This original petition is filed under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside the award passed by the second respondent dated 14.06.2000 in Arbitration Case No.13 of 1998.

2. The factual matrix culminating into the present petition filed under Section 34 of the Arbitration and Conciliation Act, 1996, is as follows:

(a) The first respondent was appointed by the petitioner as a tenderer for supply of rice to various godowns in Tamil Nadu Civil Supplies Corporation Limited in the State of Tamil Nadu and the first respondent has agreed to supply 18503 Mts. of rice (14003 Mts. of boiled rice and 4500 Mts. of raw rice). An agreement was entered into on 20.07.1996 and 17. 10.1996 and the first respondent has supplied 18643 Mts. of rice as against the ordered quantity of 18503 metric tonnes and completed the supply as per the agreement. According to the petitioner Corporation, as per the conditions stipulated in the agreement, the first respondent has to supply gunnies with rice, but the gunnies supplied by the first respondent are not in accordance with the B-Twill specification. As per the terms and conditions of the agreement, apart from new bale of B-Twill gunnies, the tenderer was allowed to supply the stocks in once used new bale of gunnies. As per the Bureau of Indian Standard specification IS 2566/ 1984 B-Twill gunnies are of two types. The superior quality type is known as 2.25 1bs gunnies weighing 1020 grams for 100 Kg capacity and 845 grams for 75 Kg capacity. The next type is called 2 Ibs gunnies of B-Twill category for which no specification has been prescribed by the Bureau of Indian Standards. According to the petitioner Corporation, when the first respondent supplied rice to the petitioner from Andhra Pradesh, the gunnies available in the open market of Andhra Pradesh were B-Twill type of gunnies of 2 1bs quality. The supply of rice in the said gunnies by the first respondent was detected by the staff of the petitioner at the loading point itself. The rice packed in 2 1bs gunnies resulted in dropping/ spilling of rice during handling operations.

i (b) It is the case of the petitioner that the first respondent requested the officials to accept the gunnies and gave an undertaking in writing agreeing for imposition of gunny cut in order to avoid huge loss of transport charges, handling charges, demurrage and wharfage charges, etc. It is the further case of the petitioner that the first respondent has executed an undertaking on Rs.10/- Non-Judicial stamp paper, agreeing for imposition of gunny cut by the petitioner. It was based on the said undertaking, the petitioner Corporation has accepted the consignment with the said gunnies of inferior quality and subsequently made the gunny cut to the tune of Rs. 6,07,621.90, which was recovered. It is the case of the petitioner that the gunny cut was done in accordance with Clauses 19 and 11 of the tender conditions and agreement respectively. The first respondent, after receiving the bills, filed the above claim petition after lapse of two years.

3. Based on the dispute raised by the first respondent, the second respondent was appointed as a sole arbitrator, before whom the first respondent filed a claim, for which the petitioner filed counter and the first respondent filed reply, to which a rejoinder was also filed by the petitioner. After hearing the arguments on both sides, the second respondent, the sole Arbitrator has passed an award on 14.06.2000, stating that no gunny cut shall be made in respect of gunnies, viz., new bale, once used new bale, sound serviceable A-Twill or B-Twill 100 Kgs. or 75 Kgs. capacity supplied with rice on and upto 03.09.1996. Holding that there is no violation of tender or agreement conditions. the sole Arbitrator directed that out of the total amount of Rs.6,07,621.90, after retaining 25% amount of gunny cut in respect of gunnies supplied on and from 04.09.1996, remaining amount shall be paid to the first r