Judgment:
B.N. Kirpal, J.
(1) This judgment will dispose of the objections filed by the respondents to the award dated 15th September, 1986 given by the Sole-Arbitrator in favor of the petitioner.
(2) Briefly stated, the facts are that the petitioner and respondent No. 1 entered into a contract dated 12th November, 1984 whereby certain civil works had to be executed by the petitioner. It appears that the work to the petitioner was awarded by respondent No. 1 on the recommendations of the respondent's Architects M/s. M. R. Wareekar and Associates Private Limited.
(3) After the award of the work the petitioner entered upon the site and started working. The gross value of the work was Rs. 1,87,22,415.00 In order to assist the petitioner, and in terms of the contract, a mobilisation advance of Rs 56,16,724.00 was given by respondent No. 1 to the petitioner. This advance was not to bear any interest and was adjustable against the bills of the petitioner. After 50 per cent of gross work had been done.
(4) According to the petitioner, he had done work worth Rs. 67,79,059.00 and because payments were not being made by respondent No. 1, he stopped working with effect from 30th April, 1985. According to the petitioner, even the tills which had been certified as payable by the Architects were not paid to him. It is further the case of the petitioner that as there were some disputes with regard to measurements, remeasurements took place in October, 1985 but on 1st November, 1985 respondent No. I terminated the contract of the petitioner.
(5) Before the termination of the work, as disputes between the parties had already arisen by letter dated 5th June 1985 written by the aforesaid Architects, Shri A. , Paracer, Additional Director General (Woks). Central Public Witness D. was appointed as the Sole-Arbitrator in terms of clause 43 of the agreement between the parties.
(6) The arbitrator entered upon the reference on 1st November, 1985 and the parties filed their claims and counter claims before him.
(7) It is not necessary to refer to the counter-claims of the respondent but I may here notice the claims which were finally put forth before the arbitrator, after the same were enhanced on the termination of the contract :
SI. No. Nature of the claim Amount/claimed 1. Balance payment for work done 45,16,989 2 Balance payment for materials procured on behalf of respondent No 1. 6,89,850 3. Interest on delayed payment till 15-9-86 10,29,013 (date of award) 4,5,&7.Infructuous expenditure on establishment idle machinery idle shuttering etc for the period 1-5-85 to 1-11-85. 6,90,000 6. Withdrawn 8. Loss of profit during the period the work was suspended i.e. 1-5-85 to 1-1l85 at the rate of Rs. 1.5 lacs per month. 9,00,000 9. Withdrawn 10.Constuction of site office/store 1,52,000 11. Materials lying at site purchased by the petitioner at his own cost for his own use including tools and plants 2,67,000 12. Loss of profit on account or breach of contract by respondent 32,00,000 13.Withdrawn 14. Refund of tax debited at source 27,116 15. Refund of security deposit 1,00,000 16. Interest from the date of the award to the date of payment 17. Costs of the arbitration 1,16,20,068 Total 1,16,20,068
The respondents, of course, did not accept their liability to pay the aforesaid amounts claimed by the petitioner and, as has already been indicated, they preferred their counter claims before the Sole Arbitrator.
(8) Before the Arbitrator, documentary evidence was filed. In addition thereto, affidavits by way of evidence were also filed and some witnesses were also examined. It appears that arguments were heard and thereupon the arbitrator made and published his award. In the award it was, inter alia, stated as follows :
'WHEREAS,I have read and applied my mind to the pleadings of both the parties, their claims and Counter claims, the oral and documentary evidence, the arguments of the Learned Counsels and the authorities cited by them support of their arguments and I have given due weight and consideration to all the above and I have reached my conclusions only after deep and careful consideration.
Now, thereforee, I hereby make and publish my Award as follows : On due adjustment of the amount held justified under the counter Claims made by the Respondents (M/s. Hindustan Vegetable Oils Corporation Limited) against the amount held justified under the claims made by the Claimants (Shri Jagdish Chander) I hereby award that the respondents shall pay to the Claimants a sum of Rs 32,65,017.00 (Rupees Thirty Two Lakhs Sixty Five Thousand and Seventeen only) including admissible interest.
