Trade & Industrial Corporation vs India Tourism Development ...
1994 Latest Caselaw 660 Del

JUDGMENT

Usha Mehra, J.

1. M/s Trading and Industrial Corporation (In short 'Corporation') entered into an agreement with M/s. India Tourism Development Corporation Limited (In short 'ITDC') regarding supply and installation of Kitchen equipments at Vigyan Bhawan, New Delhi. The said agreement dated 19th November, 1979 contained an arbitration Clause No. 48 which provided that in the event of any dispute, the matter will be referred to arbitration. The Managing Director (In short M.D.) of I.T.D.C. will appoint an Arbitrator. Dispute arose between the parties and M.D. appointed Mr. K.L. Sehgal as the Sole Arbitrator to adjudicate the dispute. As per Clause 48 all cases where the amount of the claim in dispute is Rs. 50,000/- and above the Arbitrator shall give reasons for the award.

2. The Arbitrator after hearing the parties made and published his award on 21st February, 1989. Against claim No. 1 he awarded Rs. 9,077.32 paise in favor of the claimant. This amount represented the refund of penalty. All other claims including claim of interest were rejected. Even on refund of penalty amount, no interest was awarded. As regards Claim No. 7 cost of arbitration proceedings, the Arbitrator instead of awarding the amount of cost in favor of the party fixed his own fee as cost amounting to Rs. 7,000/- to be shared by both the parties.

3. It is against this award that the present objections have been filed by the claimant/ petitioner, inter alia, on the grounds that Arbitrator rejected the claims arbitrarily without assigning any reasons. As per Clause-48 the Arbitrator was required to give a reasoned award. But he failed to render the same. Without assigning any reason the Arbitrator rejected his claim of balance payment which was withheld at the rate of 10%. It was to be released after the expiry of 12 months of defect liability. The defect liability period in this case expired long time back, but the I.T.D.C. did not release that withheld amount of Rs. 10,245.39 paise. Besides the balance amount, another sum of Rs. 1,64,438.46 paise was also due on account of the principal amount outstanding against the bills submitted but not paid. Statement of calculation showing the amounts due were filed as Annexure-A. The facts supported by documentary evidence were pleaded before the Arbitrator. It appears he ignored the complete evidence and the material facts pleaded before him in support of his claims. Moreover, claimant manufactured items 1 and 7 of the schedule of quantities in November, 1980 valued at Rs. 22,472/ These articles were never lifted by the I.T.D.C, therefore, those had to be disposed of in the open market for Rs. 12,500/- thereby claimant suffered actual loss of Rs. 9,972/-. Even the earnest money of Rs. 2,600/- which after completion of work was required to be refunded has not been refunded though work stood completed in November, 1980. It was in this back-ground that the claimant preferred his claims.

4. The Arbitrator without dealing with any of claimant's evidence and supported by documentary evidence and pleadings rejected the same without assigning any reason. Not even semblance of reasoning has been given. In the absence of the same it is difficult to appreciate as to what weighed in the mind of the Arbitrator when he rejected the claims of the petitioner. Ordinarily, this Court being not a Court of appeal on the award of the Arbitrator would not have interfered with the same nor can insist to know how the Arbitrator arrived at that conclusion i.e. the mind process of the Arbitrator at the time of giving the award. But when the arbitration clause requires that the Arbitrator would give reasoned award then a duty is cast on such an Arbitrator to assign reasons for his conclusions. An award is not a speaking award if it does not speak as to why the Arbitrator awarded that amount and rejected the rests. Such an award does not speak the mind of the Arbitrator. Question whether an Arbitrator must give reasons for his award came up for consideration before the Constitution Bench of the Supreme Court in the case of Raipur Development Authority v. Chokhamall Contractors, where it has been held that an Arbitrator was not obliged to give reasons for his award except when he was required to do so by the arbitration clause. When the terms of the agreement require that award should be a reasoned one it is obligatory on the part of the Arbitrator to state reasons. Though it is not Obligatory to give detailed judgment. But if the reading of the award shows his mind as to on which basis he acted in arriving at the conclusion then that is sufficient to conclude that he has given reasoned award. When the arbitration clause and the terms of his reference required him to give reasoned award then in such a case the Arbitrator is supposed to discuss and set out the reasons which lead him to make that award. Setting out the conclusion upon claims referred to him without discussing the reasons for coming to those conclusions does not make that award a reasoned or speaking award so held by the Supreme Court in Jagodia (Overseas) Pvt. Ltd. v. Industrial Development Corporation of Orissa Ltd. and D.K. Jain v. DDA, (1991) 2 PLR page 27. In view of this settled principle of law, we have to see whether in this case the Arbitrator has given reasons in arriving at the conclusions while rejecting the claims. Against Claim No. 1 petitioner had claimed Rs. 1,16,438.46 Paise on account of balance payment plus interest. As against this, Arbitrator has awarded Rs. 9,077.32 paise for refund of penalty amount. All other claims as well as interest claimed have been disallowed. No interest payable on bills not paid from time to time nor even on Rs. 9,077.30 Paise, withheld as pending has been awarded. From the reading of the award given against claim No. 1, it is not only difficult but impossible to infer the thought process of the mind of the Arbitrator. On what basis he rejected all other payments and why interest on the amount awarded has been rejected, no reasoning has been given for rejecting the claim.

5. Similarly, against Claim No. 2 petitioner has claimed the amount for manufacturing of equipment. This claim has also been rejected with one word "rejected". The award in question leaves one totally in the dark as to why other claims have been rejected. Hence the Award in question is not sustainable.

6. Regarding claim No. 3 i.e. refund of earnest money deposit, he concluded that no deposit was made. After having said so in the same breath he gave directions to I.T.D.C's Legal Department and Finance Section to once again check up whether earnest money was deposited or not? This shows he had not applied his mind. He himself was not sure. Without waiting for the reply from Legal and Finance Department, of the respondent, he rejected the claim which is nothing but misconduct of the proceedings by the Arbitrator. Similarly, claim of interest and damages were disallowed without assigning any reason.

7. As regards claim No. 7 the contractor had claimed, cost of the proceedings. Instead of dealing with his claim, the Arbitrator awarded fee to himself which was not a term of the reference nor the petitioner/objector had agreed to be paid by him.

8. For the reasons stated above, I have no hesitation in concluding that the Arbitrator has misconducted himself and the proceedings. There is a clear violation of the mandate, given under Clause-48 of the agreement, by the Arbitrator by not giving a reasoned Award. Hence the impugned award is set aside.