Karnataka High Court
Dakshina Kannada Sahakari Sakkare ... vs N. Narayana Shetty on 25 May, 2004
Equivalent citations: 2004(3)ARBLR5(KAR), 2004(4)KARLJ275
Author: Ram Mohan Reddy
Bench: Ram Mohan Reddy
JUDGMENT Ram Mohan Reddy, J.
1. The appellant, being aggrieved by the judgment and decree dated 18-8-2001 passed in Arbitration Suit No. 2 of 2001 (Arbitration Case No. 6 of 1987), on the file of I Additional Civil Judge (Senior Division) and Chief Judicial Magistrate, Mangalore (for short, the 'Civil Court'), has preferred this appeal under Section 39(1) of the Arbitration Act, 1940 (for short, the 'Act').
2. Facts, in brief are as follows:
The appellant a Co-operative Society registered under the Karnataka Co-operative Societies Act, called for tenders for execution of 14 items of civil works, for construction of sugar factory at Brahmavara. The appellant accepted tender of the respondent for 6 items of work. The appellant entered into 6 separate agreements in respect of the tendered items of work, with the respondent, the details of which are as under:
SI. No. Nature of work Agreement Number Estimated amount
1.
Construction of main factory building DKS/CWP/166/483/ 82-83 Rs. 20,00,000/-
2. Construction of spray ponds, hot and cold water channels and spray pump house DKS/177/601/82-83 (6-8-1982) Rs. 6,15,100/-
3. Construction of molasses tank foundation building DKS/178/602/82-83, dated 6-8-1982 Rs. 1,00,683/-
4. Construction of 'C' type quarters 6 buildings DKS/176/602/82-83, dated 1-1-1983 Rs. 9,20,967.60
5. Construction of 'F' type quarters 8 buildings DKS/173/681/82-83, dated 1-1-1983 Rs. 9,90,131.20
6. Construction of sugar godown DKS/173/681/82-83, dated 9-2-1983 Rs. 9,36,796.22 The total value of the contract under the aforesaid six contracts was Rs. 55,63,578/-
3. The dates on which the construction to be commenced; the completion date and the actual date of completion are tabulated as hereunder:
Commencement date Completion date Actual Completion date I. Construction of Main Factory Building, etc. 3-3-1982 3-3-1983 (12 months) January 1985 II.
Constructions of Spray ponds, hot and cold water channels and Spray Pump House 1-10-1982 1-5-1983 (6 months) January 1985 III.
Construction of Molasses Tank Foundation 8-11-1982 8-5-1983 (6 months) June 1984 IV.
Construction of 'C' type quarters - 6 buildings 1-2-1983 1-9-1983 (7 months) December 1984 V. Construction of 'F' type quarters - 8 buildings 20-12-1982 20-6-1983 (6 months) July 1984 VI.
Construction of Sugar Godown 10-2-1983 10-7-1983 (5 months) May 1986 (Stopped from 4-3-1985 till March 1986)
4. The parties are at variance as regards the reasons for completion of the construction of the aforesaid items of work beyond the stipulated date. Though the works were completed and the factory commenced production during the year 1935, the appellant did not settle the claims of the respondent and therefore, invoking Clause 19 of the agreement, the respondent addressed a letter dated 4-2-1987 to the Director of Sugar, Bangalore to resolve the disputes and stated a claim for Rs. 18,66,546.96 with interest at the rate of 18% p.a. The Director of Sugar did not respond to the letter dated 4-2-1987 and therefore, the respondent was compelled to issue a notice dated 9-8-1987 through his Counsel to the appellant, despite which no efforts were made to settle the claim. Left with no other alternative, the respondent filed an application under Section 20 of the Act before the Civil Court on 2-11-1987 which was numbered as A.C. No. 6 of 1987.
5. The appellant on notice, entered appearance, resisted the application by filing its statement of objections denying the material allegations and specifically contended that the Director of Sugar, Bangalore, being seized of the dispute, as an Arbitrator, in accordance with Clause 19 of the contract, the application for appointment of Arbitrator by the Civil Court was not maintainable.
6. In the premise of the pleadings of the parties, the Civil Court framed issues and by order dated 29-11-1989 held Clause 19 of the contract provided for arbitration and directed the parties to select the Arbitrator of their choice. The appellant being aggrieved by the said order, preferred a Civil Revision Petition No. 1814 of 1989 before this Court and obtained an interim order of stay, during pendency of the said petition.
