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2012 DIGILAW 1114 (PNJ)

Crompton Greaves Limited v. Punjab State Electricity Board

2012-08-29

A.N.JINDAL

body2012
JUDGMENT A.N. Jindal, J The sole question which has arisen for determination in this case is, “whether it was obligatory on the part of the arbitrator to elaborate the reasons while passing the award?” The case relates to the award dated 21.12.1998 passed under The Arbitration Act, 1940, which was made rule of the court by the Civil Judge (Sr. Division), Patiala on 23.8.2008 and the appeal preferred by it was dismissed by the Additional District Judge, Patiala, on 27.3.2012. The petitioner company vide agreement dated 24.6.1987 had placed the work on the respondent for supply of T.G. Sets and allied equipments, its installation, erection and commissioning with associated civil works for Rohti (2x400 KW TG sets with 10% continuous overload capacity) and Dhariwal (4x750 KW TG sets with 10% continuous overload capacity), Hydro Electric Projects on turn key job basis. On account of the failure to the T.G. Sets, to work properly, due to the defective supply, a dispute arose between the petitioner and the respondent No.1 and as per clause contained in purchase order/agreement, the respondent No.2 was appointed as the arbitrator before whom both the parties put in appearance and filed their statements of claims. Replies and rejoinders were also filed. Both the parties also produced their documents in support of their cases. Thereafter, the arbitrator after applying its judicious mind passed the award of Rs.80 lacs that too without interest in favour of the respondent No.1. However, it was ordered that if the petitioners fail to clear the award amount within three months from the date of award, then respondent No.1 would be entitled to recover interest @ 12% per annum, whereas, the respondent No.1 was also awarded a sum of Rs.12,22,539/- against claims No.1, 5 and 6. It was also held that the petitioner shall adjust a sum of Rs.2 lacs already received by way of bank guarantee of the respondent No.1. If they fail to pay the amount within three moths from the date of the award, the respondent shall be entitled to the interest at the same rate. It was also observed that after adjusting the amount so allowed to the respondent No.1 to the tune of Rs.12,22,539/- plus Rs.2 lacs so allowed on the account of the bank guarantee, the total comes to Rs.65,77,161/- along with interest @ 12% per annum w.e.f. 21.3.1998. It was also observed that after adjusting the amount so allowed to the respondent No.1 to the tune of Rs.12,22,539/- plus Rs.2 lacs so allowed on the account of the bank guarantee, the total comes to Rs.65,77,161/- along with interest @ 12% per annum w.e.f. 21.3.1998. Against the said award, the petitioner has filed the objection before the trial court. The respondent No.1 also filed the objection petition. However, the trial court while dismissing the objection petition made the award as rule of the court. The appellate court also upheld the judgment. Arguments heard. At the very outset, learned counsel for the petitioner, without disputing the authority of the arbitrator and challenging the terms of the agreement, has raised only point that since no reasons were recorded by the arbitrator for awarding a sum of Rs.80 lacs on account of the goods supplied to the respondent No.1, therefore, the arbitrator cannot be said to be acted in a judicious manner. Having considered the contention, the same is devoid of any merit. Although the arbitrator has not given any definite conclusion regarding the award of Rs.80 lacs, but perusal of the award would indicate that after the parties appeared before the arbitrator and set up their rival claims, the arbitrator had accepted certain documents and rejected the others by giving reasons for the same. The terms of the agreement do not call for recording reasons for every award, therefore, it was not obligatory on the part of the arbitrator to record reasons like a judgment, but he has to assess the damages as per his own method and sense of observations. The institution of the arbitration has been recognized as a substitute of judgment and the arbitrator being not judicial minded could not be equated with the judges as to record the reasons. The trial court has placed reliance on the judgment delivered in case State of Punjab and others vs. Aneja Construction Company 2003 (3) Arbitration Law Reporter 117 (P&H) wherein it was held that the arbitrator is not required to give reasons in support of his award. It is only when the terms of the contract require that the Arbitrator should give reasons for the award, it is obligatory for him to give reasons. It is only when the terms of the contract require that the Arbitrator should give reasons for the award, it is obligatory for him to give reasons. In case titled as Markfed Vanaspati & Allied Industries vs. Union of India, reported as 2007 (5) Recent Apex Judgments 152, the award was challenged on the ground that it was a non speaking and does not give reasons in support of the decision reached. In this verdict the Apex Court observed as under :- 12. This Court, in Bijendra Nath Srivastava v. Mayank Srivastava & Others 1995 (1) RRR 313 : (1994) 6 SCC 117 in para 20 at page 133 and para 31 at page 138, observed that the arbitrator is under no obligation to give reasons in support of the decision reached by him, unless the arbitration agreement or deed of settlement so required. If the arbitrator or umpire chooses to give reasons in support of his decision, then it would be open to the court to set aside the award upon finding an error of law. The reasonableness of the reasons given by the arbitrator cannot, however, be challenged. It is not open to the court to look for the reasons and proceed to examine whether they were right or erroneous. The arbitrator is the sole judge of the quality as well as the quantity of the evidence. It will not be for the court to take upon itself the task of being a judge of the evidence before the arbitrator. The Court should approach an award with a desire to support it, if that is reasonably possible, rather than to destroy it by calling it illegal. 