Kuldip Chand Sood, J.—Works "Remodeling of Sewerage Scheme to Manali Town (SH: C/O Treatment work near libetian Colony for right bank" was awarded to M/s. Khub Chand Tyagi, Engineers and Contractors, hereinafter referred to as the Contractor, by the State of Himachal Pradesh through its Executive Engineer, Irrigation and Public Health Division, Kullu and a formal agreement was executed between the parties on the standard contract form in terms of Agreement No. 1 of 1992-93.

2. Disputes, having arisen between the parties, in respect of certain claims by the Contractor and counter claims by the State, were referred to the sole arbitration of the Superintending Engineer, Arbitration, Himachal Pradesh Public Works Department, Solan, by the Chief Engineer (North, I.P.H. Dharamshala) in March 6, 1997 in terms of clause 65 of the contract agreement. The works were to commence on June 22, 1994 and completed by December 21, 1994. However, the date for the completion of the works was extended by the Department till December 31, 1996.

3. The Arbitrator made his award on November 27, 1997 allowing some of the claims of the Contractor as also some of the counter claims made by the Department. Against the various claims made by the Contractor, the following award was made: Sr. No. Description of Claim Amount Demanded Amount Awarded Remarks 1 2 3 4 5

1. Work done. Rs. 3484986 modified to Rs. 43,04679 Rs. 28,69757

2. Expenditure on infrastructure Rs. 2,52,087.50

3. Cost of material at site. Rs. 68250 Modified to Rs. 1,83,434 Rs. 55,030

4. Cost of plant and machinery. Rs. 1,60,000 Rs. 64,000

5. Cost of shuttering and scaffolding. Rs. 2,56,000 Rs. 76,800

6. &7 Escalation of labour and material under. Clause 60 of agreement. Rs. 3250463 Rs. 9,67,450 Rs. 6,86,676

8. In built profit on balance work. Rs. 16,55766 Nil

9. Security deposit. Rs. 1,50,000 Rs. 1,00,000

10. Infructuous exp. incurred. Rs. 1,80,000 Nill

11. Transportation of Staff and labour. Rs. 20,000 Nil.

12. Amount withheld. Rs. 4,97,231 Nil.

13. Interest 24%. 12% per annum simple interest on Rs. 33,35,833 for two years till date of award.

14. Arbitration cost. Amount not specified Nil. Total: Rs. 38,52,263. Similarly, the following award was made in favour of the State: Sr. No. Description of Claim Amount Demanded Amount Awarded Remarks Counter-claims;

1. Cement. 38,390.00 Considered and allowed under claim 1 as per admissibility.

2. Electrical and Mech. Equipment. 15,03,415 Nil.

3. Recovery of material issued. 11,75,503 4,96,513

4. Hire charges of machinery (Truck). 12,181 12,181

5. Royality. 12,669 12669

6. Performance Bound. 4,73,625 25,000 to be remained for one year.

7. Rebate 0.1% 5062.00 5062.00

8. Sundries 1% On Rs. 50,62,228 50622.00 Nil. Total: Rs. 5,26,425.

4. The net amount payable to the contractor as awarded by the Arbitrator comes to rupees 33,35,838. Against the claimed interest of 24%, 12% simple interest was allowed to the Contractor. Dis-satisfied with the award of the Arbitrator, both the State and the Contractor filed objections under Section 34 of the Arbitration and Conciliation Act, 1996. Arbitration Act for short. The objections made by the Contractor are registered as O.M.R (M) No. 37 of 1998 and the objections laid by the State are registered as O.M.R (M) No. 46 of 1998. This judgment shall dispose of both these objections.

5. This is admitted position that unprecedented floods took place in the river Beas in September 1995 and all the executed and under execution works/structures, plant, machinery were washed away resulting in total destruction of the works completed or under completion by the Contractor. The objections of the State are: (a) That the costs of the works completed by the Contractor were rupees 31,70,041 plus rupees 21,34,605 on account of electrical and mechanical equipments but arbitrator allowed rupees 38,52,263 to the contractor alongwith interest at the rate of 12%. This amount allowed by the arbitrator was excessive taking into consideration the payments