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2002 DIGILAW 435 (GUJ)

STATE OF GUJARAT v. B. B. CHAUHAN

2002-05-10

K.A.PUJ, M.H.KADRI

body2002
M. H. KADRI, J. ( 1 ) THIS First Appeal is filed by the appellant - State of Gujarat against the judgment and order dated 17. 01. 1990 passed by the learned 4th Joint Civil Judge [s. D. ], Vadodara rejecting Civil Misc. Application No. 151 of 1989 filed by the State of Gujarat for setting aside the award made by the Arbitrator on 21. 07. 1989 under Section 33 of the Arbitration Act in the Arbitration Case No. 1 of 1989 and also making the award as a `rule of court in the Special Civil suit No. 434 of 1989. ( 2 ) BY the impugned judgment and order, the learned trial Court passed a decree modifying the award passed by the arbitrator to the extent of reducing the interest for some period. ( 3 ) FOR appreciating the contentions raised in this appeal, it will be appropriate to state few facts pertaining to the disputes raised between the parties. The work of constructing of Up-stream parapet wall on top of earthen dam of Sukhi reservoir project was entrusted to the respondent vide L. C. B. Agreement No. 8/1987-88 and the work order was issued in favour of the respondent vide appellants letter dated 17. 12. 1987 with the time limit of six months from the date of issue of work order. The actual date of commencement of work was 08. 02. 1988 and thus, the work was initially started late by 53 days and even, thereafter, it was alleged by the appellant that the respondent did not maintain proportionate progress of the work to complete the same within the time limit stipulated in the tender agreement. Since the opponents work was very slow, the appellant addressed several letters dated 03. 02. 1988, 24. 03. 1988, 12. 04. 1988, 30. 05. 1988, 12. 07. 1988, 23. 08. 1988 and 29. 10. 1988 for acceleration of the work. It was submitted that upto 16. 06. 1988, the opponent had worked only 10% of the contract work and for that work, the opponent was paid Rs. 54,861=22ps. and since no progress was made in completion of contract work, the appellant terminated the contract on 05. 12. 1988. It is also evident from the record that the respondent has also raised certain disputes with regard to non supply of material, drawings, detailed plans etc. 54,861=22ps. and since no progress was made in completion of contract work, the appellant terminated the contract on 05. 12. 1988. It is also evident from the record that the respondent has also raised certain disputes with regard to non supply of material, drawings, detailed plans etc. and the said grievances were ventilated by the opponent vide its letter dated 02. 02. 1988, 15. 02. 1988, 28. 03. 1988 and 15. 04. 1988. The respondent thereafter made a demand for appointment of an arbitrator vide its letter dated 12. 12. 1988 invoking Clauses 51 and 52 of the agreement. The said demand was reiterated vide its other letters dated 28. 02. 1989, 28. 03. 1989 and 15. 04. 1989. It was the say of the appellant that none of earlier letters including letters dated 12. 12. 1988, 24. 12. 1988, 28. 02. 1989 and 28. 03. 1989 was received by the appellant and copies of those letters were first time received by the appellant along with respondents letter dated 15. 04. 1989, in which the respondent has appointed one Mr. V. D. Patel, Retired, Superintending Engineer, Irrigation Department, Vasundhara Society, Vadodara as an arbitrator. Since the appointment of the arbitrator was not made in accordance with clauses 51 and 52 of the agreement, the said appointment was challenged by the appellant before the Civil Court, Baroda by way of Special Civil Suit No. 111 of 1989. Interim relief granted by the Court in the said proceedings was vacated on 30. 06. 1989 and the arbitrator made an award on 21. 07. 1989. On this date, the Special Civil suit No. 111 of 1989 challenging the appointment of the arbitrator was not finally disposed of and on that count, though the request for adjournment of arbitration proceedings was made by the appellant, the same was not accepted by the arbitrator and ex-parte award was passed by the arbitrator accepting more or less, the entire claim of the respondent. The detailed statement raising the claims on different counts and claims accepted by the arbitrator there against, which is part of the arbitration award, is reproduced herein under: - sr. DESCRIPTION of Claim amount origi- amount no. nally claimed awarded in Rs. in Rs. - 1. Work executed but payment not made by the Department [collection of rubble 400cmt at Rs. 105. DESCRIPTION of Claim amount origi- amount no. nally claimed awarded in Rs. in Rs. - 1. Work executed but payment not made by the Department [collection of rubble 400cmt at Rs. 105. 00 and colle- ction of material bricks bats or metal 50 cmt. for concrete at the rate of rs. 0. 5/- cmt. Rs. 63,500=00 rs. 63,500=00 2. Loss of profit due to not executing this work due to the fault of the department at the rate of loss 20% of about work amounting to Rs. 3. 40 lacs not executed. Rs. 68,000=00 rs. 68,000=00 3. Loss of establishment charge suffered due to the closure of work due to the fault of the department for about 9 months at the rate of Rs. 7,000=00 per month. Rs. 63,000=00 rs. 54,000=00 4. Loss suffered due to advance payment made to the makardams and mis prices for contract work and necessary work due to closure of work rs. 15,000=00 rs. 15,000=00 5. Loss suffered due to advance payment made to the transporting contractor for carting of materials for the work rs. 20,000=00 rs. 20,000=00 6. Payment not made for collection of Kapchi carted on site of work [100 cmt. at Rs. 200. 