SHEET AP No.804 of 2010 IN THE HIGH COURT AT CALCUTTA Ordinary Original Civil Jurisdiction ORIGINAL SIDE THE STATE OF WEST BENGAL & ORS. Versus M/S. S.S. MONDAL & COMPANY BEFORE: The Hon'ble JUSTICE SOUMEN SEN Date :
3. d November, 2016. Appearance: Mr. Paritosh Sinha, Adv. Mr. Arindm Mandal, Adv. …for the State/petitioner. Mr. Amitava Ghosh, Adv. …for the respondent. The Court : This application for setting aside of the award has been filed under the old Arbitration Act of 1940. The said award is a non-speaking award. The arbitrator on consideration of the oral and documentary evidence has passed an award in favour of the respondent. The claim in the arbitration proceeding arose out of a work contract for construction of double lane R C C Bridge at Kankpool over Nonagang Khal (River) within Police Station - Habra of North 24 parganas under Calcutta Cannels, SubDivision in reference to Tender No.124/CC of 1988-89 issued by the Authority concerned. The work could not be completed within the stipulated period of time for which the department granted extension and within the extended period, the work was completed. The department did not impose any penalty for the delayed completion which shows that the department was responsible for the delay. In any event it appears that the oral and documentary evidence were produced before the arbitrator by the parties. In fact, the authority of the arbitrator who had passed the award in favour of the respondent was challenged by the petitioner unsuccessfully. The width and ambit of Court’s scrutiny to a non-speaking award was considered by a Division Bench in ‘State of West Bengal vs. Usha Ranjan Sarkar’ reported at 2013 (3) CHN512in which I was a member of the Bench. The relevant observations of the Bench are as follows: “ 4. Before we address our mind to any other issue, one thing needs to be emphasized and remembered is that the award is a non-speaking award. Since the scope of enquiry in considering an application for setting aside of a non-speaking award has been argued and we were reminded of our limitation we first address on the scope width and power of the Court in considering such an application for setting aside of a non-speaking award.
5. Under the 1940 Act, there was no requirement and/or compulsion on the part of an arbitrator to give any reason in support of his conclusion. This has resulted in insertion of Section 31(3) of the Arbitration and Conciliation Act, 1996. The Parliament felt that the award shall state reasons upon which it is based unless parties have agreed otherwise or the award is on agreed terms under Section 30 of the 1996 Act. The position in England is similar and is summed up by Russel as follows:“Under S.52(4) of the Arbitration Act, 1996 (corresponding to S.31(3) of the Arbitration and Conciliation Act, 1996) an award must contain the reasons for the determinations made by the tribunal unless either it is an agreed award or the parties have agreed to dispense with reasons. Parties to an arbitration, and particularly the losing party, are entitled to know the reasons for the tribunal’s decision by which they are bound, unless they have specifically agreed in writing to dispense with reasons. Further, reasons are efectively a prerequisite for any appeal against the tribunal’s decision, because in practice it will only be possible to argue that there has been an error of law if the tribunal has explained the basis of its findings by giving reasons. It is sufficient for the purposes of a reasoned award under S.52(4) of the Arbitration Act, 1996 that the tribunal complies with the parties’ requirements for reasons even if they fall short of what would usually be required under English Law. The only reasons that have to be given are those “for”. the award, i.e. those in favour, and not those of a dissenting arbitrator. It is, however, common practice for the reasons of any dissenters to be given also, and though these are sometimes included within the award document, they do not form part of the award itself.”
6. However, 1940 Act does not require any such reason to be stated by the Arbitrator unless the Arbitration Agreement requires the arbitrator to give any such reason.
7. The jurisdiction of the Court in considering a non-speaking award has been considered and in various decisions, however, for the present we deal with some of the decisions where the principles have been laid down.
8. It is well-settled position that under Arbitration Act, 1940 unless the contract so required, reasons were not required to be given. It is not necessary to give reasons and an award cannot be set aside merely because it is a non-speaking award.
9. In State of Orissa Vs. Dandasi Sahu (1988(4) SCC12, the Hon’ble Supreme Court was considering an unreasoned award. It was held that arbitration is resorted to as a speedy method of adjudication of disputes. Awards without reason are not bad per se. An award can be set aside only on the ground of misconduct or on an error of law apparent on the face of the award. When the parties choose their own arbitrator to be the Judge in dispute between them, they cannot, when the award is good on the face of it, object to the decision either upon law or on facts. Therefore, when arbitrator commits a mistake either in law or in fact in determining the matters referred to him, where such mistake does not appear on the face of the award and the documents appended to or incorporated so as to form part of it, the award will neither be remitted nor set aside.
