Kerala High Court
State Of Kerala And Anr. vs Joseph Vilangadan on 18 January, 1990
Equivalent citations: AIR1990KER276, (1990) 2 CIVLJ 467, AIR 1990 KERALA 276, 1990 (1) ARBI LR 111, (1990) 1 KER LT 273, (1990) 1 ARBILR 111
JUDGMENT Radhakrishna Menon, J.
1. The petitioners in Arbitration O.P. 150/85 before the 1st Addl. Sub Court, Ernakulam, are the appellants.
2. Essential facts lie in a narrow compass. The contract, the State had entered into with the respondent-Contractor to do the work of 'widening and strengthening single lane section to two lanes from K.M. 438/0 to 444/0 road formation of C.D. Works', was terminated by the State on 24-3-1980 on the ground that the contractor failed to perform the contract. The contractor thereupon filed O.S. (Arb.) 226/80 before the Court below for filing the arbitration agreement and for the appointment of an arbitrator. Accepting the case of the contractor the Court appointed an arbitrator who passed an award and filed the same in Court, The Contractor thereafter filed O.P. 64/84 under Section 17 of the Arbitration Act to pass a decree in terms of the award. The State filed O.P. 100/84 under Sections 16, 30 and 33 of the Arbitration Act to set aside the award. Both these petitions were disposed of by a common judgment dated 24th September, 1985. O.P. 64/84 was dismissed and O.P. 100/84 was allowed and the award was remitted to the arbitrator 'to consider issues II, III, IV and VII and the counter-claims which are found to be illegal and contradicting in view of the finding in Issue No. I that the termination is not unlawful'. The arbitrator was given three months' time to resubmit the award.
3. I shall now recapitulate the findings of the Court below in respect of the issues dealt with and disposed of by the arbitrator :
(a) Issue No. I, the Court below has upheld the finding that the termination of the contract was lawful.
(b) Issue No. II, it has been found thus :--
"...The learned Counsel for the claimant has argued that the award is not a speaking award and hence it cannot be said that the award has to be set aside. Whether it is a speaking award or not, when there is a question of law and there is error on the face of it, the Court has got jurisdiction to interfere under Section 16. Thus as it is a question of law the finding of the arbitrator with regard to Issue No. II has to be held as illegal on the face of the record."
This finding was arrived at after considering the argument advanced on behalf of the State, to quote the relevant passage from the judgment.
"...In the present case the arbitrator has held that the termination is not unlawful. When the termination is lawful the argument of the learned Government Pleader is that the consequences of the termination has to be suffered by the claimant as prescribed in the contract. The question to be seen is whether the consequences should be suffered by the claimant is a question of law..... Here he whole claim witty regard to the damages are based on the "statement that the termination is unlawful..."
(c) Issue No. III, the finding is that 'this is a case clearly coming under Clause (c) (Section 16(1)(c)) as nothing can be stated in support of the finding. Hence I hold this finding is also to be remitted to the arbitrator'.
(d) Issues Nos. IV and VII, the finding is that they 'are dependent on the claims in other issues'.
(e) Issue No. VI, the finding is that 'it is only a finding of fact and this Court has no jurisdiction to interfere'.
4. It can thus be seen that Issues Nos. II, III, IV and VII require to be investigated afresh in the light of the finding on Issue No. I namely, that the termination of the contract was lawful.
5. After the remand, the arbitrator, in exercise of the power vested in him under Section 13(d) of the Arbitration Act corrected his finding on Issue No. I by deleting 'un' from the words 'not unlawful' as if the said word 'un' happened to be there due to an accidental slip, and thereby declared that the termination of the contract was not lawful. He further found that since the termination was not lawful there was no need to change his views in regard to Issues Nos. II, III, IV and VII. the award based on these findings, was filed in Court. The contractor thereupon filed Arbitration O.P. 150/85 to pass a decree in terms of the award and the State filed O.P. 11/86 to set aside the award.
6. The points formulated by the Court below are :--
(i) Whether the correction by the arbitrator is illegal?
