1927 JTR(SC) 40
1927 AIR(PC) 164 ; 1926 54 LawReportsInd.App. 427 ; 1927 29 BomLR 1150 ; 1927 31 CWN 1027 ; 1928 27 LW 665 ; 1928 55 ILR(Cal) 126
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
VISCOUNT SUMNER, LORD SINHA, LORD BLANESBURGH, AND SIR JOHN WALLIS.
SALEH MAHOMED UMER DOSSAL (A FIRM) - Appellant
Versus
NATHOOMAL KESSAMAL - Respondents
On appeal from the Court of the Judicial Commissioner of Sind.
Decided On : May. 5. 1927.
An arbitration award is not "bad on its face" if it refers to a contract only to identify the dispute, even if the outcome contradicts contract terms, as the umpire is entitled to reach independent conclusions of law or fact.
Act
Referred
:ARBITRATION ACT
: S.14
(A) Indian Arbitration Act, 1899 - Section 11, clause 2 - Arbitration award - Error on the face of the award - Where an award refers to a contract solely to identify the dispute, such reference does not incorporate the terms of the contract into the award - The umpire is entitled to reach independent conclusions of law or fact based on evidence and arguments - An award is not bad on its face merely because the goods ordered to be delivered differ from the description in the original contract. (Paras 10, 11)
(B) Judicial Review of Arbitration - An award cannot be set aside for a mistake in law unless such mistake is visible on the face of the award itself. (Para 9)
Facts of the case:
A contract was entered into for the purchase of newspaper bales of a specific weight. A dispute arose when the buyer refused delivery of a portion of the goods. The matter was referred to arbitration, and the umpire issued an award directing the buyer to pay a sum and the seller to deliver specific bales. The revisional court set aside the award on the ground that it was bad on its face, as the bales in question were lighter than those specified in the contract, meaning the buyer was directed to take delivery of goods they had not ordered.
Findings of Court:
The award's reference to the contract was limited to earmarking the origin of the dispute and did not incorporate the contract's terms. The umpire had considered all evidence and arguments before reaching his conclusion, and the parties were bound by those conclusions.
Issues: Whether an arbitration award is bad on its face if it directs the delivery of goods that do not conform to the contract description, provided the award refers to the contract only to identify the dispute.
Ratio Decidendi: A guarded reference to a contract to identify the dispute does not incorporate the contract's terms into the award. The umpire's conclusions of law or fact, reached after considering evidence, are binding and do not constitute a visible error on the face of the award, even if the result differs from the original contract terms.
Result: Appeal allowed.
(B) Judicial Review of Arbitration - An award cannot be set aside for a mistake in law unless such mistake is visible on the face of the award itself. (Para 9)
Facts of the case:
A contract was entered into for the purchase of newspaper bales of a specific weight. A dispute arose when the buyer refused delivery of a portion of the goods. The matter was referred to arbitration, and the umpire issued an award directing the buyer to pay a sum and the seller to deliver specific bales. The revisional court set aside the award on the ground that it was bad on its face, as the bales in question were lighter than those specified in the contract, meaning the buyer was directed to take delivery of goods they had not ordered.
Findings of Court:
The award's reference to the contract was limited to earmarking the origin of the dispute and did not incorporate the contract's terms. The umpire had considered all evidence and arguments before reaching his conclusion, and the parties were bound by those conclusions.
Issues: Whether an arbitration award is bad on its face if it directs the delivery of goods that do not conform to the contract description, provided the award refers to the contract only to identify the dispute.
Ratio Decidendi: A guarded reference to a contract to identify the dispute does not incorporate the contract's terms into the award. The umpire's conclusions of law or fact, reached after considering evidence, are binding and do not constitute a visible error on the face of the award, even if the result differs from the original contract terms.
Result: Appeal allowed.
Arbitration - The Board held that an award incorporating contract terms and reasons for rejection did not contain an error on its face.
Delivery - Mentioned by counsel for the appellant but not analyzed by the court.
Shipping - Mentioned by counsel for the appellant but not analyzed by the court.
Arbitration - A High Court of Bombay decision which held an award was bad on its face, subsequently reversed by the Privy Council.
Solicitors for appellants: Watkins & Hunter.
Judgement
Appeal (No. 7 of 1926) from an order of the Court of the Judicial Commissioner of Sind in its revisional jurisdiction (April 6, 1925) reversing an order of that Court in its District Court jurisdiction.
By a contract in writing dated December 1, 1919, the respondent agreed to purchase from the appellants "600 bales only American old newspapers, each bale of 5 cwts.," at a named price. The contract contained a clause referring all disputes to the arbitration of two arbitrators in Karachi with power to them to nominate an umpire in the event of disagreement.
Differences, which arose owing to the respondent refusing to take delivery of 400 out of the 600 bales contracted for, were referred under the contract to two arbitrators; upon their disagreeing they nominated an umpire.
On November 8, 1920, the umpire issued his award, which recited that the reference was as to certain
4 Law. Rep. 54 Ind. App. 427 ( 1926- 1927) Saleh Mahomed Umer Dossal V. Nathoomal Kessamal
205
disputes arising between the present parties " under a contract made between them, No. 8/06, dated December 1, 1919." The award contained no further reference to the contract or its terms. It provided that the respondent was to pay to the appellant firm a certain sum, and that upon his doing so the appellant firm should deliver to the respondent " 400 bales old newspapers, arrived per s.s. Kandahar under bill of lading No. E. 118 dated June 23, 1920." There were provisions for the event of a failure to take delivery, also for the costs of the arbitration and for filing the award in Court.
The umpire, at the request of the appellants, applied to the Court of the Judicial Commissioner in its District Court jurisdiction praying that the award might be filed in Court under s. 11, cl. 2, of the Indian Arbitration Act, 1899. An order as prayed was made.
