Skip to content


The Fertilizer Corporation of India Ltd. Vs. I.D.i. Management Incorporation and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberFirst Appeal No. 28 of 1978
Judge
Reported inAIR1984Delhi333; 26(1984)DLT149
ActsArbitration Act, 1940 - Sections 10(2), 29 and 31; Code of Civil Procedure (CPC), 1908 - Order 41
AppellantThe Fertilizer Corporation of India Ltd.
Respondenti.D.i. Management Incorporation and ors.
Advocates: C.M. Oberoi,; C.B. Pai,; D.P. Mehta,;
Cases ReferredMakka Narsimlu v. Gunnala Raghunandan Rao
Excerpt:
a contract had been entered into by the parties for erecting and installing the plant - in this lieu, the court awarded the non-speaking awards - in this context, the minority arbitrator gave relevant reasons for his dissent - there was no error found in the majority awards because the arbitrators had not tied themselves to any of the legal proposition - thus, it was held that under sections 10(2), 31 and 33 of the arbitration act, 1940, the award could not be set aside - - the decision arrived at unanimously by the two arbitrators, or on their failure to reach unanimous decision the award of the umpire shall be accepted as final and binding upon both the parties. they said that the catalyst installed in the reformer furnace which was specifically guaranteed under the contract to.....avadh behari rohatgi, j.(1) this arbitration has been a long drawn out affair. by a contract dated 12-2-1964 between the fertilizer corporation of india (the corporation) and girdler corporation, later known as c.i. girlder inc. (the contractor), the contractor agreed to erect and instal a methanol plant at the corporation's trombay division at bombay of the description and on the terms set out in the said contract. the plant was supplied on a turn-key basis. it was to have a capacity to produce 100 metric tons of methanoi per continuous day of 24 hours with either refinery gas or petroleum naptha as the feed stock. the contractor was to be paid 45 million rupees as the price of the plant. (2) article xiv of the said contract contained an arbitration clause which is as follows: 'all.....
Judgment:

Avadh Behari Rohatgi, J.

(1) This arbitration has been a long drawn out affair. By a contract dated 12-2-1964 between the Fertilizer Corporation of India (the Corporation) and Girdler Corporation, later known as C.I. Girlder Inc. (the contractor), the contractor agreed to erect and instal a Methanol Plant at the Corporation's Trombay Division at Bombay of the description and on the terms set out in the said contract. The plant was supplied on a turn-key basis. It was to have a capacity to produce 100 metric tons of Methanoi per continuous day of 24 hours with either refinery gas or petroleum naptha as the feed stock. The contractor was to be paid 45 million rupees as the price of the plant.

(2) Article Xiv of the said contract contained an arbitration clause which is as follows:

'All disputes and differences between the Contractor and the Corporation shall be referred to arbitration, each party appointing an Arbitrator, and the Two Arbitrators nominating an Umpire, as the first step before consideration of any specific issue referred to them. The decision arrived at unanimously by the two Arbitrators, or on their failure to reach unanimous decision the award of the Umpire shall be accepted as final and binding upon both the parties. The provisions of the Indian Arbitration Act, 1940 shall govern the said arbitration proceedings. The venue of the Arbitration shall be New Delhi. The parties hereby expressly submit to the jurisdiction of the courts at New Delhi for all disputes arising out of the Agreement, the Arbitration proceedings and the enforcement of any award that may be made therein.'

(3) The plant was ready for commissioning on December 29, 1965. The performance of the plant was erotic and unsatisfactory. It did not produce the required quantity of hundred metric tons of Methanoi per day. This was the main complaint of the Corporation. They said that the Catalyst installed in the Reformer Furnace which was specifically guaranteed under the contract to function satisfactorily for a period of one year had repeatedly failed to perform its function, there being repeated failures and shut downs in the plant. There was considerable correspondence between the parties. On February 16,1967 the contractor notified the Corporation that performance test would be carried out by February 19, 1967. Performance test was given accordingly.

