U.P. Jal Nigam & Others vs M/S Anuj Construction Pvt. Ltd.
2014 Latest Caselaw 4175 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

RESERVED
 
FIRST APPEAL FROM ORDER NO.3171 OF 2007 
 

 
U.P. Jal Nigam and others. 				....Appellants
 
Vs.
 
M/s Anuj Construction Pvt. Ltd. 	                 ....Respondent
 

 
************
 
Hon'ble Rajes Kumar, J.

Hon'ble Om Prakash-VII, J.

( Delivered by Hon'ble Rajes Kumar, J. )

Heard Sri M.M.D.Agarwal, learned counsel for the appellants and Sri Ashish Mohan Srivastava, learned counsel appearing on behalf of the respondent.

This is an appeal against the order of District Judge, Kanpur Nagar dated 18.08.2007 passed in Arbitration Case No.404/70 of 2004 whereby the objection of the appellant filed under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the "Act") against the arbitration award dated 31.08.2004 has been rejected.

Briefly stated facts of the case are that in December, 1994, U.P. Jal Nigam invited tenders for supplying and laying of Fazalganj Govind Nagar Feeder main and duplication of Feeder Main in between Zone 14 and Zone 15 along with other appurtenant works at Kanpur. The respondent submitted the tender. The tenders were opened on 12.01.1995. Vide letter dated 09.05.1995, the Executive Engineer wrote a letter to the respondent stating that his tender being lower has been accepted and he has been asked to deposit the security money by 12.05.1995 by all means and appear for signature in the contract bond so that the date of starting of work may be directed. In pursuance of the letter, the respondent furnished the security and contract bond no.2/SE/95-96 has been executed on 15.05.1995. The date of commencement of work was fixed as 15.05.1995 and the date of completion of work was fixed as 31.12.1995. The contract amount was Rs.56,06,285/-. The contract provided amongst other thing for supply and laying of ISI Marked Pre-stressed concrete pipe of 350mm and 450mm diameter able to bear 6 kg/cm2 test pressure.

After the execution of the aforesaid contract bond under the terms mentioned therein, the respondent wrote a letter to the Executive Engineer on 22.05.1995 stating therein that by letter dated 17.05.1995 Indian Hume Pipes, New Delhi has shown their inability to take up production of these pipes before October, 1995 and with this supply schedule, we would not be able to complete this work by the end of December, 1995. It is also stated that meanwhile, we are contacting other manufacturers, who make ISI mark PSC pipes and keep you posted of developments.

It appears that the respondent has requested the officials of the Jal Nigam to allow the supply of pipes manufactured by M/s Vichitra Prestressed Concrete Udyog Private Limited, New Delhi but such request has been rejected by letter dated 03.08.1995 and it is informed that pipes manufactured by Indian Hume Pipes or any other reputed firms may be supplied. On the further insistence by the respondent to allow the supply of pipes manufactured by M/s Vichitra Prestressed Concrete Udyog Private Limited, New Delhi, the Executive Engineer vide letter dated 25.09.1995 informed that at present M/s Vichitra Prestressed Concrete Udyog Private Limited, New Delhi does not possess the ISI licence for the manufacturing of 350mm and 450mm diameter pipes. It appears that the respondent again wrote a letter dated 30.09.1995 to Superintending Engineer stating therein that the manufacturers have explained to us that they have not earlier supplied 350mm and 450 mm pipes as these are slightly odd sizes. However, they assured us that these two sizes are in the process and necessary moulds for these sizes have already been ordered. They will also arrange inspection of ISI mark on the pipes on commencement of production. The respondent assured the supply of ISI mark pipes. By letter dated 19.10.1995 the Executive Engineer informed to the respondents that M/s Vichitra Prestressed Concrete Udyog Private Limited, New Delhi at present does not fulfil the requirement of contract, there is already delay in the start of work for which you shall be held responsible. It appears that the respondent wrote a letter enclosing an uncertified photocopy of the letter wherein endorsement has been made extending the validity of ISI lience upto 31.12.1995 of M/s Vichitra Prestressed Concrete Udyog Private Limited, New Delhi. This letter has been replied by Executive Engineer vide letter dated 13.12.1995. In para 4, it is categorically stated that M/s Vichitra Prestressed Concrete Udyog Private Limited, New Delhi is not authorised manufacturer of 350mm and 450mm ISI pipes. Thereafter, a letter dated 29.12.1995 has been written by Superintending Engineer to the respondent whereby the contract has been terminated after 31.12.1995 and it is further stated that non-execution of the contract amounts to gross breach of contract within the meaning and terms under Clause 59.2 (at page 109-110) of the contract bond and further it has been observed that you are liable for damages, which will be recovered from the security deposit.

