Judgment

Markandey Katju, J.

These appeals have been filed by special leave against the impugned judgment and order dated 21st March, 2002 of the Kerala High Court in MFA No. 452 of 1997.

Heard learned counsel for the parties and perused record.

The appellant, Asian Techs Ltd., entered into an agreement dated 02.09.1986 with the Union of India for construction of 'Provision of Lab and Administrative Block', etc. for NPOL at Kakkanad, Cochin. The probable amount of contract was Rs. 3,58,96,665, and the construction was to be completed before 08.09.1988. The period of the contract was 24 months. Ex. R1 is the agreement and Ex. R1(a) is the General Conditions of Contract known as IAFW 2249. According to the appellant, due to the delay caused by the respondents, the project could not be completed by 30.06.1990. According to the appellant, the delay was because the site of the work proposed was changed by the respondents subsequent to the signing of the agreement. Also, the design and structural particulars of the building were fundamentally altered by the respondents by omitting the basement floor itself. The respondents nominated the suppliers of prime cost items belatedly. They did not finalize the design and structural particulars of the work within the period of the contract which expired on 08.09.1988 and dragged on the works, resulting in suspension of the ongoing works and making the labour and machinery items idle. By efflux of time the cost of labour, fuel, materials, etc. increased. The respondents assured to settle the rates for extra items across the table and persuaded the petitioner to continue to carry out and complete the works. The respondent No. 2 allowed unconditional extension of time at the first instance on 10.11.1988 and then from time to time, without levy of liquidated damages. There was no agreement of whatsoever nature in respect of rates for works carried out between 08.09.1988 and 30.06.1990, or on rates for extra and altered items. The respondent did not pay even at the agreed rates in the agreement in respect of certain items and avoided reference to rates in the MES Schedule of Rates for many other items, for which rates were to be derived. The contract stipulated settlement of rates for extra items of work involved by respondent No. 2, being the accepting officer.

The respondents prepared the last bill on 27.02.1991 for works completed on 30.06.1990, which was received under protest on 07.05.1991. The General Condition 7(d) of IAFW 2249 forming part of the contract reserved rights of the petitioner and respondent No. 2 to correct any mistake in fixation of rates at any time, even after receipt of the last payment. It is alleged that the respondent No. 2 failed to communicate any decision on objections to incorrect fixation of rates, duly notified from time to time by the petitioner. The rates were fixed by a board of subordinate officials, behind the back of the petitioner, violating the contract, and thus huge amounts due and payable to the petitioner were wrongfully withheld.

The petitioner invoked the arbitration clause in the agreement for settlement of the disputes and differences which arose and sent a demand notice dated 10.12.1991 for payment of Rs. 1,24,58,108 together with interest thereon. Respondent No. 2 on 15.06.1992 intimated readiness and willingness to refer the disputes and differences as specified in the notice dated 10.12.1991 to arbitration. The Chief Engineer, Air Force was appointed as the sole arbitrator on 15.12.1992 and the respondents participated in arbitration proceeding without any demur or protest.

The sole arbitrator found patent mistakes in fixation of rates of extra items and determined unpaid amounts and passed a non-speaking award dated 30.12.1993 in favour of the petitioner for payment of Rs. 39,75,484 together with past, pendente lite and future interest and rejected the counter-claims. The Subordinate Judge's Court, Ernakulam passed a decree in terms of the aw