The necessity of supporting pleadings and evidence for counterclaims, the requirement to consider basic legal principles while assessing damages/compensation, and the burden of proof on parties claiming compensation.

Arbitration and Conciliation Act, 1996, Section 23(3) –

Judgment :

1. The Petitioners Claimants have challenged impugned award dated 27 January 2009 passed by the sole Arbitrator appointed in view of the Arbitration clause provided in the agreement pertaining to the work of Supply and Transportation to site of imported D.I. Pipes and Specials for Variav R.W.S.S. Surat for Gujarat Water Supply and Sewerage Board.

2. The Claimants prevented from performing the contract, as alleged; the Respondents refuted the same. Admittedly, the shipment did not take place. The non opening of letter of credit by the Respondents was another factor. The Claimants admittedly, received advance of Rs.60 lakhs, but quite late, as per the agreed time. There arose dispute. This Arbitration proceedings to resolve the same.

3. The first sole Arbitrator resigned on 19 May 2006. The present learned Arbitrator, entered upon the reference on 26 May 2006 and proceeded from the stage of evidence and arguments, based upon the material available on record, including written notes of arguments and the comments. The Arbitration Proceedings were closed for publishing the award on 30 December 2008.

4. The Arbitrator recorded as under:

“There was delay in establishment of bank guarantees by Claimants and delay by Respondents in payment of Advance. This advance payment was made by Respondents within the delivery period.

There was no item of work undertaken by Claimants within the said original delivery schedule of Contract, i.e.25.02.2004.

Respondents granted Extension revising the delivery schedule upto 30.08.2004. Materials were manufactured, inspected and and Inspection Certificate/Release Note issued on 16.08.2004. Supply of materials did not take place.

Respondents issued letter/notice on 02.09.2004 stating that supply had not started and requested Claimants to complete the supply within seven days otherwise the order would be cancelled as per Clause 9.0 of Contract. In reference thereto the Claimants vide their letter dated 03.09.2004 demanded LC and release of shipment instructions from Respondents for shipment of materials.

LC was demanded earlier also but declined by Respondents by their letter dated 02.07.2004 since demand for LC from Respondents was not in accordance with terms of Contract. There is no evidence of any further request for LC having been made by Claimants after 02.07.2004 and before 02.09.2004.

The demand for shipment clearance was made for the first time by Claimants in their letter dated 03.09.2004. As stated earlier, demand for LC from Respondents was not in accordance with terms of contract and clearance for shipment was not called for. The letter dated 03.09.2004 thus did not convey inclination of Claimants for shipment and supply of materials unless the said two conditions were met.

By letter dated 15.09.2004, Respondents terminated the Contract for nonsupply of materials as per notice of termination.”

5. The operative part of the award is as under:

“Claim No.1 is regarding order placed at the risk and cost of Claimants-

As stated above, the Claimants did not perform the contract even during the extended time, the Respondents was left with no other alternative except to cancel the contract and get the work completed at the risk and cost of the Claimants, for which due notice was also given to the Claimants. The Respondents have enclosed copies of the orders placed on different firms for completing the works. This was not at all controverted by the Claimant. I, therefore, allow this claim.

Since the Respondents have already recovered the amount of performance bank guarantee to the tune of Rs.42,48,558/the Respondents is entitled to recover Rs.18,51,442/i. e. Rs.61,00,000/minus Rs.42,48,558/under this claim.”

But, denied all other contra claims for want of pleadings and material.

6. Admittedly, no pleadings and material placed by the Respondents to support the claim, but still the following observations are made to support Clai