goods Act deals with  suits\t for
\nbreach\t-of the contract where the buyer refuses to pay\t for
\nthe goods -according to the terms of the contract.   Section
\n55 states :\n<\/p>\n
“55. (1) Where under a contract of sale the property in\t the
\ngoods  has  passed  to the buyer and  the  buyer  wrongfully
\nneglects  or refuses to pay for the goods according  to\t the
\nterms of the contract, the seller may sue him for the  price
\nof the goods.\n<\/p>\n
(2)Where under a contract of sale the price is payable on  a
\nday   certain  irrespective  of\t delivery  and\t the   buyer
\nwrongfully neglects or refuses to pay such price, the seller
\nmay sue him for the price although the property in the goods
\nhas not passed and the goods have not been
\nappropriated to the contract.”\n<\/p>\n
(1)  50 I.A. 324.\n<\/p>\n
(2) [1944] 1. K.B. 566.\n<\/p>\n
 639<\/span><\/p>\n
This section does not apply to the present case because\t the
\nbins  were not manufactured and the property could not\thave
\npassed to the Government.  But the appellant was entitled to
\nclaim  damages for the wrongful cancellation of the  balance
\n2528  bins by the Government and for non acceptance  of\t the
\n2528 bins under s.  56 of the Indian Sale of Goods Act which
\nprovides :\n<\/p>\n
“56.   Where  the buyer wrongfully neglects  or\t refuses  to
\naccept\tand  pay for the goods, the seller may sue  him\t for
\ndamages for non-acceptance.”\n<\/p>\n
In  the\t present  case, the  arbitrator\t has  estimated\t the
\nmeasure\t of damages as equivalent to the value of the  steel
\nused  up in making the component parts.\t That is  the  legal
\nproposition  upon which the arbitrator has based  his  award
\nand  the  question  is whether\tthat  legal  proposition  is
\ncorrect.  Now the amount representing the value of the steel
\nused up in making the component parts of the unfinished 2528
\nbins could not be the true measure of damages for their non-
\nacceptance.   The normal rule for computing the damages\t for
\nnon-acceptance\t of  2528  unfinished  bins  would  be\t the
\ndifference  between the contract price and the market  price
\nof  such goods at the time when the contract is broken.\t  If
\nthere  is no available market at the place of delivery,\t the
\nmarket price of the nearest place or the price prevailing in
\nthe controlling market may be taken into consideration.\t  It
\nwas  argued for the appellant that this rule may  not  apply
\nbecause\t the  bins were not completely fabricated,  but,  in
\nthat  case  the measure of damages would be  the  difference
\nbetween the contract price on the one hand, and the cost  of
\nlabour\tand  material required for the\tmanufacture  of\t the
\ncomponent  parts of the 2528 unfinished bins on\t the  other.
\nIn  this  case,\t the arbitrator\t found\tthat  the  appellant
\nproduced  no evidence with regard to the manufacturing\tcost
\nof  the\t component parts of the 2528  unfinished  bins.\t  In
\nother  words,  the appellant failed to prove  the  resultant
\ndamage on account of breach of contract, but if in spite  of
\nthis finding the arbitrator decided to award damages to\t the
\nappellant  the highest amount which he could award for\tnon-
\nacceptance  would be Rs. 1,03,066\/- which is the  difference
\nbetween the contract price at Rs. 107\/2\/6 per bin  including
\nthe price for extra partition amounting to Rs. 2,68,891 \/and
\nthe value of the steel used up in manufacturing their compo-
\nnent  parts  amounting to Rs. 1,65,825\/-.  The\testimate  of
\ndamages\t at this figure is based on the assumption that\t the
\nappellant had manufactured completely 2528 bins according to
\nthe terms of the contract.  It is therefore manifest that on
\nno  conceivable\t legal basis whatever could  the  arbitrator
\npronounce  an  award  for  a sum  of  Rs.  1,65,825\/-  which
\nrepresents  the\t value of the steel used up  in\t making\t the
\ncomponent  parts  as the compensation to be awarded  to\t the
\nappellant.   In other words, the arbitrator has ignored\t the
\nprovisions  of\ts.  73 of the Indian Contract  Act  and\t has
\nawarded
\n640<\/span>
\ndamages to the appellant on a wrong legal basis.  The  award
\nof  the arbitrator therefore is vitiated by an error of\t law
\napparent on the face of it.\n<\/p>\n
For  these reasons I hold that the judgment of the  Division
\nBench  of the High Court dated August 1, 1962 is  right\t and
\nthese appeals must be dismissed with costs.
