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2004 DIGILAW 379 (CAL)

COAL INDIA LIMITED v. MANISH TRADERS

2004-06-11

D.K.SETH, RAJENDRA NATH SINHA

body2004
D. K. SETH, J. ( 1 ) THIS appeal arises out of a decision dated 7th July 1995 passed by the learned single Judge in Matter No. 262 of 1992. The matter No. 262 of 1992 is related to an application under sections 30 and 33 of the Arbitration Act, 1940 (1940 Act) seeking to set aside the award. The award appears to be a non-speaking one. As rightly submitted by the learned counsel for the respondent the jurisdiction of the Court to interfere with a non-speaking, award is very very limited. Submission on behalf of the appellant: ( 2 ) THE learned counsel for the appellant accepted the said settled proposition of law and contended that a non-speaking award is not sacrosanct. It can be interfered with in certain cases and this is one, which comes within the exception. He has raised two points. One with regard to the existence of the dispute or in other words the arbitrability of the alleged disputes raised before the Arbitrator and other was with regard to the jurisdiction of the Arbitrator in passing the award on the face of the objection taken in the counter-statement filed by the appellant with regard to the no claim certificate (at page 52 of the Paper Book)granted by the claimant-respondent. He had relied on various decisions to support his contention, which we would be referring at appropriate stage. Submission on behalf of the respondent: ( 3 ) OPPOSING the said contention the learned counsel for the respondent had sought to distinguish the scope of the no claim certificate at page 52 of the Paper Book. He had also pointed out that the appointment of the arbitrator was agreed to by the parties and by consent of parties the issues were framed. Therefore, it is no more open to raise the question of arbitrability of the disputes as figured within the issues framed by consent. He has also relied upon series of decisions to which we will be referring at appropriate stage. Issues to be decided: ( 4 ) AFTER having heard the learned counsel for the parties, it appears that the respective counsel had raised various points. We need not address ourselves on all those points so raised. He has also relied upon series of decisions to which we will be referring at appropriate stage. Issues to be decided: ( 4 ) AFTER having heard the learned counsel for the parties, it appears that the respective counsel had raised various points. We need not address ourselves on all those points so raised. In view of the scope of this appeal, we would confine ourselves only to two questions - (1) arbitrability and (2) the jurisdiction based on the no claim certificate. Non-speaking award : Scope of interference by Court: ( 5 ) WE had occasion to deal with such a question with regard to the scope of interference by the Court in respect of a non-speaking award in union of India v. M/s. Kamnip Industrial Gases Ltd. , being APO No. 447 of 1996, disposed of by us on 29th April 2004. 5. 1. A non-speaking award is as much subject to section 30 of the 1940 Act as is a speaking award, however, within the settled principles of law governing interference with non-speaking award by the Court. In case of a non-speaking award, the Court has every right to examine the question of jurisdiction in order to ascertain whether the award is in excess of the reference or beyond the scope of the agreement providing for arbitration. Admittedly, the scope of arbitration is confined within the area where the agreement operates. It cannot exceed the field covered by the agreement. Therefore, in order to examine as to the questions raised in an application under section 30 and 33 of the 1940 Act even in case of non-speaking award, the Court has every'right to examine whether the award is in excess of the agreement or it is perverse. The Court can look into and examine the agreement and the other materials on record for the purpose of exercising its jurisdiction to interfere with a non-speaking award within the limited scope available to the Court. We had occasion to so hold following the settled principles of law as laid down by various decisions referred to in Union of India v. M/s. Kamnip Industrial Gases ltd. , being APO No. 447 of 1996, disposed of on 29th April 2004. 5. 2. On behalf of the respondent, reliance was placed on M/s. Sudarsan Trading Co. v. The Government of Kerala and Anr. , being APO No. 447 of 1996, disposed of on 29th April 2004. 5. 