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12. The award also reduces the performance bank guarantee amount by 50%, without any discussion, elucidation and reason.

13. In order to justify the computation made in the award and also the principle or the method adopted by the arbitral tribunal, BEEL has referred to the Hudson’s formula and relied upon judgments of this Court in McDermott International Inc. v. Burn Standard Company Limited and Others. 6, and Associate Builders v. Delhi (2006) 11 SCC 181 (for short, McDermott International Inc.). Development Authority7, in addition to an earlier decision of this Court in A.T Brij Paul Singh and Others v. State of Gujarat8, and a few judgments of the High Courts.

14. In McDermott International Inc. this Court has referred to various methods of computation of damages in paragraphs 102 to 107. In particular, reference has been made to Hudson’s formula, Emden’s formula, and Eichleay’s formula in the following terms:

“Method for computation of damages

102. [Ed.: Para 102 corrected vide Official Corrigendum No. F.3/Ed.B.J./52/2006 dated 31-7-

2006] . What should, however, be the method of computation of damages is a question which now arises for consideration. Before we advert to the rival contentions of the parties in this behalf, we may notice that in M.N. Gangappa v. Atmakur Nagabhushanam Setty & Co. [(1973) 3 SCC 406] this Court held that the method used for computation of damages will depend upon the facts and circumstances of each case.

107. If the learned arbitrator, therefore, applied the Emden Formula in assessing the amount of damages, he cannot be said to have committed an error warranting interference by this Court.”

15. McDermott International Inc. refers to Sections 559 and 7310 of the Indian Contract Act, 187211, which deal with the effect of failure to perform at fixed time in contracts where time is of essence, and computation of damages caused by breach of contract, respectively, and states that these Sections neither lay down the Section 55 - Effect of failure to perform at fixed time, in contract in which time is essential - When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of the essence of the contract. Effect of such failure when time is not essential.—If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure. Effect of acceptance of performance at time other than that agreed upon.—If, in case of a contract voidable on account of the promisor’s failure to perform his promise at the time agreed, the promisee accepts performance of such promise at any time other than that agreed, the promisee cannot claim compensation for any loss occasioned by the non-performance of the promise at the time agreed, unless, at the time of such acceptance, he gives notice to the promisor of his intention to do so. Section 73 - Compensation for loss or damage caused by breach of contract. - When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.

Hindustan Copper Limited28, Delhi Development Authority v. R.S. Sharma and Co29., J.G. Engineers (P) Ltd. v. Union of India and Another30, and Union of India v. L.S.N. Murthy.31

39. In 2006, this Court in McDermott International Inc. despite following the ratio of Saw Pipes Limited, made succinct observations regarding the restrictive role of courts in the post- award interference. In addition to the three grounds introduced in Renusagar Power Co. Limited v. General Electric Co32, as noticed above, an additional ground of ‘patent illegality’ was introduced Saw Pipes Limited, for exercise of the court’s jurisdiction in setting aside an arbitral award. This Court, in McDermott International Inc, held that patent illegality, must be such which goes to the root of the matter. The public policy violation should be so unfair and unreasonable as to shock the conscience of the court. Arbitrator where s/he acts contrary to or beyond the express law of contract or grants relief, such awards fall within the purview of Section 34 of the A&C Act. Further, what would (2006) 4 SCC 445.