7. This Court by order dated 14-11-1996 dismissed the said C.R.P. No. 1814 of 1989. After the dismissal of the CRP, the Civil Court, with the consent of both the parties, appointed one Sri K. Vasudeva, retired engineer as an Arbitrator and by an order of reference dated 6-2-1993 directed the Arbitrator to arbitrate on the disputes between the parties relating to the construction of Sugar factory building and to submit the award on or before 25-6-1993 and fixed a fee of Rs. 1,000/- tentatively.
8. The Arbitrator after affording reasonable opportunities to the parties and on appreciating the documentary evidence laid before it, passed an award dated 13-2-1995 and filed the same into the Civil Court on 28-2-1995. By the award, the total value of the contract was arrived at Rs. 75,23,573.33/-, entitling the respondent to a balance sum of Rs. 14,60,466.28 with pre and pendente lite interest at the rate of 18% p.a. i.e., from 9-8-1987 to 13-2-1995 and future interest at the rate of 14% p.a. from 13-2-1995 until decree.
9. The appellant on 19-4-1995 filed I.A. No. 9, dated 15-4-1995 under Sections 30 and 33 of the Act to set aside the award on the ground that the Arbitrator had committed misconduct and that the award was improperly procured, as also that the award was passed beyond the stipulated period. The appellant on 4-9-1995 filed I.A. No. 10 under Order 11, Rule 1 read with Section 151 of the Code of Civil Procedure. The Civil Court by its order dated 17-11-1997 rejected I.A No. 10. The said rejection was questioned by the appellant in C.R.P. No. 164 of 1998 before this Court which was disposed of by an order dated 16-3-1998 with an opportunity to the appellant to make necessary application under Order 11 of the CPC if so advised. On 3-12-1997, the appellant filed I.A. No. 11 under Section 33 of the Act and on 24-7-1998 filed I.A. No. 12 under Order 11, Rule 1 of the CPC. The Civil Court dismissed both I.A. Nos. 11 and 12 by a common order dated 28-6-1999.
10. In view of the appellant having filed I.A. No. 9 under Sections 30 and 33 to set aside the award of the Arbitrator, Rule 7 of the Karnataka High Court Rules (Notification No. Spl. 22/63, dated 29-8-1963) was applicable and therefore, the Civil Court by its order dated 5-3-2001 directed that the Arbitration Case No. 6 of 1987 be registered as an arbitration suit. Accordingly, the said case was registered as Arbitration Suit No. 2 of 2001. The Civil Court thereafter framed the following issues:
1. Whether the respondent/defendant proves that the Arbitrator appointed herein exceeded his jurisdiction in recording the findings on the relevant aspects urged before him?
2. Whether this Court has got jurisdiction?
3. Whether the petition is maintainable?
4. Whether there are any errors apparent on the record?
5. Whether the findings recorded by the Arbitrator while passing the award needs interference by this Court?
6. What order?
11. The appellant, on 16-4-2001 filed interlocutory application under Order 14, Rule 5 numbered as I.A. No. 13, which, the Civil Court dismissed by an order dated 20-6-2001. Thereafter, on 27-6-2001, the appellant filed another I.A. under Order 13, Rule 4 read with Section 151 of the CPC, which was numbered as I.A. No. 14. The said I.A. came to be dismissed by the Civil Court by its order dated 5-7-2001 with an observation that the document mentioned therein can be looked into at the hearing of the case on its merits.
12. The Civil Court appreciating the pleadings of the parties and the documentary evidence on record, dismissed I.A. No. 9 and made the award the rule of the Court by its judgment and decree. The appellant being aggrieved by the same has preferred this appeal.
13. Having heard Sri Gopal Hegde, learned Counsel for the appellant and Sri Uday Holla, learned Senior Counsel for the respondent, perused the impugned judgment and decree and records, the only question for determination in this appeal is whether the findings of the Civil Court calls for interference, in the facts, and circumstances of the case?
14. We shall now proceed to consider the contentions of the parties. The award is questioned on two main grounds, namely, that it is "otherwise invalid" under Clause (c) of Section 30 and that there is "no arbitration agreement" under Section 33 of the Act.