I further award that in case the above mentioned amount is not paid by the Respondents to the Claimants within thirty days. of making of this award, the Respondents shall further pay simple interest @ 15 per cent per annum on the amount of Rs. 22,31,745.00 (Rupees Twenty Two Lakhs, Thirty One Thousand, Seven Hundred, Forty Five only) from the date of the Award up to the date of actual payment or date of decree whichever is earlier.
EACH party shall bear its own cost of arbitration.
THE Claimantsr shall pay an amount of Rs. 10,000 (Rupees Ten Thousand only) to the Arbitrator as charges for making the award in terms of section 14(1) of the Arbitration Act 1940.
(9) The petitioner thereafter filed an application under sections 14, 17. and 29 of the Arbitration Act, inter alia, praying that the Arbitrator should be directed to file the award and the award should be made the rule of the Court. Notice of the application was issued and notice was also sent to respondent No. 2, the sole arbitrator, directing him to file the award and the proceedings in Court.
(10) The award and the proceedings were filed in Court and thereupon notice of filing of the award was issued to the parties.
(11) On behalf of respondent No.1 detailed objections were filed to the award. Reply to the objections was filed and after the filing of the rejoinder, the following issues were framed :
'1. Whether there was a valid arbitration agreement between the parties ?
2.Is the award liable to be set aside for the reasons stated in objections ?
3.Relief.'
It was directed that evidence by way of affidavits may be filed.
(12) At this stage it may be noticed that the respondent had also filed an application under section 33 of the Arbitration Act being O.M.P. No. 125 of 1986. In this petition the respondent had challenged the validity of the arbitration agreement on various grounds including the ground that the agreement was void because fraud had been played upon respondent No. 1 by the petitioner and the Architects. By a separate judgment dated 15th December, 1988 the aforesaid O.M.P. No. 125 of 1986 was dismissed. It is thereafter that the objections filed by respondent No. 1 have been taken up for hearing. (issues 1, 2 and 3)
(13) Various contentions were urged by the learned counsel for the respondent before me. The first submission of the learned counsel was that the arbitrator has misconducted the proceedings by violating the substantive provisions of Section 73 of the Indian Contract Act inasmuch as damages have been awarded for breach of the contract without any loss having been proved by the claimant. It was further submitted that the arbitrator has misconducted himself by awarding damages at least at the rate of about 10 per cent of the contract value without there being any evidence on record. Secondly it was submitted that the arbitrator violated the rules of natural justice by ignoring the only evidence on record pertaining to the question of loss of profit which evidence, if it had been looked into, would have, shown that the profit of the claimant/petitioner was only 1 per cent. Thirdly, it was contended that in allowing the claims Nos. 4, 5, 7 and 8 the arbitrator has violated the provisions of section 74 of the Contract Act because notwithstanding there being a provision for liquidated damagea, the claimant under these heads has been awarded m excess thereof. Fourthly, it was contended that clause 2(b) of the contract between the parties has been violated by the arbitrator, which clause provided, that if there was to be any variation of the schedule of quantities then such variation was permissible only if written instructions were issued to the claimant and in this case no such written instructions have been issued. Fifthly, it was contended that the arbitrator did not pass any orders on application for discovery which had been filed by the respondent and, furthermore, had not insisted that the reply to the interrogatories should be on oath. Sixthly, it was contended that the award is a non-speaking award and this violates the principles of natural justice and the award is liable to be set aside on this ground alone. Lastly it was contended that there is an error apparent on the face of the award inasmuch as the arbitrator has awarded interest more than what is permissible.
(14) In support of his contentions, learned counsel for the petitioner has not only invited my attention,to the statement of claim which had been filed by the petitioner but has also referred to, in detail, the record of the proceedings maintained by the arbitrator including documentary and other evidence on the record.