10. In Rajasthan State Mines & Minerals Ltd. Vs. Eastern Engg. Enterprises (1999(9) SCC283 this Court opined:
“44. (a) 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. (b) It is not open to the court to admit to probe the mental process by which the arbitrator has reached his conclusion where it is not disclosed by the terms of the award. (c) If the arbitrator has committed a mere error of fact or law in reaching his conclusion on the disputed question submitted for his adjudication then the court cannot interfere. * * * (e) In a case of a non-speaking award, the jurisdiction of the court is limited. The award can be set aside if the arbitrator acts beyond his jurisdiction. (f) To find out whether the arbitrator has travelled beyond his jurisdiction, it would be necessary to consider the agreement between the parties containing the arbitration clause. The arbitrator acting beyond his jurisdiction is a different ground from the error apparent on the face of the award. (g) In order to determine whether the arbitrator has acted in excess of his jurisdiction what has to be seen is whether the claimant could raise a particular claim before the arbitrator. If there is a specific term in the contract or the law which does not permit or give the arbitrator the power to decide the dispute raised by the claimant or there is a specific bar in the contract to the raising of the particular claim then the award passed by the arbitrator in respect thereof would be in excess of jurisdiction.”
11. In Continental Construction Ltd. Vs. State of U.P. (2003(8) SCC4 it was, inter alia, held:-
“16. The award is a non-speaking one. It is trite that the court while exercising its jurisdiction under Section 30 of the Arbitration Act, 1940 can interfere with the award only in the event the arbitrator has misconducted himself or the proceeding or there exists an error apparent on the face of the award.
17. The learned Civil Judge and the High Court have not found that the umpire acted arbitrarily, irrationally, capriciously or independent of the contract. No finding has been arrived at that the umpire has made conscious disregard of the contract which was manifest on the face of the award.”
12. In Ispat Engineering & Foundry Works Vs. Steel Authority of India Ltd. (2001(6) SCC347 it was accordingly held that since the parties chose their own arbitrators to adjudicate the disputes between them, the parties cannot object to such an adjudication or decision either upon the law or on the facts except however as envisaged in terms of Section 30 of the Act of 1940.
13. The reappraisal of evidence by the court is not permissible.
14. The award of the arbitrator is ordinarily final and conclusive unless a contra intention is disclosed in the agreement itself.
15. 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 and it is not open to the court to attempt to assess the mental process by which the arbitrator has reached his conclusion where it is not disclosed by the terms of the award.
16. The arbitrator or umpire, as the case may be, has no authority or jurisdiction to abdicate the terms of the contract or what the parties desired under the contract.
17. The same view is reiterated in D.D. Sharma Vs. Union of India (2004(5) SCC325 and Asian Techs Limited Vs. Union of India & Ors. (2009(10) SCC354 18. In Rajendra Construction Co. Vs. Maharashtra Housing & Area Development Authority & Ors. (2005(6) SCC678, the Supreme Court held as follows:“15. After considering the relevant provisions of law, legal position in England, America and Australia and after referring to leading decisions on the point, this Court held that an award passed under the (old) Act was not liable to be set aside or remitted only on the ground that no reasons had been recorded in support of such award. The Court also referred to the Hand Book of Arbitration Practice by Ronald Bernstein wherein it was stated: “The absence of reasons does not invalidate an award. In many arbitrations the parties want a speedy decision from a Tribunal whose answer Yes or No; or a figure of X. Such an award is wholly effective; indeed, in that it cannot be appealed as being wrong in law it may be said to be more effective than a reasoned award.”
16. The Court then proceeded to state:
“19. It is now well settled that an award can neither be remitted nor set aside merely on the ground that it does not contain reasons in support of the conclusion or decisions reached in it except where the arbitration agreement or the deed of submission requires him to give reasons. The arbitrator or umpire is under no obligation to give reasons in support of the decision reached by him unless under the arbitration agreement or in the deed of submission he is required to give such reasons and if the arbitrator or umpire chooses to given reasons in support of his decision it is open to the court to set aside the award if it finds that an error of law has been committed by the arbitrator or umpire on the face of the record on going through such reasons. The arbitrator or umpire shall have to give reasons also where the court has directed in any order such as the one made under Section 20 or Section 21 or Section 34 of the Act that reasons should be given or where the statute which governs an arbitration requires him to do so.”