00/ cmt. Rs. 20,000=00 rs. 20,000=00 7. Payment not made for collection of bricks of 3 lacs carted on site of work at rate of Rs. 500. 00/1000 bricks and sand 300 cmt Rs. 50. 00/cmt. Rs. 1,05,000/- rs. 1,05,000/- 8. Loss of profit suffered at the rate of Rs. 20. 00/ of this much magnitude tender amount for not quating any new work due to commitment of this work [work of about 3 lacs not executed] rs. 1,00,000/- rs. 1,00,000/- 9. Loss of rent suffered by the claimant @ Rs. 4000. 00 per month for six months rs. 24,000=00 rs. 18,000=00 10. Refund of Security Deposit rs. 15,000=00 rs. 15,000=00 11. Cost of Arbitration rs. 20,000=00 rs. 20,000=00 ============= ============== total rs. 5,93,500/- rs. 5,73,500/- --The above arbitration award was filed before the Court of Civil Judge [s. D. ] at Baroda on 25. 07. 1989 and the same was given number as Special Civil Suit No. 434 of 1989. Pursuant to this award, an application was filed by the respondent to make the said award as rule of the court. 5,93,500/- rs. 5,73,500/- --The above arbitration award was filed before the Court of Civil Judge [s. D. ] at Baroda on 25. 07. 1989 and the same was given number as Special Civil Suit No. 434 of 1989. Pursuant to this award, an application was filed by the respondent to make the said award as rule of the court. ( 4 ) THE appellant also, being aggrieved and dissatisfied with the said award, moved an application under Section 33 of the Arbitration Act to set aside the said award passed on 21. 07. 1989 and the said application came to be numbered as Civil Misc. Application No. 151 of 1989. The learned Civil Judge [s. D. ], Baroda passed a consolidated order on 17. 01. 1990 and disposed of the appellants application being Civil Misc. Application No. 151 of 1989 as well as the Special Civil Suit No. 434 of 1989 whereby the appellants application was rejected and the award passed by the arbitrator was made rule of the Court except slight modification in the award in respect of interest. ( 5 ) IN the above background of the facts, the present appeal is filed by the appellant - State of Gujarat before this Court. Mr. B. Y. Mankad, learned AGP appearing for the appellant-State, has contended that though the appeal is filed against the consolidated order passed by the learned Civil Judge [s. D. ], Baroda, challenge made by the appellant is not only against the merits of the award, but also against the rejection of the appellants application for setting aside the award. He has fairly submitted that initially, when the present appeal is filed before this Court, a Civil Revision Application No. 1117 of 1990 was filed before this Court challenging the order passed by the learned Civil Judge [s. D. ], Baroda in Civil Misc. Application No. 151 of 1989 and the said Civil Revision Application was summarily rejected, possibly on the ground that the appellant has filed First Appeal against the said order and in view of the fact that the appeal is maintainable against the composite order. The said Civil Revision Application was not seriously contested and no further proceeding was taken against that order of rejection. The said Civil Revision Application was not seriously contested and no further proceeding was taken against that order of rejection. It is also a matter of fact that during the pendency of the above first appeal and during the course of arguments, the appellant has filed separate first appeal before this Court very recently challenging the order passed by the learned Civil Judge [s. D. ], Vadodara in Civil Misc. Application No. 151 of 1989 along with Civil Application making a prayer for condonation of delay in filing the First Appeal. However, the said Civil Application was rejected by this very bench as it was moved after a period of 12 years. Thus, there was no decision of this Court so far merits of the order while rejecting the appellants application for setting aside the arbitration award and hence, it was submitted by Mr. Mankad that the present appeal may be considered by this Court for the purpose of setting aside the arbitration award as well as for the purpose of merits of the above First Appeal. ( 6 ) MR. Mankad has further submitted that such composite appeal is permissible. For this purpose, he has relied upon the judgment of the Calcutta High Court in the case of Fateh Chand Murlidhar vs. Juggilal Kamlapat reported in A. I. R. 1955 Calcutta 465 wherein it is held that `where after an award had been filed, and application was made to the Court for setting it aside and it set it aside, dismissing the application for a judgment on the award by the same order, an appeal against the order which contains both the directions is competent. A separate appeal from the order rejecting the application for a judgment on the award is not required. 6. 1 mr. Mankad has further placed reliance on the judgment of the Madhyapradesh High Court in the case of Jaykumar Jain and Ors. vs. Om Prakash and Ors. reported in A. I. R. 1970 Madhya Pradesh 119, wherein it is held that `in the case of a composite order, by which a court refuses to set aside an award and also passes a decree in accordance with its terms, the order refusing to set aside the award and the decree are both appealable as the provisions contained in Sections 17 and 39 are not mutually exclusive. Therefore, the fact that a decree has been passed does not preclude an appeal against the order refusing to set aside the award. If the order is set aside, the decree which is founded on it would lapse and consequently it cannot operate as a bar to the appeal against the order. A fortiori the making of two separate orders does not, take away the right of appeal given under Section 39 (1) (vi) to a person aggrieved by an order setting aside or refusing to set aside an award. 