15. The first and foremost contention of the appellant is that there exists no arbitration clause in the contract resulting in the award being null and void. Although no such contention was raised before the Civil Court or the Arbitrator, it is sought to be pressed for the first time in this appeal. Dilating on the said contention, the learned Counsel would draw our attention to Clause 19 of the contract, which reads as under:
"19. All disputes regarding this contract except in cases where the Architects decision is final and binding shall be referred to the Additional Registrar of Co-operative Societies/Director of Sugar, Bangalore".
16. According to the appellant, the said clause does not state that the Additional Registrar of Co-operative Societies/Director of Sugar, Bangalore, shall act as an Arbitrator nor that his decision is final and binding between the parties, muchless prescribe a procedure to be followed by the Arbitrator.
17. It is noticed from the records that the appellant did not object to the respondent lodging a claim on 4-2-1987 before the Director of Sugar, treating Clause 19 of the contract as an arbitration clause, with a suggestion to change the Arbitrator to a technical person on making due amends to the said clause in the contract. The appellant in its counter-filed in A.C. No. 6 of 1988, while denying the claims of the respondent admitted Clause 19 to be an arbitration agreement and denied the jurisdiction of the Civil Court to refer the dispute to another Arbitrator, that since the proceedings were pending before the Director of Sugar. Para 7 of the counter-statement reads:
"7. It is admitted that the petitioner raised a dispute and requested the Director of Sugar, Government of Karnataka, Bangalore to resolve the dispute for arbitration as provided under Clause 19 of the contract of agreement and this respondent has given full details of their case and the matter is still pending before the Arbitrator. The allegation in the petition para 5 that the Director of Sugar has no power to arbitrate is false. In fact the Arbitrator has called for the answer to the petitioner's claim and this respondent has given the detailed answers to the Arbitrator for adjudication and the matter is pending enquiry. The allegation that the Arbitrator has not sent any information regarding the same is false".
18. The Civil Court's order dated 29-11-1988 directing resolution of the disputes arising out of and under the contract, by an Arbitrator though questioned by the appellant in C.R.P. No. 1814 of 1989 before this Court, was not on the ground that there was "no arbitration agreement". The said order of the Civil Court is final and binding, between the parties in view of the dismissal of the CRP.
19. The Constitution Bench of the Supreme Court in Waverly Jute Mills Company Limited v. Raymon and Company (India) Private Limited, , observed thus - "Now an agreement for arbitration 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 this proceedings, even if that is without protest, because it is well-settled that consent cannot confer jurisdiction. But in such a case, there is nothing to prevent the parties from entering into a fresh agreement to refer the dispute to arbitration while it is pending adjudication before the Arbitrators, and in that event, the proceedings thereafter, before them might be upheld as referable to that agreement and the award will not be open to attack as without jurisdiction.
20. The observation of the Supreme Court in Khardah Company Limited v. Raymon and Company (India) Private Limited, AIR 1962 SC 1810, in the circumstances is apposite:
"We agree that when a contract has been reduced to writing we must look only to that writing for ascertaining the terms of the agreement between the parties but it does not follow from this that it is only what is set out expressly and in so many words in the document that can constitute a term of the contract between the parties. If on a reading of the document as a whole, it can fairly be deduced from the words actually used therein that the parties had agreed on a particular term, there is nothing in law which prevents them from setting up that term. The terms of a contract can be express or implied from what has been expressed. It is in the ultimate analysis a question of construction of the contract. And again it is well-established that in construing a contract it would be legitimate to take into account surrounding circumstances".
There can be no dispute with regard to the principles laid down in Mallikarjun v. Gulbarga University, (2003)3 Arb. LR 579.
21. In view of the admission of the appellant, that Clause 19 is an arbitration clause, the appellant cannot be allowed to approbate and reprobate and resile from its earlier stand. The positive assertion of the appellant that the Director of Sugar is empowered to arbitrate on the disputed claims, sufficiently establishes that there was consensus-ad-idem amongst the parties while drawing up Clause 19 of the contract to be an arbitration clause. If truly the said clause was not an arbitration clause, the appellant ought to have raised the said plea in its counter. In the established facts of the case, we are of the considered opinion that the contention of the appellant that there is no arbitration clause in the contract is but a specious plea, which deserves to be rejected.