(ii) Is there any reason to set aside or remit the award?
(iii) Reliefs and costs?
7. On point No. 1 the Court below opined that the arbitrator had the power to correct the mistake under Section 13(d) of the Arbitration Act, although it was done after the remit. The Court below accordingly allowed O.P. 150/85 and passed a decree in terms of the award. Consequently the petition O.P. 11/86 filed by the State was dismissed. The said judgment is under attack in this appeal at the instance of the State.
8. It was contended on behalf of the appellants that since the finding on Issue No. I namely, that the termination of the contract was lawful, had become final in view of the judgment, the arbitrator ought to have considered and disposed of Issues Nos. II, III, IV and VII in accordance with law. Under such circumstances, the learned Government Pleader submits, the arbitrator has no authority to correct the alleged mistake in the award in the exercise of powers vested in the arbitrator under Section 13(d) of the Arbitration Act. It was further contended that in any event, since the order correcting the alleged mistake was passed without notice to the appellants, the same was liable to be declared null and void. The counsel for the contractor however wanted this Court to approach the issues from a different angle. According to him, the arbitrator has always the power to correct any clerical mistake or error arising from any accidental slip or omission. This is a power, the arbitrator can exercise suo motu and there is therefore no need to give any notice to the parties before he exercised this power. On the merits of the case, it was contended that the directions to the arbitrator to dispose of Issues Nos. II, III, IV and VII taking into account the finding on Issue No. I, would not in any way interfere with the power of the arbitrator under Section 13(d) of the Arbitration Act. He therefore submitted that on the correction being made, the arbitrator was justified in sustaining his original finding on Issues Nos. II, III, IV and VII.
9. The questions that emerge from the above competing contentions, can be enumerated as follows :--
(1) What is the effect of a judgment remitting only some of the issues on the powers of the arbitrator?
(2) Has the arbitrator power under Section 13(d) of the Arbitration Act to correct an alleged mistake in the award which stands confirmed by the order of remand under Section 16?
(3) Assuming that the arbitrator has power to correct the mistake under Section 13(d) can he pass the order in that regard without notice to the parties?
10. Coming to question No. 1 : Law in this regard can be stated thus : Generally speaking even after the remand all the original powers of the arbitrator so far as they are not affected by the order of remission, or the provisions of the Arbitration Act, are revived. But the powers and duties of the arbitrator shall not exceed those which are essential to give effect to the remand order. To give an illustration : 'suppose an award good as to three points, and bad as to the 4th and sent back as to that alone, the arbitrator is 'functus' officio'Jas to the three and cannot alter his judgment as to them'. (See Johnson v. Latham, (1851) 20 LJQB 236). Under such circumstances, his power is limited to re-consider the matters referred to him in such a way that it does not amount to a redeter-mination of matters already decided by his award. (See Russel on Arbitration, page 491, 19th Edition). To put it pithily the arbitrator is bound to carry out and abide by the order remitting the matters to him.
11. Regarding question No. 2 : The answer depends upon the construction of Section 15(c) of the Arbitration Act. This section provides that the Court in which the award has been filed under Section 14(2) may, by order, modify or correct the award where the award contains a clerical mistake or an error arising from an accidental slip or omission. This section should be read and understood in the light of the provisions contained in Sections 14(2), 16 and 17 as they are connected with one another. (See Amod Kumar v. Hari Prasad, AIR 1958 All 720). The power of the Court to modify the award is circumscribed by Section 15. Thus understood, this section, it should be said, insists that the parties to the arbitration proceedings shall make a request to rectify the mistakes and on such a request being made the Court is competent to correct any clerical mistake or error arising from an accidental slip or omission in the award and modify the award under Section 15(c) because the award, in accordance with which the Court has to pronounce judgment, must be one that embodies the real intention of the parties. The Court instead of correcting any obvious mistakes or slips in an award by itself, can pass an order under Section 16 and direct the arbitrator to rectify the mistake and submit his decision thereon within the specified period. So in a given case the remand order is silent about such mistakes as are covered by Section 15(c) (identical with the mistakes covered by Section 13(d), it can be inferred without the fear of contradiction that there are no such mistakes in the award or in any event, iaccording to the parties there are no such mistakes in the award warranting rectification under Section 13(d). In such cases, the only power the arbitrator could exercise is to reconsider the matters referred to him by the remand order. In other words, the arbitrator has no power to vary the award which is confirmed by the order of remand, by invoking Section 13(d). It therefore follows that an arbitrator has no power to correct any clerical mistake or error arising from an accidental slip or omission in an award which has become final by virtue of the judgment of the Court. If no such finality is attached to the award, then the arbitrator has the power to correct any mistake or omission in an award provided the conditions stipulated under Section 13(d) are satisfied.