6. 2 mr. Mankad has also relied upon the judgment of Lucknow bench of Allahabad High Court in the case of Mt. Ishwar Dei vs. Chhedu reported in A. I. R. 1952 Allahabad 802, wherein it is observed that `where order of the Court is a composite order which on the one hand dismisses the objections of the defendant to the award and on the other hand adopts the award and directs that a decree should be framed in terms of the judgment passed by it, the order is to be treated to be an order refusing to set aside an award and appeal is maintainable against the order under Section 39 (1) (vii) of the Act. ( 7 ) MR. Mankad has further submitted that the arbitrator has committed an error in passing the arbitration award especially when the Civil Suit challenging the appointment of the arbitrator was pending before the Civil Court. He has further submitted that since the arbitrators very authority was under challenge, he should have waited till outcome of the legal proceedings initiated to challenge his appointment. Since this was not done and he passed arbitration award in undue haste on 21. 07. 1989, the same would amount to legal misconduct and the said award is required to be quashed and set aside. ( 8 ) MR. Mankad has further submitted that the arbitrator was not entitled to pass any award by invoking Clauses 51 and 52 of the agreement. As a matter of fact, the arbitrator has violated the procedure laid down in Clauses 51 and 52 and has also not complied with the conditions enumerated therein. ( 8 ) MR. Mankad has further submitted that the arbitrator was not entitled to pass any award by invoking Clauses 51 and 52 of the agreement. As a matter of fact, the arbitrator has violated the procedure laid down in Clauses 51 and 52 and has also not complied with the conditions enumerated therein. The alleged notices, as referred to in the award, were not received and as a matter of fact, there was specific reference in correspondence emanated from the appellant to the arbitrator that the said notices were concocted and were subsequently created only with a view to justify the respondents action for the appointment of the arbitrator. In such a situation, the arbitrator should not have exercised powers and passed any award against the appellant. Mr. Mankad has further submitted that even otherwise, it was not open for the arbitrator to invoke Clauses 51 and 52 of the agreement, as the agreement was already terminated on 05. 12. 1988 as the contractor was not in a position to complete the work order within the stipulated time. In support of his submission, he has relied on the decision of the Bombay High Court in the case of Union of India vs. Ajit Mehta and Associates, Pune and Ors. reported in A. I. R. 1990 Bombay 45, it is held that `in spite of a full and final settlement of the claim, the arbitration clause in the contract may subsist where the party invoking it alleges that in fact there was no accord and satisfaction for some reasons such as the final bill was submitted or receipt was given under coercion, mistake or misrepresentation, without prejudice, under protest etc. For then that itself becomes a dispute arbitrable under the clause. However, when there is no such allegation made when invoking the arbitration clause, and it is invoked simpliciter, it will have to be held that the contract itself had come to an end and with it the arbitration clause which was a part and parcel of it. It is also held in the said judgment that `the impugned award is null and void as appointment of arbitrator was itself without jurisdiction. It is also held in the said judgment that `the impugned award is null and void as appointment of arbitrator was itself without jurisdiction. The award can be challenged at any stage and bar of limitation under Article 119 does not prevent party from raising such objection or prevent from ignoring it as non est or using its suo motu power to set it aside. The Court has further held that `the arbitrator is held to be guilty of legal misconduct if in spite of there being specific prohibition in the contract against entertainment of certain claims, such claims are granted by the arbitrator. If the relevant documents and necessary papers are not before the arbitrator, then such an award can only be described as one with no evidence and is liable to be set aside. 8. 1 mr. Mankad has further relied upon the decision of the Apex Court in the case of Waverly Jute Mills Co. Ltd. vs. Raymon and Co. (India) Pvt. Ltd. reported in A. I. R. 1963 SC 90 wherein, it is held that `an agreement for arbitrations is the very foundation on which the jurisdiction of the arbitrators to act rests, and where that is not in existence at the time when they enter on their duties, the proceedings must be held to be wholly without jurisdiction. And this defect is not cured by the appearance of the parties in those proceedings, even if that is without protest, because consent cannot confer jurisdiction. ( 9 ) MR. Mankad has further submitted that the trial Court has also committed an error in disposing of appellants application for setting aside the ex-parte award as well as the respondents suit for making the arbitration award as `rule of the Court by a consolidated order. This type of course is not open for the trial Court especially when serious disputes were raised against the appointment