Gangadhar Sarda vs Union of India

A.M. Bhattacharjee, Ag. C.J.

The learned District Judge, in whose Court the impugned award was filed, having rejected the application of the appellant for setting aside the same, the appellant has come up in appeal against the order of the District Judge refusing to set aside the award.

The impugned award has not set out any of the facts and circumstances of the case or the respective contentions or arguments of the parties nor has given any reason whatsoever for accepting or rejecting any of the claims or counter-claims preferred by the parties and (to borrow expressions from the Civil P. C.) is in the nature of a "decree" only and not a "judgment". Mr. Deb, the learned Standing Counsel for the respondent Union of India, has, therefore, as is usual for a counsel appearing to support an award, urged that the award not having spelt out any fact or law, no error of law, and. therefore, far less an error of law apparent on the face of the award, can be discovered which would warrant setting aside of or any other interference with the award.

As is well-known, as early as in 1857, Williams, J., in Hodgkinson v. Fernie (1957 3. CB NS 189 at 202) observed that "where a cause or matters in difference are referred to an arbitrator, a lawyer or layman, he is constituted the sole and final Judge of all questions both of law and fact" and that "the only exceptions to that rule are cases where the award is the result of corruption or fraud, and one other where the question of law necessarily arises on the face of the award or upon some paper accompanying and forming part of the award" and in 1923 the Privy Council quoted these observations with unqualified approval in AIR 1923 66 (Privy Council) and ruled (at 69) that "an error in law on the face of the award means, that you can find in the award or a document actually incorporated thereto, as for instance a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which is the basis of the award and which you can then say is erroneous" Even in 1901, two decades before the Privy Council made the above quoted view in Hodgkinson (supra) a part of law of Arbitration in India in Champsey Bhara (supra), it observed in Ghulan Khan v. Muhammad Hassan ( 1902 ILR 29 Cal 167 at 186) that the Arbitrators "may have erred in law, but Arbitrators may be Judges of law as well as Judges of facts and an error in law certainly does not vitiate art award". Be that as it may the observations of the Privy Council in Champsey Bhara (AIR l923 PC 66) (supra), based on the view in Hodgkinson (1857 3 CBNS 189 ) (supra), have been approved by our Supreme Court in a number of decisions and whether one looks at one of the earliest decisions in S.B. Dutt Vs. University of Delhi, or at one of the latest decisions in N. Chellappan Vs. Secretary, Kerala State Electricity Board and Another, , one, would find the same observations to be quoted and/or followed almost with faithful adherence. Reference may be made among others to the decisions in Union of India (UOI) Vs. A.L. Rallia Ram, in Jivarajbhai Ujamshi Sheth and Others Vs. Chintamanrao Balaji and Others, . in Bungo Steel Furniture v. Union of India ( AIR 1967 SC 379 at p. 380), in Firm Madanlal Roshanlal Mahajan Vs. Hukumchand Mills Ltd., Indore, , in Union of India (UOI) Vs. Bungo Steel Furniture Pvt. Ltd., and in Allen Berry and Co. Pvt. Ltd. Vs. The Union of India (UOI), New Delhi, But even though the principle is thus clearly and formally established by oar pre independence as well as post-independence apex Courts, difficulties very often arise in applying that principle to different sets of facts. It may be noted that, white laying down the ambit of judicial scrutiny Hodgkinson (supra) confined it to "the case falls within the exceptions mentioned by Williams, J. in (1857) 3 CBNS 189", i.e., Hodgkinson''s case and the observations of Diplock. L. J. in Giacomo Costa v. British Italian trading, (1962) 2 All ER 53?, quoted with approval in Allen Berry (supra) to the effect that "an award can only be set aside for error which is on its face", may also lend further assurance to the impression that an award can be assailed only when it is procured by corruption or fraud or when it demonstrates an error apparent on its face. But to read the observations in such a manner would be to misread them as in none of those cases the question as to whether an award can be set aside on those two grounds only and on no other, was in Issue and all those cases wore concerned with the question as to what the expression "error apparent on the face of the award" should mead. Apart from the warning sounded by the Supreme Court itself not to read its judgment as if it were a statute or the Bible with every word to be venerated, a bare perusal of S. 30, the Arbitration Act listing a number of grounds for the setting aside of an award and the construction of one such ground in S. 30 (c), namely, "is otherwise invalid", as to be "wide enough to cover all forms of invalidity'''' in Union of India v. Om Prakash (supra, at p. 1749), would leave no manner of doubt that setting aside of an award was never and could never be meant to be kept confided to those two grounds only, with Section 30 of the Arbitration Act starting at out face with a list of grounds more than those two.

