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It has been held that non-consideration of the counter-claim would render the award illegal and void.

In K.V. George v. Secy. to Govt., Water and Power Deptt., (1989) 4 SCC 595 it was observed as under:

"11. It has been lastly submitted on behalf of the respondents that the arbitrator has misconducted himself and the proceedings by not deciding the counterclaim filed by the Government while considering the claim filed by the appellant and making an award. The High Court has rightly held that the arbitrator misconducted himself and the proceedings and allowed the appeal, setting aside the second award made by the arbitrator in Arbitration Case No.276 of 1980.

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                   CR-164-2017                 [35]

12. The first question that falls for consideration in this case is whether the finding of the High Court setting aside the order of review made in IA No. 3780 of 1981 and setting aside the order made in O.P. (Arb.) No. 81 of 1981 dated 18-8-1981 whereby the case was remanded to the arbitrator is sustainable or not. Admittedly, the appellant filed a claim petition being Arbitration Case No. 132 of 1980 making certain claims before the arbitrator. The respondents filed the counterclaims. The arbitrator without considering the counterclaims kept the counterclaims for subsequent consideration and made an award. The trial court set aside the award and remitted the same to the arbitrator for making a fresh award considering the claims and counterclaims filed by the parties. On an application for review, the trial court set aside the order and passed a decree in terms of the award. It is not disputed that the arbitrator did not at all consider the counterclaims and kept the same for consideration subsequently while making award in respect of the claims filed by the appellant. Undoubtedly, this award made by the arbitrator is not sustainable in law and the arbitrator has misconducted himself and in the proceedings by making such an award. It is the duty of the arbitrator while considering the claims of the appellant to consider also the counterclaims made on behalf of the respondents and to make the award after considering both the claims and counterclaims. This has not been done and the arbitrator did not at all consider the counterclaims of the respondents in making the award. As such the first award dated 22-1-1981 made by the arbitrator in Arbitration Case No.132 of 1980 is wholly illegal and unwarranted and the High Court was right in holding that the arbitrator misconducted himself and the proceedings in making such an award and in setting aside the same and directing the arbitrator to dispose of the reference in accordance with law considering the claim of the contractor 35 of 44 CR-164-2017 [36] and the counterclaim of the respondents. The order allowing the application for review by the trial court is also bad inasmuch as there was no mistake or error apparent on the face of the order dated 18-8-1981 made in O.P. (Arb.) No. 81 of 1981 nor any sufficient reason has been made out for review of the said order. The order dated 18-8-1981 is legal and valid order and the order dated 18-3-1982 allowing the application for review being IA No. 3780 of 1981 and setting aside the order in O.P. (Arb.) 81 of 1981 dated 18-8-1981 is, therefore, bad and unsustainable."

To the same effect are the observations in Union of India v. Jain 36 of 44 CR-164-2017 [37] Associates, (1994) 4 SCC 665 :

"7. In K.P. Poulose v. State of Kerala this Court held that misconduct under Section 30(a) does not connote a moral lapse. It comprises legal misconduct which is complete if the arbitrator, on the face of the award, arrives at an inconsistent conclusion even on his own finding, by ignoring material documents which would throw abundant light on the controversy and help in arriving at a just and fair decision. It is in this sense that the arbitrator has misconducted the proceedings in the case. In that case the omission to consider the material documents to resolve the controversy was held to suffer from manifest error apparent ex facie. The award was accordingly quashed. In Dandasi Sahu v. State of Orissa this Court held that the arbitrator need not give any reasons. The award could be impeached only in limited circumstances as provided under Sections 16 and 30 of the Act. If the award is disproportionately high having regard to the original claim made and the totality of the circumstances it would certainly be a case of non-application of mind amounting to legal misconduct and it is not possible to set aside only invalid part while retaining the valid part. In other words the doctrine of severability was held inapplicable in such a situation. It is, therefore, clear that the word 'misconduct' in Section 30(a) does not necessarily comprehend or include misconduct of fraudulent or improper conduct or moral lapse but does comprehend and include actions on the part of the arbitrator, which on the face of the award, are opposed to all rational and reasonable principles resulting in excessive award or unjust result or the like circumstances which tend to show non- application of the mind to the material facts placed before the arbitrator or umpire. In truth it points to fact that the arbitrator or umpire had not applied his mind and not adjudicated upon the matter, although the award professes to determine them.

37 of 44 CR-164-2017 [38] Such situation would amount to misconduct. In other words, if the arbitrator or umpire is found to have not applied his mind to the matters in controversy and yet, has adjudicated upon those matters in law, there can be no adjudication made on them. The arbitrator/umpire may not be guilty of any act which can possibly be construed as indicative of partiality or unfairness. Misconduct is often used, in a technical sense denoting irregularity and not guilt of any moral turpitude, that is, in the sense of non-application of the mind to the relevant aspects of the dispute in its adjudication. In K.V. George v. Secretary to Government, Water & Power Department, Trivandrum this Court held that the arbitrator had committed misconduct in the proceedings by making an award without adjudicating the counter-claim made by the respondent. In Indian Oil Corpn. Ltd. v. Amritsar Gas Service the counter- claim was rejected on the ground of delay and non- consideration of the claim, it was held, constituted an error on the face of the award.