of the arbitrator as well as the arbitrator has passed the ex-parte award in undue haste, without hearing other party to the agreement. Mr. Mankad has relied on the judgment of the Supreme Court in the case of Madan Lal [dead] by his legal representative vs. Sunder Lal and Anr. Mr. Mankad has relied on the judgment of the Supreme Court in the case of Madan Lal [dead] by his legal representative vs. Sunder Lal and Anr. reported in A. I. R. 1967 SC 1233, wherein it is held that `it is clear from Section 17 of the Arbitration Act that an application for setting aside the award is contemplated therein and it is only when no such application has been made within the time allowed or if such an application has been filed and has been rejected that the Court proceeds to pronounce judgment in terms of the award. The Act, therefore, contemplates the making of an application to set aside an award and the grounds on which such an application can be made are to be found in Section 30. The grounds on which an application can be made for setting aside the award are (a) that an arbitrator or umpire has misconducted himself or the proceedings, (b) that an award has been made after the issue or an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under Section 35, or (c) that an award has been improperly procured or is otherwise invalid. ( 10 ) MR. Mankad has then submitted that the arbitrator was appointed by the respondent, who was a retired Superintending Engineer and from the tenor of the award, it appears that he passed the award as per the instructions of the respondent, as virtually the entire claim of the respondent was accepted by the arbitrator. The award, therefore, suffers from not only legal misconduct, but it was also based on personal knowledge of the arbitrator. In such a situation, the award is required to be quashed and set aside. In support of this submission, Mr. Mankad has relied on the judgment of Apex Court in the case of Dewan Singh vs. Champat Singh and Ors. reported in A. I. R. 1970 SC 967, wherein it is held that `the proceedings before the arbitrators are quasi-judicial proceedings. They must be conducted in accordance with the principles of natural justice. The parties to the submission may be in the dark as regards the personal knowledge of the arbitrators. There may be misconceptions or wrong assumptions in the mind of the arbitrators. If the parties are not given opportunity to correct those misconceptions or wrong assumptions, grave injustice may result. 10. The parties to the submission may be in the dark as regards the personal knowledge of the arbitrators. There may be misconceptions or wrong assumptions in the mind of the arbitrators. If the parties are not given opportunity to correct those misconceptions or wrong assumptions, grave injustice may result. 10. 1 mr. Mankad has lastly submitted that there were glaring errors in the award and the award was made in such an exorbitant way, that it hardly deserves any approval from the Court. He has further submitted that the arbitrator has not at all tried to verify the claims presented by the respondent and without any verification of the facts and figures, the award was passed by the arbitrator. Mr. Mankad has further submitted that the tender amount for the work in question was Rs. 4,29,124=10 and cement was to be provided by the appellant and cost of cement was fixed at Rs. 2,33,274=60ps. The balance amount of labour, material to be provided by respondent including the profit on the part of the respondent was determined at the rate of Rs. 2,56,849=50ps. Against this amount, the appellant has paid the sum of Rs. 54,861=22 ps. for the work done by the respondent as per third and final bill prepared by the appellant. Thus, balance amount was to the extent of Rs. 2,01,988=28ps for which no work was done. As against which, the claim of Rs. 5,93,500=00 was made and the arbitrator has awarded the amount of Rs. 5,73,500=00. Over and above this, there were several discrepancies found in the award. As far as claim no. 1 is concerned, the arbitrator has awarded the amount of Rs. 83,500=00 for the work done and not measured. The final measurement was already done by the appellant and the amount of final bill was Rs. 54,861=22ps against which the payment of Rs. 49,592=00 was made in two running amount bills. The same was not at all taken into consideration. As far as, the claim no. 2 is concerned, the arbitrator has awarded a sum of Rs. 68,000=00 in the statement of account and loss of profit due to non-execution of work because of the fault of the appellant was worked out at the rate of 20% of the work amounting to Rs. 3,40,000=00. As far as, the claim no. 2 is concerned, the arbitrator has awarded a sum of Rs. 68,000=00 in the statement of account and loss of profit due to non-execution of work because of the fault of the appellant was worked out at the rate of 20% of the work amounting to Rs. 3,40,000=00. As a matter of fact, while making discussion on this point in the body of the award, the figure was written at Rs. 83,500=00. As far as claim no. 3 is concerned, the arbitrator has awarded the amount of Rs. 54,000=00, as against the claim of the respondent of Rs. 63,000=00 on account of loss of establishment charges suffered due to closure of the work for about nine months at the rate of Rs. 7,000=00 per month. In the body of the award, the arbitrator has mentioned the period of closure as three months instead of nine months and awarded the amount of Rs. 56,000=00 for the closure of work for eight months at the rate of Rs. 7000=00 per month. As far as