Jharkhand High Court
M/S Bharat Coking Coal Limited ... vs New Satnam Transport Company on 12 April, 2023
IN THE HIGH COURT OF JHARKHAND AT RANCHI
Arbitration Appeal No. 10 of 2008
M/s Bharat Coking Coal Limited having its Head Quarter at Koyla
Bhawan, P.O. Koyla Nagar, P.S. Saraidhela, District-Dhanbad
... ... Appellant
Versus
New Satnam Transport Company, a partnership firm with Sri Tirath
Singh, son of Sri Santokh Singh and Smt. Pritpal Kaur, wife of Sri
Gurupal Singh, as partners both residents of Katras Road, Matkuria,
P.O. P.S. and District-Dhanbad ... ... Respondent
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CORAM: HON'BLE MRS. JUSTICE ANUBHA RAWAT CHOUDHARY
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For the Appellant : Mr. Anoop Kr. Mehta, Advocate
: Mr. Manish Kumar, Advocate
For the Respondent : Mr. J.K. Pasari, Advocate
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16/12.04.2023 Heard learned counsel for the parties.
2. This appeal is directed against the judgment dated 31.01.2008 (decree
sealed and signed on 08.02.2008) passed by the learned Sub Judge VI,
Dhanbad in Title (Arb.) Suit No. 31 of 1995 rejecting the objection filed
under Section 30 of the Arbitration Act, 1940 for setting aside the Award
dated 12.04.2006. The sole Arbitrator was appointed vide order dated
27.05.2005 in Title (Arbitration) Sut No. 31 of 1995 passed by the learned
Sub-ordinate Judge VII th, Court, Dhanbad.
Foundational facts and background of the case.
3. The foundational facts are that by a Notice dated 08.06.1991 the
Appellant ( hereinafter referred to as BCCL) invited persons willing to
undertake the work of sand transportation in any mine in BCCL to do the
job at the rate decided by BCCL bunker wise/source wise for various areas
of BCCL including from different river Ghat/stock to Kustore (East/South)
bunkers of Kustore Colliery under Kustore Area for the year 1991-92.
4. By Letter of Intent dated 22.07.1991, issued by BCCL, the rate was
communicated to be rate of 88-89 plus 15% and the formal contract was
awarded to the claimant by work order dated 10 th of October, 1991. It has
been the specific case of the claimant that vide letter dated 06.11.1991, the
claimant recorded his protest to the rate and kept the issue of rate fixation
alive and while the work was going on, the claimant once again vide a
letter dated 22nd January, 1992 communicated that the rate for the year
1991-92 was yet to be finalized which was causing financial hardship to
him. Numerous letters right from 16th September, 1991 to 15th of
December, 1994 were issued by the claimant wherein the claimant
repeatedly demanded the finalization of rate of sand transport.
5. So far as the BCCL is concerned, their specific case was that work order
dated 10th of October, 1991 was binding. Clause-14 prohibited granting of
any escalation on account of rate increase in the price of Diesel/POL/Tyres
or any other items required for work or on account of increased rate/levies
etc. during the contract period and therefore no arbitrable dispute could be
raised by the contractor on account of the aforesaid heads. It was also
raised that the work order provided that only such disputes as relatable to
transportation of sand namely quantity, quality etc. were referable for
arbitration.
6. When the dispute arose between the parties the claimant approached the
Civil, Court, Dhanbad under Section 8 & 20 of the Arbitration Act, 1940
on the strength of clause-19 of the work order, BCCL opposed the same
but the application of the claimant was allowed against which BCCL filed
appeal. The appeal was dismissed which was challenged by BCCL before
Hon'ble Supreme Court of India by filing SLP being SLP (Civil) No. 6592
of 1997 which was disposed of on contest on 05.02.1999. Order passed by
the Hon'ble Supreme Court is quoted as under: -
"We have heard learned counsel for the parties. In our view, no case
for our consideration survives in this Special Leave Petition against
the order of reference to arbitration as number of disputes are raised
by the respondent. Learned counsel for the petitioners vehemently
placed for our consideration two submissions namely-
(i) Under Clause 14 of the agreement no escalation of the rate
was payable on account of increase in prices of
diesel/POL/Tyres or any other items required for the work
or on account of increased statutory taxes/levies during the
contract period: and
(ii) 15% escalation was already agreed and the respondent had
accepted without any demur. Therefore, no arbitrable
dispute survives.
Learned counsel for the respondent submitted that the claims put
forward by the respondent include number of items apart from the
item mentioned in Clause 14 of the Agreement and 15 per cent
escalated amount which the respondent had received was subject to
the contention raised by it in its representation against 15 per cent
escalation. All these questions, in our view are required to be
thrashed out before the Arbitrator and it cannot be said that all these
disputes are therefore not arbitrable. It is obvious that it will be open
to the petitioners to submit before the Arbitrator whether any of the
disputes is really arbitrable or not and whether the respondent was
fully satisfied with the amount that it received. All these questions are
left open. Subject to the aforesaid observations, the Special Leave
Petition is disposed of."
7. On 23.04.1999 one Arbitrator was appointed who, vide award dated
24.03.2001, awarded a sum of Rs. 2,05,570/- with interest @ 8% thereon if
not paid within four months. The awarded amount was paid by BCCL by
cheque dated 10.07.2001 which was accepted and acknowledged by the
claimant vide letter dated 23.07.2001. Initially On 22.06.2001, the
objection was filed by the claimant under Section 34 of the Arbitration and
Conciliation Act, 1996 and on 08.08.2001, the claimant contractor filed
another objection under Section 30 and 33 of the Arbitration Act of 1940.
BCCL contested the objection. The Civil Court, Dhanbad was pleased to
set aside the award dated 24.03.2001 and directed appointment of new
Arbitrator. The High Court upheld the order by Civil Court by judgment
and order dated 19.11.2003. The BCCL filed Special Leave Petition on
25.02.2004 which too was dismissed by the Hon'ble Supreme Court.
