1. By this petition, filed under section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “Said Arbitration Act”), petitioner has impugned the arbitral award rendered by the arbitral tribunal on 18th June, 2009 directing the petitioner to indemnify the respondent by creation of a fund under the control of respondent and deposit the sum of Rs.26,30,662/- and Rs.58,170/- together with interest on the sum of Rs.26,30,662/- at the rate of 30% p.a., from 21st July, 2005 till 13th February, 2007 and further interest on the sum of Rs.26,30,662/-, at the rate of 10% from 14th February, 2007 till actual deposit.

2. The arbitral tribunal directed the petitioner to keep the said amount in a fixed deposit of a nationalized Bank of their choice within four weeks from the date of the said award. Petitioner was directed to deposit the said amount initially for the period of one year and was directed to keep the said fixed deposit renewed till such time as the appeals and further appeals which may be filed were finally disposed of. Some of the relevant facts for the purpose of deciding this petition are as under:

3. By letter dated 9th December, 1997, M/s. Tata Finance Limited sanctioned in favour of the petitioner lease of type I and type II equipments. On 19th December, 1997, parties executed lease agreement bearing No.LS-361/97-98. The said lease was for the period of five years. Separate supplementary lease schedules were also executed on 19th December, 1997 in respect of both type I and type II equipments. In respect of assets under type I, the respondent represented that they were entitled to claim 25% depreciation and in respect of type II equipments 100% depreciation.

4. Under clause 2.2 of the said agreement the respondent was entitled to recover service charges at the rate of 30% p.a., on the compounding basis with monthly rests from the due dates specified in supplementary lease schedules attached/to be attached till the actual date of payment. Under clause 2.4 of the said agreement, lessor was entitled to vary the lease rental charges at any time during the continuance of the said agreement in the event of certain eventualities set out therein. Clause 2.2 and 2.4 of the lease agreement are extracted as under:

“Clause 2.2 – Without affecting lessor's right the lessee's obligation to pay the lease rentals specified arrears of such lease rentals, such arrears of lease rentals shall carry service charges at the rate of 30% per annum on the compound basis with monthly rests from the due dates specified in Supplementary Lease Schedules attached/to be attached till date of actual payment.

Clause 2.4 : The Lessor shall be entitled to vary the lease rentals charges at any time during the continuance of this agreement in the event of a change occurring on the basis of which the lease rentals charged hereby are computed, namely, valuables relating to depreciation rate, permitted as per the Indian Income Tax regulations for the time being in force on declining balances or modifications in the cost of money to the Lessor. The Lessee irrevocably agrees and declares that the lease rentals charges shall be increased in correlation to increase in taxes whether sales tax or excise, and any other related or consequential charges that may be levied on or in connection with the Lease of the Equipment under this Agreement at any time hereafter or any increase in the price of the Equipment between the date of the order placed on the manufacturer/supplier thereof and the date of its delivery.”

5. Clause 14 of the lease agreement provided for indemnity on happening of certain eventualities set out therein. Clause 14 of the lease agreement is extracted as under:

“14. The Lessee shall indemnity and keep indemnified the Lessor, at all times against any loss or seizure of the Equipment under distress, executing or other legal process or destruction or damage to the Equipment by fire, accident or other cause, from any claim or