claim no. 6 is concerned, the arbitrator has awarded a sum of Rs. 20,000=00 on account of payment not made for collection of kapchi carted on the site. However, in the body of the award, it was mentioned that the amount of Rs. 56,000=00 was awarded for 100 cmt. Kapchi at the rate of 200=00 per cmt. As far as the claim no. 8 is concerned, the arbitrator has awarded a sum of Rs. 1,00,000=00 to the respondent because the respondent could not take up any other work because of his involvement in the work order of the appellant. As a matter of fact, there is no such practice or precedent. The arbitrator has totally misconducted the proceedings as the respondent was not called for the work for which he had tendered his claim and was successful in getting the award in his favour. Due to all these reasons, Mr. Mankad has submitted that it is very apparent on the face of it that the arbitrator has misconducted the arbitration proceedings and has gone as per the say of the respondent. Since the trial Court has not considered all these points, the decree passed in pursuant to the said award is absolutely illegal, unlawful and, hence, it is required to be quashed and set aside. Since the trial Court has not considered all these points, the decree passed in pursuant to the said award is absolutely illegal, unlawful and, hence, it is required to be quashed and set aside. ( 11 ) THE grounds raised by Mr. Mankad were seriously contested by Mr. Dayani, learned advocate appearing for the respondent. ( 12 ) MR. Dayani has submitted that the scope of the present appeal is not at par with the scope of the appeal under Section 96 of the Code of Civil Procedure. He has submitted that the scope of the present appeal is very limited and that too, it is as per the provisions contained in Section 30 of the Arbitration Act. Section 30 contains the grounds for setting aside the award, which read as under:section 30 : Grounds for setting aside award:an award shall not be set aside except on one or more of the following grounds: (A) that an arbitrator or umpire has misconducted himself or the proceedings; (B) that an award has been made after the issue of an order by the court superseding the arbitration or after the arbitration proceedings have become invalid under Section 35; (C) that an award has been improperly procured or it is otherwise invalid. Mr. Dayani has submitted that the arbitrator has neither misconducted himself nor the proceedings. He has further submitted that the arbitrator has not passed the order after issuance of any order passed by the Court superseding the arbitration or after the proceedings have become invalid under Section 35 of the Act. He has further submitted that there is no allegation to the effect that the award has been improperly procured or it is otherwise invalid. With regard to the alleged termination of the agreement on 05. 12. 1988, Mr. Dayani has submitted that the same would not invalidate the claim made by the respondent or on that count, the arbitration proceedings cannot be held to be invalid. In support of his submission, he has relied upon the decision of the Supreme Court in the case of Damodar Valley, Corporation vs. K. K. Kar reported in A. I. R. 1974 SC 158 wherein, it is held that `a repudiation by one party alone does not terminate the contract subsists for the determination of the rights and obligations of the parties and the arbitration clause also survives. This is not a case were the plea is that the contract is void, illegal or fraudulent etc. in which case, the entire contract along with the arbitration clause is non est, or voidable. Where the dispute between the parties is that the contract itself does not subsist either as a result of its being substituted by a new contract or by rescission or alteration, that dispute cannot be referred to the arbitration as the arbitration clause itself would perish if the averment is found to be valid. ( 13 ) ). Mr. Dayani has further submitted that the challenge to appointment of the arbitrator cannot be sustained in view of the fact that injunction granted earlier was vacated and, thereafter, the arbitrator proceeded with the arbitration proceedings and ultimately, the award was passed. Due to passing of the arbitration award, the suit challenging appointment of the arbitrator itself has become infructuous and was disposed of on that count. Mr. Dayani has further submitted that despite several notices issued on the appellant, no one has participated in the arbitration proceedings and hence, it cannot be said that the arbitrator has passed an ex-parte order, which is said to be in violation of principles of natural justice. Mr. Dayani has also submitted that since the arbitrator has decided the matter on material placed before him and the facts stated in the statement of the claim, which were not controverted by the appellant, it is subsequently not open for the appellant to raise any grievance against the award of the arbitrator in this proceeding. With regard to the judgment and order passed by the trial Court, Mr. Dayani has submitted that both the proceedings namely, Civil Misc. Application No. 151 of 1989 as well as Special Civil Suit No. 434 of 1989 were consolidated with the consent of the parties and they were not seriously objected before the Trial court. Even after the judgment and order passed by the trial Court, two separate legal remedies were resorted to by the appellant, i. e. , one by filing the present appeal and secondly, by filing Civil Revision Application before this Court. After rejection of Civil Revision Application wherein