1988 JTR(SC) 529
1988 AIR(SC) 2018 ; 1989 1 ArbLR 37 ; 1988 2 CurCC(SC) 486 ; 1988 3 JT 552 ; 1988 RLR 597 ; 1988 2 Scale 542 ; 1988 4 SCC 153 ; 1988 Supp2 SCR 579 ; 1988 2 UJ 652 ; 1988 KHC 1035
SUPREME COURT OF INDIA
SABYASACHI MUKHARJI AND S. RANGANATHAN, JJ.
State of Orissa and others, Petitioners
Versus
M/s. Lall Brothers, Respondent.
Spl. Leave Petn. (Civil) No. 7396 of 1987, D/- 25-8-1988.
Advocates appeared
Mr. M.K. Banerjee, Solicitor General; Mr. R.K. Mehta and Miss Mona Mehta, Advocates with him, for Petitioners; Mr. G.L. Sanghi, Sr. Advocate; Mr. A.P. Jena and Mr. Vinod Bhagat Advocates, with him, for Respondent.
Act Referred :ARBITRATION ACT : S.30, S.14, S.33, S.35
(A) The Arbitration Act provisions S.30, S.14, S.33, and S.35 govern the setting aside or modification of awards, where S.30 addresses awards that are invalid or set aside, S.14 defines the scope and duties of an arbitrator, S.33 allows awards to be set aside for misconduct or legal errors apparent on the face, and S.35 deals with correction of awards. In this matter, those statutory provisions frame the courts analysis of challenges to the arbitrators lumpsum award and the alleged irregularities in proceedings.
(B) Key legal principles include that an award cannot be set aside merely because the court might have reached a different conclusion through inference or argument; an unreasoned award or a lumpsum award is not per se invalid; an award is conclusive between parties and can only be disturbed on grounds of arbitrator misconduct, an error apparent on the face of the award, or if the award was procured improperly or rendered after the arbitration became invalid; and the court will not speculate on reasons for the award where none are given.
Facts of the case:
A contractor engaged in civil works for a government project completed work later than stipulated and received partial payment. A dispute arose over additional payments claimed by the contractor, leading to arbitration. An arbitrator appointed under the contract issued a lumpsum award with interest, which was modified by a subordinate judge regarding the interest period. A further appeal to the High Court challenged the award on grounds including error of law, misconduct, closure of the contract, and lack of jurisdiction, but the High Court allowed only the modification of interest and dismissed other challenges. The Supreme Court granted leave to appeal and examined the validity of the award.
Findings of Court:
The Supreme Court held that the High Court correctly declined to set aside the award, as there was no error apparent on the face of it, no misconduct by the arbitrator, and the award was a reasoned decision within the arbitrators jurisdiction despite being a lump sum. The court noted that acceptance of the final bill under protest did not automatically nullify the arbitration clause, and the arbitrator had considered the claims and documents before issuing the award.
Issues:
Whether the challenges concerning error of law apparent on the face, misconduct, closure of the contract, and lack of jurisdiction were maintainable against the award.
Ratio Decidendi:
An award is not invalid merely because a different inference could be drawn; the court will not secondguess the arbitrator where no reasons are stated, and an award stands unless tainted by misconduct, a legal error on the face, or invalidity under the Arbitration Act; the substantive merits are not revisitable by the court.
Result:
The application for leave to appeal was dismissed, upholding the award.
(A) The Arbitration Act provisions S.30, S.14, S.33, and S.35 govern the setting aside or modification of awards, where S.30 addresses awards that are invalid or set aside, S.14 defines the scope and duties of an arbitrator, S.33 allows awards to be set aside for misconduct or legal errors apparent on the face, and S.35 deals with correction of awards. In this matter, those statutory provisions frame the courts analysis of challenges to the arbitrators lumpsum award and the alleged irregularities in proceedings.
(B) Key legal principles include that an award cannot be set aside merely because the court might have reached a different conclusion through inference or argument; an unreasoned award or a lumpsum award is not per se invalid; an award is conclusive between parties and can only be disturbed on grounds of arbitrator misconduct, an error apparent on the face of the award, or if the award was procured improperly or rendered after the arbitration became invalid; and the court will not speculate on reasons for the award where none are given.
Facts of the case:
A contractor engaged in civil works for a government project completed work later than stipulated and received partial payment. A dispute arose over additional payments claimed by the contractor, leading to arbitration. An arbitrator appointed under the contract issued a lumpsum award with interest, which was modified by a subordinate judge regarding the interest period. A further appeal to the High Court challenged the award on grounds including error of law, misconduct, closure of the contract, and lack of jurisdiction, but the High Court allowed only the modification of interest and dismissed other challenges. The Supreme Court granted leave to appeal and examined the validity of the award.
Findings of Court:
The Supreme Court held that the High Court correctly declined to set aside the award, as there was no error apparent on the face of it, no misconduct by the arbitrator, and the award was a reasoned decision within the arbitrators jurisdiction despite being a lump sum. The court noted that acceptance of the final bill under protest did not automatically nullify the arbitration clause, and the arbitrator had considered the claims and documents before issuing the award.
Issues:
Whether the challenges concerning error of law apparent on the face, misconduct, closure of the contract, and lack of jurisdiction were maintainable against the award.
Ratio Decidendi:
An award is not invalid merely because a different inference could be drawn; the court will not secondguess the arbitrator where no reasons are stated, and an award stands unless tainted by misconduct, a legal error on the face, or invalidity under the Arbitration Act; the substantive merits are not revisitable by the court.
