The main legal point established is that compensation claims in arbitration must be based on proven breach and loss, and the tribunal must consider and apply the relevant contract provisions.

By this appeal filed under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter 'Act of 1996' for short), appellant seeks to challenge an Order and Judgment dated 14th October 2004 passed by the learned District Judge, Raigad Alibag, substantially rejecting the arbitration application filed by the appellant challenging the award made by the arbitral tribunal on 10th March 2004. By the said award dated 10th March 2004, the arbitral tribunal had allowed most of the claims made by the respondent (for the sake of convenience, the appellant is referred to as 'owner' and the respondent is referred to as 'the contractor' in the later part of judgment). Some of the relevant facts for the purpose of deciding this appeal are summarized as under:

2. There was an old bridge across Dharamtar Creek on Alibag-Pen Road which was showing severe distress. The owner decided to get a new bridge constructed adjacent to the old bridge under “Build Operate and Transfer” (BOT) scheme. In the year 1996, a Government Resolution was issued by which the Government laid down policy guidelines for inviting private participation with own funding on BOT basis for roads and bridges projects. The owner invited offers for construction of two lane bridge across Dharamtar creek with approaches in Km.19/200 of Alibag-Pen-Khopoli road. Tender notice was published on 18th December 1998. The date of pre-bid meeting was 15th February 1999. The owner accepted the bid of contractor and issued Works Order on 31st August 1999. The offer made by the contractor in the tender was Rs. 15,25,00,000/-. The letter of acceptance was issued by the owner in the name of the then bidder Ameya Developers Pvt. Ltd., who by letter dated 23rd August, 1999, informed the owner regarding floating of new company in the name and style of “Patwardhan Infrastructure Pvt. Ltd.” and requested to issue work orders in the name of Patwardhan Infrastructure Pvt. Ltd. The owner accordingly gave approval to transfer the work in the name of Patwardhan Infrastructure. The owner issued a notification on 5th February 2001 for levy of toll from 6th February 2001 and specified a rate of toll per trip. The concession period offered by the contractor was 13 years 7 months and 26 days. By letter dated 28th March 2001 to the owner, the contractor alleged that at the time of entering into agreement, contractor was not told that an approach was sanctioned by the owner to Ispat factory on NH-17 and the said factory was using that approach and all vehicles were using facility road. The contractor alleged that it had contemplated while bidding that the entire traffic to Ispat factory would use only the approach and gate near the facility since no approach from NH-17 was in use. The contractor demanded compensation alleging loss of toll which could not be foreseen while bidding.

3. By letter dated 14th September 2002, the contractor informed the owner regarding diversion of traffic by Ispat factory via NH-17 instead of passing through toll booth causing loss to the contractor and requested for joint survey of traffic between 25th September 2002 and 29th September 2002 to ascertain the loss. During the period between 30th September 2002 and 5th October 2002, a joint traffic count was taken. The contractor placed reliance upon an alleged note from the Inspector of Police, Pen Raigad stating that the Ispat factory was not using the gate on highway to Goa and companies own buses and trucks were not using the gate. Use of said gate was started all of a sudden somewhere from 15th February 2001 and at the same time, vehicles passing through Dharamtar Creek had started using that road from 15th February 2001 onwards. It was alleged that earlier all these vehicles were using Ispat Companies gate near Dharamtar bridge. The said alleged note was annexed by the contractor in the arbitration proceedings as Exhibit-C-17. By letter dated 16th September 2002, the contractor issued a notice under clause 3.4.17