Absence of reasoned findings and proof of actual loss for liquidated damages renders arbitral award patently illegal.

The Petitioner (SSTPL) was awarded a tender by the Respondent (HLL) on 10.02.2006 for the construction of an office complex

The contract stipulated a 15-month completion period from 27.03.2006, which was subsequently extended several times until 16.05.2009 due to scope enhancement and delays

Disputes arose, leading the Petitioner to invoke arbitration on 20.05.2009; thereafter, the Respondent terminated the contract on 15.02.2010

The Arbitral Tribunal issued an award on 05.05.2018, partly allowing claims for final bill payments and security deposits while rejecting claims for escalation and illegal termination

The Petitioner challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, primarily regarding the rejection of its claims and the grant of LD

1. Whether the Arbitral Award is liable to be set aside for being unreasoned in contravention of Section 31(3) of the Act regarding Claim Nos. 1, 3, and 6

2. Whether the Arbitrator committed patent illegality by failing to consider relevant contractual clauses (Clause 15 vs. Clause 19 of SCC) while deciding Claim No. 2

3. Whether the award of Liquidated Damages (Counter-Claim 1(a)) in the absence of evidence of actual loss is legally sustainable

4. Whether the termination of the contract by the Respondent was legal

Section 31(3) of the Arbitration and Conciliation Act, 1996, which mandates that an arbitral award must state the reasons upon which it is based

the "patent illegality" ground under Section 34(2A), as interpreted in Associate Builders v. DDA and Delhi Metro Rail Corp. Ltd. v. Delhi Airport Metro Express Pvt. Ltd., which establishes that ignoring vital evidence or relevant contractual terms renders an award perverse

Sections 73 and 74 of the Indian Contract Act, 1872, and the principles from Kailash Nath Associates v. DDA, holding that proof of actual loss is a sine qua non for awarding damages unless such loss is impossible to prove

The Court found that the Arbitrator failed to provide any intelligible reasoning for the determination of rates in Claim No. 1, merely referring to an annexure without explaining why the Respondent’s internal committee rates were binding despite Clause 15(d) of the SCC

For Claim No. 2, the Arbitrator erroneously applied Clause 19 (dealing with delay compensation) to a claim that pertained to rate revision for extra items under Clause 15, constituting patent illegality by ignoring the correct contractual provision

Similarly, Claims 3 and 6 were rejected without addressing the Petitioner’s arguments under Sections 55 and 73 of the Contract Act

On Liquidated Damages, the Court observed that the Arbitrator awarded the maximum penalty of 7.5% without any evidence of actual loss or a finding that loss was difficult to prove; mere letters citing "huge expenditure" did not constitute legal proof of loss

the Court upheld the finding on termination (Issue 4), noting it was a "plausible view" based on the Petitioner's failure to apply for a Provisional Completion Certificate as required by Clause 23(i)

The petition under Section 34 was allowed, and the arbitral award dated 05.05.2018 was set aside in its entirety