Himachal Pradesh High Court
Astra Construction Pvt. Ltd. vs State Of Himachal Pradesh on 1 October, 2001
Equivalent citations: [2002]108COMPCAS711(HP)
Author: M.R. Verma
Bench: M.R. Verma
JUDGMENT M.R. Verma, J.
1. Since common questions of law and identical facts are involved in these two petitions, therefore, both these petitions are being disposed of by this common order.
2. The work of reconstruction of 55 metres span bridges across Panvi Khud at Kilometre 334/170 on NH 22 of double lane standard with footpath was awarded in favour of the petitioner vide agreement No. 65 for 1993-94 for Rs. 78,24,840. The work was to commence with effect from March 31, 1995, and was to be completed by March 25, 1996. Since the work was not completed by the petitioner, therefore, the contract was rescinded on December 17, 1997. The dispute, thus, having arisen between the parties, the same was referred for arbitration as per the terms and conditions of the agreement. The arbitrator vide his award dated February 25, 1999, awarded a sum of Rs. 7,60,024 in favour of the respondent and a sum of Rs. 38,275 in favour of the petitioner and after adjustment awarded a sum of Rs. 7,21,749 in favour of the respondent. Feeling aggrieved, the petitioner has filed an application for setting aside the arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996, (hereafter referred to as "the Act") which has been registered as OMP (M) No. 5 of 1999.
3. The reconstruction of 54 metres span bridge across Manglad Khud at Kilometre 249/570 on NH 22 of double lane standard with footpath was also awarded in favour of the petitioner vide agreement No. 63 of 1993-94. The tender amount was Rs. 64,03,945. The work was to commence with effect from March 26, 1994, and was to be completed by March 25, 1996. The contract, however, was rescinded on December 17, 1997. Thus, the dispute having arisen between the parties the disputes were referred for arbitration as per the agreement. The arbitrator vide his award dated March 17, 1999, awarded a sum of Rs. 4,82,234 in favour of the respondent and Rs. 33,185 in favour of the petitioner and after adjustment a sum of Rs. 4,49,109 was awarded in favour of the respondent. Feeling aggrieved, the petitioner preferred an application under Section 34 of the Act for setting aside the award. This application has been registered as OMP (M) No. 7 of 1999.
4. The grounds on the basis of which the prayers for setting aside the awards, have been made are almost identical in both the petitions and the applications have been contested by the respondent on similar grounds. The petitioner has sought setting aside of the awards on the grounds that the awards are not speaking awards and the arbitrator has failed to give reasons in support of the awards, that the drawings were not supplied to the petitioner well in time nor the extension of time to complete the works was granted thereby incapacitating it in executing the work within the stipulated period, that the awards deal with disputes which were beyond the jurisdiction of the arbitrator, that the awards are not in accordance with law. The respondent, while refuting the grounds, as taken in the application, has further claimed that the applications under Section 34 of the Act are not maintainable.
5. On the respective pleadings of the parties, the following similar issues were framed on May 19, 2000, in each case :
"1. Whether the award in question is invalid for want, of being a speaking award ?. . . opp
2. Whether the objector was incapacitated to execute the work within the stipulated period, as alleged ?. . . opp
3. Whether the award deals with the dispute(s) not contemplated and not falling within the terms of the submissions to the arbitrator and contains decision on matter beyond the scope of the submissions to the arbitrator ?.. . opp
4. Whether the award is not in accordance with law ?. . . opp
5. Whether the present petition is not maintainable under the Arbitration and Conciliation Act, 1996 ?. . . opr
6. Relief. "
6. Parties led evidence by way of affidavits. Arguments were heard. The record perused.
7. My findings on the aforesaid issues are as follows :
Issues Nos. 1 and 4 ; It has been contended by the learned counsel for the petitioner that under the Act the arbitrator is bound to give reasons for the award which have not been given in either of these cases, therefore, the awards being violative of the provisions of Section 31(3) of the Act are illegal and liable to be set aside.
8. On the other hand, it was contended for the respondent that an arbitrator being a judge chosen by the parties as per the agreement is not required to give detailed reasons to support his award. In these cases, the arbitrator has given reasons for his conclusions, therefore, there has been due compliance with the provisions of Section 31 of the Act and the award cannot be termed as violative of the provisions of law.
9. Sub-section (3) of Section 31 of the Act reads as follows : . . .
(3.) The arbitral award shall state the reasons upon which it is based, unless :
(a) The parties have agreed that no reasons are to be given, or
(b) the award is an arbitral award on agreed terms under Section 30.