22. The next contention of the appellant is that the reference to the Arbitrator was with regard to only one contract, that of work of main factory building (civil) and machine foundations quoted at Rs. 29,00,000/- and not in respect of the other five contracts. This plea, at the threshold, itself, deserves to be rejected. The claims put forth by the respondent, in his letter dated 4-2-1987 to the Director of Sugar; the legal notice dated 9-8-1987 addressed to the appellant; the petition under Section 20 of the Act; the order dated 29-11-1988 of the Civil Court; all relate to claims under the 6 contracts, and additional works in terms of the said contracts. The objections of the appellant in the counter-statement as well as the counter-claim put forth are in relation to the claims. This plea of the appellant stands rejected.
23. The appellant has found fault with the directions of the Arbitrator to the parties to file their respective claims and counter-claims, as being beyond the scope of reference. The learned Counsel would make submissions with regard to the scope of Section 8 and that of Section 20 of the Act. It is true that while Section 8 of the Act is in respect of appointment of an Arbitrator, Section 20 deals with making of a reference of the dispute to arbitration. Reliance is placed on the ruling of the Madhya Pradesh High Court in Union of India through General Manager, South Eastern Railway, Calcutta v. S. V. Krishna Rao, AIR 1979 MP 49 (sic) and the decision of the Supreme Court in Union of India v. Sri Om Prakash, .
24. The Madhya Pradesh High Court held that the purposes of Sections 8 and 20 of the Act are altogether different. In Sri Om Prakash's case, supra, the Supreme Court answered in the positive, the question as to whether the Court had no jurisdiction after appointing an Arbitrator under Section 8(2) of the Act, to proceed further to make an order referring the disputes to the Arbitrator.
25. In Orissa Mining Corporation Limited v. Prannath Vishwanath Rawlley, , the Supreme Court held that when the amount has been specified in the plaint and when the reference is confined to the claim, the Arbitrator will have to restrict his award only to the claim.
26. The Supreme Court in Union of India v. G.S. Atwal and Company (Asansole), , observed that the Arbitrator had no jurisdiction to unilaterally enlarge the scope of reference and render a non-speaking award on that basis. The jurisdiction of the Arbitrator is founded upon the agreement between the parties, who are bound by the decision of the Arbitrator to the extent of the agreement.
27. The Supreme Court in the case of Rajasthan State Mines and Minerals Limited v. Eastern Engineering Enterprises and Anr., , held that where the reference to the Arbitrator is solely based upon the agreement between the parties and no other specific issue which would confer jurisdiction on the Arbitrator to go beyond the terms of the contract, is referred to him, the Arbitrator, is bound by the terms of the contract.
28. In the case of Associated Engineering Company v. Government of Andhra Pradesh, , the Supreme Court observed thus:
"If the Arbitrator commits an error in the construction of the contract, that is an error within his jurisdiction. But, if he wanders outside the contract and deals with matters not allotted to him, he commits a jurisdictional error. Such error going to his jurisdiction can be established by looking into material outside the award".
The aforesaid observation was followed by the Supreme Court in its decision in the case of Steel Authority of India Limited v. J.C. Budharaja, Government and Mining Contractor, .
29. Here in the instant case, it will bear repetition to state that the respondent made a claim for Rs. 18,66,546.96/- in his letter dated 4-2-1987 addressed to the Director of Sugar, in terms of Clause 19 of the Contract, so also in the legal notice dated 9-8-1987 and the application under Section 20 of the Act before the Civil Court. However, in the claim petition before the Arbitrator, the respondent claimed, in addition, a sum of Rs. 35,00,000/- towards compensation, overhead charges of Rs. 15,77,000/- and profit of Rs. 10,51,000/-. The Arbitrator rejected the additional claims as also some of the other items of the claims while awarding a sum of Rs. 14,60,466.28/- and interest.
30. In addition it is useful to notice Clause 6 of the First Schedule to the Act, which contemplates a procedure by which the Arbitrator could call upon the parties to state their claims and counter-claims:
"6. The parties to the reference and all persons claiming under them shall, subject to the provisions of any law for the time being in force, submit to be examined by the Arbitrators or umpire on oath or affirmation in relation to the matters in difference and shall, subject as aforesaid, produce before the Arbitrators or umpire all books, deeds, papers, accounts, writings and documents within their possession or power respectively, which may be required or called for, and do all other things which, during the proceedings on the reference, the Arbitrators or umpire may require".
31. It is not in dispute that the order of reference of the disputes arising out of and under the contracts, to arbitration is one under Section 20 of the Act. The order does not specify the points of reference, but states in unmistakable words as "the disputes between the parties relating to the construction of the Sugar Factory Building".
