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JKLR-Part(IV) CIMA 96-A /2000 Back To Index |
(2001) 1 J & K LAW REPORTER 383 RAM
SAROOP GUPTA
Petitioner CIMA
96-A/2000, decided on 27.11.2000.
J&K Arbitration Act, Svt. 2000 (1945 AD),
S. 39 - Award of the arbitrator - Non-speaking award - Challenge to the award
– Scope and ambit of the powers of the courts to interfere.
By and large, the courts have disfavoured interference with arbitration award on
account of error of law and fact on the score of mis-appreciation and misreading of the
materials on record and have shown definite inclination to preserve the award as far as
possible. It has been held by the courts in no less clear terms that the award of an
arbitrator cannot be set aside merely because by a process of inference and arguments it
may be demonstrated that the arbitrator has committed some mistake in arriving at his
conclusion on the merits of the disputes referred to him for adjudication. The award can
of course be challenged on the ground of error of law on the face of the award, when in
the award itself or in any document actually incorporated in it, there is found some
illegal proposition which is the basis of the award and which is erroneous. [Para 3]
The jurisdiction of the court is further limited in case of a non-speaking award.
It is only in a speaking award that the court can examine an error of law on the face of
the record and look into the reasoning of the award which is not possible in case of a
non-speaking award. [Para 10]
On the facts of the case, held :
There is no infirmity in the said order. The arbitrator has acted within his
jurisdiction. As the award is a non-speaking award and the arbitrator has neither given
the reasons for his factual conclusions nor disclosed the mental process by which he
reached his conclusions, it is not open to the court to speculate as to what impelled the
arbitrator to arrive at his conclusion. In such a case, it is not possible for the court
to say that there is any error apparent on the face of the award to justify interference
with the award. We are, therefore, of the clear opinion that the learned Single Judge
correctly refused to interfere with the factual conclusions of the arbitrator in a
non-speaking award.
[Para
11] Cases referred : Chronological 1. Champsey Bhara & Co. v Jivraj Balloo Spg.
& Wvg. Co. Ltd. AIR 1923 PC 66 2. Hodgkinson v Fernie (1957) 3 CB NS 189 Advocates who appeared in this case : JUDGMENT AND ORDER Per Dr. B. P. Saraf, Chief Justice ( Oral )
This is an appeal under section 39 of the Jammu and Kashmir Arbitration Act, 2002
(1945 A.D.) against the order of learned Single Judge dated October 13, 2000 by which the
learned Single Judge rejected the objections of the appellant (“contractor”) to
the award being made the rule of court and the prayer for setting aside the award on the
ground of misconduct. 2. The
facts of the case, briefly stated, are as follows. The disputes and differences between
the appellant and the respondents arising out a contract entered into between them for
provision of Key Personnel Quarters at Akhnoor were referred for arbitration to Colonel J.
Natarajan. He was the sole arbitrator. The appellants and the respondents filed their
respective claims before the arbitrator. The appellant made a claim of Rs.1,34,043/- on
account of the work executed by him. The
appellant also claimed Rs.94,200/- for non-supply of coal. The arbitrator awarded a sum of
Rs.11,330/- against the claim of Rs.94.200/-
on account of non-supply of coal. As against the claim of Rs.48,000/- on account of wages
paid to the chowkidar, a sum of Rs.6000/- was awarded. Similarly, the arbitrator awarded a
sum of Rs.42,354/- in favour of the respondents as against their claim of Rs.1,03,000 /-
for compensation for getting the balance work executed through another contractor and
Rs.1,20,000/- on account of loss of revenue. The award was filed in this Court under the
J& K Arbitration Act for making it the rule of court. The appellant filed objections
and prayed that the award be set aside on the ground of misconduct. Learned Single Judge
rejected the application of the appellant and made the award rule of court. Learned Single
Judge, in his order, observed that the claims of the appellant required appreciation of
evidence. He said that the award was a non-speaking award and there was nothing to show
that the arbitrator had acted illegally. The learned Judge observed that the findings of
the arbitrator were findings of fact based on appreciation of evidence. He held that the