the challenge was made against the rejection of the appellants application for setting aside the ex-parte award, it is not open for the appellant to agitate the said issue in the present appeal. After rejection of Civil Revision Application wherein the challenge was made against the rejection of the appellants application for setting aside the ex-parte award, it is not open for the appellant to agitate the said issue in the present appeal. Even the First Appeal, which was recently filed by the appellant before this Court raising grievances against rejection of its application for setting aside the ex-parte award, has been dismissed by this Court on the ground of limitation. Thus, taking any view of the matter, the said issue cannot be re-agitated in the present appeal and it is also barred by principle of res-judicata. Mr. Dayani has also submitted that the challenge to the award on merits is not permissible in the present proceedings as the scope of the present appeal is very limited. In support of his submission, Mr. Dayani has placed reliance on the judgment of the Apex Court in the case of Puri Construction Pvt. Ltd. vs. Union of India reported in A. I. R. 1989 SC 777, wherein it is held that `when a Court is called upon to decide the objections raised by a party against an arbitrator award, the jurisdiction of the Court is limited, as expressly indicated in the Act and it has no jurisdiction to sit in appeal and examine the correctness of the award on merits. mr. Dayani has also relied on the judgment of the Supreme Court in the case of S. Harcharan Singh vs. Union of India reported in A. I. R. 1991 SC 945 wherein, it is held that `in a case where contractor is claiming payment at enhanced rate for the additional work required to be done and if the arbitrator on the basis of interpretation of term of the contract, does not accept the claim full but partly allows the said claim, the award of the arbitrator can not be vitiated by an error of jurisdiction. mr. Dayani has further relied on the judgment in the case of M/s. Naraindas R. Israni vs. Union of India reported in A. I. R. 1993 Delhi 78 wherein it is held that `an arbitrator is not required to give a detailed judgment just like a civil court. What is expected of the arbitrator is simply this much that he must give out the trend of his thought process. What is expected of the arbitrator is simply this much that he must give out the trend of his thought process. Hence, where there is no detailed break-up justifying the amounts allowed by the arbitrator, it will not amount to misconduct and on that ground the award given by arbitrator is not liable to be set aside. ( 14 ) ). Mr. Dayani has further submitted that the learned trial Court has rightly not interfered with the award of the arbitrator and, for this purpose, he has relied on the judgment of this Court in the case of State of Gujarat and Anr. vs. M/s. Vir Vijay construction Company reported in 1994 (1) G. L. R. 119 wherein, it is held that `the arbitrator in not required to give reasons in details. The award can be set aside only on the ground of error of law on the face of it. Civil court does not sit in appeal over the award and review the reasons assigned by the arbitrator. The award can also not be interfered with if two views are possible and the arbitrator accepts one of them. The Civil Court can set aside the award if the arbitrator has misconducted himself or has acted contrary to or gone beyond the terms of the reference. mr. Dayani, while justifying the judgment and order of the learned trial Court has relied on the judgment of this Court in the case of Oil and Natural Gas Corporation vs. Essar Steel Limited reported in 2000 (4) G. L. R. 3652, wherein it is held that `the award of the arbitrators in absence of any cognizable misconduct or recognized excess of jurisdiction, the trial Court has rightly passed the impugned order making the award of the arbitrators rule of the court and resultant challenge against it before us in this appeal is not only fruitless, not only substanceless, but totally devoid of merits and, therefore, only the fate it deserves is the dismissal at the threshold. mr. mr. Dayani has also placed reliance on the decision of the Apex Court in the case of Indu Engineering and Textiles Ltd. vs. Delhi Development Authority reported in A. I. R. 2001 SC 2668, wherein it is held that `this Court, while dealing with the power of Courts to interfere with an award passed by arbitrator, had consistently laid stress on the position that an arbitrator is a Judge appointed by the parties and as such the award passed by him is not to be lightly interfered with. mr. Dayani has also placed reliance on the decision of the Supreme Court in the case of Maharashtra State Electricity Board vs. Sterilite Industries (India) and Anr. reported in A. I. R. 2001 SC 2933, wherein it is held that `unless the error of law sought to be pointed out by the petitioners in the instant case is patent on the face of the award neither the High Court nor the Supreme Court can interfere with the award. The exercise to be done by examining clause 14 (ii) of the contract entered into between the parties, construing the same properly and thereafter applying the law to it to come to a conclusion one way or the other, is too involved a process and it cannot be stated that such an error is apparent or patent on the face of the award. Whether under the context of the terms and conditions of a contract, a stipulation in the form and nature of cl. 14 (ii) operates as a special provision to the exclusion of Section 73 