The court upheld the arbitrator's findings of breach of contract and justified rescission, while setting aside parts of the award lacking adequate reasoning.

JUDGMENT

( Delivered by the Hon’ble, the Chief Justice )

This dispute arises out of a works contract dated 29th July, 2000 between the Central government represented by the Chief Engineer Shillong Zone, Spread Eagle Falls (the respondent) and M/s N.J. Devani Builders (P) Ltd. (the appellant) valued at Rs.8,24,29,936.83/-. It contained an arbitration clause.

The contract was for construction of residential accommodations by the appellant for army personnel at Teliamura. The execution of the work was to commence on 9th October, 2000 and was to be done in two phases (Phase-I and Phase-II) which were to be completed by 8th January, 2002 and 8th April, 2003, respectively.

No substantial work was ever commenced. There was a continuing dispute between the parties with regard to the soil conditions and drawings. It was never resolved.

By a notice dated 19th February, 2001, the appellant accused the respondents of abandoning the contract. On 8th March, 2001, the appellant rescinded the contract.

The matter went to arbitration.

On 3rd April, 2002, Major General (Retd) C T Chari was appointed as the sole arbitrator by the Shillong Bench of the Gauhati High Court. The learned arbitrator entered upon the reference on 2nd July, 2002, and invited the parties to file their claims and counter claims as would appear from the recital part of the award.

In the statement of claim, the appellant made eight claims which are as follows:

“Claim No.1: Rs.35,37,346:00. Whether the Claimant is entitled to any balance payment for work done and materials at site.

Claim No.2: Rs.9,30,386:00. Whether the Claimant is entitled to any payment for infrastructure established.

Claim No.3: Rs.3,00,000:00 Whether the Claimant is entitled to any payment for infrastructure in the form of labour camps, shuttering materials and miscellaneous items.

Claim No.4: Rs.4,00,000:00 Whether the Claimant is entitled to any payment for loss suffered on account of movement of transport, labour, staff and personnel to and from site.

Claim No.5: Rs.6,00,000:00 Whether the Claimant is entitled to any payment for loss suffered on account of idle labour, T&P, personnel, labour and other establishment at site.

Claim No.6.: Rs.60,00,000:00 Whether the Claimant is entitled to any payment for loss suffered on account of overhead charges, idle T&P, personnel, labour and other establishment at head office and profit.

Claim No.7: Whether the Claimant is entitled to any payment by way of interest.

Claim No.8: Rs.1,00,000:00 Whether the Claimant is entitled to cost of reference.”

As a counter blast, the respondents made a counter claim comprising of eight heads of claim as follows:

“CLAIM NO.1: EXTRA AMOUNT INCURRED IN COMPLETING THE BALANCE WORK THROUGH OTHER AGENCY AT THE RISK AND COST OF THE DEFAULTING CONTRACTOR FOR Rs.99,24,828.25/-.

CLAIM NO.2.: DAMAGES ON ACCOUNT OF DELAY IN UTILISATION OF ACCN FOR Rs.10 LAKHS

CLAIM NO.3: EXTRA AMOUNT SPENT ON ACCOUNT OF ESTABLISHMENT OF GE (I) PROJECT OFFICE AND A PORTION OF CHIEF ENGINEERS OFFICE FOR DELAY AT ELEVEN MONTHS AND SEVENTEEN DAYS FOR Rs.13,05,406/-.

CLAIM NO.4 DEPREGIATION OF GE’S OFFICE T & P FOR DELAYED PERIOD OF 11 MONTHS AND 17 DAYS FOR Rs.46,900/-.

CLAIM NO.5: INFLATED COST OF FUTURE PROJECTS FOR Rs.43,57,709/-.

CLAIM NO.6: COST OF PREPARATION OF FINAL BILL FOR Rs.50,000/-.

CLAIM No.7: COST OF REFERENCE FOR Rs.2,00,000/-.

CLAIM NO.8: SIMPLE INTEREST @ 18% PER ANNUM ON ALL ABOVE CLAIMS FROM THE DATE OF CANCELLATION TO THE DATE OF PHYSICAL PAYMENT.”

On 30th November, 2003, the learned arbitrator made and published his award.

The following award was made claim wise as follows:

“Claim No.1 - Rs.22,74,391.05/-

Claim No.2 - Rs.2,32,600/-

Claim No.3 - Nil

Claim No.4 - Nil

Claim No.5 - Rs.2,50,000/-

Claim No.6 - Rs.2,50,000/-

Claim No.7 - from the date of accrual of the cause of action till the date of the award i.e. 8th March, 2003 (8th March, 2001) to 30th November, 2003 till the date of payment if not made within 90 days from the date of the award, 12% per annum. If made wi