Himachal Pradesh High Court
________________________________________________________________ vs Himachal Pradesh Agro Industries ... on 24 July, 2017
Author: Sandeep Sharma
Bench: Sandeep Sharma
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA
Arb. Case No.11 of 2009
Judgment reserved on:11.07.2017
.
Date of Decision: 24th July, 2017
________________________________________________________________
Praveen Diwan & others ....Objectors/Petitioners.
Versus
Himachal Pradesh Agro Industries Corporation Limited
....Claimant/ Respondent.
Coram:
The Hon'ble Mr. Justice Sandeep Sharma, Judge.
Whether approved for reporting?1 Yes.
For the Petitioners : Mr. Neeraj Gupta, Advocate.
For the Respondent : Mr. Balwant Kukreja, Advocate.
Sandeep Sharma, Judge
By way of instant application/objections having
been filed by the objectors-petitioners (for short objectors)
under Section 34(3) of the Arbitration and Conciliation Act,
1996, challenge has been laid to the award dated 20th October,
2008, passed by the Principal Secretary (Horticulture) to the
Government of Himachal Pradesh, in Arbitration Case No.1 of
2003, in respect of the dispute between the parties relating to
the alleged buying back of the equity shares by the objectors
in view of the sanction of the equity assistance of ` 40.00 lacs
Whether reporters of the local papers may be allowed to see the judgment?
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by the respondent-claimant (for short claimant)) to the
objectors.
.
2. Briefly stated facts as emerge from the record are
that the objectors established a company M/s Himalayan
Vegefruits Limited to set up an industrial unit for the processed
fruits and vegetables at Parwanoo, District Solan, Himachal
Pradesh and in this regard objectors approached claimant-
Corporation for sanction of equity assistance amounting to
`40.00 lacs, which was sanctioned in their favour. Pursuant to
aforesaid sanction made in favour of the objectors, objectors
entered into an agreement with the claimant-Corporation for
direct Equity Participation Agreement on 22.3.195 and
1.4.1997 respectively. Above named objectors-company
allotted 4,00,000 shares of face value of `10/- each in favour
of the claimant-corporation and issued shares certificates for
4,00,000 shares in favour of the corporation on receipt of
payment of `40.00 lacs.
3. It also emerge from the record that as per clause 1
and 2 of the Agreement, objectors were to buy back the shares
within five years from the date of first disbursement and after
expiry of three years from the date of commercial production.
The claimant-Corporation vide notices dated 31.3.2000 and
11.5.2001 called upon the objectors to buy back the shares,
but since objectors failed to buy back the shares, the claimant-
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Corporation re-called the entire equity amount of `40.00 lacs
alongwith interest on 12.9.2002 and raised a demand of
.
`1,20,91,082/-. The aforesaid amount included face value of
shares i.e. `40.00 lacs and interest at the rate of 17.5% with
effect from 1.4.1995 to 30.9.2002.
4. Aforesaid claim put forth by the claimant-
Corporation was resisted by the objectors on the ground that
agreement dated 22.3.1995 for direct equity participation
agreement was for `10.00 lacs and not for `20.00 lacs, as
alleged by the claimant-Corporation. Objectors further
contended that in terms of the agreement, as referred above,
Claimant-Corporation was required to invest in the objectors-
company through their own funds and such, funds were to be
arranged by the objectors-company from the Ministry of Food
Processing Industries, Government of India (for short 'MOFPI) or
from National Horticulture Board, Government of India. As per
objectors, Corporation never actually invested such funds after
entering into agreements with the objectors. Objectors further
claimed that there was a Tripartite Agreement between the
corporation, 'MOFPI' and M/s Himalayan Vegefruits Limited,
whereby objectors received funds from 'MoFPI' and from
National Horticulture Board under this Tripartite Agreement.
