The main legal point established in the judgment is that the termination of a contract must be in accordance with the contract terms and supported by evidence. Counter claims must be supported by evidence and not based on hypothetical claims.

The petitioner (The Chief Project Manager, Central Railway, Mumbai through the Union of India), has challenged Award dated 26.12.2008 passed by the learned Arbitrate Tribunal, by filing the present petition under section 34 of the Arbitration and Conciliation Act, 1996 (for short “the Arbitration Act).

2. The summary of Award is as under:

“CLAIMANT'S CLAIMS:

Claims as per Claims as Amount

Claim No. Brief Description Terms of Modified vide CD Awarded

Reference III

1 Work done not paid 10,16,800/- 10,16,800/- 9,40,580/-

2 Payment of 6th Bill 6,61,180/- 6,61,180/- 5,75,431/-

3 Refund of Security 10,88,100/- 10,88,100/- 10,88,100/-

Deposit

4 Loss of profit 18,43,285/- 18,43,285/- 2,00,000/-

5 Loss of Advance 38,60,700/- 38,30,172/- 1,00,000/-

6 Loss due to 4,50,000/- 4,50,000/- 75,000/-

Infrastructure

7 Under utilization of 51,35,775/- 42,11,397/- Nil

labour

8 Under utilization of 25,67,888/- 21,30,480/- 50,000/-

overheads

9 Loss of business 25,67,888/- Withdrawn Nil

opportunities

10 Interest 24%P.A. 24%P.A Nil

11 Cost of Litigation 5,00,000/- 5,00,000/- Nil

TOTAL 2,74,50,374 30,29,111

RESPONDENT'S COUNTER CLAIMS:

Claim Nos. Brief Description Amount claimed Amount Awarded

(in Rs.) (in Rs.)

1 Delay in completion of 22,16,000/- Nil

contract

2 Risk and Cost 30,64,120/- Nil

3 Labourunder utilization 10,60,356/- Nil

4 Incidental losses 3,17,77,440/- Nil

TOTAL 3,81,17,916/- Nil

We, the Arbitral Panel, hereby order that an amount of Rs.30,29,111/- (Rupees Thirty Lakh Twenty Nine Thousand One Hundered and Eleven only) may be paid by the respondent to the claimant towards total of the awards within 45 days. The Arbitral Panel also directs the respondent that the amount recovered against Risk and Cost to be returned to the claimant after due verification. If the payment is not made within 45 days, the award shall carry a simple interest of 12% w.e.f date of receipt of award to the actual date of payment."

3. The factual background as per the petitioner is as under:

(a) On 8.10.2003, the respondent was awarded with a contract for the work of conversion of 1500 V DC OHE to 25 K V AC OHE in KhardiKasara Section at a total cost of Rs.2,17,61,740/- with a rider of completion period of twelve months ie upto 07.10.2004. As per the contract, the respondents were required to submit all details designs and drawings within the prescribed time.

(b) As alleged, during the period January 2004 to March 2004, the respondents failed to make any plan nor submitted the required designs and drawings and also the respondents could not show the progress of the work though the petitioners conducted weekly progress meetings with the respondent to speed up the progress. Respondents had not taken care while submitting the plans and drawings initially as the same were not as per the requirements and standards and therefore, the same were required to be corrected and resubmitted on several time until its final approval causing in ordinate delay in making progress in the work.

(c) On 27.05.2004, seven days notice was issued to the respondent to show the progress of work as the progress of the work was extremely poor. Thereafter, contract period was extended upto 30.11.2004.

(d) As alleged, until 07.01.2005, the drawings resubmitted with correction and the approval, was intimated. There was no progress in the work and only 30% progress was shown by the respondent. On 10.01.2005, again seven days notice was given to the respondent to show progress in the work. Thereafter, again on 02.02.2005, 48 hours notice was given to the respondents as they failed to show any progress.

(e) On 07.02.2005, the contract was terminated at the risk and cost of the respondent in respect of the balance work.

(f) After termination of the contract, disputes arose between the petitioner and the respondent thereby the respondent raised 11 claims which were ref