32. In the facts and circumstances set out supra it would be traversity of justice to accept the contention of the appellant that the direction of the Arbitrator to the parties to file claims and counter, would tantamount to travelling beyond the scope of reference and thus a misconduct.
33. It is next contended by the appellant that the Arbitrator being a creature of the contract travelled beyond the scope of the contract, as there was total absence of evidence to establish additional work, which claims were beyond the four corners of the contract. Reliance was placed upon the aforesaid rulings of the Supreme Court, in support of the said contention.
34. Sri Udaya Holla, learned Senior Counsel for the respondent pointed out to Clause 5 found in the annexure termed "definitions", annexed to the contract which reads as under:
"5. The contractor shall carry out all subsidiary and allied works like compound, site development, etc., at the tendered rates and rates for extra items decided for the main work, if directed by the architect".
35. This clause is not exhaustive of the words classified subsidiary and allied but is inclusive. The respondent in terms of the said clause is bound to carry out construction of such works as directed by the architect. This clause when read in conjunction with arbitration agreement, Clause 19 of the contract, referred to supra it is reasonable to conclude that the respondent is entitled to lay a claim in respect of items of work disputed by the appellant. The admitted fact that no separate agreements were entered into between the parties for the subsidiary or additional works is in itself a circumstance going against the appellant. One another important fact that requires to be considered, which we would do in the later part of the judgment is that the actual estimated value of the 6 items of work on the date of tender was Rs. 55,63,578/- while the appellant in its "works certificate", certified the revised estimated cost of the actual works completed by the respondent as on 19-6-1986 at Rs. 72,64,000/-. The contention of the appellant that the claims for additional works were beyond the terms of the contract has to necessarily fail.
36. Sri Gopal Hegde, learned Counsel for the appellant, would contend that respondent having completed the works beyond the stipulated period, the Arbitrator ought not to have awarded revised rates and by doing so has exceeded his jurisdiction. The learned Counsel would point out to Clauses 2, 5 and 6 of the contract, stipulating the period of completion of works to be strictly observed by the respondent also with regard to seeking of extension of time for completion of the work, which decision to grant or refuse, was to be final. Clause 6 relates to the issuance of a final certificate after the completion of all the works.
37. The respondent claimed revised rates in respect of Item 1 that is construction of factory building, for work done beyond agreement period that is 3-3-1983 at Rs. 8,02,923.30/- on the ground that he was prevented due to breach of contract by the appellant in completing the works by 3-3-1983, The respondent relied upon several correspondence between the parties detailing the reasons for the delay. Although a show-cause notice dated 28-6-1982 was issued by the appellant to the respondent, no action in furtherance thereof was taken and was abandoned. With regard to Item 6 Re-construction of Sugar Godown, the respondent sought for revised rate for work done after stoppage at Rs. 56,301.77/-.
38. A strange unexplained conduct of the appellant needs serious consideration. As on 19-6-1986 the appellant issued a "work certificate" of even date, certifying that the respondent had completed certain percentage of works as on the said date and that the total value of all work as per revised estimated cost was Rs. 72,64,000/-. The said document is not denied by the appellant. The work certificate is extracted as under:
"This is to certify that Sri N. Narayana Shetty, Contractor, Hallady, Harkady Post, Udupi Taluk, Dakshina Kannada was entrusted with the following works in construction of our Factory during the years 1982-83 to 1985-86.
Sl.No. Name of the work Revised estimate of Rs. in lakhs % of work completed
1.
(a) Main Factory Building(b) Machinary Foundation Rs. 29.00 99%
2.
Construction of Spray Pond, Hot and Cold Water Channels and Pump House Rs. 12.15 99%
3. Construction of Sugar Godown Rs. 9.37 95%
4. Construction of Molasses Tank Foundation Re. 1.00 100%
5.
(a) Construction of 'C' Type Quarters (b) Construction of 'F' Type Quarters Rs. 19.12 99%
6. Other works like Clearance of site and Temporary Structure Rs. 2.00 99% The contractor has completed the above works as mentioned above during the years 1982-83 to 1985-86".
The value of work tendered by the respondent was Rs. 55,63,578/-, while the revised estimated cost was Rs. 72,64,000/-.