(15) Before dealing with the contentions of the learned counsel for the respondent it is necessary to bear in mind that the jurisdiction of the Court hearing objections under section 30 of the Arbitration Act is not an appellate Jurisdiction. It is now well settled that an award can be set aside only for the reasons specified in Section 30 of the Arbitration Act. When the parties, by agreement, refer the disputes to an arbitrator then the decision of the arbitrator is not to be lightly interfered with by the Court, It is also pertinent to notice, in a case like the present, that the arbitrator who has been appointed was a serving officer of the Government of India holding a very high rank, namely, he was a Chief Engineer of the Public Works Department. The Supreme Court has had occasion to comment on the expertise of the arbitrator with respect to the subject-matter evolved in the dispute. After observing, in the case of Municipal Corporation of Delhi v. M/s. Jagan Nath Ashok Kumar and another, : [1988]1SCR180 , that the arbitrator was a sole judge of the quality and quantity of the evidence even though, on the same evidence the Court might have arrived at a different conclusion, the Court noted with approval the following observations of Lord Goward, C.J in Mediterranean & Eastern Export Co, Ltd. v. Fortress Fabrics Ltd. (1948) 2 All Er 196 : (2)
The modern tendency is in my opinion more especially in commercial arbitrations to endeavor to uphold awards of the skilled persons that the parties them selves have selected to decide the questions at issue between them. If an arbitrator has acted within the terms of his submission and has not violated any rules the Courts should be slow indeed to set aside his award'.
In the present case, the arbitrator who was chosen was a person who was, presumably, an expert or well-versed in civil engineering. The arbitrator was selected by the agreement of the parties and the selection of a Chief Engineer shows that the parties wanted to appoint a person who was an expert in the line. An award made by such a person should not, thereforee, be lightly interfered with.
(16) Even though the arbitrator may be an expert, he is still bound by the law of the land. It has been rightly contended by the learned counsel for the respondent that the principles of natural justice apply to the arbitration proceedings and, further, the arbitrator is bound to apply the correct law. The provisions of the Contract Act are applicable and it is the duty of the arbitrator to see and to ensure that the said provisions are not violated.
(17) The award in the present case is a non-speaking award. Most of the submissions of the learned counsel for the respondent seem to proceed on the basis as if it impossible to discern the mental process or the reasoning of the arbitrator in the making of his award. The total claimant before the arbitrator put forth by the claimant was for Rs. l,16,20,068.00 . There was a counter-claim of the respondent and, as already noted, the respondent had grapted an advance of Rs. 56,16,724.00. The arbitrator, in his award, has Stated that he has referred to pleadings of both the part, their claim and, counter claims, file and documentary evidence as well as the arguments of the counsel put the Authorities cited by them. He has further situated that after adjusting the amount held justified wider sum of Rs. 32,65,0171-, including admissible interest, was awarded. The arbitrator has further awarded future interest on a different sum, namely, a sum of Rs. 22,31,745.00 fall in the date of the award up to the date of actual payment or date of decree, whichever is earlier.
(18) From the aforesaid award, it is impossible to come to any conclusion as to which of the dafas of the petitioner claimant have been accepted and to what exteat.
(19) The award docs not refer to any document. No document is incorporated in the award. I do not find any error apparent on the face of the award, relating to the claim of the petitioner/claimant and there is no proposition of law apparent on the face of the award which I can find has been wrongly decided except, perhaps, awarding interest from the date of the award to the date of payment or decree, whichever is earlier. Of comes, the contention of the learned counsel for the respondent was that except with regard to the award of interest, which is erroneous on the face of the award, the other part of the award is liable to be set-aside on the ground of misconduct.
(20) Under section 30 of the Arbitration Act, one of the grounds on. which the award can be set-aside is if an arbitrator 'has misconducted himself or the proceedings'. As I understand this provision apart from legal misconduct which must be apparent on the face of the award, there can be a misconduct which is personal to the arbitrator like where the arbitrator was related to one of the parties and, thereforee, biased or has accepted a bribe. The other type of misconduct which is referred to in section 30 is the misconduct of the proceedings. If proceedings are held in violation of the principles of natural justice it would amount to the arbitrator having misconducted the proceedings. For example, if evidence is improperly shut out or evidence is taken behind the back of one of the parties or sufficient opportunity is not granted to any of the parties to present its case or defend itself before the arbitrator, then the award maybe set-aside under section 30(a) of the Arbitration Act. 30(a) of the Arbitration Act
(21) In order to see whether there has been any misconduct of the proceedings or any other misconduct, the Court may be entitled to see the record before the arbitrator. The Court, however, is not entitled to examine the record and then hold that the decision of the arbitrator, on merits, is incorrect. Though a number of decisions were cited before me on the question of non-speaking award, it is not necessary, to refer to all of them except to note the latest decision that of M/s. Sudarsan Trading Co. v. The Govt. of Kerala & Anr 'Judgments' Today 1989 S.C: 339 in which it was, inter alia, observed as follows :
'THE next question on this aspect which requires consideration is that only in a speaking award the court can look into the reasoning of the award, 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. See the observations of this Court in Hindustan Steel Works Construction Ltd. v C. Rajasekhar Rao : [1987]3SCR653 . In the instant case the arbitrator has merely set out the claims and given the history of the claims and then awarded certain amount. He has not spoken his mind indicating why he has done what he has done ; he has narrated only how he came to make the award in absence of any reasons for making the award, it is not open to the court to interfere with the award. Furthermore, in any event, reason ableness of the reasons given by the arbitrator, cannot be challenged. Appraisement of evidence by the arbitrator is never a matter which the court questions and considers. If the parties have selected their own forum, the deciding forum must be conceded the power of appraisement of the evidence. The arbitrator is the sole judge of the quality as well as the. quantity of evidence and it will not be for the court to take upon itself the task of being a judge on the evidence before the arbitrator. See the observations of this Court in Municipal Corporation of Delhi v. M/s. Jagan Nath Ashok Kumar & Anr : [1988]1SCR180 .
