Rajagopalan, O.C.J.—Sri M. N. Varma (hereinafter referred to as the contractor) entered into a contract with the Government of India to construct huts in the Avadi camp for the use of the military authorities. It was what was known as a lump sum contract. The amount was over Rs. 20 lakhs. The works were completed in 1945. Disputes about the quantum still payable to the contractor were referred to arbitrators in accordance with clause 35 of the contract between the contractor and the Government. Since the two arbitrators differed they referred the questions at issue between the parties to an umpire. The award of the umpire Sri C. G. Modi, dated 29th July, 1953, ran:

“The Union of India, the opponents, do pay to the claimant Shri Mangaldas N. Varma the sum of Rs. 6,05,000 (rupees six lakhs and five thousand only) in respect of the claim. I do further award that the opponents do pay to the claimant Rs. 20,000 (rupees twenty thousands only) for costs of this reference.”

Though the arbitration proceedings were at Bombay, Avadi, it should be remembered, ay within the territorial jurisdiction of the District Court of Chingleput. The contractor preferred O.P. No. 38 of 1953 to the District Judge of Chingleput to file the award and pass a decree in terms thereof. The Government in its turn filed O.P. No. 48 of 1953 to set aside the award of the umpire. The learned District Judge allowed O.P. No. 38 of 1953 and dismissed O.P. No. 48 of 1953. Against these decisions C.M.A. Nos. 275 of 1955 and 76 of 1955 respectively were preferred by the Government.

To appreciate the scope of the contentions of Mr. Rege, the learned counsel for the Government appellant, what preceded the umpire’s award has to be set out. These facts themselves were never in dispute. The arbitration clause in the contract between the contractor and the Government provided for the settlement of disputes by the Major-General (Administration) as arbitrator. It was common ground that that office was abolished and it ceased to exist even by August, 1948. In September, 1951, the contractor and the Government agreed to submit the disputes between them for settlement by the two arbitrators, Mr. S. K. Patil and Brigadier Halloway. The reference to arbitration specifically provided that if there was any difference between the arbitrators the disputes should be referred to an umpire (Exhibit A-2). Exhibit A-2 itself listed the points of difference between the Government and the contractor.

The arbitrators entered upon their duties. Exhibit B-15 was the detailed claim presented to the arbitrators by the contractor. The total of his claim against the Government was Rs. 57,78, 929-4-0. The heads of claims were marked A to E. Of these item A was a claim for Rs. 98,211-7-0 which the contractor claimed was the balance due to him under the contract itself for the work done. Items B-1 to B-12 represented claims for compensation. The total of the claims under items A and B-1 to B-12 came to Rs. 6,03,049-11-0. Item C was a claim for Rs. 3,52,855-9-9 which according to the contractor represented the interest on the said sum of Rs. 6,03,049-11-0 at 9 per cent. per annum from 1st April, 1945 till 30th September, 1951. The contractor claimed that further interest would be payable on the total sum awarded at 9 per cent. from 30th September, 1951, till the date of payment. Under item D the contractor claimed Rs. 72,366 as compensation, because he had to maintain as establishment to finalise his claims against the Government and to recover what was lawfully due to him. The basis of the claim under item E, Rs. 47,49,658 was that if the contractor had been paid what was lawfully due to him on the dates when they fell due, he would have been in a position to invest these sums in his contract business and he would have been able to earn considerable profits. Exhibit A-12 was only a summary of these claims. In Exhibit A-13 the details of the counter-claim made by the Government against the contractor amount

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