Ram Saroop Gupta vs Union of India

Dr. B.P. Saraf, Chief Justice

This is an appeal under section 39 of the Jammu and Kashmir Arbitration Act, 2002 (1945 A.D.) against the order of learned Single Judge

dated October 13, 2000 by which the learned Single Judge rejected the objections of the appellant (""contractor"") to the award being made the rule

of court and the prayer for setting aside the award on the ground of misconduct.

The facts of the case, briefly stated, are as follows. The disputes and differences between the appellant and the respondents arising out a

contract entered into between them for provision of Key Personnel QuArticleers at Akhnoor were referred for arbitration to Colonel J. Natarajan.

He was the sole arbitrator. The appellants and the respondents filed their respective claims before the arbitrator. The appellant made a claim of Rs.

1,34,043/ on account of the work executed by him. The appellant also claimed Rs. 94.200/ for nonsupply of coal. The arbitrator awarded a sum

of Rs. 11,330/ against the claim of Rs. 94.200/ on account of nonsupply of coal. As against the claim of Rs. 48.000/ on account of wages paid to

the chowkidar, a sum of Rs. 6000/ was awarded. Similarly, the arbitrator awarded a sum of Rs. 42,354A in favour of the respondents as against

their claim of Rs. 1 ,Q3,000/ for compensation for getting the balance work executed through another contractor and Rs. 1,20,000/ on account of

loss of revenue. The award was filed in this Court under the J and K Arbitration Act for making it the rule of court. The appellant filed objections

and prayed that the award be set aside on the ground of misconduct. Learned Single Judge rejected the application of the appellant and made the

award rule of court. Learned Single Judge, in his order, observed that the claims of the appellant required appreciation of evidence. He said that

the award was a nonspeaking award and there was nothing to show that the arbitrator had acted illegally. The learned Judge observed that the

findings of the arbitrator were findings of fact based on appreciation of evidence. He held that the court had no power to probe the mental process

of the arbitrator. In coming to his conclusion, he relied on the decision of Supreme Court in State of UP. v Ram Nath International Construction

(P) Ltd, (1996) 1 SCC 18. Aggrieved by the order of the learned Single Judge, the appellant is before us by way of this appeal.

We have heard Mr. R.K. Gupta, learned counsel for the appellant and perused the order of the learned Single Judge. The award in the instant

case is a nonspeaking award. The appellant seeks to challenge the determination of the amount of compensation by the arbitrator under different

heads in the above award which, in our opinion, is not permissible. Law is well settled that where the matter in difference are referred to an

arbitrator, he is constituted the sole and final judge of all questions, both of law and of fact, and his decision is binding on the Articleies to place

their grievances in the manner provided by the arbitration agreement. The award of the arbitrator can be challenged only within the limited scope of

challenge available under the provisions of the Arbitration Act. On perusal for the Arbitration Act and grounds of challenge, it is clear that the

legislature in its wisdom has limited the scope and the ambit of challenge to an award. The civil courts an entrusted with the power to facilitate

arbitration and effectuate the awards. They cam exercise the appellate powers over the decision of the arbitrator. By and large, the courts have

disfavoured interference with arbitration award on account of error of law and fact on the score of misappreciation and misreading of the materials

on record and have shown definite inclination to preserve the award as far as possible. It has been held by the courts in no less clear terms that that

award of an arbitrator cannot be set aside merely because by a process of inference and arguments it may be demonstrated that the arbitrator has

committed some mistake in arriving at his .conclusion on the merits of the disputes referred to him for adjudication. The award can of course be

challenged on the ground of error of law on the face of the award, when in the award itself or in any document actually incorporated in it, there is

found some illegal proposition which is the basis of the award and which is erroneous. As held by the Supreme Court in Allen Berry and Co. (P)

Ltd. v. Union of India AIR 1971 SC 696, even when an arbitrator commits a mistake either in law or in fact in determining the matter referred to

him, but such mistake does not appear on the face of the award or in a document appended to or incorporated in it so as to form Article of it, the

award will neither be remitted nor set aside notwithstanding the mistake. It is only when an erroneous proposition of law is stated in the award and

it is the basis of the award that the award can be set aside or remitted on the ground of error of law apparent on the face of the record. But in no

event the court can set aside the award on the ground of mistake of fact committed by the arbitrator,

In State of Rajasthan v. Puri Construction Co. Ltd. (1994) 6 SCC 485, the Supreme Court has said in categorical terms that in its anxiety to

render justice to the pArticley to arbitration, the court should not reappraise the evidence intrinsically with a close scrutiny for finding out the

conclusion drawn from some facts by the arbitrator is, according to the understanding of the court, erroneous, Such exercise of power, which can

be exercised by the appellate court with powers to reverse the finding of fact, is alien to the scope and ambit of challenge to an award under the

Arbitration Act.

It may be pertinent in this connection lo quote the observations of Williams J in Hodgkinson v Fernie (1957 3 CB NS 189) which were cited

with approval by the Privy Council in Champsey Bhara and Co. v. Jivraj Balloo Spg. and Wvg. Co. Ltd. AIR 1923 PC 66:

The law has for many years been settled, and remains so at this day, that, where a cause or matters in difference are referred to an arbitrator, a

lawyer or a laymen, he is constituted the sole and final judge of all questions both of law and of fact. The only exception to that rule are cases

where the award is the result of corruption or fraud, and one other, which though it is to be regretted is now, I think firmly established, viz.. where

the question of law necessary arises on the face of the award or upon some paper accompanying and forming part of the award.