(4) As a result of various discussions and negotiations that took place between the parties certain understandings were arrived at which were recorded in a letter of March 21, 1967 (the March Agreement). In this agreement the outstanding disputes between the parties were defined. The case of the Corporation is that despite the assurances given by the contractor there was a failure of the Catalyst in operation and the performance of the plant was far from satisfactory. It is alleged that there being something basically wrong with the Reformer Furnace, which was a vital part, the plant was not capable of giving sustained production of 100 metric tons per day. As the contractor failed to remedy the defects in the plant the Corporation terminated the contract and took 'juridical possession' of the plant by its letter dated July 8, 1967.

(5) In or about 1967 disputes and differences arose between the Corporation and the contractor and in accordance with the said Article Xiv the Corporation duly appointed Mr. B. Sen as an arbitrator and the contractor duly appointed Mr. J. Russell Wilson as an arbitrator and the two arbitrators on February 7,1969 nominated Lord Devin as Umpire. By a supplemental agreement between the parties made on 1-3-1973 it was provided that the disputes and differences aforesaid should be considered as having always been referred to Lord Deviin, Mr. Russell Wilson and Mr. B. Sen as the three arbitrators, that Lord Deviin should act as the Chairman of the Arbitral Tribunal and that the award or awards should be made in the manner provided in section 10(2) of the Indian Arbitration Act.

(6) This was an eminent Tribunal of Aribtration consisting of members of three countries. Mr. Russell Wilson is a patent attorney of the United States. Mr. B. Sen is a senior advocate of India. Lord Deviin was a law lord in England. They held various sessions between 1971 and 1974. The cost of the arbitration assessed by the Tribunal ran into twelve lacs, parties own expenses being separate.

(7) On October 3, 1969 the Corporation filed a request for arbitration which concluded with four claims (hereinafter called claims I, Ii, Iii and IV). On March 14, 1970 the contractor filed the reply which concluded with four claims (hereinafter called counter-claims I, Ii, Iii and Iv counter-claims Iii and Iv being in the alternative).

(8) In the course of the arbitration proceedings Idi Management, the respondent to this appeal, succeeded to all the rights and liabilities of the contractor under the contract.

(9) The Arbitral Tribunal held 33 sessions on and between May 24, 1971 and March 3, 1973, to take evidence. They required the parties to submit their arguments in writing and also heard oral arguments.

(10) On March 3, 1973 the parties agreed that the Tribunal should make an interim award or awards on certain disputes which were specified in the order dated March 3,1973 made with the consent of the parties. Accordingly the Tribunal made an interim award on August 21, 1973. The material portion of the award is as under :

'ANDWHEREAS we have considered all the evidence put before us and the arguments addressed to us and have deliberated thereon And Whereas we have decided to 'hear oral arguments on Claim Hand Whereas a majority of us are agreed upon an award in relation to Claim I and counterclaim I and in the premises Counterclaims Iii and Iv do not arise. Now we Petrick Devlin and J. Russell Wilson Hereby Award and Declare as follows : (1) The Claimants are not entitled undeclaim I to a sum to be assessed in respect of lost production and. (2) The respondents are entitled under counterclaim I to be paid such sum not exceeding $ 302, 740, 53 as may be shown to be the outstanding balances due to them under the said Contract in dollars as well as in Indian currency. In Witness Hereof we have subscribed our signatures as on the 21st day of August one thousand nine hundred and seventy three. sd/- Lord Devlin. sd/- J. Russell Wilson'

(11) It will be seen from the interim award that the claim of the Corporation which was the subject matter of the interim award was the loss of production. They claimed Rs. 471.45 lakhs as damages on account of lost production during the period 9-3-1967 to 31-12-67 and additional period of 18 months, that is, 1-1-68 to 30-6-69 during which the plant failed to give the rated capacity of 100 metric tons of Methanol per day The majority rejected this claim of the Corporation in its entirety.

(12) The counter-claim of the contractor was that, though they had been paid 95 per cent of the price of the plant, the remaining five per cent of the price was not being released to them inspire of the fact that they had done all that was required of them under the contract. The majority allowed this claim of the contractor. In substance this was the decision of the majority in their interim award. Mr.B.Sen did not concur with the majority and thereforee did not sign the award.

