By this petition filed under section 34 of the Arbitration and Conciliation Act, 1996, the petitioner has impugned the arbitral award dated 30th June, 2005 rendered by the sole arbitrator allowing some of the claims made by the respondent. The petitioner herein was the original respondent in the arbitral proceedings and the respondent herein was the original claimant. Some of the relevant facts for the purpose of deciding this petition are as under :-

2. On or about 4th September, 1997 Engineers India Ltd. floated a tenders on behalf of the petitioner for Crude Distribution System. The respondent submitted their bid in response to the said tender. On 23rd February, 1998, the petitioner by a fax letter accepted the bid of the respondent and awarded work at Rs.14,03,30,247/-. The said contract was governed by the provisions of General Conditions of Contract (GCC) and Special Conditions of Contract (SCC). The contractual completion date was within 8 months from the said letter dated 23rd February, 1998.

3. On 6th March, 1998, a kick off meting was held between the respondent and the said consultant EIL wherein the design and engineering of the said project was to be approved as per the provisions of the Special Conditions of Contract. It is the case of the respondent that on 23rd March, 1998 a meeting was held between the said EIL and the respondent and as per the minutes of the meeting, the respondent was to procure approval from the said consultant and if such approval was not given by the said consultant within two weeks, the respondent could proceed without approval.

4. On 26th March, 1998, the respondent established two bank guarantees for Rs.35,08,260/- towards security deposit and for Rs.1,40,33,000/- towards mobilization advance and performance of contract. On 3rd April, 1998 petitioner issued a Letter of Acceptance which included certain terms and conditions. According to the said Letter of Acceptance, the contract was to be completed within a period of eight months of the issue of fax of acceptance dated 23rd February, 1998. The fax and letter of acceptance along with the tender document, the contract agreement etc. all formed the part of the contract document.

5. Correspondence was exchanged between the parties from time to time during the progress of the work. On 6th September, 2000, the respondent completed the work under the Crude Distribution System. On 3rd October, 2000 the petitioner issued its completion certificate. On 3rd October, 2000 the respondent submitted a final bill for Rs.2,37,87,663/-.

6. It is the case of the respondent that the bank guarantees as per the last extension were in force till 1st February, 2002 with a claim period upto 30th June, 2002. The petitioner however sought further extension of bank guarantees. It is the case of the respondent that only on 15th September, 2001, the petitioner for the first time contended that the final bills raised by the respondent would not be paid since the increased quantities had resulted in a change of tender status.

7. By letter dated 25th September, 2001, the respondent requested the petitioner to make payment of the final bill and also the increased quantities in accordance with the schedule of rates. On 31st October, 2001, the respondent by their letter informed the petitioner of the financial implication of seeking extension of the bank guarantee without settling the final bill.

8. On 12th November, 2001, the petitioner requested the respondent to depute an authorized person to their office to take commercial decisions in respect of the negotiations/finalization of the final bill. The representative of the respondent met the representatives of the petitioner regarding the payment of the final bill on 19th November, 2001.

9. It is the case of the respondent that the petitioner vide their fax dated 23rd November, 2001 informed the respondent that they would ex-parte levy the lowest rate in respect of the increased quantities. The respondent vide letter