IMPORTANT POINT
The arbitrator being a creature of the agreement, must operate within the four corners of the agreement and cannot travel beyond it and he cannot award any amount which is ruled out or prohibited by the terms of the agreement.

JUDGMENT

B.P. Jeevan Reddy, J.-Leave granted. Heard Shri F.S. Nariman, learned counsel for the appellant and the learned Attorney General for the respondent-corporation.

2. A contract was entered into between the appellant and the Oil & Natural Gas Corporation (O.N.G.C.), whereunder the appellant undertook to construct 304 pre-fabricated housing units at Panvel, Phase-I. The appellant commenced the construction but did not complete it even within the extended period. The respondent thereupon terminated the contract and got the said work done through another agency. Disputes arose between the parties in the above connection, each party raising claims against the other, which were referred for decision to two arbitrators (joint Arbitrators). By their award dated 18th June, 1991, the arbitrators decided that while the O.N.G.C. shall pay to the appellant a sum of Rs.1,09,04,789/-, the appellant shall pay to the O.N.G.C. a sum of Rs.41,22,178/-. In other words the appellant was held entitled to a net amount of Rs.67,82,620/- with interest at the rate of 18 per cent per annum from the date of award till the date of payment or till the date of decree whichever was earlier. While the appellant applied for making the said award a Rule of the Court, the respondent-corporation filed objections seeking to have the award set aside. The learned Single Judge overruled the objections of the respondent-corporation and made the award a Rule of the Court. Corporation appealed against the same, which has been partly allowed by the Division Bench.

3. The appellant had claimed various amounts under as many as 19 heads, while the respondent-corporation claimed certain amounts under three heads. The arbitrators rejected the appellant s claim under heads 3, 5, 7, 8, 10, 11, 12 and 18. They awarded various amounts under the other heads, the total of which came to Rs.1,09,04,789/-. So far as the respondent s claims are concerned, the arbitrators rejected claim No. 2 but accepted claim No. 1 (partly) and claim No. 3 (partly) and awarded various amounts totalling Rs. 41,22,178/-.

4. In the appeal before the Division Bench the respondent-corporation confined its attack only to claims 1, 4, 6, 9 and 13. The Division Bench rejected the respondent s contentions with respect to claims 1 and 13 but upheld the same with respect to claims 4, 6 and 9. Only the appellant has come to this Court challenging the Judgment of the Division Bench. We shall deal with these three claims in their proper order.

5. I : Appellant s claim No. 4 arises on account of the shortage of cement in the bags supplied by the respondent. The appellant s case was that the corporation had undertaken to supply cement to it in bags, each bag containing 50 kg. of cement, but as a matter of fact, the cement actually found in the bags was less. The appellant complained of the same to the officers of the corporation from time to time and a record of the shortages has indeed been kept by the parties. On this count, the appellant claimed a sum of Rs. 3,96,984.50p., against which the arbitrators awarded an amount of Rs. 3,70,221.50 paise. The defence of the corporation was that according to the stipulation contained in Schedule-A to the Tender notice, the corporation was not to be held responsible for any variation in the weight of the cement in the bags supplied by them. The relevant stipulation read as follows :

"Ordinary Port-land construction cement M.T. 830/-  Ex Commission s    Godown, Greater    Bombay.

Note : 20 (Twenty bags) bags of cement shall mean one metric tonne for the purpose of recovery irrespective of variation in standard weight of cement filled in bags."

6. The appellant s case, however, was that though the Schedule to the Tender notice did contain the above stipulation, the appellant had, in its letter dated 5th March, 1984, which was in the nature of a counter-off