Accepting, therefore, as one must, that an award may be "otherwise invalid" on grounds other than an error apparent on its face, let me consider the point urged by Mr. Kharga, the learned advocate appearing for the appellant, Challenging the validity of the award." Mr. Kharga has contended that as it was clearly provided in the contract in question that the works thereunder were to be completed within six months from the date of the acceptance of the tender of the appellant, but as no work order was issued to the appellant within that period, the contract expired and the arbitration agreement forming port of the contract also expired therewith and could no longer maintain any reference to arbitration. The arbitration agreement having thus expired and any reference there after to arbitration based there on being thus invalid, the same has, according to Mr. Kharga, vitiated the whole the arbitration proceedings resulting in the impugned award. The learned District Judge in his judgment under appeal has pointed out that the appellant having done some works under the contract and having also preferred his claims therefor, which were also referred to for arbitration, and having himself insisted on an early appointment of a sole arbitrator when the one an pointed earlier resigned, can no longer urge that the contract, including the arbitration clause, came to an end and the arbitration clause could no longer be resorted to As to the arguments advanced on behalf of the appellant that time was essence of the contract and the contract, therefore, expired with the expiry of the time fixed, the District Judge pointed out, and in my view rightly, that there cannot be a straightway presumption that time is the essence of contract and that whether or not time is the essence in a contract depends on the intention of the parties to be ascertained from the facts and circumstances of the case.

But that apart, when the existence and the validity of a contract is not challenged, but it is urged by one party that the contract has come to an end, whether by effluxion of time or otherwise, while the other party disputes such termination, that by itself is very much a dispute or difference under, or arising from, or in relation to, or in connection with, the contract to justify reference thereof to arbitration under a clause to that effect which formed part of the contract As observed by the Supreme Court in Damodar Valley Corporation Vs. K.K. Kar, ; where the binding nature of the contract is not disputed, but a difference has arisen between the parties thereto as to whether there has been a breach by one side or the other or whether one or both the parties have been discharged from further performance, sued differences are ''upon'' or in relation to or in - connection with the contract. In AIR 1923 66 (Privy Council) also, it was urged before the Privy Council that since "the contract was repudiated or came to an end that then the arbitration clause could no longer be appealed to" and the contention was rejected. That being so; the contention put forward by Mr. Kharga that because of the expiry of the period of six months within which the contract work were to be performed, the contract came, to on end and therefore, any resort., to: the arbitration clause thereafter was incompetent and would vitiate the award as other wise invalid" within the meaning of Section 30 (c), Arbitration Act, must also be rejected.

