RAJIV SAHAI ENDLAW, J.

The Union of India (Railway Board) has preferred this petition under Section 34 of the Arbitration Act, 1996 for setting aside of the award No. ARB/AKG/RB/ML/GKP dated 20th December, 2004 of Shri A. K. Goel, Chief Materials Manager, Northern Railway, New Delhi acting as the sole arbitrator appointed under the terms of the agreement between the parties.

The undisputed facts are that the Railway Board placed a supply contract on the respondent for textile material. Out of the material supplied by the respondent under the said contract at several Railway Depots, one of depots rejected certain quantities of white cloth stating that the material was inferior in quality and withheld the payments therefor.

It was the claim of the respondent before the arbitrator that the goods were duly inspected by the technical team of DGS&D prior to clearance; that similar goods consigned to other depots of the railways had been accepted; that initially only a small quantity was rejected after technical inspection and the subsequent rejection of the larger quantity was mala fide; that Rs. 12,44,195/- of the respondent had been wrongly withheld inasmuch as, when the respondent approached to take the delivery of the rejected goods, it was found that the goods had been consumed by the consignee depot which had rejected the goods; that respondent had as a gesture of goodwill offered to replace the goods but there was no response from the railways; that on subsequent joint inspection, it was found that the rejected stores in than form were not available and only cut pieces and stitched cloth were shown and for which reason no inspection was possible; that the respondent had again as a gesture of goodwill offered a discount of 3% as a special case to settle the disputes. The respondent thus claimed Rs. 12,44,194/- being the agreed price of the rejected goods and interest till the date of claim at 16.5% per annum amounting to Rs. 8,52,103/- making the total claim of Rs. 21,46,298/-.

The petitioner/objector contested the claim. It was not disputed that the rejected cloth was not available in the than form and was available only in cut pieces or stitched form. It was contended that the goods being not as per the order, the price thereof was not payable.

The petitioner/objector also made a counter claim as under :

(i) Towards ground rent for storing the rejected goods : Rs. 7,355/- till 22nd August 2003 and of Rs. 5 per day till the lifting of the rejected goods;

(ii) Towards cutting and stitching charges : Rs. 2,11,445/-.

(iii) Towards testing charges : Rs. 21,263/-.

(iv) Towards incidental charges : Rs. 24,682/-.

Total : Rs. 2,64,745/- plus additional ground rent from 22nd August, 2003 onwards.

The arbitrator in his award has, inter alia, held that the difference between the ordered and the rejected goods was not such so as to change the nature of usability or to effect the strength or life thereof. The arbitrator further held that the rejection should have been before cutting and stitching of the cloth. The arbitrator accordingly held the respondent entitled to Rs. 12,44,195/- less 3% discount voluntarily offered by the respondent and further held that the petitioner/objector shall be free to use the material at its end. The arbitrator further held the respondent entitled to the interest at 6% per annum only from 45 days after the award.

The respondent did not prefer any objections to the award. The counsel for the petitioner/objector argued that the respondent having not supplied the goods as per the order, the award for the price thereof is contrary to law; that the discount of 3% is irrational and arbitrary and there is no explanation as to why the discount was not more; that though the arbitrator has in the award noticed the counter claim having been made by the petitioner/objector but no finding has been given thereon. It is urged that the award is thus liable to be set aside.

On perusal of the objections filed, I find