Judgment Untwalia, J. 1. This is an appeal under Sec.39 of the Arbitration Act, 1940 (hereinafter referred to as the Act) from the order dated the 6th of January, 1959, of the Subordinate Judge of Dhanbad, modifying the award after setting aside In part. 2. Messrs Garmon Dunkerley and Co. Ltd. the appellant, entered into a contract with the Central Public Works Department of the Union of India, the respondent, in 1948 for the supply of Stone ballast and chips at Sindri for use in the construction of the fertilizer factory. According to the terms of the agreement, the appellant was to complete the supply within 6 months from the aate of its commencement, i.e., 15th of May, 1948. The respondents case is that it (appellant) failed to supply within the period stipulated in the agreement; there were series of correspondence which would show that, in spite of the respondents repeated requests, the appellant made no attempt to remove the inconvenience caused to the Government due to the non-supply of the much needed materials and, ultimately, in accordance with Clause 2 of the agreement, the respondent served a notice on the appellant claiming penalty or liquidated damages to the extent of 10 per cent, of the contract amount, which amount of penalty came to Rs. 22367A. The respondents further case is that it had to undergo extra expenses to the extent of Rs. 2408/12/- in obtaining supply of materials from some other sources on account of the appellants failure to supply the same. The appellant refuted the claim of the respondent and asserted that it was not liable to pay any penalty under Clause Z of the contract or damages under Clause 3. Various (littering amounts under the two heads had been claimed by the respondent from the appellant and, a dispute having arisen in that regard between the parties, the matter was referred to arbitration as per Clause 14 of the agreement which provided for the reference of, inter alia, such dispute to the sole arbitration of the Chief Engineer/Additional Chief Engineer Central Public Works Department, and if the Chief Engineer/Additional Chief Engineer, is unable or unwilling to act to the sole arbitration of some other person appointed by the Chief Engineer/Aaflitional Chief Engineer willing to act as such arbitrator/ By letter dated the 17th of April, 1956 (Ext. 2) the Additional Chief Engineer appointed Mr. 2) the Additional Chief Engineer appointed Mr. N. R. Ramchandan-l, Superintending Engineer, Calcutta Central Circle II, Calcutta, as an arbitrator to decide the dispute whether levy of penalty in this case is justified or not under the terms of the agreement and give his award. In the first instance, in this letter of reference, it was stipulated, "The quantum of penalty is not to be decided." But later on the appellant wanted the question of quantum also to be referred to the said arbitrator, and, accordingly, the Additional Chief Engineer issued another letter dated the 23rd of June, 1956 (Ext. 4/h) asking the arbitrator to determine the quantum of compensation also. On such reference being made, the parties filed their written statements before the said arbitrator. As stateabove, the respondent claimed two amounts, namely Rupees 22367/- by way of penalty or liquidated damages to the extent of 10 per cent, under Clause 2 of the agreement and Rs. 2408/12/- as compensation under Clause 3. 3. The arbitrator made the award dated the 20th of July, 1957 (Ext. 3) in the following terms:- - "The contractor did not make the supply as per his agreement, and therefore made himself liable to penalty as per Clause 2 of the agreement. There has however been extraordinary delay on the part of the Central P. V. D. in having dealt with the matter of serving notice with regard to imposition of penalty. For almost 2 years there appears no correspondence and record. Therefore the quantum of penalty as 10 per cent, is not justified. There should be only a nominal compensation of one per cent., i.e., Rs. 2236/70 nP. Regarding compensation as per Clause 3 of the agreement the Central P. W. D. have been making varying demands at one time Rupees 11,308/127- which is corrected to Rs. 1308/12/- and finally corrected to Rs. 2408/12. Due to this and due to the fact that no proper "notice was served on the contractor apprising them of the fact that the Centra! P. W. D. was taking such action against them, 1 consider no compensation due to Government front the contractor." On the award being filed in court under Sec.14 of the Act the respondent filed its objection for the setting aside of the award on various grounds or for its modification or correction. P. W. D. was taking such action against them, 1 consider no compensation due to Government front the contractor." On the award being filed in court under Sec.14 of the Act the respondent filed its objection for the setting aside of the award on various grounds or for its modification or correction. The appellant filed rejoinder and asserted that the award is final and binding on the parties as it has been passed after considering all the facts, evidence, adduced and produced before the Arbitrator. The learned Subordinate Judge after deciding certain points of objection against the respondent, has come to hold that the award of the arbitrator in regard-to the matter of compensation under Clause 3 of the contract cannot disturbed but as regards the portion of the award award ing only 1 per cent. Penalty under Clause 2 of the as reement he has held- "Manifestly there is an error apparent on the face of the award and the award reducing the claim to 1 per cent, under Clause 2 of the agreement cannot (be) sustain (ed)." further after setting aside that portion of the award, he has modified it and has held that the respondent is entitled to get damages at 10 per cent, as claimed, that is to say the sum of Rs. 223677-. Hence this appeal by the appellant company. 