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2017 DIGILAW 828 (JK)

Union of India v. Pawan Kumar Gupta

2017-09-11

ALOK ARADHE, B.S.WALIA

body2017
JUDGMENT : Aradhe, J. 1. In this appeal under Section 39 of the Arbitration Act, 1940 (hereinafter to be referred to as the “Act”), the appellant has assailed the validity of judgment dated 11.04.2005 by which the objections preferred by it under Section 30 read with Section 33 of the Act have been rejected by the learned Single Judge and the award passed by the Arbitrator dated 28.07.1995 has been made rule of the Court. 2. Facts giving rise to the filing of the instant appeal briefly stated are that a contract agreement was executed between the appellant and the respondent for construction of OTM accommodation at Udhampur. However, during the subsistence of the contract, certain disputes arose between the parties. Thereupon, in September, 1993, in pursuance of clause 70 of the Agreement executed between the parties, the matter was refereed for arbitration. Thereafter, the Arbitrator passed award dated 28.07.1995. Thereupon, an application under Section 30 read with Section 33 of the Arbitration Act for setting aside the award was filed by the appellant. The aforesaid application was dismissed by the learned Single Judge vide order dated 11.04.2005. The learned Single Judge has inter alia held that the award being non-speaking does not call for any interference as the Arbitrator is the judge of the parties appointed by their choice and his decision is binding upon them unless it is shown that the Arbitrator has travelled beyond the agreement. It has further been held that there is no express clause in the agreement which prohibits the grant of aforesaid claim of the respondent, therefore, the Arbitrator cannot be said to have travelled beyond the provisions of the agreement in awarding the claim. Accordingly, application filed by the appellant under Section 30 read with Section 33 of the Arbitration Act was dismissed and the award was made rule of the Court. 3. Mrs. Sindhu Sharma learned ASGI for the appellant submitted that the learned Single Judge ought to have appreciated that the award passed by the Arbitrator is non-speaking and is perfunctory and suffers from the vice of non application of mind and on this ground alone, the award is liable to be set aside. In support of the aforesaid submissions, reference has been made to a decision of Hon’ble Supreme Court in Anand Brothers Private Limited vs. Union of India and others, (2014) 9 Supreme Court Cases 212. In support of the aforesaid submissions, reference has been made to a decision of Hon’ble Supreme Court in Anand Brothers Private Limited vs. Union of India and others, (2014) 9 Supreme Court Cases 212. On the other hand, learned counsel for the respondent has submitted that the aforesaid decision has no application to the facts situation of the case as the aforesaid decision has been referred in the context of Clause 70 of the Agreement which was incorporated in the standard form of agreement in the year 1986, whereas the contract in question pertains to the year 1982. It is further submitted that clause 17 of the contract agreement empowers the Arbitrator to pass a non-speaking award. It is also submitted that merely because an award is non-speaking, the same would not be bad in law. 4. We have considered the submissions made by learned counsel for the parties and have perused the record. From the perusal of the record of the arbitrator, it is evident that the dispute to the arbitration itself has been referred in the month of September 1993 in pursuance of clause 70 of the agreement. The agreement is also on record. Relevant extract clause 70 of the agreement executed between the parties reads as under: “70. Arbitration: All disputes, between the parties to the Contract (other than those for which decision of the CWE or any other person is by the Contract expressed to be final and binding) shall, after written notice by either party to the Contract to the other of them, be referred to the sole arbitration of an Engineer Officer to be appointed by the authority mentioned in the tender documents. ……………………………………………………………………………………………… ………………………………………... The Arbitrator shall give his award within a period of six months from the date of his entering on the reference or within the extended time as the case may be on all matters referred to him and shall indicate his findings, along with sums awarded separately on each individual item of dispute …………………………………………………………………………………………………………………………………………” 5. Thus, it is evident that under clause 70 of the agreement, duty was enjoined upon the arbitrator to indicate his findings while awarding the sums. The Supreme Court in Anand Brothers? Thus, it is evident that under clause 70 of the agreement, duty was enjoined upon the arbitrator to indicate his findings while awarding the sums. The Supreme Court in Anand Brothers? case (supra) has held that the conclusion arrived at by the arbitrator has to be supported by reasons on the basis of which one can logically describe the process as tantamount to recording a finding. It has further been held that the conclusion supported by reasons would constitute a finding. 6. Supreme Court in the case of Indian Rare Earths Limited vs. Unique Builders Ltd., AIR 2015 Supreme Court 3137 by placing reliance on the Constitutional Bench decision of the Supreme Court in the case of Raipur Development Authority etc vs. M/S Chokhamal Contractors etc, AIR 1990 SC 1426 while considering the scope of Section 30 of the Act has held that if the agreement between the parties requires the arbitrator to give reasons in support of his decision, then he is under an obligation to assign the reasons and in case the arbitrator passes an award, the same can be set aside by the Court. Even otherwise, the order passed by a quasi-judicial authority must require application of mind. In the case of S.N. Mukherjee v. Union of India, (1990) 4 SCC 594 , the Supreme Court has held that people must have confidence in the judicial or quasi judicial authorities. While emphasizing the need for assigning reasons, it was held that giving of reasons minimizes the chances of arbitrariness and hence, it is an essential requirement of the rule of law. In the case of Secretary and Curator, Vitoria Memorial Hall v. Howrah Ganatantrik Nagrik Samity and others, (2010) 3 SCC 732 , it has been held by the Supreme Court that reason is the heartbeat of every conclusion. Absence of reasons renders the order indefensible/unsustainable particularly when the order is subject to further challenge before a higher forum. It has further been held that recording of reasons is a principal of natural justice. It ensures transparency and fairness in decision making. Similar view has been taken by the Supreme Court in B.A. Linga Reddy etc. vs. Karnataka State Transport Authority and others, AIR 2015 Supreme Court 767. 7. It has further been held that recording of reasons is a principal of natural justice. It ensures transparency and fairness in decision making. Similar view has been taken by the Supreme Court in B.A. Linga Reddy etc. vs. Karnataka State Transport Authority and others, AIR 2015 Supreme Court 767. 7. Under Clause 70 of the agreement executed between the parties, the Arbitrator is required to give his findings which necessarily implies that he has to record his conclusions by reasons which has not been done in the instant case. The aforementioned aspect of the matter has not been appreciated by the learned Single Judge. In the result, the award passed by the arbitrator cannot be sustained in the eye of law in view of law laid down by the Supreme Court in the case of Indian Rare Earths’s case supra. Therefore, the order passed by the learned single Judge as well as award passed by the arbitrator is hereby set aside and quashed. The matter is remitted to the Arbitrator to hear the parties afresh and to pass a speaking award in terms of clause 70 of the agreement executed between the parties. Let the aforesaid exercise be carried out by the arbitrator within a period of four months from today. Needless to state that the competent authority shall be at liberty to nominate the arbitrator in terms of arbitration agreement to adjudicate the dispute between the parties The amount deposited by the appellant before the Registrar Judicial of this Court shall be refunded to the appellant within one week from today. 8. To the aforesaid extent, the appeal is disposed of.