Hon’ble Ashwani Kumar Mishra, J.—Union of India through Executive Engineer, Lucknow Central Division-II, Central Public Works Department, Aliganj, Lucknow, has filed the present appeal under Section 37 (1)(b) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘Act’), challenging the judgment and order of the District Judge, Lucknow dated 29.1.2010, whereby the objection of the appellant against the award of the arbitrator dated 16.3.2006, filed under Section 34 of the Act, has been rejected.

2. Brief facts giving rise to present dispute are that appellant on 31.5.2001 invited item rate tenders from pre-qualified contractor for construction and electrical works of Regional Office Building for NABARD, Gomti Nagar, Lucknow. Nine contractors applied pursuant to it and five ultimately were shortlisted, including M/S J.S.M. Construction Co. through its proprietor Srikant Singh - respondent No. 3 (hereinafter referred to as ‘contractor’). The first call of the tender was invited on 15.1.2002 for the five shortlisted contractors but on account of various discrepancies, the same was rejected. Similarly, the second call of tenders invited on 10.4.2002 was also rejected. The third notice for call of tender dated 14.5.2002 was challenged by the respondent-contractor and the Writ Petition No. 3031 (M/B) of 2002 was allowed on 2.12.2002, quashing the notice dated 14.5.2002 and fresh notice for inviting tenders were issued fixing 25.1.2003. The respondent-contractor also submitted its bid, which was lowest and consequently, it was accepted after negotiations and got communicated vide letter dated 9.5.2003. An agreement No. 2/EE/LCD-II/2003-04 dated 9.5.2003 was drawn and signed by the appellant and respondent-contractor. The estimated cost of the project was quantified at Rs. 7,23,42,701 and the lowest tender of contractor, submitted and accepted, was to the tune of Rs. 6,75,51,617/-. The work was to start on 19.5.2003 and stipulated date of its completion was 18.2.2005 i.e. after a period of 21 months.

3. Tender of respondent-contractor had been submitted on the prescribed tender document/format which included price escalation as a part of the tender itself. The tender of contractor, accepted by appellant, has been brought on record as Annexure-1. The tender encloses performa of schedules, relevant portion whereof containing schedule ‘E’, clause 10 CC as filled by the contractor in the tender, and definition clause 2(xi), are reproduced below :

“Schedule ‘E’

Schedule of component of materials, labour etc. for escalation.

Clause 10 CC

Component of materials- ‘X’

Expressed as per cent of total value of works. ......75%

Component of labour- ‘Y’

Expressed as per cent of total value of works. ......25%

Component of P.O.L.- ‘Z’

Expressed as per cent of total value of work. .......NIL %

Definition: 2(xi)

Standard Schedule of Rates : D.S.R. 2002 with upto date correction slips”

4. From the aforesaid, it is clear that price escalation components of material, labour and P.O.L. (Petroleum Oil and Lubricant) were required to be filled as part of the bid itself in schedule ‘E’. As per clause 10 CC, percentages were specified as 75%, 25% and Nil respectively in the tender submitted by the contractor for working out price escalation. It appears that price escalation as per contract was calculated in accordance with the various components of work in schedule ‘E’ by resorting to method of calculation given in clause 10 CC. Seven quarterly escalation payment upto the month of February, 2005 amounting to Rs. 24,05,734 was paid to the contractor.

5. Respondent-contractor was not satisfied with the quantification of price escalation awarded to it and claimed higher price escalation. Representations were submitted by the respondent-contractor on 31.10.2004 and 17.11.2004. These representations were considered and rejected by the appellant on 7.12.2004 and the decision was communicated to the contractor on 8.12.2004. Being aggrieved