Aggrieved by the termination of the contract, the respondent filed Civil Misc. Writ Petition No.1299 of 1996 for extension of time. The Division Bench of this Court vide order dated 18.01.1996 dismissed the writ petition summarily, held as follows:

"The argument advanced was that the initial contract was granted to the petitioner to complete the work by 31st of December but that was dependant upon the petitioner's getting supply from some supplier. It is said that the original supplier contacted by the petitioner did not honour that contract with the result that the petitioner had to enter into another contract. It is further said that even subsequent step taken by the petitioner with another supplier was approved by the Jal Nigam authorities only in December and therefore reasonable time should have been allowed to the petitioner to complete the contract and it was not in the fitness of the things and perhaps also illegal that they rescinded the contract on 29th December as per the original time schedule envisaged in the original contract.

The steps of the petitioner are his individual efforts. The respondents having nothing to do with it. The time factor was known to the petitioner, consequently, it does not lie in the mouth of the petitioner to say that the alleged approval in December should be interpreted as a factor entitling them under the law to get the time extended. Shri Sabhajeet Singh Yadav has put in appearance on behalf of the respondents and has opposed the writ petition.

In view of the aforesaid discussion the writ petition is dismissed summarily. However, it will be open to the petitioner, if so advised, to make such a representation as it may be under the law entitle to."

After the dismissal of the writ petition, the respondent filed application under Section 11 of the Act before this Court. Hon'ble The Chief Justice in exercise of powers under Section 11 (5) of the Act on 25.01.2002 appointed Justice H.N.Seth, Retd. Chief Justice as Arbitrator. The order appointing the Arbitrator has been challenged by the appellant before the Apex Court in S.L.P. No.16307 of 2002, which has been dismissed vide order dated 17.01.2003 and the order appointing the Arbitrator has been upheld. In pursuance thereof, the arbitration proceeding proceeded before the Arbitrator. Before the Arbitrator one affidavit of Keshav Gupta, Project Engineer, Barrage Unit-I, U.P. Jal Nigam, Kanpur was filed stating therein the entire facts of the case. Wherein the order of Division Bench of this Court dated 18.01.1996 has also been referred. No counter affidavit has been filed by the respondent in reply to the averments made in the affidavit. However, after hearing both the parties, sole Arbitrator has given an award on 31.08.2004 in favour of the respondent as follows:

 
"Claim No.1	Balance due against the
 
			 work done   			Rs.  28,748/-
 
Claim No.2		Security deposit			Rs.2,80,320/-
 
Claim No.3		Security deposit			Rs. 40,117/-
 
Claim No.4		Compensation @ 10% for
 
			work not done 			Rs.4,76,733/-
 
Claim No.6		Overhead expenses		Rs. 33,000/-
 
Claim No.8		Interest @ 15% 	
 
			Found payable			Rs.11,58,695/-
 

 
				Total				Rs.20,49,656/-
 
Cost of Proceedings :					Rs.70,000/-
 

 
	Further interest of Rs.21,49,961/- @ 15% till the date has 
 
also been awarded.
 

