The Petitioners (Original Respondents) have challenged, under Section 34 of the Arbitration and Conciliation Act, 1996 (for short, the Act), an award passed by the Sole Arbitrator on 26th September, 2006, in favour of the Respondents (Original Claimants).

2. The operative part of the award is as under:-

“i. Sum of Rs.11,00,98200 (Rupees Eleven Lacs Nine Hundred and Eighty Two only) being the amount towards the recovery as Liquidated Damages by the Respondent from the Claimant’s final bill.

ii. Sum of Rs.60,30800 (Rupees Sixty Thousand Three Hundred and Eight only) being the amount towards the recovery as liquidated Damages by the Respondent for the extra work/excess work bills from the Claimants.

iii. Respondent to pay simple interest at the rate of 7% per annum from the date of final bill till realization for (i) and (ii) above.

iv. Each party to bear their own costs of the Arbitration.”

FACTS

3. On 7th September, 1998, based upon work order dated 2nd June, 1998, an agreement executed between the parties, whereby the Petitioners awarded the Respondents the work of Electrification of B.G. Loading facility at Vasco Terminal, IOC, Goa.

4. As per clause 4 of work order dated 2nd June, 1998, the contract need to be completed within 10 months from the date of handing over the site to the Respondents by the Petitioners which includes mobilization period of 4 weeks. However, the time was further extended for 2½ months till 15/07/1999.

5. As per clause 5 of the Contract, the work needs to be completed in accordance with the specifications, designs, drawings, bills of quantities and instructions on or before the due date. The time was stated to be the essence of the contract.

6. Clause 6 of the Contract provides for compensation of delay for unfinished work and further that in case the claimants commit any default or breach of the terms and Conditions of the Agreement and/or the General Conditions of the contract or failed in the due performance thereof within the time fixed and do not complete the entire work within a stipulated period, the Petitioners (Original Respondents) shall be entitled to recover and the Claimants agreed to pay, as and by way of compensation or liquidated damages, an amount calculated @ 1% for every week or part thereof, of the delay beyond the stipulated date on account of any item which is not completed or finished and delivered on the stipulated date, subject to a maximum of 10% of the total contract value. It was also agreed that the amount of compensation or liquidated damages fixed represent the genuine, fair and reasonable pre-estimate loss and damages that would be suffered by the Petitioners (Respondents), on account thereof. It was also agreed as alleged that the sum payable by the Respondents (Original Claimants) should be considered as reasonable compensation irrespective of whether actual loss or damage is sustained or not and the Respondents would not be required to render any proof in support thereof.

7. As per the work order, the contract had to be sequentially performed in four parts, which were

“(a) Preparation and approval of the drawings and the documents.

(b) Procurement of the materials as required under the work order.

(c) Compliance of statutory requirements such as obtaining Labour and Electrical Inspector’s Licences prior to the site being handed over to the Claimant by the Respondent.

(d) The testing, installation and commissioning of the entire work including obtaining the Electrical Inspector approval after the site is handed over to the Claimant by the Respondent.”

8. As per the Petitioners, the site order handed over on 02/07/1998. The Respondents Claimants’ case was that the site was to be taken over as per the letter dated 04/02/1999 and actual site was handed over on 07/02/1999. The final bill dated 01/05/2000, indicated the work commenced on 02/07/1998 and the work was deemed closed on 31/03/2000. The actual work was completed as per the Respondents on 14/12/1