The measure of damages for the wrongful cancellation of a contract is the difference between the contract price and the cost of the labour and material required for the manufacture of the goods.

( 1 ) THIS is an appeal by the Union of India from an order refusing to set aside an award. 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 and the respondents Messrs. Bungo Steel Furniture (Pr.) Ltd. Both contracts contain the usual arbitration clause embodied in Clause 21 of the genera) 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 conditions thereof. The claims and the counter claims of the parties under the two contracts were referred to the arbitration of the umpire Sir Rupen Mitter. The award of the learned umpire is dated September 2, 1959. The umpire 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 under contract No. A. T. 1000 the Government of India 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 umpire 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 (sic) bins. The umpire found that only 1805 bins had been manufactured under contract No. A. T. 1000 and 367 bins had been manufactured under contract No. A. T. 1048 and that in all 2172 bins were manufactured by the respondents and were accepted by the Government of India, and that the respondents were entitled to the price of 2172 bins so supplied inclusive of the price of steel amounting to Rs. 2,42,044/ -. The umpire also found that the Government of India 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.

( 2 ) THE umpire also found that the respondents were entitled to credit for the sum of Rs. 10,385/- on account of the cost of supply of the extra partitions for 2172 bins. The learned Judge has held that this finding is erroneous and the error is obvious on the face of the award and he modified the award accordingly by reducing the amount awarded to the respondents by the sum of Rs. 10,3885/ -. This finding of the learned Judge is not challenged in this appeal. The respondents have not filed any appeal from the judgment modifying the award. The umpire also found, that the respondents were entitled to credit for the sum of Rs. 27,969/- on account of payment made by them towards the cost of steel on M. R. O. and that the Government of India was entitled to a cross credit for a sum of Rs. 7,851/-on account of payment made by it to the respondents directly; these two findings are not challenged by the parties.

( 3 ) THE umpire found that the Government of India was under an obligation to supply steel for the manufacture of the bins and that it did supply such steel, He disbelieved the respondents' case that they had rejected the steel sheets supplied by the Government and had used steel sheets from their own stocks and that the steel sheets supplied by the Government became rusted and were still lying in their factory grounds in masses of powdered rusts. He found that (a) the price of the total quantity of steel supplied by the Government to the respondents at basic rates was Rs. 2,53,521/ -. (b) 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) no surplus steel was left after manufacture of 2172 finished bins and the component parts and the unfinished bins, It follows from these find