( 1 ) THIS appeal is preferred under Section 37 of the Arbitration and Conciliation Act, 1996 (for short, the Act) against the order dated 5-11 -2004 in O. P. No. 1457 of 2001 on the file of the Court of Ill-Addl. Chief Judge, City Civil court, Hyderabad, whereunderthe application made by the appellant herein undersection 34 of the Act to set aside the arbitral award dated 6-6-2001 was dismissed.

( 2 ) THE facts, in brief, may be noted as under: the second respondent herein was awarded the contract for supply of fresh fruits at supply depots at Tirumalgherry, Hakimpet and ASC golconda for the period from 1-10-1999 to 30-9-2000 in pursuance of the tenders invited by the appellant. As per the agreement dated 6-8-1999 executed between the parties, the second respondent was required to make the supply of fresh fruits in terms of the specifications and conditions annexed to the agreement. It is not in dispute that in pursuance of the said agreement though the supply of fruits was commenced with effect from 1-10-1999, the 2nd respondent stopped the supply from 6-6-2000 on the ground that nonlocal variety of fruits demanded by the appellant were not available. Consequently, the appellant had to resort to local purchase of fruits from 6-6-2000 to 15-8-2000 incurring a sum of rs. 4,14,582-07 ps. Thereafter, the contract in favourof the second respondent was rescinded vide notice dated 29-6-2000 and a short term agreement was executed in favour of a third party forthe supply of fresh fruitsforthe period from 16-8-2000 to 30-9-2000. For the said purpose, it was claimed that the appellant incurred a sum of Rs. 1,74,548-65 ps. towards consideration under the shortterm agreement.

( 3 ) AGGRIEVED by the action of the appellant in terminating the contract and forfeiting the security deposits worth Rs. 1. 01 lakhs and also withholding the payment for the fruits supplied by the 2nd respondent upto 5-6-2000, the 2nd respondent invoked the arbitration clause underconditionno. 23 of the agreement and sought for reference of the dispute to a sole Arbitrator. Accordingly, a sole Arbitrator (1st respondent herein) was appointed and the 2nd respondent filed his statement of claim to which the appellant filed its statement of defence. Though the appellant did not make any independent claim before the Arbitrator, it appears that a counter-claim was made by letter dated 13-12-2000 for a sum of rs. 5,89,130-72 ps. contending that the contractor/2nd respondent herein was liable to pay the additional expenditure incurred by the appellant in meeting the requirement of fruits during the remaining contract period.

( 4 ) THE Arbitrator, after heating both the parties, passed an Award dated 6-6-2001 holding that the contract was void ab initio and therefore the question of its enforceability did not arise. Accordingly, it was concluded that no right accrued to any of the parties for breach of the contract and therefore the claim of the second respondent for Rs. 12,23,732/-towards the alleged loss suffered by him could not be accepted. Similarly, a sum of rs. 5,89,130/- claimed to have been spent by the appellant herein subsequent to the breach of the contract by resorting to local purchases at its own expense, was also denied. However, the Arbitrator, having taken note of the fact that the contract in question was non-gratuitous, opined that Section 70 of the contract Act would attract and accordingly ordered that the appellant herein shall pay a sum of Rs. 38,173/- towards the cost of fresh fruits admittedly supplied by the 2nd respondent which remained unpaid till that date together with interest at the rate of 18% perannum. The arbitrator further directed the appellant to return the Fixed Deposit Certificates to the 2nd respondent.

( 5 ) AGGRIEVED by the same, the appellant hereinfiledo. P. No. 1457 of 2001 on the file of the Court of Ill-Addl. Chief Judge, City Civil court, Hyderabad under Section 34 of the arbitration and Conciliation Act