15. The decided cases of this Court demonstrate that this Court has consistently taken the view that scope of interference in a non-speaking award is extremely limited. The Court cannot probe into the mental process of the arbitrator. The court should endeavour to support a non-speaking arbitration award provided it adhered to the parties' agreement and was not invalidated due to arbitrator's misconduct. The Apex Court in case Rajendra Construction Company vs. Maharashtra Housing & Area Development Authority & Ors. The Court cannot probe into the mental process of the arbitrator. The court should endeavour to support a non-speaking arbitration award provided it adhered to the parties' agreement and was not invalidated due to arbitrator's misconduct. The Apex Court in case Rajendra Construction Company vs. Maharashtra Housing & Area Development Authority & Ors. AIR 2005 (SC) 3701 observed as under :- (16) In the opinion of this Court, it could not be disputed that in India, it has been ’firmly established’ that it was not obligatory on the Arbitrator or Umpire to record reasons in support of the award when "neither any arbitration agreement nor any deed of submission" required reasons to be recorded. In that case also, it was urged, as has been done in the instant case, that if no reasons are disclosed by the Arbitrator, it would not be possible for the court to find out whether the award passed is in accordance with law. The Court, however, negatived the contention observing that if the parties wanted reasons to be recorded in support of the award to be passed by Arbitrator or Umpire it was open to them to make a provision in the agreement/contract itself to that effect. But in the absence of any stipulation in the contract, the court could not say that Arbitrator was duty bound to record reasons and if reasons are not recorded in support of the award, the award was vulnerable and liable to be set aside or should be remitted to the Arbitrator. According to this court, such an order would amount to virtually introducing by judicial verdict an amendment to the Act. No doubt, if the reasons are recorded by the Arbitrator or Umpire in support of the award, they can be considered by the court and if those reasons disclose an error apparent on the face of the record, the award can be set aside by a competent court of law. But in the absence of such requirement under the agreement itself, the party could not insist for reasons in support of the award nor a court of law can interfere with non speaking award. (20) The present awards are not under the new Act but under the old Act. But in the absence of such requirement under the agreement itself, the party could not insist for reasons in support of the award nor a court of law can interfere with non speaking award. (20) The present awards are not under the new Act but under the old Act. It is, therefore, obvious that they could not have been set aside by the High Court on the ground that they were not supported by reasons and were not speaking awards. The Delhi High Court in case M/s R.G. Desai & Associates (P) Ltd. vs. Sunil Dev, 2006 (2) Arb. L.R. 463 observed that it is not open to the court to exercise jurisdiction under Section 30 to examine what might have gone through the mind of arbitrator and to probe the mental process of reasoning adopted by the arbitrator in arriving at his conclusions. The relevant observations made by the Apex Court in Sunil Dev's case (supra) is reproduced as under :- “7. It may be pointed out that in the case of Purre Helium India (P) Ltd. vs. Oil & Natural Gas Commission, VI (2003) 8 SCC 593 : 2003 (3) R.A.J. 484 , the Supreme Court observed in paragraph 41 thereof that the jurisdiction of the court in interfering with the non-speaking award is limited. It further observed in paragraph 42 that if the claim of the claimant is not arbitrable having regard to the bar/prohibition created under the contract, the court can set aside the award but unless such a prohibition/bar is found out, the court cannot exercise its jurisdiction under Section 30 of the Act. In other words, if there is no such bar to enter upon arbitration then in the case of non speaking award the decision of the arbitrator cannot be interfered with and the scope of interference is extremely limited. In the very same decision, the Supreme Court relying upon its earlier decision in the case of Rajasthan State Mines & Minerals Ltd. vs. Eastern Engg. Enterprises, VII SLT 13 = 1999 (9) SCC 283 : 1999 (3) R.A.J. 326 observed, inter alia, that it is not open to the court to speculate, where no reasons are given by the arbitrator, as to what impelled the arbitrator to arrive at his conclusion. Enterprises, VII SLT 13 = 1999 (9) SCC 283 : 1999 (3) R.A.J. 326 observed, inter alia, that it is not open to the court to speculate, where no reasons are given by the arbitrator, as to what impelled the arbitrator to arrive at his conclusion. It, however, observed that it is not open to the Court to probe the mental process by which the arbitrator has reached his conclusion. A similar observation has been made by the Supreme Court in the case of National Fertilizers v. Puran Chand Nangia, VII (2000) SLT 514 = AIR 2001 SC 53 : 2000 (3) R.A. J. 237 in paragraph 35 wherein the Supreme Court observed as under :- “In law also, the appellant has no case. In the case of non-speaking award, it is not permissible for Court to probe into the mental process of the arbitrator ....” These decisions of the Supreme Court make it clear when there is a non-speaking award, it is not open to the Court exercising jurisdiction under Section 30 of the 1940 Act to examine what might have gone through the arbitrator's mind and to probe the mental process of the reasoning that may have been adopted by the arbitrator in arriving at the conclusion. That being the case, the contention of the learned counsel for the petitioner that no reasons have been given and that there is no basis to support such conclusion arrived at by the arbitrator insofar as claims No.1 to 4 are concerned, does not hold good. Accordingly, this contention is rejected.” As such, the only point raised at this revisional stage does not weigh with the mind of the court. No mistake apparent on the face of the record has been pointed out or detected, condemning the award as illegal and the arbitrator having misconducted. Dismissed.