The court can interfere with an Arbitral Award if it is contrary to public policy, patently illegal, unfair, or unreasonable. The award must not be in conflict with the fundamental policy of Indian law.

JUDGMENT :

ROHIT B. DEO, J.

1. Heard Mr. W.T. Mathew, the learned counsel for the appellant and Mrs. Pranita Choube h/f. Mrs. Anjali Joshi, the learned counsel for the respondent. The short question involved in this appeal under section 37 of the Arbitration and Conciliation Act, 1996 (“Act” for short) is whether the Principal District Judge, (“PDJ”) Nagpur erred in setting aside the Arbitral Award dated 30.9.2004 on the premise that the arbitrator ignored the contractual terms and conditions and that the Arbitral Award falls foul of the substantive law of the land.

2. Only those facts which are absolutely necessary to decide the issue involved, need be stated.

3. The Defence Estates Officer (“DEO”) representing Ministry of Defence, Government of India, is the claimant, who sought the relief of forfeiture of security deposit and imposition of penalty from the arbitrator.

4. The genesis of the arbitration is Tender Notice dated 1.12.2000, issued by the claimant, inviting offers for grant of licence for removal of sand from the Kanhan River Bed, within the jurisdiction of Kamptee Contentment for the period of one year from date of handing over the possession.

5. The appellant herein, was the successful bidder, who deposited Rs. 92 lacs as the bid amount and Rs. 9.20 lacs as security deposit.

6. It would be apposite to note certain contractual terms and conditions, which are also culled out in the judgment impugned.

7. The routes for removal of sand from river bed admeasuring 343.17 acres were described as “Ajni Ghat and Ghat Across the Railway Line.” The Tender Notice specifically stated that the contractor shall not be provided route from Gora Bazar. The further recital is, that the Government would have no objection to the contractor making available alternative routes internally through the river bed by erecting temporary bridges from Ajni Ghat or across the river to facilitate the removal of sand. A specific recital is that the contractor shall under no circumstances be allowed to enter the river bed either from Gora Bazar or through any other new route, not approved by the local army authority at Kamptee. The tenderers were advised to inspect the plan of area and to get acquainted with the site in the context of the terms and conditions. The material terms and conditions of the contract, are culled out by the learned PDJ in paragraph 2(d) of the judgment impugned.

8. It is irrefutable that the duration of the contract, which initially was 1.1.2001 to 31.12.2001 was extended upto 22.1.2002 on payment of licence fees on pro-rata basis and upon the determination of the contract, the possession of the site was handed over to the Sub-Divisional Officer, (Defence Estates) Kamptee at midnight of 22.1.2002.

9. The subsequent auction purchaser M/s. Heera Laxmi Infrastructure (P) Limited, Nagpur took the possession of the site on 23.1.2002. The Sub-Divisional Officer (Defence Estates) Kamptee conveyed to Defence Estates Officer, Mumbai that the inspection of the site revealed big pits made by the previous contractor-appellant herein in Gora Bazar Ghat area. As a consequence, the security deposit of Rs. 9.20 lacs was withheld and damages claimed from the previous contractor - appellant herein.

10. The previous contractor-appellant herein denied liability to pay damages, and consequently the Defence Estates Officer, Mumbai sought constitution of Arbitral Tribunal.

11. The Director, (Defence Estates), the authority to appoint the arbitrator in terms of clause 30 of the Tender Notice, appointed Mr. A.R. Datta as the sole arbitrator.

12. The claimant-respondent herein sought the relief of forfeiture of security deposit of Rs. 9,20,000/- damages of Rs. 6,23,013/- penalty of Rs. 10,00,000 and interest of Rs. 2,20,705/- thus claiming Rs. 17,73,718/- cumulatively.

13. The appellant herein denied the claim and lodged a counter claim for damages for not