JUDGMENT :

I.P. MUKERJI, J.

1. TMT bars are made from billets. These billets have to undergo a manufacturing process. Steel Authority of India Limited, (the respondent) required TMT bars having diameters of 8, 10, 12, 20, 25 and 32 mm.

2. They entered into an agreement with the appellant on 16th June, 2011 by which the latter became “the wet leasing agent” of the respondent for the area around Durgapur. The appellant was required to manufacture TMT bars of the above specification from the billets supplied by the respondent, for three years from 20th June, 2011 to 20th June, 2014. 90% of the weight of billets had to be converted into TMT bars. A minimum of 9684 metric tons were to be manufactured and supplied every month. There was a liquidated damages clause in the agreement whereunder the appellant was liable for a fixed amount for a shortage in supply. The amount was arrived at by a calculation shown in the agreement.

3. When the tender for such supply was invited by the respondent on or about 6th October, 2010, a condition was prescribed that the bidder should have a valid “BIS” Certificate/licence by the Bureau of India Standards and that the manufactured product should have a BIS Certificate after undergoing the required tests. The appellant possessed this licence and was awarded the contract. But their licence expired on 17th May, 2012.

4. However, they continued to supply and the respondent continued to receive the billets without the BIS licence after 17th May, 2012 upto 27th July, 2012. From 28th July, 2012, they refused to supply the billets. Many contentions were raised by the appellant. It was said that the respondent was aware of the expiry of the appellant’s licence on 17th May, 2012 but still continued to accept the supply made by them, on reminding them that they should obtain renewal of the licence forthwith, referring inter alia to the respondent’s letters dated 25th May, 2012, 27th June, 2012, 9th July, 2012 and 16th July, 2012 and the invoice raised by them on 30th June, 2012 on a sales order dated 27th June, 2012. This suspension of supply continued till 20th September, 2012.

5. For this period of stoppage of supply, the respondent imposed liquidated damages which it called penalty, of Rs.1,46,42,271/-on the basis of a calculation made by them in terms of the liquidated damages clause in the agreement.

6. Although some efforts were made in a conciliation proceeding to resolve the disputes between the parties, it failed and ultimately, the above amount was deducted by the respondent from the pending bills of the appellant. The agreement between the parties contained an arbitration clause. This dispute became the subject matter of the arbitral reference between the parties. A learned arbitrator was appointed who entered upon the reference and adjudicated upon the solitary issue as to whether the imposition of penalty was justified or not.

7. By his award dated 25th May, 2017, he held that the imposition of penalty was unjustified and that the respondent was entitled to the said sum of Rs.1,46,42,271/-along with interest @ 8% per annum from the date of deduction till recovery. Other claims made by the appellant were rejected.

8. Aggrieved by this award, the respondent made an application under Section 34 of the Arbitration and Conciliation Act, 1996 before the learned judge, Commercial Court at Asansol. The Section 34 application was allowed. The learned judge held on 12th February, 2020 that in view of the Bureau of Indian Standards Act, 1986 and the rules and regulations framed thereunder, supply of TMT bars without a BIS licence was illegal. The award, in his words, was unfair, “unreasonable which shocks the conscience of the court.” He ruled that the award was patently illegal. The award was also criticized on the same grounds for having ignored the provision in the contract for liquidated damages to be awarded, described as penalty for breach of contract. The imposition of penalty imposed by the respondent was up