The main legal point established in the judgment is the importance of adhering to the terms and conditions of the contract agreement and the limitations of granting price escalation without an express clause.

B.D. Agarwal, J.

1. This appeal under Section 37 of the Arbitration and Conciliation Act, 1996 ('Arbitration Act') has been filed by the Union of India praying for setting aside the award dated 21.12.2005 passed by the learned sole arbitrator in Arbitration Case No. MS 3 of 2002 and also the judgment and order dated 24.11.2006 passed by the learned Additional District Magistrate (Judicial), Aizawl in Arbitration Case No. 1 of 2006 upholding the award.

2. I have heard Mr. S.N. Meitei, learned central government counsel for the appellant. The sole respondent/contractor was represented by Mr. A.R. Malhotra, learned Counsel. I have also perused the impugned award, contract agreement and evidence of the parties.

3. The impugned award has been assailed basically on the ground that the same is in contravention of Section 28 of the Arbitration Act. It was also contended on behalf of the appellant that although there was no clause of price escalation the learned arbitrator has given the award in favour of the respondent due to misconceived and wrong interpretation of Clause 10(a) of the contract agreement. Learned CGC also submitted that the impugned award has been passed on the ground of equity and fair play which cannot be a criteria for awarding price escalation of consumable goods sans any specific clause in this regard in the contract agreement. Learned CGC further submitted that although the request of the contractor/respondent to revise the transportation rates due to hike in the rates of petroleum products was rejected by the department on 21.06.2000, the respondent instead of invoking Clause 26 of the IAFW 2320 to rescind the contract agreement continued to complete the work and despite receiving final payment without protest, the learned arbitrator has acceded to the claim of the contractor to grant price escalation of petrol/diesel. In addition to these grounds the impugned award has also been assailed on a technical infirmity relating to appointment of arbitrator. According to learned CGC as per Clause 36 of the General Conditions (IAFW- 2320) the arbitrator should have been an engineering officer whereas in the present case the Hon'ble Chief Justice, Gauhati High Court appointed a retired High Court Judge to resolve the dispute by way of arbitration, which is contrary to the contract agreement and as such the entire award is null and void.

4. On the other hand, Mr. Malhotra, learned Counsel for the sole respondent, submitted that since there was no clause in the agreement disentitling the contractor to claim the benefit of price escalation, the learned arbitrator has rightly given the benefit within the meaning of Clause 10(a) of the agreement. In support of this submission, the learned Counsel relied upon two decisions of the Supreme Court rendered in the case of Tarapore & Co. v. State of M.P. [1994] 1 SCR 1012 and Bharat Coking Coal Ltd. v. L.K. Ahuja (2004) 5 SCC 109. Learned Counsel further contended that similar benefit of price escalation of petroleum products was given to another firm in identical situation and as such the learned arbitrator has rightly passed the impugned award giving the same benefit to the present respondent.

5. Before addressing the legal and factual questions raised by the learned Counsel for the parties it is necessary to recapitulate the brief facts of the case leading to reference for arbitration and culminating in filing of this appeal.

6. The respondent herein was awarded contract works for handing and conveyance of cement, bitumen and steel from Guwahati to different work sites under Project Pushpak of Border Road Task Force. The work orders were issued in pursuance to a contract agreement that was executed by the parties on 13.08.1999. In addition to the terms and conditions of the contract agreement, the general conditions of contract based on IAFW-2320 were also made a part of that contract agreement. Within two months of the issuance of the work orders there was upward revision of