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(iv) The claimant MTNL was not justified in imposing penalty of 5% of the value of the terminals as no loss was alleged or proved by claimant."

Submissions of learned counsel

17. Mr. D.K. Malhotra, learned counsel for the Petitioner, submitted that under Clause 4.2 of the GCC read with first PBG furnished by the Petitioner, the proceeds of the performance security under the said PBG shall be payable to MTNL only "as compensation for any loss resulting from the supplier's failure to complete its obligations under the contract." He submitted that in the entire claim petition filed by the MTNL, there was no averment by it that it had suffered any loss. MTNL also failed to produce any evidence to prove any loss suffered by it resulting from the Petitioner's alleged failure to comply with its obligations under the contract. He contended that no breach of contract had been committed by the Petitioner. The time for replacing the first lot of 5,000 terminals (handsets) had not expired by the time MTNL issued the termination letter. It was contended that MTNL in fact had put on hold the supply of the next lot of 10,000 terminals awaiting satisfactory test results and therefore there was in fact no default committed by the Petitioner. It is submitted that the learned Arbitrator having conclusively held in para 13 of the Award that MTNL had failed to prove loss and therefore, was not entitled to levy 5% of the PO as penalty, erred in requiring the Petitioner to compensate MTNL for the amount under the additional PBG. It is further submitted that in light of the law explained by the Supreme Court in Union of India v. Rampur Distillery and Chemicals Company AIR 1973 SC 1098, Haryana Telecom Limited v. Union of India 2006 (90) DRJ 211 and of this Court in Indian Oil Corporation v. M/s. Lloyds Steel Industries 144 (2007) DLT 659 it was incumbent on the MTNL not only to raise a specific plea in respect of the loss suffered by it but also prove such loss occasioned by the Petitioner's failure to complete supplies of the terminals in terms of the PO dated 4th March 2004. Mr. Malhotra finally pointed out that the learned Arbitrator failed to deal with the Petitioner's counter claims and even on this score, the impugned Award requires to be set aside.

19. Mr. Vasishta submitted that although in the statement of claim MTNL may not have specifically urged that it suffered a loss, in para 30 it was averred that the default on the part of the Petitioner in keeping to its commitment in terms of the contract "adversely affected the interests and performance of the Claimant." Further, in reply to a question in cross- examination, MTNL's witness denied that the Petitioner had suffered any loss and stated that in fact MTNL had suffered "huge losses" due to non- availability of the handsets. He relied upon the decision of the Calcutta High Court in W.J. Younie v. Tulsiram Jankiram AIR 1942 Cal 382 to urge that MTNL could have validly sought to recover from the Petitioner the amount governed by the additional PBG even when it was not furnished by the Petitioner. Relying on the decision of this Court in Mahanagar Telephone Nigam Limited v. Haryana Telecom Limited 2010 (2) Arb. LR 60 (Del) it was submitted that it was not necessary for MTNL to actually prove the loss suffered by it and that it was obvious that on account of the Petitioner's failure to complete supplies in terms of the PO, MTNL would have suffered loss. Lastly, it was submitted that the scope of interference with the Award under Section 34 of the Act is limited and there was no warrant in the case for the Court to re-appreciate the evidence and come to a different conclusion only because it was a plausible one.

MTNL's failure to plead and prove loss

23. The central issue however concerns the encashment by MTNL of the first PBG furnished by the Petitioner and MTNL's claim for a further amount equivalent to 5% of the value of the PO on account of the failure by the Petitioner to furnish the additional PBG.

24. It is important to note that in the present case MTNL has not invoked the clause relating to LD. In other words it has not sought to recover LD in terms of Clause 16.2 GCC. Apart from encashing the first PBG, it has sought to recover the amount covered by the additional PBG, which if furnished would have been worded no different from the first PBG. Recovery both under the first and the second PBG therefore hinged upon MTNL actually suffering loss on account of the Petitioner's failure to supply the terminals within the stipulated time under the PO. Clause 4.2 of the GCC makes it clear that proceeds of the performance security shall be payable to the MTNL "as compensation for any loss resulting from the suppliers' failure to complete its obligations under the contract." The performance security bond was to be furnished in the form prescribed by the MTNL itself. The wording of the operative portion of the first PBG was identical to Clause 4.2 of the GCC. The amount under the PBG was payable to MTNL "against any loss or damage caused to or suffered or would be caused to or suffered by the MTNL by reason of any breach by the said Contractor of any of the terms or conditions contained in the said Agreement." While the Bank which issued the PBG had to pay the amount on demand by MTNL, and in fact it did so in the present case, MTNL was obliged to satisfy the condition for encashing the BG. In other words it was incumbent on MTNL not only to have pleaded that it suffered loss on account of the failure of the Petitioner to comply with its obligation under the contract but to also prove the extent of loss claimed by it.

29. A perusal of the statement of claims shows that there is indeed no specific averment by the MTNL that it had suffered losses or damages. In para 30 it is stated in passing that the default on the part of the Petitioner in keeping its commitment in terms of the contract "adversely affected"

the interests and performance of the Claimant. However, this by no means satisfied the requirement of MTNL having to plead and prove that it had suffered loss. The reply given by the MTNL's witness in the cross- examination that MTNL had suffered 'huge losses' was again only by a side wind and was not backed up by any evidence placed on record by the MTNL. Importantly MTNL did not challenge the categorical finding in para 13 of the impugned Award by the learned Arbitrator as under: