The court set aside the arbitral award due to the arbitrator's arbitrary findings regarding contract termination and lack of evidence supporting claims, establishing grounds for patent illegality under the Arbitration Act.

JUDGMENT :

(Anubha Rawat Choudhary, J.)

This appeal has been filed challenging the order dated 17.03.2020 passed by the learned District Judge I–cum-Commercial Court, East Singhbhum, Jamshedpur in Arbitration Case No. 12 of 2019. By the impugned judgment, the petition filed by the appellant (hereinafter referred to as the Railways) for setting aside the arbitral award passed in favour of the respondent (hereinafter referred to as the claimant) has been dismissed. The arbitral award was signed on 08.05.2018.

2. The matter was referred to the sole arbitrator vide order dated 10.03.2016 passed by this Court in Arbitration Application No.11 of 2015 under section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act of 1996).

3. The claimant is a contractor, inter alia, engaged in performing the works contract for planning and engineering and provides in house consultancy services, Rail electrical work, railway overhead electrification work and designing. The Railways published a “Notice Inviting Tender” on 06.06.2012 for a work named and styled as "Provision of OHE, RC, PSI, SCADA” to remove infringement for civil works (Ph-1) in connection with the third line between Sini-Adityapur under Chakradharpur, South Eastern Railway (Construction) Division. The claimant submitted his tender and was declared successful. The claimant was issued a letter of Acceptance on 28.08.2012. The claimant deposited a sum of Rs.2,16,240/- as initial security deposit vide TDR No. 110633 dated 17.07.2012 of Central Bank of India, Chaibasa Branch and further a sum of Rs.7,67,000/- as performance guarantee in the shape of B.G. No. 43/02 dated 13.09.2012 of Central Bank of India, Chaibasa Branch. After submission of the aforesaid bank guarantee, an agreement was executed between the claimant and the Railways on 18.04.2013 for carrying out the work mentioned above. The scope of work included the casting of the foundation, erection of poles for the provision of overhead electrification of railway lines, and connection of fixtures and wires for conducting electricity for the purpose of running the railway system. It was the specific case of the claimant that the dispute was only in connection with the work of over-head electrification awarded to the claimant vide letter of Acceptance dated 28.08.2012 and agreement dated 18.04.2013 and the entire contract was governed by the general terms of the contract of Railways. The work could not be completed within the stipulated time and the dispute arose between the parties. The Railways terminated the contract vide termination notice dated 22.12.2014.

4. It has been recorded in the award itself that the learned arbitrator entered into reference pursuant to the order passed by this Court in Arbitration Application No. 11 of 2015 under section 11(6) of the Act of 1996; upon entering into reference, notice was issued and the first date of arbitration was fixed on 27.08.2016 and the parties appeared on the said date and a proposal was made on behalf of the Railways to explore the possibilities of amicable settlement through mediation instead of proceeding with arbitration; the claimant accepted the proposal and with consent of the parties, the learned arbitrator directed the parties to exchange their respective statement of accounts before the learned arbitrator; the statement of account submitted by the claimant was accepted in part by the Railways and from a comparative analysis of the statement submitted by the claimant and the statement submitted by the Railways, it could be gathered that an amount of Rs. 17 Lakh (approximately) was admitted by the Railways. Since the entire claim of the claimant was not accepted, the dispute could not be resolved through mediation and the matter proceeded and the claimant filed a statement of claim on 26.04.2017 under different heads claiming a sum of