STATE OF HIMACHAL PRADESH v. RAM NARAIN MADAN — 1997 DIGILAW 375 (HP)

JUDGMENT Kamlesh Sharma, A.C.J. - This appeal is directed against judgment dated 8th April, 1997 passed by learned Single Judge of this Court whereby the objections of the appellant-State have been dismissed and the award of the arbitrator has been made rule of the Court. The arbitrator had given lumpsum award of Rs. 5,47,238/- plus interest at the rate of 12% per annum from 9-7-1985 to the date of realisation of payment or the date of decree whichever is earlier, in favour of the respondent-claimant. 2. The facts in brief are that vide agreement No. 8 of 1981-82 the work of construction of Civil Hospital building at Una (Block A) was allotted to the claimant. The agreement contained arbitration clause i.e., Clause No. 25. As usual dispute arose between the parties and the matter was referred to the arbitrator for adjudication, who has given a non-speaking lumpsum award dated 8-6-1995 and filed it in this Court, which was registered as Civil Suit No. 208 of 1995. 3. On the basis of the objections filed by the State, reply of the claimant and rejoinder of the State learned Single Judge has framed the following issues : (1) Whether the Arbitrator has mis-conducted himself and the proceedings, as alleged ? OPD (2) Whether the award is without jurisdiction, as alleged. If so, its effect ? OPD (3) Whether the award is otherwise invalid as alleged ? OPD (4) Relief. 4. In support of its objections the State has adduced evidence by way of affidavit of Shri S. D. Kaundal, the then Superintending Engineer, 8th Circle, H.P. PWD, Hamirpur, whereas the claimant has not led any evidence and has relied upon his affidavit filed in support of his reply to the objections. 5. Before the learned Single Judge, the learned Assistant Advocate General has confined himself to the following objections : "(i) he has challenged the award on the ground that it is a lumpsum award. (ii) according to him, Claim Nos. 5. Before the learned Single Judge, the learned Assistant Advocate General has confined himself to the following objections : "(i) he has challenged the award on the ground that it is a lumpsum award. (ii) according to him, Claim Nos. 25 to 27 were barred under Clause 10C of the agreement which provided that if contrary claims regarding statutory increase in the minimum wages of labour or other costs of materials, etc., it would be referable to the Engineer-in-Charge, whose decision shall be final and binding on the parties." Relying upon the judgments of the Supreme Court in Union of India v. Jai Narain Misra (AIR 1970 SC 753.), and State of Rajasthan v. Puri Construction Co. Ltd. and another ((1994) 6 SCC 485 = 1995(1) Arb. LR 2.), the learned Single Judge has rejected the first objection holding that, "making of a lump sum award is well within the parameters and jurisdiction of the arbitrator as has been done in this case." The State has not challenged these findings in the present appeal. 6. So far second objection is concerned, the learned Single Judge keeping in view the judgment dated 8-1-1997 passed by Division Bench of this Court while answering the reference made to it in titled Moti Lal v. State of H.P. (Civil Suit No. 151 of 1994.), has held that as per Clause 10C of the agreement the jurisdiction of the Arbitrator is barred in toto in respect of Claim Nos. 25 to 27, which pertain to the claims regarding statutory increase in the minimum wages of labour or other cost of material, etc. as these are referable to the Engineer-in-Chief, whose decision will be final and binding on the parties. Despite these findings, the learned Single Judge has upheld the award on the ground that it is lumpsum award and it is not possible to find out whether the amount of Claim Nos. 25 to 27 is included in it or not. The precise observations of the learned Single Judge are : "Under Claim Nos. 25 to 27, reference has been made to Clause 10C and an amount of Rs. 65,775/-, Rs. 31,252/- and Rs. 1,23,970/- respectively, has been claimed under these claims. However, an amount of Rs. 4,06,294/- has been awarded and it cannot be said with certainty that all these claims have been included in the said lump-sum award." 7. 25 to 27, reference has been made to Clause 10C and an amount of Rs. 65,775/-, Rs. 31,252/- and Rs. 1,23,970/- respectively, has been claimed under these claims. However, an amount of Rs. 4,06,294/- has been awarded and it cannot be said with certainty that all these claims have been included in the said lump-sum award." 