 
	Being aggrieved by the award, objection has been filed by the appellant under Section 34 of the Act, which has been dismissed vide impugned order dated 18.08.2007.
 

Learned counsel for the appellant submitted that the award is patently illegal, erroneous and unfair. He submitted that the Arbitrator has been appointed contrary to the terms of the contract. He submitted that the Arbitrator has not considered the order of the Division Bench of this Court passed in Writ Petition No.1299 of 1996 wherein the Division Bench of this Court has declined to extend the period of contract and has categorically observed that the "steps of the petitioner are his individual efforts. The respondents have nothing to do with it." The time factor was known to the petitioner, subsequently, it. He submitted that the time factor was known to the petitioner. Consequently it does not lie in the mouth of the petitioner to say that alleged approval in December should be interpreted as a factor entitling them under the law to get the time extended. He further submitted that the affidavit of Sri Keshav Gupta has not been considered, to which no counter affidavit has been filed and if the averment of the affidavit could have been considered, the result would be different. He submitted that under the contract, the respondent had to supply and lay down ISI pipes of 350mm and 450mm diameter able to bear hydrostatic pressure of 6kg. per sq.cm. The agreement did not provide that the pipe should be obtained from which manufacturer. The appellant was only interested in the supply of the material as per specification and had no concern that from whom such pipe would be obtained. It appears that Indian Hume Pipe had a factory at Jhansi, a nearest place and was manufacturing pipes of the specification. The respondent approached them for the supply but could not get the supply. Thereafter, the respondent approached the officer to accept the product of M/s Vichitra Prestressed Concrete Udyog Private Limited, New Delhi, which has been declined on the ground that they did not possess the licence to manufacture the ISI mark pipes of 350mm and 450mm diameter, which was required to be supplied in terms of the contract. The insistence of the respondent to accept the pipes manufactured by M/s Vichitra Prestressed Concrete Udyog Private Limited, New Delhi was wholly unjustified as it was not ISI marked pipes. The period of execution of the contract has been fixed after the negotiations and the respondents agreed to complete the work within seven and half months. Indian Hume Pipe could not supply the pipes and the officers did not permit to accept the pipes manufactured by M/s Vichitra Prestressed Concrete Udyog Private Limited, New Delhi. The contract could not be executed within time, has no relevance. The fact remains that the respondent failed to execute the contract within the stipulated period. Various explanation for non-execution of the contract, is wholly immaterial. The fact remains that the respondent failed to execute the contract within the stipulated period, which amounts to breach of contract. Therefore, was liable for the damages, which was claimed at Rs.1.98 lacs. He submitted that the Arbitrator has lost the site of the actual fact and has illegally on the basis of the various correspondence, has arrived to the conclusion that the appellant in fact has not allowed the respondent to supply the pipes manufactured by M/s Vichitra Prestressed Concrete Udyog Private Limited, New Delhi, resulting the non-execution of the contract within the specified period. Arbitrator had failed to consider that the M/s Vichitra Prestressed Concrete Udyog Private Limited, New Delhi had no licence to manufacture ISI mark pipes of 350mm and 450 mm during the relevant period. No officer had any authority to accept the pipes other than ISI mark pipes contrary to the contract to put himself in trouble. He submitted that the present is the case of unfair and unreasonable award opposed to the public policy and liable to be set aside.

Reliance is placed on the decision of the Apex Court in the case of Oil and Natural Gas Corporation Ltd. Vs. SAW Pipes Ltd., reported in AIR 2003 SC, 2629. Further placed reliance in the case of Food Corporation of India Vs. M/s Chandu Construction & Anr., reported in JT 2007 (5) SC, 305, wherein Apex Court has held that an arbitrator derives his authority from the contract and if he acts in disregard of the contract, he acts without jurisdiction.