The same principle has been stated in M/s.Aiopi Parshad & Sons Ltd. v. The Union of India (supra). There this Court held that the award was liable to be set aside because of an error apparent on the face of the award. An arbitration award might be set aside on the ground of an error on the face of it when the reasons given for the decision, either in the award or in any document incorporated with it, are based upon a legal proposition which is erroneous. But where a specific question is referred, the award is not liable to be set aside on the ground of an error on the face of the award even if the answer to the question involves an erroneous decision on a point of law. But an award which ignores express terms of the contract, is bad. Similarly, in Jiyarajbhal Ujamshi Sheth & Ors. v. Chintamanrao Balaji & Ors. (supra), this Court reiterated that an award by an arbitrator is inclusive as a judgment between the parties and the court is entitled to set aside an award if the arbitrator has misconducted himself in the proceedings or when 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 of the Arbitration As or where an award has been improperly procured or is otherwise invalid under section 30 of the Act, An award may be set aside on the ground of error on the face of the award, but 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 in the light of the aforesaid observations that the contentions of the learned counsel for the respondent have to be examined.
(22) It was submitted, in support of his first contention, by Mr. Sibal that there is no document on record to support the claim of the petitioner/claimant for Rs. 32 lacs in respect of loss of profit. It was contended that there is no material on the record on which the arbitrator could have come to this conclusion. Mr. Sibal invited my attention to the documents which had been filed by the petitioner/claimant including the assessments to the income-tax which, according to Mr. Sibal, showed that the profit assessed was only 1 percent of the volume of work done by the petitioner. The learned counsel also referred to and relied upon a certificate issued by the Income-tax Officer under section 194(c) relating to deduction of tax at source and as per this certificate the tax was to be deducted at the rate of O.4 per cent instead of 2 per cent. The submission of the learned counsel was that the arbitrator has ignored the record relating to income-tax and has awarded amount under this claim without any evidence.
(23) Firmly, as has already been noted hereinabove, it is not possible to know from the award as to what extent the claim of the petitioner for damages on account of loss of profit has been upheld. The total claim of the petitioner was for Rs. 1,16,20,068.00 . After adding the sum of Rs. 56,16,724.00 given as advice fay the respondent to the petitioner, which advance was not returned, to the award of Rs. 32,65,017.00 , the total amount awarded in favor of the petitioner/claimant comes to Rs. 88,81,741.00 . The amount thus awarded is about Rs. 27 lacs less than what was claimed. It is not known as to what was the extent of loss of profit which had been awarded, if at all, and what fate has been applied by the arbitrator. I do not think it is permissible for this Court to go into the various certificates issued by the Income-tax Authorities and then try and compute as to what was the legally permissible rate of profit which could, if at all, have been awarded. Mr. Lakhanpal, the learned counsel for the petitioner, has invited my attention to clause 17(b) of the contract which deals with the amount which the contractor could charge in respect of extra items. It was provided by clause 17(b) that the prices of extra items were to be determined as follows :
'WHERE extra items are not of similar character then analysis of rates will be carved out on market rates and enhancement of 15 pet cent (fifteen per cent) will be allowed to the contractor to cover overhead and contractor's profit'
The submission of the learned counsel for the petitioner was that the contract itself, thereforee, gaye an indication as to what was permissible as the rate of profit. Learned counsel has also drawn my attention to the proceedings before the arbitrator dated 27th August, 1986 in which it is recorded, referring to the submissions of the petitioner, as follows
'IN the open tenders Central Public Witness D. has been allowing a contractor's profit amounting to 10 per cent During earlier hearings it had been down by the Claimants that the High Courts hays accepted profits at the rate of 10 percent and in one case the Supreme Court had allowed a profit at 15 per cent. In the present case fines there were restricted tenders, the margin of profit included by the tenderers in their offers was bound to be high. '
The claimant, as would be evident from the above, did place reliance on clause l7(b) of the contract as well as made submissions with regard to what is allowed by Central Public Witness D. and also referred to decisions of the Courts. Whether this was sufficient evidence or not is entirely for the arbitrator to decide. It is not for this Court to come to the conclusion that the arbitrator was bound to act and rely upon the documents relating to tax to be deducted at source or the profit deter mined by the Income-tax Authorities.