(13) After the Interim Award the Tribunal held six sessions on and between February 5 and 17, 1974 to hear further arguments and to take evidence upon all other claims and matters remaining in the arbitration. The Corporation abandoned Claim Iv and were given leave to add three further claims. The contractor abandoned counter-claim No. II. On the remaining disputes the majority made the final award on Febuary 16, 1974. The material portion of the final award is in these terms :

'ANDWHEREAS we have considered all the evidence put before us and the 'arguments addressed to us and have deliberated thereon And WHERE'S a majority of us are agreed upon an Award or Awards in relation to all the said Claims and matters Now We PATRICK: Lord Devlin and J. Russell Wilson Hereby Award To The Claimants : (a) In satisfaction of Claim Iia Rs. 1,06,121 with interest thereon from 8 July 1967. (b) In satisfaction of claim Iic Rs. 2,58,069 with interest thereon from 5 August 1967, and (c) In satisfaction of Claim Iii Rs. 2,35,306 with interest from 31 July 1969. All such interest to be at the rate of 6 per cent, per annum and to run untill the date of the award. And We Declare that, save as aforesaid, the Respondents are not liable upon any of the Claims. And We Award to the Respondents in satisfaction of counter claim I Us $ 302,600,50 with interest thereon at 6 per cent annum from 8 July 1967 until the date of this award'.

(14) From this final award it will be seen that the Corporation's claims were allowed in respect of the specific items : Claim Iia for the Quenchoot, claim Iic in respect of Catalyst, Claim Iii on accounting. In respect of the contractor's claim they were awarded Us .$ 3026000.50 with interest. In the Interim Award it was held that the contractor was 'entitled under counter claim I to be paid such sum not exceeding $ 302,740.53 as may be shown to be the outstanding balance due to them under the said contract.' This counterclaim I was now in the final award quantified as Us $ 302,600.50 which the contractor was held entitled to receive from the Corporation. This was in the main the balance 5 per cent of the price of the plant which the Corporation had refused to release on account of unsatisfactory performance of the plant.

(15) The final award, as was the interim award, was the decision of the majority consisting of Lord Devlin and J. Russell Wilson. Mr. B. Sen did not agree with the majority. Nor did he sign the interim and the final awards. He issued a dissenting note dated 16-2-1974 giving reasons as to why he did not not agree with the majority awards, interim and final. This note, unlike the majority awards, is a detailed document of 32 pages setting out his reasons why he was not concurring with the majority.

(16) In 1974 the contractor made a petition before learned judge on the original side of this court under section 14 of the Arbitration Act 1940 (the Act slating that the award dated 16-2-74 be made a rule of the court. The arbitrators filed both the interim award dated August 21, 1973 and the final award dated 16-2-1974. On notice being given the Corporation on 26-10-74 filed objections to the award, both interim and final, under ss. 30 and 33 of the Act. The Corporation raised a large number of objections to the majority awards.

(17) Prithvi Raj J. by his order dated April 14,1978 dismissed the objections of the Corporation. He made the awards-interim as well as final-a rule of the court and passed a decree in terms thereof. From his order the (corporation appeals to this court.

(18) (THE majority awards are non-speaking awards. In his separate dissenting note dated 16-2-1974. Mr. B. Sen has given his reasons for differing from the majority. The Corporation relies heavily on Mr. B. Sen's note in order to attack the majority awards. On behalf of the Corporation it is contended that the note of Mr. B. Sen dated 16-2-1974 is a minority award and it can be looked at for the purpose of finding the reasons of the majority awards.

(19) The opinion of Mr. B. Sen formed the principal topic of discussion and submitted as a ground for setting aside the majority awards. cannot agree with this submission. The majority arbitrators refrained from giving reasons for their awards, which they had every right to do. The minority arbitrator, Mr. B. Sen, is a well known and reputed member of the legal profession. He gave reasons for his dissent. That he did so can only be attributed to an honest and understandable desire on his part to indicate to his colleagues where and now he differed from them : and of course to give those interested the same information. The reasons which he has given cannot be said to be reasons of the majority. Mr. B. Sen's reasons are minority reasons as such form no part of the award.

