An Arbitrator must indicate the basis for awarding damages.

RAMENDRA MOHAN DATTA, J.

( 1 ) THIS appeal arises from the judgment and order of Sabyasachi Mukharji, J. dated May 9. 1977: (Reported in AIR 1977 NOC 263 (Cal) in an application for setting aside the award of the Arbitrator Sri S. K. Sen dated June 12, 1969.

( 2 ) THE matter arose out of a contract between the Union of India represented by the Iron and Steel Controller and the respondent (hereinafter called Apeejay) regarding supply of enamelled sheets, black plates etc. from the United States of America which was to be financed out of the Development Loan Fund placed at the disposal of the Government of India by the U. S. Government. One of the terms of the said contract was for security deposit to the extent of 5% of the contract value of the goods by Apeejay. Such security amount at the calculated rate amounted to a sum of Rs. 1,99,156. In terms of the said contract a guarantee bond was executed by Apeejay in favour of the Union of India in lieu of the said security amount through Punjab National Bank. In the absence of the Arbitrator's records which were not placed before us during the hearing of this appeal it is difficult to appreciate what was meant by the Arbitrator and by the learned Judge of the court below when they referred to the performance guarantee bond and what were the terms and conditions thereof. All that we have ascertained is that the guarantee bond could be enforced by forfeiture in case of breach of the said contract.

( 3 ) IT appears that the facts are that the Union of India opened three letters of credit each dated Jan. 20, 1962 of the total value of $829716. 00 with the Chase Manhattan Bank of New York, U. S. A. Against the said letters of --credit Apeejay in terms of the said contract shipped 53. 745 tonnes of contracted materials within the time stipulated but failed to ship the balance quantity within such stipulated period. The Union of India no doubt -- extended such time for shipment at the request of Apeejay but the time was so extended without prejudice to their right to levy liquidated damages for delay in shipment in accordance with the terms of the contract. The terms of the contract provided that except in the case of Force Majeure Apeejay would be liable to pay such liquidated damages for delay in shipment even though the time might be extended by the Union of India.

( 4 ) AFTER such extension Apeejay shipped certain quantity of goods but failed and neglected to ship 162 tonnes being the balance quantity of the said materials entailing forfeiture of the said security deposit on account of such breach.

( 5 ) IN breach of the said agreements the principal of Apeejay drew in U. S. dollars to the extent of $6910. 13 in the United States representing the amount of remuneration which was payable to Apeejay in Indian currency in India. According to Union of India there was wrongful breach on that account entailing forfeiture of the said security deposit amount by enforcing the said bank guarantee.

( 6 ) THE Union of India complained of further breach on the part of Apeejay which wrongfully shipped more than 25% of the materials in India Flag Vessels instead of in U. S. Vessels.

( 7 ) THE Union of India claimed that they were entitled to claim liquidated damages from Apeejay at the rate of 2% per month of the value of the materials amounting to a sum of Rs. 95. 581. 70. In the alternative, they claimed at the rate of 1% amounting to RS. 37,635. 91 and in the further alternative, and without prejudice to the aforesaid the Union of India claimed that it suffered loss and damages and prayed that the Arbitrator should award such damages in their favour on such basis as the Arbitrator might think fit and proper.

( 8 ) UNDER those circumstances, the Union of India in its statement of claim claimed that it was entitled to collect the said sum of Rs. 1,99,156/-, under the said Bank Guarantee; and Rs. 95. 581. 70 being the liquidated damages calculated at 2% per month and, alternatively, at the

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