Welcast Steels Ltd. vs Cement Corporation of India Ltd. and Others

Shiv Narayan Dhingra, J.—By this order I shall dispose of objections raised by the Objector/Respondent against an award dated 30.6.1992 whereby the learned Arbitrator allowed a sum of Rs. 1,34,283/- to be paid to the petitioner within 30 days of the passing of the award and in case of delay in payment beyond this, interest @ 18% p.a. to be paid.

In the objections raised by the Objector/Respondent i.e. Cement Corporation of India Ltd., it is submitted that the learned Arbitrator misconducted himself as well as the proceedings as he passed a non-speaking award. The arbitration clause did not provide that a non-speaking award may be passed. Since the award gives no reason and no calculations, the award was bad in law and liable to be set aside. The other ground taken by the Objector is that claim No. 2 filed by the petitioner before the Arbitrator was beyond the scope of Purchase Order/Contract between the parties and could not have been considered/entertained by the learned Arbitrator. The arbitrator also failed to take into consideration that the counter-claim made by the Objector/Respondent was in accordance with Clause 3 of the Special terms and conditions of the contract and was liable to be allowed and the bank guarantee was rightly invoked by the respondent and the amount of bank guarantee was liable to be adjusted towards the liquidated damages. The other objection is that the learned Arbitrator ignored the fact that there was no justifiable claim made by the claimant and the only claim which could have been considered by the Arbitrator was claim No. 3 for Rs. 14,200/- thus, the award of Rs. 1,34,283/- on the face of it was disproportionate. It is also submitted that 18% p.a. interest as awarded by the learned Arbitrator was exorbitant.

A perusal of record would show that the claimant had made six claims before the Arbitrator; claim No. 1 was for Rs. 2,99,595/- on account of wrongful encashment of bank guarantee by the respondent, claim No. 2 was for Rs. 2,65,200/- on account of difference in base price of supplies made to other units of respondent with interest, claim No. 3 was for Rs. 14200/- on account of Railway escalation charges/freight charges, claim No. 4 was for Rs. 75,700/- on account of difference in base price of scrap and claim No. 5 was for interest and claim No. 6 was for cost of arbitration. The Objector/Respondent in reply denied all the claims and raised counter claim for liquidated damages to the tune of Rs. 1,79,512/- and a counter claim of Rs. 2,83,817/- towards additional cost incurred in procuring the material from alternate source.

The learned Arbitrator passed a non-speaking lumpsum award in following terms:

I, K.C. Sodhia, the Sole Arbitrator, having considered carefully and fully all relevant aspects of the claims and counter-claims of the two parties, has come to the conclusion that, in full and final settlement of the claims and counter-claims of the two parties, the Cement Corporation of India Ltd. should pay a sum of Rs. 1,34,283 (Rs. One lac thirty four thousand two hundred and eighty three) to Welcast Steels Ltd., within thirty days of the date of this Award. In case of delay in payment beyond the period mentioned, interest at the rate of 18% per annum will be payable by the Cement Corporation of India Ltd.

It is argued by the learned Counsel for the Objector that the arbitration agreement does not say that a non-speaking award can be passed although it does not say in specific words that only a reasoned award was to be passed. He submitted that since there was no negative covenant, the Arbitrator was supposed to pass a reasoned award. It is also argued that the Arbitrator was obliged to hold whether any of the claims made by the claimant were maintainable under the terms of the contract or not and then only decide what was the amount payable and in view of the fact that the Arbitrator had not given any finding about the maintainability of the claims of the petitioner and passed a lumpsum award, the award was liable to be set aside. The Counsel relied upon Tamil Nadu Electricity Board Vs. M/s. Bridge Tunnel Constructions and others, support of his arguments.

I consider that the judgment relied upon by the Objector/Respondent does not help the Objector/Respondent. In T.N. Electricity Board''s case (supra) , the reference was made to the Arbitrator by the Court with specific directions that the Arbitrator shall decide the arbitrability of the claims and if he considered that the claims filed were within the scope of arbitration clause, then he would have jurisdiction to decide the same. Despite these directions of the Court, the Arbitrator gave a lumpsum award. It was under these circumstances that the Supreme Court held that it was difficult to discern as to what extent the Arbitrator had considered the admissible and inadmissible claims which he adjudged and to what extent he had exercised his jurisdiction vis-a-vis the admissible claims and disallowed the non-arbitrable claims. Thus, the award was held to be non-acceptable by the Court. In the present case, the reference to the Arbitrator was not made by the Court with any specific question to be decided by the Arbitrator and the reference was made to the Arbitrator by the parties. I, therefore consider that the above judgment is not applicable and the award cannot be set aside on the grounds taken by the Objector/Respondent.

In State of Orissa and Others Vs. Lall Brothers, Supreme Court held that the fact that there was an unreasoned award was no ground to set aside an award. Lumpsum award was not bad per se. In M.K. Shah Engineers & Contractors v. State of Madhya Pradesh (1992) 2 SCC 594 Supreme Court reiterated the law on this issue and held that an arbitration award was not vitiated merely because the Arbitrator had not given item-wise award and had chosen to give a lumpsum award. A lumpsum award was not a bad award. It was well settled that an award need not formally express the decision of the Arbitrator on each matter of difference nor it was necessary for the award to be a speaking award. This law was again reiterated in Rajendra Construction Company Vs. Maharashtra Housing and Area Development Authority and Others, and in Markfed Vanaspati and Allied Industries Vs. Union of India (UOI), .

I also do not agree with the Objector/Respondent that in case the arbitration clause does not say that a lumpsum award may be given, the Arbitrator cannot give a lumpsum award. An Arbitrator is bound to give a reasoned award only if the reference made to him or the arbitration clause from which he draws power specifically provides that he has to give a reasoned award.

The argument of the Objector/Respondent that 18% p.a. interest was on a higher side and the Court should reduce the interest also cannot be accepted. The amount was awarded by the Arbitrator in the year 1992, at that time 18% interest was not on the higher side and if the amount had been paid as directed by the Arbitrator within 30 days, the Objector would not have to pay any interest, the Objector is liable to pay interest only from one month after the date of passing of the award, no pendent lite interest was awarded to the petitioner. Under these circumstances, it would not be proper to interfere with the interest granted by the Arbitrator.

The objections made by the Objector/Respondent are hereby dismissed. The award dated 30.6.1992 is made a rule of the Court. Decree Sheet in terms of the award be prepared.

With these, the suit/petition stand disposed of.