Learned counsel for the respondent submitted that it is not open to the appellant to raise the dispute regarding the appointment of the arbitrator and inasmuch as the appointment of the arbitrator has been upheld by the Apex Court in SLP. He further submitted that from the perusal of the various correspondence it is apparent that the contract was deliberately hindered by the department to complete the work awarded in the contract on time which was to lay down a pipeline of 350mm and 450mm diameter pre-stressed concrete pipe of 6kg/sq.cm. Test pressure. He submitted that the dispute arose when the appellant in contravention of the contractual agreement insisted on procuring the stipulated denomination pipes from one Indian Hume Pipe Company from 03.08.1995, which was not in a position to supply and kept on prohibiting/stopping the respondent from procuring pipes of stipulated denomination from one M/s Vichitra Prestressed Concrete Udyog Private Limited, New Delhi, which was in a position to supply the pipes. He submitted that under the Act, there is very limited scope under Section 34 of the Act and in appeal by this Court to interfere with the award.

Reliance has been placed on the decision of the Apex Court in the case of Municipal Corporation of India Vs. Jagan Nath Ashok Kumar, reported in AIR 1987 SC, 2316 in the case of B.V.Radha Krishna Vs. Sponge Iron India Ltd., reported in AIR 1997 SC, 1324, in the case of Associated Construction Vs. Pawanhans Helicopters Pvt. Ltd., reported in AIR 1008 SC, 2911 and in the case of M/s Sumitomo Heavy Industries Ltd. Vs. Oil & Natural Gas Company, reported in AIR 2010 SC, 3400.

We have considered the rival submissions and perused the record.

To adjudicate the issue, it would be appropriate to refer the findings recorded by the arbitrator, which are as follows:

"It is not disputed that under the Contract the Claimant was required to supply I.S.I. mark P.S.C. Pipes of 350mm and 450 mm diameter capable of bearing hydrostatic pressure of 6kg per sq. cm. Although the contract did not require the claimant to procure such P.S.C. Pipes from any particular manufacturer, the correspondence referred to above indicates that the understanding between the parties was that claimant would place orders for supply of pipes with a manufacturer only after obtaining respondents consent for it. This understanding appears to have been arrived at so as to ensure supplying of pipes of requisite specifications to the satisfaction of the respondents and to reduce and obviate chances of their being rejected after they were brought by the contractor to the site for laying, entailing delay in completing the work. It is also clear that the respondents told the Contractor that as they had confidence in the material supplied by the Indian Hume Pipe Company, it should procure the pipes from them. The claimant, therefore, contacted HPC as early as December, 1994. HPC made it clear that they will be able to supply the pipes only if firm order was placed with them before March, 1995. The Claimant was not in a position to place firm orders for supply of pipes with the H.P.C. till its tender was accepted in the month of May 1995. As soon as the work was awarded to the claimant in May 1995, it approached HPC for supplying the pipes. As the claimant could not place firm order for the purpose, prior to March, 1995, H.P.C. expressed its inability to supply the pipes on the ground that its hands were full as it had, in the mean time booked orders of other clients. The Claimant duly informed the respondents about this and also approached other manufacturers of pipes including Vichitra Udyog, who were authorized to manufacture I.S.I. mark prestressed concrete pipes of 500mm and above diameter. Vichitra Udhyog who did not, at the moment, have a license for manufacturing ISI marked 350mm and 450mm diameter PSC pipes, told the claimant that as the pipes required by it were of old size, their manufacture could be under taken by them only after it placed a firm order for the purpose with them. They also assured the claimant that in case it placed the order, they would manage to obtain requisite authorization for manufacturing the same with ISI marking by getting the size of pipes included in their license. As according to the understanding between the parties, claimant was required to obtain respondents consent before placing orders for supply of pipes with a manufacturer and because the H.P.C. was not in a position to supply I.S.I. marked pipes in time. It, approached the respondents with the request that they may accept ISI marked pipes supplied by Vichitra Udhyog. The respondents on their part still wanted the contractor to supply ISI marked pipes manufactured by H.P.C. They, therefore, contacted H.P.C. in the first week of July, 1995 asking them to try to re-shcdule its production and agree to supply the pipes to the contractor at an early date. But H.P.C. informed the claimant and through it the respondents, that it was not possible for them to supply the pipes before January, 1996.

