Judgment :-

R.V. Raveendran, J.

This appeal by special leave relates to the validity of an arbitration award made against the respondent. The respondent (also referred to as the `Corporation) entered into a contract dated 9.6.1984 with the appellant (also referred to as the `contractor) for supply of 32 lacs bamboo mats at a price of Rs.3.35 per mat to be supplied by the appellant, inclusive of sales-tax, F.O.R. destination. In pursuance of the said contract the respondent supplied 5,59,554 mats. The contractor sent various communications requesting for joint inspection and payment.

2. As its demands were not complied with, at the instance of the appellant, the disputes were referred to arbitration. The claims of the contractor were as follows:

(i) Amount due towards supplies Price of 5,59,554

mats at Rs.3.35 each Rs.18,74,505.90

Less: Amount paid by respondent

(Initial claim:Rs.13,94,710.60

subsequently reduced) Rs. 4,86,114.75

Rs. 13,88,391.15

(ii) Loss of profit at the rate of Rs.1 lac p.m.from Dec.,

1984 to May, 1985

Rs. 6,00,000.00

(iii) Loss of business on account of supply orders

placed by the appellant with another agency

Rs. 5,00,000.00

(iv) Refund of earnest money

Rs. 25,000.00

(v) Interest on the balance sale price at 20% per annum up to date of claims statement (30.9.1985)

Rs. 2,87,340.82

3. The respondent resisted the claim. It contended that the mats supplied were of sub-standard quality and did not conform to the specifications, and therefore the entire supply was rejected; that the appellant had failed to comply with the arrangements mutually agreed in the telex dated 15.12.1984 and letter dated 2.3.1985; that the appellant did not contact the Regional Offices for joint inspection of the defective mats; and that as the appellant committed breach by failing to supply mats according to the specifications and failed to act in accordance with the arrangements arrived at between the parties, it was not entitled to any relief. The respondent made a counter claim for Rs.8,16,733/70, made-up of Rs.1,78,698.68 towards the extra cost incurred for risk purchase and Rs.6,38,035.02 towards storage charges for the rejected mats, which were not removed from the warehouses of the respondent.

4. The arbitrator made a reasoned award dated 31.8.1988. He rejected the claim of appellant for damages on account of loss of profit and loss of business as also the interest up to the date of claim statement. The arbitrator awarded a sum of Rs.11,80,132.48 towards the price of material supplied (at 85% of the price) and Rs.25,000/-towards refund of earnest money deposit, in all, Rs.12,05,132.48 with pendente lite interest at the rate of 11% per annum on Rs.11,80,132.48 up to the date of the award. The arbitrator rejected the counter claims of the respondent.

5. Thesaid award was challenged by the respondent by filing a petition under sections 30 and 33 of the Arbitration Act, 1940 (for short `the Act) for setting aside the award in the High Court of Calcutta. A learned Single Judge of the High Court held that the award was well-reasoned, and made after analyzing the evidence and applying judicial mind; that the award did not suffer from any infirmities; that the respondent failed to make out that the arbitrator had misconducted himself or the proceeding or that there was any error of law apparent on the face of the award; and that the correctness of factual findings and the reasonableness of the award could not be challenged under sections 30 and 33 of the Act. As a consequence, the application for setting aside the award was dismissed by judgment dated 20.3.1992.

6. Feeling aggrieved, the respondent filed an intra-court appeal. A Division Bench of the High Court allowed the appeal by judgment dated 25.5.2001, and set aside the award on the following grounds :

.(a) The appellant did not discharge its onus to adduce evidence that the mats supplied were in accordance with the specifications;

.(b) that the respondent had rejected 1,30,30