Judgment:
1. This appeal is directed against an order passed by the Hon'ble First Court on 1st April, 2010 in A.P. No. 164 of 2008 whereby the learned Trial Court was pleased to dismiss the application for setting aside of an award published by the leaned Arbitrator on 31st December, 2007.
2. The disputes between the parties relate to a work/contract dated 27th June, 1982 for construction of two school buildings and one block of flats at Beida District Libya. The value of the contract was for an aggregate sum of 3,171,53.66 Libyan Dinars (hereinafter referred to as LD). It is admitted by the respondent that an amount of Rs.4,87,723.00 LD has already been paid by the appellant to the respondent in respect of the said contract.
3. The facts of the case briefly are as follows:
A suit was filed in 1985 by the appellant for recovery of interest bearing loans from the respondent. The said suit was stayed by the Court on an application filed under Section 34 of the Arbitration Act, 1940, on the ground that the disputes between the parties are covered under the arbitration clause contained in the agreement.
4. In these circumstances, the matter was referred before the departmental Arbitrator and subsequently by an order dated 1st February, 1993 the reference was directed to be presided over by the learned Arbitrator whose award has been assailed in the proceedings filed under Sections 30 and 33 of the said Act. It further appears from the facts that the contractor filed a counter statement and forwarded his claim and further dealt with the claim made by the petitioner.
5. Accordingly, the status of the parties was subsequently changed at the 3rd meeting held before the learned Arbitrator and it is recorded in paragraph 23 of the award the original claimant became the respondent and the original respondent became the claimant. The pleadings were filed and the reference commenced and it appears that the several meetings held before the award was published and admittedly award was published on 31st December, 2007. It appears from the award that the contractor was directed to be entitled a sum of Rs.1,46 crores plus interest. The award also finds that the employer entitled to a sum of Rs.30.39 lakhs without any interest.
6. In the statement of claim which was filed by the contractor before the arbitrator, the contractor prayed inter alia on the heads as stated hereinafter:-
(i) Value of purported final bill as prepared by Hindustan Steelworks Construction Limited for the items covered by the contract and certified thereon. LD 337,375.382
(ii) extra items of work certified and entered/to be entered in the measurement book of LD 133,571.100 Hindustan Steelworks Construction Limited evaluated at the rate of the claimant.
(iii) Claims raised in the claim statement of the statement of fact LD 682,010.00 Total value LD 11,52,956.482
(iv) The total amount paid by Hindustan Steelworks Construction Limited as advance against the works carried out by the claimant including payments against Running Account bills LD 4,87,723,830 Total Balance due to claimant LD 4,87,723.830 Say LD : 6,65,233/- Equal to Rs.2,66,09,320/-
7. The total claim of the contractor was Rs.2,66,09,320/- and out of which the learned Arbitrator awarded a sum of Rs.1,46,22,219.80 including interest thereon. The counter-claim of Rs.2,24,59,259/-was also filed on behalf of the Hindustan Steel Works & Construction Limited (hereinafter referred to as the HSWCL). The learned Arbitrator allowed the counter-claim of the HSWCL to the tune of Rs.30,39,170/- together with interest thereon.
8. The award was challenged before the learned Trial Count inter alia on the following grounds:-
(i) Non-application of mind and error apparent on the fact of the award;
(ii) Arbitrator did not give credit to the appellant the sum admitted to have been received by the contractor;
(iii) The arbitrator had only dealt with third head of the claim but not dealt with other two heads of the claim;
(iv) The arbitrator did not consider the point of interest bearing loan allegedly given to the contractor/respondent; and
(v) The claim before the Arbitrator allegedly exceeded from the claim in the alleged letter of reference dated 9th July, 1984 (Pg. 2 of Paper Book Vol. I).
