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Judgment
Abdul Hadi, J.—These two original side appeals are by the Tamil Nadu Electricity Board against the common order dated 16-11-1987 of
P.K. Sethuraman, J. in O.P. Nos. 414 of 1983 and 103 of 1984 and Application No. 2380 of 1984 in O.P. No. 414 of 1983. The above said
Tamil Nadu Electricity Board will be referred to as ''the appellant'' hereinafter O.P. No. 414 of 1983 is by the two Arbitrators, viz. P.S.
Subramaniam and E.S. Narayanan, for receiving the Award dated 24-10-1983 passed by them. They are formal respondents in both the appeals
Application No. 2380 of 1984 is by the Engineering Construction Corporation Limited, a subsidiary Company of Larsen and Toubro Limited,
which is the contesting respondent in both these appeals, it being the 1st respondent in O.S.A. No. 96 of 1988 and 3rd respondent in O.S.A. No.
97 of 1988. The said Engineering Construction Corporation Limited (which will hereinafter be referred to as the applicant) was amalgamated with
the said Larson and Toubro Limited with effect from 1-10-1982 and the latter got itself substituted in the place of the former in O.P. No. 414 of
1983 by order dated 7-10-1987. The said Larsen and Toubro Limited, will hereinafter be referred to as the contesting respondent. The said
Application No. 2380 of 1984 prayed for passing of a decree in terms of the above said Award for a sum of Rs. 50,50,000/- with interest against
the appellant and in favour of the said applicant, that is, in fact, now in favour of the contesting respondent. The said Award has been passed by
the Arbitrators as against the claim of the above said appellant for a total sum of Rs. 1,43,13,189.98 against the appellant. O.P. No. 103 of 1984
is by the appellant to set aside the said Award, filed under S. 30 and 33 of the Arbitration Act. The learned trial Judge has dismissed the said O.P.
No. 103 of 1984 and allowed the said Application No. 2380 of 1984, granting decree in terms of the Award. As against the said dismissal of
O.P. No. 103 of 1984 O.S.A. No. 96 of 1988 has been filed and as against the decree granted in Application No. 2380 of 1984 O.S.A. No. 97
of 1988 has been filed. Admittedly, pursuant to the contract between the appellant and the applicant, the applicant undertook to get cool water
from the sea for cooling the machinery in the thermal station of the appellant at Tuticorin. The total contract value was Rs. 3,64,32,518/-. The
tenders were called for in specification No.C 1191 in April, 1976. The conditions imposed by the appellant for accepting the tender of the
applicant for the above said contract were set out in the applicant''s acceptance letter dated 23-7-1976. The appellant also awarded additional
work relating to cool water and hot water tunnels for the third unit and hot water recirculation system in the pump house on 26-6-1978 to the
applicant, and the applicant undertook to execute the said additional work at the same terms and conditions of the original contract as per the
applicant''s letter dated 6-1-1977. The contract value including the additional work for Rs. 30 lakhs and odd came to Rs. 3,94,60,568/-. The
applicant commenced the work on 26-7-1976 and completed the work within the extended time allowed by the appellant and by their letter dated
23-4-1982 to the appellant the applicant made final representation in respect of various claims. According to the appellant those claims were
totally unsustainable. However, as the claims related to a long period, the appellant wanted time to send a reply, but in the meanwhile, the applicant
by their letter dated 2-6-1982 invoked the arbitration clause and nominated Mr. P.S. Subramanian, one of the respondents herein, as their
Arbitrator. So, appellant also nominated Mr. E.S. Narayanan, one of the respondents herein, as its arbitrator. According to the appellant, the
claims will not come under the arbitration clause and they are not arbitrable. The arbitrators entered upon the reference on 13-7-1982 and the
applicant submitted the claim statement and the appellant filed the counter statement. The total claim was Rs. 1,45,71,879.95. But, subsequently it
was reduced to the above referred to claim of Rs. 1,43,13,189.98. The appellant raised legal and preliminary objections and also disputed every
claim of the applicant and wanted the applicant to prove its claims. According to the appellant, the Company did not at all prove the claims and did
not lead any evidence in support of the claims, in spite of specific directions by the Arbitrators to produce the account books relating to vouchers.
On the whole, there were 12 claims, out of which one was not pressed.