(24) From the aforesaid, it will follow that it is not possible for me to come to the conclusion that there has been any misconduct of the proceedings in this regard as has been alleged by the learned counsel.
(25) In support of his contention that rules of natural justice have been violated, the learned counsel for the respondent has submitted that the arbitrator had ignored the documents on record relating to the Income-tax which showed that the profit of the petitioner could not have been more than 1 per cent Mr. Lakhanpal submits that from the income-tax assessments, it cannot be deducted that the profit on the execution of the works by the petitioner was only 1 per cent. It was submitted by him that in arriving at the assessable income, a number of deductions are allowed and merely because the assessable profit represents only 1 per cent of the quantum of work done does not mean that the profit element of the petitioner is only 1 per cent. As I have already observed earlier, it is not possible for me to come to the conclusion that the arbitrator has ignored this evidence on record. The arbitrator has stated in the preamble of the award that he has taken into consideration all the evidence on the record, both oral and documentary In view of this statement it is not possible to hold that any evidence has been ignored by the arbitrator.
(26) In support of his third submission, Mr, Sibal has contended that the agreement between the parties postulated that if there was any delay in payment of amount payable to the claimant after the bills were certified by the Architect then the claimant would be entitled to receive interest at the rate of 15 per cent per annum. The submission of the learned counsel for the objector was that this clause amounted to a clause providing for liquidated damages and under section 74 of the Contract Act no amount in a addition to the interest on unpaid bills could have been awarded. It was thereforee, submitted that the claim of the petitioner under Heads 4, 5, 7 and 8 could not have been accepted.
(27) I am unable to accept the aforesaid contention. Firstly, it is not known to what extent, if any, had the claim Nos. 4, 5, 7 and/or 8 been accepted. Secondly, It is not possible for me to come to the conclusion that there is any provision in this case for payment of liquidated damages. The learned counsel is no doubt correct in submitting that if there is a provision for liquidated damages then more amount than what is stipulated therein can under no circumstances be granted. Even then, for awarding liquidated damages, some loss or damage has to be proved. Liquidated damages is a genuine pre-estimate of loss or damage which a party is expected to have suffered in case of breach of contract. The clause with regard to payment of interest pertained only to delay in payment of money for the work already done and the cost of material procured for the respondent These claims of the petitioner was covered by claim 3 (supra). Claims 4, 5, 7 and were in respect of loss due to suspension of work between 1st May, 1985 and 1st November, 1985. The interest which was claimed was in respect of the work done prior 1st May, 1985. The provision for payment of interest on the bills as certified by the Architect cannot be regarded as a provision for payment of liquidated damages by the respondent in the event of these being a breach of the contract.
(28) In support of his next contention, learned counsel for the respondent submitted that a large portion of the claim of the petitioner was in respect of extra work which he is alleged to have undertaken. It was submitted that the contract specified certain quantities of work to be done like clearance of the Jungle and removing earth. The claim of the petitioner before the arbitrator, was. for clearance of jungle in excess of the quantity specified and also removal of surplus earth. According, to Mr. Sibal the contract specified in clause 2(b) that there could be variation of the scheme of quantities only under written instructions. The submission was that by allowing the claim of the petitioner in respect of extra quantities the arbitrator has violated the provisions of clause 2 (h).