Since, there was a dispute inter se parties, matter came to be
referred to the learned Arbitrator in terms of Arbitration clause
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contained in agreement dated 22.3.1995 and 1.4.1997. As per
aforesaid agreement, Financial Commissioner (Development)
.
to the Government of Himachal Pradesh (now the Principal
Secretary(Horticulture) to the Government of Himachal
Pradesh) was appointed as sole Arbitrator, who vide award
dated 20th August, 2008, passed the award in favour of
claimant- Corporation and against the objectors for a sum of
`40.00 lacs alongwith interest at the rate of 17.5% with half
yearly rests from the date of disbursement of the aforesaid
amount of `40.00 lacs by the claimant corporation till
realization of the entire amount. Learned Arbitrator further
ordered that on receipt of full payment, claimant-corporation
shall transfer the shares in favour of the objectors or their
nominee.
5. Being aggrieved and dissatisfied with the aforesaid
award passed by the learned Arbitrator, objectors have filed
instant objections under Section 34(3) of Arbitration and
Conciliation Act, 1996, praying therein for setting aside the
award dated 20th October, 2008, passed by the learned
Arbitrator.
6. In nutshell, submissions having been made by Mr.
Neeraj Gupta, learned counsel representing the objectors are
that award is unjust, unreasonable and is against the
expressed terms of contract. Mr. Gupta, further contended that
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learned Arbitrator has acted contrary to the facts pleaded in
the reply filed by the objectors and the award is thus opposed
.
to the public policy of India. While referring to the impugned
award passed by the learned Arbitrator, Mr. Gupta, argued that
Arbitrator has travelled beyond its jurisdiction to misconstrue
and misinterpret the agreement executed between the
objectors and the claimant-Corporation on one hand and the
Tripartite agreement executed between the claimant-
Corporation, 'MOFPI' and M/s Himalayan Vegefruits Limited, on
the other hand. Mr. Gupta, further contended that since
objectors had taken a specific stand with regard to the claim
made by the claimant corporation that since corporation failed
to adhere to the terms and conditions of the Bi-agreement
executed with the claimant-corporation, claim put forth by the
corporation on the basis of Tripartite agreement is wholly
unsustainable.
7. Mr. Gupta, further contended that impugned award
itself suggests that learned Arbitrator has failed to give reasons
in support of his findings qua three issues, which were framed
for adjudication. Reasons assigned by the learned Arbitrator,
nowhere satisfy the test laid down for "Reasons" by the
Hon'ble Apex Court as well as this Court in various
pronouncements and as such, impugned award cannot be said
to be reasoned award, as required under the provisions of
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Section 31(3) of the Arbitration and Conciliation Act, 1996. Mr.
Gupta, also submitted that since there was a breach of
.
conditions of such clause and condition, therefore, for all
intents and purposes, the agreement required for operation
with respect to equity participation ought to have been the "
Tripartite Agreement" and not the agreement executed
between the claimant and the objectors. As per Mr. Gupta, the
Bi-Agreement, on account of non performance by the claimant
corporation and otherwise in view of the Tripartite Agreement
was in fact a subordinate agreement which was also
subservient to the operating clauses of the Tripartite
Agreement. But such aspect of the matter was neither gone
into by the learned Arbitrator nor any findings have been
returned in this regard and as such, impugned award is liable
to be set-aside.
8. While concluding his arguments, Mr. Gupta, forcibly
contended that learned Arbitrator has fallen in error while
arriving at a conclusion that buy back of 4,00,000 shares is to
be governed by two agreements dated 1.4.1997 and
22.3.1995. Learned counsel further contended that since
learned Arbitrator has failed to return specific findings as
regards to the defence made by the objectors in the reply,
wherein it was specifically contended that claimant corporation
failed to comply with the conditions laid in Bi-Agreement
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executed between itself and the objectors company and as
such, learned Arbitrator has committed an error of law and
.
jurisdiction while holding that objectors have failed to buy back
the shares. With the aforesaid submissions, Mr. Gupta,
contended that the impugned award being opposed to settle
law and against the Public Policy of India, is liable to be set-
aside.
9. Mr. Balwant Kukreja, learned counsel representing
claimant-Corporation, supported the impugned award and
stated that there is no illegality and infirmity of the same,
rather learned Arbitrator has dealt with each and every aspect
of the matter very carefully while passing the award and as
such, same deserves to be upheld. While refuting the aforesaid
contention having been made by the learned counsel for the
objectors, Mr. Kukreja, invited attention of this Court to clause
1 and 2 of the agreement to suggest that objectors were to buy
back the shares within five years from the date of first
disbursement and after expiry of three years from the date of
commercial production and since petitioners/objectors failed to
do the same, they were called upon by the claimant
corporation to buy back the same vide repeated notices. But
since no heed was paid to the aforesaid notices, claimant
corporation finally recalled the entire equity amount of `40.00
lacs alongwith interest and raised a demand of `1,20,91,082.