Upon an application to the Court in its re visional jurisdiction the order was reversed and the award set aside.
The learned Judicial Commissioner said that by the terms of the contract each bale was to be 5 cwts., whereas it was admitted that the 400 bales in dispute weighed only 500 lbs. each; the buyers were consequently entitled to refuse delivery. As the award directed the buyers to take delivery of goods which they had not ordered, it was bad on its face, and could be set aside. The lower Court, in their view, in making the order for filing acted illegally, and with material irregularity in the exercise of its jurisdiction; its order could therefore be reversed in revisional proceedings.
An application by the present appellants for a review of the judgment was dismissed.
1925. May 5. Sir George Lowndes K.C. and E. B. Raikes for the appellant firm referred to Champsey Bhara 6c Co. v. Jivraj Balloo Spinning and Weaving Co. (( 1923) L. R. 50 I. A. 324.), mentioning also Landauer v. Asser ([ 1905] 2 K. B. 184.) and Hirji Mulji v. Cheong Yue Steamship Co. ([ 1926] A.
C. 497.)
The respondent did not appear.
May 5. The judgment of their Lordships was delivered by
VISCOUNT SUMNER. In this ease, as the respondent did not appear, their Lordships with the very full assistance of counsel for the appellants have examined it with, as they believe, every care to see whether there is any irregularity, or other matter than that which has been fully argued, to which their attention ought to be directed, but they are satisfied that the only question which can reasonably be raised is whether the Court of the Judicial Commissioner, from which the appeal comes, were or were not right in their decision that the award made in the arbitration between the present parties was bad on its face.
Though it was no part of the proceeding now before the Board, it is the case that after the issue was decided, that is now under appeal, the present appellants applied to have it reviewed, and on that occasion one of the members of the Court, whose judgment is under appeal, said, in refusing the application " It may be admitted for the present purposes, that our decision proceeded largely on the same grounds as those that commended themselves to the High Court of Bombay in Jivraj Balloo Spinning and Weaving Co. v. Champsey Bhara & Co. (( 1919) I. L. R. 44 B. 780.) Those grounds did not commend themselves to their Lordships of the Privy Council, and the judgment of the High Court of Bombay was reversed.(L. R, 50 I. A. 324.) That judgment of their Lordships of" the Privy Council was delivered on March 6, 1923, and at the time we heard the revisional application in question it had
4 Law. Rep. 54 Ind. App. 427 ( 1926- 1927) Saleh Mahomed Umer Dossal V. Nathoomal Kessamal
206
not reached India. It may be assumed for present purposes that, had that judgment been placed before us at the hearing our judgment would not have proceeded on the lines on which it did proceed."
It is therefore perfectly plain, that the one point which was in dispute in the Court below was, whether or not under the circumstances of the case there could be said to be an error upon the face of the award, which had been brought before them by the regular process of objection on the part of one of the parties to the award, when filed.
The contract is referred to in the award. It recites a contract made between the parties dated December 1, 1919, but it does so for one purpose only—namely, to earmark the disputes which had arisen and which, by a subsequent written reference, had been referred first to the arbitration of two named arbitrators, and then, in the event which happened, of the umpire, who made the award when they differed. The umpire recited that both parties were present on every occasion when he sat; that he considered all the evidence, documents and accounts before him and the arguments of the pleaders, and then made the award. Para.1 of his award adjudged that one party should pay a named sum with interest at a fixed rate, and from dates which were fixed also and then with the costs of the arbitration. Para.2 stated that on receipt of these amounts the other party should forthwith deliver certain goods, which were precisely specified. Para.3 provided for a right to require payment of storage charges, if there was delay in taking delivery, and the amount of the arbitration costs was then specified as well. There was also a clause, which stated that in addition to these costs, all costs, if any, incurred in filing the award in Court should be paid. That clause is a severable matter, and was treated by the first judge as a mere indication of opinion for his guidance and not as part of the award, and when afterwards the award came to be questioned before the full Court, no exception was taken to his decision on this ground, which therefore stands.
The exception taken to his decision was that the umpire had been guilty of that particular form of judicial misconduct, which consists in making a mistake in law, and letting it be visible on the face of his award. The argument was that the contract was incorporated into the award by the reference mentioned above, and that, adopting the parties admission that the bales tendered were of substantially less weight than the bales whose deliverable weight was specified in the contract, the award must be taken to have disclosed on its face an error in law in construing the terms of the contract, which related to the description of the goods sold and to the law applicable to the sale and delivery of goods by description.
Their Lordships, independently of the judgment of the Board in Jivraj Balloo Spinning and Weaving Co.
v. Champsey Bhara & Co.(L. R. 50 I. A. 324), could not have entertained that view, because it appears to them quite plain that this award, the terms of which are very precisely stated, makes its allusion to the contract very guardedly and for the purpose only of earmarking the origin of the dispute in question. It is perfectly consistent with the umpires having come to conclusions of law or of fact of his own, by which the parties who submitted their disputes to him would be bound.
On looking at the previous decision of the Board, however, it may be observed that that was a stronger case than the present one, because in that case there had been a rejection of the goods altogether, a fact which was referred to in the award. By this and other exceptional references to the contracts, the award incorporated their written terms, and the rules and regulations, subject to which they were made; and the letters between the parties, stating the grounds on which the goods were rejected, were also mentioned and included. It then proceeded to state how the arbitrators got at their conclusion. On these facts the decision of the Board was that there was nothing that could be called error upon the face of the award, and therefore, the appeal succeeded. A fortiori this appeal must succeed also.
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Their Lordships will humbly advise His Majesty that the appeal be allowed with costs, and the decision of the first judge be restored.