39. Therefore, the appellant itself having employed revised rates for the works completed by the respondent, cannot now turnaround and question the claim for revised rates for the aforesaid two works that is Items 1 and 4. Moreover the Arbitrator has concluded that the total value of the work done by the respondent was Rs. 75,23,513/-. The difference between the revised estimated rate arrived at by the appellant and that by the Arbitrator is Rs. 2,59,513/-. The learned Counsel was not able to point out which of the items of extra work exceeded 25% of the original works by reason of which Clauses 12 and 13 of the contract was applicable and which were not considered by the Arbitrator. In our considered view it cannot be said that the Arbitrator exceeded in his jurisdiction in awarding revised rates. The learned Senior Counsel would rely upon the decision in National Fertilizer v. Puran Chand Nangia, , wherein the Apex Court while dealing with the construction of the clause regarding total quantity of the work which may vary upto ± 25% on either side disentitled the contractor for any extra payment on this account. Taking judicial notice of the concept of variation being common feature of work contract and referring to line of decisions of the Apex Court, held that such a clause was applicable to a case where the value of the sum total of the additions and deletions exceeded 25% of the contract price and was independent for the purpose of finding out ± 25% variation to be pooled together. We do not see how the decision applies to the facts of this case.
40. The next contention advanced by Sri Gopal Hegde, the learned Counsel for the appellant is that the Arbitrator committed a misconduct in not making a speaking/reasoned award though the parties specifically sought for a reasoned award. It is a fact that in the prayer column of the petition under Section 20 of the Act, the respondent sought for a specific direction to the Arbitrator to make a speaking award, but the Civil Court by its order dated 28-11-1988 implidely refused the said prayer while directing the Arbitrator to make his award. So also in the order of rererence dated 6-2-1993, the Civil Court did not direct the Arbitrator to make a speaking award.
41. The learned Counsels for the parties submitted that the law on the said subject is well-settled. In the light of the well-settled principles of law we consider it unnecessary to cite the long list of decisions but will refer to a few of them hereafter.
42. In Rajasthan State Mines and Minerals Limited's case, supra, the Supreme Court observed thus:
"It is well-settled law that the Arbitrator is the creature of the contract between the parties and hence, if he ignores the specific terms of contract, it would be a question of jurisdictional error which could be corrected by the Court and for that limited purpose agreement is required to be considered for deciding whether the Arbitrator has exceeded his jurisdiction. Reference to the terms of contract is a must".
43. In Orissa Mining Corporation Limited's case, supra, the Supreme Court held thus: "When an agreement is filed in Court and order of reference is made, then he claim as a result of the order of reference is limited to a particular relief and the Arbitrator cannot enlarge the scope of the reference and entertain fresh claims without a further order of reference from the Court".
44. The Apex Court in New India Civil Erectors (Private) Limited v. Oil and Natural Gas Corporation, , the Supreme Court held that the facts of the said case that the claim made by contractor on account of escalation in the cost of construction during the period subsequent to the expiry of the original contract period was not sustainable in the face of the stipulation which was binding upon both the parties and the Arbitrator.
45. In the case of Tamil Nadu Electricity Board v. Bridge Tunnel Constructions, , the Apex Court held that in the case of jurisdictional error there can be no embargo on the power of the Court to admit the contract into evidence and to consider whether or not the umpire had exceeded the jurisdiction, because the nature of the dispute is something which has to be determined outside the award, whatever might be said about it in the award or by the Arbitrator.
46. In Union of India and Ors. v. Santiram Ghosh and Ors., 1998 Supp. (1) SCC 68, the Apex Court held that there can be no doubt that when an Arbitrator acts beyond the terms of reference, the award is illegal and not binding on the parties.
47. In Raipur Development Authority and Ors. v. Chokhamal Contractors and Ors., , the Constitution Bench of Supreme Court held thus:
"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 under Section 20 or 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".
48. The Apex Court in Food Corporation of India and Anr. v. Great Eastern Shipping Company Limited, , held that where two men of commerce in respect of money claim under Charter Party Agreement entered into arbitration, the non-speaking award of a lump sum amount, by both the Arbitrators, each of whom was appointed by their respective parties, was, in the facts of the said case upheld.
