The main legal point established in the judgment is the requirement for a valid contract, the bar of limitation, and the necessity for the arbitrator to consider preliminary objections before making an award.

M.L.Singhal, J.

1. This revision petition is directed against the order of learned District Judge, Chandigarh dated 3.2.2000, affirming that of Subordinate Judge 1st Class, Chandigarh dated 12.9.1992, whereby the latter had allowed the application of the Food Corporation of India (herein after to be referred as FCI) under Sections 14(2) read with Section 17 of the Arbitration Act and made award delivered in its favour by the arbitrator and against M/s Bodh Raj Daulat Ram and Ors. (herein after to be referred as "the firm") rule of the Court, except for the modification that where the latter had allowed interest at the rate of 18% per annum on the awarded amount from the date of filing of the application under Sections 14(2) read with Section 17 of the Arbitration Act, 1940 till the date of realisation of the decretal amount, learned District Judge brought down the rate of interest to 14% per annum.

2. FCI called tenders for the conversion of gram-whole lying at Dabwali into gram dal. The work for conversion of 600MT gram-whole at Ex. Dabwali and 553MT Ex-E1-lenabad at the rate of minus Rs. 12/- per quintal was awarded to the firm on the basis of two tenders submitted by them. The tenders after submission were converted into agreements bearing No. D.22(58)/Gramdal/APO/79-80 and D.22(58)/Gramdal/APO/79-80/Vol.II and their acceptance was conveyed to the firm vide telegram dated 31.12.1979/1.1.1980 and dated 2/4.1.1980 respectively.

3. As per the FCI, the firm committed default in fulfilling their contractual obligation. So, their contract was cancelled by the FCI at their risk and costs. The FCI suffered losses due to the breach of the contractual obligation by the firm. The matter was referred to arbitration as per the arbitration agreement between the parties. Sh. R.N. Misra, Additional Legal Adviser to the Government of India (Ministry of Law and Justice) New Delhi was appointed as sole arbitrator by the Managing Director, FCI vide letter dated 17.1.1985 under the terms and conditions agreed to by the parties with reference to the contracts mentioned above and the differences between them relating to the said tenders were referred to for arbitration. Arbitrator gave his awards on 25.9.1986. The firm was directed to pay a total sum of Rs. 4,42,752/- to the FCI subject to set off of Rs. 14,100/- if with-held by the FCI in connection with A/Ts in dispute. The claim of the FCI for interest at the rate of 18% from 2,1.1980 till payment was rejected. As regards the claim of the firm for refund of the earnest money under Clause 4 of the tender documents forming part of the contracts was rejected without prejudice to any rights and remedies of the FCI under the contract and the law. Arbitrator informed the FCI that the award had been made and signed by him on 25.9.1986. The FCI filed application under Section 14(2) read with Section 17 of the Arbitration Act. 1940 praying that the arbitrator be directed to file in Court his proceedings and the award and it (award) be made rule of the Court. In compliance with the order of the Court, Arbitration filed arbitration proceedings and the award in Court.

4. The firm filed objections under Sections 30 and 33 of the Arbitration Act and prayed for setting aside of the award and cancellation of the arbitration agreements. The firm raised the following objections to the award being made rule of the Court before the Court:

1. There was no valid contract between the parties and as such question of arbitration clause being operative between the parties does not arise. Therefore, the reference to the arbitrator and consequential award by him is null and void and non-est in the eye of law.

2. The condition precedent for the formation of contact of deposit of security by the objectors was not fulfilled. Therefore no agreement came into existence and as such question of breach of contract in the circumstances of the case does not arise. The only remedy in the circumstances of the case available