7. Further relying upon the judgment of the Supreme Court in State of Andhra Pradesh and another v. R. V. Rayanim, etc. (AIR 1990 SC 626 = 1990(1) Arb. LR 1.), the learned Single Judge has observed in para 13 of his judgment; "13. It is thus clear that there is a lumpsum award and it is not possible to find out as to which claim has been omitted that which included in making the lumpsum award. In such a situation it cannot be said that the arbitrator has travelled beyond his jurisdiction. He has to give reason only in a speaking award. It may be mentioned that since he had not been directed for giving a reasoned award, he has not given any reasons in support thereof and he was not legally enjoined to do so." 8. Similar reasoning has been given for rejecting another objection of the State that claims under Item Nos. 3, 8, 9, 10, 17, 18, 20, 23 and 29 which were admittedly withdrawn during the course of proceedings have been included in the award. Challenging these findings, the learned Advocate General has urged that from the perusal of the impugned award it is clearly discernible that part of the amount of Item Nos. 25 to 27, which were beyond the jurisdiction of the arbitrator was allowed, which vitiates the whole of the award as this amount is not separable from the lumpsum amount of the impugned award. Relying upon the judgments of the Supreme Court Tamil Nadu Electricity Board v. M/s. Bridge Tunnel Constructions and others (AIR 1997 SC 1376 = 1997(2) Arb. LR 1.), the learned Advocate General has argued that the arbitrator was enjoined to exclude Item Nos. 25 to 27 from his lump sum award in view of the clear legal position that as per Clause 10C of the agreement his jurisdiction is barred in respect of these items. Referring to another judgment of the Supreme Court in Union of India v. Jain Associates and another ((1994) 4 SCC 665 = 1994(1) Arb. 25 to 27 from his lump sum award in view of the clear legal position that as per Clause 10C of the agreement his jurisdiction is barred in respect of these items. Referring to another judgment of the Supreme Court in Union of India v. Jain Associates and another ((1994) 4 SCC 665 = 1994(1) Arb. LR 494.), the learned Advocate General has further submitted that since the amount granted in the impugned award against Item Nos. 25 to 27 cannot be separated from the lump sum amount of the award, the whole of the award deserves to be set aside and the case may be remanded to another Arbitrator. 9. On the other hand, learned Counsel appearing for the claimant has supported the impugned judgment. He has submitted that Item Nos. 25 to 27 falling under Clause 10C of the agreement, are arbitrable by the arbitrator. This argument has been raised to be rejected in view of the Division Bench Judgment dated 8-1-1997 passed in a reference made in Civil Suit No. 151 of 1994 titled Moti Lal v. State of H.P. The learned Counsel has also urged that part of the award, which pertains to the items except item Nos. 25 to 27 may be upheld. This submission is also without any force, as it is not discernible from the lump sum amount of the impugned award that how much amount has been given against Item Nos. 25 to 27. 10. After giving our best consideration to the respective contentions of learned Advocate General for the State and the learned Counsel for the claimant, we find substance in the submissions made by the learned Advocate General that from the impugned award it can be made out that a part of the amount of Item Nos. 25 to 27 has been granted by the Arbitrator. At page 5 of the award for Item Nos. 23 to 25 an amount of Rs. 4,06,294/- has been awarded. Even if he has allowed claim of Item Nos. 23, 24 and 28 to 32 in full it will come to Rs. 3,74,988/- and the remaining amount of Rs. 21,306/- is against Item Nos. 25 to 27 for which the arbitrator had no jurisdiction. Since it cannot be said with certainty as to whether the arbitrator has granted only Rs. 21,306/- against Item Nos. 25 to 27 or more or full amount of Rs. 3,74,988/- and the remaining amount of Rs. 21,306/- is against Item Nos. 25 to 27 for which the arbitrator had no jurisdiction. Since it cannot be said with certainty as to whether the arbitrator has granted only Rs. 21,306/- against Item Nos. 25 to 27 or more or full amount of Rs. 2,54,062/- against these items, the whole of the award gets vitiated and deserves to be set aside. 11. The learned Judges of the Supreme Court in Tamil Nadu Electricity Board v. M/s. Bridge Tunnel Constructions and others, (supra) were dealing with almost similar situation as that of the present case wherein the arbitrator had given non-speaking lump sum award without deciding the arbitrability of items mentioned in the claims. In this context the learned Judges have held in para 26 of the judgment : "26. It would thus be clear that the arbitrator cannot clothe himself conclusively with the jurisdiction to decide or omit to decide the arbitrability of a particular item or the claim made by the parties. When a specific reference has been made to the arbitrator and the parties raise the dispute of arbitrability, with the leave of the Court by a direction of the Court in a proceeding under Section 33, he is to decide the arbitrability of the dispute and make a decision while giving reasons in support thereof. The decision of the arbitrator in granting a particular sum by a non-speaking award, therefore, hinges upon the arbitrability of a dispute arising under the contractor or upon a particular item claimed thereunder. He is required to give the decision thereon. The question of decision by implication does not arise since his jurisdiction to decide the dispute on merits hinges upon his jurisdiction to decide the arbitrability of the dispute. In this case, in view of the finding recorded by the Court, which has become final, as referred to earlier, the Arbitrator/Umpire was enjoined to decide the arbitrability of the claims set up by the respondent and disputed by the appellant. Admittedly, the award of the Umpire does not contain any decision on arbitrability of