The Privy Council (in Champsey Bhara and Co. v. Jivraj Balloo Spg. and Wvg. Co. Ltd., supra) held:

An error in law on the face of the award means, in their Lordship' view, that you can find in the award or a document actually incorporated

thereto, as for instance, note appended by the arbitrator stating the reasons for his judgment, some legal propositions which is the basis of the

award and which you can then say is erroneous. It does not mean that if in a narrative a reference is made to a contention of one party that opens

the door to seeing first what the contention Is, and then going to the contract on which the parties' rights depends to see If that contention is

sound,

It may also be expedient to quote the following observations of the Supreme Court in Union of India v. Rallia Ram AIR 1963 SC 1685:

The award of the arbitrator is ordinarily final and conclusive, unless a contrary intention is disclosed by the agreement. The award is the decision

of a domestic tribunal chosen by the parties, and the civil courts which are entrusted with the power to facilitate arbitration and to effectuate the

awards, cannot exercise appellate powers over the decision, Wrong or right the decision is binding, If It be reached fairly after giving adequate

opportunity to the parties to place their grievances in the manner provided by the arbitration agreement. But it is now firmly established that an

award is bad on the ground of error of law on the face of it, when in the award itself or in a document actually incorporated in it, there is found

some legal proposition which is the basis of the award and which is erroneous. An error in law on the face of the award means 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. It does not mean that if in a narrative a reference is

made to contention of one party, that opens the door to seeing first what that contention is, and then going to the contract on which the parties'

right depend to see if that contention is sound,

In N, Chellapan v. Secretary, Kerala State Electricity Board AIR 1975 SC 230, the Supreme Court held:

The umpire as sole arbitrator was not bound to give a reasoned award and if in passing the award he makes a mistake of law or of fact, that is no

ground for challenging the validity of the award, It is only when an erroneous proposition of law is stated in the award and which is the basis of the

award, can the award be set aside or remitted on the ground of error of law apparent on the face of the record."" (Emphasis supplied)

This legal position was reiterated by the Supreme Court in Colmbatore District Podu Thazillar Sangam v Balasubramania Foundry (1978) 3

SCC 723. In the following words:

It is an error of law and not mistake of fact committed by the arbitrator which is justifiable in the application before the court. If there is no legal

proposition either in the award or in any document annexed with the award which is erroneous and the alleged mistakes or alleged errors are only

mistake of fact and if the award is made fairly after giving adequate opportunity to the partis to place their grievances in the manner provided by the

arbitration agreement, the award is not amenable to correction by the court."" (Emphasis supplied)

In State of UP v Ram Nath International Construction (P) Ltd. (1996) 1 SCC 18, the Supreme Court held:

The jurisdiction of the court to interfere with an award of an arbitrator is undoubtedly a limited one. The adjudication of the arbitrator is generally

binding between the parties and It Is not open to the court to attempt to probe the mental process by which the arbitrator has reached his

conclusion. Award of an arbitrator can be set aside by a court only on the ground indicated in section 30 of the Arbitration Act. It is not open to

the court to reassess the evidence to find whether the arbitrator has committed any error or to decide the question of adequacy of evidence and the

court cannot sit on the conclusion of the arbitrator by reexamining and reappreciating the evidence considered by the arbitrator."" (Emphasis

supplied)

10, The Jurisdiction of the court is further limited in case of a nonspeaking award, It Is only in a speaking award that the court can examine an

error of law on the face of the record and look into the reasoning of the award which is not possible in case of a nonspeaking award. Because, as

observed by the Supreme Court in Hindustan Steel Works Construction Ltd. v C. Rajasekhar Rao (1987) 4 SCC 93, it is not open to the court to

probe the mental process of the arbitrator and speculate, where no reasons are given by the arbitrator, as to what impelled the arbitrator to arrive

at his conclusion, In State of Maharashtra v. Nav Bharat Builders 1991 Supp, (1) SCC 86, Supreme Court held: ""Where a nonspeaking award

has been made in respect of payment of compensation for stoppage of work and additional interest, it cannot be said that the arbitrator had

committed any error apparent on the face of the award."" In National Fertilizers v. Puran Chand Nangia JT 2000 (Suppl. 1) SC 591 the Supreme

Court has reiterated the legal position that in case of a nonspeaking award, it is not permissible for the court to probe into the mental process of the

arbitrator.

On a careful consideration of order of the learned Single Judge in the light of the law set out above, we find that there is no infirmity in the said

order. The arbitrator has acted within his jurisdiction, As the award is a nonspeaking award and the arbitrator has neither given the reasons for his

factual conclusions not disclosed the mental process by which he reached his conclusions, it is not open to the court to speculate as to what

impelled the arbitrator to arrive at his conclusion. In such a case, it Is not possible forum court to say that there Is any error apparent on the face of

the award to justify interference with the award. We are, therefore, of the clear opinion that the learned Single Judge correctly refused to interfere

with the factual conclusions of the arbitrator in a nonspeaking award. Obviously, this appeal is devoid of any merit and hence dismissed. In view of

the above, CMP and caveat are also disposed of.