9. The learned Trial Court was pleased to dismiss the application and the Court held that the arbitrator cannot be said to have fallen in any great error that would prompt a correction in proceedings of the present nature. His Lordship further held as follows:-
The particular challenge urged by the petitioner in respect of some of the sub-heads of claim out of the 75 considered by the arbitrator also seems to be out of place. It is the petitioners contention that eight of the 22 sub-heads of claim allowed by the arbitrator did not figure in the letter of July 9, 1984 and, of the 14 other claims that figured in the letter and have been granted in full or in part, seven were in excess of the amounts indicated on July 9, 1984. The petitioner has not challenged and of the 22 sub-heads of claim allowed by the arbitrator on any other ground save that some of them did not figure in the letter of July 9, 1984 and some others were in excess of what had been claimed therein. The solitary sentence against the arbitrators observations at the 349th sitting in the reference does not imply that no claim beyond those contained in the letter of July 9, 1984 would be entertained. The observation suggested that the subsequent addition of or embellishment to the original claims may not be considered. In the several tens of pages that the award expends on the many heads of claim put forward bythe contractor, all matters were taken into account. It is not the petitioners case that the arbitrator traveled beyond the scope of the reference in considering the various claims. A stay observation recorded in the minutes of any sitting cannot be taken in isolation to pit the entirety of the award against a possible interpretation of the observation. It cannot be said that the observation precluded the arbitrator from considering the sub-heads of claim made under the third major head despite all of it being reflected in the statement of claim that the contractor carried to the reference.
10. As would appear from the structure of the award, the arbitrator concentrated on the sub-heads of claim that figured under the third major head of claim made by the contract and on the several heads of counter-claim of the petitioner herein. There is no discussion in the award on either the final bill (covered by the contractors first head of claim) or on the extra items of work certified (the contractors second head of claim). There is, similarly, no discussion in the award on the admitted payments received as would appear from the summary of the statement of claim extracted above.
11. The Court cannot go into what transpired in the mind of the arbitrator since there is no reference in the award to the two major heads of claim and the adjustment on account of payments received by the contractor. In a sense, the award may be criticized as being incomplete or flawed in such aspect but it would also be inequitable to subject the respondent herein to a further reference some 26 years after the contract was executed. The manner in which the first and second heads of claim have been described in the summary by the contractor show that there may not have been any dispute between the parties in such regard. The contractor had claimed the final bill as certified and the amount due on account of extra items of work as certified. Since the arbitrator did not refer to these two heads of claim, it would be evident that the petitioner herein did not question that such amounts had, indeed, being certified by it for payment. Whatever may have figured in the pleadings filed by the petitioner filed in the reference, there is no assertion in this present challenge that the petitioner had questioned the amounts claimed to have been certified under the first two heads. It was a mater that was certainly overlooked by the arbitrator but since the sum of the amounts under the first two heads (LD 337,375.382 plus LD 133,571.100 amounting to LD 470,946.482) is more than offset by the amount of LD 487,723.830 admitted by the contractor to have been received from the employer, it is such differential amount of LD 16,777.348 (LD 487,723.830 less LD 470,946.482) that has to be reduced from the gross amount awarded in favour of the contractor by the arbitrator.
12. Accordingly, the principle sum awarded of LD 249,243.42 has to be reduced by the amount of LD 16,777.348 and the principal sum to which the contractor was found entitled will stand at LD 232,466.072. The conversion rate appears from the award. Since LD 249,243.42 was found to be equivalent to Rs.99,69,736.80, the arbitrator appears to have proceeded on the basis that one Libyan Dinar being equivalent to Rs.40/-. Thus, the principal sum to which the contractor is entitled is LD 232,466.072 together with interest thereon at 18 per cent annum as awarded by the arbitrator on LD 159,453.072 (LD 232,466.072 less LD 73,013) equivalent to Rs.63,78,122.88 from December 31, 2007 till today and on LD 159,453.072 at the rate of six per cent per annum till realization. The rate of exchange will be reckoned to be Rs.40/- to the Libyan Dinar. There will be judgment upon award in favour of the respondent herein accordingly. There will also be judgment upon award in favour of the petitioner herein in the sum of Rs.30,39,170.40 together with interest at the rate of six per cent per annum from today till realization.
