R.D. DHANUKA, J.

1. By this petition filed under section 34 of the Arbitration and Conciliation Act, 1996 (for short the said Arbitration Act) the petitioner has impugned the arbitral award dated 27th July, 2011 made by the learned arbitrator directing the petitioner to pay a sum of Rs. 56,87,400/- with interest at the rate of 8% per annum w.e.f. 20th June, 2001 till the date of realisation to the respondent herein. Some of the relevant facts for the purpose of deciding this petition.

2. The petitioner was original respondent in the arbitration proceedings whereas the respondent was the original claimant. By an agreement dated 11th December, 1997 the respondent appointed the petitioner as Dealer Operated Lube Depot Operator at Diu for the period of two years from October, 1997. The said agreement was thereafter extended till 31st March, 2000 on the terms and conditions contained in agreement dated 11th December, 1997.

3. Under clause 8 of the said agreement the respondent had agreed to advise names of the customers with monetary limits upto which cheques could be accepted by the petitioner from such customers. It was provided that all sales ex-godown will be strictly against advance payment by cheques/demand drafts. It was made clear that supplies to other customers will be only against demand drafts in advance for the full value. The petitioner was required to maintain necessary customer cards indicating the receipt of payment and the supplies made against such payments. Clause 8 of the said agreement is extracted as under:-

8. All sales ex-godown will be strictly against advance payment by cheques/DDs. The Divisional Office of the Corporation will advise the names of the customers with the monetary limits upto which the cheques can be accepted from the customers. Supplies to other customers will be only against DDs in advance for the full value. The necessary customer cards indicating the receipt of money and the supply against them will be maintained by the Contractor.

4. Under clause 9 of the said agreement, all the cheques/DDs received during the day were required to be deposited in the account of the respondent with the State bank of India same day or at the most next day. It was provided that in no case, there should be delay in depositing the cheques/DDs. Under clause 14 of the said agreement the respondent had agreed to pay to the petitioner various charges towards handling/ operating/rental of lube godown. Clause 17 of the said agreement provided that the contractor shall adhere to the code of discipline laid by the respondent and Government in regard to handling of POL products and its said product. The petitioner had agreed to indemnify the respondent for any loss caused to the respondent on account of any breach of the terms by the contractor or any reason whatsoever.

5. Clause 24 of the said agreement provides for adjudication of the disputes or differences by arbitration. The dispute or differences were agreed to be referred to the sole arbitration of the Director (Marketing) of the respondent or of some officer of the respondent who could be nominated by the Director (Marketing). It was provided under the said clause that it was known to the parties to the agreement that the arbitrator so appointed was a shareholder and employee of the respondent. It was provided that no person other than the Director (Marketing) or a person nominated by such Director (Marketing) of the Corporation shall act as arbitrator.

6. It was the case of the respondent that on 27th January 2000 the officials of the respondent had carried out inspection of the office and godown of the petitioner and found that there was a shortage of 92 barrels from the total stock. The cost of such 92 barrels was Rs. 8,15,834.33. It was also noticed by the respondent that the petitioner had extended unauthorised credit of Rs. 3,15,810.67 in November 1999 to M/s. Jai Murlidhar Petroleum. It was the case of the respondent that the petitioner had