the claims." And in para 35 : "35. We have set out the relevant portions of the award. Admittedly, the award of the Umpire does not contain any decision on arbitrability of the claims." And in para 35 : "35. We have set out the relevant portions of the award. From a reading thereof, it is clear that the Arbitrator had considered the claims made on the basis of escalation and damages, in a non-speaking award of the disputes consisting of arbitrable and non-arbitrable claims. He awarded a lump sum amount of Rs. 70,83,793/-. It is difficult to discern as to what extent the Umpire had considered the admissible and inadmissible claims which he adjudged. In such a situation, it is not possible to discern to what extent he had exercised his jurisdiction visa-vis of the admissible claims and disallowed the non-arbitrable claims. So, it is not clear whether the exercised his authority either beyond his jurisdiction or in abdiction thereof. In either case, it is an error of jurisdiction, the very foundation or his decision." And concluded in para 36 : "36. It is well-settled that in the matter of challenge to the award there are two distinct and different grounds viz., that there is an error apparent on the face of the record and that the arbitrator has exceeded his jurisdiction. In the latter case, the Court can look into the arbitration agreement but under the former it cannot do so unless the agreement was incorporated or cited in the award of evidence was made part of the agreement. In the case of jurisdictional error, there is no embargo on the power of the Court to admit the contract into evidence and to consider whether or not the Umpire had exceeded the jurisdiction because the nature of the dispute is something which has to be determined outside the award, whatever might be said about it in the award or by the arbitrator. In the case of non-speaking award, it is not open to the Court to go into the merits. Only in a speaking award the Court can look into the reasoning in the award and correct wrong preposition of law or error of law. It is not open to the Court to probe the mental process of the arbitrator and speculate, when no reasons have been given by the arbitrator, as to what impelled the arbitrator to arrive at his conclusion. It is not open to the Court to probe the mental process of the arbitrator and speculate, when no reasons have been given by the arbitrator, as to what impelled the arbitrator to arrive at his conclusion. But in the later case the Court, with reference to the terms of the contract/ arbitration agreement would consider whether or not the Arbitrator/Umpire has exceeded his jurisdiction in awarding or refusing to award the sum of money awarded or omitted a consolidated lump sum." It is further held by the learned Judges that once a finding recorded that the Umpire/ Arbitrator has committed error of jurisdiction, two courses are open, namely, either to remit the award to the Umpire/Arbitrator for reconsideration or to set aside the award in toto. 12. In Union of India v. Jain Associates and another (supra), it is held in para 9 of the judgment : "9. It is true that if the bad portion of the award is severable from the good part the Court may set aside the bad part and uphold the rest of the award. But when it hinges upon the state of mind of the Arbitrator or the Umpire, the award being a non-speaking award, it is not reasonably certain as to what part of the award is good and vice-versa. And if such a part cannot be separated then the whole award must be declared as invalid and it would be set aside on the ground of misconduct under Section 30(a) of the Act." 13. Therefore, in view of the our findings that the arbitrator has considered and awarded the claim under Items 25 to 27, which was not within his jurisdiction being barred under Clause 10(C) of the agreement which amount is not separable from the lumpsum amount being not discernible and the ratio of the Supreme Court judgment in Tamil Nadu Electricity Board v. M/s. Bridge Tunnel Constructions and others, referred to hereinabove, we have no hesitation to set aside the award. We are also of the view that in the facts and circumstances of this case, the ratio of the judgment in State of Andhra Pradesh and another v. R. V. Rayanim, etc., (supra) is not applicable. 14. We are also of the view that in the facts and circumstances of this case, the ratio of the judgment in State of Andhra Pradesh and another v. R. V. Rayanim, etc., (supra) is not applicable. 14. The result of above discussion is that there is merit in this appeal and it is accepted, and the impugned judgment dated 8-4-1997 passed by the learned Single Judge in Civil Suit No. 208 of 1995 is set aside. The case is remanded to the arbitrator for fresh decision within a period of four months from the receipt of the records. In the facts and circumstances of this case, more specifically, that the arbitrator, who had given the earlier award stands retired, we appoint Superintending Engineer, Arbitration, Solan as Arbitrator in the present case. The records be sent to him urgently. The award amount, which has been deposited by the appellant and is lying in the fixed deposit in the Registry of this Court is ordered to be returned to the appellant alongwith interest. No. costs. Appeal allowed.