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Learned counsel further stated that amount of `40.00 lac was
not invested or funds were not provided to the petitioner as
.
alleged, rather in terms of tripartite agreement executed
amongst Ministry of Food Processing Industry, Government of
India, H.P. Agro Industries Corporation Limited and Himalayan
Vegefruits Limited, a sum of `20.00 lacs was provided by
Ministry of Food Processing Industry, Government of India to
H.P. Agro Industries Corporation Limited for further investment
in Himalayan Vegefruits Limited and as per clause 1 of the
agreement, remaining amount of `20.00 lacs was to be
provided by the claimant corporation to M/s Himalayan
Vegefruits Limited . Learned counsel representing the claimant
corporation contended that there is no scope of interference as
far as this court is concerned, especially when it clearly emerge
from the record that award is based on the proper appreciation
of evidence and documents adduced on record by the
respective parties.
10. Learned counsel further contended that though
findings returned by the learned Arbitrator are based upon the
correct appreciation of the material adduced on record by the
respective parties, but even if it is presumed that the decision
of the arbitrator is erroneous, same is not liable to be interfered
by filing objections under Section 34 of the Act. Since,
Arbitrator has not acted in violation of any law and as such
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impugned award passed by the learned Arbitrator deserve to
be upheld.
.
11. I have heard learned counsel for the parties and
have carefully gone through record.
12. Before adverting to the correctness of the aforesaid
submissions having been made by learned counsel for the
parties viz-a-viz impugned award passed by learned Arbitrator,
this Court deems it fit to take note of the judgment passed by
Hon'ble Apex Court in Hindustan Tea Company v. M/s K.
Sashikant & Company and another, AIR 1987 Supreme Court
81; wherein it has been held as under:-
" Under the law, the arbitrator is made the final
arbiter of the dispute between the parties. The
award is not open to challenge on the ground that
the Arbitrator has reached a wrong conclusion or
has failed to appreciate facts.
Where the award which was a reasoned one was
challenged on the ground that the arbitrator acted
contrary to the provisions of Section 70 of the
Contract Act, it was held that the same could not be
set aside."
13. Similarly, Hon'ble Apex Court in M/s Sudarsan
Trading Company v. The Government of Kerala and another, AIR
1989 Supreme Court 890, has held as under:-
"It is not open to the court to probe the mental
process of the arbitrator and speculate, where no
reasons are given by the arbitrator as to what
impelled him to arrive at his conclusion. In the
instant case the arbitrator has merely set out the
claims and given the history of the claims and then
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awarded certain amount. He has not spoken his
mind indicating why he has done what he has done;
he has narrated only how he came to make the
.
award. In the absence of any reasons for making
the award, it is not open to the Court to interfere
with the award. Furthermore, in any event,
reasonableness of the reasons given by the
arbitrator, cannot be challenged. Appraisement of
evidence by the arbitrator is never a matter which
the Court questions and considers. If the parties
have selected their own forum, the deciding forum
must be conceded the power of appraisement of
the evidence. The arbitrator is the sole judge of the
r quality as well as the quantity of evidence and it
will not be for the Court to take upon itself the task
of being a judge on the evidence before the
arbitrator."
14. Reference is also made to the judgment passed by
the Hon'ble Apex Court in McDermott International Inc. v. Burn
Standard Company Limited and others (2006) 11 Supreme Court
Cases 181. The relevant paras of the judgment are reproduced
as under:-
In terms of the 1996 Act, a departure was made so far
as the jurisdiction of the court to set aside an arbitral
award is concerned vis-a-vis the earlier Act. Whereas
under Sections 30 and 33 of the 1940 Act, the power of
the court was wide, Section 34 of the 1996 Act brings
about certain changes envisaged thereunder. Section
30 of the Arbitration Act, 1940 did not contain the
expression " error of law...". The same was added by
judicial interpretation.
