( 1 ) THIS is an appeal under Section 39 (1) (vi) of the Arbitration Act, 1940, preferred by M/s. Dilip Construction Co. from an order of the District Judge, Durg at Rajnandgaon, setting aside an award of the umpire in its favour, directing the payment of a sum of Rs. 8,65,000/- by the Hindustan Steel Ltd.

( 2 ) THE material facts, shortly stated, are these. By a contract dated 26th February, 1960, the appellant was employed by the respondent for winning and raising 45,00,000 Cft. of BF grade lime-stone ore from its Nandini Mines, and for transporting and loading the same into wagons at the railway siding of the mines. The deed of contract contained an arbitration clause, and it reads thus:

"61. If at any time any question, dispute or difference whatsoever shall arise between the Employer and the Contractor upon or in relation to or in connection with the contract either party forthwith give to the other notice in writing of the existence of such question, dispute or difference and the sama shall be referred to the arbitration of two persons, one to be nominated by the Employer and the other by the Contractor or failing agreement between these two to an Umpire appointed by them. Such submission shall be deemed to be a submission to arbitration within the meaning of the Indian Arbitration Act, 1940 or any statutory modification thereof. The award of the Arbitrators or Umpire shall be final and binding upon the parties upon every or any such reference, the costs of and incidental to the reference and to the award respectively shall, subject to the condition that the amount of such costs to be awarded to either party shall not, in respect of a monetary claim exceed the percentage set out below of any such award, irrespective of the actual fees, costs and expenses incurred by either party, be in the discretion of the arbitrators or umpire who shall determine the amount thereof, as between party and party and direct by whom and to whom and in what manner the same shall be borne and paid. Work under the contract shall, if reasonably possible, continue during the arbitration proceedings, and no payments due or payable by the Employer shall be withheld on account of such proceedings. Provided, that in matter of claims where the amount involved does not exceed Rs. 25,000/- the decision of the Engineer shall be final and binding on the contractor and such items shall not be open to arbitration. Except that no issues on which the final settlement is otherwise provided for in this contract shall be referred to Arbitration. "

( 3 ) THE period stipulated in the contract for the completion of the work was of 12 months w. e. f. 29th December, 1959, but that period was extended from time to time upto 15th December, 1961. During the period in question, the appellant could perform the contract to the extent of 31,52,132. 32 Cft. of lime stone, and received payments for the work done against running bills. Upon termination of the contract, the respondent prepared a final bill for Rupees 21,000/ -. This was not accepted by the appellant and it instead submitted its own bill dated 5th May, 1965, raising a demand for payment of Rs. 16,77,197. 28 P. That was followed by a letter dated 28th May, 1965, addressed by the appellant to the respondent, by which it requested a final settlement of accounts within 15 days. On 21st June, 1965, the appellant served the respondent with a lawyer's notice of submission to arbitration, stating that it had named one L. V. Parekh to be its arbitrator and requesting the respondent to nominate its arbitrator within 10 days, failing which the arbitrator named by it was to become the sole arbitrator and was to proceed with the reference. In response to the same, the respondent sent a reply dated 2nd July, 1965 to the following effect:

"in the contract under reference between your clients and the Hindustan steel Limited, Bhilai Plant, no dispute as contemplated under the arbitration agreement has arisen, which would e