The Arbitrators passed, in effect, a non speaking - one-sentence Award, dated 24-10-1983 awarding the above said sum of Rs. 50,50,000/-
with interest 9% p.a. in favour of the applicant. In the above said O.P. No. 103 of 1984, the appellant raised the following contentions to set aside
the Award:-
(1) The appellant wanted the arbitrators to give speaking Award with reasons. But the Arbitrators had given a single line Award without recording
the reasons and the appellant also raised objection with regard to the maintainability of the claims and the Arbitrators failed to give a ruling on such
objections and, therefore, the same amounts to legal mis-conduct on the part of the Arbitrators. (2) The claims are non-arbitrable in nature, having
regard to the agreement between the parties and the specific undertaking by the applicant in their letter. (3) The applicant did not at all lead any
evidence but merely produced the correspondence between the parties.
On the other hand, the contention of the contesting respondent was that the petition filed to act aside the Award was not maintainable, that the
Arbitrators were technically highly qualified Engineers, that they had carefully considered the claims on the materials placed before them and had
passed the Award, that there was no legal mis-conduct on their part and that there was documentary evidence, though no oral evidence.
The learned Judge had come to the conclusion that the Award passed by the Arbitrators was not liable to be set aside since there was no error
on the face of the record, nor the Arbitrators misconducted themselves. Plea of no evidence also was not accepted by the learned trial Judge.
Before us, the Learned Counsel for the appellant initially submitted that in view of Raipur development Authority v. M/s. Chokhanal Contractors
AIR 1990 Supreme Court 1426 which held that the Award passed under the Arbitration Act, was not liable to be set aside merely on the ground
that no reason has been given in its support, he could not attack the award on the ground that it a non-speaking Award. So, the only two
submissions made by him are (1) the claims were non-arbitrable and hence the Arbitrators had no jurisdiction to pass the Award in respect of
claim Nos. 1, 6 and 10 out of the total 12 claims made by the applicants; and (2) there was no evidence for passing the said Award.
Regarding the first of the above said two submissions, no doubt, claim No. 1 is for a sum of about Rs. 18.27 lakhs and claim No. 6 for a sum of
about Rs. 15.31 lakhs and claim No. 10 for, about Rs. 1.06 lakhs and the case of the appellant is that those claims had already been settled
between the parties by accord and satisfaction and, that they cannot be arbitrated upon by the Arbitrators, But, the objection of the Learned
Counsel for the contesting respondent is that this contention of non-arbitrability and the consequent lack of jurisdiction of the Arbitrators to decide
these claims, cannot be raised by the appellant. In this connection, apart from taking us to certain admitted facts, he relied on M/s. Tarapore & Co.
v. Cochin Shipyard Ltd., Cochin AIR 1984 Supreme Court 1072 and Prasun Roy v. Calcutta M.D. Authority AIR 1988 Supreme Court 205 in
support of his contention. The said, admitted facts are: on 23-4-1982 by Ex. C.25-A, the applicant wrote to the appellant making the above said
claims including the above referred to claim Nos. 1, 6 and 10. The said letter was followed by another letter dated 2-6-1982 stating that there has
been inordinate delay in the settlement of the dues and the applicant has no other option but to invoke the arbitration clause as provided for in the
contract between the parties. Further, by the said letter, the applicant nominated the above referred to P.S. Subramaniam as its nominee Arbitrator
and has requested the said Arbitrator to enter upon the reference. The said letter also concluded by saying that the applicant awaited to hear from
the appellant the name and address of the applicant''s nominee-Arbitrator. To that second letter, the appellant replied on 2-7-1982 as follows:-
Referring to your letter cited. I would inform you that the Tamil Nadu Electricity Board has appointed Thiru E.S. Narayanan, B.E. Chief
Engineer/Thermal, Tamil Nadu Electricity Board, Electricity Avenue, Madras-600 002 as its nominee arbitrator in the matter of dispute that have
arisen in the above contract.
A copy of the said reply was also sent both to the above said Subramaniam and Narayanan. On the same day, another letter was also addressed
to the above said Narayanan, stating as follows:
Based on the approval accorded in the Board''s Proceedings cited, you are nominated to be the Arbitrator in the matter of disputes between Tamil
Nadu Electricity Board and M/s. Engineering Construction Corporation Ltd., that have arisen in the above contract specification C.1101. I request
you to enter upon reference in the matter for Arbitration.
