Judgment

S.B. Majmudar, J.-Leave granted.

2. These appeals by special leave are preferred by the State of Andhra Pradesh being aggrieved by a common judgment and order dated 08.04.1996 of the High Court of Andhra Pradesh in appeal against order of the Trial Court as well as in companion civil revision petition arising out of the very same judgment of the Trial Court. The question in controversy between the parties in these appeals which were finally heard by consent of learned counsel for the parties is to the follow­ing effect :-

Whether the award of the arbitrator to the tune of Rs. 38,32,697/- with 18% interest per annum from the date of reference i.e. 27.06.1985 till payment in favour of Respondent No. 1 which was made rule of the court, was legally justified or not.

3. A few relevant facts leading to these appeals deserve to be noted at the outset. Respondent No. 1-Contractor had executed a works contract assigned to him for laying distribution pipe lines to 32 fluoride affected villages in Prakasam District of An­dhra Pradesh. As per the said agreement dated 30.07.1980 executed by the Executive Engineer on behalf of the appellant-State granting the said contract to Re­spondent No. 1, the initial value of the work was Rs. 8,52,355.66. The site in question was handed over to Respondent No. 1-Contractor on 01.08.1980. The period of work was twelve months. Some dispute arose between the appellant-State on the one hand and Respondent No. 1 on the other, in connection with the aforesaid works contract. As there was an arbitration clause in the contract for referring the dispute to arbitration for resolving the same, the said clause got invoked be­tween the parties. The contention of Respondent No. 1-Contractor was that the sole arbitrator, as provided in the articles of agreement, being the Superintending Engineer of Panchayat Raj, Hyderabad, N.A.P. Guntur, could not act an arbitrator as he was directly concerned with the contract work, he was required to be substituted by some other arbitrator. Accordingly, Respondent No. 1 moved an application behind C.P. No. 56 of 1984 under Section 8 of the Arbitration Act, 1940 (hereinafter referred to as ‘the Act’) in the Court of II Additional Judge, City Civil Court, Hyderabad for substituting another arbitrator in place of the aforesaid arbitrator. The said petition was decided by the learned Judge after hearing the parties by his order dated 25.02.1985. In place of sole arbitrator mentioned in the contract one Shri T. Nabi Saheb, Superintending Engineer, Retired, Ramchandranagar, Ananthapur. (Respon­dent No. 2 herein) was appointed as sole arbitrator for adjudication of disputes that had arisen between Respondent No. 1 (petitioner before the court) and the appellant-State (first respondent before the court) in respect of agreement dated 30.07.1980 relating to the work i.e. providing distribution pipe lines to 32 fluoride affected villages in Prakasam District. The arbitrator was direc­ted to sign a copy of the minutes of the order and enter upon reference in accordance with the agreement and to make the award within four months from the date of entering upon the reference pursuant to the said agreement between the parties. It is not in dispute between the parties that the said decision has become final.

4. Pursuant to the aforesaid order of the Trial Court, the arbitrator entered upon the reference, heard the parties and adjudicated upon the dispute by a non-speaking award and on various heads submitted before him by Respondent No. 1 for adjudication, the aforesaid award of Rs. 38,32,697/- with interest was passed by him on 25.10.1985. The said award was submitted by Respondent No. 1 for making it a rule of the court by filing O.S. No. 1420 of 1985. A notice was issued to the appellant-State authorities about the said filing of the award by the trial Court. The appellant-State filed O.P. No. 34 of 1988 on 26.02.1988 for setting aside the said award on various grounds raised therein. Tha