Consequently, fresh arbitration commenced leading to the award passed in
the present case.
8. Before the learned Arbitrator, it was contended by BCCL that the rates
of transportation given and relatable to the year 1989-90 and 1990-91 had
nothing to do with the work order under consideration, as the work order
under consideration was distinct and separate from those related to 1989-90
and 1990-91. It was contended that in the year 1988, tender for the sand
transportation was invited for three years for the period 1988-89, 1989-90
and 1990-91, but the rates were finalized for the year 1988-1989 only.
Since the rates for the remaining period could not be finalized, a separate
agreement was entered into and the issue of payable rates for those two
years namely 1989-90 and 1990-91 was referred to arbitration. In respect
of the work order for the period 1991-92 i.e. the work order which was in
dispute in the present arbitration proceedings, it was their case that while
issuing the notice, the escalation element was duly considered by adding
15% over and above the rate of 1988-89 and the notice was given wide
publicity out of which the contract between the parties was born. By
accepting the Letter of Intent and continuing with the work thereafter, the
claimant had accepted the counter offer by BCCL. BCCL also denied that
the revision of rates was ever assured to the claimant. It was also their case
before the learned Arbitrator that unilateral and uncalled for
correspondences by the claimant did not create any right or arbitrable
dispute. BCCL further contended that admittedly the claimant had been
paid for the work of sand transportation for the period 1991-92 at old rate
of 1988-89 plus 15% escalation as per the condition of the notice and work
order, hence the demand of the claimant of 60% enhancement of the rate
for the base year 1988-89 was wholly misconceived. It was contended that
the arbitrator being a creature of the agreement was not at liberty to travel
beyond the conditions of agreement which included a bar on payment of
escalation in view of the fixed rate, i.e. rate of 1988-89 plus 15%.
However, BCCL did not raise any objection so far as computation was
concerned.
9. The perusal of the award reveals that BCCL did not question the
authenticity of the fact of receiving the letters/documents annexed with the
statement of claim but kept their right to interpret the same at the time of
hearing.
10. A supplementary claim was also made by the claimants for future
interest and refund of earnest money and the total claim was for an amount
of Rs. 1,66,37,137.37 and it was also brought on record that the claimant
had already received an amount of Rs. 2,05,570.00 by cheque dated
10.07.2001.
11. The issues and the decision in terms of the award is as under: -
Issues framed Finding in the award
1) Whether the claim On the face of the record, the contents of the Statement of
could forward by the
Claims in particular the claimant has included items apart
claimant include the
number of items apart from the items mentioned in Clause- 14 of the Agreement
from the items
(the work order dated 10th October, 1991).
mentioned in Clause-14
of the agreement.
2). Whether the items of On the face of the record, the items of claims forwarded by
claims made by the
the claimant are over and above the claim of 15% escalated
claimant is over and
above the claim of 15% amount which the claimant has already received.
escalated amount
which the claimant has
already received;
3). Whether the For the sake of convenience and the issues being allied to
disputes raised by
each other, the issue Nos. 3, 4 and 6 has been dealt with
the claimant in
consideration of the analogously and following finding has been arrived at:
contractual condition
are arbitrable; "On examination it is found that the Clause -14 is not a
clause putting the items mentioned therein in the category of
4) Whether any of the
EXCEPTED MATTERS. It is one thing to urge that the
disputes as raised by
the claimant for their claimant would not get any reimbursement of the escalated
application U/S 20
amount on account of their being Clause- 14 in existence
before the Court is
really arbitrable or whereas it is a different thing to urge that the disputes
not;
relating to the items mentioned in Clause -14 are not
arbitrable. The Arbitration Clause being Clause- 19 is
5) Whether the
claimant is fully absolutely free from any restriction and does not
satisfied with the
contemplate of any EXCEPTED MATTERS. I hold that all
amount that it received;
the disputes raised by the claimants are arbitrable."
6) Whether in view With regard to issue no. 5 following findings has been
of the inclusion recorded by the learned Arbitrator:
of Clause-14 in
the work order "The claimant is not satisfied with the payment received
for the related work, inclusive of 15% of escalation in respect of Diesel/POL/Tyre
the claimant is
entitled to get etc. is patent from the pleadings itself. The question is
labour escalation, whether his accepting the payment of the final bill amounts
POL escalation,
material escalation to legal satisfaction closing the door on arbitration.
and escalation in Beginning from the letter dated 22-7-1991, at least till 20-9-
Government Taxes etc.
1994 the claimant had written innumerable letters putting on
record that the rate for the year 1991-92 was yet to be
finalized. The legal effect of such correspondences cannot be
brushed aside as has been sought to be done by BCCL by
espousing that the correspondences were uninvited and
unwarranted and the rates for the year mentioned stood
finalized once for all with the issuance of the work order
dated 10-10-1991. The correspondences by the claimant
might be uninvited yet BCCL was under 'duty to speak'. In a
running contract in which the parties were actively involved
and one of the parties was continuously writing about the
purport and scope of the contract against the alleged
understanding thereof by the other party, the latter was under
an obligation to record the negative. Where there is a 'duty
to speak', not to speak or to maintain silence amounts to
consent.
Here, the silence of BCCL amounted to consent that the
rates were to be finalized. Had BCCL something else in
mind, it was always open to it to issue a STOP Work order
or to assert that the rate of 1988-89 along with 15%
escalation thereon was final for the year 1991-92. Hence, it
is concluded that the claimant cannot be said to be legally
satisfied with the amount received."
7) Whether the Money due to a person withheld by the holder without
claimant is entitled to
justified reason and without a contract to the contrary is of
for the payment of the
interest; if so, at what course refundable/reimbursable/payable with interest - this
rate from which date?
is a basic tenet of the world of Commerce. Hence, the
claimant is entitled to interest.
8) Whether the The claimant is entitled to extra rate claimed on account of
claimant is entitled to
route diversion made by the District Administration. The
any extra rate claimed
on account of alleged fact of Route diversion was also never denied or proved to
route diversion said to
the contrary by BCCL.
be made by the District
Administration.
12. The following is the comparative table of the claimed amount and
the awarded amount :-
Claimed Amount Awarded Amount
(A) Claims for rate difference in respect of
sand transportation from different River
Ghat/Stock to Kustore (East)/(South)
Bunker of Kustore Colliery under Kustore
Area, BCCL for the period from 22-7-
1991 to 31-3-1992, the arithmetic of which
is :
(i) in respect of Muraidih Ghat the work Against claim (A)(i) the amount of
done was for Rs. 37,64,884.00, Increase in Rs. 6,08,028.76 only was Awarded.
percentage was 30% and the difference of
amount/payable claim was Rs.
11,29,465.00
(ii) in respect of Kapasara/ Domarkunda Against claim (A)(ii) the amount of
Ghat the work done was for Rs. Rs. 11,51,577.68 only was Awarded.
71,30,512.00, increase in percentage was
30% and the difference of amount/payable
claim was Rs. 21,39,154.00
(iii) in respect of Bhowra Ghat the work Against claim (A)(iii) the amount of
done was for Rs. 46,962.00, increase in Rs. 7584.36 only was Awarded.
percentage was 30% and the difference of
amount/payable claim was Rs. 14,087.00
(iv) in respect of Stock to Bunker the work
done was for Rs. 2652.00, increase in Against claim (A)(iv) the amount of
percentage was 40% and the difference of Rs. 428.29 only was Awarded.
amount/payable claim was Rs. 1,061.00
(B) Additional rate payable/claim due to Since against the claim of Rs. 4,89,434.00
diversion of route by the District the claimant had received a sum of Rs.
Administration was 10% of Base rate plus 2,05,570.00 under Award of Sri S.
escalation (Muraidihi/Barja Ghat). The Chattopadhyay dated 24-3-2001, the
claim was to the tune of Rs. 4,89,434.00 learned Arbitrator held that there is no
justifiable reason or evidence to justify the
reopening of the claim. Hence, NIL
Award was given.
(C) Interest @24% per annum from 1-4- The claimant was awarded simple interest
1992 to 31-5-1999 over money blocked @13% per annum computable from
was claimed which amounted to Rs. 1-4-1992 till the date of actual satisfaction
64,89,904.00. of the Award i.e. till the date of actual
payment on the sum of Rs. 17,67,619.00.
Supplementary claim no. (i) for further
interest of Rs. 59,61,656.00 being interest
@24% per annum for the period from 1-6-
1999 to 31-12-2005.
The interest @24% was claimed from the
due date till realization of the claim or the
date of decree, whichever is earlier.
(D) Expenses incurred in Court In the absence of any proof regarding
proceedings up-to Hon'ble Supreme Court expenses in Court, the learned Arbitrator
was claimed to the tune of Rs. 3,00,000.00 given NIL award.
The claimant claimed further 24% per
annum of Rs. 1,05,63,105.00 payable from
respective due date till realization of claim
or date of decree whichever is earlier.
Supplementary claim (ii) was made for The learned Arbitrator held that BCCL
refund of Rs. 50,000.00 (Earnest money shall return the sum of Rs. 50,000.00 lying
deposit) and Rs. 62,376.37 (security deposited with it on account of earnest
deposit). money and Rs. 62,376.37 on account of
security deposit without any interest.
13. BCCL filed objection to the award and primarily raised the
ground that -
-the learned Arbitrator failed to appreciate that while accepting the
counter offer rate of the Respondent of 15% rate escalation over the rate
of 1988-89, by sending and uncalled for correspondences which did not
create any right in favour of the claimant to get the rate escalation and
such correspondences could not make the claim on a/c of rate escalation
arbitrable dispute, for adjudication;
-The learned Arbitrator committed error of law in holding on the basis of
letters of the claimant beginning from 22/7/91 till 20/9/94 that that the
rate of the year 1991-92 was not yet finalised and the legal effect of these
letters cannot be brushed aside while holding that correspondences by
the claimant might be uninvited yet respondent was under duty to speak
against that without appreciating these letters do not form part of
contract.
- the formerly appointed Arbitrator made the award for a sum of Rs.
2,05,570/- in favour of the Claimant and the claimant accepted the said
award without any demour vide Cheque dated 17/07/01 and thereby the
claimant was not entitled to any further amount out of the subsequent
arbitration and in making the award under challenge learned Arbitrator
committed legal misconduct; the learned Arbitrator committed legal
conduct in interpreting clause of the work order 19 in isolation
ignoring specific prohibitory clause 14 of the work order prohibiting any
escalation of any nature under the contract.
-The award made by the learned Arbitrator is otherwise perverse and
against the provisions of law out of jurisdictional error committed by the
Ld. Arbitrator having gone beyond the contract.
-The interest allowed is highly excessive @13% per annum and that too
with effect from 1992 against the provisions of interest Act.
-The contractual conditions does not provide for payment of interest and
the learned Arbitrator should not have allowed the interest with effect
from 1/4/92 when the learned Arbitrator has been appointed by the
learned Court vide order dt.- 27/5/05 more so when the Respondent has
accepted the payment of the awarded amount under the earlier award in
respect of the constructing work without any protest in estopping the
claimant from making any further claim in respect of the related work.
-The award is out and out perverse and from the fact of it is illegal and
thereby fit to be set aside.
14. The learned court below refused to interfere with the award and
made it the rule of the court by the impugned judgement.
