IMPORTANT POINT
The court established that CWC was required to prove the actual damage or loss only if it was possible to establish the same, and upheld the Arbitral Tribunal's decision based on the evaluation of evidence.

JUDGMENT

Vibhu Bakhru, J. - The appellant, M/s Metal Engineering and Forging Company (hereafter `MEFC') has filed the present appeal under Section 37(1)(c) of the Arbitration and Conciliation Act, 1996 (hereafter `the A&C Act') impugning an order dated 13.09.2022 (hereafter `the impugned order') rendered by the learned Commercial Court.

2. By virtue of the impugned order, the learned Commercial Court had rejected MEFC's application preferred under Section 34 of the A&C Act, being OMP(Comm.) No. 1/19 captioned M/s Metal Engineering & Forging Company v. Central Warehousing Corporation & Anr., whereby MEFC had challenged an Arbitral Award dated 29.09.2018 (hereafter `the impugned award') rendered by an Arbitral Tribunal comprising of a Sole Arbitrator.

3. The disputes between the parties essentially relate to MEFC's claim for a refund of the amounts withheld/recovered by respondent no.1, Central Warehousing Corporation (hereafter `CWC') on account of delay in transporting cargo. MEFC claims that CWC is not entitled to recover any amount as it has not proved that it has suffered any loss on account of any delay in transportation of the goods. MEFC also claims that delays were on account of reasons beyond its control. CWC claims that in terms of the contract between the parties, it is entitled to impose a penalty. It disputes that it has not suffered any loss and claims that it has suffered loss of goodwill, which cannot be precisely quantified or proved. The Arbitral Tribunal accepted CWC's contention. However, since the Committee constituted by CWC had quantified that a penalty in the sum of Rs.22,00,000/- was imposed on account of delays that were for justifiable reasons, the Arbitral Tribunal had allowed MEFC's claim to the said extent against MEFC's claim for a sum of Rs.49,89,124/- along with interest. MEFC is aggrieved to the extent that its claim for the remaining amount was not allowed and assailed the impugned award to the said extent.

4. There is no serious dispute that CWC had recovered transportation charges from its customers, and that, the penalty levied for the delay in transportation of goods does not correspond to any monetary loss suffered by CWC, on account of any deduction or discount in the charges payable by CWC's customers for the transportation of goods. However, CWC has sought to justify the levy of penalty on the ground of loss of goodwill suffered by it.

5. The principal question to be addressed is whether the decision of the Arbitral Tribunal to accept CWC's contention vitiates the impugned award on the ground of patent illegality.

6. MEFC is a proprietorship concern and is stated to possess technical expertise in the business of handling and transportation of cargo and manufacturing of defence stores. MEFC is carrying on the business of providing the aforesaid services to government organisations, semi-government organisations and public sector companies, in terms of the respective contracts entered into with them.

7. On 17.09.1997, CWC invited tenders for appointment of contractors (H&T Contractors) (on regular basis) for providing handling and allied services, and transportation by road of Import and Export Cargo at ICD Kanpur. MEFC submitted its offer pursuant to the aforesaid notice and was successful. On 09.10.1997, an ad hoc contract for the aforesaid work was entered into between MEFC and CWC, which was extended on a month-to-month basis till 09.12.1997.

8. On 17.12.1997, CWC awarded the regular contract to MEFC for the period of two years for handling and transportation of containers from ICD Kanpur to JNP, Navi Mumbai and vice versa. The agreement dated 17.12.1997 (hereafter `the Agreement') stipulated that the transportation period would be seven days, commencing from the date of the job order. CWC reserved the right to impose penalty at the rate of Rs.2,000/- per Twenty Equivalent Units (TEU) per day for delay in transportation of container(s) beyond seven days.

9. CWC recovered various amounts on ac