Swastika Metal Works vs Union Of India And Anr.
1989 Latest Caselaw 441 Del

JUDGMENT

P.N. Nag, J.

(1) The petitioner, a partnership firm, has tiled this petition under Sections 14 and 17 of the Indian Arbitration Act, 1940 seeking directions to respondent No. 2 to file the award dated 7th October, 1985 together with the file relating to the arbitration proceedings in court and also for issuance of notice of filing of the award and the proceedings after the award is filed in court by respondent No 2, arbitrator

(2) The petitioner firm, which deals in brass, copper, zinc, nickel, silver sheets strips and other metal products as importers, exporters and manufacturers, in pursuance of the invitation for tenders by respondent No. 1 vide invitation to tender No. POM/TEC/107/069/7-5-79/P.1 due to be opened on 28th July, 1979 for the supply of 16201 Kgs. of brass strips to the specifications prescribed therein, offered its tender which was accepted by the respondent after having further correspondence and the condition of delivery was amended so as to read "618 months in 2 or 3 lots of equal or near about weight". As per Clause 17 cf the Schedule to the Acceptance of Tender, some authority of respondent No. 1 was to inspect the material at the petitioner's premises and after his approval the same was to be dispatched for delivery to the respondent, it appears, according to the petitioner, that the inspection procedure was very cumbersome and there was default and negligence on ihe part of the inspecting authority of the respondent No. I in not inspecting the material within time and as such there was some delay in the supply of stores. Therefore without Inspection of the material there could not be any supply within the stipulated period by the petitioner to respondent No. 1 and as such the petitioner requested for extension 66 delivery period from time to time. In this connection the petitioner has made reference to various written requests and reminders, viz., 1-10-1980, 10-10-1980, 25th October, 1980 and 15th November, 1980, but the delivery dale was not extended beyond 15-9-1980. The petitioner, therefore, sent a telegram, dated 25th January, 1982 giving 15 days' time to the respondent No. 1 to decide the matter otherwise the petitioner would be free to dispose of the stores and claim damages but Of no use and in these circumstances, the petitioner had no other alternative tut to dispose of the stores partly processed and fully processed so as to avoid further loss and accordingly the petitioner floated tender inquiries and the material was disposed of with the result the petitioner sustained loss on account of the risk sales amounting to Rs. 6,19,611.35 as on 14th Febru?J-y, 1983, including interest up to that date. The petitioner also claimed 5 per cent balance payment due on account of supplies made to the respondent by bills Nos. 1670, 113, 386, 6&8 and 789 amounting to Rs. 15,467.11 and interest on this amount up to 14th February, 1983 amounted to Rs. 7,693.41. Thus, the total amount due from the respondent No. I to the petitioner as on 14th February, 1983 was Rs. 6,42,771.87. Interest thereon from 15th February, 1983 to 4th March, 1984 @ 19.4 per cent worked out to Rs. 1,31,625.39. Thus, the total amount claimed by the petitioner in the Statement of Claim before the Arbitrator was Rs. 7,74,39-7.26. Since there was arbitration clause in the agreement, the matter was referred to the arbitrator who has given his award dated 7th October, 1985 and allowed the claim of the petil'ontr for the 5 per cent balance price due to the petitioner for the supplies made to Union of India ammoniating" to Rs. 15,467.

(3) In pursuance of the notice issued by this court the arbitrator, respondent No. 2, filed the award dated 7th October, 1985 and arbitration proceedings in court and, thereafter notices of filing of the award were issued to the parties. The petitioner has filed objections dated 6th May, 1986 to the award praying therein that the award dated 7th October, 1985 may be set aside and remitted to the arbitrator for fresh trial.