As already noted before, the impugned award has only declared acceptance or rejection of the various claims preferred by the parties, without stating any reason whatsoever for such acceptance or rejection. However much one may wonder, an unreasoned award is beyond challenge while a reasoned award is subject to judicial scrutiny. As pointed out by the Supreme Court in Jivarajbhai Ujamshi Sheth and Others Vs. Chintamanrao Balaji and Others, , "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" and that "on the assumption that the arbitrator must have arrived at his conclusion by a certain process of reasoning, the Court cannot proceed to determine whether the conclusion is right or wrong", as "It is not open to the Court to attempt to probe the mental process by which the arbitrator has reached his conclusion where it is not disclosed by the terms of his award". This has been reiterated again in Bungo Steel Furniture Pvt. Ltd. Vs. Union of India (UOI), , where the Supreme Court has observed that it is now a well-settled principle that if an arbitrator, in deciding a dispute before him, does not record his reasons and does not indicate the principles of law on which he has proceeded, the award is not on that ground vitiated" and that "it is only when the arbitrator proceeds to give his reasons or to lay down the principles on which he has arrived at his decisions that the Court is competent to examine whether he has proceeded contrary to law and is entitled to interfere if such error in law is apparent on the face of the award". Whether this distinction or discrimination between a speaking and a non-speaking award, making the former subject to objective judicial scrutiny while making the latter immune from judicial review, is right or just or fair or reasonable is a different matter and one may be fully justified in sharing the view of H. L. Anand, J., of the Delhi High Court in Bhilwara Synthetics v. Delhi Hindustani Mercantile Association ( AIR 1982 Delhi 155 at p. 157) where the learned Judge has observed that "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" and that "in the expanding 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 enachronistic that an arbitrator in India is still immune from any such obligation". B. K. Behera. J., of the Orissa High Court in State of Orissa Vs. J.N. Choudhury, , while agreeing with H. L. Anand, J., has, however, observed that "it is for the Legislature to think of the change in the system". But the immunity of non-speaking awards from, and the liability of speaking awards to judicial scrutiny and control are creations, not of the lex scripta of the Legislature, but of the judicial dicta of the Courts and the resultant anachronism, if any, may therefore, be set right by those Courts whole pronouncements have created the situation. I must, however, point out that in Rohtas Industries Ltd. and Another Vs. Rohtas Industries Staff Union and Others, , a three-Judge Bench of the Supreme Court, speaking through Krishna Iyer, J., has observed (at p. 431) that "the arbitrator may not state the law as such", but "even then such cute silence confers no greater or subtler immunity on the award than plain speech" and that "the need for a speaking order, where considerable numbers are affected in their substantial rights, may well be a facet of natural justice or fair procedure". Though it was pointed out that in that case that their Lordships "do not have to go so far", it has nevertheless been observed that "the law sets no premium on juggling with drafting the award or hiding the legal error by blanking out" and that "the inscrutable face of the sphinx has no better title to invulnerability than a speaking face which is a candid index of the mind". His Lordship proceeded further to "express hopefully the view that a minimal judicialization by statement laconic or lengthy of the essential Jaw that guides the decision is not only reasonable and desirable but has over the ages, been observed by the arbitrators and quasi-judicial Tribunals as a norm of processual justice". It appears, therefore, that a new ground, though not fully broken, has been forked to some extent which may, if persued, usher in a new development in this branch of law. Though this decision does not appear to have been brought to the notice of the learned Judges in the Delhi High Court decision in Bhilwara Synthetics ( AIR 1982 Del 155 ) (supra) or in the Orissa High Court decision in State of Orissa Vs. J.N. Choudhury, , yet as the point in question has not been decisively decided in Rohtas Industries Ltd. and Another Vs. Rohtas Industries Staff Union and Others, as the learned Judges felt that they were not required "to go so far", the long catena of earlier decisions of the Supreme Court would still govern the matter whereunder a non-speaking award has been given full-proof immunity and all-proof invulnerability. The Law Commission of India, in its 76th Report on Arbitration Act, 1940, submitted in November, 1978, under the Chairmanship of Justice H. R. Khanna, appears to have considered (at pages 37-40) the question of the desirability or propriety of requiring the arbitrator to state the reasons for his award, but has regretted its inability "to accept the suggestion for amending the law". The Law Commission has realized that under the law as it now stands, many "dishonest" awards may survive because of the arbitrators not being required to state reasons for their awards, but has at the same time felt that if the arbitrators, who in a large number of cases.......would be laymen", are required to state reasons for their awards, "many honest awards would be set aside". The Law Commission was probably inspired by the principle of our Criminal Jurisprudence whereunder thousands guilty may be allowed to escape but no innocent should be punished and accordingly has not recommended statement of reasons by the arbitrators for their awards, so that even though dishonest awards may survive in numbers, no honest award should suffer for non-statement of reasons. As the Latin adage goes, out res magis valest quam pereat and, therefore, let all awards, honest or not flourish as far as possible, and not perish. That is probably what prompted the Supreme Court to observe in Smt. Santa Sila Devi and Another Vs. Dhirendra Nath Sen and Others, 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".

The appeal, therefore, fails and is dismissed, but with no order as to costs.

Appeal dismissed.