4. It was argued by the learned Advocate-General on behalf of the appellant that the arbitrators award awarding a penalty of 1 per cent., only under Clause 2 of the agreement is not liable to be set aside because there is no error of law apparent on the face of the award in this regard; assuming that there is one, it is an error in the decision of a disputed question of law which was specifically referred for the decision of the arbitrator and hence it is binding on the parties. He further submitted that, in case that portion of the award is set aside, the court is not entitled and justified in modifying the award under Sec.15 of the Act and to determine the quantum of damages at 10 per cent, under Clause 2 of the agreement. He further submitted that the proper course was to remit the award under Section 16 of the Act. He further submitted that the proper course was to remit the award under Section 16 of the Act. The learned Government pleader appearing on behalf of the respondent supported the decision of the court below modifying the award and further submitted that in case this Court be inclined to direct the award to be remitted under Sec.16 of the Act, the whole of the award should be set aside and remitted back, that is to say, the decision of the arbitrator in regard to the matter of compensation under Clause 3 of the agreement also should be set aside and the entire matter be referred back to him for a fresh award. I may state here that the decision of the learned Subordinate Judge on the other questions of fact or law was not attacked by either party. Clauses 2 and 3 of the agreement read as follows: "2. The contractor is to deliver the materials on or before the dates mentioned in the tender, failing which he shall be subject to pay or allow one per cent, on the total amount of the contract for every day not exceeding ten days that he shall exceed his time, as and for liquidated damages. 3. In every case in which the "Payment or allowance mentioned in Clause 2 shall have been incurred for ten consecutive days, the Divisional Officer shall have power either to annul the contract altogether, or to have the supply completed without further notice at the Contractors risk and expense, as he may deem best suited to the interests of Government and the contractor shall have no claim to compensation for any loss that he may incur in any way". The two letters of reference (Exts. 2 and 4/h) dated respectively the 17th of April 1956 and the 23rd of June, 1956, do not in the least suggest or Indicate that any specific question of law was referred to the arbitrator. The reference was for decision of the matter as to the levy of penalty (meaning penalty under Clause 2 and compensation under Clause 3 of the agreement as held by the learned Subordinate Judge) and the quantum. The reference was for decision of the matter as to the levy of penalty (meaning penalty under Clause 2 and compensation under Clause 3 of the agreement as held by the learned Subordinate Judge) and the quantum. That is to say, the arbitrator was asked to decide as to whether the contractor, namely, the appellant company was on the facts and in the circumstances of the case liable to pay any damages or compensation under "Clause 2 or 3 of the agreement, if so, to what extent. The arbitrator in clear terms, has found that the contractor did not make the supply as per his agreement and therefore made himself liable to penalty under Clause 2 of the agreement, but has awarded a nominal compensation of 1 per cent, only on the ground that for almost two years there appeared to be no correspondence on record and there has been extraordinary delay on the part of the Central Public Works Department in giving notice with regard to the imposition of penalty. The reason given by the arbitrator for fixing the low amount of compensation under Clause 2 of the agreement in the eye of law is obviously bad and, therefore this portion of the award cannot stand as the error of law is apparent on its face. The factors to be taken into consideration for determining the quantum of compensation ought to have been those which occurred or appeared from the correspondence between the parties at the relevant time of the execution ot the contract or shortly thereafter. Taking into consideration those factors, the arbitrator was first to determine as to whether the contractor had made himself liable for penalty under Clause 2 of the agreement and if so, on the tacts and in the circumstances of the case what should be the quantum of penalty. But it was quite wrong and erroneous in law for the arbitrator to say that, merely because of the delay in the subsequent correspondence and in serving or notice, the quantum of penalty should be I per cent only. In my opinion, the reason given by the arbitrator in support of his decision fixing a nominal compensation at 1 per cent, under Clause 2 of the agreement is irrelevent and bad in the eye of law. In my opinion, the reason given by the arbitrator in support of his decision fixing a nominal compensation at 1 per cent, under Clause 2 of the agreement is irrelevent and bad in the eye of law. The view 1 have expressed is supported by the decision of the Supreme Court in Gobardnan Das V/s. Lachmi Ram, AIR 1954 SC 689 . In that case the award showed that both the respondents were found liable upon the bahi khata account but the exact amount was not determined and though Rs. 3500.00 out of a larger sum found due was awarded against respondent No. 1 the liability of respondent No. 2 was remitted in toto. Ghulam Hasan J. delivering the judgment of the Court stated: "It is obvious that the arbitrators in not finding a specific sum to be due from respondents 1 and 2 to the appellant failed to decide the dispute as contemplated by the agreement to refer to arbitration. On the other hand they went out of their way to declare that whatever amount in addition to Rs. 3500.00 was found due from respondent 1 upon the bahi kahta account was remitted having regard to his labour and poverty and the whole unspecified amount found due against respondent 2 upon the same bahi khata account was remitted in full in view of his labour and poverty". It was further observed "We are in agreement with the High Court that the agreement for reference to arbitration should be liberally construed by the court so as to lean in favour of upholding the award given by arbitrators, but that is no ground for sustaining the award where the arbitrators have clearly misdirected themselves and have exceeded the scope of their authority." 