Result:
The application for leave to appeal was dismissed, upholding the award.
A.P.Jena, G.L.SANGHI, M.K.BANERJI, Mona Mehta, R.K.MEHTA, VINU BHAGAT
Judgment
SABYASACHI MUKHARJI, J. : - This is an application for leave to appeal under Art. 136 of the Constitution from the decision and judgment of the High Court of Orissa, dated 8th April, 1987. By the said judgment the High Court had allowed the appeal in part and modified the award so far as it related to the payment of interest on the awarded amount. Another appeal challenging the validity of the award was, however, dismissed.
2. In or about 1975-76 the respondent was entrusted with the work of "Construction of balance work of earth dam of Koska Minor Irrigation Project" vide an agreement No. 207 F-2. The said work was due to be completed on 3rd Aug. 1977 but it was actually completed on 31st March, 1978. The estimated value of the work was Rs. 25,06,229/-. It is stated that the contractor, respondent herein, had executed only 18 out of 22 items of work beside one extra item and he was paid a sum of Rs. 23,63,122/- for the work done. According to the petitioner, no further amount was due to the contractor, the respondent.
3. Final bill was prepared on 12th Feb. 1980 and it was unconditionally accepted by the respondent-contractor. This contention, however, was sought to be disputed before us by the respondent-contractor by producing certain bill stated to be the final bill which was "accepted under protest". It is, however, not necessary for us to go into this question at this stage.
4. On or about 16th April, 1980, the respondent-contractor raised certain claims and gave notice for appointment of an arbitrator according to the contract. On 22nd April, 1980, the Chief Engineer appointed Shri N.K. Mishra as arbitrator. However, on the application of the respondent the Subordinate Judge removed Shri N.K. Mishra and instead appointed Shri P.C. De as the arbitrator. Before the arbitrator the respondent filed its claim along with some documents and the petitioner filed his counter statement. It is stated on behalf of the State that no further evidence was adduced by the respondent but the petitioner produced the measurement books. The petitioner contended that no amount was due. The respondent disputed that.
5. The arbitrator on basis of the claim statement and some document filed by the respondent-contractor gave a lump sum award for Rs. 14,67,000/- plus interest at 9% from 30-4-1978. The award was given on 23rd June, 1982. On 11th July, 1983, the learned Subordinate Judge made the award rule of the Court with the modification that the interest was directed to run from 23-6-1982 instead of 30-4-1978. The High Court allowed the appeal in part and deleted the direction regarding future interest awarded by the arbitrator and modified by the learned Subordinate Judge. In appeal it was contended before the High Court for the said judgment by the Subordinate Judge that the following objections were taken against the award, namely :
"(i) that there is an error of law apparent on the face of the award;
(ii) that the arbitrator has misconducted himself by giving a lump sum award without examining each item of the claims;
(iii) that the claimant having accepted the final bill unconditionally deposit, the contract between the parties stood closed and, therefore, the arbitration clause was not operative and the arbitrator appointed had no jurisdiction to adjudicate upon the disputes;
(iv) that the award of interest is without jurisdiction".
6. Except the documents on record, neither of the parties adduced any evidence. It was urged before us that the High Court did not accept challenge to the award but modified the order of interest as indicated before. The award in question contained the recitals to the effect that the arbitrator had gone through the claim statement, counter statement and documents produced before him and heard the representations made by the parties. There is no error of law apparent on the face of the award. There was no misconduct on the part of the arbitrator or in the conduct of the proceedings. It was contended before us that this is an award which was an unreasoned and a lump sum amount was awarded without specifying the amount awarded on particular grounds.
7. In our opinion, the High Court was right in refusing to accept the challenge to the award. The fact that there is an unreasoned award is no ground to set aside an award. Lump sum award is not bad per se, as such. An award is conclusive as a judgment between the parties and the court is entitled to set aside an award only if the arbitrator has misconducted himself in the proceedings or when the award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under S. 35 of the Arbitration Act or where an award has been improperly procured or is otherwise invalid under S. 30 of the Act. An award may be set aside by the Court on the ground of error on the face of the award, but an award is not invalid merely because by a process of inference and argument it may be demonstrated that the arbitrator has committed some mistake in arriving at his conclusion.
8. It is not open to the court to speculatle, where no reasons are given by the arbitrator, as to what impelled him to arrive at his conclusions. See in this connection the observations of the Judicial Committee in Champsey Bhara & Co. v. Jivraj Balloo Spinning & Weaving Co. Ltd. 50 Ind App 324 : and of this court in Jivarajbhai Ujamshi Seth v. Chintamanrao Balaji, (1964)5 SCR480:
9. The fact that a lump sum award has been given is no ground to declare the award bad. See further Firm Madanlal Roshanlal Mahajan v. Hukumchand Mills Ltd., Indore, (1967) 1 SCR 105: Union of India v. Bungo Steel Furniture Pvt. Ltd., (1967) 1 SCR324: as well as the decision of this court in Allen Berry & Co. (P) Ltd. v. Union of India, New Delhi, (1971) 3 SCR 282:
10. Learned Solicitor General for the petitioner relied on Continental Construction Co. Ltd v. State of Madhya Pradesh, (1988) 3 SCR 82: Reliance was misplaced. If a question of law was not specifically referred to the arbitrator his decision is not final. It was reiterated that the abitrator is bound by law, and if an error of law in the award is on the face of it, it is amenable to be corrected.
11. In that view of the matter the points sought to be urged in this application for leave are not entertainable. The application fails and is accordingly dismissed.
Application dismissed.
For Citation : AIR 1988 SC 2018