U.P.State Electricity Board vs Searsole Chemicals Limited

V.P.Goel, J.—This first appeal from order under Section 39(vii) of the Indian Arbitration Act, 1940 (hereinafter referred to as the Act) is directed against the order/Judgment dated 1121993 passed by Civil Judge, Dehradun, in Misc. Case No. 150 of 1990, refusing to set aside award dated 641990.

The short facts concerning the arbitration award in question may be stated as follows:

An agreement dated 2511974 was entered between M/s. Searsole Chemicals Limited, Dehradun (hereinafter referred to as the Claimant) and U. P. State Electricity Board (hereinafter referred to as the Board) for supply of electricity by the latter to the former. The agreement was for continuous supply during 24 hours of each day throughout the whole period of the agreement. To this condition, there was a proviso that the Board would not be responsible for damages or otherwise on account of interruptions of supply of electricity in some situations. These situations can be briefly categorised as: (i) accidental interruptions, (ii) on account of order or direction of the State Government, and (iii) causes beyond the control of the supplier. To be further brief, for the interruptions on account of vismajor, not forcedmajor, the board would not be responsible for damages.

During the continuance of the aforesaid agreement, a dispute arose between the claimant and the Board on two counts. The first was in regard to the liability of the claimant on account of wrong billing, overcharging, levy of unjustifiable penalties and the second was the amount payable to the claimant by the Board on account of heavy damages suffered by the claimant due to frequent interruptions and inadequate and faulty supply of electricity as well as nonsupply of electricity to the claimant''s plant at its factory Kunanwala. The claimant asked the Board to refer the dispute for arbitration as provided in the agreement. The Board did not accede to its request. Consequently, the claimant filed application under Section 20 of the Act. It was registered as Suit No. 353 of 1983. The court allowed it and ordered the agreement to be filed. In compliance to this order the claimant appointed one Sri S. D. Mohan as Arbitrator and the Board appointed Sri Laxmi Behari as Arbitrator. Sri Laxmi Behari is a member of Higher Judicial Service and was working as Professor of Law in Lal Bahadur Shastri Administrative Academy at Mussoorie. Both the Arbitrators appointed Sri J. C. Gupta, District Judge, Dehradun as Umpire in the event of difference of opinion between them. The claimant filed claim statement before the Arbitrators claiming a sum of Rs. 1,87,751.98 p. to be refunded on account of excessive charges and a sum of Rs. 49,52,552 as damages on account of illegal interruptions of supply of electricity. The Board filed written statement.

The Arbitrators framed as many as eight issues on .the pleas urged by the claimant as well as the Board before them. The Arbitrators gave the Award on 641990 which is supported by reasons. By this Award the Arbitrators granted refund of Rs. 1,74,338.98 p. to the claimant. The Arbitrators further granted a sum of Rs, 24,00,000 for the loss suffered by the claimant on account of interruptions in power supply. The Arbitrators have also awarded interest at the rate of 12% per annum from 12111986 to the date of the Award and further interest at the rate of 6% from the date of the Award till the date of the payment. Against Award dated 641990, the Board filed objections before the Civil Judge, Dehradun. It was registered as Misc. Case No. 150 of 1990. Before the Civil Judge, Board took following grounds to challenge the validity of the award:

(i) The Arbitrators had no authority to award interest under Section 29 of the Arbitration Act.

(ii) Though there was guarantee of supply of electricity of the 24 hours of day but there was a proviso to it under which, in some circumstances, supply could be interrupted without liability of paying damages. The Arbitrators did not consider the proviso.

(iii) The claim petition was vague.

(iv) The claim petition was not verified according to law, and

(v) Interference fawn by the Arbitrators for the evidence was not proper; the Arbitrators did not give the detailed reasons and did not apply their mind fully to the facts and circumstances.

The Civil Judge considered and rejected all the aforesaid contentions and award was made Rule of the Court.

Being aggrieved by the judgment of the Civil Judge dated 1121993, the Board preferred the present appeal from order.