(20) The awards clearly state that they are the awards of the majority. Only Lord Devlin and Mr. J. Russell Wilson signed the awards. Mr. B Sen did not sign. He was a dissenting member. In his dissenting note he disagrees with the view of the majority. But that is neither here nor there. The dissenting opinion of Mr. B. Sen simply shows, what everybody knows, that there are two sides to every question. Like the two sides of a coin. That there can be different and differing points of view on every conceivable question under the sun is all that the note of Mr. B. Sen shows. But no value can be attached in law to his dessending opinion. The awards of the majority will prevail. (See Holland and Couper v. City of Vagcower (1959) 19 Dlr 404 and Yarrows Ltd. v. C.N. Steamship Co. Ltd. (1951) 2 Dlr 204.

(21) Section 10(2) of the arbitration Act says that the opinion of the majority will prevail. The majority is a term signifying greater number. Section 10(2) is based on the theory of numbers. It requires counting of heads. If there are arbitrators, two will have the deciding voice because they constitute the majority. The remaining one will be in a minority. The opinion of the minority cannot be looked at for any purpose. The award with which the law is concerned is the award of the majority.

(22) The majority awards, as I have said, are non-speaking awards. The majority has not given any reasons for their decision.

(23) The two outstanding and substantial disputes raised before the arbitrators were these: (1) the claim of the Corporation for the loss of production and (2) the claim of the contractor with regard to the balance 5 per cent of the plant. The majority rejected the Corporation's claim for lost production without giving any reasons. Counsel for the contractor drew our attention to Article X of the contract which provided that neither party would be liable to the other for any loss of profit or for any similar indirect damages. He also called our attention to the March Agreement which narrowed down the disputes between the parties. From the March Agreement one thing is quite clear. And it is this that the Corporation accepted the plant. It says, 'FCI accepts the Methanol Plant which specifically fulfillled its Naptha performance guarantee during the performance test held during the period beginning at 1200 hours on March 4, 1967 and ending at 1200 hours on March 9, 1967'. Thereafter it refers to a few outstanding disputes which required to be resolved. The contractor in his turn agreed to 'give its attention for suitable remedial measures to the Hot Spot on Waste Heat Boiler and to the design of the Quenchpot'. He agreed that he shall remove 'the defects in the design of the Quenchpot and the Waste Heat Boiler'. He also agreed to replace at no cost to the Corporation spare charges of Catalyst used by him in the plant. The Corporation in its turn agreed 'to pay or arrange to pay Girdler Corporation the outstanding balance due to them under the contract in dollars as well as in Indian currency immediately' upon receipt of bank guarantee in its favor. These rights and duties defined by the March Agreement were 'in full and final settlement of all obligations of the parties as setforth in the contract executed in supersession of the agreement dated 12-2-1964'.

(24) On the basis of this March Agreement Lord Devlin, the Chairman of the Tribunal, in the course of the arbitration proceedings wrote to the parties a letter dated October 9, 1973 of which the following is an extract :

'It will be apparent from the nature of the Award that the majority of the arbitrators considered that the supplemental agreement of March 21, 1967 defined the rights of the parties as alleged by the respondents. Mr. B. Sen's opinion was to the contrary, but he accepts that any further argument must be governed by the majority decision. Accordingly, the oral arguments on the various heads of claim Ii will be concerned with the rights and duties of the parties under the March Agreement'.

(25) Counsel for the Corporation made a two-fold submission. Firstly, he submitted that the majority went wrong in holding that the March Agreement defines the rights and duties of the parties. He submitted that the original contract of 1964 was not wiped out by the March Agreement and that the contractor was bound to fulfill his obligations under the original contract. He argued that as there was a fundamental breach of the implied term of the original contract that the plant will produce 100 metric tons per day of Methanol, the Corporation was entitled to damages on account of loss of production under section 16 of the Sales of Goods Act and section 73 of the Indian Contract Act. It appears to me that on a construction of the contract the majority were entitled to come to the conclusion they did. Having accepted the Methanoi Plant, as is explicitly stated in the March Agreement, it was not open to the Corporation to make any claim of damages for loss of production. The original contract also did not entitle Corporation to claim remote or indirect damages such as loss of production.

