ARBITRATION AGREEMENT REFERRING THE MATTER IN DISPUTE TO THE SOLE

ARBITRATOR

THIS AGREEMENT made at………………..on the day 30 of July, 2007 between Maytas Limited,
having its registered office at 469 Street, Vishakhapatnam High, Vishakhapatnam- 431 201,
Andhra Pradesh; hereinafter referred to as "the party of the FIRST PART" and East India
Udyog Limited, having its registered office at Ummed Bhawan, Sector-19, Amravati, Andhra
Pradesh- 598 876; hereinafter referred to as "the party of the SECOND PART".

WHEREAS the party of the First Part has undertaken the purchase of 1791 transformers
manufactured by the party of the Second Part vide Agreement July 30, 2007(hereinafter referred
to as "the said agreement).

AND WHEREAS the differences and disputes have arisen between the said parties above
mentioned relating to the said agreement and the parties hereto could not settle the disputes
mutually, the parties will have to agree on the settlement of any such dispute arising out of or in
connection with the subjected Agreement by arbitration.

AND WHEREAS the parties have agreed to refer their disputes to the arbitration, of the sole
arbitrator Mr. Mohak Vilecha.

NOW THIS AGREEMENT WITNESSES AS FOLLOWS:

(The parties, by reading the Rules, shall declare that they have accepted to comply with the
terms, obligations and consequences of this agreement)

(1) All the disputes between the parties relating to the said agreement shall be referred to
arbitration of the sole arbitrator viz. Mr. Mohak Vilecha (hereinafter referred to as "the arbitrator")
for their final determination.

(2) Any such dispute in question will be resolved through an Ad Hoc Arbitration process.

(3) The seat of the arbitration proceedings conducted under this Agreement shall be Andhra
Pradesh, India. The arbitration shall be governed by the laws of India, and the courts of Andhra
Pradesh shall have exclusive supervisory jurisdiction over the arbitration proceedings, including
any challenges to the arbitration award and the granting of interim measures.

(4) The parties have decided to have the arbitration conducted at Hotel Raj Kunnoor, Opp. Jedi
Circle, Amravati, Andhra Pradesh- 564 721.

(5) The Sections applicable according to the governing law are:•Section 2(e) of the Arbitration
and Conciliation Act, 1996. •Section 21 of the Arbitration and Conciliation Act, 1996•Section 9 of
the Arbitration and Conciliation Act, 1996.
(6) The parties have agreed on the Arbitration and Conciliation Act, 1996 as the applicable law
to this arbitration and the rules of the same shall be applied to any such proceedings.

(7) The arbitration proceedings will be conducted in English language and all parties shall file
their pleadings etc. in English language. The parties shall also file documentary evidence
accompanied by a translation into English language

(8) The name of the parties, any documents produced as evidence and what goes on during the
proceeding as well will not be revealed in order to maintain their confidentiality.

(9) The parties each undertook to pay half of the arbitration expenses that were notified
subsequent to the initiation of proceedings by the Arbitrator as an advance payment.
Each party also undertakes to pay his share of the total expenses determined within the Arbitral
Award. In the case where the defendant does not pay half of the advance payment, then the
claimant shall be obliged to pay the total advance payment amount.

(10) Furthermore, the parties have agreed to split the cost of proceeding which is mentioned
below: •Stay: INR.1,00,000 /- •Food: INR. 30,000 /-•Stationery: INR. 5,000 /-•Travel: INR.
35,000 /-

(11) The Party of the Second Part, East India Udyog Limited demanded a sum of Rs.
87,20,165/- as damages from the party of the first part.

(12) The Parties shall appoint a sole arbitrator by mutual agreement within 15 days from the
date on which a party serves the other party with a written demand for arbitration. In the event of
a failure to appoint an arbitrator by mutual agreement, the arbitrator shall be appointed as per
the provisions specified under the Arbitration and Conciliation Act, 1996.

(13) The arbitrator shall have the power to open up, review and revise any certificate, opinion,
decision, notice or requisition and to determine all matters in dispute.

(14) The arbitrators shall make their award within a period of four months or such further
extended time as may be decided by them, as the case may be, with the consent of the parties
from the date of entering on the reference.

