Arbitral award scrutiny, risk-purchase claims and liquidated damages shape the modified relief and costs outcome.

Interference with an arbitral award was confined to the narrow grounds under the Arbitration Act, 1940, and the award of the contractor's balance price was upheld because the contract had been substantially performed and the pumps were accepted and used, subject only to deduction of an unadjusted advance. The purchaser's claims for risk-and-purchase costs and spares were rejected because the substituted procurement was not shown to match the original contractual specification and the contractor had remained willing to supply spares against payment. Liquidated damages were allowed for contractual delay under the Contract Act, with the prior time-bar treatment held inconsistent; interest was reduced to 9% simple and costs were directed on an actual-basis approach.

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Issues: (i) Whether the arbitral award granting the contractor the balance 10% price payable under the contract was liable to be interfered with. (ii) Whether the purchaser was entitled to recover risk and purchase costs and the cost of spares from the contractor. (iii) Whether the purchaser was entitled to liquidated damages and, if so, at what rate of interest and costs the modified award should carry.

Issue (i): Whether the arbitral award granting the contractor the balance 10% price payable under the contract was liable to be interfered with.

Analysis: The award was examined within the narrow scope permitted under Sections 30 and 33 of the Arbitration Act, 1940. The arbitral finding was that the contract had substantially been performed, the pumps supplied were accepted and put to use, and the contractually contemplated tests had been carried out without any proved complaint of defect or non-performance. The Court accepted that the arbitrators had taken a plausible view on the contractual obligations and on the effect of acceptance of the goods. An inadvertent omission in the award regarding an unadjusted advance was also noticed, requiring a deduction from the balance price.

Conclusion: The award of the balance price was upheld, subject to adjustment of the unadjusted advance.

Issue (ii): Whether the purchaser was entitled to recover risk and purchase costs and the cost of spares from the contractor.

Analysis: The claim for risk and purchase cost failed because the substituted pumps procured from another supplier were not the same contractual item as originally agreed, the contract required strict conformity to the specified stainless steel impellers, and the contractor had not been put on notice to supply the substituted specification on the same footing. The purchase was treated as a unilateral alteration of the bargain and the resulting extra cost was not fastened on the contractor under Section 73 of the Contract Act, 1872. The claim for spares also failed because the contractor remained ready and willing to supply them against payment, while the purchaser had refused payment, so the contractor could not be blamed for non-supply.

Conclusion: The claims for risk and purchase cost and for spares were rejected.

Issue (iii): Whether the purchaser was entitled to liquidated damages and, if so, at what rate of interest and costs the modified award should carry.

Analysis: The Court held that there was contractual delay and breach on the contractor's part, and that liquidated damages were recoverable in such a contract without proof of actual loss under Section 74 of the Contract Act, 1872. The rejection of this counterclaim by treating it as time-barred was found inconsistent with the award's own treatment of limitation on the contractor's claims and was held to be perverse. On the question of interest, the Court applied the modern approach of awarding a lower rate in light of the economic scenario and long pendency. On costs, the Court applied the principle that costs should ordinarily follow the event and directed costs on an actual-basis approach, limited to 75% of the proved expenditure.

Conclusion: The purchaser was held entitled to liquidated damages, the interest was reduced to 9% per annum simple, and costs were awarded in favour of the contractor on a quantified basis.

Final Conclusion: The objections were disposed of by substantially upholding the award with limited modifications in favour of both sides, resulting in a reduced net amount payable under the award and a lower interest rate, while maintaining the contractor's entitlement to the principal reliefs.

Ratio Decidendi: Interference with an arbitral award is warranted only where the finding is illegal, contrary to the contract, or perverse; acceptance of substituted goods without contractual notice may defeat a risk-purchase claim; and liquidated damages may be awarded for contractual delay without proof of actual loss where the contract and facts justify such recovery.

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