(26) The awards of the majority were attacked on the ground that there was an error apparent on their face. When we pointed out to counsel for the Corporation that the awards of the majority gave no reasons he invited us to read the dissenting note of Mr. B. Sen to find the reasons of the majority. We expressed our inability to accede to this request.

(27) Counsel said that the approach of the majority is disclosed by Mr. B. Sen's note. It will, he said, give us a clue to the mind of the majority. The basis of the majority reasoning, he submitted, can be gleaned from Mr. B. Sen's note. I do not agree. Neither reasons nor 'basis' nor 'clue' nor 'approach' can be found from the note of Mr. B. Sen. He was in the minority of one. When the majority awards are non-speaking awards we cannot impute to the majority the reasons given by the minority. It will be a strange thing if the minority, can give to the court the reasons of the majority, when the majority has chosen to remain silent. The basis must come from the mind and hand of the maker of the award. There are only two awards and they are the awards of the majority. The dissenting opinion of one arbitrator is not part of the award. Under section 10(2), Arbitration Act the awards of the majority shall prevail.

(28) The March Agreement is a crucial document in this case. The arbitrators realised its importance. The majority took the view that it defined the rights and duties of the parties, as Lord Devlin put it. Mr. B. Sen did not concur with the majority. He thought that the original contract continued to govern the parties and the March Agreement was not a complete repository of the parties rights and duties.

(29) This raises a question of construction in each case, for it has to be decided as a fact whether there was 'a full and final settlement' of all the obligations of the parties and whether there was a 'supersession of the agreement dated February 12, 1964'. By agreement between the parties dated 21-3-1967 the Corporation accepted the promise of something else than the remedy to repudiate, assuming that they were entitled to repudiate on a fundamental breach. There was agreement. There was accord. In a climate of conciliation a new agreement was executed in March 1967. This March Agreement is a definitive, statement of the outstanding disputes and reciprocal promises. The capital importance of this settelement is that the plant was accepted by the Corporation. If the plant has been accepted where is the question of damages for loss of production or profits. The right to claim damages on this score was not reserved. It was given up. This would appear from the express terms of the March Agreement which was 'a full and final settlement' of the old standing disputes.

(30) The March Agreement was a composition settlement. There was mutual surrender on certain points. The parties by this agreement agreed to be bound in supersession of the original agreement. The original cause of action was discharged from the date when the March Agreement was made. The execution of the March Agreement is of central importance in this case. This was the view of the majority whose word is, and must be, final. Were it not so there would be no end to controversy.

(31) The March Agreement was a clear case of accord and satisfaction. The parties put their past behind them. In all amity they chalked out a course of action for the future. In a spirit of give and take the difference were composed on this condition that if certain things are done by each party all disputes will stand settled.

(32) The single question in this case is whether the majority awards disclose an error of law on their face. There is no statement of reasons in the awards. Nor do they incorporate any legal proposition as the basis of the awards. The question whether the majority were right in holding that the March Agreement defined the rights and duties of the parties is not for us to decide. It is not for us to weigh the evidence, That task ponged to the Tribunal. And there can be no doubt that the finding of the Tribunal, which in this case means the majority, should not be disturbed except in cases where there is an error of law on the face of the award or misconduct. As to this there are strong and abundant authorities, eg. : Union of India v. A.L. Rallia Ram, : [1964]3SCR164 ; Jivrajbhai Ujamshi Seth and others v. Chintamanrao Balaji, : [1964]5SCR480 ; Bungo Steel Furniture (Pvt.) Ltd. v. Union of India, : [1967]1SCR633 ; Upper Ganges Valley Electricity Supply Co. Ltd. v. The U.P. Electricity Board. : [1973]3SCR107 ; N. Chellapan v. Secretary, Kerala Electricity Board and another, : [1975]2SCR811 ; and Rohtas Industries and another, : (1976)ILLJ274SC .