(4) During the course of hearing counsel for the petitioner strenuously urged that the award is a non-speaking award and as such the award gave an undue protection to considerable incompetence, arbitrations and dishonesty in thg arbitral process. Therefore, this itself is a sufficient ground for setting aside the award and remitting it for fresh trial by the arbitrator. in this connection counsel for the petitioner has heavily relied on M/s. Bhilwara Synthetics Ltd. v. Delhi Hindustani Mercantile Association and others (AIR 1982 Del. 155).(1) Strong reliance has been placed by him on the following observations in paragraph 6: "SILENCE,no doubt, is a rare virtue and in the claim of spiriti.ai thought has been sublimated to heights of bliss and divinity. Narman Pandits Lakshnam i.e. silence is an insignia of a wise man, says the Indian Scripture. While the role and importance of license in nature's scheme of things is still being explored, there is little doubt that in the present stage of law of arbitration m India, silence is a truly golden. It is one of the well known anomalies of law of arbitration that while a speaking award is subjected to unrestricted justiciability, a non-speaking award enjoys near immunity from judicial control. In the expending horizon of natural justice and the development of administrative law when every judicial, quasi-judicial, executive and administrative body, charged with the duty to make a decision affecting rights and obligation, is considered under a duty to give reasons for its decision, it is quite linchronistic that an arbitrator in India is still immune from any such obligation. It is important to remember that duly to give reasons enlightens the party, who is affected by the decision, as to why the decision was unfavorable to it, illumines the path of the appellate authority, controls the tribunal itself and constitutes a built-in safeguard ..against arbitrariness. It is for tins reason that in England the right to know reasons has been given statutory recognition. In English law, an award by an Arbitrator without reasons, even without adequate reasons, would be baa in law but no so in India. In international arbitration, the convention recognises the obligation to give reasons. While the rule that the arbitrator need give no reason for the award may have had its importance at one time, there is little doubt that the power to make a non-speaking award must have given undue protection to considerable incompetence, arbitrariness and view dishonesty in the arbitral process. Unfortunately, little legal thought, has so far been devoted to the problem and it is high time the matter is considered afresh so as to bring the arbitral process in India in conformity with the normal accepted elsewhere."

The question whether or not the award can be set aside on the sole ground that the award is a non-speaking or non-reasoned in the absence of any stipulation to contrary in the arbitration clause has been considered by the Supreme Court at number of occasions. However, the view of the Supreme Court has been not to set aside the award merely on the ground that the award is a non-reasoned or non-speaking award. It is unnecessary to refer to various decisions of the Supreme Court. Solstice it to refer to the latest decision of the Supreme Court in Raipur Development Authority and other? v. M/s. Chokhamal Contractors and others . (2) This controversy has been set at rest by the Constitution Bench in this case. After having considered the matter in depth and law up-to-date the Supreme Court observed:

"IT is now well settled that an award can neither be remitted nor set aside merely on the ground that it does not contain reasons in support of the conclusion of decisions reached in it except where the arbitration agreement or the deed of submission requires him to give reasons. The arbitrator or umpire is under no obligation to give reasons in support of the decision reached by him unless under the arbitration agreement or in the deed of submission he is required to give such reasons and if the arbitrator or umpire chooses to give reasons in support of his decision it is open to the court to set aside the award if it finds that an error of law has been committed by the arbitrator or umpire on the face of the record on going through such reasons. The arbitrator or umpire shall have to give reasons also where the court has directed in any order such as one made under Section 20 or Section 21 or Section 34 of the Act that reasons should be given or where the statute which governs an arbitration requires him to do so."

"THE question which arises fod consideration in these cases is whether it is appropriate for this Court to take the view that any award passed under the Act, that is, the Indian Arbitration Act, 1940 is liable to be remitted or set aside solely on the ground that the arbitrator has no given lessons thus virtually introducing by a judicial verdict an amendment to the Act when it has not been the law for nearly 718 decades. The people in India as in other parts of the world such as England, U.S.A. and Australia have become accustomed lo the system of settlement of disputes by private arbitration and have accepted awards made against trim as binding even though no reasons have been given in support of the awards for a long time. They have attached more importance to the element of finality of the awards then their legality. Of course when reasons are given in support of the awards and those reasons disclose any error apparent on the face of the record people have not refrained from questioning such awards before the courts. It is not as if that people are without any remedy at all in cases where they find Chat it is in their interest to require the arbitrator to give reasons for the award. In cases where reasons are required, it is open to the parties to the dispute to introduce a term either in the arbitration agreement or in the deed of submission requiring the arbitrators to give reasons in support of the award. When the parties, to the dispute insist upon reasons being given, the arbitrator is, as already observed earlier, under an obligation to give reasons. But there may be many arbitrations in which parties to the dispute may not relish the disclosure of the reasons for the awards, in the circumstances and particularly having regard to the various reasons given by the Indian Law Commission for no recommending to tile government to introduce an amendment in the Act requiring the arbitrators to give reasons toi their awards we feel that it may not be appropriate to take the view that all awards which do not coat in reasons should either be remitted or set-aside. A decision on the question argued before us involves a question of legislative policy which should be left to the decision of Parhameiil. It is a well known rule of construction that it a certain interpretation has been uniformly put upon the meaning of a statute and transactions such as dealings in property and making of contracts have taken place on the basis of that interpretation, the Court will not put a different interpretation upon it which will materially affect those transactions. We may refer here to the decision of the Court of Appeal rendered by Lord Evershed M.R. in Brownsea Havel Properties v. Poole Corporation in which it is observed thus

"........There is well established authority for the view that a decision of long standing on the basis of which many persons will in the course of time have arranged their affairs should not lightly be disturbed by a superior court not strictly bound itself by the Jecision."