Accordingly the Arbitrators entered upon reference in the matter and both parties to the Arbitration participated in the proceedings. In such a
situation, the Learned Counsel for the contesting respondent contends that it is not open to the appellant to complain of lack of jurisdiction on the
part of the Arbitrators on the ground that the above said claims are not arbitrable.
In AIR 1984 Supreme Court 1072 referred to above, relied on by the said Counsel, there was an arbitration agreement between a contractor
and a Company and the dispute between them was referred to arbitration, without prejudice to the rights of the company to the contrary. The
Company participated in the arbitration proceedings and the Award was passed finally against the Company. In that context, the Supreme Court
held that the Company could not be permitted to contend that the reference was without prejudice to the right of the company to the contrary.
There, the company by their letter agreed to refer the dispute to the Arbitrator, but without prejudice to the company''s rights to contend that the
claim of the contractor was not covered by the arbitration clause. The Company also did raise the contention before the Arbitrator that he had no
jurisdiction to entertain the dispute as it would not be covered by the arbitration clause. In that context, the Supreme Court observed as follows:
Not only the respondent did not have recourse to an application under S. 33 of the Arbitration Act, but of its own it referred to a specific question
of law to the arbitrator for his decision, participated in the arbitration proceeding invited the arbitrator to decide the specific question and took a
chance of a decision. It cannot therefore, now be permitted to turn round and contend to the contrary on the nebulous plea that it had referred the
claim dispute to the sole arbitrator prejudice to its right to contend to the contrary.
On the other hand, the Learned Counsel for contesting respondent drew our attention to Continental Construction Co. Ltd v. State of M.P. AIR
1988 Supreme Court 1166 and urged that the above referred to AIR 1984 Supreme Court 1072 had been distinguished in the latter decision,
AIR 1988 Supreme Court 1166. In the latter decision, the Supreme Court observed, that"" it was observed (in Tarapore and Company Vs.
Cochin Shipyard Ltd., Cochin and Another, that if the agreed fact situation, on the basis of which agreement was entered into, ceases to exist, the
agreement to that extent would become otiose. If the rate initially quoted by the Contractor became irrelevant due to subsequent price escalation
contractor''s claim for compensation for the excess expenditure incurred due to the price rise could not be turned down on the ground of absence
of price escalation clause in that regard in the contract. Agreement as a whole has to be read."" But, in the above said AIR 1988 Supreme Court
1166 there were specific clauses which barred consideration of extra claims in the event of price escalation. On this factual difference, the above
said latter Supreme Court decision distinguished the former decision. But this point has no relevance to our present case.
Further in the other Supreme Court decision AIR 1988 Supreme Court 205 referred to above, the principle enunciated in Tarapore and
Company Vs. Cochin Shipyard Ltd., Cochin and Another, has also been reiterated. There, the following passage from Russel on the law of the
Arbitration, 15th Edition at page 295 is quoted with approval:
Although a party may by reason of some disability be legally incapable of submitting matters to arbitration, that fact is not one that can be raised as
a ground for disputing the award by other parties to a reference who were aware of the disability. If one of the parties is incapable the objection
should be taken to the submission. A party will not be permitted to lie by and join in the submission and then if it suits its purpose attack the award
on that ground. The presumption in the absence of proof to the contrary will be that the party complaining was aware of the disability when the
submission was made.
The Supreme Court has further reiterated that the above said principle could be invoked even when the challenge is made even before making of
the Award. That is why it is stated as follows:
Mr. Kacker submitted that this principle could be invoked only in a situation where the challenge is made after the making of an award, and not
before. We are unable to accept this differentiation. The principle is that a party shall not be allowed to blow hot and cold simultaneously. Long
participation and acquiescence in the proceeding preclude such a party from contending that the proceedings were without jurisdiction.
In the present case, as already noted, even in its above said reply dated 2-7-1982, the appellant only stated that the above said E.S. Narayanan
had been appointed as its ""nominee arbitrator in the matter of disputes that have arisen"" between the parties. It did not say that it appointed the said
Arbitrator ""without prejudice"" to its alleged claim that some of those disputes were not arbitrable. Further, we find from the other letter of the same
date addressed to the said Narayanan that the above said nomination of the said Arbitrator was on the basis of the ""approval accorded"" in the
appellant-Board''s proceedings B.P.Ms.No.401 (Administrative) dt.30-6-82 from T.N.E.B. Therefore, the above said principle laid down in the
above said Supreme Court decision would apply to the present case afortiorari. It should also be noted that even in paragraph 9 in O.P. No. 103
of 1984, the petition for setting aside the Award, the appellant only stated that it had nominated the above said Arbitrator hoping to raise the
question that the claims are not arbitrable before the Arbitrators. So, it is clear that it did not protest at all against any of the above said disputes
being referred to the Arbitrators, any time before the said reference.