2. On behalf of the respondent, reliance was placed on M/s. Sudarsan Trading Co. v. The Government of Kerala and Anr. , AIR 1989 SC 890 (para 29) where it was held that it is not open to the Court to probe the mental process of the Arbitrator and speculate, where no reasons were given by the Arbitrator, as to what impelled the Arbitrator to arrive at his conclusion. In Hindustan Steel Works Construction Ltd. v. C. Rqjasekhar Rao, (1987) 4 SCC 93 (paras 3 and 4), it was held that only in speaking award the Court can look into the reasoning. These principles have been reiterated in National Fertilizers v. Puran Chand Nagina, (2000)8 SCC 343 (para 34 ). The principle is well settled. But then a non-speaking award is not immune from Court's interference in an appropriate case. The above ratio does not operate as a complete bar as was held in State of Jandk and Anr. v. Dev Dutt Pandit, AIR 1999 SC 3196 at p. 3202 (para 18 ). The Court can interfere in a case even if the award is a non-speaking one where the Umpire travels totally outside the permissible territory and exceeds jurisdiction in making the award, the error goes to the root of jurisdiction. [union of India v. M/s. Kamrup industrial Gases Ltd. (supra) relying upon Jivarajbhai Ujamshi Sheth and ors. v. Chiniamanrao Badqji and Ors. , AIR 1965 SC 214 (para 23) followed in Associated Engineering Co. v. Government of Andhra Pradesh and Anr. , air 1992 SC 232 ]. In order to ascertain the situation, the Court can look into the affidavits and the pleadings of the parties and other materials and orders of the Court through which the reference was made as well as agreement itself [m/s. Kamrup Industrial Gases Ltd. (supra) following the decision in Bunge and Co. v. Dewar and Webb, (1921)8 Lloyds Report 436 (KB) followed in Attorney General for Manitoba v. Kelly, (1922) 1 AC 268 at page 276]. If the Arbitrator wanders outside the contract or the reference, he commits a jurisdictional error. Such an error going to the root of the jurisdiction can be established by looking into the materials outside the award. v. Dewar and Webb, (1921)8 Lloyds Report 436 (KB) followed in Attorney General for Manitoba v. Kelly, (1922) 1 AC 268 at page 276]. If the Arbitrator wanders outside the contract or the reference, he commits a jurisdictional error. Such an error going to the root of the jurisdiction can be established by looking into the materials outside the award. The dispute as to jurisdiction is a matter, which is within the award or outside whatever may be said about it in the award. The ambiguity of the award can, in such cases, be resolved by admitting extraneous evidence. The rationale of this rule is that the nature of the dispute is something, which has to be determined outside and independent of what appears in the award. Such jurisdictional error need to be proved by evidence extrinsic to the award. M/s. Kamrup Gases Ltd. (supra) following M/s. Alppi Parshad and Sons ltd. v. Union of India, AIR 1960 SC 588 and Bunge and Co. (supra ). Similar principle was laid down in Steel Authority of India Ltd. v. J. C. Budharaja, government and Mining Contractor, AIR 1999 SC 3275 . In New India civil Erectors (P) Ltd. v. Oil and Natural Gas Corporation, (1997) 11 SCC 75 : AIR 1997 SC 980 (para 7), it was held that the Arbitrator being the creature of the agreement must operate within the four corners of the agreement and cannot travel beyond it. Therefore, within the settled principles, as discussed above, a non-speaking award can very well be looked into. 5. 3. The learned counsel for the appellant on the other hand relied on P. K. Ramaiah and Co. v. Chairman and Managing Director, National thermal Corporation, 1994 Supp. 3 SCC 126; Union of India v. Popular builders, Calcutta, (2000)8 SCC 1 ; Associated Engineering Co. v. Government of Andhra Pradesh and Anr. , AIR 1992 SC 232 ; New India civil Erectors (P) Ltd. v. Oil and Natural Gas Corporation, AIR 1997 SC 980 ; Rajasthan State Mines and Minerals Ltd. v. Eastern Engineering enterprise, (1999) 9 SCC 283 and Grid Corporation of Orissa Ltd. and Anr. v. Balasore Technical School, AIR 1999 SC 2262 to support his contention. , AIR 1992 SC 232 ; New India civil Erectors (P) Ltd. v. Oil and Natural Gas Corporation, AIR 1997 SC 980 ; Rajasthan State Mines and Minerals Ltd. v. Eastern Engineering enterprise, (1999) 9 SCC 283 and Grid Corporation of Orissa Ltd. and Anr. v. Balasore Technical School, AIR 1999 SC 2262 to support his contention. Since we have already discussed the question relying upon m/s. Kamrup Industrial Gases Ltd, (supra) where most of these decisions were referred to and discussed, we do not think it is necessary to dilate on these decisions any further. Arbitrability : ( 6 ) IN the present case, on the question of arbitrability of the dispute, the learned counsel for the respondent raised contentions : (1) the issues having been framed by consent, the same cannot be re-opened and thus the award cannot be challenged; (2) the objection having not been raised before the Arbitrator, it is not open to the appellant to raise the same in the proceeding under section 30 of the 1940 Act or in the appeal; and (3)the parties having agreed to the passing of award with or without reason, the appellant cannot challenge the non-speaking award. Framing of issues by consent: 6. 