The main legal point established in the judgment is that the Arbitrator's decisions must be in accordance with the terms of the Agreement and cannot be patently illegal or against the most basic notions of justice. The court clarified that while dealing with a Petition under section 34 of the Arbitration Act, the Court can set aside the award but cannot modify the award by substituting it.

JUDGEMENT

GAURI GODSE, J.

FACTUAL ASPECTS

1. This Appeal is under section 37 of The Arbitration and Conciliation Act, 1996 (“The Arbitration Act”). This Appeal takes exception to the Judgment and Order dated 8th March 2006 passed by the learned Single Judge dismissing Arbitration Petition No. 18 of 2003 filed by the present Appellant under Section 34 of the Arbitration Act to set aside an award dated 11th September 2002 made by a sole Arbitrator. That award was made in arbitration proceedings between Oil and Natural Gas Corporation (“the Respondent”), being the claimant and C.R. Menon (“the Appellant”), the sole Proprietor of Suprabha Industries, being the opponent. Thereafter, an additional Award dated 9th September 2005 was declared as per the Order dated 8th February 2005 passed by the learned Single Judge in exercise of the powers under sub-section 4 of section 34 of the Arbitration Act, during the pendency of the Arbitration Petition No. 18 of 2003. The additional Award was also challenged in the said Arbitration Petition No. 18 of 2003.

2. The Appellant and the Respondent entered a contract for stevedoring services on the terms and conditions recorded in the Agreement dated 13th November 1992 (“the Agreement”). As per the Agreement, the Appellant was required to employ 52 workers of the former contractor viz. M/s. Kanji & Jadhavji & Co. It is the case of the Appellant that as per the contract, 52 workers were employed and that the Appellant carried out the contract with those 52 workers satisfactorily and efficiently. However, after a period of about two months, the Respondent directed the Appellant to employ an additional work force of 44 workers. Considering the nature of the contract, the Appellant had no option but to employ these additional 44 workers, which resulted in heavy losses to the Appellant. Hence, the Appellant by letter dated 8th April 1993, made a grievance with the Respondent that he was unable to bear the expenses of the additional work force of 44 workers. The Appellant, thus, by his letter dated 10th May 1993 requested the Respondent to increase the rate of the contract as it was not feasible for the Appellant to accommodate the additional 44 workers.

3. It is the case of the Appellant that though initially the Respondent agreed to consider an increase in the rate provided in the contract on account of the additional work force required to be employed by the Appellant, there was no written confirmation. In fact, thereafter, the Respondent by its letter dated 24th May 1993, threatened to terminate the contract by relying upon clauses 9, 12 and 15 of the Agreement. The Appellant by notice dated 7th June 1993 terminated the contract by giving 30 days’ notice. It is further the case of the Appellant that by a letter dated 10th June 1993, it was recorded that in the meeting held with the Respondent on 8th June 1993, the Respondent had agreed that additional 44 workers would be taken back and employed at some different place. However, the Respondent refused to keep its promise.

4. By a letter dated 31st March 1994 issued by the Appellant’s Advocate, the Respondent was called upon to refer the disputes to arbitration in accordance with the Agreement. The Respondent however refused to refer the disputes to arbitration by contending that there was no arbitrable dispute. After repeated requests by the Appellant, the Respondent appointed an in-house committee to look into the grievances of the Appellant. On 14th March 1996, the in-house committee after considering the claim of the Appellant, recommended release of an amount of Rs. 9,17,076.58. This amount was paid by the Respondent to the Appellant. Thereafter on 17th March 1999, the Respondent issued a letter to the Appellant claiming that the amount of Rs. 9,17,076.58 paid to the Appellant was in fact obtained by the Appellant in collusion with the in-house com