The main legal point established in the judgment is that a supplemental agreement modifying the original contract can lead to novation, disentitling a party to certain claims. The court also emphasized the importance of reserving the right to claim damages before executing a supplemental agreement.

V. Kameswar Rao, J.

1. The challenge in this petition is to the Award dated March 24, 2006, whereby the learned Arbitrator has dismissed the claims made by the petitioner herein.

Facts

2. On January 20, 1985 a notice inviting tender for the work of construction of Garrage Head Regulator and other appurtenant works for Tanakpur Hydroelectric Project situated in the state of Uttar Pradesh (now Uttranchal) was issued by the respondent corporation. The petitioner submitted its tender on April 22, 1985 which was accepted and a letter of intent (LOI) was issued on October 15, 1985 followed by letter of award dated December 26, 1985. A formal agreement was executed between the parties on February 05, 1986. The terms of contract stipulated that the petitioner was to commence the works within 30 days after issuance of letter of award. Any failure on the part of the petitioner would have also led to cancellation of project and forfeiture of money. Clause 13 of the Contract stipulated for grant of mobilization advance upto a maximum limit of 5% of the contract value, which was interest bearing recoverable advance. The Contract also provided for interest bearing recoverable advance upto maximum of 10% for construction plants and equipments.

3. The petitioner in total obtained an amount of Rs. 1,77,61,764/- from the respondent pursuant to this clause in the Contract.

4. It was the case of the petitioner before the learned Arbitrator that immediately after the issuance of letter of award, a site office was set up on November 15, 1985 and with a right earnest to commence the work mobilized its resources, machinery and plant from different work sites within and outside the State, major part of which came from its work of Hydroelectric Project, Salal, J&K.

5. The case of the petitioner was also that despite insisting upon the officer of the respondent of their obligation to make available site so as to enable it to set up crushing plant, offices, stores, mechanical work shop, labour huts, staff quarters etc., the respondent failed to provide the site for the purpose. Only a small fraction was provided. In the absence of the site and the respondent not getting clearance of various authorities, the work was seriously hampered and could be commenced only in late November, 1986 when an area of 96 hectares was handed over to the petitioner by the respondent.

6. It was its case that for the period during which the labour and machinery remained idle due to non-availability of site and also for the damages suffered by it, the petitioner raised disputes as per the terms of the agreement between the parties. A reference was made and the respondent appointed a learned Arbitrator, who was to make an award on the following issues:-

(i) Waiver of interest till November 15, 1986 on mobilization, machinery and equipment advance.

(ii) Idle charges of machinery and manpower from November 15, 1985 to November 15, 1986.

7. The first Arbitrator could not conclude the arbitration proceedings due to his untimely death. The vacancy was filled by a new Arbitrator, who made an award dated January 31, 1995 and the same was filed in this Court for making Rule of the Court.

8. It is noted that both the parties were aggrieved by the Award and filed their respective objections under Sections 30 & 33 of the Indian Arbitration Act, 1940. When the objections came up for hearing before the learned Single Judge on December 20, 2000, the learned Single judge after noting that both the parties are aggrieved by the Award and none of them has prayed for making the award Rule of the Court, was of the view that the best course was to set aside the award and to make appointment of another Arbitrator to resolve the disputes raised by the parties.

9. Mr. Justice, N.C. Kochhar (Retired) was appointed as a Sole Arbitrator, who entered reference.

10. When the proceedings were at the arguments stage, Justice Kochhar unfortunately expired, which resulted filing of an application under Section 1