JUDGMENT

R.V. Raveendran, J.

1. Leave granted. Heard learned Counsel.

2. The appellants (also referred to as `employer') invited tenders for the manufacture, laying, testing and commissioning of water pipeline of a length of 37.41 km. under a water supply scheme in Ajmer District. Tenders were received from various tenderers including respondent (hereinafter referred to as the `contractor'). As different tenderers had stipulated different terms and conditions, the tenderers were invited for discussions, and common terms of reference (for short `CTR') were formulated on 22.2.1988 and the original tender conditions stood modified to the extent of the alterations in the CTR.

3. Thereafter the offer of the respondent was accepted and a work order dated 23.8.1988 was issued to him stipulating the period for completing the contract as two years from that date. There was an amendment to the work order on 8.11.1988. The employer and the contractor entered into an agreement dated 11.1.1989 enumerating and stipulating the documents which will form part of the contract and the modifications agreed in regard to certain terms. The value of the work as per the work order was Rs. 9,91,94,602.50. Ten percent of the value of work (Rs. 99.19 lakhs) which was agreed to be released as mobilization advance, was released to the contractor between 25.1.1989 and 5.5.1989. The contractor created an equitable mortgage over its plant by depositing its title deeds thereto as security for the mobilization advance. By letter dated 15.12.1990, the contractor confirmed that the original title deeds will remain in deposit with the employer till the entire amount of advance was repaid in full with interest.

4. The contract (clause 23 of General Conditions of Contract) provided for settlement of disputes by arbitration. By letter dated 18.6.1990 respondent invoked the provision for arbitration and sought appointment of an arbitrator to decide its claims aggregating to Rs. 2,01,66,547, arising on account of certain alleged omissions and commissions of the employer. Another dispute was raised in respect of the rate payable for work done subsequent to the due date of completion (22.8.1990). On 22.8.1990 the contractor stopped the work. By that date it had manufactured 15.26 km. of pipes and had laid 11.6 km. out of them and tested only 1.4 km. of pipeline as against the total contracted quantity of 37.41 km. On 13.9.1990 the employer notified the contractor that if he did not resume the work, the balance of the work would be got executed through an alternative agency in terms of the contract, by treating the contract as having been abandoned on 22.8.1990, and recover the excess cost from the contractor.

5. The respondent-contractor sent a reply dated 3.11.1990 stating its efforts to complete the work were rendered futile on account of the delays and breaches on the part of the employer; and it was necessary to enter into a fresh agreement as the tender was not accepted in the manner in which it ought to have been accepted. The contractor did not resume the work. The contractor's stand was that in the absence of an extension of time for completion by mutual consent before the stipulated date for completion, it was not liable to continue the work on the tendered rates. The employer on 30.3.1991 made a final demand calling upon the contractor to state whether it was ready to re-start and complete the remaining work and if so to submit a revised time schedule for such completion. As the contractor did not resume the work, the employer initiated steps to get the balance work executed through an alternative agency. In the meanwhile the contractor filed a suit against the appellant in the District Court, Ajmer and obtained a temporary injunction restraining the employer from imposing liquidated damages.

6. The contractor made an application to the District Court, Ajmer, under Section 20 read with Section 8 of the Arbitration Act, 1940 (Act for short) for filing the arbitration