The Learned Counsel also brought to our notice Damodar Valley v. K.K. Kar AIR 1974 Supreme Court 158. There too, one of the parties to
the arbitration agreement raised a plea of full and final settlement between the parties even prior to the reference to arbitration. Therefore, the
contention by that party was that the rights and obligations under the contract did not subsist and consequently the arbitration clause also perished
along with the settlement and that the dispute whether there had or had not been a settlement could not be the subject of an arbitration. In that
context, the Supreme Court held that there was a basic fallacy underlying this contention. The Supreme Court further held that the question
whether there had been full and final settlement of the claim under the contract was itself a dispute arising ''upon'' or ''in relation to'' or ''in
connection with'' the contract and that a claim for damages was a dispute which arose between the parties and was upon or in relation to or in
connection with the contract ad that the reference to the Arbitrators by one of the parties was not barred. In view of the above said Supreme
Court decisions, we hold that it is not open to the appellant to raise the question of lack of jurisdiction on the part of the Arbitrators to decide the
above referred to claim Nos. 1, 6 and 10.
Then coming to the next submission of lack of evidence to support the claim of the contesting respondent, the argument of the Learned
Counsel for the appellant is that no witness at all was examined on the side of the contesting respondent and that the correspondence between the
parties containing assertion and denial would not amount to proof and that further despite the direction given by the arbitrators, the contesting
respondent did not produce the relevant account books and other relevant documents to establish its claim. On the other hand, the Learned
Counsel for the contesting respondent pointed out that there was no ""direction"" by the arbitrators for producing any account book or document.
The proceedings of the Arbitrator dated 18-4-1983 only states that the parties ""may produce"" the documents etc., which may be in their power or
possession to which they intend to refer or otherwise considered as required. Further, the proceedings of the Arbitrators dated 17-9-1983 only
stated that the claimant (applicant) submitted that they would be filing the document to support the quantities, rates, etc., claimed by them in their
statement of facts. The Learned Counsel for the contesting respondent also submitted that having regard to the fact that the parties are corporate
bodies and the entire material was contained in the documentary evidence supported by books and vouchers in the possession of the appellant
itself with copies of them being available with the applicant, it was agreed on 17-9-1983 to have a joint inspection of the documents agreed upon
and a not disputed by the parties. Accordingly there was such joint inspection and the appellant itself later filed submissions before the Arbitrators
mentioning the quantities of the work, etc., arising from the contract, it cannot be said that there was no evidence to support the Award. Further,
he also pointed out that strict rules of evidence are not applicable to the arbitration proceedings. We see force in this contention. That apart, the
Learned Counsel for the contesting respondent placed before us a weightier argument as a pure proposition of law by citing two decisions, one of
the Delhi High Court and another of Supreme Court. The Delhi High Court decision is Natwar Lal Shamal Das and Co. Vs. Minerals and Metals
Trading Corporation of India, which observed as follows:
if an award is a non-speaking award the court cannot says that the arbitrator''s decision is base on good evidence or insufficient evidence or no
evidence at all. I have therefore no hesitation in holding that these awards are non-speaking awards and the corporation cannot assail them on the
ground of no evidence.
No doubt with reference to this decision, the Learned Counsel for the appellant pointed out that in the said Delhi case there was evidence before
the Arbitrator and two witnesses were examined by the claimants and that the Court also emphasized that regarding the quality or sufficiency of the
evidence given, the Court could not be a Judge and that it was for the Arbitrator to weight the evidence adduced by the parties. But, we find that
after saying so, the Delhi High Court also observed that since the awards were non-speaking Awards, they could be assailed on the ground of no
evidence.