court had no power to probe the mental process of the arbitrator. In coming to his
conclusion, he relied on the decision of Supreme Court in State of U.P. v Ram Nath International Construction (P)
Ltd. (1996) 1 SCC 18. Aggrieved by the order of the learned Single Judge, the
appellant is before us by way of this appeal. 3. We have
heard Mr. R. P. Gupta, learned counsel for the appellant and perused the order of the
learned Single Judge. . The award in the instant case is a non-speaking award. The
appellant seeks to challenge the determination of the amount of compensation by the
arbitrator under different heads in the above award which, in our opinion, is not
permissible. Law is well settled that where the matters in difference are referred to an
arbitrator, he is constituted the sole and final judge of all questions, both of law and
of fact, and his decision is binding on the parties if it is reached fairly after giving
adequate opportunities to the parties to place their grievances in the manner provided by
the arbitration agreement. The award of the arbitrator can be challenged only within the
limited scope of challenge available under the provisions of the Arbitration Act. On
perusal of the Arbitration Act and grounds of challenge, it is clear that the legislature
in its wisdom has limited the scope and ambit of challenge to an award. The civil courts
are entrusted with the power to facilitate arbitration and effectuate the awards. They
cannot exercise the appellate powers over the decision of the arbitrator. By and large,
the courts have disfavoured interference with arbitration award on account of error of law
and fact on the score of mis-appreciation and misreading of the materials on record and
have shown definite inclination to preserve the award as far as possible. It has been held
by the courts in no less clear terms that the award of an arbitrator cannot be set aside
merely because by a process of inference and arguments it may be demonstrated that the
arbitrator has committed some mistake in arriving at his conclusion on the merits of the
disputes referred to him for adjudication. The award can of course be challenged on the
ground of error of law on the face of the award, when in the award itself or in any
document actually incorporated in it, there is found some illegal proposition which is the
basis of the award and which is erroneous. As held by the Supreme Court in Allen Berry & Co. (P) Ltd. v. Union of India AIR
1971 SC 696, even when an arbitrator commits a mistake either in law or in fact in
determining the matter referred to him, but such mistake does not appear on the face of
the award or in a document appended to or incorporated in it so as to form part of it, the
award will neither be remitted nor set aside notwithstanding the mistake. It is only when
an erroneous proposition of law is stated in the award and it is the basis of the award
that the award can be set aside or remitted on the ground of error of law apparent on the
face of the record. But in no event the court can set aside the award on the ground of
mistake of fact committed by the arbitrator. 4. In State of Rajasthan v Puri Construction Co. Ltd.
(1994) 6 SCC 485, the Supreme Court has said in categorical terms that in its anxiety to
render justice to the party to arbitration, the court should not re-appraise the evidence
intrinsically with a close scrutiny for finding out that the conclusion drawn from some
facts by the arbitrator is, according to the understanding of the court, erroneous. Such
exercise of power, which can be exercised by the appellate court with powers to reverse
the finding of fact, is alien to the scope and ambit of challenge to an award under the
Arbitration Act. 5. It may
be pertinent in this connection to quote the observations of Williams J in Hodgkinson v Fernie (1957 3 CB NS 189) which were
cited with approval by the Privy Council in Champsey
Bhara & Co. v Jivraj Balloo Spg. & Wvg. Co. Ltd. AIR 1923 PC 66: “The law has
for many years been settled, and remains so at this day, that, where a cause or matters in
difference are referred to an arbitrator, a lawyer or a laymen, he is constituted the sole
and final judge of all questions both of law and of fact…The only exception to that
rule are cases where the award is the result of corruption or fraud, and one other, which
though it is to be regretted is now, I think firmly established, viz., where the question
of law necessary arises on the face of the award or upon some paper accompanying and
forming part of the award.”