(33) The celebrated decision is Champsey Bhara & Co. v. Jivrai Balloo Shipping & Weaving Co., Air 1923 Pc 66. Generations of lawyers and judges have paid a respectful tribute to the masterly exposition by Lord Dunedin. This decision has stood for half a century and alone. In the Champsey Bhare case it was held that the arbitrators were entitled to give their own interpretation or construction of Article 52 of the Rules of the Bombay Cotton Trade Association and that the finding was not open to review on a motion to set aside the award. The principle enunciated was that the award must stand unless on the face of it the arbitrators had tied themselves down to some legal proposition which was erroneous.

(34) Lord Dunedin in the Champsey Bhara case says that case differs from. Londauer v. Asser (1905) 2 K.B. 184 'in an essential particular'. The difference is that in the Landauer case a legal proposition was stated in terms on which the award proceeded while in Champsey case no legal proposition at all is stated as a ground of the award. Lord Dunedin says at p. 69 'to make this equiparate with that of Landauer & Co. v. Asser & Co. (1905) 2 K..B. 184 the award would have to run somewhat thus :

'In respect of the ground of rejection contained in the letters of the 11th and 25th Nov. and in respect of clause 52 of the Articles, I decide that, etc.'

(35) If these words are added in the Champsey award it would have the result of tying the arbitrators down to some legal proposition. If the arbitrator says: 'On the wording of this clause I hold so and so, then that clause is impliedly incorporated into the award because he invites the reading of it.' Blaibar Co. v. Leopold Newborne (London) Ltd. (1953) 2 LR. 427 per Denning LJ).

(36) The other principle Lord Dunedin enunciated is that if in a narrative a reference is made to a contention of one party, that alone does not open 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.

(37) In Allen Berry & Co. Ltd. v.Union of India, : [1971]3SCR282 the Supreme Court has said :

'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. 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 face of it, object to the decision either upon the law or the facts. thereforee 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.'

(38) Applying these principles to this case I find that there is no error in the majority awards because the arbitrators have not tied themselves down to any legal proposition.

(39) This conclusion was countered by counsel for the Corporation by referring us to the letter of Lord Devlin dated October 9, 1973 where he said that the 'supplemental agreement of March 21, 1967 defined the rights of the parties', and that they, the majority, will be concerned with 'the rights and duties of the parties under the arch Agreement.' The short answer to the argument is that this letter dated Oct. 9, 1973 is not incorporated in the awards -interim or final. Interim award is dated August 21,1973. Final award is of February 16, 1974. This letter stands midway between the two dates. It is true that it expresses the view of the majority on an important question but it was signed by Lord Deviin alone. It was not signed by J. Russell Wilson, though it must have been written with his concurrence. But it is no part of the award. Unless it is referred to in the award it cannot be said to be incorporated therein. 'The principle of reading the contract or other document is not to be encouraged or extended.' [Alien Berry and Co. Ltd. v. Union of India, (supra)]. To hold that the language used in the majority awards in the instant case incorporates the documents, such as the original contract of 1964, March Agreement of 1967, Lord Devlin's letter of Oct. 1973, or so closely connects them therewith that they must be treated as part of the awards, would seem to me personally, with great respect, to make too much out of too little.

(40) The majority have not stated their reasons. We do not know the route of reasoning they took in arriving at their conclusion. 'It is not open to the Court to attempt to probe the mental process by which the arbitrator has reached his conclusion where it is not disclosed by the terms of the award'. In Jivrajbhai Ujamshi Seth (supra) at p. 220 Shah J. said :

'An award may be set aside by the court on the ground of error on the face of the award, but an award is not invalid merely became by a process of inference and argument it may be demonstrated that the arbitrator has committed some misconduct in arriving at his conclusion.

And again:

'It is not open to the court to speculate, where no reasons are given by the arbitrator, as to what impelled the arbitrator to arrive at his conclusion. On the assumption that the arbitrator must have arrived at his conclusion by a certain process of reasoningl, the court cannot proceed to determine whether the conclusion is right or wrong.'