We have heard learned counsel for the parties and perused the Award, the impugned judgment and other material on the record. Sri S.C. Budhwar, learned counsel for the Board, urged before us that arbitrators committed error apparent on the face of the record by holding that the log books had not been filed. The log books had been, in fact, tiled and the inference drawn by the Arbitrators on the ground of nonproduction was wholly impermissible; that the arbitrators did not consider statutory provisions under which the direction was issued by the State Government for stopping supply which had resulted interruption, and that the arbitrators committed mistake apparent on the face of the record in holding that interruptions were not accidental.

The arbitrators, on issue Nos. 1 and 2, on assessment of evidence, had come to the conclusion that, "Log books which the opposite party produced did not give any reasons or where the reasons were given they were untenable." In the court below the argument on behalf of the Board that on the question of interruption of supply of electricity the Board had produced log book except of one substation which could not be produced. It was further argued that the arbitrators had not correctly evaluated and appreciated the evidence of entries in the logbook. We have carefully gone through the judgment of the trial court and we find that there was no such allegation in the court below that the arbitrators had not considered any log book, which had been produced on behalf of the Board. The arbitrators on assessment of evidence on record, documentary as well as oral, produced before them, decided issue No. 2 in favour of the claimant and held that besides the log books which the .opposite party produced did not give any reason or where the reasons were given, they were untenable. This is a finding recorded by arbitrators on appreciation of evidence and is not amenable to be interferred with under Sections 30 and 33 of the Arbitration Act as the conclusion reached is not unreasonable.

Sri Budhwar, learned counsel for the appellant vehemently urged before us that the arbitrators committed legal misconduct in the proceeding and also committed to error of law apparent on the face of award in drawing adverse inference against the Board in not producing the log books while the log books were actually produced. Similar argument was raised before the learned Civil Judge who did not accept the contention of the appellant and held that the arbitrators have given the award after taking into consideration the entire evidence on record and the award cannot be set aside on this ground.

Plea of Section 29 of the Arbitration Act was raised before the trial court and after applying the law laid down in Sudersan Trading v. State of Kerala, AIR 1989 SC 890, it held that the arbitrators have full authority to award interest. It is immaterial whether the claimant has claimed the same or not. Learned counsel for the appellantSri Budhwar did not raise serious controversy on this point before us.

On the scope and ambit of the power of interference of the court that 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 Supreme Court and also Privy Council and English Courts. Both the parties have referred to some of such decisions in support of their respective contentions. Sri Budhwar, appearing on behalf of the appellant/Board, cited before us K. I. Poulose v. State of Kerala, AIR 1975 SC 1259; Union of India v. Jain Associates, 1994 (3) JT 303 and State of Rajasthan v. Puri Construction Company Ltd. and another, JT 1994(6) SC 412. On the basis of these authorities learned counsel urged that if there is an error apparent on the face of award, it can be set aside. He has referred to us the finding of the arbitrators that they had drawn adverse inference foe not producing the log books despite the fact that log books had been filed before them. We have gone through the award and the order of the learned Civil Judge and we find that the finding of the arbitrators that they had considered the entire material on record, oral and documentary, which included the log books as well which were not accepted to have reflected a correct picture and thereafter it had held that there was interruption in the supply of the electricity and the Board had faled to give proper explanation for the same and the claimants were entitled to the damages. This being a finding of fact based on appreciation of evidence is not vulnerable.

Sri S. P. Gupta, learned counsel for the claimant respondent vehemently urged before us that the ambit of Section 39 of the Act to interfere with the award is limited and the award cannot be set aside merely because on assessment of evidence this court may come to a different conclusion as civil court is not sitting in appeal against the award. This Court has no power to reappreciate or reassess the evidence, more so, when the award is a reasoned one and the reasons given in support of the award are tenable. In support of his contention, he placed reliance in State of Rajasthan v. Puri Construction Company Ltd. and another, JT 1994 (6) SC 412 and U. P. Hotels v. U. P. State Electricity Board, AIR 1989 SC 268. In this case the Supreme Court held, "Even assuming that there was an error of construction of the agreement or even that there was an error of law in arriving at a conclusion, such an error is not an error which is amenable to correction even in a reasoned award under the law. In order to set aside an award, there must be a wrong proposition of law laid down in the award as the basis of the award." The Court further held that

"the view taken by the Umpire on Section 49 was a possible view in the light of the decision of the Supreme Court......Even on the assumption that such a view was not right, the award was not amenable to interference or correction by the courts of law as there was proposition of law which could be said to be the basis of the award of the Umpire, and which was erroneous."

