Union of India v. Banwarilal Mittal — 1991 DIGILAW 34 (CAL)

ORDER This is an application under Ss. 30 And 33 of the Arbitration Act, 1940 for setting aside of the award dated 28th September, 1989 passed by the Joint Arbitrators S.R. GANGULY and A.N. SANYAL. 2. By the said award the Joint Arbitrators made an award in favour of the claimant directing the respondents to pay a sum of Rs. 3,36,688.96 p. and in addition to return, duly discharged, to the claimant the F.D.R. for Rs. 10,000/- furnished by the claimant towards earnest money. The item wise break up of the said award for the said sum of Rs. 3,36,688.96 p. has also been indicated in the award. Itemwise break-up as indicated in the award is as follows : Claim Item 3 : Loss suffered due to non-payment of work done outside the scope of Agreement (a) Chiselling from bard rod in excavation in foundation Rs.1,50,000/-(Admitted in assessment by a Jt. Arbitrator on site inspection in the presence of both of parties) (b) Continuous bailing out of water (Not established as due to the Claimant) NIL (c) Removal of slush solid and mud etc. from the bottom of foundation NIL (Not established as due to the Claimant) (d) Re-excavation of foundation of trenches etc. twice etc. NIL (Not established as due to the claimant) Claim Item 4 : Loss suffered due to illegal termination of contract : (a) Ballast Rs. 1000/- (b) Stone Chips Rs. 900/- (c) Sand Rs. 375/- (d) Bricks Rs.1500/- ... Rs. 3,775/- (Amounts admissible on records) (e) Advance made to labourers NIL (Amount claimed not established on records). (f) Advance to suppliers for pipes Rs. 10.000/- (Amount admissible on facts) 3. The petitioner has taken several grounds in the petition challenging the said award. The grounds taken on the petition are as follows: I. For that the said Joint Arbitrators erred in holding that the respondent did work outside the scope of the agreement, and awarded a sum of Rs. 1,50,000/- as per claim item no. 3 in total disregard to the contractual stipulation as contained in the rates provided in the agreement. II. For that the said Joint Arbitrators by totally overlooking the fact that the line proposed to be relied was on a existing pipe line and thereby misconducted themselves and the proceedings. III. For that the said Joint Arbitrators erred in awarding sums of Rs.3,775/- and Rs. 10,000/- as claimed under item no. II. For that the said Joint Arbitrators by totally overlooking the fact that the line proposed to be relied was on a existing pipe line and thereby misconducted themselves and the proceedings. III. For that the said Joint Arbitrators erred in awarding sums of Rs.3,775/- and Rs. 10,000/- as claimed under item no. 4 on account of alleged illegal termination of contract, and thereby misconducted themselves and the proceedings. IV. For that the said Joint Arbitrators ought to have held that the termination of Contract was according to law and that no claim was sustainable on that account. In any event awarding of Rs. 10,000/- on account of advance as alleged advance for pipes to the suppliers was too remote and not admissible under the law; V. For that the said Joint Arbitrators by awarding Rs.49,600/- and Rs. 31,500/- under claim items 6 and 7 are erroneous and not in accordance with law and thereby misconducted themselves and the proceedings. 4. At the time of hearing of this application, the learned Counsel for the petitioner referring to claim item no. 3 has submitted that the award in respect of such claim is outside the scope of the reference. The claim item no.3 as indicated above, is under the heading “loss suffered due to non-payment of work done outside the scope of agreement”. The learned Counsel for the petitioner has also referred to claim item no.4 which is under heading “loss suffered due to illegal termination of contract.” 5. The learned. Counsel for the petitioner has taken this as the only ground of challenge and has not pressed the other grounds which have been taken in the petition. It is submitted by the learned Counsel for the petitioner that the Joint Arbitrators committed a mistake in holding that tile respondent did work outside the scope of the agreement and awarded the sum of Rs. 1,50.000/- against claim item no. 3 in total disregard of the contractual stipulation concerning the rates provided for in the agreement. Regarding claim item no. 4, the submission on behalf of the respondent is that the Joint Arbitrators in awarding the sum of Rs. 3,775/- and Rs. 10,000/- as claimed under item no. 4 on account of illegal termination of contract, misconducted themselves as also the proceeding. 6. Regarding claim item no. 4, the submission on behalf of the respondent is that the Joint Arbitrators in awarding the sum of Rs. 3,775/- and Rs. 10,000/- as claimed under item no. 4 on account of illegal termination of contract, misconducted themselves as also the proceeding. 