Submission on behalf of the appellant-BCCL
15. The learned counsel for the appellant has submitted that the
impugned order by which the award passed by the learned Arbitrator under
the provision of Arbitration Act, 1940 has been made the rule of the court,
is under challenge. The learned counsel submits that the learned Arbitrator
has travelled beyond the contract of the parties and had committed
jurisdictional error while pronouncing the award.
16. He submits that it is not in dispute that the amount as per the rate
as mentioned in the work order was already paid to the respondent i.e., the
rate of the year 1988-89 plus 15% and the claim of the respondent was over
and above the said rate which in turn was on the basis of certain
communications issued by the respondent. Learned counsel has also
submitted that under clause 14 of the work order, no escalation was
payable. He submits that once the rate was fixed through the work order
which was never modified by any modification of contract between the
parties, there was no scope for directing any additional payment over and
above the rate which was fixed and paid by the appellant to the claimant.
The learned counsel submits that mere silence on the part of the appellant
to the communication issued by the respondent that the rate was not yet
final, was not sufficient to grant any additional amount over and above the
rate fixed on the basis of work order. He submits that even the learned
Arbitrator did not record any finding that the rates stood modified. The
learned Arbitrator only recorded that the silence of the appellant to the
communication made by the claimant only amounted to the fact that the
rates were not finalized. Learned counsel has further submitted that the
awarded rate of interest is excessive. He submits that the learned Arbitrator
has awarded interest @ 13% for the pre-reference period, pendente lite as
well as future interest till payment.
17. The learned counsel has further referred to Section 29 of the
Arbitration Act, 1940 to submit that it was the jurisdiction of the court
concerned to award interest for the period post decree and therefore, the
learned Arbitrator could not have awarded interest till payment.
Submission on behalf of the claimant-respondent
18. Learned counsel for the claimant, on the other hand, has opposed
the prayer of the appellant. He submits that this Court is exercising power
under appellate jurisdiction to the order by which the award was made the
rule of the court. The learned counsel submits that the scope of interference
in the award is per se very restricted and is all the more constricted at the
appellate stage. The learned counsel has relied upon a judgment passed by
the Hon'ble Supreme Court in the case of M/s Ravindra Kumar Gupta &
Company Vs. Union of India reported in (2010) 1 SCC 409. Learned
counsel has further submitted that the scope of interference in the matter of
arbitral award is very limited even under the 1940 Act. He has relied upon
the judgment passed by the Hon'ble Supreme Court reported in (2003) 7
SCC 396 (State of U.P. Vs. Allied Constructions). He has further relied
upon the judgment passed by Hon'ble Supreme Court reported in (2007) 9
SCC 503 (BOC India Ltd. Vs. Bhagwati Oxygen Ltd.) para 27 and 28 to
submit that even when the Arbitrator has taken a plausible view, there is no
scope for interference.
19. The learned counsel has vehemently submitted that interpretation
of contract between the parties is in the exclusive jurisdiction of the learned
Arbitrator and there is no scope for referring to the clauses of agreement
between the parties and come to a different finding.
20. On the point of interest, the learned counsel for the respondent
has relied upon judgment passed by Hon'ble Supreme Court reported in
(2018) 9 SCC 266 (Reliance Cellulose Products Ltd. Vs. Oil and Natural
Gas Corporation ltd.) (para 24) to submit that the Hon'ble Supreme Court
has clearly held that the learned Arbitrator under the 1940 Act had the
power to grant interest for all the three periods; pre reference, pendente lite
and future interest. The learned counsel submits that the Arbitrator having
granted interest at the flat rate of 13% for pre reference, pendente lite and
future interest till payment has not committed any illegality. He has also
submitted that the said judgment has also been relied upon and followed by
this Court in Arbitration Appeal No.7 of 2003 vide judgment dated
01.11.2018, para 14 and 15 thereof.
21. The learned counsel for the claimant, on the merit of the case, has
submitted that there was a clear communication from the side of the
claimant that the rate which will be finalized for the period 1990-1991,
would be the rate for the contract period of 1991-1992 involved in the
present case. The learned counsel submits that the Arbitrator has
considered the said communication and has awarded a lump sum award
and there is no scope for entering into the mental process of the Arbitrator
once the calculation of the amount for which the award has been granted,
has not been mentioned in the award. He submits that the claim was much
higher and the learned Arbitrator has reduced the amount substantially
though has not given any calculation. During the course of the Arbitration,
the learned counsel has also submitted that with regard to other contractors,
the rate for the period 1989-1990 and 1990-1991 was revised and therefore,
the claimant was also entitled to such revision. The learned counsel for the
claimant has submitted that the claim was calculated on the basis of such
award passed in relation to third parties. However, from perusal of the
award, no specific reference of any such award has been mentioned. The
learned counsel does not dispute that so far as the amount of the rate of
1988-89 plus 15% is concerned, the same was already paid to the claimant
and the claim was over and above the rate of 1988-89 + 15 %.
Rejoinder argument on behalf of the appellant
22. In response, learned counsel for the appellant has referred to the
judgment passed by Hon'ble Supreme Court reported in (2022) 3 SCC 739
(Atlanta Ltd. v. Union of India) [para 21 (h)] to submit that though there is
limited scope in the matter of interpretation of contract as has been done by
the learned Arbitrator, but still the award can be interfered with if it is
found to be beyond the terms of the agreement. He submits that the rate is
an important element of the agreement between the parties.
Finding of this Court
23. Before proceedings to decide the case on merits, it is important to
take into consideration the law laid down by the Hon'ble Supreme Court in
the matter of interference with arbitral award under the Arbitration Act,
1940.
