Montgomery County school officials have been ordered to reinstate a high school basketball coach after an arbitrator ruled that the coach was fired because he cut the son of a senior school system administrator from his team.

According to the outside arbitrator's findings, the principal of Damascus High School had "no basis" to remove Angelo Orelli, a teacher who was boys' varsity basketball coach for three years until May 1989.

The principal, Merrill E. Fisher, replaced Orelli after the coach cut a student whose father is a top Montgomery administrator, the arbitrator concluded. After the student was denied a place on the team, the father, Pat D. Abrunzo, telephoned the coach, threatened his job, and later told him that he had started "reprisals," according to the findings.

The 38-page report, obtained yesterday by The Washington Post, was first disclosed in yesterday's editions of The Montgomery Journal. The report does not mention Abrunzo by name, but the principal and other sources confirmed yesterday that he is the administrator cited in the dispute.

Abrunzo was out of town yesterday and unavailable for comment.

Orelli said he would not discuss the case in detail. But he said, "I couldn't be any more pleased with the outcome of this whole thing."

The findings issued last month are the latest in a series of controversies involving Fisher, the principal of the 1,000-student high school in northern Montgomery.

Fisher drew criticism this spring for replacing the adviser to the cheerleading squad, and later for plagiarizing parts of his commencement address to graduating seniors. The latter incident prompted the Montgomery Board of Education to consider instituting a countywide plagiarism policy.

In the basketball case, Orelli took his complaint to an outside arbitrator after losing two appeals within the school system.

Orelli, a special education teacher in Montgomery since 1978, had been a boys' basketball coach at Damascus since 1981, and was made varsity coach during the 1986-87 school year.

During the arbitration hearing last winter, Fisher, an assistant principal and the school's athletic director testified that the coach had an overall varsity record of eight wins and 54 losses, which caused discontent among players and poor morale throughout the school.

The assistant principal testified that during Orelli's second season, "some students wore bags on their heads in shame for the basketball team losses," according to the arbitrator's findings.

Damascus officials testified that Orelli cut the administrator's son after an ineffective, hasty tryout in the fall of 1988.

But the arbitrator's report quoted testimony from Orelli that the player was talented but unmotivated and that his team had deteriorated because key players had graduated. "We find no evidence of any deficiency in . . . any aspect of {his} performance as a coach," concluded the arbitrator, Louis Aronin, who works for the American Arbitration Association.

The arbitrator ordered the school to offer Orelli the coaching job again, and to pay him the nearly $4,000 stipend he would have earned last year.

Yesterday, Carl W. Smith, an associate superintendent, said that the school system had no plans to appeal the arbitrator's findings. A school spokesman said attorneys for the school system and the Montgomery County Education Association, which represents Orelli, will discuss whether he will resume coaching. "Right now, I'm still giving it a lot of consideration," Orelli said.

Fisher said in an interview yesterday that he had asked Orelli to reconsider cutting the player from the team after Abrunzo complained to him.

The principal said he already has a contract for the coming season with another coach, but would follow the arbitrator's order. "Clearly, I don't agree with him," Fisher said, "but he is the arbitrator."