13. Being aggrieved, this appeal has been preferred by the appellant.
14. The learned Counsel appearing on behalf of the appellant had contended that the impugned award was liable to be set aside on the following grounds:
a) The Arbitrator had exceeded her jurisdiction in rejecting the claim of the appellant on account of interest bearing loans on the ground that these were not covered by the arbitration clause. Admittedly, the money claimed by the appellant has been received, utilized and appropriated by the respondent. In rejecting the claim, the learned Arbitrator had given much weight to the fact that in the affidavit-in-opposition filed to the application under Section 34 of the Act before the Hon'ble High Court, the appellant had contended that the disputes were not covered by the arbitration clause. It is respectfully submitted that having obtained a stay of the suit before the Hon'ble High Court on the ground that the disputes were covered by the arbitration clause. It is respectfully submitted that having obtained a stay of the suit before the Hon'ble High Court on the ground that the disputes were covered by the arbitration clause it was impermissible and contrary to law that the respondent had before the Arbitrator sought to contend that the disputes arising out of the suit were outside the scope of the arbitration clause. The legal principle applied by the Arbitrator i.e. that consent cannot confer jurisdiction is erroneous and inapposite to the facts and circumstances of the instant case. In fact, it is well settled that arbitration is a creature of contract and consent can confer jurisdiction. In fact, having obtained a stay of the suit before the Hon'ble High Court and the High Court having directed that the disputes in the suit be referred to arbitration, the Arbitrator committed a jurisdiction error in not entertaining the claim of the appellant on account of interest bearing loans
b) It is further submitted that by oversight, the learned Arbitrator has failed to consider the admitted amount which had been advanced by the appellant to the respondent under the contract. In sub clause (iv) of the Statement of Claim whereas the respondent had admitted that a sum of 4,87,723.830 LD had been received by the respondent from the appellant. Accordingly, it was the admitted case of the respondent that the respondent was liable to give due credit to the appellant for this amount. In fact, in the rejoinder filed by the respondent before the learned Arbitrator, it was the respondents own case that the real position of who owes whom can only be assessed when all the extra works, claims etc of the respondent are settled and evaluated [Para 10.60 at page 742 of Volume III]. Thus, the Arbitrator was obliged both in fact and in law to settle accounts by and between the parties after giving the appellant due credit for the sum of 4,87,723.830 LD. In the award, there is total silence in respect of the said sum of 4,87,723.830 LD. Ironically, in the judgment of the Trial Court, the learned Judge has proceeded on the basis that the amounts included under heads (i), (ii) and(iv) (amount of Rs.4,87,723.80 LD advanced) were admitted and hence has only adjusted an amount of 16,000 LD in the impugned judgment. It is respectfully submitted that the Trial Court had no power to modify the award under the Act (Section 16 of the Act). It is settled law if the award is silent in respect of a particular claim, that particular claim is deemed to have been rejected. In AIR 1963 SC 1677 at paragraphs 10 and 13 this principle is also enshrined in Section 11 Explanation V of the Code of Civil Procedure, 1908 and is well settled. Accordingly, the Trial Court has erred in law in holding that silence in an award of a particular claim is deemed to be an admission. The Trial Court having held that the impugned award is incomplete or flawed erroneously concluded that it would be inequitable to refer the parties to a further reference. It is submitted that the grounds under Section 30 of the Act do not contemplate equitable considerations playing any role as a ground which the Court takes into account adjudicating an application for setting aside of an award.
c) (i) The arbitration clause clearly stipulated that the Arbitrator shall give a separate award in respect of each dispute or difference referred. It is respectfully submitted that in failing to do so the Arbitrator has violated the express terms of the reference [AIR 1970 SC 753 at paragraph 6]. Accordingly, on this ground alone the award is liable to be set aside.
(ii) The arbitration clause expressly provided that the party invoking the arbitration clause must clearly stipulate and specify the dispute with the amount in respect of each such dispute. The reference to arbitration was made by the respondent by virtue of a letter dated 9th July, 1984 [at page 161 Vol. I]. In the 349th meeting of the Arbitrator (at page 160 Vol. II) the Arbitrator had clarified that subsequently the claim made by the party cannot exceed those which were made at the time of the reference. Notwithstanding the same and in total disregard thereof the Arbitrator has proceeded to consider the claim Nos. 13, 41, 47, 57, 58, 62, 63, 68 and 72 which had never been raised in the letter dated 9th July, 1984 has been considered and wrongfully awarded to the respondent. Thus, there was total disregard to the terms of the reference.