of the Contract Act is a matter of appreciation of facts in a case, and when the decision thereon is not patently absurd or wholly unreasonable, there is no scope for interference by Courts dealing with a challenge to the award. ( 15 ) ON the basis of the aforesaid facts and circumstances as well as decisions cited by him, Mr. Dayani has submitted that the judgment and decree passed by the trial Court is required to be confirmed and no interference is called for by this Court so far as making the award of the arbitrator as a `rule of the Court. Since the arbitrator has neither committed any misconduct nor the award has been improperly procured nor it was otherwise invalid, the trial Court has rightly confirmed the award. Since the arbitrator has neither committed any misconduct nor the award has been improperly procured nor it was otherwise invalid, the trial Court has rightly confirmed the award. Looking to the nature of the scope of First Appeal under Section 39 (1) (vii) of the Arbitration Act, this Court should not interfere with the judgment and order passed by the trial Court. ( 16 ) WE have heard Mr. Mankad, learned AGP appearing for the appellant and Mr. Dayani for Mr. Acharaya, learned advocate appearing on behalf of the respondent at length. We have gone through the facts and evidence on record. The learned advocates of both the parties have also taken us through the record and proceedings of the entire case and after perusing the pleadings of the parties as well as after considering all the necessary and relevant documents touching the subject matter of the appeal as well as authorities cited by both the parties, we are of the view that the impugned judgment and order passed by the learned trial Court calls for interference of this Court. ( 17 ) IT is rather strange and shocking to observe that the manner and method in which the arbitrator is appointed, despite the appointment of the arbitrator being under challenge, and despite the fact that the arbitrators attention being drawn to the noncompliance of the terms and conditions of clauses 51 and 52 of the agreement, conducting ex-parte proceedings and their culmination in the award based on complete non application of mind and resulting into gross miscarriage of justice, rejection of the appellants application for setting aside the ex-parte award and making the award as the rule of the Court in a quite astonishing manner raise very serious doubts and suspicions about the entire transactions. It is apparent on the face of the record that the respondent has master minded the whole plan of robing the appellant - State Government, the arbitrator, instead of remaining neutral or impartial, gave quite imaginary award in favour of the respondent, the concerned officials of the State Government chose to remain rather aloof or indifferent to the arbitration proceedings and the trial Court has put its seal without proper examination or evaluation of the points at issue. The cumulative effect of all these things is that the respondent has come out as an ultimate beneficiary not only at the cost of the State exchequer but also at the costs of equity, fair play and justice. ( 18 ) FROM the facts stated hereinabove, this Court is of the view that the arbitrator should have verified and/or carefully examined as to whether proper notices were served on the appellant and due procedure has been followed prior to his appointment as the arbitrator. The facts on record further warrant that the arbitrator should have waited till the final out come of the suit wherein his appointment as arbitrator was challenged. The fact situation further demands that before passing any ex-parte award, the arbitrator should have minutely and meticulously examined the claim of the respondent. One can understand that they claimant will never restrict his claim, but the deciding authority should always take due care and caution. Here, the arbitrator has not taken any care whatsoever. Whatever was stated in the statement of claim was believed to be gospel truth and the claim was virtually accepted in its entirety, in spite of the fact that the tender price was of Rs. 4,90,124=10ps. Cement worth Rs. 2,33,274=60ps. was to be provided by the appellant. The work was carried out by the respondent only to the extent of 10% for which he was already paid. The contract was terminated for not carrying out the work within the stipulated period, despite issuance of several notices by the appellant. Loss on profit was was claimed on account of non-execution of the work not undertaken by the respondent. Several discrepancies were found in the figures mentioned in the statement as well as in the body of the award. All these points, which assumed much significance had neither drawn the due attention of the arbitrator nor the trial Court. It is for this reason that this Court comes to a conclusion that the arbitrator has committed legal misconduct and that the impugned award has been improperly procured. We have undertaken this exercise only because all the proceedings referred to earlier in this judgment were either prematurely terminated or they were terminated merely on technicalities or on the ground of delay or on the ground of pendency of this first appeal. We have undertaken this exercise only because all the proceedings referred to earlier in this judgment were either prematurely terminated or they were terminated merely on technicalities or on the ground of delay or on the ground of pendency of this first appeal. Whatever may be the reasons, since there was no decision on merits, the question of res judicata