17. In the opinion of this Court, it could not be disputed that in India, it has been “firmly established”. that it was not obligatory on the arbitrator or umpire to record reasons in support of the award when “neither any arbitration agreement nor any deed of submission”. required reasons to be recorded. In that case also, it was urged, as has been done in the instant case, that if no reasons are disclosed by the arbitrator, it would not be possible for the court to find out whether the award passed is in accordance with law. The Court, however, negatived the contention observing that if the parties wanted reasons to be recorded in support of the award to be passed by the arbitrator or umpire it was open to them to make a provision in the agreement/contract itself to that effect. But in the absence of any stipulation in the contract, the court could not say that arbitrator was duty-bound to record reasons and if reasons are not recorded in support of the award, the award was vulnerable and liable to be set aside or should be remitted to the arbitrator. According to this Court, such an order would amount to virtually introducing by judicial verdict an amendment to the Act. No doubt, if the reasons are recorded by the arbitrator or umpire in support of the award, they can be considered by the court and if those reasons disclose an error apparent on the face of the record, the award can be set aside by a competent court of law. But in the absence of such requirement under the agreement itself, the party could not insist for reasons in support of the award nor a court of law can interfere with non-speaking award.
18. It was, however, urged that recording of reasons in support of the order is part and parcel of “natural justice”. and on that count also, unreasoned award should be treated as null and void and ineffective. We are unable to uphold the argument. A similar contention was raised in Chokhamal and negatived by this Court observing that the said doctrine applies to administrative law field. In the decisions pertaining to administrative law, this Court has always insisted for recording of reasons in support of the order or decision. The Court observed that it would apply to “public law”. field and not to “private law”. field like arbitration agreement.
19. The Court stated:
“35. It is no doubt true that in the decisions pertaining to Administrative Law, this Court in some cases has observed that the giving of reasons in an administrative decision is a rule of natural justice by an extension of the prevailing rule. It would be in the interest of the world of commerce that the said rule is confined to the area of Administrative Law. We do appreciate the contention, urged on behalf of the parties who contend that it should be made obligatory on the part of the arbitrator to give reasons for the award, that there is no justification to leave the small area covered by the law of arbitration out of the general rule that the decision of every judicial and quasi-judicial body should be supported by reasons. But at the same time it has to be borne in mind that what applies generally to settlement of disputes by authorities governed by public law need not be extended to all cases arising under private law such as those arising under the law of arbitration which is intended for settlement of private disputes.”
20. This Court noted that a consistent view has been taken by all courts that an award was not liable to be set aside merely because reasons were not given except where the arbitration agreement or the deed of submission or an order made by the court under Sections 20, 21 or 34 of the Act or the statute governing the arbitration required the arbitrator or umpire to give reasons for the award.”
19. Keeping such principles in mind let us now see the challenge to the award. Apart from the grounds mentioned in the memo of appeal, we find from the application filed under Section 30 or 33 of the Arbitration Act, 1940 two specific pleas have been taken in paragraphs 22 and 23 which are reproduced hereinbelow:-
“22. That in view of the principles as laid down by the Hon’ble Supreme Court of India in the case of the Executive Engineer (Irrigation), Balimela & others-VsAbhaduta Jena & others reported in 1988(1) Scc 418=AIR1988SC1520that “in regard to pendenti lite interest, that is, interest from the date of reference to the date of Award, the claimants would not be entitled to the same for the simple reason that the arbitrator is not a Court within the meaning of Section 34 of the C.P.C now were the reference to arbitration made in the course of Suits”., the contractor was or is not entitled to interim interest as prayed for by him in the arbitration and as such, the said award made by the Arbitrator, is bad and liable to be set aside.
23. Furthermore, the question as to whether the Arbitrator can give a nonspeaking award in an arbitration, where the state and its instrumentalities are parties has since been decided by the Hon’ble Supreme Court in the case of Raipur Development Authority & others-Vs-M/s. Chokhamal Contractors & others reported in AIR1990SC14261989(2) SCC721which, inter alia, runs as follows:(Judgment dated 4.5.89) “Governments and their instrumentalities should as a matter of policy and public interest if not as a compulsion of law-ensure that wherever they enter into agreements for resolution of disputes by resort to private arbitrations, the requirement of speaking awards is expressly stipulated and ensured.”
. The petitioner has failed to demonstrate that the arbitrator has allowed any claim contrary to any clause of the contract. However, on consideration of the award related to interest I feel that the awarding of interest at the rate of 18% was on higher side as it was beyond even the lending rate prevailing at that point of time. Under such circumstances, the rate of interest as awarded in Clause (e) and (f) of the award is reduced to 10%. The application succeeds in part. However, there shall be no order as to costs. (SOUMEN SEN, J.) B.Pal