15. Hence, it is submitted that the award should have been set aside.
16. On the contrary, the learned Counsel appearing on behalf of the respondent submitted that 9th July, 1984 was not a letter of reference. It is the claim pertaining to the final bills of the contractor which were certified by the appellant. It is further submitted that the learned Trial Judge considering that the matter pending for more than 26 years only reduced the amount i.e. LD 16777.348 from the total amount awarded by applying the principles of doctrine of severalty. Such benefit was also given to the appellant.
17. It is further submitted that the award published by the learned Arbitrator was well reasoned and a speaking award. The Court cannot sit in appeal over the award passed by the learned Arbitrator. The learned Arbitrator had taken plausible views and the Court was not go into the mental process of the Arbitrator.
18. He relied upon the following decisions in support of his contention:-
(i) Champsey Bhara and Co. v. Jivraj Balloo Spinning and Weaving Co. Ltd. reported in AIR 1923 PC 66;
(ii) M/s Allen Berry and Co. Private Ltd. v. The Union of India reported in AIR 1971 SC 696;
(iii) M/s Ravindra Kumar Gupta and Company v. Union of India reported in AIR 2010 SC 972;
(iv) Mangilal v. Krishnaji Rao Pawar and Anr. reported in AIR 1971 SC 1943;
(v) The Upper Ganges Valley Electricity Supply Co. Ltd. v.
19. The U.P. Electricity Board reported in AIR 1973 SC 683.
20. He submitted that the findings of the Arbitrator cannot be said perverse. The Court cannot set aside the award nor Court can sit in appeal over the conclusion of the Learned Arbitrator.
21. He also submitted that if the arbitrator takes a plausible view, the award cannot be set aside and the Court cannot also go into the mental process of the arbitrator. In the case of Champsey Bhara (supra) where the Privy Council formulated the principle as follows:
An error in law on the face of the award means, - that you can find in the award or a document actually incorporated thereto, as for instance, a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which is the basis of the award and which you can then say is erroneous. It does not mean that if in a narrative a reference is made to a contention of one party that opens the door to seeing first what that contention is, and then going to the contract on which the parties rights depend to see if that contention is sound.
22. The Privy Council upheld the award stating that it was impossible to say what was the mistake on the face of the award which the arbitrators had made as they had not tied themselves down to any legal principle which was unsound. The mere fact that the Court would have construed a document differently than the arbitrator would not induce the Court to interfere unless the construction given by the arbitrator is such that it is against the well-established principles of construction.
23. In the case of M/s Allen Berry (supra) where the Three Judges Bench of the Supreme Court held as follows:
9. The question whether a contract or a clause of it is incorporated in the award is a question of construction of the award. The test is, does the arbitrator come to a finding on the wording of the contract. If he does, he can be said to have impliedly incorporated the contract or a clause in it whichever be the case. But a mere general reference to the contract in the award is not to be held as incorporating it. The principle of reading contracts or other documents into the award is not to be encouraged or extended (see Babu Ram v. Nanhemal, C.A. No. 107 of 1966, D/- 5-12-1968 (SC). The rule thus is that as the parties choose their own arbitrator to be the Judge in the dispute between them, they cannot, when the award is good on the fact of it, object to the decision either upon the law or the facts. Therefore, even when an arbitrator commits a mistake either in law or in fact in determining the matters referred to him, but such mistake does not appear on the face of the award or in a document appended to or incorporated in it so as to form part of it, the award will neither be remitted nor set aside notwithstanding the mistake.
24. In the light of the principle stated above, the question calling for determination is whether there is any error apparent on the face of the award or whether the arbitrator misconstrued the facts in deciding the question. It appears to us that the disputes referred to the arbitrator contained disputes both on fact and on law. The Court would only interfere when it comes within the exception as has been recorded by the Court and such exception has been observed in Giacomo Costa Fu Andrea v. British Italian Trading Co. Ltd., reported in 1962 (2) All ER 53 where Lord Justice Diplock concluded as follows :-
It seems to me, therefore, that, on the cases, there is none which compels us to hold that a mere reference to the contract in the award entitles us to look at the contract. It may be that in particular cases a specific reference to a particular clause of a contract may incorporate the contract, or that clause of it, in the award. I think that we are driven back to first principles in this matter, namely, that an award can only be set aside for error which is on its face. It is true that an award can incorporate another document so as to entitle one to read that document as part of the award and, by reading them together, find an error on the face of the award.