49. In Paradip Port Trust and Ors. v. Unique Builders, , the Supreme Court following the principles laid down in several decisions held that, when a Court is called upon to decide the objections raised by a party against an arbitration agreement, the jurisdiction of the Court is limited, as expressly indicated in the Arbitration Act and it has no jurisdiction to sit in appeal and examine the correctness of the award on merits, so also that appraisement of evidence by the Arbitrator is ordinarily not a matter for the Court. It further held that an award may be set aside by the Court on the ground of error on the face of the award, but an award is not invalid merely because by a process of inference and agreement, it may be demonstrated that the Arbitrator has committed some mistake in arriving at his conclusion. It is not open to the Court to give or speculate reasons for the award when it is non-reasoned.
50. Subhash Aggarwal Agencies v. Bhilwara Synthetics Limited, , the Apex Court observed thus:
"Giving reasons in support of a decision was not considered to be a rule of natural justice under the law of arbitration or under administration law".
51. The Supreme Court in the case of P.V. Subba Naidu and Ors. v. Government of Andhra Pradesh and Ors., , held thus:
"An award can be set aside on the ground that the Arbitrator in making it, had exceeded his jurisdiction. But, 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".
52. Applying the well-established principles of law as laid down in the judgments cited above, to the facts of this case, we consider it appropriate to conclude thus:
(i) There is no cavil of doubt that the jurisdiction of the Court in interfering with a non-speaking award is limited and it is not open to the Court to speculate nor attempt to probe into mental process, or as to what implied the Arbitrator to arrive at his conclusion and further whether the conclusion is right or wrong. That a non-speaking award cannot be set aside on the ground of error of law on the face of the award.
(ii) In the instant case neither the arbitration agreement nor deed of submission or the order of the Civil Court under Section 20 of the Act requires the Arbitrator to give reason for the award. The Arbitrator has made a general statement that he has studied and examined all the documents, exhibits very carefully, considered all arguments and documents of the parties and having bestowed fall thought to the matter in dispute of each and every point raised by the parties, he was making the award. From this, it can be said that that the Arbitrator has applied his mind to all the records/documents in making of the award. Clause 19 of the contract which provides for arbitration is widely worded. There is no need for us to examine and interpret the contract to see whether the claims were sustainable in terms of the contract.
(iii) The award is a non-speaking award. Nothing can be pointed out by the appellant to hold that there is an error of law which is apparent on the face of the award nor any material to set aside that the Arbitrator exceeded his jurisdiction in awarding the amount as he did. The contention that the award is invalid because by a process of inference and agreement it can be demonstrated that the Arbitrator committed some mistake in arriving at his conclusion, is not acceptable to us.
53. The Arbitrator by his award rejected the counter-claim of the appellant for Rs. 30,30,000/- The contention of the learned Counsel for the appellant that the Arbitrator had committed breach of contract by failing to apply his mind to the case and failed to record a finding with regard to the disputes, counter-claim of the appellant and the breach of contract by the respondent cannot be countenanced. The fact that the Arbitrator rejected some of the claims and did not allow all the claims in entirety, it is not open for this Court to speculate or probe into the mental process by which or determine whether the conclusion of the Arbitrator is right or wrong. For the very same reasons recorded by us, supra, it cannot be said that the Arbitrator did not apply his mind to the facts of the case in arriving at his conclusion. The decision in State of Orissa v. Orient Paper and Industries Limited, , has no application to the facts of this case, but what is applicable is the decision in Smt. Santa Sila Devi and Anr. v. Dhirendra Nath Sen and Ors., , the Supreme Court held thus:
"The absence of any provision in regard to this claim is capable only of one interpretation and that is that Arbitrator rejected the claim. It is, therefore, an instance where the silence of the award is a clear indication, having regard to the adjudication being professedly complete and de praemisses that the claim in that respect was not upheld. This would not render the award incomplete".
54. The learned Counsel for the appellant would next contend that the Arbitrator did not seek extension of time for making of the award dated 13-2-1995 and filing the same on 18-2-1995 though the Civil Court had extended time upto 30-6-1994 for filing of the award. The records speak to the fact that the time was granted only upto 30-6-1994 and thereafter the Arbitrator's request for extension of time was pending consideration by the Civil Court. The parties by letter dated 5-12-1994 have expressed their willingness before the Arbitrator, without any demur for extending time upto 28-2-1995 for publication of the award. In Hari Krishna Wattal v. Vaikunth Nath Pandya (dead) by L.Rs and Anr., , the Supreme Court reiterated that Sub-section (2) of Section 28 of the Act indicates one exception to the rule that the Arbitrator can enlarge the time, and that is when the parties agree to such an enlargement.