6. The learned Counsel for the petitioner has argued that the claimant having completed the work under the contract cannot claim for any extra cost in the shape of non-payment of work done outside the scope of agreement. Similarly, it has been argued on behalf of the petitioner that under claim item no. 4 advance to suppliers for pipes cannot be a claim for alleged illegal termination of the contract. He has also submitted that the Joint Arbitrators by disregarding the specific provisions in the contract and also the objection raised by the petitioner regarding the aforesaid claims have misconducted themselves and the proceeding. The learned Counsel has relied on a decision of the Supreme Court in the case of Continental Construction Co. Ltd. v. State of M.P. reported in AIR 1988 SC 1166 . In this case, the Supreme Court has observed that the arbitrator is a tribunal selected by the parties to decide their disputes according to the law and so is bound to follow and apply the law and if he does not he can be set right by the Court provided his error appears on the face of the award. In this case there was clear finding of the arbitrator that the contract was not rendered in effective in terms of s. 56 of the Contract Act due to abnormal rise in prices of material and labour. An objection was taken by the respondent that the Contractor having completed the work was not entitled to claim extra cost towards rise in prices of material and labour. The Supreme Court has observed that the arbitrator misconducted himself in not deciding this specific objection raised by the respondent regarding the legality of extra claim of the appellant. 7. The learned Counsel for the respondent has submitted that regarding claim no. 3, it was open to tile Joint Arbitrators to decide any claim relating to work done in course of or in connection with the contract. The learned Counsel for the respondent has also contended that there is no express provision in the contract prohibiting such claim. 7. The learned Counsel for the respondent has submitted that regarding claim no. 3, it was open to tile Joint Arbitrators to decide any claim relating to work done in course of or in connection with the contract. The learned Counsel for the respondent has also contended that there is no express provision in the contract prohibiting such claim. It has also been submitted by the learned Counsel for the respondent that in any event, in the instant award the contract has not been actually incorporated to the award nor there is any note appended by the Joint Arbitrators stating reasons for their award. In the present award, the Joint Arbitrators have indicated the items of claim with the beading as submitted by the claimant before the Joint Arbitrators and made his award against some of the items and rejecting the others. The learned Counsel for the respondent also submits that the impugned award is not a speaking award, what the Joint Arbitrators have done in this case is to indicate the items of claim and their award made against each of the claims. The learned Counsel has contended that the impugned award is not a speaking award in any sense. The Joint Arbitrators have not indicated any reasons in their award as to why they have accepted some items of claim and rejected the others. He has also submitted that an Arbitrator is not bound to indicate his reason unless it is a condition in the arbitration agreement. Relying on a decision of the Supreme Court, the learned Counsel has contended that it is not open to the Court to prove the mental process of the Arbitrator and speculate, where no reasons are given by the Arbitrator, as to what impelled the Arbitrator to arrive at his conclusion. 8. In the present case, as would appear from the award, it has been submitted by the learned Counsel for the respondent that the Joint Arbitrators have merely set out the claims and then awarded certain amount. They have not spoken their mind indicating what they have done and why they have done. They have narrated only how they came to make the award. It is, therefore, the submission of the learned Counsel for the respondent that this award does not call for any interference by the Court. They have not spoken their mind indicating what they have done and why they have done. They have narrated only how they came to make the award. It is, therefore, the submission of the learned Counsel for the respondent that this award does not call for any interference by the Court. The learned Counsel has placed reliance on the decision of the Supreme Court in the case of Sudarsan Trading Co v. Government of Kerala reported in AIR 1989 SC 890 . 9. The learned Counsel in reply to the contention for the petitioner that the Joint Arbitrators have disregarded some of the provisions of the Contract or they have made an award contrary to the provisions of the contract. The learned Counsel far the respondent submits that when there is no dispute as to the contract, how the contract should be interpreted is a matter for the arbitrators and the court cannot substitute its own decision on an interpretation of the contract. The learned Counsel for the respondent has, however, submitted that in any event there is no reference to the contract in the award and court cannot look into the contract in order to find out how the Arbitrators have interpreted the contract and whether such interpretation is correct or not. 10. The learned Counsel far the respondent has also submitted that the ratio of the decision in the Continental Case reported in AIR 1988 SC 1166 is peculiar on the facts of the case and the Supreme Court had occasion to refer to the said decision in Continental Construction Case in a later decision in State of Orissa v. Lall Brothers reported in AIR 1988, SC 2018, Here the Supreme Court has observed in paragraph 10 of the report that reliance an Continental Construction Co. Ltd. was misplaced. The Supreme Court has also observed that it was reiterated that the arbitrator was bound by law, and if an error of law was an the face of it, it was amenable to be corrected. 