Madras High Court
Hindustan Petroleum Corporation ... vs Banu Constructions on 9 February, 2021
OSA.No.270 of 2020
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 09.02.2021
CORAM :
The Hon'ble Mr.SANJIB BANERJEE, THE CHIEF JUSTICE
AND
The Hon'ble Mr.JUSTICE SENTHILKUMAR RAMAMOORTHY
O.S.A.No.270 of 2020
and C.M.P.No.13352 of 2020
Hindustan Petroleum Corporation Ltd.,
Rep. by its Senior Manager-Retail Upgradation
South Zone, 4th Floor, Thalamuthu Natarajan
Building, Gandhi Irwin Road, Egmore,
Chennai 600 008. .. Appellant
-vs-
1.Banu Constructions,
Civil & Electrical Engineeering Contractors
No.4 (Old No.44) 3rd Street,
Thiruvalluvar Nagar, Alandur,
Chennai 600 016.
2.A.M.Atri
Sole Arbitrator .. Respondents
(Second respondent stand deleted
as per order dated 3.8.2020)
Appeal filed under Order XXXVI Rule 9 of O.S. Rules read with
Clause 15 of Amended Letters Patent 1865 and Section 37 of the
Arbitration and Conciliation Act, 1996, against the order dated
03.08.2020 passed in O.P.No.57 of 2015 on the file of this Court.
Page 1 of 13
https://www.mhc.tn.gov.in/judis/
OSA.No.270 of 2020
For Appellant : Mr.O.R.Santhana Krishnan
For Respondents : Mr.R.Thiagarajan
on Caveat
for 1st respondent
JUDGMENT
(Delivered by The Hon'ble Chief Justice)
The argument on behalf of the appellant is short and sweet: that
the first principles of arbitration law do not permit an unreasoned
order to be justified by supplementing reasons therefor upon looking
into the evidence or records pertaining to the arbitral reference.
2. This is a classic example of what cannot be done by an
Arbitration Court when in receipt of a petition for setting aside an
arbitral award. The primary ground of challenge before the Arbitration
Court was that the award was unreasoned. As if in agreement with
such principal contention, some 30 pages have been expended in
constructing an order that seeks to give reasons and legal crutches to
a completely unreasoned award.
https://www.mhc.tn.gov.in/judis/
OSA.No.270 of 2020
3. It is elementary that when parties to an agreement carry their
disputes to a consensual forum in preference to the usual forum of a
civil Court, the Court will be slow in entertaining a challenge that either
party may come up with on being dissatisfied with the resultant
award. The Court will hold the parties to their bargain and require
them to abide by the decision of their consensual tribunal. This
principle is subject to certain exceptions. The exceptions have been
statutorily recognized in Section 34 of the Arbitration and Conciliation
Act, 1996. It may only be said that, in essence, Section 34 of the Act
provides for a supervisory jurisdiction to correct manifest errors and to
ensure that there is no grave miscarriage of justice. However, by no
stretch of imagination does Section 34 of the Act confer appellate
authority on the Arbitration Court in seizin of a petition to set aside the
award.
4. In a regular appeal, it is open to the Court to embark on a
fact-finding exercise, to re-read and re-appraise the evidence, to
interpret the documents afresh and to do all things de novo that the
Court of original jurisdiction could have done. Such expansive
authority is not available to an Arbitration Court while dealing with a
https://www.mhc.tn.gov.in/judis/
OSA.No.270 of 2020
petition for setting aside an award. The Court has to yield to the
arbitrator's assessment as to the quality and the quantity of the
evidence, the arbitrator's interpretation of the agreement between the
parties, unless such interpretation is patently unreasonable or absurd
to the meanest mind or is opposed to public policy. Even errors of law
committed by arbitrators are not amenable to correction unless such
errors lead to manifest miscarriage of justice.
5. It is now appropriate that the award be seen in its entirety
and for whatever it may be worth. The award has been incorporated
in the appeal papers and begins at page 110 with the cause-title to the
arbitral reference and concludes half-way at page 120 of the papers.
