JUDGMENT S. Ravindra Bhat, J. 1. The petitioner challenges the correctness of an award of a sole arbitration dated 30th May, 2005 under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter the Act). 2. The brief facts of the case are that the petitioner entered into a contract with the respondent (hereinafter called DGS&D) for supply, erection and commissioning of 2X750 KVA DG sets and one 750 KVA transformer. These equipments were to be supplied, erected and commissioned in the premises of the Indian Navy at Port Blair. The value of the transformer was Rs. 3,70,000/- and its commissioning charges were Rs. 20,000/-. 3. It is undisputed that the original specification for the transformer was DY-11; it was, however, later changed to YD-11. This change led to considerable dispute. The petitioners contention was that the AT unit of the respondent had confirmed to the standards and specifications of YD-11, whereas the respondents on the other hand maintained that it was in fact DY-11. Learned Counsel for the petitioner further contends that only the name plate had been changed and a wrong name plate has been affixed on the equipment. 4. The petitioner sought a reference of the disputes and made claims to the extent of Rs. 10,76,693/- towards balance 10% payment of the supplies and erection made. In addition, the petitioner also claimed Rs. 3,42,520/- as well as interest on that amount from 15.11.1999 onwards. The respondent also filed counter claim. It sought for return of 90% value of the transformer i.e. Rs. 3,33,000/- (claim No. 2) and a sum of Rs. 7,49,500/- towards risk purchase losses and interest, for the acquisition of new transformer. 5. The arbitrator after considering the materials and contentions concluded that so far as the 2X750 KVA DG sets were concerned, the supply and erection had been done in accordance with the contract. He, however, held that since the final inspection disclosed that the transformer had not been taken over by the respondent, as the petitioner failed to supply it in terms of the order, there was breach of contract entitling the respondent to withhold a sum of Rs. 10,70,693/-. 6. The claim for other amounts by the petitioner were also turned down. The respondents counter claim Nos. 2 and 3 were allowed and the petitioner was saddled with the liabilities of Rs. 3,33,000/- with interest. 10,70,693/-. 6. The claim for other amounts by the petitioner were also turned down. The respondents counter claim Nos. 2 and 3 were allowed and the petitioner was saddled with the liabilities of Rs. 3,33,000/- with interest. The petitioner was, however, permitted to take back the transformer lying at Port Blair. 7. Mr. Relan, learned Counsel contends that the award discloses patent illegality on the face of the record. He relied upon a finding in the award and emphasized that as the final inspection had satisfactorily recorded commissioning of the DG sets and rest of the contract, the arbitrator could not, by any stretch of the imagination withhold or refuse the claim to the extent of Rs. 10,39,693/-, which the arbitrator himself had calculated. The petitioner particularly relies upon the initial portion of the award whereby the arbitrator recorded the admission by the respondent (during the course of hearing) that there was no dispute in respect of commissioning and final inspection of the DG sets and in fact deducted the 15% value towards the supply of the transformer being Rs. 37,000/- to arrive at the final figure of Rs. 10,39,693/-. 8. As far as the finding on the counter claim were concerned, learned Counsel relied upon various letters including C-7 dated 26.10.1995, C-8 dated 19.06.1994, C-12 dated 20.07.1998, to show that what was supplied was indeed in accordance with the specifications. He also relied upon the letter dated 23.05.1995 and 16.05.2001, internal correspondence of the respondent which placed here by the respondent along with their reply to submit that transformer supplied was as per the specifications. 9. Learned Counsel submitted that there are facial errors on the record which warrant interference of this Court under Section 34 of the Act. Learned Counsel relied upon the decision of the Supreme Court in OIL & Natural Gas Corporation Ltd. v. Saw Pipes Ltd. [2003]3SCR691 . Learned Counsel for the respondent justified the award and submitted that even though the arbitrator indicated admission in the initial portion while dealing with claim `A of the petitioner, yet in the conclusion he rightly held that the entire stores were not supplied in accordance with the specifications and had therefore not been taken over. He further submitted that the respondents acted within their rights under the contract to withheld 10% of the entire consideration payable to the petitioner. As regards the award of Rs. He further submitted that the respondents acted within their rights under the contract to withheld 10% of the entire consideration payable to the petitioner. As regards the award of Rs. 3,33,000/-, counsel submitted that it constituted merely a refund of 90% of consideration paid to the petitioner to which the respondent was legitimately entitled since transformer was rejected. 