Despite this, the Superintending Engineer and the Executive Engineer of Jal Nigam, Kanpur, were not inclined to accept supply of ISI marked pipes manufactured by Vichitra Udhyog. The Executive Engineer informed the claimant that as per instructions from higher authorities pipes manufactured by Vichitra Udhyog were not acceptable. To begin with they did not assign any reason for this stand. When the Claimant insisted that despite his best efforts it was unable to procure I.S.I. marked pipes from any other manufacturer in the region and as Vichitra Udhyog were prepared to supply I.S.I. marked P.S.C. pipes, there was no reason why the Contractor should not be permitted to obtain supply from them. It undertook to have the pipes tested by the respondents before they were removed from the factory of the manufacturer. The respondents indicated that P.S.C. Pipes manufactured by the Vichitra Udhyog could not be accepted because at the moment Vichitra Udhyog did not have requisite authorization for the purpose from the Bureau of India Standards. As the Claimant felt that it could procure P.S.C. pipes of requisite specification from Vichitra Udhyog it approached the Chief Engineer requesting him to use his good offices for persuading the respondent engineers to accept the supply of pipes of requisite specification, manufactured by Vichitra Udhyog. Consequently on 13th December, 1995 the Executive Engineer wrote to the claimant indicating that the pipes manufactured by Vichitra Udhyog could be supplied by the Claimant, provided the Vichitra Udhyog could manage the requisite authorization from the Bureau of Indian Standard Institution for manufacturing such pipes and the pipes were got tested by the respondents engineers before they were removed from the factory premises. They further indicated that necessary documents showing the authorization and manufacture of pipes conforming to the specifications were also to be furnished to the respondents. This is precisely what the claimant had been saying right from the month of May 1995 when HPC expressed its inability to supply the pipes.

It is apparent that the stand taken by the respondents regarding the supply of P.S.C. pipes by Vhichitra Udhyog on condition that they obtain the requisite authorization for its manufacture from Indian Standard Institution Bureau and got the same tested by the respondents before removal from factory was quite apt and fair. There is no reason why the same stand could not be taken by them in the month of May, 1995 when for the first time to Claimant informed them that H.P.C. had expressed its inability to supply the pipes to the Claimant in time. Above mentioned correspondence indicates that the stand taken by the respondents in this regard was that it could not accept pipes manufactured by Vichitra Udhyog as at the moment the Udhyog did not have the requisite authorization from the Bureau of Indian Standard Institutions to manufacture the same. Subsequently, the respondents in their letter dated 13th December, 1995 came round to the position that this particular stand taken by them for refusing to accept supply may not be appropriate and that the claimant could be permitted to place order with Vichitras' provided it ensured that Vichitra would get necessary authorization for the purpose before it went into production of the pipes. It is thus clear that the respondents had erred in with holding their consent to claimants placing order for supply of pipes with Vichitras' right from May to December 1995. There was thus a clear breach of obligation on their part on this account. Of course, this consent would have been subject to their right to inspect the pipes before they were moved from the Factory of Vichitra Udhyog and to rejection by them if on such inspection it was found that the pipes did not confirm to requisite specification. By committing breach of this obligation the respondents made it impossible for the Claimant to place orders for supply of such pipes with Vichitra Udhyog. The question of placing order and seeking consent of the respondents for obtaining supply from any other manufacturer, which at the moment possessed authorization for manufacturing ISI marked pipes, at any stage prior to 13th December, 1995 did not arise, as the case of the Claimant is that to the best of its knowledge there was no other manufacturer in the area who could supply such pipes. This fact had been brought to the notice of the respondents as early as May, 1995 and the respondents did not indicate to the Claimant the name of any other manufacturer who could supply the same. On the other hand they insisted on the supply being obtained from H.P.C. and for that purpose they even contacted the H.P.C. as late as in the month of July, 1995 asking them to reschedule their production. Although during the course of arguments the respondents suggested that there were two other manufacturer who could, if approached, supply the P.S.C. pipes to the Claimant, they did not make even a whisper about it in their correspondence with the claimant during the relevant period. Even before me they did not produce any material to show that at the relevant time these manufacturer were in a position to give ready delivery of pipes of requisite specification. It is obvious that when on 13th December, 1995 the respondents permitted the claimant to, on certain conditions, place order for supply of pipes with Vichitra, it was not possible for the Vichitra Udhyog to obtain the requisite authorization from the Bureau of Indian Standard Institution and to manufacture and supply the P.S.C. pipes with I.S.I. marking of requisite specification before 31st December, 1995. I find that the Claimant made his best efforts to obtain the supply of pipes of requisite specification from the only source known to him but then it could not place order for the same with Vichitra Udhyog prior to 18th December, 1995 because the respondents withheld their consent for the purpose, on un tenable grounds I, therefore, conclude that the breach of obligation in this regard rested with the respondents and they are on this account accountable to the Claimant.