While interpreting Section 30 of the 1940 Act, a
question has been raised before the courts as to
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whether the principle of law applied by the arbitrator
was (a) erroneous or otherwise or (b) wrong principle
was applied. If, however, no dispute existed as on the
date of invocation, the question could not have been
.
gone into by the Arbitrator.
The 1996 Act makes provision for the supervisory role of
courts, for the review of the arbitral award only to
ensure fairness. Intervention of the court is envisaged in
few circumstances only, like, in case of fraud or bias by
the arbitrators, violation of natural justice, etc. The court
cannot correct errors of the arbitrators. It can only
quash the award leaving the parties free to begin the
arbitration again if it is desired. So, scheme of the
provision aims at keeping the supervisory role of the
court at minimum level and this can be justified as
parties to the agreement make a conscious decision to
exclude the court's jurisdiction by opting for arbitration
as they prefer the expediency and finality offered by it.
The arbitral award can be set aside if it is contrary to (a)
r fundamental policy of Indian law;(b) the interests of
India; (c) justice or morality; or (d) if it is patently illegal
or arbitrary. Such patent illegality, however, must go to
the root of the matter. The public policy violation,
indisputably, should be so unfair and unreasonable as to
shock the conscience of the court. Lastly where the
Arbitrator, however, has gone contrary to or beyond the
expressed law of the contract or granted relief in the
matter not in dispute, would come within the purview of
Section 34 of the Act.
What would constitute public policy is a matter
dependant upon the nature of transaction and nature of
statute. For the said purpose, the pleadings of the
parties and the materials brought on record would be
relevant to enable the court to judge what is in public
good or public interest, and what would otherwise be
injurious to the public good at the relevant point, as
contradistinguished from the policy of a particular
government.
15. Careful perusal of the aforesaid judgments passed
by the Hon'ble Apex Court clearly suggest that jurisdiction of
this Court is limited while considering the award Under Section
34 of the Act. The award passed by the Arbitrator can only be
interfered in case of fraud or bias, violation of the principles of
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natural justice etc. Apart from above, interference on the
ground of "patent illegality" is permissible only if the same is
.
going to the root of the matter. The public policy, violation
should be so unfair and unreasonable as to shock the
conscience of the Court. In the aforesaid judgment passed by
the Hon'ble Apex Court, it has been held that what would
constitute 'public policy' is a matter dependent upon the nature
of the transaction and the statute.
16. It is quite evident from the reading of aforesaid
judgments, referred hereinabove, that Court while deciding
objections, if any, filed under Section 34 of the Act, against the
award passed by the learned Arbitrator, does not sit in the
appeal over the findings recorded by learned Arbitrator and
there cannot be reappraisal of the evidence, on the basis of
which learned Arbitrator has passed the award. In terms of
Section 34 of the Act, court can consider the objections only, if
the award is in any manner against the "public policy", which
certainly has to be liberally interpreted keeping in view the
facts of the case. But interestingly, in the present case, perusal
of objections filed by the petitioner nowhere suggests that
award is against public policy. Perusal of objections filed by the
objectors shows that neither there are any specific allegations
that the award was against 'public policy' nor it has been
clarified as to which findings or objections made by the learned
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Arbitrator are against public policy save and except general
allegations that the award is against the expressed terms of
.
contract and is unjust, unreasonable, unsustainable and
patently illegal.
17. This Court after carefully gone through the
pleadings/objections having been filed by the objector, has no
hesitation to conclude that objections are vague in nature and
by no stretch of imagination, same cannot be termed to be
against public policy. Perusal of impugned award passed by
learned Arbitrator certainly compels this Court to agree with
the contention having been made by Mr. Balwant Kukreja,
learned counsel representing the claimant-Corporation that
each and every aspect of the matter has been dealt with
carefully by the learned Arbitrator while deciding the
claims/counter-claims of the parties concerned. Learned
Arbitrator taking note of claim as well as written statement
having been filed by the respective parties formulated points
for determination. It clearly emerges from the award that all
the issues raised by the objectors/petitioners were taken for
adjudication by the learned Arbitrator while passing the award.