(29) There is no merit in this submission. Firstly from the award it is not known whether any amount has been awarded in respect of extra work alleged to have been done by the petitioner. Secondly, It is not permissible for this court to look into the contract as the contact is not incorporated in the award. Assuming that clause 2(b) of the contract can be seen, even then the respondent cannot succeed because it is for the arbitrator to decide as to what amount, if any, it to be awarded to the petitioner keeping in view the provisions of clause 2(b) and the evidence on record. It may here be noted that while the case of the respondent before the arbitrator was that no written instructions had been issued with regard to the petitioner undertaking any extra quantity of work, according to Mr. Lakhanpal the Architects in his evidence before the arbitrator, had stated that the extra work had been undertaken under his directions.
(30) With regard to the contention of Mr. Sibal that the award is a non-specking award, the said submission may only be noticed and rejected. Even though the question as to whether a non-speaking award can be given or not has been referred to a Larger Bench of the Supreme Court, nevertheless it has been held by the Supreme Court itself that non-speaking award is a valid award. (See State of Orissa v. Dandasi Sahu, : AIR1988SC1791 and Gujarat Water Supply & Sewarage Board v. Unique Erectors (Gujarat) (P) Ltd. & Aur., Judgments Today 1989 S.C. 285).
(31) With reference to the contention of the learned counsel for the respondent that no order was passed by the arbitrator on the Application for discovery, Shri Lakhanpal has drawn my attention to the application dated 8th February, 1986. In this application it was stated that here was collusion between the petitioner/claimant and the Architect and in spite of the best efforts the respondents were not able to procure all the documents pertaining to the contract and it was apprehended 'that the claimant/contractor will fabricate records and documents in support of its claims in collide on with other interested parties'. It was grayed that, under the circumstances, the petitioners herein be directed to make discover on affidavit of all the documents in their possession and power relating to their claim. The arbitrator, on the said application, on the next date of hearing i.e. on 19th February, 1986 observed in paragraph 4 of the proceedings as follows :
The respondents stated that they were not sure whether all the documents issued or signed or authenticated by the Architects M/s. M. R. Warerkar & Associates had already filed or made available to them or whether during the course of hearing some documents not seen by them earlier might be produced by the claimants in support of their claim In older to remove this apprehension it was agreed that no further documents signed, authenticated or issued by M/s. M. R. Warerkar & Associates Architects, which had not already been filed or handed ever to the respondents shall be relied upon by the claimants during the course of hearing. On the respondents side a statement of all the original designs/drawing received by them would be filed for record before the next hearing.'
The submission made before the arbitrator was the same as was made in the aforesaid application for discovery and as the allegation of the respondent was that some documents may be forthcoming as a result of collusion between the Architect and the petitioner herein, the arbitrator rightly directed that ao further document signed, authenticated or issued by the Architect shall be relied upon by the petitioner/claimant during the course of hearing, It is true that in the said order there is no specific reference to the application for discover dated 8-2-86 but the aforesaid order of 19th February, 1986 specifically dispelled the fear of the respondent which was contained in the application of 8th February, 1986. It is pertinent to note that at no point of time thereafter was here any complaint made by the respondent to the arbitrator that any document had been manufactured by the claimant in collusion with the Architect and the same placed on record.
(32) It had also been submitted that the respondent bad filed application requiring the petitioner-herein to answer some interrogatories. In the objections filed in this court it had been contended that no order was passed on this application. Before me it was submitted that the reply which was filed by the petitioner-herein was not by affidavit on oath.
(33) It is true that application for interrogatories was filed on 13th August 1986 and on that very day the arbitrator passed the following order :
'IT was finally agreed that the claimants would examine all the 27 questions and let us have their well-considered views/replies on these question as early as possible. In case they decide to 'reply to these queries, they may do so on oath, A copy of the interrogatories was handed over to the claimants. It was also agreed that the claimants would file their replies during he course of hearing on 16-8-1986'
It is clear from the aforesaid that necessary order was guised by the arbitrator. It is no doubt true that a reply was filed to the inter oratories bill the said reply was not on oath. It is not, thereforee, correct to contended that the arbitrator had not passed any order on the application for interrogatories. When the reply was received by the arbitrator was not on oath, it was for the arbitrator to decide as to how much reliance should be placed on such a reply. In a non-speaking award like the present it is not possible to know as to how the mind of the arbitrator worked and it is not possible for this court to speculate in this behalf. Ail that has to be seen is whether the arbitrator misconducted the proceedings in this connection. The answer, to my mind is clearly in the negative. On the application of the responded requisite order was passed and if the order was not complied with it was for the arbitrator to see as to what consequences should low there from.