24. In the judgement passed in the case of B.V. Radha Krishna v.
Sponge Iron India Ltd., reported in (1997) 4 SCC 693 the Hon'ble
Supreme court has referred to earlier judgement passed in the case of
"State of Rajasthan Vs. Puri Construction Co. Ltd." in para 11 and has
referred to para 12, 26 to 28 of the judgement which are as follows: -
"On the scope and ambit of the power of interference by the court
with an award made by an arbitrator in a valid reference to
arbitration, various decisions have been made from time to time by
Law Courts of India including this Court and also by the Privy
Council and the English Courts. Both the parties have referred to
such decisions in support of their respective contentions. The factual
contentions of the respective parties are proposed to be scrutinised
and then the facts are proposed to be tested within the conspectus of
judicial decisions governing the issues involved."
"The arbitrator is the final arbiter for the dispute between the parties
and it is not open to challenge the award on the ground that the
arbitrator has drawn his own conclusion or has failed to appreciate
the facts. In Sudarsan Trading Co. v. Govt. of Kerala it has been held
by this Court that there is a distinction between disputes as to the
jurisdiction of the arbitrator and the disputes as to in what way that
jurisdiction should be exercised. There may be a conflict as to the
power of the arbitrator to grant a particular remedy. One has to
determine the distinction between an error within the jurisdiction and
an error in excess of the jurisdiction. Court cannot substitute its own
evaluation of the conclusion of law or fact to come to the conclusion
that the arbitrator had acted contrary to the bargain between the
parties. (emphasis supplied) Whether a particular amount was liable
to be paid is a decision within the competency of the arbitrator. By
purporting to construe the contract the court cannot take upon itself
the burden of saying that this was contrary to the contract and as
such beyond jurisdiction. If on a view taken of a contract, the
decision of the arbitrator on certain amounts awarded is a possible
view though perhaps not the only correct view, the award cannot be
examined by the court. Where the reasons have been given by the
arbitrator in making the award the court cannot examine the
reasonableness of the reasons. If the parties have selected their own
forum, the deciding forum must be conceded the power of
appraisement of evidence. The arbitrator is the sole judge of the
quality as well as the quantity of evidence and it will not be for the
court to take upon itself the task of being a judge on the evidence
before the arbitrator.
In Municipal Corpn. of Delhi v. Jagan Nath Ashok Kumar, it has
been held by this Court that appraisement of evidence by the
arbitrator is ordinarily never a matter which the court questions and
considers. It may be possible that on the same evidence the court
may arrive at a different conclusion than the one arrived at by the
arbitrator but that by itself is no ground for setting aside the award. It
has also been held in the said decision that it is difficult to give an
exact definition of the word 'reasonable'. Reason varies in its
conclusions according to the idiosyncrasies of the individual and the
time and circumstances in which he thinks. In cases not covered by
authority the verdict of a jury or the decision of a Judge sitting as a
jury usually determines what is 'reasonable' in each particular case.
The word reasonable has in law prima facie meaning of reasonable
in regard to those circumstances of which the actor, called on to act
reasonably knows or ought to know. An arbitrator acting as a Judge
has to exercise a discretion informed by tradition, methodized by
analogy, disciplined by system and subordinated to the primordial
necessity of order in the social life. Therefore, where reasons
germane and relevant for the arbitrator to hold in the manner he did,
have been indicated, it cannot be said that the reasons are
unreasonable.
In this case, claims before the arbitrators arise from the contract
between the parties. It is well settled that if a question of law is
referred to arbitrator and the arbitrator comes to a conclusion, it is
not open to challenge the award on the ground that an alternative
view of law is possible. In this connection, reference may be made to
the decisions of this Court in Alopi Parshad and Sons Ltd. v. Union
of India and Kapoor Nilokheri Coop. Dairy Farm Society. In Indian
Oil Corpn. Ltd. v. Indian Carbon Ltd., this Court has held that the
court does not sit in appeal over the award and review the reasons.
The court can set aside the award only if it is apparent from the
award that there is no evidence to support the conclusions or if the
award is based upon any legal proposition which is erroneous."
25. In the case of "Hindustan Construction Co. Ltd. v. Governor of
Orissa" reported in (1995) 3 SCC 8, the Hon'ble Supreme Court observed
on the scope of interference by the Court as follows:
"... It is well known that the court while considering the question
whether the award should be set aside, does not examine that
question as an appellate court. While exercising the said power, the
court cannot reappreciate all the materials on the record for the
purpose of recording a finding whether in the facts and
circumstances of a particular case the award in question could have
been made. Such award can be set aside on any of the grounds
specified in Section 30 of the Act...."
26. In the judgement passed by the Hon'ble Supreme Court in the
case of Harish Chandra and Company v. State of Uttar Pradesh, (2016) 9
SCC 478, it has been clearly held that one cannot dispute the legal
proposition that an award can be set aside only on the grounds specified in
clauses (a), (b) and (c) of Section 30 of the 1940 Act and on no other
grounds. It has also been held that the grounds such as inadequacy of
reasons in support of an award, error committed by the arbitrator on facts,
alternate and/or more plausible view could be taken than what is taken by
the arbitrator, improper appreciation of evidence done by the arbitrator in
recording any finding, etc. are not the grounds on which any award much
less a reasoned award can be set aside. In other words, none of these
grounds can be made the foundation for setting aside the award because
they do not fall within the four corners of any of the three sub-clauses of
Section 30 of the 1940 Act.
27. In BOC India Ltd. v. Bhagwati Oxygen Ltd., (2007) 9 SCC 503
dealing with regards to award governed by the provisions of Arbitration
Act, 1940, it has been held that in the case of a reasoned award, the court
can interfere if the award is based upon a proposition of law which is
unsound in law and that the erroneous proposition of law must be
established to have vitiated the decision. It has also been held that such
error of law must appear from the award itself or from any document or
note incorporated in it or appended to it and it was not permissible to travel
and consider materials not incorporated or appended to the award.