Apart from above, this Court having carefully gone through the
impugned award finds that all the arguments having been
made by the learned counsel representing the objectors/
petitioners in the present petition stands answered in the
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impugned award. Learned Arbitrator while holding Claimant
Corporation entitled to a sum of ` 40.00 lacs alongwith interest
.
has specifically taken note of agreements dated 22.3.1995 and
1.4.1997. Similarly, this Court finds that issue with regard to
investment of funds in direct equity participation by Claimant
Corporation has been carefully examined by the arbitrator by
taking note of the reply/ written statement filed by the
objectors/petitioners. While retuning findings qua issue No.3 i.e.
"whether a Tripartite Agreement was executed between the
parties and Bi Agreement between the parties was never
complied, if so, what are its effects?", learned Arbitrator has
rightly come to the conclusion that claimant corporation after
execution of tripartite agreement dated 21.4.1995 entered into
an agreement dated 1.4.1997 for `20.00 lacs each. Vide
aforesaid agreement, as referred above, MOFPI, Government
of India provided an amount of `.20 lacs to H.P.Agro Industries
Corporation Limited and by second agreement an amount of
`20.00 lac was to be provided to H.P. Agro Industries
Corporation to the petitioners/objectors in terms of sanction
letter dated 15.2.1995. Since, equity sum of `40.00 lacs was
provided to petitioners vide aforesaid agreements, learned
Arbitrator rightly held that buy back of 4,00,000/- shares is/was
to be governed by these two agreements dated 1.4.1997.
Otherwise also perusal of clause 1 and 2 of the agreement,
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suggest that objectors/petitioners were to buy back the shares
from the date of first disbursement and after expiry of three
.
years from the date of commercial production. Since, objectors
failed to buy back the shares, claimant- Corporation recalled
the entire equity amount with up to date interest in terms of
agreements arrived inter se parties. It also emerge from the
record that buyback of shares so invested by the claimant-
corporation was to be governed by the agreements for buy
back of shares as agreed vide agreement dated 1.4.1997.
Since, petitioners/objectors failed to buy back the shares
inspite of the notice which was duly acknowledged by them
vide their letter dated 17.9.2012, learned Arbitrator rightly not
found any fault with the action of claimant-Corporation in
recalling the entire equity amount of `40.00 lacs. It also emerge
from the record that petitioners/objectors in the written
statement filed before the learned Arbitrator specifically
requested for deferment of the buyback of shares, meaning
thereby they were liable to buy back the share held by H.P.
Agro Industries Corporation Limited.
18. After having gone through the findings returned by
the learned Arbitrator on the basis of evidence adduced on
record by the respective parties, this Court sees no reasons to
interfere with the impugned award in the instant proceedings
by re-appreciating the evidence, as it would amount to hear the
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appeal as against the judgment of civil Court. At the cost of
repetition, it may be observed that jurisdiction of this Court is
.
limited and award can be set-aside only if it is against the
"public policy", but unfortunately neither any material has been
placed on record nor any argument has been made on behalf of
the petitioner to substantiate that how the award is against the
public policy. Needless to say, question of interpretation of the
agreement and its terms and sufficiency of evidence was within
the domain of the Arbitrator and actually objections having
been filed by the petitioners/objectors deserve to be dismissed
being unsustainable in the eyes of law.
19. At this stage, it would be apt to take note of the
judgment passed by the Hon'ble Apex Court in Oil & Natural
Gas Corporation Limited versus Western Geco International
Limited (2014) 9 Supreme Court Cases 263; wherein Hon'ble
Apex Court taking note of the judgment passed by the Hon'ble
Apex Court in Oil & Natural Gas Corporation Limited versus Saw
Pipes Limited (2003) 5 Supreme Court Cases 705, has held as
under:-
"34. It is true that none of the grounds enumerated under
Section 34(2)(a) were set up before the High Court to
assail the arbitral award. What was all the same urged
before the High Court and so also before us was that the
award made by the arbitrators was in conflict with the
"public policy of India" a ground recognized under
Section 34(2)(b)(ii) (supra). The expression "Public Policy
of India" fell for interpretation before this Court in ONGC
Ltd. v. Saw Pipes Ltd. (2003) 5 SCC 705 and was, after a
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comprehensive review of the case law on the subject,
explained in para 31 of the decision in the following
words: (SCC pp.727-28)
.
