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Issues Involved:
1. Nature of the Contract 2. Validity of the Reference to Arbitration 3. Constitution of the Arbitral Tribunal 4. Accord and Satisfaction Detailed Analysis: I. Nature of the Contract: The primary issue was whether the contract was a lump sum contract prohibiting extra claims. The Petitioner argued that the contract was a lump sum contract, and extra claims were barred under Clauses 13.4 and 44.2. The Respondent contended that the contract allowed for variations and extra payments under Clauses 38, 39, 40, 42, and 44.3. - Legal Principles: The Arbitrator must adjudicate in accordance with the contract, and an award disregarding the contract is liable to be set aside. This principle is supported by Supreme Court decisions in cases like *Associated Engineering Co. v. Government of Andhra Pradesh* and *ONGC v. Saw Pipes*. - Contractual Provisions: Clause 13.4 stated that the lump sum bid price was fixed and not subject to adjustment. However, Clauses 38, 39, 40, 42, and 44.3 allowed for variations and extra payments. Clause 44.2 prohibited price increases due to compensation events, but Clause 44.3 allowed for price adjustments based on the Engineer's assessment. - Interpretation: The Court emphasized that contracts must be interpreted as a whole. The contract did not strictly prohibit extra payments, and the Engineer's role included valuing variations and compensation events. The Court rejected the Petitioner's argument that the contract was a strict lump sum contract. II. Validity of the Reference to Arbitration: The Petitioner argued that the reference to arbitration was premature as the Adjudicator had not rendered a decision within 28 days, and the Respondent should have sought a replacement. The Respondent contended that arbitration was invoked correctly after the Adjudicator failed to decide within the stipulated period. - Contractual Provisions: Clauses 24.1 and 25 outlined the procedure for disputes. A decision by the Engineer could be referred to the Adjudicator within 14 days, and the Adjudicator had to decide within 28 days. - Court's Findings: The Respondent referred the dispute to the Adjudicator within the required period, and the Adjudicator failed to decide within 28 days. Therefore, the Respondent was entitled to invoke arbitration. The Court upheld the arbitral Tribunal's view that the arbitration was validly invoked. III. Constitution of the Arbitral Tribunal: The Petitioner challenged the Tribunal's constitution, arguing that the Institution of Engineers erroneously appointed an Arbitrator and only the Chief Justice or a Judicial authority could decide jurisdictional issues. - Contractual Provisions: Sub-clause (5)(c) of Clause 25(3) allowed the Chairman of the Institution of Engineers to appoint an Arbitrator if a party failed to do so within 30 days. - Court's Findings: The Petitioner failed to appoint its Arbitrator, and the Institution of Engineers' appointment was valid. The Tribunal's jurisdictional decision was upheld, referencing *You One Engineering and Construction Co. Ltd. v. National Highways Authority of India*. IV. Accord and Satisfaction: The Petitioner argued that there was no arbitrable dispute due to accord and satisfaction, as the Respondent had waived extra claims in a letter dated 10th January 2005. The Respondent claimed the letter was written under duress. - Documentary Evidence: The Respondent's letter dated 10th January 2005 waived extra claims for delays not attributable to the Petitioner. Subsequent letters from the Respondent alleged coercion. - Court's Findings: The Respondent failed to provide oral evidence of coercion. The Tribunal's decision to not consider the coercion claim was found perverse. The Court held that the Respondent's waiver of claims was clear and the Tribunal's award was set aside. Conclusion: The Court quashed and set aside the arbitral award, finding that the contract allowed for extra payments, the arbitration was validly invoked, the Tribunal was correctly constituted, and the Respondent had waived its claims, making the award contrary to the express terms of the contract. The Arbitration Petitions were made absolute in terms of prayer Clause (a).
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