For the first 9 pages of the 11-page award, the Arbitrator refers to the
nature of the contract, sets out the table indicating the heads of claim,
records the preliminary objections made by the respondent in the
reference, notes the parawise reply to the claim statement as
furnished by the respondent Corporation, refers to the counter-claim of
the respondent in the reference and its prayer, paraphrases the
prayers made by the claimant and the response thereto of the
respondent. In covering all such matters, it comes to three-quarters of
https://www.mhc.tn.gov.in/judis/
OSA.No.270 of 2020
the page down at page 118 of the appeal papers. Thereafter begins a
section intituled as 'Findings' and the same reads as follows:
“Findings:
I have gone through the Statement of Claim of Claimant's
application filed by the Claimant and Reply/counter claim,
rejoinder and sur-rejoinder filed by both the parties under
Section 17 of Arbitration & Conciliation Act, 1996, I have
also given full opportunity to both the parties to make their
arguments during the last arbitration hearing held where
both the parties made their very elaborate and detailed
arguments and confirmed that they have nothing more to
argue.
As stated, I have heard both the parties in detail and at
length in the arbitration hearing held, wherein, both the
parties have argued elaborately their respective issues in
the case.”
6. The award dated September 10, 2014, immediately runs into
the business end at pages 119 and 120 of the appeal papers where the
quantum in respect of various heads, whether allowed or disallowed,
are indicated except for 6 or 7 lines by way of an excuse for reasons
while dealing with the third head of claim. It is tempting to set out
what appears at pages 119 and 120 of the appeal papers except that it
https://www.mhc.tn.gov.in/judis/
OSA.No.270 of 2020
may not be worth the paper it is printed on for its abject lack of
reasons.
7. Any fundamental process of adjudication in civil matters,
particularly in the adversarial set-up that is followed here, involves at
least two sets of parties and the process of adjudication is the charting
of the course beginning with a claim, its defence, the evidence in
support of either, the consideration of such matter by the Adjudicator
and the conclusion thereupon. It is imperative – as has been
statutorily mandated by the Act of 1996 – that reasons be furnished in
support of an award unless the parties dispense therewith by
agreement. Reasons indicate the application of the mind to the
matters in issue and the consideration given by the Adjudicator to the
facts against the milieu of the applicable law to arrive at the findings
rendered at the culmination of the journey of adjudication.
8. In a claim as in the present case, particularly relating to works
contracts, every head of claim has to be dealt with in principle and the
quantum awarded or declined has next to be justified. It will not do
for merely head of claim to be explained and the quantum awarded in
https://www.mhc.tn.gov.in/judis/
OSA.No.270 of 2020
respect thereof not to be. Both must have reasons in support of the
conclusion and, in the absence of either, the award becomes
vulnerable.
9. There is not an alphabet expended by way of reasons in
respect of the first and second heads of claim. The quantums awarded
are Rs.3,13,819.32 and Rs.4,18,981.44, respectively. While these
may appear to be meagre amounts, the complete lack of reasons robs
the figures and the heads in respect of such figures of any value. In
respect of the third head of claim, the Arbitrator noted that the
defence raised was that the bills were not submitted in line with the
terms of the purchase order. The Arbitrator then went on to suggest
that even though there had been considerable delay on the part of the
claimant in claiming the amount, merely such delay would not defeat
the claim. At the highest, the justification for the submission of the
claim may have been provided by the Arbitrator. The reasoning
furnished does not even indicate how any money was due from the
respondent in the reference to the claimant on account of such claim.
In any event there is nothing to suggest how the quantum of the claim
was arrived at except that the quantum awarded matched the amount
https://www.mhc.tn.gov.in/judis/
OSA.No.270 of 2020
claimed.
10. While it is not necessary for an arbitral award to justify every
paisa or a rupee awarded to the claimant, the broad premise on which
the quantum is founded has to be discernible from award itself for the
award to be meaningful or even intelligible in legal terms. In short,
the award impugned before the Arbitration Court in this case was the
classical example of what an arbitral award could never be.
11. Towards the end of page 119 and over the page, the
operative part of the award is repeated. If one searched such segment
with the most powerful of magnifying glasses, the only reasons that
appear in the award are contained in the solitary line preceding the
operative part:
“In consideration of the above analysis/documents &
pleadings on record ...”
12. The Arbitrator speaks of a consideration, but does not
demonstrate how he considered the matter by indicating any reasons
to show what impelled him to allow the several heads or the various
https://www.mhc.tn.gov.in/judis/
OSA.No.270 of 2020
quantums under such heads. As to the use of the word 'analysis' it
appears to be a figment of the Arbitrator's imagination as there is no
element of analysis evident from the award.