The Privy Council (in Champsey Bhara &
Co. v. Jivraj Balloo Spg. & Wvg. Co. Ltd., supra) held: “An error in law on the face of the award
means, in their Lordship’ view, that you can find in the award or a document actually
incorporated thereto, as for instance, note appended by the arbitrator stating the reasons
for his judgment, some legal propositions which is the basis of the award and which you
can then say is erroneous. It does not mean that if in a narrative a reference is made to
a contention of one party that opens the door to seeing first what that contention is, and
then going to the contract on which the parties’ rights depend to see if that
contention is sound.” 6. It may
also be expedient to quote the following
observations of the Supreme Court in Union of India
v Rallia Ram AIR 1963 SC 1685 : “The award of
the arbitrator is ordinarily final and conclusive, unless a contrary intention is
disclosed by the agreement. The award is the decision of a domestic tribunal chosen by the
parties, and the civil courts which are entrusted with the power to facilitate arbitration
and to effectuate the awards, cannot exercise appellate powers over the decision. Wong or
right the decision is binding, if it be reached fairly after giving adequate opportunity
to the parties to place their grievances in the manner provided by the arbitration
agreement. But it is now firmly established that an award is bad on the ground of error of
law on the face of it, when in the award itself or in a document actually incorporated in
it, there is found some legal proposition which is the basis of the award and which is
erroneous. An error in law on the face of the award means you can find in the award or a
document actually incorporated thereto, as for instance a note appended by the arbitrator
stating the reasons for his judgement some legal proposition which is the basis of the
award and which you can then say is erroneous. It does not mean that if in a narrative a
reference is made to contention of one party, that opens the door to seeing first what
that contention is, and then going to the contract on which the parties’ right depend
to see if that contention is sound.” 7. In N. Chellapan v Secretary, Kerala State Electricity
Board AIR 1975 SC 230, the Supreme Court held: “The umpire
as sole arbitrator was not bound to give a reasoned award and if in passing the award he
makes a mistake of law or of fact, that is no ground for challenging the validity of the
award. It is only when an
erroneous proposition of law is stated in the award and which is the basis of the award,
can the award be set aside or remitted on the ground of error of law apparent on the face
of the record.”
(Emphasis
supplied) 8. This
legal position was reiterated by the Supreme Court in Coimbatore District Podu Thazillar Sangam v
Balasubramania Foundry [1978] 3 SCC 723 in the following words : “It is an
error of law and not mistake of fact committed by the arbitrator which is justiciable in
the application before the court. If there is no legal
proposition either in the award or in any document annexed with the award which is
erroneous and the alleged mistakes or alleged errors are only mistake of fact and if the
award is made fairly after giving adequate opportunity to the parties to place their
grievances in the manner provided by the arbitration agreement, the award is not amenable
to correction by the court.”
(Emphasis supplied) 9. In State of U.P. v Ram Nath International Construction (P)
Ltd. (1996) 1 SCC 18, the Supreme Court held: “The
jurisdiction of the court to interfere with an award of an arbitrator is undoubtedly a
limited one. The adjudication of the arbitrator is generally binding between the parties
and it is not open to the court to attempt to probe the mental process by which the
arbitrator has reached his conclusion. Award of an arbitrator can be set aside by a court
only on the ground indicated in section 30 of the Arbitration Act. It is not open to
the court to reassess the evidence to find whether the arbitrator has committed any error
or to decide the question of adequacy of evidence and the court cannot sit on the
conclusion of the arbitrator by re-examining and re-appreciating the evidence considered
by the arbitrator.”
(Emphasis supplied) 10. The
jurisdiction of the court is further limited in case of a non-speaking award. It is only
in a speaking award that the court can examine an error of law on the face of the record
and look into the reasoning of the award which is not possible in case of a non-speaking
award. Because, as observed by the Supreme
Court in Hindustan Steel Works Construction Ltd. v
C. Rajasekhar Rao (1987) 4 SCC 93, 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 the arbitrator to arrive at his conclusion. In State of Maharashtra v Nav Bharat Builders 1991
Supp. (1) SCC 86, Supreme Court held: “Where a non-speaking award has been made in
respect of payment of compensation for stoppage of work and additional interest, it cannot
be said that the arbitrator had committed any error apparent on the face of the
award.” In National Fertilizers v Puran Chand Nangia JT 2000
(Suppl.1) SC 591, the Supreme Court has reiterated the legal position that in case of a
non-speaking award, it is not permissible for the court to probe into the mental process
of the arbitrator. 11. On a careful
consideration of order of the learned Single Judge in the light of the law set out above,
we find that there is no infirmity in the said order. The arbitrator has acted within his
jurisdiction. As the award is a non-speaking award and the arbitrator has neither given
the reasons for his factual conclusions nor disclosed the mental process by which he
reached his conclusions, it is not open to the court to speculate as to what impelled the
arbitrator to arrive at his conclusion. In such a case, it is not possible for the court
to say that there is any error apparent on the face of the award to justify interference
with the award. We are, therefore, of the clear opinion that the learned Single Judge
correctly refused to interfere with the factual conclusions of the arbitrator in a
non-speaking award. Obviously, this appeal is devoid of any merit and hence dismissed. In
view of the above, CMP and caveat are also disposed of. ......... |