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2. We have heard Mr. C.K. Sharma Baruah, Advocate General, Arunachal Pradesh assisted by Mr. S. Shyam, Advocate for the appellant and Mr. P.C. Markanda and Mr. G.N. Sahewalla, Senior Advocates, assisted by Mr. Rajesh Markanda, Advocate for the respondent No. 1.

3. It would be essential to first lay the prefatory facts. Following a tender process initiated by the State of Arunachal Pradesh for awarding the works of installing six Micro Hydel Power Projects on turn key basis at different locations, the respondent No. 1 having been adjudged to be most suitable, was settled with the contracts therefor. In addition thereto, the respondent-Company was also awarded the construction works of a water supply scheme in Naharlagun Township in the State. This was in the year 1993. Disputes and differences having arisen between the parties out of the related contracts, the respondent-company approached this Court under Section 11(6) of the Act for appointment of an Arbitrator for resolution thereof. This Court after hearing the parties appointed the respondent No. 2 as the sole Arbitrator in all the cases. On such appointment, the Arbitrator embarked on the reference. Names and particulars of the Projects and Arbitration Proceedings for ready reference are extracted herein below.

  Sl.          No. NAME OF PROJECT                     ARBITRATION CASE NO.

1.     Water Supply Scheme of Naharlagun Township      2/20/99 of 2001
2.     Sipit Micro Hydel Project (2 × 1 MW)            21/97 of 2001
3.     Sidip Micro Hydel Project (3 × 1 MW)            4/22/99 of 2001
4.     Liromoba Micro Hydel Project (2 × 1 MW)         5/23/99 of 2001
5.     Mukto Micro Hydel Project (1 × 3 MW)            6/24/99 of 2001
6.     Kitpi Micro Hydel Project (3 × 1 MW)            7/25/99 of 2001
7.     Nuranang Micro Hydel Project (3 × 2 MW)         8/26/99 of 2001
 

4. In course of the Arbitral Proceedings on the prayer of the respondent-company in Arbitration Case No. 3/21/1999 of 2001 and 4/22/1999 of 2001 pertaining to Sipit Micro Hydel Project and Sidip Micro Hydel Project, the learned Arbitrator passed interim awards on 8.12.2001 awarding a sum of Rs. 2.10 crore and Rs. 3.5 crore respectively in favour of the Contractor, however, subject to the furnishing of Bank Guarantee of the like amounts and on the condition of completing and commissioning the Power Plants within the dates mentioned therein. Accordingly the Bank Guarantees having been furnished by the respondent-company, the State Government deposited the amounts of the interim award with the Arbitrator through a cheque dated 4.10.2002 and a demand draft dated 13.1.2003 both drawn in the name of the Arbitrator. The Bank Guarantees so furnished were initially for a period upto 31.3.2002 and extended thereafter till 28.2.2003.

12. Though in terms of the interim award dated 8.12.2001 payments were made, the respondent-company failed to live up to the promise and did not complete the work not to speak of commissioning the project. As the Bank Guarantees were scheduled to expire on 28.2.2003, left with no alternative, the State Government filed applications on 24.2.2003 before the learned Arbitrator-praying for invocation and/or extension of the validity thereof. Though in the interim award, the learned Arbitrator had granted leave to the State Government to approach the Arbitral Tribunal for recovery of the amount awarded in the event of the failure on the part of the respondent-company to complete the project within the date fixed, no order was passed on the applications dated 24.2.2003 as a result whereof, the Bank Guarantee lapsed on 28.2.2003. An total amount of Rs. 5.6 crore in all had been directed to be paid by the interim award for the two projects Sipit Micro Hydel Project and Sidip Micro Hydel Projects covered by Arbitration case Nos. 3/21/99 of 2001 and 4/22/1999 of 2001. Contending that the inaction on the part of the learned Arbitrator to pass an appropriate order on the applications dated 24.2.2003 amounted to deliberate omission on his part allowing the respondent-company to illegally and fraudulently misappropriate the awarded amount, the State Government also alleged lack of fairness on the part of the Arbitrator to its prejudice. In its counter, it further asserted that the learned Arbitrator admitted certain documents in spite of strong objections on its behalf in Arbitration Case No. 8/26/99 of 2001 pertaining to Naharlagun Micro Hydel Projects though the same were neither submitted in the proper format nor at the appropriate stage of the proceedings. The objections raised on behalf of the State were totally ignored to its detriment. It was further averred that, the receipt of the amount of the interim awards by way of: account payee cheque/demand draft in his name and the collection thereof by him through his account was also an index of undue association of the learned Arbitrator with the respondent-company. The State Government, therefore, alleged high degree of, bias against the Arbitrator in favour of the respondent-company. According to it, therefore, it was left with no other alternative but to file applications under Section 14(1)(a) of the Act for a declaration that the mandate of the respondent No. 2 to act as the sole Arbitrator had terminated in all the arbitration cases.