5. In the instant case, there are two parts of the award one relating to the liability and quantum of compensation under Clause 2 of the agreement and the other holding that the appellant is not liable to pay any compensation under Clause 3 of the contract. In the instant case, there are two parts of the award one relating to the liability and quantum of compensation under Clause 2 of the agreement and the other holding that the appellant is not liable to pay any compensation under Clause 3 of the contract. While dealing with the first part of the award, I may make it clear that the decision of the arbitrator that the appellant is liable to pay penalty under Clause 2 of the agreement was not attacked before us by advancing any argument on behalf of the appellant nor was it attacked in the court below by filing any objection to the award. Hence that portion of the first part of the award remains. But the portion fixing the quantum of compensation at 1 per cent, under Clause 2 of the agreement has been rightly set aside by the court below. 1 am, however, of the opinion that the court had no power to modify the award under Sec.15 of the Act which provides: 15. The Court may by order modify or correct an award (a) where it appears that a part of the award is upon a matter not referred to arbitration and such part can be separated from the other part and does not affect the decision on the matter referred or (b) where the award is imperfect in form or contains any obvious error which can be amended without affecting such decision or (c) where the award contains a clerical mistake or an error arising from an accidental slip or omission." The learned Government pleader endeavoured to support the modification of the award under Clause (a) of Sec.15 as he conceded, and rightly that Clause s (b) and (c) would not cover the modification in question. The portion of the award determining the quantum of compensation payable under Clause 2 of the agreement is not upon a matter not referred to arbitration. Obviously this matter was referred to arbitration but this portion of the award as I have said above, is bad because of the error of law apparent on its face. The portion of the award determining the quantum of compensation payable under Clause 2 of the agreement is not upon a matter not referred to arbitration. Obviously this matter was referred to arbitration but this portion of the award as I have said above, is bad because of the error of law apparent on its face. This is, therefore, a case which is covered by Clause (c) of Sub-section (1) of Sec.16 of the Act which reads thus- "16(1) The Court may from time to time remit the award or any matter referred to arbitration to the arbitrators or umpire for reconsideration upon such terms as it thinks fit(c) where an objection to the legality of the award is apparent upon the face of it." In my judgment, therefore, the matter in regard to the quantum of compensation under Clause 2 of the agreement has got to be remitted to the arbitrator for his fresh decision. I am not prepared to accept the argument of the learned Government pleader that, for the matter of that whole of the award has to be set aside and remitted to the arbitrator for a fresh decision on all the matters referred to arbitration. It could not be shown to us by advancing any valid or substantial argument that the second part of the award holding that the appellant is not liable to pay any compensation under Clause 3 of the agreement is bad or fit to be set aside, I may also state that no cross objection has been filed by the Union of India against the decision or the learned Subordinate Judge in that respect. I may repeat that the whole of the argument of the learned Government pleader in this regard has been that, if the modification of the award as made by the learned Subordinate Judge is not sustained and the matter is remitted back to ths arbitrator for a fresh decision, the award cannot be and should not be set aside in part and remitted as such but ought to be set aside in whole and remitted for a fresh decision of the arbitrator on all the matters referred to arbitration. I have no hesitation in rejecting this argument. I have no hesitation in rejecting this argument. 6 In the result, the appeal is allowed in part to the extent indicated above and the court below is directed to refer the matter of quantum of compensation payable under Clause 2 of the agreement to the arbitrator for a fresh decision of that matter and for the submission of his decision to that court within a time to be fixed by it in accordance with the provisions of Sub-section (2) of Sec.16 of the Act. I may make it clear that the matter has to be remitted back for fresh decision to the same arbitrator, namely, Mr. N. K. Ramchandani if he is available. In case he neglects or refuses to act or is incapale of acting due to one reason or the other, the parties may take steps for appointment of a new arbitrator in accordance with the provisions made in Clause 14 of the agreement or under Section 8 of the Act. The parties are to bear their own costs of the appeal in this Court. Ramaswami, J. 7 I agree.