1. Framing of issues by consent is only confined to the identification of the area where the dispute exists. It is not a consent with regard to the admissibility of the disputes or the issues framed. The consent given in course of the proceedings with regard to the framing of issues is always subject to sections 30 and 33 of the 1940 Act. Once the issues are framed by consent, it is preposterous to suggest that the award thereon would be outside the purview of. sections 30 and 33 of the 1940 Act. Framing of issues by consent do not foreclose the right of the party to challenge the award on the grounds available to him in law. Therefore, it is very much open to a party to question the arbitrability of the disputes referred. 6. 1. 2. Since by consent the issues were settled, it was sought to be urged on behalf of the respondent that, those issues cannot be re-opened in exercise of jurisdiction under section 30. The contention seems to be fallacious. As we have already discussed the consent related to identifying the areas of dispute. 6. 1. 2. Since by consent the issues were settled, it was sought to be urged on behalf of the respondent that, those issues cannot be re-opened in exercise of jurisdiction under section 30. The contention seems to be fallacious. As we have already discussed the consent related to identifying the areas of dispute. It did not preclude a party to challenge the award under section 30. Therefore, the decision in Gujarat Waiter Supply and sewerage Board v. Unique Erectors (Gujarat) (P) Ltd. and Anr. , AIR 1989 SC 973 (paras 7 and 8) has no manner of application in the present case. Question of objection: 6. 2. Relying on Rashtriya Chemicals and Fertilizers Ltd. v. M/s. Mohindersingh and Co. and Anr. , AIR 1985 Bom. 381 (paras 6, 25 and 28), the learned counsel contended that a party cannot sit back on an objection during the hearing before the Arbitrator and raise it later after finding himself faced with an adverse award since such conduct would amount to acquiescence. But this decision does not apply in this case since the appellant had taken this very objection right from the beginning. In the counter-statement, this was one of the main objections raised. The above decision, therefore, does not help the respondent. 6. 2. 1. The decisions in Star Construction and Transport Co. and Ors. v. India Cements Ltd. , (2001)3 SCC 351 (para 5); Ispat Engineering and Foundry works, B. S. City, Bokarov. Steel Authority of India Ltd. , B. S. City, Bokaro, (2001) 6 SCC 347 (paras 3 and 4) were relied upon by the learned advocate for the respondent to contend that the parties cannot object to adjudication by the Arbitrator of their own choice except, however, as envisaged in section 30 of the 1940 Act. We have already discussed that all awards are subject to section 30, which is supported by the above decisions. Therefore, we need not dilate on this point any further. Challengability of the non-speaking award : 6. 3. The learned counsel for the respondent relied upon S. Harcharan singh v. Union of India, AIR 1991 SC 945 (paras 6 and 7), which supports the view that the Arbitrator is not required to give reasons and, therefore, the award cannot be questioned, on the ground of error on the face of the award. 3. The learned counsel for the respondent relied upon S. Harcharan singh v. Union of India, AIR 1991 SC 945 (paras 6 and 7), which supports the view that the Arbitrator is not required to give reasons and, therefore, the award cannot be questioned, on the ground of error on the face of the award. We have already discussed the question earlier and found that it can be questioned within the limitation/restriction laid down in various decisions. On facts, this decision appears to be distinguishable. Similarly, the decision in Raipur Development Authority and Ors. v. M/s. Chokhamal constructors and Ors. , (1989)2 SCC 721 (para 33) does not apply in the present case. Similarly, the decision in M/s. Neelkantan and Bros. v. Superintending Engineer, National Highways, Salem and Ors. , AIR 1988 SC 2045 (para 2) does not apply in the facts and circumstances of the case. The learned counsel for the respondent has distinguished the decisions cited by the learned counsel for the appellant and contended that those are not applicable in the present case. Jurisdiction : No claim certificate: ( 7 ) IN order to examine the jurisdiction, we may refer to the no claim certificate at page 52 of the Paper Book. This is sought to be distinguished by the learned counsel for the respondent that the effect of this no claim certificate was confirmed only to the operation of the stockyard. Referring to the agreement (page 37 PB) at page 38, the learned counsel for the respondent points out that the agreement was not confined to the stockyard operation alone. It also included transportation. Therefore the claim as was Ipdged (at page 294 Item No. 97 PB) did not relate to stockyard operation for which the no claim certificate was granted. Whether the claim is outside the stockyard operation: 7. 