The Learned Counsel for the contesting respondent also relied on the following passage in Food Corporation of India v. Joginderpal
Mohinderpal AIR 1989 Supreme Court 1263 which was a case of speaking Award:
Halsbury''s Laws of England Vol.2, 4th Edn., para 62 reiterates that an arbitrator''s award may be set aside fore (sic) of law appearing on the face
of it. Though this jurisdiction not to be lightly exercised, the award can also be set aside (sic) inter alia, the arbitrator has misconducted himself or
the Proceedings. It is difficult to give an exhaustive definition of which may amount to misconduct on the part of the arbitrator. There is discussed in
Halsbury''s Laws of England (supra). It is not misconduct on the part of an arbitrator to come to an erroneous decision, whether his error is one of
fact or law and whether or not his findings of fact are supported by evidence See the observations of the Russel on Arbitration, 20th Edn., page
""(Emphasis Supplied). It is also significant to note the following passage from the said decision:
It (arbitration) has a social purpose to fulfill today. It has a great urgency today when there has been an explosion of litigations in the he courts of
law established by the sovereign power. Therefore, it should be the endeavour of those who are interested in the administration of justice to help
settlement by arbitration, if possible. It has also a social efficacy being the decision by the consent of the parties. It has also the advantage of not
(merely-sic) quickness of decision but the simplicity of procedure. But in proceedings for arbitration there must be adherence to justice, equity, law
and fair play in actions. However the proceedings for arbitration must adhere to the principles of natural justice and must be in consonance with
such practice and procedure which will lead to a proper resolution of the dispute and create confidence of the people for whose benefit these
processes are resorted to. Once they do so and the award is clear, just and fair, the courts should, as far as possible, give effect to the award of
the parties and it make the parties compel to adhere to and obey the decision of their chosen adjudicator.
No doubt, the Learned Counsel for the contesting respondent drew out attention to a passage in K.P. Pouloss v. State of Kerala AIR 1975
Supreme Court 1259 which held that if the Arbitrator arrives at a decision ""by ignoring very material documents which threw abundant light on the
controversy to help a just and fair decision"" it is misconduct under S.30 of the Arbitration Act. But, in the present case it is nobody''s case that the
Arbitrators arrived at the Award in question by ignoring any material document. Therefore, the above referred to AIR 1975 Supreme Court 1259
has no application to the facts of the present case. The net result is, in view of the above said observations in AIR 1989 Supreme Court 1263, we
are bound to follow the said decision and, therefore, we hold that the non-speaking Award in the present case, cannot be set aside.
The Learned Counsel for the contesting respondent also drew our attention to the following passage in Santa Sila v. Dhirendra Nath AIR 1963
Supreme Court 1677:
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 See Selby v.
Whitbread and Co. 19171 KB 736 at p.748.
He also relied on the following passage in State of Orissa and Others Vs. Lall Brothers,
The fact that there is an unreasoned award is no ground to set aside an award. Lump sum award is not bad perse, as such an award is not invalid
merely because by a process of inference and argument it may be demonstrated that the arbitrator has committed some mistake in arriving at his
conclusion. It is not open to the court to speculate, where no reasons are given by the arbitrator, as to what impelled him to arrive at his
conclusions.
No doubt, Learned Counsel for the appellant relied on Fertilizer Corporation of India v. M/s. Bharat Painters AIR 1986 Orissa 82 which was
also a case of non-reasoned award. There, the Court initially observed thus:
It is no doubt true that the scope of interference by a Court in case of a non-reasoned award is rather very limited and a court has no jurisdiction to
investigate into the merits of a case and to examine the evidence on record for the purpose of finding out whether or not the arbitrator has
committed an error of law. This view is consistent right from the case of AIR 1923 66 (Privy Council) the case of N. Chellappan Vs. Secretary,
Kerala State Electricity Board and Another, .
However, it finally concluded that in view of the fact that no evidence, either oral or documentary was let in before the Arbitrator his making the
Award based on no evidence, amounts to misconduct within the ambit of S.30 of the Arbitration Act. We are unable to agree with the final
conclusion reached by the learned Judge, who decided the above said Orissa case, particularly in view of the above said passage quoted from
AIR 1989 Supreme Court 1267. Likewise, for the same reasoning, we are unable to agree with M/s. Bombay Ammonia Pvt. Ltd. v. Union of
India AIR 1987 Delhi 148 which held that an Award based on no evidence was liable to be set aside. We also find that in Union of India Vs.
Commercial Metal Corporation and Another, it has been held that if the award is non-speaking, a probe into the mental processes of the
Arbitrator is not permissible.
In the result, there is no case for interference with the decree passed by the learned trial Judge in terms of the Award and hence these appeals are
dismissed. However, in the circumstances of the case, no costs.