Before me the respondents took the stand that they were justified in withholding their consent for placing orders for the supply of pipes with Vichitra Udhyog for the reason that on earlier occasion the supply made by Vichitra Udhyog to sister Jal Nigam at Jhansi was found to be defective and they had reason to believe that such supplies will not be up to the mark. They have placed certain papers on record in support of this plea. I am unable to accept this submission. In the first place through out the correspondence between the Claimant and the Respondent from May to December, 1995 there is not a whisper of respondent taking up the stand that they were not giving their consent for supply of pipes manufactured by Vichitra Udhyog because the supply made by them to the sister Jal Nigam at Jhansi had been found to be defective. Claimant tried to explain the nature of that defect orally and urged that the said consideration was not relevant. In my opinion it is not necessary for me to go into it as subsequently the respondents themselves agreed to accept the pipes manufactured by Vichitras on conditions laid down in their letter dated 13th December, 1995. More so when the respondents admit that subsequently they got the work completed with the pipes manufactured and supplied by Vichitra Udhyog."

So far as the claim of the appellant that the arbitrator has been appointed contrary to the provisions of the contract, can not be accepted at this stage. The arbitrator has been appointed by Hon'ble The Chief Justice in exercise of powers under Section 11 (5) of the Act vide order dated 25.01.2002. The order appointing the arbitrator has been challenged by the appellant before the Apex Court, which has been dismissed on 31.03.2008 and the appointment of the arbitrator has accordingly, been upheld. Therefore, the first submission of learned counsel for the appellant regarding the appointment of the arbitrator, has no substance.

Now coming to the award of Rs.28,478/- against claim no.1 is concerned, it appears that apart from the contract for the supply of ISI mark pipes of 350 mm and 450 mm diameter, the respondent has executed certain extra work. There is no dispute in this regard. Therefore, the award of Rs.28,478/- in respect of claim no.1 is upheld.

