Document Fragment View

Matching Fragments

(iii) The Arbitrator has purported to rely on 'prevalent trade practice' though as a matter of fact the Appellant was not able to demonstrate any material placed on the record to show that any such practice prevailed or was accepted in the trade;

(iv) The Arbitrator had not considered any other formula and had proceeded on the erroneous premise that Hudson's Formula is the only formula available and which is accepted by the Supreme Court. This, it was held, was contrary to the law laid down by the Supreme Court in McDermott International Inc. v. Burn Standard Co. Ltd. 2

9. Brij Paul Singh's case therefore does not stipulate as a doctrine of law that the formula which has been prescribed in Hudson's treatise must invariably be accepted in all cases as a measure of damages sustained on account of loss of overheads. On the other hand in the subsequent decision of the Supreme Court in McDermott International (supra), the Supreme Court has relied upon the following observations contained in the earlier decision in M.N.Gangappa v Atmakur Nagabhushanam Setty & Co.3.

"In the assessment of damages, the court must consider only strict legal obligations, and not the expectations, however reasonable, of one contractor that the other will do something that he has assumed no legal obligation to do."

10. The judgment in McDermott International (supra) considers various formulae including Hudson's Formula, Emden Formula and Eichleay Formula. As regards Hudson's Formula the Supreme Court has noted, in the following extract, that although it has received judicial support in many cases, it has been the subject matter of criticism :

11. In McDermott International (supra) the Supreme Court has held that it is an accepted position that different formulae can be applied in different circumstances and the question as to whether damages should be computed by taking recourse to one or other formula, having regard to the facts and circumstances of a particular case, would fall within the domain of the Arbitrator. In the present case no other formula other than Hudson's formula has been considered in the arbitral award. In the present case the Arbitrator proceeded on the basis that it was only Hudson's Formula which was to be applied and that 3 (1973) 3 SCC 406.