Jivrajbhai UJamshi Seth (supra) (p. 220).

(41) Once it is accepted that the court cannot explore the thought processes of the arbitrator how will it ever know what were his reasons for a given conclusion. The award which is the outer expression of the mind of the arbitrator does not give his inner thoughts.

(42) What was referred to the arbitrators were the specific disputes raised by the Corporation against the contractor and contractor's disputes against the Corporation. On these the arbitrators gave their findings. They awarded some sums to the Corporation and some to the contractor. They gave a practical decision on merits according to their business sense. The arbitrators have said nothing on fundamental breach, implied warranty of fitness, section 16 of the Sale of Goods Act or section 73, Contract Act. These concepts figure prominently in the thinking of Mr. B. Sen as appears from his dissenting note. And it is on these that the Corporation stake their claim But the majority awards are non-speaking awards.

(43) The arbitrators' award differs fundamentally from judicial justice that we the judges administer in courts of law. The judges are required in their judgments to give reasons because they have a Court of Appeal set over them. But it is not so with the arbitrator. His ropes and pulleys are different. The foot rules and the set-squares that he uses in arriving at his decisions are different from our known judicial methods. From his decision there is no appeal. The arbitrator is a domestic forum. He may be a lawyer or a layman. A lay arbitrator is not necessarily well versed in law. For that matter no one knows all the law, nor even lawyers and judges. In 1825 Abbut Cj said : 'God forbid that it should be imagined that an attorney, or a counsel, or even a judge is bond to know all the law.' (2 C and P. 113).

(44) An arbitrator is not required to give reasons, He hears both sides and gives his decision. He is not bound by the technical rules of evidence. Nor by any fixed legal procedure. As Lord Halsbury observed in Andrews v. Mitchel (1930) 74 L.J.K.339. 'We must not insist upon a too minute observance of the regularity of forms among persons who naturally by their education or by their opportunities cannot be supposed to be very familiar with legal procedure, and may accordingly make slips in what is mere matter of form without any interference with the substance of their decisions.' All that is expected of an arbitrator is that he will act impartially. It is presumed that he will do so to the best of his ability. After hearing the injured and the injuring party he gives rough justice of the world. For good or ill, for better or worse, the parties have chosen him and have agreed to be bound by his award. This is why the award is final both on facts and law. Only on the restricted ground stated in sections 30 and 33 of the Act it can be set aside.

(45) 'JUDICIAL demolition' of an award is possible only when some legal proposition is stated in the award and which is erroneous. Two striking examples of erroneous legal propositions on which the awards were set aside are Dr. S. Dutt v. University of Delhi, : [1959]1SCR1236 and Rohtas Industries and another v. Rohtas Industries (supra).

(46) Suppose the majority were wrong in their view that the March Agreement defines the rights and duties of the parties. So what This is neither misconduct nor an error of law on the face of the award. The award will not be set aside because the arbitrators or the majority of them went wrong in their construction of the contract. Unless the majority in their awards say : 'On the wording of this clause we hold so and so' there is no error on the face of it. Nor is it misconduct to decide a question wrongly. 'It is not misconduct for the arbitrator to make a mistake of law' (Russell on Arbitration 20th ed. p. 423).

(47) Nor is it open to me on this motion to set aside the award only because I might myself have come to a different conclusion. The court does not sit in appeal over the decision of the arbitrators. 'The mere dissent of the court from the arbitrator's conclusion on construction is not enough to set aside an award.' (Kalagtan Govt. v. Duff Development Co., (1923) Ac 395. The decision of the arbitrator cannot be set aside by the court only because the court would have come to a different conclusion on a question of construction of the contract. I thereforee hold that the awards do not disclose any error of law.

