The petitioner is liable for damages due to breach of contract, regardless of inter-party settlements, requiring compensation for both lease rentals and expected profits.

JUDGMENT

Mini Pushkarna, J.

Facts of the case:

1. The present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (" ARBITRATION ACT ") has been filed by the petitioner against the Arbitral Award dated 28th June, 2016 ("Third Award") passed by the learned Sole Arbitrator in the third round of arbitration proceedings between the parties.

2. Pursuant to Tender Notification issued by the petitioner/Bharat Sanchar Nigam Limited ("BSNL"), earlier known as the Department of Telecommunication ("DoT"), Government of India, respondent no. 2/ Renewable Energy Systems Limited ("RESL") was declared as a successful bidder for manufacture and supply of 9070 units of Solar Power Generating Systems ("SPGS"). In order to carry out the contract, the respondent no. 2 approached the respondent no. 1/Canara Bank for grant of finance and credit facilities in order to procure the material for supplying to petitioner the requisite 9070 SPGS.

3. Subsequently, a Tripartite Master Lease Agreement ("MLA") was executed among respondent no. 1/Canara Bank, respondent no. 2/ RESL and the petitioner on 19th February, 1998. As per the MLA, petitioner was the lessee, respondent no. 1 bank was the lessor and respondent no. 2/RESL was the supplier. In terms of the said MLA, the SPGS were to be sold to respondent no. 1, who in turn was to supply 9070 SPGS on lease to the petitioner/BSNL for a fixed period of 5 years and thereafter, the same were to be owned by the petitioner. The delivery of SPGS was to be made as per consignee details giving destination of the SPGS. The SPGS were to be installed by RESL at different stations, after the destination details were provided by BSNL. The petitioner as lessee, had agreed to pay to Canara Bank, Quarterly Lease Rental ("QLR").

4. The respondent no. 1 and respondent no. 2 independent of the aforesaid Master Lease Agreement, entered into and executed an Agreement dated 11th March, 1998 for opening Inland Irrevocable Letters of Credit, a Deed of Hypothecation of Goods dated 04th March, 1998 and an Agreement to Indemnify dated 27th February, 1998, which provided for disbursal of credit facilities and the rights and obligations of the parties therein.

5. The petitioner provided consignee details only for 1000 units of SPGS, which were delivered. A Supplementary Agreement dated 19th April, 2000 was executed between the parties in respect of the 1000 units that had been commissioned. This agreement recorded the amount of the QLR, the date of commencement of QLR and other charges payable by BSNL to Canara Bank. The petitioner, despite reminders by respondents failed to give destination details for the remaining 8070 units of SPGS. Vide its letter dated 2nd February, 2000, the petitioner/BSNL called upon the respondent no.2/RESL to extend the Performance Bank Guarantee ("PBG") and accordingly a fresh PBG was submitted on 7th April, 2000.

6. However, pursuant to an order passed by DoT dated 22nd May, 2001, on account of change of policy by the government, the SPGS were not required. Resultantly, the petitioner withdrew from the contract and failed to provide destination details of the remaining 8070 units of SPGS, thereby committing breach of contract. Thus, disputes arose between the parties.

7. As per respondent no.1/Canara Bank, it was deprived of the lease rental for the entire quantity of 9070 units besides lease management fees and additional fees of QLR for each completed month of delay in respect of the remaining 8070 units. In respect of the 1000 units that had been installed, the lease management fees was not paid to Canara Bank. RESL took the stand that BSNL had committed a default by refusing to accept the delivery of 8070