Sri Budhwar cited the case of K. P. Poulose (supra). From this, learned counsel cited the observations of paragraph 6. This observation is reproduced below:

"Misconduct under Section 30(a) has not a connection of a moral lapse. It comprises of legal misconduct which is complete if the arbitrator on the face of the award arrives at an inconsistent conclusion even on his own finding or arrives at a decision by ignoring from material documents which throw abundant light on the controversy to hold a just and fair decision. It is in this sense that the arbitrator has misconducted the proceedings in this case."

We have carefully gone through the award as well as the order of the Civil Judge and we find no inconsistent conclusion on the findings of, the arbitrators in the instant case. The arbitrators have not ignored any documentary evidence much less material documents which may throw light on the controversy. The arbitrators, as stated above, have specifically observed that either log books do not contain reasons and if they contain reasons, the same are not tenable. In Bijendra Nath Srivastava (Dead) through LRs. v. Mayank Srivastava and others, AIR 1994 SC 2562, after taking note of the various decisions of the Supreme Court, High Courts and Privy Council, in paragraph 22 of the Judgment Law has been summarised. The relevant portion of para 22 of the case is extracted and quoted below:

"As regards an award made by an arbitrator under the Act the law is wellsettled that the arbitrator''s award is generally considered binding between the parties. The power of the court to set aside an award is restricted to the grounds a set out in Section 30 of the Act, namely, (a) where the arbitrator has misconducted himself or the proceedings; (b) where the award has been made after the issue of an order by the court superseding the arbitration or after arbitration proceedings have become invalid under Section 35; and (c) where the award has been improperly procured or is otherwise invalid. The court can set aside the award under clause (c) of Section 30 if it suffers from an error on the race of the award. An award might be set aside on the ground of an error on the face of it when the reasons given by the decision, either in the award or in any document incorporated with it, are based upon a legal proposition which is erroneous. In the absence of any reasons for making the award, it is not open to the court to interfere with the award. The court cannot 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. An award is not invalid merely because by a process of inference and argument it may be demonstrated that the arbitrator has committed grave mistake in arriving at his conclusion. The arbitrator is under no obligation to give reasons in support of the decision reached by him unless under the arbitration agreement or deed of settlement he is required to give such reasons. If the arbitrator or umpire chooses to give reasons in support of his decision it would be open to the court to set aside the award if it finds that an error of law has been committed by the arbitrator or umpire on the basis of the recording of such reasons. The reasonableness of the reasons given by the arbitrator cannot, however, be challenged. The arbitrator is the sole Judge of the quality as well as the quantity of the evidence and it will not be for the court to take upon itself the task of being a Judge of the evidence before the arbitrator. The 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 Chempsey Bhara and Company v. Jivara Bails Spinning & Weaving Company Ltd., (1923) LR 50 Ind App 324 at p. 331: AIR 1923 PC 65 at p. 59; Jivarabhai Ujamshi Sheth v. Chintamanrao Balaji, (1964) 5 SCR 480 at pp. 49495: AIR 1965 SC 214 at p. 22U; Sudarsan Trading Co. v. Government of Kerala, (1989) 1 SCR 665 at pp. 68384: AIR 1989 SC 890 at pp. 90001; Rajpur Development Authority v. M/s. Chokhamal Contractors, (1989) 3 SCR 144: AIR 1990 SC 1426 and Smt. Santa Silva Devi v. Dhirendra Nath Sen, (1964) 3 SCR.410 at p. 421: AIR 1963 SC at p. 1680]".

In our opinion the principle laid down by the Supreme Court in Bijendra Nath Srivastava''s case (supra) is fully applicable in the instant case.

The appellant/Board failed to make out any case whatsoever for interference either in the impugned award or in the impugned judgment. Finding recorded by the arbitrators are findings based on appreciation of evidence and are not amenable to be interfered with under Sections 30 and 33 of the Act. On the facts of this case learned Civil Judge, in our opinion, is correct in dismissing the objections ol the Board.

The appeal is dismissed. The judgment of the Civil Judge dated 1121993 is affirmed. Parties shall bear their own costs.