11. I have indicated above the nature of the impugned award, In my opinion, this award cannot be said to be a speaking award. In the instant award what the Joint Arbitrators have done is that they have merely set out the claims and given the history of the claims and then awarded certain amount. 11. I have indicated above the nature of the impugned award, In my opinion, this award cannot be said to be a speaking award. In the instant award what the Joint Arbitrators have done is that they have merely set out the claims and given the history of the claims and then awarded certain amount. They have not spoken their mind indicating as to why they have awarded sums indicated against some of the claim items and why they have rejected same others. 12. When the award is not speaking award and if there is no error of law appearing an the face of the award, the scope of interference by the Court is very limited. The Supreme Court had occasion to consider the scope of interference by the Court in a number of cases. The Supreme Court has summarised the law as to how the Court should act while considering an application far setting aside the award in Sudarsan Trading Co. v. Government of Kerala AIR 1989 SC 890 (supra). The Supreme Court has observed that only in a speaking award the Court can look into the reasoning of the award. It is not open to the court to probe the mental process of the arbitrator and speculate, where no reasons are given by the arbitrator, as to what impelled the arbitrator to arrive at his conclusion. Furthermore in any event, the reasonableness of the reasons given by the arbitrator cannot be challenged and appraisement of evidence by the arbitrator is never a matter which the court questions and considers. The Supreme Court also observes that if the parties have selected their own forum, the deciding forum must be conceded the power of appraisement of the evidence and the arbitrator is the sale judge of the quantity as well as the quality of evidence. It will not be for the court to take upon itself the task of being a judge on the evidence before the arbitrator. It has also been observed by the Supreme Court that whether a particular amount was liable to be paid or damages liable to be sustained, is a decision within the competency of the arbitrator and by purporting to construe the contract, the Court can not take upon itself the burden of saying that this was contrary to the contract and, as such beyond jurisdiction. The Supreme Court proceeds to observe that there was a distinction between the disputes as to the jurisdiction of the arbitrator and the disputes as to in what way that jurisdiction should be exercised. Once there is no dispute as to the contract, what is the interpretation of that contract is a matter for the arbitrator and on which the court cannot substitute its own decision. 13. As It has been a settled proposition of law, that an award can be set aside if the arbitrator has misconduted himself or the proceedings or has proceeded beyond his jurisdiction or where there are errors apparent on the face of the award they only be set aside if in the award there is any proposition of law which is apparent on the face of the award, namely, in the award itself or any document incorporated in the award and the same is erroneous. If the terms of the contract are not so incorporated with the award, the Court is not entitled to look into the contract in order to find out how the arbitrator has come to his conclusion. The arbitrator is the final arbiter of law as also the fact, and it is not misconduct on the part of an arbitrator to come to an erroneous decision whether his error is one of fact or law and where his findings of fact are supported by evidence. See Food Corporation of India v. Joginder Pal. AIR 1989 SC 1236. 14. The Supreme Court in State of Orissa v. M/s. Loll Brothers, AIR 1988 SC 2018 has observed that the award may be set aside by the court on the ground of error of law 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. 15. I am of the view that the impugned award is not a speaking award• and no reasons are indicated in the award itself as to how and why the Joint Arbitrators have arrived at their findings. I also do not find any incorporation of the contract into the award nor any document appended to the award indicating the reasons of the Joint Arbitrators, if any. I also do not find any incorporation of the contract into the award nor any document appended to the award indicating the reasons of the Joint Arbitrators, if any. I do not find any infirmity in the award on the grounds as urged on behalf of the petitioners at the time of hearing of this application. I do not see any error of law appearing on the face of the award nor do I find any legal proposition of law being the basis of the award and which one can say is erroneous. This award, in my opinion, does not call for any interference. 16. I have already indicated above that the petitioner has not taken any other grounds except those stated above, being the grounds nos. I and III of paragraph 17 of the petition. 17. This application for setting aside the award is dismissed with cost. Interim order, if any, is vacated. Application dismissed.