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2000 DIGILAW 65 (MAD)

N. M. MOHAMMED KHAN v. MURUGAN FISHERIES (P) LTD.

2000-01-14

A.SUBBULAKSHMY

body2000
ORDER O.P. No. 143 of 1996 is filed by the Arbitrator under Section 14(2) of the Arbitration Act, 1940 to receive the award dated 20.4.1995 and pass award filed by him after notice to both the parties. O.P. No. 293 of 1997 is filed by Chowgule & Co. Ltd. for setting aside the award. Application No. 2630 of 1996 is filed by Murugan Fisheries Limited for passing decree in pursuance of the award dated 20.4.1995 passed by the Arbitrator. An agreement was entered into between Murugan Fisheries Limited and Chowgule & Co. Limited for construction and supply of one trawler by the vendor Chowgule House to the purchaser Murugan Fisheries. Chowgule Company agreed to deliver the trawler as per the description and specification and the purchaser also agreed to pay an ex yard price of Rs. 79,74,400 for the trawler which is inclusive of vendors risk insurance charges and survey charges. Clause 14 of that agreement provides for referring to the Arbitrator if any dispute arises and all questions arising out of the interpretations of the agreement shall be referred to the sole arbitration of an Arbitrator mutually agreed upon by the parties whose award shall be final and binding upon the parties. Under Clause 14, the parties mutually agreed that the award passed by the Arbitrator shall be final and binding upon the parties. Accordingly, the matter was referred to the Arbitrator as per the agreement and one M. M. Mohammed Khan, Advocate was appointed as Arbitrator and he passed the award on 20.4.1995. The Arbitrator has stated in the award that he has considered the oral and documentary evidence of both the parties neither side desiring that he should take the assistance of a technical expert from I.R.S. Surveyor, Bombay. Evidently in view of the evidence on record on the technical side of the dispute and hearing the arguments of both sides he passed the award holding that regarding the first prayer in the claim petition, Chowgule & Company (P) Ltd. shall pay to M/s. Sri Murugan Fisheries Ltd., Madras-13 a sum of Rs. 4 lakhs only and the claim regarding the Ruston Engine is rejected and regarding prayers 2 and 3, M/s. Chowgule & Co. (P) Ltd., shall pay to M/s. Sri Murugan Fisheries (P) Ltd., a sum of Rs. 10,000 only per month from 19.12.87 to the date when the above said Rs. 4 lakhs only and the claim regarding the Ruston Engine is rejected and regarding prayers 2 and 3, M/s. Chowgule & Co. (P) Ltd., shall pay to M/s. Sri Murugan Fisheries (P) Ltd., a sum of Rs. 10,000 only per month from 19.12.87 to the date when the above said Rs. 4,00,000 is paid to M/s. Sri Murugan Fisheries (P) Ltd. Chowgule & Company Limited filed O.P. No. 293 of 1997 stating that the Arbitrator has not given any reasons for passing such an award and so, that award passed by the Arbitrator is not sustainable and it has to be set aside. The Supreme Court has held in M/s. Sudarsan Trading Co. vs. Government of Kerala ( AIR 1989 SC 890 = 1989 (2) Arb. LR 6 (SC)) that, "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. In the instant case the Arbitrator has merely set out the claims and given the history of the claims and then awarded certain amount. He has not spoken his mind indicating why he has done what he has done; he has narrated only how he came to make the award. In absence of any reasons for making the award, it is not open to the Court to interfere with the award. Furthermore, in any event, reasonableness of the reasons given by the Arbitrator, cannot be challenged. Appraisement of evidence by the Arbitrator is never a matter which the Court questions and considers. If the parties have selected their own forum, the deciding forum must be conceded the power of appraisement of the evidence. The Arbitrator is the sole Judge of the quality as well as the quantity of evidence and it will not be for the Court to take upon itself the task of being a Judge on the evidence before the Arbitrator. ... Once there is no dispute as to contract, what is the interpretation of that contract, is a matter for the Arbitrator and on which Court cannot substitute its own decision. If on a view taken of a contract, the decision of the Arbitrator on certain amounts awarded is a possible view though perhaps not the only correct view, the award cannot be examined by the Court. If on a view taken of a contract, the decision of the Arbitrator on certain amounts awarded is a possible view though perhaps not the only correct view, the award cannot be examined by the Court. Therefore, the High Court had no jurisdiction to examine the different items awarded clause by clause by the Arbitrator and hold that under the contract these were not sustainable in the facts found by the Arbitrator. ... In the instant case the Court had examined the different claims not to find out whether these claims were within the disputes referable to the Arbitrator, but to find out whether in arriving at the decision, the Arbitrator had acted correctly or incorrectly. This the Court had no jurisdiction to