28. In the judgement passed by the Hon'ble Supreme Court in the
case of Atlanta Ltd. v. Union of India, (2022) 3 SCC 739, the scope of
interference in arbitral award under the Arbitration Act, 1940 has been
summarized as under:-
" 17. The consistent view taken in several judicial pronouncements is
that the Court does not sit in appeal over an award passed by an
arbitrator and the only grounds on which it can be challenged are those
that have been specified in Sections 30 and 33 of the Arbitration Act,
namely, when there is an error on the face of the award or when the
learned arbitrator has misconducted himself or the proceedings. In this
context, we may usefully refer to Kwality Mfg. Corpn. v. Central
Warehousing Corpn., where it has been observed as follows : (SCC pp.
146-47, para 10)
"10. At the outset, it should be noted that the scope of interference by
courts in regard to arbitral awards is limited. A court considering an
application under Section 30 or 33 of the Act, does not sit in appeal over
the findings and decision of the arbitrator. Nor can it reassess or
reappreciate evidence or examine the sufficiency or otherwise of the
evidence. The award of the arbitrator is final and the only grounds on
which it can be challenged are those mentioned in Sections 30 and 33 of
the Act. Therefore, on the contentions urged, the only question that arose
for consideration before the High Court was, whether there was any error
apparent on the face of the award and whether the arbitrator
misconducted himself or the proceedings."
(emphasis supplied)
18. In Assam SEB v. Buildworth (P) Ltd., where the learned arbitrator
has taken a particular view on the construction of the provisions of the
contract, the Court had held as below : (SCC p. 154, para 13)
"13. The arbitrator has taken the view that the provision for price
escalation would not bind the claimant beyond the scheduled date of
completion. This view of the arbitrator is based on a construction of the
provisions of the contract, the correspondence between the parties and
the conduct of the Board in allowing the completion of the contract even
beyond the formal extended date of 6-9-1983 up to 31-1-1986. Matters
relating to the construction of a contract lie within the province of the
Arbitral Tribunal. Moreover, in the present case, the view which has been
adopted by the arbitrator is based on evidentiary material which was
relevant to the decision. There is no error apparent on the face of the
record which could have warranted the interference of the court within
the parameters available under the Arbitration Act, 1940. The arbitrator
has neither misconducted himself in the proceedings nor is the award
otherwise invalid." (emphasis supplied)
19. It is also a well-settled principle of law that challenge cannot be laid
to the award only on the ground that the arbitrator has drawn his own
conclusion or failed to appreciate the relevant facts. Nor can the Court
substitute its own view on the conclusion of law or facts as against those
drawn by the arbitrator, as if it is sitting in appeal. This aspect has been
highlighted in State of Rajasthan v. Puri Construction Co. Ltd., where it
has been observed thus : (SCC pp. 500-501, para 26)
"26. The arbitrator is the final arbiter for the dispute between the parties
and it is not open to challenge the award on the ground that the arbitrator
has drawn his own conclusion or has failed to appreciate the facts. In
Sudarsan Trading Co. v. State of Kerala it has been held by this Court
that there is a distinction between disputes as to the jurisdiction of the
arbitrator and the disputes as to in what way that jurisdiction should be
exercised. There may be a conflict as to the power of the arbitrator to
grant a particular remedy. One has to determine the distinction between
an error within the jurisdiction and an error in excess of the jurisdiction.
Court cannot substitute its own evaluation of the conclusion of law or
fact to come to the conclusion that the arbitrator had acted contrary to the
bargain between the parties. Whether a particular amount was liable to be
paid is a decision within the competency of the arbitrator. By purporting
to construe the contract the court cannot take upon itself the burden of
saying that this was contrary to the contract and as such beyond
jurisdiction. If on a view taken of a contract, the decision of the arbitrator
on certain amounts awarded is a possible view though perhaps not the
only correct view, the award cannot be examined by the court. Where the
reasons have been given by the arbitrator in making the award the court
cannot examine the reasonableness of the reasons. If the parties have
selected their own forum, the deciding forum must be conceded the
power of appraisement of evidence. The arbitrator is the sole judge of the
quality as well as the quantity of evidence and it will not be for the court
to take upon itself the task of being a Judge on the evidence before the
arbitrator." (emphasis in original and supplied)
20. As long as the arbitrator has taken a possible view, which may be a
plausible view, simply because a different view from that taken in the
award, is possible based on the same evidence, would also not be a
ground to interfere in the award. In Arosan Enterprises Ltd. v. Union of
India, this Court has held as follows : (SCC p. 475, para 36)
"36. Be it noted that by reason of a long catena of cases, it is now a well-
settled principle of law that reappraisal of evidence by the court is not
permissible and as a matter of fact exercise of power by the court to
reappraise the evidence is unknown to proceedings under Section 30 of
the Arbitration Act. In the event of there being no reasons in the award,
question of interference of the court would not arise at all. In the event,
however, there are reasons, the interference would still be not available
within the jurisdiction of the court unless of course, there exist a total
perversity in the award or the judgment is based on a wrong proposition
of law. In the event however two views are possible on a question of law
as well, the court would not be justified in interfering with the award."
(Also refer MCD v. Jagan Nath Ashok Kumar.)
21. In Rajasthan State Mines & Minerals, relied on by the respondent
Union of India, on a conspectus of the case law relating to an award
made under the Arbitration Act, 1940 and the scope of interference by
courts in such an arbitral award, the legal position was summarised by
the Court in the following words : (SCC pp. 309-11, para 44)
"44. From the resume of the aforesaid decisions, it can be stated that:
(a) It is not open to the court to speculate, where no reasons are given by
the arbitrator, as to what impelled the arbitrator to arrive at his
conclusion.
(b) It is not open to the court to admit to probe the mental process by
which the arbitrator has reached his conclusion where it is not disclosed
by the terms of the award.