25. In the case of M/s Ravindra Kumar Gupta (supra) where the Supreme Court held as follows:
In this case, the Supreme Court notice the earlier judgment in the case of Ispat Engineering & Foundry Works, B.S. City, Bokaro v. Steel Authority of India, B.S. City, Bokaro [(2001) 6 SCC 347] : (2001 AIR SCW 2327) wherein it was held as follows:
4. Needless to record that there exists a long catena of cases through which the law seems to be rather well settled that the reappraisal of evidence by the court is not permissible. This Court in one of its latest decisions [Arosan Enterprises Ltd. V. Union of India (1999) 9 SCC 449 : (1999 AIR SCQ 3872)] upon consideration of decisions in Champsey Bhara & Co. v. Jivraj Balloo Spg. & Wvg. Co. Ltd. [AIR 1923 PC 66], Union of India v. Bungo Steel Furniture (p) Ltd. [(1967) 1 SCR 324] : (AIR 1967 SC 1032) N. Chellappan v. Secy., Kerala SEB [(1975) 1 SCC 289] : (AIR 1975 SC 230), Sudarshan Trading Co. v. Govt. of Kerala [(1989) 2 SCC 38], State of Rajasthan v. Puri Construction Co. Ltd. [(1994) 6 SCC 485] : (1994 AIR SCW 5061) as also in Olympus Superstructures (P) Ltd. v. Meena Vijay Khetan [(1999) 5 SCC 651] : (1999 AIRSCW 1831) has stated that reappraisal of evidence by the court is not permissible and as a matter of fact, exercise of power to reapprise the evidence is unknown to a proceeding under Section 30 of the Arbitration Act, 1940. This court in Arosan Enterprises categorically stated that in the event of there being no reason in the award, question of interference of the court would not arise at all. In the vent, however, there are reasons, interference would still be not available unless of course, there exist a total perversity in the award or the judgment is based on a wrong proposition of law. This Court went on to record that in the event, however, two views are possible on a question of law, the court would not be justified in interfering with the award of the arbitrator if the view taken recourse to is a possible view. The observations of Lord Dunedin in Champsey Bhara stand accepted and adopted by this Court in Bungo Steel Furniture to the effect that the court had no jurisdiction to investigate into the merits of the case or to examine the documentary and oral evidence in the record for the purposes of finding out whether or not the arbitrator has committed an error of law. The court as a matter of fact, cannot substitute its own evaluation and come to the conclusion that the arbitrator had acted contrary to the bargain between the parties.
After considering the facts and circumstances of this case, it appears to us that the Court cannot sit in appeal or can set aside an award when the learned Arbitrator takes a plausible view.
26. In the instant case, after applying the principles laid down in the decisions, in our considered opinion, the award cannot be set aside on the ground that the award suffers from any apparent mistake on the part of the learned Arbitrator. It is an admitted fact that the Court cannot go into the mental process of the learned Arbitrator to probe the matter how the learned Arbitrator has arrived at to the award published by him. The question of amending the award also cannot be a ground in the instant case since the matter was awarding the decision of the Court for 26 years.
27. In our considered opinion, we do not find that there is any error apparent on the face of the award or the award has been made contrary to the law. Hence, we cannot accept the contention of the appellant.
28. On the given facts and the materials placed before us, we do not find that any ground has been made out in the appeal which can call for any interference by this Division Bench, in respect of the order appealed from.
29. The principles and tests laid down in the decisions cited at the bar we are of the opinion that the learned Arbitrator did not exceed his jurisdiction and it cannot be said that there is any error which is apparent on the face of the award.
30. In these circumstances, we find that the order of the learned Trial Judge does not suffer from any irregularity and/or illegality and accordingly we affirm the same and dismiss this appeal.
31. For the reasons stated hereinabove the appeal is dismissed.
32. Photostat certified copy of this judgment, if applied for, be supplied to the parties.