13. In the operative part of the award, the Arbitrator deals with
all three heads on which he has awarded and says that the standing
order in respect of each was 'admitted'. If there was any admission, it
was the bounden duty of the Arbitrator to demonstrate how the
admission had been made. Indeed, in the few lines that the Arbitrator
has used in dealing with the third head of claim, the Arbitrator has
indicated that the respondent in the reference had denied the claim
but had done no more. Thus, the use of the similar expressions “is
admitted” or “is also admitted”, as found in the operative part of the
award pertaining to the three heads of claim, have to be read in the
context of the four or five lines by way of reasons appended to the
third head of claim at page 119 of the papers. Nothing appears to
have been admitted by the respondent in the reference and, if there
was any admission, it may have been only the relevant standing
orders. However, as to how the standing orders justify the heads of
claim or the amounts awarded thereunder, there is no indication or
https://www.mhc.tn.gov.in/judis/
OSA.No.270 of 2020
any suggestion in such regard in the rather unfortunate award.
14. In dealing with the challenge, that must have been squarely
founded on the award being non-speaking in nature, the Arbitration
Court assigns the following reasons:
“19.This takes us to the last plea pertaining to non-
speaking award. A perusal of award reveals that it does
give reasons. It does refer to clause 6 of the STC, which
deals with escalation/de-escalation and then finds for the
contractor. That the impugned award is epigrammatic by
itself does not become a ground to dislodge it as long as it
is not laconic as case on hand is one where impugned
award proceeds on admission.”
15. The award has been described in its entirety in this order.
No page thereof has been left out or ignored, lest it does injustice to
the Arbitrator and the party which was the beneficiary of the award.
In the light of what appears clearly from the face of the award, the
above observation of the Arbitration Court is exceptionable and not
acceptable. The complete lack of reasons cannot be glossed over in
the manner it has been in the judgment and order impugned. The
exercise undertaken to rewrite the arbitration award by ascribing
https://www.mhc.tn.gov.in/judis/
OSA.No.270 of 2020
reasons in support of the claims allowed and quantum awarded is not
the business of the Arbitration Court and such an exercise could not
have been undertaken in this jurisdiction or within the limited arena of
operation permitted by Section 34 of the Act of 1996. The judgment
and order impugned go against the most rudimentary tenets of the
governing law and the jurisprudential philosophy established in this
branch over the years.
16. As a consequence, the judgment and order impugned herein
dated August 3, 2020, stand set aside in entirety. The award
impugned by way of the petition under Section 34 of the Act of 1996,
dated September 10, 2014, is set aside. The petition under Section 34
of the Act stands allowed. In view of the dignified and fair stand taken
on behalf of the award-holder and the fact that it may, in the ultimate
analysis, be the award-holder who has suffered the maximum
prejudice as a consequence of the Arbitrator not furnishing any
reasons, no costs are awarded against the erstwhile award-holder.
17. The parties have agreed that this Court may name an
Arbitrator who will take up the reference as expeditiously as possible
https://www.mhc.tn.gov.in/judis/
OSA.No.270 of 2020
and conclude the same in accordance with law by rendering a
reasoned award without undue delay. In view of such agreement
between the parties and the matter being left to the Court, this Court
appoints Mr.C.Manickam, retired District Judge, as the Arbitrator to
take up the reference on the basis of the statement of claim and
statement of defence and counter-claim as already filed in course of
the previous reference. The parties will be entitled to lead evidence
and the Arbitrator will be entirely free to decide on the future course of
action in the reference.
18. It is needless to say that the present order should be
confined to the matters that arose for consideration and the Arbitrator
will be completely uninfluenced by anything recorded here that may
appear to be prejudicial to either side.
O.S.A.No.270 of 2020 stands allowed. Consequently,
C.M.P.No.13352 of 2020 is closed.
(S.B., CJ.) (S.K.R., J.)
09.02.2021
Index : Yes
sra
https://www.mhc.tn.gov.in/judis/
OSA.No.270 of 2020
The Hon'ble Chief Justice
and
Senthilkumar Ramamoorthy, J.
(sra)
O.S.A.No.270 of 2020
09.02.2021
https://www.mhc.tn.gov.in/judis/