"31. Therefore, in our view, the phrase "public
policy of India" used in Section 34 in context is
required to be given a wider meaning. It can be
stated that the concept of public policy connotes
some matter which concerns public good and the
public interest. What is for public good or in public
interest or what would be injurious or harmful to
the public good or public interest has varied from
time to time. However, the award which is, on the
face of it, patently in violation of statutory
provisions cannot be said to be in public interest.
Such award/judgment/decision is likely to adversely
affect the administration of justice. Hence, in our
view in addition to narrower meaning given to the
term "public policy" in Renusagar case 1994
rSupp(1) SCC 644, it is required to be held that the
award could be set aside if it is patently illegal. The
result would be -- award could be set aside if it is
contrary to:
(a) fundamental policy of Indian law; or
(b) the interest of India; or
(c) justice or morality, or
(d) in addition, if it is patently illegal.
Illegality must go to the root of the matter and if
the illegality is of trivial nature it cannot be held
that award is against the public policy. Award could
also be set aside if it is so unfair and unreasonable
that it shocks the conscience of the court. Such
award is opposed to public policy and is required to
be adjudged void."
35. What then would constitute the 'Fundamental policy
of Indian Law' is the question. The decision in Saw Pipes
Ltd. (supra) does not elaborate that aspect. Even so, the
expression must, in our opinion, include all such
fundamental principles as providing a basis for
administration of justice and enforcement of law in this
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country. Without meaning to exhaustively enumerate the
purport of the expression "Fundamental Policy of Indian
Law", we may refer to three distinct and fundamental
.
juristic principles that must necessarily be understood as
a part and parcel of the Fundamental Policy of Indian law.
The first and foremost is the principle that in every
determination whether by a Court or other authority that
affects the rights of a citizen or leads to any civil
consequences, the Court or authority concerned is bound
to adopt what is in legal parlance called a 'judicial
approach' in the matter. The duty to adopt a judicial
approach arises from the very nature of the power
exercised by the Court or the authority does not have to
be separately or additionally enjoined upon the fora
concerned. What must be remembered is that the
importance of Judicial approach in judicial and quasi
judicial determination lies in the fact that so long as the
Court, Tribunal or the authority exercising powers that
affect the rights or obligations of the parties before them
shows fidelity to judicial approach, they cannot act in an
arbitrary, capricious or whimsical manner. Judicial
approach ensures that the authority acts bonafide and
deals with the subject in a fair, reasonable and objective
manner and that its decision is not actuated by any
extraneous consideration. Judicial approach in that sense
acts as a check against flaws and faults that can render
the decision of a Court, Tribunal or Authority vulnerable
to challenge."
20. It clearly emerge from the aforesaid judgment that
the concept of public policy connotes some matter which
concerns public good and the public interest. Similarly,
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award/judgment/decision likely to adversely affect the
administration of justice has been also termed to be against
.
"public policy".
21. Another arguments having been made by the
learned counsel for the objectors that impugned award is not
non-speaking order and no reasons, whatsoever have been
given while passing the award, also deserve outright rejection.
It has been observed hereinabove that each and every aspect
of the matter has been dealt with carefully by the learned
Arbitrator while passing the award. In this regard, reliance is
placed upon the judgment passed by the Hon'ble Apex Court in
Markfed Vanaspati & Allied Industries versus Union of India
(2007)7 Supreme Court Cases 679, wherein it has been held
that Arbitration is a mechanism or a method of resolution of
dispute that unlike court takes place in private, pursuant to
agreement between the parties. The relevant para Nos. 10 to
17 of the judgment are reproduced as under:-
"10.In M/s Sudarsan Trading Co. v. Govt. of Kerala & Another
(1989) 2 SCC 38 in para 29 at page 53, Sabyasachi Mukharji, J.
speaking for the Court observed that the court in a non- speaking award cannot probe into the reasoning of the award. The Court further observed that only in a speaking award may the court look into the reasoning of the award, and it is not open to the court to probe the mental process of the arbitrator and speculate, where no reasons are given by the arbitrator as to what impelled him to arrive at his conclusion. Furthermore, the reasonableness of the arbitrator s reasons cannot be challenged. The arbitrator s appraisement of the evidence is never a matter for the court to entertain.
