Full Judgment Text
(REPORTABLE)
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.8019 OF 2009
(Arising out of Special Leave Petition
(C) No. 3755 OF 2008)
M/s. RAVINDRA KUMAR GUPTA
& COMPANY ….APPELLANT(S)
VERSUS
UNION OF INDIA ……RESPONDENT(S)
J U D G M E N T
SURINDER SINGH NIJJAR, J.
1. Leave granted.
2. Challenge in this appeal is to the Judgment dated 10.7.2007
of the Division Bench of the High Court of Uttrakhand at Nanital
whereby the Appeal from Order (AO) No.322 of 1998 New No.242 of
2001 filed by Union of India challenging the award of the arbitrator
has been partly allowed.
3. The grievance made by the appellant before us is that the High
Court travelled beyond its jurisdiction in re-appreciating the
evidence led by the parties before the arbitrator and by substituting
its own conclusions for the conclusions recorded by the arbitrator.
It is submitted by the learned counsel for the appellant that the
award of the Labour Court had been made the rule of the court by
the Court of Civil Judge, Sr. Division, Roorkee (hereinafter referred
to as the Civil Court). While considering the objections raised by
the Union of India, the Civil Court took due notice of the evidence
led by the parties before the arbitrator. It has been specifically
held that the arbitrator has not acted beyond the scope of the
reference nor can it be said that the arbitrator has misconducted
himself in law or procedure.
4. We may notice here the relevant facts.
The appellant (hereinafter referred to as a contractor), was
allotted certain civil works on 22.3.1988. Initially, the work was
scheduled to be completed on or before 28.06.1989. However by
mutual agreement, the period of contract was extended from time to
time and finally till 5.11.1990. The work was completed on
3.11.1990.
5. Disputes arose between the parties after completion of the
work regarding the work and payment for the same. The contractor
invoked the arbitration clause contained in Clause 70 of the
agreement, dated 22.3.1988. Necessary claim was filed before the
sole arbitrator under the Indian Arbitration Act, 1940 on 21.4.1994.
Both the parties participated in the proceedings.
6. The arbitrator, after elaborate discussion of the entire evidence
led by the parties, passed the award dated 30.10.96.
7. Thereafter the contractor filed Original Suit No.184/96 in the
Civil Court with a prayer for making the award of the sole arbitrator
rule of the Court. The Union of India also filed Miscellaneous Suit
No.147/96, with a prayer for setting aside the Award. Both the
suits were heard together by the Civil Court. In the miscellaneous
suit it was pleaded by the Union of India that the award of the
arbitrator is infirm being against the law and available evidence. As
such the arbitrator has misconducted himself in law. The main
issue between the parties is with regard to claim No.5. It was
stated by Union of India that the arbitrator had acted beyond its
jurisdiction by allowing claim No.5 of the contractor, contrary to the
provision contained in Clause 11(c) of IAFW 2249, which is part of
the agreement, dated 22.3.1988. The Civil Court duly framed
issues. It took due notice of the objections raised by the Union of
India. It was submitted on behalf of Union of India, that the
arbitrator cannot accept any claim going beyond the scope of the
dispute entrusted and referred to him. The Civil Court specifically
observed as follows:
“In the present case, dispute of loss suffered
by the decree holder for the hold-ups and
delay was referred to the arbitrator and the ld.
Arbitrator has decided this dispute within his
jurisdiction.”
8. It has been specifically observed by the Civil Court that the
parties had placed the case before the arbitrator on the point in
issue. It is further observed that the arbitrator has passed the
award giving reasons in detail. Therefore it cannot be said that the
arbitrator has acted beyond the scope of reference.
9. The Civil Court took due notice of the settled propositions of
law that at the time of hearing of objections under Section 30 of the
Arbitration Act, 1940 the Court jurisdiction of the Court is limited.
It has also been noticed that the Court cannot hear the objections
against the award as an appellate court, as the arbitrator is the
final arbiter of the dispute referred to him. After noticing the legal
position and after examining clauses of the agreement, the award
has been made rule of the court.
10. The findings of the Civil Court were challenged by the Union
of India in appeal before the High Court, which has been partly
allowed. In partly allowing the appeal the Division Bench has set
aside the finding recorded by the arbitrator by merely stating as
follows:
“So far as the contention of learned
counsel for the appellant that claim No.5 is
against clause 11(c) of IAFW, which is part of
the agreement, is concerned, we have
carefully perused the award given by the
Arbitrator as well as the impugned judgment
of the Court below. Claim 5 was for loses due
to hold-ups and delay in the work. The
Union of India in reply before the Arbitrator
stated that the delay in execution of work
was due to default of the contractor himself.
He had not employed sufficient manpower
and resources to complete the work in time.
There is no reason to disregard this
statement on behalf of Union of
India/appellant. We find that the Arbitrator
acted unreasonably and irrationally in
ignoring the limits and the provisions of the
contract as submitted by the learned counsel
for the appellant.”
11. We are of the considered opinion that the High Court
committed a serious error in re-appreciating the evidence led by the
parties before the arbitrator. This evidence was duly scrutinized
and evaluated by the arbitrator. With regard to claim No.5, the
arbitrator has given elaborate reasons. Therefore, finding recorded
by the arbitrator cannot said to be either perverse or based on no
evidence. A firm finding has been recorded that under claim No.5
there was default and delay on the part of Union of India with
respect to:
(i) The payment of RARs final bill.
(ii) Delay in appointing agency for ATT.
(iii) Delay in giving decision.
(iv) Increase in height of Tent plinth (given late).
12. This conclusion has been erroneously substituted by the
High Court with its own opinion on appreciation of the evidence.
Such a course was not permissible to the High Court while
examining objections to the award under Section 30 of the
Arbitration Act, 1940.
13. The law with regard to scope and ambit of the jurisdiction of
the courts to interfere with an arbitration award has been settled in
a catena of judgments of this Court. We may make a reference here
only to some of the judgments. In the case of State of Rajasthan
vs . Puri Construction Company Limited. and Anothers . ( 1994) 6
SCC 485, this Court observed as follows:
“The arbitrator is the final arbiter for the
dispute between the parties and it is not open
to challenge the award on the ground that the
arbitrator has drawn his own conclusion or
has failed to appreciate the facts. In Sudarsan
Trading Co. v. Govt. of Kerala 1989 Indlaw SC
463 it has been held by this Court that there is
a distinction between disputes as to the
jurisdiction of the arbitrator and the disputes
as to in what way that jurisdiction should be
exercised. There may be a conflict as to the
power of the arbitrator to grant a particular
remedy. One has to determine the distinction
between an error within the jurisdiction and
an error in excess of the jurisdiction. Court
cannot substitute its own evaluation of the
conclusion of law or fact to come to the
conclusion that the arbitrator had acted
contrary to the bargain between the parties.
Whether a particular amount was liable to be
paid is a decision within the competency of the
arbitrator. By purporting to construe the
contract the court cannot take upon itself the
burden of saying that this was contrary to the
contract and as such beyond jurisdiction. If
on a view taken of a contract, the decision of
the arbitrator on certain amounts awarded is a
possible view though perhaps not the only
correct view, the award cannot be examined by
the court. Where the reasons have been given
by the arbitrator in making the award the
court cannot examine the reasonableness of
the reasons. If the parties have selected their
own forum, the deciding forum must be
conceded the power of appraisement of
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.
In the case of Municipal Corpn. Of
Delhi v. Jagan Nath Ashok Kumar 1987(4) SCC
497, it has been held by this Court that
appraisement of evidence by the arbitrator is
ordinarily never a matter which the court
questions and considers. It may be possible
that on the same evidence the court may arrive
at a different conclusion than the one arrived
at by the arbitrator but that by itself is no
ground for setting aside the award. It has also
been held in the said decision that it is difficult
to give an exact definition of the word
‘reasonable’. Reason varies in its conclusions
according to the idiosyncrasies of the
individual and the time and circumstances in
which thinks. In cases not covered by
authority, the verdict of a jury or the decision
of a judge sitting as a jury usually determines
what is ‘reasonable’ in each particular case.
The word reasonable has in law prima facie
meaning of reasonable in regard to those
circumstances of which the actor, called on to
act reasonably knows or ought to know. An
arbitrator acting as a judge has to exercise a
discretion informed by tradition, methodized
by analogy disciplined by system and
subordinated to the primordial necessity or
order in the social life. Therefore, where
reasons germane and relevant for the
arbitrator to hold in the manner he did, have
been indicated, it cannot be said that the
reasons are unreasonable.”
14. In the case of Arosan Enterprises Ltd . vs . Union of India,
(1999) 9 SCC 449 , t his Court upon analysis of numerous earlier
decisions, held as follows:
“Be it noted that by reasons of a long catena
of cases, it is now a well-settled principle of
law that re-appraisal of evidence by the court
is not permissible and as a matter of fact
exercise of power by the court to reappraise
the evidence is unknown to proceedings under
section 30 of the Arbitration Act. In the event
of there being no reasons in the award,
question of interference of the court would not
arise at all. In the event, however, there are
reasons, the interference would still be not
available within the jurisdiction of the Court
unless of course, there exist a total perversity
in the award or the judgment is based on a
wrong proposition of law. In the event however
two views are possible on a question of law as
well, the court would not be justified in
interfering with the award.
The common phraseology “error apparent on
the face of the record” does not itself, however,
mean and imply closer scrutiny of the merits of
documents and materials on record. The
Court as a matter of fact cannot substitute its
evaluation and come to the conclusion that the
arbitrator had acted contrary to the bargain
between the parties. If the view of the
arbitrator is a possible view the award or the
reasoning contained therein cannot be
examined………”.
15. This view has been reiterated by this Court in the case of
Oil & Natural Gas Corporation Ltd. vs. SAW Pipes Ltd. as
follows:
“In the light of the aforesaid decisions, in our
view, there is much force in the contention raised
by the learned counsel for the appellant.
However, the learned senior counsel Mr. Dave
submitted that even if the award passed by the
arbitral tribunal is erroneous, it is settled law
that when two views are possible with regard to
interpretation of statutory provisions and or
facts, the Court would refuse to interfere with
such award.
It is true that if the arbitral tribunal has
committed mere error of fact law in reaching its
conclusion on the disputed question submitted to
it for adjudication then the Court would have no
jurisdiction to interfere with the award. But, this
would depend upon reference made to the
arbitrator : (a) if there is a general reference for
deciding the contractual dispute between the
parties and if the award is based on erroneous
legal proposition, the Court could interfere; (b) It
is also settled law that in a case of reasoned
award, the Court can set aside the same if it is,
on the face of it, erroneous on the provision of
law or its application; (c) If a specific question of
law is submitted to the arbitrator, erroneous
decision in point of law does not make the award
bad, so as to permit of its being set aside, unless
the Court is satisfied that the arbitrator had
proceeded illegally.”
16. In the M/s. Kwality Manufacturing Corporation vs .
Central Warehousing Corporation it was held:
“At the outset, it should be noted that the scope
of interference by courts in regard to arbitral
awards is limited. A court considering an
application under Section 30 or 33 of the Act,
does not sit in appeal over the findings and
decision of the arbitrator. Nor can it re-assess or
re-appreciate evidence or examine the sufficiency
or otherwise of the evidence. The award of the
arbitrator is final and the only grounds on which
it can be challenged are those mentioned in
Sections 30 and 33 of the Act. Therefore, on the
contentions urged, the only question that arose
for consideration before the High court was,
whether there was any error apparent on the face
of the award and whether the arbitrator
misconducted himself or the proceedings.”
17. Again it is reiterated in the judgment of Madhya
Pradesh Housing Board vs . Progressive Writers and
Publishers (2009) 5 SCC as follows:
“The finding arrived at by the arbitrator in
this regard is not even challenged by the Board in
the proceedings initiated by it under Section 30
of the Act. It is fairly well settled and needs no
restatement that the award of the arbitrator is
ordinarily final and the courts hearing
applications under Section 30 of the Act do not
exercise any appellate jurisdiction. Reappraisal of
evidence by the court is impermissible.”
18. In this case, the Supreme Court notice the earlier judgment
in the case of Ispat Engineering & Foundry Works, B.S. City,
Bokaro vs . Steel Authority of India, B.S. City, Bokaro [(2001) 6
SCC 347] 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] 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],
N. Chellappan v. Secy., Kerala SEB [(1975) 1 SCC
289], Sudarshan Trading Co. v. Govt. of Kerala
[(1989) 2 SCC 38], State of Rajasthan v. Puri
Construction Co. Ltd. [(1994) 6 SCC 485] as also
in Olympus Superstructures (P) Ltd. v. Meena
Vijay Khetan [(1999) 5 SCC 651] has stated that
reappraisal of evidence by the court is not
permissible and as a matter of fact, exercise of
power to reappraise 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 event, 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.”
19. In our opinion, the impugned judgment of the High Court
does not fall within the limited jurisdiction available to the Court for
interference in the award of an arbitrator.
20. For the aforesaid reasons the appeal is allowed. The
impugned judgment of the High Court is set aside.
………….……………………….J
(TARUN CHATTERJEE)
.…………………………………J
(SURINDER SINGH NIJJAR)
NEW DELHI
DECEMBER 03, 2009