(c) If the arbitrator has committed a mere error of fact or law in reaching
his conclusion on the disputed question submitted for his adjudication
then the Court cannot interfere.
(d) If no specific question of law is referred, the decision of the arbitrator
on that question is not final, however much it may be within his
jurisdiction and indeed essential for him to decide the question
incidentally. In a case where a specific question of law touching upon the
jurisdiction of the arbitrator was referred for the decision of the arbitrator
by the parties, then the finding of the arbitrator on the said question
between the parties may be binding.
(e) In a case of a non-speaking award, the jurisdiction of the court is
limited. The award can be set aside if the arbitrator acts beyond his
jurisdiction.
(f) To find out whether the arbitrator has travelled beyond his
jurisdiction, it would be necessary to consider the agreement between the
parties containing the arbitration clause. The arbitrator acting beyond his
jurisdiction is a different ground from the error apparent on the face of
the award.
(g) In order to determine whether the arbitrator has acted in excess of his
jurisdiction what has to be seen is whether the claimant could raise a
particular claim before the arbitrator. If there is a specific term in the
contract or the law which does not permit or give the arbitrator the power
to decide the dispute raised by the claimant or there is a specific bar in
the contract to the raising of the particular claim then the award passed
by the arbitrator in respect thereof would be in excess of jurisdiction.
(h) The award made by the arbitrator disregarding the terms of the
reference or the arbitration agreement or the terms of the contract would
be a jurisdictional error which requires ultimately to be decided by the
Court. He cannot award an amount which is ruled out or prohibited by
the terms of the agreement. Because of specific bar stipulated by the
parties in the agreement, that claim could not be raised. Even if it is
raised and referred to arbitration because of a wider arbitration clause
such claim amount cannot be awarded as the agreement is binding
between the parties and the arbitrator has to adjudicate as per the
agreement.......... ...
(i) The arbitrator could not act arbitrarily, irrationally, capriciously or
independently of the contract. A deliberate departure or conscious
disregard of the contract not only manifests the disregard of his authority
or misconduct on his part but it may tantamount to mala fide action.
(j) The arbitrator is not a conciliator and cannot ignore the law or
misapply it in order to do what he thinks just and reasonable; the
arbitrator is a tribunal selected by the parties to decide the disputes
according to law."
22. In a recent ruling in NTPC, decided by a three-Judge Bench of this
Court, drawing strength from the decision in Kwality Mfg. Corpn., it
has been held thus : (NTPC case, SCC para 13)
"13. From the above pronouncements, and from a catena of other
judgments of this Court, it is clear that for the objector/appellant in order
to succeed in their challenge against an arbitral award, they must show
that the award of the arbitrator suffered from perversity or an error of law
or that the arbitrator has otherwise misconducted himself. Merely
showing that there is another reasonable interpretation or possible view
on the basis of the material on the record is insufficient to allow for the
interference by the Court (see State of U.P. v. Allied Constructions;
Ravindra Kumar Gupta & Co. v. Union of India and Oswal Woollen
Mills Ltd. v. Oswal Agro Mills Ltd.)." (emphasis supplied)"
29. Upon perusal of the impugned award, this Court finds that the
learned Arbitrator has dealt with both the points which have been
specifically referred to in the submissions made by the appellant in the
earlier round of litigation in S.L.P. (Civil) No. 6592 of 1997 disposed of on
05.02.1999 and has returned findings by considering the materials on
record. The learned Arbitrator, after considering materials on record,
clearly recorded that all the disputes raised by the claimant were arbitrable.
The learned Arbitrator also considered the point as to whether accepting
the payment of final bill amounted to closing the door on arbitration and
recorded a finding by considering the correspondences that the claimant
cannot be said to be legally satisfied with the amount received. The learned
Arbitrator further held that the claimant was entitled to extra rate claimed
on account of route diversion made by the district administration after
having decided the jurisdictional issues/preliminary issues. In connection
with the claim as raised by the claimant, the learned Arbitrator
straightaway proceeded to pronounce the award and partly allowed the
claim as mentioned in the chart above. The learned Arbitrator recorded that
the claimant could be entitled to interest which is the basic tenet of the
world of commerce and accordingly, awarded simple interest @13% per
annum computed from 01.04.1992 till the date of actual satisfaction of the
Award i.e. till the date of actual payment of sum of Rs. 17,67,619.00.
30. This court finds that it cannot be said that the award was based on
an erroneous proposition of law appearing on the face of the award in order
to vitiate the award. This court finds that the learned arbitrator has
considered all aspects of the matter including the terms of the contract and
all the materials on record and the statement of claim and has come to
conclusions based on fact. This court finds that the learned arbitrator has
acted within his jurisdiction while interpreting the contract and applying
the same to the facts and circumstances of the case based on materials on
record. The award cannot be said to be an award which is contrary to the
contract entered into by the parties. It is also not the case of the appellant
that the learned arbitrator has failed to consider material documents
produced by the parties for arriving at a right decision. On the other hand,
this court is of the considered view that the learned arbitrator has duly
considered the statement of claim, the terms and conditions of the contract
and the material documents produced by the parties, which were available
on record, and came to the conclusions in favour of the claimant with
regard to all the issues including the issue regarding interpretation of the
clause 14 of the contract and also consequence of receipt of payment
pursuant to the earlier award. The view taken by the learned arbitrator is
certainly a plausible view on interpretation of contract and the transactions
between the parties in the light of the materials placed before the learned
arbitrator. The learned arbitrator has given lump sum award with regards
to quantification of the claim under each head and partly allowed the claim.