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11. This Court in State of A.P. v. R.V. Rayanim (1990) 1 SCC 433 in para 6 at page 437, dealt with a non- speaking award. The court observed that it is not open to the court to probe the mental process of the arbitrator where he has not provided the .
reasoning for his decision.
12. This Court, in Bijendra Nath Srivastava v. Mayank Srivastava & Others (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.
13. In New India Civil Erectors (P) Ltd. v. Oil & Natural Gas Corporation (1997) 11 SCC 75 in para 7 at page 78, the Court observed while dealing with a non- speaking award that the attempt of the court should always be to support the award within the letter of law.
14. In Rajasthan State Mines & Minerals Ltd. v. Eastern Engineering Enterprises & Another (1999) 9 SCC 283 in para 44 at page 309, the Court observed that in a non-speaking award the jurisdiction of the court is limited. 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 is also not possible to admit to probe the mental process by which the arbitrator has reached his conclusion where it is not disclosed by the terms of the award. Similar view has been taken in the following cases, namely, State of Bihar & Others v. Hanuman Mal Jain (1997) 11 SCC 40, P.V. Subha Naidu & Others v. Govt. of A.P. & Others (1998) 9 SCC 407, Star Construction and Transport Co. & Others v. India Cements Ltd. (2001) 3 SCC 351 and D.D. Sharma v. Union of India (2004) 5 SCC 325.
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 ::: Downloaded on - 25/07/2017 23:58:17 :::HCHP ...21...
agreement and was not invalidated due to arbitrator s misconduct.
16. Russell on Arbitration 19th Edition at Pages 110-111 .
described the entire genesis of arbitration as under:-
"An arbitrator is neither more or less than a private judge of a private court (called an arbitral tribunal) who gives a private judgment (called an award). He is a judge in that a dispute is submitted to him; he is not a mere investigator but a person before whom material is placed by the parties, being either or both of evidence and submissions; he gives a decision in accordance with his duty to hold the scales fairly between the disputants in accordance with some recognized system of law and rules of natural justice. He is private in so far as (1) he is chosen and paid by the disputants (2) he does not sit in public (3) he acts in accordance with privately chosen procedure so far as that is not repugnant to public policy (4) so far as the law allows he is set up to the exclusion of the State r Courts (5) his authority and powers are only whatsoever he is given by the disputants agreement (6) the effectiveness of his powers derives wholly from the private law of contract and accordingly the nature and exercise of those powers must not be contrary to the proper law of the contract or the public policy of England bearing in mind that the paramount public policy is that freedom of contract is not lightly to be inferred with."
Whatever has been mentioned by Russell in this paragraph is equally true for Indian Arbitrators.
17. Arbitration is a mechanism or a method of resolution of disputes that unlike court takes place in private, pursuant to agreement between the parties. The parties agree to be bound by the decision rendered by a chosen arbitrator after giving hearing. The endeavour of the court should be to honour and support the award as far as possible."
22. It clearly emerge from the aforesaid judgment passed by the Hon'ble Apex Court that scope of interference is extremely limited in non speaking award and it is not open to Court to probe mental process of the arbitrator. The Court ::: Downloaded on - 25/07/2017 23:58:17 :::HCHP ...22...
should endeavour to support a non-speaking arbitration award and it is not open to court to probe mental process of the .
arbitrator where he has not provided the reasoning for his decision. The Hon'ble Apex Court in the judgment cited hereinabove, has categorically held that 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. In the instant case, learned counsel representing the petitioners was unable to point out conditions, if any, contained in the agreement making it incumbent upon the arbitrator to assign reasons in support of his/her findings.
23. Consequently, in view of the aforesaid detailed discussion made hereinabove as well as law laid down by the Hon'ble Apex Court, this Court sees no reason to interfere with the well reasoned award passed by the learned Arbitratior and as such present petition is accordingly dismissed alongwith pending applications, if any.
(Sandeep Sharma)
24th July, 2017 Judge
(shankar)
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