does not arise. Since the composite judgment and order was passed by the trial Court and that too without any application of mind, the appellant can certainly raise this issue in the present appeal and challenge the order of refusal to set aside the ex-parte award. ( 19 ) THE view which we are taking is further fortified by the recent judgment of the Supreme Court in the case of M/s. Sikkim Subba Assocation vs. State of Sikkim reported in A. I. R. 2001 SC 2062. In this judgment, the Apex Court has had no hesitation to set aside the award of the arbitrator, as affirmed by the District Judge, insofar as it purports to award damages to the tune of Rs. 37,75,00,000=00 in favour of the appellants, as wholly uncalled for and illegal. Before arriving at this conclusion, the Honble Court referred to and relied upon its earlier judgment in the case of M/s. Alopi Parshad and Sons Ltd. vs. Union Of India reported in A. I. R. 1960 SC 588, wherein it is observed that the award may be set aside on the ground of an error on the face thereof, when in the award or in any document incorporated with it, as for instance, a note appended by the arbitrator stating the reasons for the decision wherein the legal propositions which are the basis of the award are found to be erroneous. While emphasizing the position that "misconduct" in Section 30 (a) of the Act comprises legal misconduct, the Supreme Court held it to be complete in itself when the arbitrator was found to have, on the face of the award, arrived at a decision by ignoring very material and relevant documents which throw abundant light on the controversy to help a just and fair decision or arrived at an inconsistent conclusion on his own finding. The Apex Court has further observed that it is also, by now, well settled that an arbitrator is not a conciliator and his duty is to decide the disputes submitted to him according to the legal rights of the parities and not according to what he may consider it to be fair and reasonable. Arbitrator was held not entitled to ignore the law or misapply it and cannot also act arbitrary, irrationally, capriciously or independently of the contract. The Court has further observed that Courts of law have a duty and obligation in order to maintain purity of standards and preserve full faith and confidence in alternate dispute redressal method of arbitration. When on the face of the award, it is shown to be based upon a proposition of law which is unsound on findings recorded which are absurd or so unreasonable and irrational that no reasonable or right thinking person or authority could have reasonably come to such a conclusion on the basis of the materials on record or the governing position of law to interfere. ( 20 ) HAVING regard to the facts and circumstances of the case and after having given our serious thoughts to the propositions of law propounded by the Supreme Court, we are of the view that the conclusions in the award are found seriously vitiated on account of gross misreading of the materials on record as well as due to conspicuous omission to draw necessary and lawful inferences. We are also of the view that the mere reference to the documents or material on record, or a cryptic observation that all those materials have been considered is no substitute by itself for proof of such positive consideration. We are also of the opinion that the manner in which the arbitrator has chosen to arrive the figure of the awarded amount, not only demonstrates perversity of approach, but per se proves flagrant violation of the principles of law governing the award of calculating damages for loss of profit and other things. As a result of this finding, we do not have slightest hesitation in our mind in setting aside the impugned award of the arbitrator dated 21. 07. 1989 as affirmed by the learned Trial Court, vide its judgment and order dated 17. 01. 1990, as wholly uncalled for and illegal. As a result of this finding, we do not have slightest hesitation in our mind in setting aside the impugned award of the arbitrator dated 21. 07. 1989 as affirmed by the learned Trial Court, vide its judgment and order dated 17. 01. 1990, as wholly uncalled for and illegal. The present appeal is accordingly allowed and the judgment and decree passed by the learned trial Court rejecting the appellants application for setting aside the award and making the award as rule of the court, is hereby quashed and set aside. . ( 21 ) IT is hereby made clear that at the time of granting stay against the execution of the decree, this Court has directed the appellant to deposit an amount of Rs. 3,00,000=00 and the respondent was permitted to withdraw the said amount on a condition to repay the said amount immediately with interest at the rate of 18% per annum in case the appellant succeeds in this appeal. The respondent was also directed to file an undertaking to this effect. Since the respondent has already withdrawn the said amount and has also filed an undertaking to this effect before this Court, the respondent is hereby directed to repay the amount of Rs. 3,00,000=00 along with interest at the rate of 18% per annum for the period from the date of withdrawal till the date of actual payment to the appellant within a period of 15 days from the date of receipt of certified copy of the judgment or from the date of receipt of writ of this Court by the trial Court. ( 22 ) THE appeal is accordingly allowed. We also award cost of Rs. 2,000=00, which is to be paid by the respondent to the appellant along with the payment of the above amount. Decree to be drawn accordingly. .