(34) Before dealing with the last contention of the learned counsel for the respondent relating to the award of interest I might, as this stage. refer to some of the decisions cited by the learned counsel in support of his contention that the arbitrator had misconducted himself.
(35) Relying upon Continental Construction Co. Ltd v.State of Madhya Pradesh, : [1988]3SCR103 it was contended that the Court can while consider in an award, examine whether the contract had been correctly interpreted by the arbitrator or not and whether the award of the arbitrator was in branch of the contract. The said decision is of no assistance to the learned counsel for the respondent. In that case the award was a non-speaking award but the award itself made a reference to the contract. The contract, thereforee, became incorporated in use award and the Court could then examine the contract itself in order to find out the legality of the claim of the claimant. The said. contract clearly prohibited the contractor from making a claim towards extra cost of account of rising prices of material and labour. Despite this prohibition in the contract; the arbitrator allowed the claim of the contractor in this regard. As the contract could be read by the Court and the award of the arbitrator was given separately in respect of each claim it was possible for the Court to come to the conclusion that there was an error apparent on the face of the award. It is not possible to come to any such conclusion in the present case because there is no document incorporated in the present award.
(36) Relying upon Annie Fox and others v, P. G. Well air Ltd. (1981) 2 Llr 514 it was submitted by the learned counsel for the respondent that even though the proceeding before the arbitrator were ex parte. nevertheless the award was set-aside by the Court, This is a case where misconduct in the proceedings was clearly established. The Court came to the conclusion that the arbitrator, on the basis of his evidence, had clearly applied his own knowledge without disclosing the same to the parties. It was under these circumstances that the award of the arbitrator was set-aside where there was a clear case of the violation of the principles of natural justice. The arbitrator, who is an expert, is in good position to understand, appreciate and apply the evidence before him. He is in a better position than a laymen to sift the evidence, It will be easier for him to reject the evidence which appears in tenable to him but a skilled arbitrator or an expert arbitrator cannot decide the dispute or a claim merely on the basis of his own knowledge and without notice to the parties. In the present case before me, it has not been shows to my satisfaction that any such infirmity exists.
(37) The case of Payyavula Vengamma v. Payyavula Kasanna and others, : [1953]4SCR119 is also clearly distinguishable because in that case statement of a witness had been recorded in the absence of the other party and this was clearly' in breach of the provisions of natural justice.
(38) In K. P. Poulose v. State of Kerala and another. : AIR1975SC1259 the Supreme Court held that if a material document is not taken into account while giving his decision, it will amount to a misconduct, In that case it was established on record that two very material documents had not been taken into account by the arbitrator and, thereforee, it amounted to misconduct. In that case, the Department could not produce two documents which were material. The Supreme Court observed that it was incumbent upon the arbitrator to have got hold of the said documents and his not having done so clearly amounted to a misconduct as he had ignored two material documents which were admittedly not on record. The Supreme Court further held that the Arbitrator had arrived at inconsistent conclusion even on his own finding and.. thereforee, the award suffered from manifest error which was apparent ex facie. In the present case all the material documents were before the arbitrator and it Is not possible for me to come to the conclusion that any material document was ignored.
(39) In M/s. Bhai Sardar Singh & Sons, New Delhi v. New Delhi Municipal Committee and another Air 1981 Delhi 374 the arbitrator admitted that he had given the award without looking into the conract. As the contract was an important document and the entire claim flowed from that, the Court rightly came to the conclusion, on this admitted fact, that there was a misconduct of the proceedings. No such situation arises in the present case.
(40) It was lastly contended that the arbitrator could not have awarded interest to the petitioner and that the award of interest was an error apparent on the face of the award.
