Anil K.Narendran, J.

The appellant is respondent in O.P.(Arb.)No.51 of 2005 on the file of the First Additional District Court, Ernakulam, an Original Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') seeking an order to set aside the award passed by the Arbitrator dated 23.11.2004. The Court below by order dated 31.1.2006 allowed the Original Petition, setting aside the award passed by the Arbitrator. Aggrieved by the said order, the appellant is before this Court in this appeal, under section 37(1)(b) of the Act.

2. We heard the arguments of the learned counsel for the appellant and also the learned counsel appearing for the respondent.

3. The appellant, the claimant before the Arbitrator and respondent before the court below, floated global tenders on 18.10.1999 for the work of Effluent Treatment Plants I and III. The respondent herein, the petitioner before the court below and respondent before the Arbitrator, submitted the tender on 3.12.99. There were three tenderers including the respondent. Highest bid was for 1,08,00,000/-; the second bid was for 75,30,000/-; and the third bid by the respondent was for 49,80,000/-. The bid submitted by the respondent being the lowest, the appellant sent a fax of acceptance on 5.5.2000 stating that they are pleased to award the work to the respondent at a lump sum value of 49,80,000/- inclusive of all taxes and dues, based on the lump sum price quoted in the bid.

The time for completion of the work was stipulated as 10 months from 5.5.2000 and the respondent was requested to call on the appellant for a kick off meeting on 12.5.2000 at 10.00 hours.

4. In continuation of the fax of acceptance dated 5.5.2000, the appellant sent a letter of acceptance to the respondent dated 18.5.2000, for the above mentioned work. However, on 20.5.2000, the respondent intimated the appellant that it will not be possible for them to take up the work due to their commitments to other works and requested the appellant to return the earnest money deposit. On receipt of that letter, the appellant sent a reply dated 30.5.2000, pointing out that, by the issuance of fax of acceptance on 5.5.2000 the contract is concluded. The appellant has also pointed out that, by letter dated 20.5.2000, the respondent has committed breach of the contract and as such, there is no question of returning the earnest money deposit and that, the appellant will be proceeding against them claiming compensation for the breach of contract.

5. By letter dated 6.8.2000, the appellant informed the respondent that, the work in question has been awarded to M/s.Shriram Engineering Construction Company Ltd, Chennai, for 74,00,000/- and that, the appellant sustained damages amounting to 26,46,975/- for rearranging the work, which has to be compensated by the respondent. The respondent sent a reply dated 26.8.2000, disputing and refuting the claim made by the appellant, pointing out that no formal agreement was executed for the work in question and they are entitled for interest on the earnest money deposit. Thereafter, the appellant sent a notice dated 7.10.02 informing that in case the respondent does not pay 26,46,975/- as demanded, they will be appointing an independent Arbitrator to resolve the dispute through arbitration. Then the respondent sent a reply disputing the existence of an arbitration agreement. The appellant in turn sent another letter dated 14.11.02 informing the respondent that, they have appointed a Retired District Judge as the Arbitrator to resolve the disputes and differences between the parties.

6. Before the Arbitrator, the appellant filed claim statement dated 18.12.2002 with supporting documents. The respondent entered appearance through lawyer and filed their objections. They raised a preliminary objection regarding maintainability of the arbitration proceedings, contending that, no contract was concluded between the parties. No formal agreement was