1. We have examined the agreement, the no claim certificate and the claims specified at pages 294-97. The agreement describes to be a contract "to the contractor for transportation and operation of stockyard". It also includes transport by loaded trucks from rail head as well as transport by rail. A careful scrutiny of the agreement clearly shows that this transportation referred to the agreement was all related to the stockyard operation only. Nowhere from the agreement it appears that apart from stockyard operation, it required the contractor to transport goods elsewhere. It also includes transport by loaded trucks from rail head as well as transport by rail. A careful scrutiny of the agreement clearly shows that this transportation referred to the agreement was all related to the stockyard operation only. Nowhere from the agreement it appears that apart from stockyard operation, it required the contractor to transport goods elsewhere. All incidences connected with the stockyard operation were incorporated in the agreement and none of the responsibility flowing from the agreement could be said to be independent of the stockyard operation. As rightly pointed out by the learned counsel for the appellant from pages 294-97 of the Paper book, all of the claims mentioned in Items No. 1 to 4 related to stockyard operation. We have carefully examined the same. We could not find anything, which could persuade us to disagree with the contention raised by the learned counsel for the appellant. At the same time, the learned counsel for the respondent could not point out as to which item did not relate to stockyard operation and was related to transportation. Be that as it may, the transportation mentioned in the agreement was related to the stockyard operation and not independent of it. Therefore, the no claim certificate as was sought to be distinguished by the learned counsel for the respondent does not seem to be distinguishable so as to exclude the claims lodged before the Arbitrator from the scope and effect of the no claim certificate. No claim certificate : Arbitrability: 7. 2. It was the appellant who was disputing that this amount could be claimed by the claimant/respondent after the no claim certificate was issued. Whereas the claimant/respondent was disputing that these claims were very much available under the agreement despite the no claim certificate since being outside the scope thereof. Thus, the dispute was sought to be referred. In such a case, the question of arbitrability is still open when the award is challenged under sections 30 and 33 of the Act and it is very much available to a party to point out that there existed no dispute over which the award could be passed. 7. 2. 1. In P. K. Ramaiah and Co. In such a case, the question of arbitrability is still open when the award is challenged under sections 30 and 33 of the Act and it is very much available to a party to point out that there existed no dispute over which the award could be passed. 7. 2. 1. In P. K. Ramaiah and Co. v. Chairman and Managing Director, national Thermal Corporation, AIR 1994 Supp 3 SCC 126, it was held that after voluntary unconditional written acceptance of payment in full and final settlement of the contract, subsequent claim for further amounts in respect of the same work were held to be not an arbitrable dispute. 7. 3. Having regard to the facts and circumstances of the case, it appears that the dispute, despite assertion by the respondent to the contrary, comes within the scope of stockyard operation covered under the no claim certificate (page 52 PB ). On the face of the no claim certificate, therefore, there is no scope for existence of the dispute, which related to the claims in Items No. 1 to 4 (pages 294-97 PB ). Therefore, there was no arbitrable dispute. Conclusion: ( 8 ) THUS, we find that in effect there existed no dispute. Since the claims so lodged (pages 294-97 PB) could not be said to be outside the scope of no claim certificate or could be a claim for transportation and not for stockyard operation. Therefore, the award passed by the Arbitrator appears to be wholly perverse on the face of the no claim certificate (page 52 PB) and is wholly without jurisdiction which are grounds on which the Court can interfere with a non-speaking award. Order: ( 9 ) IN the result, the appeal succeeds. The application under section 30/33 of the Arbitration Act, 1940 is allowed. The judgment and order appealed against is hereby set aside. The award is set aside. There will, however, be no order as to costs. Urgent xerox certified copy of this Dictated Order be made available to the parties, if applied for. Appeal succeeds