Head Note : Arbitration and Conciliation Act, 1996, Section 23(3) – Judgment : 1. The Petitioners Claimants have challenged impugned award dated 27 January 2009 passed by the sole Arbitrator appointed in view of the Arbitration clause provided in the agreement pertaining to the work of Supply and Transportation to site of imported D.I. Pipes and Specials for Variav R.W.S.S. Surat for Gujarat Water Supply and Sewerage Board. 2. The Claimants prevented from performing the contract, as alleged; the Respondents refuted the same. Admittedly, the shipment did not take place. The non opening of letter of credit by the Respondents was another factor. The Claimants admittedly, received advance of Rs.60 lakhs, but quite late, as per the agreed time. There arose dispute. This Arbitration proceedings to resolve the same. 3. The first sole Arbitrator resigned on 19 May 2006. The present learned Arbitrator, entered upon the reference on 26 May 2006 and proceeded from the stage of evidence and arguments, based upon the material available on record, including written notes of arguments and the comments. The Arbitration Proceedings were closed for publishing the award on 30 December 2008. 4. The Arbitrator recorded as under: “There was delay in establishment of bank guarantees by Claimants and delay by Respondents in payment of Advance. This advance payment was made by Respondents within the delivery period. There was no item of work undertaken by Claimants within the said original delivery schedule of Contract, i.e.25.02.2004. Respondents granted Extension revising the delivery schedule upto 30.08.2004. Materials were manufactured, inspected and and Inspection Certificate/Release Note issued on 16.08.2004. Supply of materials did not take place. Respondents issued letter/notice on 02.09.2004 stating that supply had not started and requested Claimants to complete the supply within seven days otherwise the order would be cancelled as per Clause 9.0 of Contract. In reference thereto the Claimants vide their letter dated 03.09.2004 demanded LC and release of shipment instructions from Respondents for shipment of materials. LC was demanded earlier also but declined by Respondents by their letter dated 02.07.2004 since demand for LC from Respondents was not in accordance with terms of Contract. There is no evidence of any further request for LC having been made by Claimants after 02.07.2004 and before 02.09.2004. The demand for shipment clearance was made for the first time by Claimants in their letter dated 03.09.2004. There is no evidence of any further request for LC having been made by Claimants after 02.07.2004 and before 02.09.2004. The demand for shipment clearance was made for the first time by Claimants in their letter dated 03.09.2004. As stated earlier, demand for LC from Respondents was not in accordance with terms of contract and clearance for shipment was not called for. The letter dated 03.09.2004 thus did not convey inclination of Claimants for shipment and supply of materials unless the said two conditions were met. By letter dated 15.09.2004, Respondents terminated the Contract for nonsupply of materials as per notice of termination.” 5. The operative part of the award is as under: “Claim No.1 is regarding order placed at the risk and cost of Claimants- As stated above, the Claimants did not perform the contract even during the extended time, the Respondents was left with no other alternative except to cancel the contract and get the work completed at the risk and cost of the Claimants, for which due notice was also given to the Claimants. The Respondents have enclosed copies of the orders placed on different firms for completing the works. This was not at all controverted by the Claimant. I, therefore, allow this claim. Since the Respondents have already recovered the amount of performance bank guarantee to the tune of Rs.42,48,558/the Respondents is entitled to recover Rs.18,51,442/i. e. Rs.61,00,000/minus Rs.42,48,558/under this claim.” But, denied all other contra claims for want of pleadings and material. 6. Admittedly, no pleadings and material placed by the Respondents to support the claim, but still the following observations are made to support Claim No.1. “The annexures to the counter claims testify to the fact that Respondents met their project requirement by placing orders on three firms at a higher cost, paid and claimed therein resulting in heavy losses. This is a matter of record which has not been controverted by Claimants. The counter claims filed by the Respondents are not stale having been filed in the arbitral proceeding within the meaning of Section 23(3) of the Arbitration and Conciliation Act, 1996.” 7. The written statement read with counterclaim dated 19 August 2005 filed by the Respondents is as under:“ a) that Learned Arbitrator to reject all the claims made by Claimant in totality. The written statement read with counterclaim dated 19 August 2005 filed by the Respondents is as under:“ a) that Learned Arbitrator to reject all the claims made by Claimant in totality. b) that Claimant be directed to compensate the losses suffered by the Respondent because of non performance of the contractual obligation by the Claimant.” 8. The annexureI referred in Counterclaim was part of written arguments/submissions, not of written statement or original counter claim. Mere statement and documents pertaining to third agencies risk lost works, just cannot be the foundation to allow counterclaim No.1. It is nothing but granting compensation without supporting pleadings and evidence. The Claimant never admitted these documents and evidence. The losses due to difference in price and the delay in supply, are also required evidence, subject to opportunity to other party, from whom such compensation is claimed and/or awarded. 