Judgment

SHAH, J. : This is an appeal with certificate under Article 133 (1) (c) of the Constitution against the order of the High Court of Punjab in First Appeal No. 75 of 1961 confirming the order of the Subordinate Judge, Delhi, refusing a motion to set aside an award directing payment by the Union of India of Rs. 3,26,251/6/3costs and future interest at 41/2 - per cent to the respondent.

2. In August 1946 the Chief Director of Purchases (Disposals), Food Department, Government of India, invited tenders for purchasing the stock of American cigarettes lying in Calcutta, Karachi, Delhi and Agra. The respondent submitted his tender offering to purchase the entire stock at a uniform rate of Re. 18/3 per packet of 20 cigarettes. The total value of the stock offered at the rate amounted approximately to Rs. 39 Lakhs. The Government of India accepted the tender. The acceptance letter (with which was enclosed Form F. D.(M) 70 setting out the general conditions of contract, was signed by the Chief Director of Purchases. Condition No. 13 in Form F. D. (M) 70 contained an arbitration clause.

"In the event of any question or dispute arising under these conditions or any special conditions of Contract or in connection with this contract (except as to any matters the decision of which is specially provided for by these conditions) the same shall be referred to the award of an arbitrator to be nominated by the Chief Director and an arbitrator to be nominated by the Contractor or in the case of the said arbitrators not agreeing, then to the award of an Umpire to be appointed by the arbitrators in writing before proceeding on the reference and the decision of the arbitrators, or in the event of their not agreeing of the Umpire appointed by them shall be final and conclusive. x x x x"

3. The respondent took delivery of 29,93,597 packets of cigarettes and paid Rs. 17,78,573 /6/4 but on inspection he found that some cigarettes were mildewed and unfit for use. A Board of Survey appointed by the Government of India to inspect the undelivered stock reported that cigarettes of the value of Rs, 6,58,458/- were wholly "unfit for issue" for the remaining cigarettes the Board recommended reduction in price at certain rates. The respondent did not agree to accept the goods on the revised terms reported by the Board and requested the Government of India to agree to a uniform reduction of 50 percent in price on the cigarettes delivered to him as well as those still lying with the Government. The Government of India thereafter decided to cancel the contract in respect of the undelivered cigarettes, and offered to take back from the respondent, out of the stock of cigarettes delivered such as "were in their original packing and could be identified: subject to the condition that no claim will be made by the respondent in respect of freight, storage, rents, charges or any other expenses incurred by the respondent in connection with the cigarettes taken back by the Government. The respondent accepted the offer made by the Government reserving his right "to claim incidental expenses" 24,13,500 packets of cigarettes in the original packing were then returned by the respondent and between June 13,1947 and February 8, 1948, Rs. 14,54,215/7/- were refunded to him by the Government of India.

4. On June 26, 1948 the respondent addressed a letter to the Director General of Disposal intimating that he had appointed M.W. Lewis as arbitrator on his behalf in accordance with Cl. 13 of the general conditions of F. D. (M) 70 and called upon the Director General of Disposals to appoint his arbitrator. By his letter dated July 7, 1948 the Director General informed the respondent that the Government of India had appointed Bakhi Shiv Charan Singh as their arbitrator reserving full liberty to take all pleas before the arbitrator including the plea that no dispute between the parties which could be referred to arbitration survived.

5. The arbitrators entered upon the reference but cou