The main legal point established in the judgment is the wrongful suspension of the Supply Order and the erroneous award of loss of profit under the Arbitration and Conciliation Act, 1996.

JUDGMENT

Vibhu Bakhru, J. - The petitioners have filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter the 'A&C Act') impugning an Arbitral Award dated 29.06.2020 (hereinafter the 'impugned award') passed by the Arbitral Tribunal comprising of the learned Sole Arbitrator.

2. The impugned award has been rendered in the context of disputes that had arisen between the parties in relation to a Supply Order dated 31.12.2013 (hereafter the 'Supply Order'). Petitioner No. 1 (hereafter 'BSF') had placed the Supply Order of eight hundred and fifty-five pieces of fogging machines on the respondent, a sole proprietorship concern of Shiv Kumar Sharma (hereafter 'ACC'). The said Supply Order was initially suspended and thereafter, terminated. In the meanwhile, ACC had manufactured and offered two hundred and forty-five machines for inspection.

3. By the impugned award, the Arbitral Tribunal has partly accepted the claims preferred by ACC. The Arbitral Tribunal accepted that the termination of the Supply Order was illegal and entered an award for a sum of Rs. 80,85,000 in his favour being the value of two hundred and forty-five pieces of fogging machines less their salvage value. In addition, the Arbitral Tribunal awarded a sum of Rs. 25,65,050 as loss of profit on the balance machines. Thus, awarding an aggregate amount of Rs. 1,06,50,050 in favour of ACC. The Arbitral Tribunal awarded interest at the rate of 18% per annum on the awarded claims from the date of termination of the Supply Order (that is, 23.07.2014) till the date of the award (amounting to Rs. 1,13,65,499.94). And, future interest at the rate of 18% per annum on the awarded amount of Rs. 2,20,15,550 (Rs. 1,06,50,050 plus Rs. 1,13,65,499.94.), if the awarded amount was not paid within a period of thirty days. In addition, the Arbitral Tribunal also awarded a sum of Rs. 5,00,000/- as costs but clarified that future interest would not be payable on this amount, but would only run on the awarded amount of Rs. 2,20,15,550.

4. The petitioners have assailed the impugned award as being patently illegal and contrary to the fundamental policy of Indian Law.

Factual Context

5. Petitioner no. 2, Directorate General of Supplies & Disposals (hereinafter 'DGS&D'), functions under the Ministry of Commerce and Industry and acts as a central purchase and quality assurance organization. DGS&D invites tenders and enters into Rate Contracts with suppliers for the purpose of facilitating purchase of materials/machines by Government departments. On 17.01.2013, DGS&D entered into a Rate Contract with ACC accepting a rate of Rs. 34,500 for fogging machines (Pulse Jet Type) with manual starting and Rs. 35,000/- for fogging machines with electrical starting.

6. To facilitate the supply for eight hundred and fifty-five fogging machines for field formation, DGS&D forwarded copies of the approved Rate Contracts, with respect to two firms: Royal Tradelinks Pvt. Ltd (hereinafter 'Tradelinks') and ACC. As per the Rate Contracts, the price per fogging machine quoted by Tradelinks was Rs. 62,400 as against Rs. 34,500 quoted by ACC.

7. On 21.11.2013, the Board of Officers of BSF examined the fogging machines of Tradelinks and ACC and recommended procurement of fogging machines manufactured by Tradelinks. On 26.11.2013 that is, after procurement from Tradelinks was recommended, BSF sent a letter calling upon ACC to send an authorised representative for physical inspection and demonstration of the fogging machines. Admittedly, the said inspection was conducted and the working of the said machine was demonstrated before the concerned officers of BSF.

8. The Finance Wing raised queries with respect to procurement of the fogging machines at a higher rate. In view of the above, on 31.12.2013, BSF placed the Supply Order (No.F23014/66/2013/Adm/BSF/2101) on ACC for the supply of e