IMPORTANT POINT
The court established that an arbitral award can only be set aside in part if some claims are valid and arbitrable, and that claims arising from work not included in the original contract are not subject to arbitration under the Arbitration and Conciliation Act, 1996.

JUDGMENT :

Arun Bhansali, C.J.

1. This appeal is directed against the judgement dated 28.06.2023 passed by the Commercial Court, Lucknow whereby the petition filed by the respondents under Section 34 of the Arbitration and Conciliation Act, 1996 (for short the ‘Act, 1996’) has been allowed and the arbitral award dated 6.11.2020 has been set aside.

2. Tender offer of the appellants for the work of rebuilding of Bridge No. 70 at Km 34/13-14 between Lalgopalganj (LGO) and Bhadri (BHDR) Station on ARC Section under ADEM/PRG of Lucknow Divison was submitted in pursuance of the tender notice dated 21.12.2016, which was accepted by the competent authority at the offered rates. The total cost of assigned work was Rs.2,50,86,758.87P.

3. Pursuant to the said acceptance, Letter of Acceptance (LoA) dated 01.05.2017 was issued. Pursuant to the terms of the contract, earnest money deposited by the appellants with the tender documents was retained and balance security deposit was to be recovered from the progressive bills @ 10% till full security amount was recovered. A performance guarantee of Rs.12,54,340/- was required to be submitted, which was submitted in the shape of FDRs by the appellants. A formal agreement was entered into between the parties to which the general conditions of Railways contract (‘GCC’) were applicable. Under the agreement, the appellants were required to complete the work within eight months from the date of issue of LoA i.e. by 31.12.2017 in conformity with the approved drawing.

4. It was claimed by the appellants that it arranged the entire paraphernalia and infrastructure including labour, staff, tools and materials at the site to execute the awarded contract. However, the contract could not be carried out between the period 01.05.2017 to 31.12.2017 in terms of the agreement as the respondents failed to provide approved drawing to construct the bridge, though it was provided that the same would be supplied at the time of execution of the agreement. The contract period was extended without penalty from 01.01.2018 to 31.07.2018. However, even during the extended period the approved drawing was not supplied.

5. It is claimed that in June, 2018, the appellants were directed by the Senior Divisional Engineer-IV to perform epoxy grouting work on Bridges No. 4, 6, 8, 12, 110, 115, 119, 96, 151, 148, 146, 146A, 147, 144, 140, 120, 116, 105A, 105, 117, 104A, 104, 127, 123, 109 & 131A. It is further claimed that though the said work was not provided in the contract, keeping in view the long standing association of the appellants with the Railways and emergent and urgent nature of the work, the same was performed whereby the appellants expended about Rs.65 Lakhs. The said epoxy grouting work was approved and verified by the competent Railway Authorities. However, the payment was not made.

6. Since the approved drawing was not provided to the appellants within time to complete the work awarded to them under the contract and on account of non payment of their dues for epoxy grouting, the respondents were requested to appoint an Arbitrator under clause 64 of the GCC. However, when the Arbitrator was not appointed, the appellants approached the High Court, which appointed a sole Arbitrator by its order dated 06.01.2020.

7. The Arbitrator passed the arbitral award dated 06.11.2020 and awarded the following amounts along with 12% pendente lite interest :

8. Feeling aggrieved, the petition under Section 34 of the Act, 1996 was filed by the respondents.

9. After hearing the partie