9. I have already observed in(a) Oil and Natural Gas Corporation Limited Vs. Oil Country Tubular Limited 2011(5) Bom. C.R. 198 “(g) In Saw Pipes (Supra) (2003) 5 S.C.C. 705 , the Apex Court has observed that the party who relied upon such clause, may lead evidence to claim more, if the damage/compensation amount is not reasonable. The Court may also direct the parties to lead evidence to confirm that the action of delay amounts to breach of contract and which has caused the damages and therefore, entitled for a reasonable compensation/ amount. The reasonable amount/ compensation cannot be equated with the fixed amount and/or maximum amount as per the liquidated damages clause in question. The observations that other side to prove that the claimant has not suffer any loss or damage itself contemplates necessity of leading evidence by both the parties. The burden is always on the parties who claimed compensation to prove actual loss, even for the reasonable compensation. The other doctrines; “Mitigation of loss”, “Burden of Proof”, “Onus of proof” and “Shift of burden” just cannot be overlooked by the Court or the Arbitrator, while determining the reasonable compensation.” (b) Indian Oil Corporation Limited Vs. Kadbrotee Engineering Industries 2011(3) Bom.C.R. 145 “In the judgment of Anindya Mukherjee Vs. Clean Coats Private Limited, Arbitration Petition No. 947 of 2009 dated 28/10/2010, this Court (Anoop V. Mohta, J.) has observed as under: “18 The Arbitrator needs to consider the basic laws while assessing and granting any kind of damages/ compensation. Kadbrotee Engineering Industries 2011(3) Bom.C.R. 145 “In the judgment of Anindya Mukherjee Vs. Clean Coats Private Limited, Arbitration Petition No. 947 of 2009 dated 28/10/2010, this Court (Anoop V. Mohta, J.) has observed as under: “18 The Arbitrator needs to consider the basic laws while assessing and granting any kind of damages/ compensation. The Apex Court in the STATE OF RAJASTHAN & ANR. VS. FERRO CONCRETE CONSTRUCTION PRIVATE LIMITED, (2009) 12 SCC 1 , has observed in paragraph No.55 as under: “55. While the quantum of evidence required to accept a claim may be a matter within the exclusive jurisdiction of the arbitrator to decide, if there was no evidence at all and if the arbitrator makes an award of the amount claimed in the claim statement, merely on the basis of the claim statement without anything more, it has to be held that the award on that account would be invalid. Suffice it to say that the entire award under this head is wholly illegal and beyond the jurisdiction of the arbitrator, and wholly unsustainable.” 10. Therefore, taking over all view of the matter and as the findings so given while passing the award, is unsustainable and as the issue and findings are interconnected/ inseparable as amount of counterclaim as awarded after adjustment of the advance amount already recovered. 11. The performance securitycumBank guarantee was invoked of Rs.42,48,558/and thereby awarded Rs.18,51,442/for balance amount as the Respondents claimed to have suffered loss of Rs.61,00,000/. The time gap of approval and direction to complete the shipment with such short time, itself shows uncontrolled and undischarged reasons but still admitted non performance, resulted into abrupt termination of the contract. The delay and the defaults of both the parties, just cannot be overlooked, even as per reasoning of the Arbitrator. The Respondents did not lead oral evidence. The Claimants lead so. Therefore, the award as passed in such circumstances, is unsustainable and incorrect. 12. The reliance on M/s. Kwality Manufacturing Corporation Vs. Central Warehousing Corporation AIR 2009 SC (Supp) 2276is of no assistance to the Respondents, in view of above facts and circumstances. The case was different and distinguishable on facts. The reasoned award in question, so passed, is contrary to the settled law and the record. It is not based on the plausible and/or possible view, but on applying the wrong principle of law and the settled practice and procedure. 13. The case was different and distinguishable on facts. The reasoned award in question, so passed, is contrary to the settled law and the record. It is not based on the plausible and/or possible view, but on applying the wrong principle of law and the settled practice and procedure. 13. Taking overall view of the matter, it is not possible to remand the matter only for the counterclaim as granted. The reasoning for the claim and the counterclaim just cannot be dissected. The adjustment of the amount so awarded read with the amount so granted is always necessary. If the case is made out as contended then the grant of counterclaim in such fashion itself is contrary to the law and the record in that case, the amount so awarded itself impermissible. There is no case of modification of the award. The award therefore, liable to be quashed and set aside. However, it will be subject to rehearing by the Arbitral Tribunal after giving opportunity of hearing to both the parties. All points are kept open. The Tribunal to decide the matter preferrably within six months. ORDER 1 The impugned award is quashed and set aside. 2 The Arbitral Tribunal to reconsider the merits of respective claims after giving opportunity of hearing to both the parties. It may be disposed of preferrably within six months. 3. The parties to take steps. 4. There shall be no order as to costs.