do, namely, substitution of its own evaluation of the conclusion of law or fact to come to the conclusion that the Arbitrator had acted contrary to the bargain between the parties. Whether a particular amount was liable to be paid or damages liable to be sustained, was a decision within the competency of the Arbitrator. By purporting to construe the contract the Court could not take upon itself the burden of saying that this was contrary to the contract and, as such, beyond jurisdiction. It has to be determined that there is a distinction between disputes as to the jurisdiction of the Arbitrator and the disputes as to in what way that jurisdiction should be exercised. There may be a conflict as to the power of the Arbitrator to grant a particular remedy." In P. K. Chinnasamy vs. Superintending Engineer, Execution Circle, Madurai ( AIR 1990 Mad. 347 = 1991 (1) Arb. LR 78 (Mad.)), a Division Bench of this Court has held that, "The Arbitrator is not bound to give a reasoned award. While passing an award, if Arbitrator makes a mistake a law or of fact, not apparent on the face of records, it is not open for challenge. The award is bad only on the ground of error of law on the face of records. An error of law apparent on the face of records means that some erroneous legal proposition, which is the basis of the award, is found expressed in the award itself or in a document actually incorporated or appended thereto, as part and parcel of the award. An error of law apparent on the face of records means that some erroneous legal proposition, which is the basis of the award, is found expressed in the award itself or in a document actually incorporated or appended thereto, as part and parcel of the award. The Court has no jurisdiction to deal judicially with the merits of a case determined by the Arbitrator. It is not the function of the Court to scrutinise the award on merits as if it is sitting in appeal on the verdict of the Arbitrator." In Trustees, Port of Madras vs. Engineering Constructions Corpn. Ltd. ( AIR 1995 SC 2423 = 1995 (2) Arb. LR 332 (SC)), it has been held that, "the Court cannot reappraise the evidence, materials before umpire and come to a different finding of fact." It has been held in Raipur Development Authority vs. Chokhamal Contractors ( (1989) 2 SCC 721 = 1989 (1) Arb. LR 430 (SC)) that, "An award passed under the Arbitration Act is not liable to be remitted or set aside merely on the ground that no reasons have been given in its support except where the arbitration agreement or the deed of submission or an order made by the Court such as the one under Section 20 or Section 21 or Section 34 of the Act or the statute governing the arbitration requires that the Arbitrator or the Umpire should give reasons for the award. This position is firmly established in India. Remitting or setting aside an award solely because it is unreasoned would mean virtually introducing by a judicial verdict an amendment to the Act when it has not been the law for nearly 7 or 8 decades. It is a question of legislative policy which should be left to the decision of Parliament. This position is firmly established in India. Remitting or setting aside an award solely because it is unreasoned would mean virtually introducing by a judicial verdict an amendment to the Act when it has not been the law for nearly 7 or 8 decades. It is a question of legislative policy which should be left to the decision of Parliament. It is significant that although nearly a decade ago the Indian Law Commission submitted its report on the law of arbitration specifically mentioning therein that there was no necessity to amend the law of arbitration requiring the Arbitrators to give reasons, Parliament has not chosen to take any step in the direction of the amendment of the law of arbitration." In the above decision, the Apex Court has observed that in the case of Government contracts, the contract of State or its instrumentality with private contractor, the State or its instrumentality should in public interest ensure that the arbitration clause provides that Arbitrator must give reasons in support of his decision. Counsel for the petitioner in O.P. No. 293 of 1997 relying upon the decision in Shri M. L. Jaggi vs. Mahanagar Telephone Nigam Ltd. and others ( (1996) 2 Supreme 93 = 1997 (Suppl.) Arb. LR 621 (SC)), submitted that if the Arbitrator had not given reasons in his award, the award is liable to be set aside. The decision reported in (1996) 2 Supreme 93 , relates to Indian Telegraph Act and the dispute is with regard to excessive billing under the Indian Telegraph Act. The Supreme Court has observed in the above decision that : "7B. Arbitration of disputes : (1) Except as otherwise expressly provided in this Act, if any dispute concerning any telegraph line, appliance or apparatus arises between the telegraph authority and the person for whose benefit the line, appliance or apparatus is, or has been, provided, the dispute shall be determined by arbitration and shall, for the purpose of such determination, be referred to an Arbitrator appointed by the Central Government either specially for the determination of that