An arbitral award may not be set aside unless there is patent illegality, which must go to the root of the matter; mere non-performance or absence of evidence for loss does not invalidate the award.

JUDGMENT

Vibhu Bakhru, J. (ORAL)

1. The appellants have filed the present application under Section 37 of the Arbitration and Conciliation Act, 1996 (hereafter `A&C Act') impugning a judgment dated 28.04.2022 (hereafter `the impugned judgment') passed by the learned Commercial Court in OMP(COMM) 136/2019 captioned Union of India and Anr. v. M/s Indian Agro Marketing Co-operative Limited.

2. The appellants had filed the said application before the learned Commercial Court under Section 34 of the A&C Act impugning an Arbitral Award dated 07.05.2019 (hereafter `the impugned award') passed by the Arbitral Tribunal comprising of a Sole Arbitrator (hereafter `the Arbitral Tribunal').

3. The appellants had circulated a Tender Enquiry on 19.12.2011 for the procurement of 5450 metric tons of Gram Whole for the defence services. The respondent participated in the tendering process and was awarded the contract for the supply of 850 metric tons of Gram Whole in terms of the Letter of Acceptance dated 09.02.2012. The said goods (Gram Whole) were to be delivered between 01.06.2012 and 30.06.2012 and the price was agreed at Rs.3,583/- per quintal.

4. The respondent furnished a security for the due performance of the said contract by way of bank guarantee, for a sum of Rs.30,45,550/- (hereafter `the bank guarantee').

5. The respondent failed to supply the goods in question as agreed. Resultantly, the appellants had invoked the bank guarantee and recovered an amount of Rs.30,45,550/-.

6. It is the respondent's case that it was not possible to perform the contract in view of the restrictions imposed by the appellant. The respondent claimed that the appellant had secured an undertaking dated 10.01.2012 from the respondent. In terms of the said undertaking, the respondent was obliged to secure pulses from wholesale mandis, in the growing areas directly, without involving any middleman. Further, it was also required to furnish proof of making such direct procurement from the wholesale mandis. Since the contract was awarded on 09.02.2012, no procurement could be made from the mandis as the season for the crop in question had passed. The respondent claimed that the commodity in question (Gram Whole) is available in mandis only during the season, which commences in November. Given the restrictions imposed on procurement of the commodity only from the mandis, the procurement and delivery of the commodity in question within the delivery period was not possible.

7. The respondent claimed that the appellant had unilaterally extended the delivery period up to 10.08.2012. The respondent claimed that the appellant was fully aware that the crops would not have reached the wholesale mandis till the middle of November, but, it did not extend the delivery period under the contract till November. The respondent also claimed that the appellants had terminated the contract without giving the necessary thirty days prior notice. The respondent states that it was ready to perform the obligations of the contract in the month of November but, the contract was not restored.

8. In view of the pleadings, the Arbitral Tribunal framed several issues. Issue nos. 3 and 4 as framed by the Arbitral Tribunal reads as under:

"3. Whether acceptance of tender dated 09.02.12 by the respondent contains any restrictive clause imposed by the respondent which makes claimant for the non-performance of the contract?

4. Whether respondent suffered any monetary loss on account of non-performance of the contract by the claimant, if so, its effect?"

9. Although issue no.3 is not happily worded, it is not disputed that the issue framed was to the effect whether the restrictions imposed by the appellants had resulted in non-performance of the contract. The Arbitral Tribunal found that the appellants had imposed restrictions on an undertaking dated 10.01.2012, without considering the availability of the product in the wholesale mandis. The Arbitral Tribunal further found that