31. On perusal of the impugned judgment, this court finds that the
learned court below has exercised its powers within the contours of the
aforesaid legal proposition in the limited scope of intervention in an
arbitral award while refusing to set aside the award and has committed no
error in law calling for any interference in appellate jurisdiction of this
court except on the point of interest, which will be considered later. This
court finds that neither the learned arbitrator has committed any legal
misconduct nor committed any factual or legal error apparent on the face
of the record while recording the findings on jurisdictional issues or on the
interpretation of contract as placed by the parties before the learned
arbitrator. This court also finds that the learned court below has considered
the stand taken by the appellant and did not find any substance in the
objections raised by the appellant. The reasoning of the arbitrator cannot
be said to be perverse to the extent that no man with ordinary prudence
could take such view. None of the findings recorded in the award can be
said to be against any provision of law or in contravention of any of the
clauses of the agreement so as to constitute a case of legal misconduct on
the part of the arbitrator within the meaning of Section 30 of the Act for
setting aside an award.
On the point of interest
32. In the judgement passed by the Hon'ble Supreme Court in the
case of Hindustan Construction Co. Ltd. v. State of J & K, (1992) 4 SCC
217, it has been held by referring to the earlier judgement passed by the
Hon'ble Supreme Court in the case of Secretary, Irrigation Department,
Govt. of Orissa v. G.C. Roy reported in (1992) 1 SCC 508 stating that
though the said decision deals with the power of the arbitrator to award
interest pendente lite, the principle of the decision makes it clear that the
arbitrator is competent to award interest for the period commencing with
the date of award to the date of decree or date of realization, whichever is
earlier.
33. Again, in the judgement passed in Bhagawati Oxygen Ltd. v.
Hindustan Copper Ltd., (2005) 6 SCC 462, it has been held as follows: -
"40. As to post-award interest, the point is covered by the decision of this
Court in Hindustan Construction Co. Ltd. v. State of J&K. It was held there
that an arbitrator is competent to award interest for the period from the date
of the award to the date of decree or date of realisation, whichever is
earlier."
34. In the case of Bhagawati Oxygen Ltd. v. Hindustan Copper Ltd.,
(2005) 6 SCC 462, the learned arbitrator had awarded interest at the
universal rate of eighteen percent for all the three stages and the concerned
High Court had reduced the rate of interest @6%. The Hon'ble Supreme
Court restored the rate of interest by observing that the rate could not be
interfered with as it was based on the ground of loan so advanced by
respondent to the appellant at that rate.
35. From the perusal of the award, it is apparent that the claimant had
prayed for further interest @24% per annum on the total claim payable
from respective due date till realization of claim or date of decree,
whichever was earlier. However, the learned Arbitrator has passed award
of simple interest @ 13% per annum payable from 01.04.1992 till the date
of actual satisfaction of the Award i.e. till the actual payment. The learned
Arbitrator has not restricted the payment of interest till the date of
realization of the claim or till the date of decree, whichever was earlier.
Consequently, the learned Arbitrator has awarded interest even for post
decree period. The decree in the present case was signed on 08.02.2008.
Although a point was argued before the learned court below that the
interest allowed was highly excessive @13% with effect from 1992 but the
learned court below has recorded that the learned Arbitrator has not caused
any jurisdictional error in the award and that the interest allowed by the
learned Arbitrator was also in accordance with law.
36. Section 29 of the Arbitration Act, 1940 clearly stipulates that in so
far as an Award is for payment of money, the Court may in the decree,
order interest from the date of decree at such rate as the court deems
reasonable, to be paid on the principal sum as adjudged by the Award and
confirmed by the decree. Section 29 of the Arbitration Act, 1940 is quoted
as under:
"29. Interest on awards.- Where and in so far is an award is for the
payment of money the Court may in the decree order interest, from the
date of the decree at such rate as the Court deems reasonable, to be
paid on the principal sum as adjudged by the award and confirmed by
the decree."
37. In the judgement passed in the case of Hindustan Construction
Co. Ltd. (Supra) and also in the case of Secretary, Irrigation Department,
Govt. of Orissa v. G.C. Roy (Supra) followed in judgement passed in the
case of Bhagwati Oxygen Ltd. (Supra), it has clearly been held that the
Arbitrator is competent to award interest for the period from the date of
Award to the date of decree or the date of realization, whichever is earlier.
Even in judgement passed by this Court in Arbitration Appeal No. 7 of
2003 decided on 01.11.2018, a coordinate bench of this court has held that
under Section 29 of 1940 Act, the Court has the discretion to award interest
at a reasonable rate from the date of decree to be paid on the principal sum
as adjudged by the Award and confirmed by the decree.
38. The award of learned Arbitrator, to the extent it awards interest
till payment i.e. even for period beyond the date of decree, cannot be
sustained in the eyes of law being perverse and contrary to the provisions
of law and contrary to the aforesaid judicial pronouncements. The learned
Arbitrator had no jurisdiction to award interest beyond the date of decree.
This Court is of the considered view that the learned court below ought to
have interfered with the award of interest by the learned arbitrator to the
extent it related to period beyond the date of decree till realization. The
judgement passed by the learned court below calls for interference to this
extent. Accordingly, the Award of interest in the present case as awarded
by the learned Arbitrator, is confined till the date of signing of the decree
i.e. 08.02.2008.
39. There is no material on record to show as to what was the
prevalent rate of interest at the time when the award was passed.
Admittedly there is no contractual rate of interest. Accordingly, for the
period from the date of decree till payment, rate of interest is reduced to
9% per annum on the awarded amount of Rs. 17,67,619.00.
40. This arbitration appeal is accordingly disposed of.
41. Office is directed to prepare a decree.
42. Let the Lower Court Records be immediately transmitted to the
court concerned.
43. Pending interlocutory applications are closed.
44. Interim order stands vacated.
45. Let this judgement be immediately communicated to the court
concerned through FAX/e-mail.
(Anubha Rawat Choudhary, J.)
Saurav/Pankaj