Now coming to the other award, we are of the view that the arbitrator has proceeded contrary to the terms of the contract. The award appears to be erroneous, unfair and unreasonable. The respondent has submitted the tender and being lowest has been accepted and he has been asked to furnish the security and execute the contract bond. The period for completing the contract was seven and half months and the date of start of work has been fixed after negotiations with the respondent to which the respondent agreed. It is not the case of the respondent that he has entered into contract under coercion, pressure or against free will. It is clear that under the terms of the contract, the respondent had to supply ISI marked pipes of 350mm and 450 mm diameter, capable of 6kg. Per sq. cm. hydrostatic test pressure. There was no stipulation in the contract that from which company such pipes were to be obtained. The only condition was that the pipes should be of ISI mark. It was open to the respondent to procure such pipes of ISI mark from any manufacturer or supplier. It appears that Indian Hume Pipe was the licencee to manufacture such pipes and factory situated at Jhansi. Therefore, the respondent approached them for the supply of such pipes but they expressed their inability to supply such pipes within the stipulated period and thereafter, the respondent had approached M/s Vichitra Prestressed Concrete Udyog Private Limited, New Delhi to supply but their product has not been accepted and, thereafter, the respondent made a request to the officials of the appellant to accept the product of M/s Vichitra Prestressed Concrete Udyog Private Limited, New Delhi but their product has not been accepted on the ground that the company did not possess the licence to manufacture ISI marked pipe of 350mm and 450 mm diameter. It was open to the respondent to supply the specified pipes within the stipulated period under the terms of the contract. It is wrong to say that the appellant has ever insisted the respondent to supply the pipes of particular manufacturer, namely, Indian Hume Pipe, New Delhi. None of the correspondence says so. Rather they asked the respondent to supply the pipes of ISI mark of the other manufacturers. Arbitrator was wrong in saying that the appellant insisted the respondent to supply ISI marked pipes manufactured by Indian Hume Pipe, New Delhi. The only insistence was to supply ISI marked pipes. M/s Vichitra Prestressed Concrete Udyog Private Limited, New Delhi did not possess the licence to manufacture ISI marked pipes of 350 mm and 450mm diameter. Therefore, the officials of the appellant had declined to accept the pipes manufactured by such company and rightly so, as it would be contrary to the terms of the contract.

In view of the above, it is apparent that the respondent failed to execute the contract within the stipulated period and has committed breach of contract. Arbitrator has illegally held to the contrary, which is on the face is, erroneous and contrary to the terms of the contract and public policy. Apex Count in the case of Food Corporation of India Vs. M/s Chandu Constructions & Anr. (Supra) , Apex Court held as follows:

"An arbitrator derives his authority from the contract and if he acts in disregard of the contract, he acts without jurisdiction. A deliberate departure from contract amounts to not only manifest disregard of his authority or a misconduct on his part, but it may tantamount to a mala fide action."

Apex Court in the case of Oil and Natural Gas Corporation Ltd. Vs. SAW Pipes Ltd., (Supra) has held that "the award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the Court. Such award is opposed to public policy and is required to be adjudged void."

We have also perused the decisions relied upon by learned counsel for the respondent.

We are of the view that on the facts of the present case, such decisions are of no help.

In view of the above, we are of the view that award of compensation @ 10% for work not done at Rs.4,76,733/-, overhead expenses at Rs.33,000/-, cost of proceedings at Rs.70,000/- is wholly unjustified.

We are further of the view that for the breach of contract, the appellant is entitle for damages claimed at Rs.1,98,000/- and thus, after adjusting a sum of Rs.1,98,000/-, the respondent is entitled for the refund of Rs.1,22,437/- against the security amount of Rs.3,20,437/-. In this way the appellant would be liable to pay Rs.28,478/- + Rs.1,22,437/- = Rs.1,50,915/- to the respondent. The amount shall be paid, if not paid. If in pursuance of the award, the amount has been paid to the respondent by the appellant, the excess amount after adjustment of the aforesaid payment shall be refunded to the appellant. The aforesaid payments shall be made within a period of three months from today. Any amount already paid, shall be adjusted.

Since there was breach of contract on the part of the respondent, therefore, the respondent would not be entitled for any interest on excess amount, which is payable to the respondent.

In view of the above, we are of the view that the order of the District Judge passed on the application under Section 34 of the Act, is erroneous and is liable to be set aside.

The appeal is partly allowed. The award dated 31.08.2004 is modified to the extent as stated above.

Dt.08.08.2014

R./