12. Coming to the 3rd question : Assuming the arbitrator has the power to correct the mistake under Section 13(d) even then he cannot pass an order under that provision without notice to the affected parties, the learned Government Pleader submits. The learned Counsel for the contractor however, argues that the Arbitration Act does not contain any provision saying that the correction could be made only after notice to parties. It is fundamental that no order in a proceeding affecting the parties thereto shall be passed without notice to them. Apart from this principle, it could be seen from the scheme of the relevant provisions in the Arbitration Act that the arbitrator could possibly exercise this power only on the request of one or possibly both of the parties or as per directions of the Court. It is said so, because the arbitrator after filing the award along with all the records in the Court would not get a chance to go through the award and the connected papers again and rectify clerical or accidental mistakes unless it be that the said mistakes in the award are brought to his notice either by the parties or by the Court by an order under Section 16 read with Section 15(c) directing the arbitrator to correct such mistakes. To put it differently : The arbitrator, having once issued his award Can undoubtedly rectify a clerical mistake or an error arising from an accidental slip or omission with the consent of both parties. If such an error fs to be rectified otherwise, the same can be had only after notice to the parties and with the strict observance of all rules of judicial procedure.
A reference in this connectiqn to the following observation of Scrutton, J. in Inland Revenue Commissioners v. Hunter, (1914) 3 KB 423, is profitable:--
"...It is clear, ..... that a referee, having once issued his award, cannot issue another without the consent of both parties. If an error is to be corrected, unless the parties assent, it can only be done by the Court on proper evidence, and with proper procedure; ..... it is of great importance that the referees should exercise their important duties in the future, ..... with strict observance of all rules of judicial procedure."
In the same strain is the comment made by Mustill and Boyd in their treatise, Commerical Arbitration on this aspect. The comment reads :--
"...Whichever course is followed, all concerned should be informed in writing of what is happening and the reasons for it."
It therefore follows that the arbitrator cannot rectify the mistakes under Section 13(d) without notice to the parties and without strictly observing all rules of judicial procedure.
13. Finding it difficult to grapple with the situation the counsel for the contractor submits that the remand order in Arbitration O.P. 100/84, inasmuch as the same is not an appealable order (see Ramanadh v. Nazir Hussain, 1986 Ker LJ 1008), the finding on Issue No. I (before the arbitrator) in that order cannot be said to be final. It is unnecessary to probe into this aspect of the case because the contractor must be said to have acquiesed in the said order as he has not challenged even the order under challenge in this appeal.
14. The counsel then contended that the award, the arbitrator passed after the remand, it cannot be challenged, on the ground that it is not a speaking order in view of the decision of the Supreme Court in Sudarsan Trading Company v. Govt. of Kerala, AIR 1989 SC
890. This point in fact does not arise in this appeal and that it is so can be seen from the memorandum of appeal. We therefore are not inclined to consider this argument.
15. The judgment under attack therefore is set aside. Accordingly O.P. 11/86 is allowed and O.P. 150/85 is dismissed. The Court below shall pass appropriate orders directing the arbitrator to consider and dispose of Issues Nos. II, III, IV and VII in accordance with the directions contained in the judgment disposing of Arbitration O.P. Nos. 64/84 and 100/84 dated 24th September, 1985.
The appeal is allowed. No costs.