Reasoned arbitral awards and non-overlapping damages are essential; unsupported compensation was struck down for patent illegality.

An arbitral award must disclose coherent reasons and a discernible method of computation; where it merely states conclusions on delay, responsibility, and quantification without explaining the basis, it is vulnerable to interference. Compensation for delay must reflect actual loss and cannot become a windfall. The award's heads for overheads and profit, idle machinery, and bank guarantee reduction were found unsupported, internally inconsistent, and overlapping, amounting to patent illegality and perversity. The Supreme Court upheld interference because the award failed the statutory standard of a reasoned decision and granted excessive, inadequately explained damages.

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Issues: (i) Whether the arbitral award was liable to be set aside for want of reasons and non-compliance with the statutory requirement of a reasoned award; (ii) whether the award of compensation for loss of overheads and profit, idle machinery, and bank guarantee reduction was arbitrary, internally contradictory, and resulted in impermissible double or excessive recovery, attracting interference under the Arbitration and Conciliation Act, 1996.

Issue (i): Whether the arbitral award was liable to be set aside for want of reasons and non-compliance with the statutory requirement of a reasoned award.

Analysis: The award recorded broad conclusions on delay, responsibility, and quantification, but did not disclose any coherent reasoning or a demonstrable method for arriving at the figures awarded. A reasoned award is required under the statutory framework, and absence of discussion of material facts, contentions, and the basis of computation renders the award vulnerable. The court also noted that the arbitral tribunal stated conclusions without explaining the basis for responsibility and quantification.

Conclusion: The award was rightly interfered with for absence of adequate reasons and for non-compliance with the requirement of a reasoned award.

Issue (ii): Whether the award of compensation for loss of overheads and profit, idle machinery, and bank guarantee reduction was arbitrary, internally contradictory, and resulted in impermissible double or excessive recovery, attracting interference under the Arbitration and Conciliation Act, 1996.

Analysis: The court held that compensation for delay must be commensurate with actual loss and cannot become a windfall. The tribunal's computation of loss of overheads and profit was found to be grossly inflated and unsupported by a clear formula or justified assumptions. The chart produced to explain the award was treated as an afterthought and did not reconcile the overlapping components of compensation. The award for idle machinery was also granted without adequate basis, and the reduction of the performance bank guarantee was made without explanation. On the governing principles under Sections 55 and 73 of the Contract Act, and the scope of interference under Section 34 of the Arbitration and Conciliation Act, 1996, the award was held to suffer from patent illegality and perversity.

Conclusion: The award was unsustainable because the quantified reliefs were arbitrary, unsupported, and amounted to overlapping or excessive compensation.

Final Conclusion: The arbitral award could not be sustained under the statutory standards governing reasoned decision-making, public policy, and patent illegality, and the High Court's interference with the award was upheld.

Ratio Decidendi: An arbitral award may be set aside where it is unsupported by reasons, departs from the contractual and statutory basis for compensation, or grants inflated or overlapping damages that amount to patent illegality or perversity.

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