(15) The award rendered by the arbitrator shall be final and binding on the Parties. The
arbitrator shall have the authority to determine and allocate costs, including attorney's fees, in
connection with the arbitration proceedings.

(16) If during the arbitration proceedings, the parties mutually agree, compromise or compound
their disputes, the reference to arbitration and the appointment of the arbitrators shall be
deemed to have been revoked and the arbitration proceedings shall stand withdrawn or
terminated with effect from the date on which the parties file a joint memorandum of Settlement
thereof, with the arbitrators
(17) The parties agree that they would cooperate and produce before the arbitrators or umpire
all books, deeds, papers, accounts, writings and documents within their possession or power,
which may be required or called for, and do all other things which during the proceedings on the
reference, the arbitrators or presiding arbitrator may require. If any of the parties do not
cooperate or remains absent at the reference, the presiding arbitrator Would be at liberty to
proceed with the reference ex-parte.
IN WITNESS WHEREOF, the Parties hereto have executed this Arbitral Agreement as of the
date first above written.

Authority's Signature: ___________________________

Contractor's Signature: ___________________________

Date: ___________________________
Appellant= M/s East India Udyog
Respondent-1= Maytas Ltd.
Respondent-2= Bank

The relevant facts, which are necessary for consideration of the questions referred to the Full
Bench, are that the appellant filed a petition under Section 9 of the Act for the relief of injunction
restraining the 2nd respondent from paying and the 1st respondent from receiving the amounts
covered by three performance bank guarantees dated 03.10.2007, 17.01.2008 and 12.12.2007
for Rs.3,48,625/-, 15,78,950/- and Rs.24,07,500/- respectively.

The 1st respondent is a Company while the 2nd respondent is a Bank. The appellant is engaged
in manufacture, supply and export of various types of power transformers with high quality and
in conformity with the ISO-9001:2000 standard.

Andhra Pradesh Northern Power Distribution Company Limited (for short APNPDCL) had
awarded a contract to one M/s. Manchu Konda Prakashan & Company for electrification of
various divisions situated in northern districts of Andhra Pradesh.

The said work was taken up by the 1st respondent informally from M/s. Manchu Konda
Prakashan & Company. The 1st respondent, which required transformers for the project at
Bansawada division of Nizamabad District of north Andhra Pradesh, issued the purchase order
dated 30-07-2007 to the appellant for supply of 1791 transformers. The total value of the order
was Rs.8,72,01,650/-.

Out of 1791 transformers, 799 were to be of 16 KVA and 992 were to be of 25 KVA. The terms
and conditions were stipulated in the purchase order. Pursuant to the understanding with the 1st
respondent, the aforementioned bank guarantees were furnished in favour of the 1st respondent
by the 2nd respondent agreeing to pay the value of bank guarantees on its invocation. Pursuant
to the purchase order dated 30-07-2007, the appellant started making supplies of transformers
and the last consignment was delivered in the month of March, 2008.

According to the appellant, representatives of 1st respondent and APNPDCL inspected the
transformers at the site and on their satisfaction the transformers were transmitted.

Further, on receipt of material at site, the 1st respondent took steps for release of payments as
agreed under the purchase order and cleared 90% of the amount payable.

Further, according to the appellant, there was a delay of 3 to 4 months in making payments, for
which the appellant did not make grievance immediately and accepted the delayed payments in
good faith. Even after completion of six months, neither the payment was made nor any
grievance about the quality of transformers was made by the 1st respondent or its customer-
APNPDCL.

The appellant contend that balance 10% of the amount was to be paid by demand draft but
payment was not made.

The 1st respondent claimed that balance amount payable was adjusted towards the taxes paid
by them. This claim of the 1st respondent, according to the appellant, was absurd and not
consistent with the agreement between the parties.

The 1st respondent also raised issues as to quality of transformers when the appellant claimed
the balance payment.

According to the 1st respondent, in-spite of repeated reminders, the appellant did not take steps
to replace the defective transformers or to rectify the defects and in these circumstances, the 1 st
respondent claimed that they were left with no option but to invoke the performance of bank
guarantees furnished by the appellant by cancelling the purchase order.