55. The Apex Court in State of Punjab v. Hardyal, , observed thus:
"A perusal of this provision indicates that it is open to the parties to an arbitration agreement to fix the time within which the Arbitrator must give award, but it has to be so stated in the agreement itself. If per chance no time has been specified by the parties in the arbitration agreement, then by virtue of operation of Section 3 read with Clause 3 of the First Schedule the award must be given within four months of the Arbitrator entering on the reference or after having been called upon to act by notice in writing from any party to the arbitration agreement or within such extended time as the Court may allow. Sub-section (1) of Section 28 is very wide and confers fall discretion on the Court to enlarge time for making the award at any time. The discretion under Sub-section (1) of Section 28 should, however, be exercised judiciously. Sub-section (2) of Section 28 also makes it evident that the Court alone has the power to extend time. This power, however, can be exercised even by the Appellate Court".
56. In view of the policy of law and the fact that the parties had taken a willing part in the proceedings before the Arbitrator without demur and had all along showed willingness to extend time, we consider it is just and proper that it is a fit case for extension of time. Accordingly, we extend time upto the date of filing of the award before the Civil Court i.e., 18-2-1995.
57. The award of interest from 9-8-1987 to 11-3-1993 i.e., pre reference period and from 11-3-1993 to 13-2-1995 i.e., pendente lite, at the rate of 18% p.a. and future interest at the rate of 14% p.a., from 13-2-1995 until the decree, is questioned on the ground that Arbitrator ought to have granted interest at the rate of interest applied by nationalised banks for term deposit and the award of pendente lite interest is one of discretion to be exercised judiciously.
58. The award of interest by an Arbitrator in a decree of money unless there are strong reasons to decline the same is no more res integra. The Apex Court having considered all its earlier decisions which have a bearing on its decision making recorded its summary of findings in the case of T.P. George v. State of Kerala and Anr., , thus:
"The next question is whether the High Court was right in setting aside the award of interest from the date of the award. This Court has held in the case of Jagadish Rai and Brothers v. Union of India, , that the award of interest ought to be granted in all cases when there is a decree of money unless there are strong reasons to decline the same. In the case of Jagadish Red and Brothers, supra, this Court has held that there are four stages of grant of interest, viz., (1) from the stage of accrual of cause of action till filling of the arbitration proceedings; (2) during pendency of the proceedings before the Arbitrator; (3) future interest arising between date of award and date of the decree; and (4) interest arising from the date of decree till realisation of the award. -The power of Court to grant interest from the date of decree is not in doubt. In the case of Hindusthan Construction Company Limited v. State of Jammu and Kashmir, , the Supreme Court has held that the Arbitrator is competent to award interest from the date of the award. This Court has held in the case of Secretary, Irrigation Department, Government of Orissa v. G.C. Roy, , that the Arbitrator has power to grant interest pendente lite. Recently in the case of Executive Engineer, Dhenkanal Minor Irrigation Division, Orissa v. N.C. Budharaj (dead) by L.Rs, , this Court has held that an Arbitrator can award interest for the prereference period. Thus, as per law laid down by this Court, interest can be awarded at all four stages".
59. In the instant case there is a decree of money which the respondent was deprived of his use to which he is legitimately entitled. The Arbitrator having exercised discretion and having not found compelling reasons to decline the same, awarded interest from 9-8-1987, i.e., from the date of issue of legal notice by the respondent. It is common knowledge that during the period 1987 onwards for almost a decade, there was a high interest rate regime in all nationalised banks. The interest at the rate of 18% p.a. for the pre and pendente lite interest cannot be characterised as excessive. The interest at the rate of 14% p.a. from 11-3-1995 until decree also cannot be said to be on the higher side calling for interference.
60. The learned Counsel Sri Gopal Hegde made a feeble attempt to question the Arbitrator's fee of Rs. 60,000/- directed to be borne by both the parties equally. We do not find any merit in the said contention and is rejected.
61. In the result and for the reasons setout supra, we are of the considered opinion that the award does not suffer from any legal flaw or error. The Civil Court has elaborately considered the claims of the parties and has made the award rule of Court and we do not find any weighty or substantive legal ground to interfere with.
There is no merit in the appeal and is dismissed, however, with no order as to costs.