dispute or generally for the determination of disputes under this section. (2) The award of the Arbitrator appointed under sub-section (1) shall be conclusive between the parties to the dispute and shall not be questioned in any Court." In Raipur Development Authority and others vs. M/s. Chokhamal Contractors and others (supra), the Supreme Court had held that, "having given our careful and anxious consideration to the contentions urged by the parties, we feel that law should be allowed to remain as it is until the competent legislature amends the law. In the result, we hold that an award passed under the Arbitration Act is not liable to be remitted or set aside merely on the ground that no reasons have been given in its support except where the arbitration agreement or the deed of submission or an order made by the Court such as one under Section 20 or Section 21 or Section 34 of the Act or the statute governing the arbitration requires that the Arbitrator or the Umpire should give reasons for the award. The award need not contain the reasons. It is seen that the decision in that case is based on award of the Arbitrator under the Arbitration Act which itself is founded on an arbitration agreement. So this Court had held that when the agreement in non statutory award between the parties voluntarily entered into did not contain a clause to make a speaking award, the need to make an award with reasons was not necessary. ..... But at the same time it has to be borne in mind that what applies generally to settlement of disputes by authorities governed by public law need not be extended to all cases arising under private law such as those arising under the law of arbitration which is intended for settlement of private disputes. .... But arbitral awards in dispute to which the State and its instrumentalities are parties affect public interest and the matter of the manner in which Government and its instrumentalities allow their interest to be effected by such arbitral adjudications involve larger questions of policy and public interest. Government and its instrumentalities cannot simply allow large financial interests of the State to be prejudicially affected by non-review, non-speaking arbitral awards. Government and its instrumentalities cannot simply allow large financial interests of the State to be prejudicially affected by non-review, non-speaking arbitral awards. Indeed this branch of the system of dispute resolution has, of late, acquired a certain degree of notoriety by the manner in which in many cases the financial interests of Government have come to suffer by awards which have raised eyebrows by doubts as to their rectitude and propriety. It will not be justifiable for Governments or their instrumentalities to enter into arbitration agreements which do not expressly stipulate the rendering of reasoned and speaking awards. Governments and their instrumentalities should, as a matter of policy and public interest - if not as a compulsion of law - ensure that where ever they enter into agreements for resolution of disputes by resort to private arbitrations, the requirement of speaking awards is expressly stipulated and ensured. It is for Government and their instrumentalities to ensure in future this requirement as a matter of policy in the larger public interest. Any lapse in that behalf might lend itself to and perhaps justify, the legitimate criticism that Government failed to provide against possible prejudice to public interest, in regard to the arbitration of disputes concerning the claim against the Government and this Court has emphasized the need for recording reasons in the awards touching the public exchequer. In other words, when the public law element is involved, in a public law remedy, public interest demands that reasons should be given even in the award." It is settled from the above said decisions that reasons are required to be recorded when it affects the public interest. The award passed by the Arbitrator in the case on hand relates to the dispute between two private parties and no public interest is involved. It is not an award touching the public esquire. So, the principles laid down by the Apex Court in Raipur Development Authority vs. Chokhamal Contractors (supra) and Shri M. L. Jaggi vs. Mahanagar Telephone Nigam Ltd. (supra) are not applicable to the case on hand. Following the decision of the Supreme Court reported in Raipur Development Authority vs. Chokhamal Contractors, (supra), I hold that the award passed by the Arbitrator is not liable to be set aside even though he has not stated reasons for passing the award. The application is ordered. O.P. No. 293 of 1997 is dismissed. Following the decision of the Supreme Court reported in Raipur Development Authority vs. Chokhamal Contractors, (supra), I hold that the award passed by the Arbitrator is not liable to be set aside even though he has not stated reasons for passing the award. The application is ordered. O.P. No. 293 of 1997 is dismissed. O.P. No. 143 of 1996 is ordered. Decree is passed in terms of the award passed by the Arbitrator. O.P. No. 293 of 1997 dismissed. O.P. No. 143 of 1996 allowed.