10. The total value of the contract in this case was Rs. 78,29,330/-. The major components were the two DG sets to be supplied by the petitioner (valued at Rs. 45,75,000), two alternators (Rs. 13,34,000) and in addition there were at least eighteen other items of which one 750 KV transformer cost Rs. 3,70,000/-. The arbitrator in this case, on the aspect of retention of 10% of the contract price concluded as follows: It is an admitted fact admitted by the respondent during the hearing s that there is no dispute in respect of the commissioning and final inspection of the DG set. The 10% balance price of the DG set comes at Rs. 10,76,693/-, 10% of the contract price and 100% of erection charges - 37,000.00 = Rs. 10,39,693.00 which is admittedly due. It is apparent from the pleadings/documents filed by the parties that the claimants failed to supply the stores in terms of the A/T. The claimants were asked by the respondents vide an A/L (C-61) dt. 20.7.98 for taking back the transformer but the claimants have not taken back the transformer hence is lying idle at the site. The 10% balance payment was to be made in terms of Clause 24(3) of the DGS&D - 74 wherein it has been mentioned that ...`Ten per cent the contract price of the plant plus the cost of erection if any, on final inspection and test, or alternatively at the contractors option the 100 per cent after erection on final inspection and test.. The submissions made by the respondents counsel in respect of the payment, was to be made to the claimants, have a force as the claimants failed to file any final inspection that transformer has not been rectified by the claimants. Apparently, the transformer had not been taken over by the respondents as the claimants failed to supply the stores in terms of the A/T hence have committed the breach of the contract, therefore, the claimants claim of Rs. 10,76,693.00 towards the 10% balance payment is rejected. 11. Apparently, the transformer had not been taken over by the respondents as the claimants failed to supply the stores in terms of the A/T hence have committed the breach of the contract, therefore, the claimants claim of Rs. 10,76,693.00 towards the 10% balance payment is rejected. 11. The relevant condition regarding retention of money can be inferred from para 19(i) which speaks as follows: 19. (i) As per Clause 24 of DGS&D-71 i.e. 90% against inspection note and bill of leading consignment note and balance 10% after erection commissioning and final inspection. 12. It is evident that the arbitrator recorded, during the course of proceedings that there was no dispute in respect of commissioning and final inspection of the DG sets. He further went on to hold that 10% of the balance price of the DG sets was Rs. 10,70,693/- of the contract. He deducted 10% of the balance value of the transformer, i.e. Rs. 37,000/-. Thereafter he held that Rs. 10,39,693/- was admittedly due to the claimant. However, in the ultimate paragraph while discussing these claims, the arbitrator concluded that the DG sets have been commissioned on 14.02.1995, as was evidenced by the final inspection but also reasoned that as the transformer had not been rectified by the claimants, it was disentitled to 10% of the balance payment. In the opinion of this Court, having regard to the total quantum of the contract which was almost Rs. 80,00,000/-, the withholding of amounts in excess of Rs. 10,00,000/- for a defective supply and erection of the transformer the total value of which itself Rs. 3,70,000/- was disproportionate and unjustified. The arbitrator could not reasonably have concluded that the entire supply was defective since the transformer did not accord to the contract, after holding that the rest of the supplies were in order, and even deducting 10% of the value of transformer i.e. Rs. 37,000/-. 13. This Court is also of the opinion that the contention of the respondents in these proceedings about the correctness of the award, are insupportable besides the facial errors noticed earlier. The arbitrator in the opinion of the Court did not consider the materials particularly C-4 (a), C-7, C-12 and the two letters pointed out to the Court during the course of hearing. All these has led to a situation where the petitioner/supplier, who had supplied an equipment worth Rs. 3,70,000/- and claimed Rs. The arbitrator in the opinion of the Court did not consider the materials particularly C-4 (a), C-7, C-12 and the two letters pointed out to the Court during the course of hearing. All these has led to a situation where the petitioner/supplier, who had supplied an equipment worth Rs. 3,70,000/- and claimed Rs. 20,000/- as commissioning charges (totaling Rs. 90,000/-) is now asked to forego Rs. 10,39,500/- as well as refund the sum of Rs. 3,33,000/-. The Court further is of the opinion that the award contains hardly any reasoning which would constitute reason under Section 31 of the Act. 14. For the foregoing reasons, the petition has to succeed. It is held that the arbitrator has committed a grave error of law and the award discloses no justifiable reasoning in support of the conclusions reached. Besides the arbitrator has rendered findings by over-looking many crucial documents relied upon by the petitioner. In these premises, the petition has to succeed. It is allowed accordingly. The impugned award dated 30th May, 2005 is hereby set aside. It is open to the parties to seek recourse to the arbitration agreement in accordance with law. Petition allowed