10. A bare reading of the above provisions makes it clear that the award must state the reasons on which it is based except when the parties have agreed that no reasons are to be given or when the award is based on a settlement arrived at as per the provisions of Section 30 of the Act.
11. In Tamil Nadu Electricity Board v. Bridge Tunnel Constructions, AIR 1997 SC 1376, the Supreme Court held as under (p. 1385) :
"Thus, the law on the award, as governed by the new Act, is other way about of the pre-existing law : it mandates that the award should state the reasons upon which it is based. In other words, unless (a) the parties have agreed that no reasons are to be given or (b) the award is an arbitral award on agreed terms under Section 30 of the new Act, the award should state the reasons in support of determination of the liability/non-liability. Thereby, Legislature has not accepted the ratio of the Constitution Bench in Raipur Development Authority v. Chokhamal Contractors, AIR 1990 SC 1426, that the award, being in the private law field, need not be a speaking award even where the award relates to the contract of private parties or between person and the Government or public sector undertakings. The principle is the same, namely the award is governed by Section 31(3)."
12. In view of the above position in law, it is clear that the arbitral award subject to the aforesaid exceptions must state reasons upon which it is based.
13. In the case on hand, it is admitted by the parties that they had not agreed that the award need not contain reasons on which it might be based nor had they settled the dispute in accordance with the provisions of Section 30 of the Act. In these circumstances, the arbitrator was legally bound to state the reasons upon which the awards in question are based.
14. The arbitrator has enclosed reasons for the award with each of the awards. However, against most of the claims what has been mentioned as reasons is claims beyond jurisdiction of arbitrator or it is proved that there is delay in issuing the drawings, therefore, a particular sum is awarded in favour of the respondent or counter claim not substantiated. However, no reason has been assigned as to why a particular claim is beyond the jurisdiction of the arbitrator or how the amount of compensation, as has been awarded, has been worked out or arrived at or why a particular claim has not been substantiated. In the award called in question in OMP (M) No. 7 of 1999, the arbitrator appears to have awarded a sum of Rs. 4,82,234 in favour of the respondent and a sum of Rs. 33,185 in favour of the petitioner though on the face of it there seems to be a clerical error in working out the later amount which ought to have been Rs. 33,125. However finally after adjustment i.e., after deducting the amount awarded in favour of the petitioner the respondent has been held entitled to a sum of Rs. 4,49,109. There is no reason whatsoever how this final figure has been worked out and how after having awarded only a sum of Rs. 4,82,234 in favour of the respondent, the amount awarded in its favour has been arrived at Rs. 6,58,834. Be it stated that to say it is proved without referring to the material on the basis of which a particular point is held to be proved or to say "it is not proved or substantiated" without referring to the material is not a process of assigning reasons. In fact, it is a conclusion and cannot be treated as a reason on which the award is based.
15. In H.P. Housing Board v. Vijay Construction Works (O. M. P. (M.) No. 11 of 2000 decided on December 12, 2000, this court held as under :
"9. The expression 'state the reasons upon which it is based' with reference to the context must mean to express the premises to the conclusion. The 'premises' to the 'conclusion' must be traced on the basis of available data. Therefore, the 'reasons', the basis of an award, must be the outcome of an act of objective thinking and analysis of the available material as per the rules of logic justifying the conclusions.
10. In view of the above meaning of the expression 'state the reasons upon which the award is based', the statement of 'reasons for award' as attached with the award cannot be treated as 'reasons' because the alleged reasons as given are 'it is proved...claim not substantiated ... it is revealed .. it is found/ without any reference to the material on the record on the basis of which such conclusions could have been drawn. The award in question, thus, does not state the reasons on which it is based, but only states the unreasoned conclusions and is, therefore, violative of Section 31(3) of the Act."
16. In view of the above factual and legal position, the awards in question which do not contain the reasons on which they are based are violative of Section 31(3) of the Act and, therefore, not in accordance with law. Accordingly, issues Nos. 1 and 4 in each case are decided in favour of the petitioner.
17. Issue No. 5 : In view of the findings already recorded on issues Nos. 1 and 4 above, it cannot be said that the present petitions are not maintainable as these do not disclose any ground to set aside the award under the provisions of the Act. This issue in each case is therefore, decided against the respondent.
18. Issues Nos. 2 and 3 : These issues concern the factual aspects of the matter. In view of the findings on issues Nos. 1, 4 and 5 above, it is not appropriate and necessary at this stage to give any findings on these issues.
19. Issue No. 6 : In view of the findings given hereinabove, both the petitions are allowed and both the awards in question are set aside.