The main legal point established is that the interpretation of contract clauses must align with the express terms of the contract, and unreasonable interpretations can be set aside.

PRATHIBA M. SINGH, J.

1. Ircon International Limited (hereinafter ‘Petitioner’) was awarded a contract for the construction of 317 dwelling units for Married Accommodation Projects, Ministry of Defence at Old Cantonment (Works) on 17th February, 2005 to M/s Baba Builders (hereinafter ‘contractor’) which was the Claimant before the Arbitrator. The notice inviting tender (hereinafter ‘NIT’) for the said works was issued on 22nd November, 2004 in response to which the bid was awarded to the contractor which thereafter resulted in letter of intent (hereinafter ‘LOI’) being issued on 17th February, 2005. The period of completion of work was 18 months from the LOI i.e.16th August, 2006.

2. Within a few months, after the work was awarded i.e. on 24th August, 2005, notice was issued by Ircon to the contractor that the progress of the work was very slow. The said notice records that instead of 25% of work which ought to have been completed as per the milestones, less than 3% of the work was in fact executed. Accordingly, show cause notice was issued seeking a reply within 7 days as to why action ought not to be initiated under Clause 50 of the General Conditions of Contract (hereinafter ‘GCC’).

3. This letter was followed by letter dated 16th September, 2005 wherein it was recorded that no improvement was found on site and accordingly 48 hours notice was issued.

4. Finally on 21st September, 2005, a notice was issued “partly withdrawing the works”.

5. In September, 2005, the performance security was forfeited. In December, 2006, Ircon demanded a sum of Rs.248.54 lakhs as risk purchase cost. On 10th February, 2007, after adjusting a sum of Rs.47.22 lakhs the balance of Rs.201.3 lakhs was demanded. Time period for executing part of the contract which was remaining with the contractor was extended till 30th June, 2010. On 8th August, 2011, the arbitration was invoked by the contractor, who raised various claims and Ircon also raised counter claims.

6. The Sole Arbitrator published the award on 7th March, 2014. The following claims of the contractor were allowed:

(i) refund of 60% security deposit – para 9.2;

(ii) refund of performance bank guarantee which was invoked by Ircon by holding that the contract was not part terminated but was merely modified under Clause 55 of G.C.C.;

(iii) directed payment of final bills RA 26 and 27 which were withheld for risk and cost recovery on the ground that since the contract was merely modified, no risk purchase was involved;

(iv) interest was awarded at 12%;

(v) counter claims were rejected on the basis that no recovery in respect of work executed on the basis of risk and cost could be permitted as there was no termination of work.

7. Counsel for the Petitioner submitted that the Arbitrator has erred in holding that the present case involved modification of the work under Clause 55 and not part termination of the contract under Clause 50. According to counsel, the three notices that were issued by Ircon were clear and a reading of the same would show that, as per Clause 50, initially a 7 day notice was issued, thereafter a 48 hours notice and finally, part termination of the contract took place. He submits that the withdrawal of a large portion of works cannot be treated as modification. Accordingly, his submission was that the Arbitrator had interpreted the contract wrongly and hence the rule Noscitur a sociis applies. He relies on Hindustan Construction Co. Ltd. v. National Hydro Electric Power Corporation. C.S.(OS) 554-A/1997 decided on 11.02.2010. Counsel also submits that the Arbitrator has gone beyond what was claimed by the Claimant and on this proposition he relies on D.D.A. v. Krishna Construction Company. Steel Authority of India v. J.C. Budharaja, Government and Mining Contractor (1999) 8 SCC 122. According to counsel, the contractor had not sought a declaration that the termination was i