JUDGMENT :

Jaspreet Singh, J.

1. The instant first appeal from order has been preferred under Section 37 of the Arbitration and Conciliation Act, 1996 challenging the judgment dated 6th of September, 2005 passed by the District Judge, Lucknow in Regular Suit No. 24 of 2003 whereby the petition under Section 34 of the Arbitration and Conciliation Act 1996 has been dismissed as a consequence the award passed by the Sole Arbitrator dated 03.05.2003 has been affirmed.

2. Briefly, the facts giving rise to the present appeal are that on 25.04.1991 an agreement was executed between the appellant U.P. State Food and Essential Commodities Corporation Ltd. (hereinafter referred to as a Corporation) and M/s. Astha Coal Trading (Private) Ltd. (hereinafter referred to as a Company).

3. The agreement in between the Corporation and the Company was for the purposes of the distribution and import of slack coal among the eligible consumers as per the direction of the Government of India/State Government. The Corporation was nominated by the State of U.P. for the import and distribution of slack coal for Uttar Pradesh and in accordance with the agreement, the Company was appointed as the handling agent.

4. In terms of the aforesaid agreement, the Company was required to insure the import and distribution of slack coal among the eligible consumer and all expenses in connection with the aforesaid import and distribution was to be borne by the Company. The Corporation was entitled to obtain commission/royalty @ 5% of the purchase price of the slack coal. The Company was required to provide a bank guarantee by way of security in favour of the Corporation for an amount equivalent to 5% of the purchase price of the coal to be imported in Uttar Pradesh at the time of obtaining the letter of allotment. For the purposes of facilitating the distribution of slack coal to the consumers the Company was required to make available the services of three centre dumps at Varanasi, Kanpur and Ghaziabad free of cost and without any financial responsibility for expenses connected with the running of the dumps/centres for the consumers of the Eastern, Central and Western part of the Uttar Pradesh.

5. The aforesaid agreement was to remain in-force initially for a period of four years and if the working of the agreement was to the satisfaction of the parties, then the same could be extended for subsequent years after increasing the commission/royalty from 5% to 6% as mutually agreed. This agreement also had an arbitration clause which is in the eye of the storm and as such for ready reference, the same is being reproduced herein after:

“15. In the event of any dispute or differences arising out of interpretation regarding any clause of this agreement, the matter will be referred for arbitration to the Managing Director of U.P. State Food &Essential Commodities Corporation whose decision in the matter be final and binding on both the parties.”

6. The controversy in between the parties commenced when in the year 1993 there were some changes in the policy enunciated by the Central Government. The result of which the import and distribution of slack coal through the Company was not feasible and there were various question marks which were raised on the State Government giving rise to opening of avenues for exploitation of consumers. The State Government thereafter took a decision not to avail the services of the handling agent as a result this decision was conveyed to the Corporation. In view thereof, the Corporation issued a letter dated 11.03.1993 terminating the contract between the parties.

7. The Company assailed the cancellation order dated 11.03.1993 before a Division Bench of this Court in Writ Petition No. NIL of 1993. The High Court by means of the order dated 19.04.1993 while allowing the writ petition of the Company set aside the order of cancellation dated 11.03.19