\nBhargava, J. The facts in these two appeals have been  given
\nin  the judgment of Ramaswami, J., and hence, they need\t not
\nbe  repeated  by us.  The award was set aside  by  the\tHigh
\nCourt,\tin  appeal from the judgment of the  learned  single
\nJudge passing a decree on its basis, on the ground that\t the
\naward of the Umpire with regard to the compensation for\t the
\nwrongful  cancellation of the contract was erroneous in\t law
\nand  the  error appeared on the face of the award.   In\t the
\naward,\tthe  arbitrator held that under Contract No.  A.  T.
\n1000,  only  1805 bins had been manufactured and  under\t the
\nsecond\t Contract  No.\tA.  T.\t1048,  367  bins  had\tbeen
\nmanufactured.\tThese bins were accepted and  the  remaining
\ncomponent  parts had not been assembled into  more  finished
\nbins  by  the  time when the  contract\twas  cancelled.\t  He
\nfurther held that the cancellation by the Government for the
\nbalance\t was  wrongful.\t  There was,  however,\tno  evidence
\nrelating   to  the  manufacturing  cost\t of  the   aforesaid
\nremaining  component  parts.   Thereupon,  he  proceeded  to
\naward,\tby way of compensation for the wrongful\t termination
\nof  the\t contract  by the Government as\t aforesaid,  to\t the
\ncompany the amount representing the value of the steel\tused
\nup  in\tmaking the said component parts which had  not\tbeen
\nassembled  into completed bins, and, therefore, he  did\t not
\nallow the Government credit for the value of the steel\tused
\nup in manufacturing those component parts.  He further\theld
\nthat  after  manufacturing the finished bins  and  component
\nparts and unfinished bins, no surplus steel was left.
\nThe High Court, in setting aside the award, was of the view,
\nthat  in this part dealing with compensation payable by\t the
\nGovernment  to the appellant, the learned Umpire  had  acted
\ncontrary  to the principles recognised in law for  assessing
\ncompensation.  In our view, considering the principles which
\napply  to the exercise of the power of a Court to set  aside
\nan award of an arbitrator, this order by the High Court\t was
\nnot justified.\n<\/p>\n
It is now a well-settled principle that if an arbitrator, in
\ndeciding  a dispute before him, does not record his  reasons
\nand does not indicate the principles of law on which he\t has
\nproceeded, the award is not on that account vitiated.  It is
\nonly when the arbitrator proceeds to give his reasons or  to
\nlay down principles on which he has arrived at his decisions
\nthat the Court is competent to examine
\n\t\t\t    641<\/span>
\nwhether he has proceeded contrary to law and is entitled  to
\ninterfere  if such error in law is apparent on the  face  of
\nthe award itself.\n<\/p>\n
In  the present case, the Umpire held that the\tcancellation
\nof  the\t contract by the Government for the balance  of\t the
\nbins  was  wrongful.  He was, therefore, fully\tentitled  to
\naward  compensation  for  that breach  of  contract  to\t the
\nappellant.   He, however, found that there was\tno  evidence
\nrelating  to  the  manufacturing  cost\tof  the\t  aforesaid.