(41) The arbitration proceedings were initiated in the present case when the arbitrator entered upon the reference on 1st November, 1985. The arbitration was invoked on 30th May, 1985 and it is in terms of the arbitration agreement that the arbitrator was appointed. The arbitrator was not appointed through the intervention of the Court. By a series of decisions culminating in Gujarat Water Supply case (supra) it now stands concluded that the arbitrator, when appointed by agreement of the parties, can award interest prior to the initiation of the proceedings and has no jurisdiction to award pendente life interest. Further in Gujarat Water Supply's case (supra) it has been held by the Supreme Court that future interest from the date of the award to the date of the decree or payment can be awarded by the Court. This being so, even if the arbitrator may not have been in a position, in law, to award future interest, this Court can certamly, in view of the aforesaid decision, award future interest under section 3 of the Interest Act, 1978 read with Section 29 of the arbitration Act, 1940.
(42) With regard to pendente life Interest, it is seen that the arbitrator has not expressly awarded any pendente lite interest. He has, however, stated that the award of Rs. 32,65,017.00 in eludes admissible interest. It is not disputed that interest of the contract on delayed payments duly certified by the Architect interest is admissible. There is nothing to indicate in the award that any pendente lite interest, apart from what was admissible in terms of the contract, has been awarded.
(43) Before concluding, I may notice another contention which had been raised by the learned counsel for the respondent and that is the claim of the petitioner in respect of items 4, 5, 7 and 8 was in respect of idle machinery etc. between the period 1st May, 1985 and 1st November, 1985. According to the petitioner it had suspended work during this period. Mr. Sibal, however, contended that even in respect of this period the petitioner had submitted a bill for a. work done during this period and this showed that the work had not been suspended. The aforesaid contention of Mr. Sibal cannot be appreciate without going into the facts on the record. It is essentially and primarily the function of the arbitrator to investigate and decide questions of fact. Whether the petitioner's claim Nos, 4, 5, 7 and 8 were justified or not was for the arbitrator to decide. It has been contended by Mr. Lakhanpal that even in the letter terminating the agreement With effect from 1st November, 1985 the respondent had said that the agreement, was being terminated because the petitioner had stopped work. The learned counsel submitted that in view of this it was not open to the respondent to contend that the work had. not been suspended, with regard to the bill for work done during this period, learned counsel for the petitioner submitted that in October, 1985 it had been agreed between the parties that measurement would be taken again. In order to assist or make it convenient for the measurements to be taken some work necessarily had to be done to bring the same up to a particular level, I do not link it is within the Jurisdiction of this Court, while deciding objections to a non-speaking award, to investigate all those contentions and then come to a conclusion. These submissions were- required to be raised before the arbitrator and it is for him to decide the same.
(44) It was also contended by the learned counsel for the respondent that there is error apparent on the face of the sward because the adjustment of the advance given to the petitioner, namely, sum of Rs. 56,16,7241 should have been as on 11-11-1985 and this has not been done. It is not possible for me to come to this conclusion. The respondent in its counter claim, had stated that it was entitled to get credit for this amount which had been advanced to the petitioner. The arbitrator in his award has noted that after taking the counter-claim into consideration he has come to the conclusion that a sum of Rs. 32,65,017 was to be awarded to the petitioner. Presumably the counter claim of the respondent has been decided by the arbitrator who has merely given his conclusion. It may here be noted that In Smt. Santa Sila Devi and another v. Dhirendra Nath Sen and others, : [1964]3SCR410 it has been held that if an award is silent on any particular item of dispute then it should he taken as having been rejected by the arbitrator. In any case, the arbitrator has not deal with claims and counter claims separately. He has given a lump sum award, the award does not contain any reasons and thereforee. it is not possible for me to come to the conclusion that there is any error apparent on the face of the award.
(45) For the aforesaid reasons, the objection are dismissed. The award of Rs, 32,65,017.00 is made the rule of the Court. The award regarding payment of simple interest at 15 per cent on Rs. 22,31,745.00 is set aside as the arbitrative did not have the jurisdiction to award this. In its place, in exercise of powers under Section 3 of the interest Act read with Section 29 of the Arbitration Act and in view of the observations of the Supreme Court in Gujarat Water Supply's case (supra), I award future interest, at the rate of 15 per cent per annum on a sum of Rs, 22,31,745.00 with effect from the date of the award till the date of payment. Parties to bear their own costs.