A. N. Dikshita, J. - The instant appeal under Section 39 of the Arbitration Act, 1940 (hereinafter referred to as the Act) has been preferred against the judgment and order dated 20-7-1978 passed by Sri S. B. Misra, Civil Judge, Jhansi decreeing the plaintiff respondent's Suit No. 41 of 1977 titled as Janki Prasad Aggarwal v. Union of India.

Tenders for the sale of coal ash by, running contract basis by "Stock measurement" and on "lump sum" for the Jhansi "traffic area" for the period of one year were invited in the month of January 1978 by the Divisional Engineer, Central Railway, Jhansi (South). This period of one year was to be reckoned from the date of execution of the agreement. The tenderers to the offer were required to deposit Rs. 2500/- as security money along with the tenders which were to be opened on 29-1-1978.

Sri Janki Prasad Aggarwal plaintiff respondent (hereinafter referred to as the respondent) submitted his tender and his offer was accepted by Divisional Superintendent (W) on behalf of the President of India vide his letter dated 13-3-1975 and he was required to execute an agreement.

Parties entered into a contract and an agreement in writing was executed on 25-4-1975. The contract for the sale of the coal ash was to commence with effect from 1-5-1975 and was to end on 30-4-1976. It was agreed between the parties that the cost of the coal ash was payable at the rate of Rs. 7000/- per month by depositing the same with the railway authorities. The entire coal ash of the "traffic areas" was to be delivered to the respondent during the period of contract i.e. 12 months.

The agreement which was executed in writing between the parties provided an arbitration clause reproduced hereunder :-

"In the event of any question of difference or dispute whatsoever at any time arising under these conditions of contract or in any other manner whatsoever under this contract or in any way relating thereto or as to the true meaning or interpretation of any of the provisions thereof (except as to any matters the decision of which is specially provided for by these conditions) the same shall be referred to for decision to a Sole Arbitrator who shall be the-or a person appointed by him in that behalf and the decision of the arbitrator shall be final and binding on both the parties. It will be the sole discretion of the-as to who should be the arbitrator. It will be no objection that the arbitrator is a Government Servant and that he had to deal with the matters to which the contract relates or that in the course of his duties as a Government Servant he has expressed views on all or any of the matters in question dispute or difference.

In the event of the arbitrator appointed by the-denying, neglecting or refusing to act or resigning or being incapable or unable to act or any reason whatsoever, it shall be lawful for the-to appoint another arbitrator in place of the outgoing arbitrator in the manner aforesaid.

Upon every and any such reference, the assessment of the costs incidental to the reference and award respectively shall be in the discretion of the arbitrator. Work under the contract shall, if reasonably possible, continue during the arbitration proceedings, and no payment due to or payable by the Railway Administration shall be withheld on account of such proceedings.

The arbitrator may from time to time with the consent of the parties to the contract enlarge the time for making the award.

Subject as aforesaid the Indian Arbitration Act, 1940 and the Rules thereunder and any statutory modification thereof for the time being in force shall be deemed to apply to the arbitration proceedings under this clause."

The respondent started performing the contract but with the passage of time disputes and differences arose between the parties with regard to the performance of the contract. Respondent protested that in spite of the deposit of the amount as per the terms and conditions of the agreement he was not allowed to lift