\nremaining component parts which, on principles applicable to
\nbreaches of contract, would ordinarily have been the  amount
\nawarded\t as  compensation.   Having no\tsuch  evidence,\t the
\nUmpire,\t it  appears,  proceeded to use\t his  discretion  to
\ndetermine the compensation which he thought should be equit-
\nably  made payable by the Government to the  appellant.\t  He
\nhad  already arrived at the finding that the steel  supplied
\nby  the Government, which had not been used up in  completed
\nbins,  had already been consumed in making component  parts.
\nIn  these  circumstances, having decided  that\tcompensation
\nshould be paid by the Government to the appellant, he  fixed
\nthe  amount of compensation at the value represented by\t the
\nsteel  used up in making those component parts.\t This  award
\nis not to be interpreted as proceeding on any basis that the
\nvalue of the steel used up in making the component parts was
\nheld by him on some principle to be the compensation payable
\nby  the Government.  What he actually meant was that  having
\nmentally  decided  on the amount that was to be\t awarded  as
\ncompensation,  he  came\t to the view that  that\t amount\t can
\nequitably  be  treated as being equal to the  value  of\t the
\nsteel used up in making the component parts.  What the value
\nof  that steel in the component parts was at that stage\t was
\nnot  computed  by him.\tMay be, the steel  had\tbecome\tless
\nserviceable  and  deteriorated\tin  value.   What  was\t the
\nconsideration that led him to consider that the value of the
\nsteel  was equal to, and not more or less than,\t the  amount
\nwhich  he considered it right to award as compensation,\t was
\nnot  indicated\tby him in his award.   This  is,  therefore,
\nclearly\t a case where the arbitrator came to the  conclusion
\nthat  a certain amount should be paid by the  Government  as
\ncompensation  for wrongful termination of the contract,\t and
\nin his discretion, he laid down that that amount is equal to
\nthe value of the steel as it existed after it had been\tcon-
\nverted\tinto  component\t parts.\t He did not  hold  that\t the
\nGovernment  was\t not entitled to the return  of\t the  unused
\nsteel.\tWhat he actually held was that the Government  being
\nentitled  to  the  value of the unused\tsteel,\tno  separate
\ndirection  in respect of it need be made, because the  value
\nof that steel was equal to the amount of compensation  which
\nhe  was\t awarding  to  the  appellant;\tand  thus,  the\t two
\nliabilities  of the appellant to the Government and  of\t the
\nGovernment to the appellant were set off against each other.
\nIn the circumstances, it has to be held that the Umpire,
\n642<\/span>
\nin  fixing the amount of compensation, had not proceeded  to
\nfollow any principles, the validity of which could be tested
\non the basis of laws applicable to breaches of contract.  He
\nawarded\t the compensation to the extent that  he  considered
\nright  in  his discretion without  indicating  his  reasons.
\nSuch a decision by an Umpire or an Arbitrator cannot be held
\nto  be erroneous on the face of the record.  We,  therefore,
\nallow the appeals with .costs, set aside the appellant order
\nof  the High Court, and restore that of the  learned  single
\nJudge.\n<\/p>\n
\t\t\t   ORDER
\nIn  view of the majority Judgment, the appeals\tare  allowed
\nwith  ,costs, the appellate order of the High Court  is\t set
\naside and that -of the learned single Judge, is restored.
\nR.K.P.S.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Bungo Steel Furniture Pvt. Ltd vs Union Of India on 30 September, 1966 Equivalent citations: 1967 AIR 378, 1967 SCR (1) 633 Author: V Ramaswami Bench: Ramaswami, V. PETITIONER: BUNGO STEEL FURNITURE PVT. LTD. Vs. RESPONDENT: UNION OF INDIA DATE OF JUDGMENT: 30\/09\/1966 BENCH: RAMASWAMI, V. BENCH: RAMASWAMI, V. BHARGAVA, VISHISHTHA […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-203559","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nBungo Steel Furniture Pvt. 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