Courts should be slow in taking decision which will have the effect of shaking rights and titles which have been founded through a long time upon the conviction that a particular interpretation of law is the legal and proper one and is ons which will not be departed from."

(5) In view of the above decision of the Supreme Court in Raipur Development Authority's case (ilipra) the view of Delhi High Court cannot be considered as correct law on this subject. It may be mentioned here that in paragraph 36 of this Judgment, the Supreme Court has referred the case of the Delhi High Court in M/s. Bhilwara Synthetics and the decision of the Delhi High Court has not been approved. In face of the Supreme Court's decision in Raipur Development Authority's case (supra) the award in the present case although is a non-speaking and non-reasoned award but is perfect and not bad in the eyes of law.

(6) Counsel for the petitioner further argued that the supplies could not be delivered within time because of cumbersome procedure involved turn inspection, the petitioner'? written requests and reminders for extension of delivery period up to 15th December, 1980 which was not acceded to and in fact the inspecting authority rejected certain samples taken by their own inspector and recommended by him but the extension was not granted beyond 15th September, 1980. According to the petitioner, there were the material documents which should have been considered by the arbitrator. Since the arbitrator has not considered these relevant materials before him, he has misconducted the proceedings and, therefore, the award is bad in the eyes of law and deserves to be set aside and remitted for fresh trial before the arbitrator.

(7) In this connection it may be relevant to point out that ill the award the arbitrator has clearly mentioned that he has made the award after having heard and examined and con- sidered the statements of the parties and their evidence and thereafter he allowed the claim of the petitioner for the 5 per cent balance price due to the petitioner for the supplies made to Union of India amounting to Rs. 15,4671-. Consideration of the evidence includes documentary evidence also. The various letters referred to by the petitioner in the objection-petition have also been filed before the arbitrator in the proceedings conducted by him. Since the award has been given by the arbitrator after having considered the evidence which includes documentary evidence including these letters which have been placed before him by the petitioner, I am of opinion that the arbitrator has considered these letters and documents while making the award. Since the award is a non-speaking award it cannot be said thatthe arbitrator has noc considered some material relevant documents placed before him as alleged by the petitioner. Silence of the arbitrator in the award of having considered these documents must be taken to be intended that such documents have been considered by him and their after the award has been passed by the arbitrator.

(8) Viewed from another angle as to what should be the approach of the courts while dealing with the cases of the awards given by the arbitrators for the purpose of making them rule of court has been explained by the Supreme Court in Smt. Santa Sila Devi and another v. Dhirendra Nath Sen and others .the observations, in paragraph of that judgment are reproduced below : "BEFORE dealing With this point k is necsssary to emphasis certain basic positions. The first of them is that a 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 (See Selby v. Whitbread and Co., (1917) I Kb 736 at p. 748). Besides it is obvious that unless the reference to arbitration specifically so requires the arbitrator is not bound to deal with each claim or matter separately, but can deliver a consolidated award. The legal position is clear that unless so specifically required an award need not formally express the decision of the arbitrator on each matter of difference. (Vide Re. Brown and the Corydon Canal Co., (1839) 9 Ad and Ell 522; 112 E3 1309 and Jewell v. Christie (1867) 2 Cp 296. Further, as Parke, B. himself put it during the course of arguments in (1853) 138 Er 1254 : 'Unless the contrary appears flies Court will presume that the award dispose? finally of all the matters in difference.

 and to repeat a sentence from the extract quoted earlier:    "WHERE an award is made de prasmissis, the presumption is, that the arbitrator intended to dispose finally of all the matters in difference; and his award will be held final, if by any intendment it can be made so.'"  

 In the light of these observations of the Supreme Court it h?is to be assumed that the arbitrator has ^OTisid.-i-ed r.ixl : "plied his mind on the matter in difference between the notices whether or not extension should have been given to the petitioner for supply of the good beyond 15th September 1980 and he has rejected the claim of ihc petitioner in th's ' regard for such an extension.   

 (9) No other point has been urged on behalf of the petitioner- obiector.   

 (10) In the light of the above discussion I do not find am legal in rarity in the award dated 7th October, 1985 on the face of it. The award dated 7th October, 1985 is made a rule of the court. A decree shall be drawn up in terms of the award of which it shall form part. No costs.