(48) The awards do not set out any reasons. The majority awards are as inscrutable as the face of the sphinx. Nor is there any note appended to the awards by the majority stating the reasons for their judgment involving some legal proposition which is erroneous. The question of construction of contract is a question of law. But whether there was accord and satisfaction is essentially a question of fact. The question of breach of contract and damages are questions of fact and are in the exclusive domain and province of the arbitrator. Even where an arbitrator makes a mistake either in law or in fact in determining the matters referred, the award is good notwithstanding the mistake. (N. Chellappan v. Secy. Karala State Elec. Board (supra). If the arbitrators arrive at an erroneous finding of fact it is not a ground for setting aside the award. It must be an error or law. It must appear from the award or in some contemporaneous document delivered with the award from which the error of law is apparent e.g, a note appended to the award by the arbitrator stating the reasons for his decision involving some legal proposition which is erroneous. There is nothing of the kind in this case. In my opinion the majority were entitled to come to the conclusion they did and I am unable thereforee to set aside the award.

(49) One other question remains to be decided. The respondents claim interest under section 29 of the Arbitration Act on the decretal amount from the date of the decree till payment. They have filed neither a cross-appeal nor cross-objections. But they invoke the powers of this court under Order 41 Rule 33, Code of Civil Procedure.

(50) The learned Judge has not awarded future interest. I think we ought not to interfere with his discretion. The matter of future interest is in the discretion of the court.

(51) In my opinion Order 41 Rule 33 cannot properly be invoked in the present case. Such a power is to be exercised in exceptional cases when its non-exercise will lead to difficulties in the adjustment of the rights of the various parties. (See Rameshwar Prasad and others v. Shambehari Lal Jagannath and another, : [1964]3SCR549 ). It is true that Order 41 Rule 33 is expressed in wide terms, but it-has to be applied with discretion. It should be applied to cases where interference in favor of the appellant necessitates interference also with a decree which has by acceptance or acquiescence become final, so as to enable the court to adjust the rights of the parties. If the appellate court reaches a conclusion which is inconsistent with that of the court appealed from and in adjusting the right claimed by the appellant it is found necessary to grant relief to a person who has not appealed, the power under O. 41 Rule 33 may properly be invoked. (See Commissioner of Income Tax. Assam. Tripura and Manipur v. The Panbari Tea Co. Ltd., : [1965]57ITR422(SC) ). As the Supreme Court has said :

'No unrestricted right, however, is conferred by the Rule to reopen decrees which have become final merely because the appellate Court does not agree with the opinion of the court appealed from.'

(See Commissioner of Income Tax, Assam, Tripura and Manipur (supra).

(52) The cases decided by the Supreme Court show that this power is exercised in cases where as a result of interference in favor of the appellant it becomes necessary to adjust the rights of the other parties ; in other words in cases where the question is one of setting mutual rights and obligations (See T. Atchaih v. Narasingarao, : AIR1978SC725 ).

(53) I do not think the respondent can take recourse to Order 41 rule 33 Code of Civil Procedure and ask us to modify the decree of the trial court by awarding him future interest. The main reason is that we are not interfering in favor of the appellant in this appeal. We are in fact dismissing the appellant's appeal. Why should we interfere with the decree of the learned single judge or modify it so as to award interest to the respondent No rights of the parties are required to be readjusted. We are letting things remain as they are.

(54) Counsel for the contractor referred us to Makka Narsimlu v. Gunnala Raghunandan Rao, : AIR1977AP374 in support of his contention. In this case it was held that interest could be allowed even though there was no appeal in this regard. With due deference to the learned judges I do not think that it is a proper exercise of the power under O. 41 rule 33, Civil Procedure Code . In view of the Supreme Court judgment I have referred to above I am not prepared to hold that even in a case like the present O. 41 rule 33 empowers us to award future interest when the learned single judge in his discretion has refused to award. The Andhra Pradesh decision is not in line with the Supreme Court rulings and makes a departure from the established law.

(55) An application for review was made to the learned single judge. He dismissed it on the ground that he was functus officio. In my opinion the respondent is not entitled to future interest. In this view of the matter I think it unnecessary to decide whether an appeal lies and if not, what is its effect The prayer for future interest is thereforee rejected.

(56) For these reasons the appeal of Fertilizer Corporation of India is dismissed with costs.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //