Full Judgment Text
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PETITIONER:
GOA, DAMAN AND DIU HOUSING BOARD
Vs.
RESPONDENT:
RAMAKANT V.P. DARVOTKAR
DATE OF JUDGMENT06/09/1991
BENCH:
RAY, B.C. (J)
BENCH:
RAY, B.C. (J)
KANIA, M.H.
SHETTY, K.J. (J)
SHARMA, L.M. (J)
VERMA, JAGDISH SARAN (J)
CITATION:
1991 AIR 2089 1991 SCR (3) 904
1991 SCC (4) 293 JT 1991 (3) 604
1991 SCALE (2)488
ACT:
Arbitration Act, 1940: Section 16--Award--When to be
remitted to Arbitrator--No allegation of bias or
illegality--High Court remanding awards for giving
reasons--Whether justified.
HEADNOTE:
The appellant-Housing Board, which had entered into four
contracts with the respondent for construction of tenements
within a certain time limit, terminated them after giving
notice on the ground that the respondent had failed to
complete the construction work despite several extensions
granted to him, and filed a suit in the Court of Civil Judge
claiming damages of over Rs.4 lakhs. The respondent filed
appllcations under Sections 34 and 20 of the Arbitration
ACt, 1940, for stay of the suit and for directions to the
appellant-Board for filing the arbitration agreement in the
Court and also for appointing arbitrator in terms of clause
25 of the agreement. As per Court’s order, the appellant
filed the agreement in the Court and appointed the Arbitra-
tor.
The Arbitrator made four awards granting the claims of
the respondent to the extent of over Rs.8 lakhs and filed
them in the Court for making them Rule of the Court. The
appellant’s objections for setting aside the awards on the
ground that the Arbitrator had misconducted himself by not
framing the main issue, viz., whether or not the claimant
abandoned the work and thereby committed the breach of the
agreement, by ignoring the letter of termination where in it
was clearly stated that the termination had been done on
account of the abandonment of the work by the claimant, and
failed to decide upon the question of the abandonment of
work and wholly side-tracked the issue and also by not
giving reasons for the award as required under the agree-
ment, under which he was appointed, were rejected by the
Civil Court, which confirmed the awards and made them the
Rule of the Court. The appellant’s appeals against this
decision was allowed by the High Court, which set aside the
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Civil Court’s order and sent back the awards to the arbitra-
tor for giving reasons, as required under clause 25 of the
agreement which specifically provided that in all cases
where amount of
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claim was Rs.50,000 and above, the Arbitrator was bound to
give
reasons.
In the appeal before this Court, on behalf of the
appellant Housing Board it was contended that having held
that the arbitrator was guilty of misconduct and the awards
were liable to be vitiated on that ground, the High Court
ought to have set aside the awards instead of sending them
back for recording reasons, which was totally unwarranted by
law.
On behalf of the respondent, it was contended that the
High Court’s order remanding the awards for recording rea-
sons clearly fell within the purview of Sec. 16(1)(c) of the
Arbitration Act, as the objection to the legality of the
award was apparent on the face of it, and not within the
provisions of Sec. 30 of the Act, inasmuch as the arbitrator
had not misconducted himself or the proceedings and the
awards in question had not been improperly procured.
Dismissing the appeals and confirming the awards, this
Court,
HELD: 1.1 Section 16 empowers the Court to remit the
award to the Arbitrator for reconsideration only in three
cases specified therein. Clause (c) of Sub-Section (1)
provides that the award shall be remitted to the Arbitrator
by the Court where an objection to the legality of the award
is apparent on the face of it. [710D]
1.2 No doubt, in the instant case, the High Court has
come to a finding that the Arbitrator was guilty of miscon-
duct for his failure to give reasons as required but there
is nothing to show that the Arbitrator misconducted himself
or the proceeding in any other manner, nor is there anything
to show that the awards have been improperly procured nor
any allegation, far less, any finding, that the Arbitrator
was biased or unfair or he had not heard both the parties or
he had not fairly considered the submissions of the parties
in making the awards in question. [710E]
1.3 It is evident from the four awards made by the
Arbitrator that the Arbitrator has considered all the spe-
cific issues raised by the parties in the arbitration pro-
ceedings and came to his finding after giving cogent rea-
sons. The awards cannot under any circumstances be consid-
ered to be made by the Arbitrator without recording any
reasons for the same. In such circumstances, it cannot be
held that the Arbitrator has misconducted himself or in the
proceedings in the matter
906
of giving the awards. The decision of the High Court remit-
ting the awards back to the Arbitrator for giving reasons is
set aside and the awards made by the Arbitrator are upheld
and made Rule of the Court. [710F-G, 711A]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 3236-39
of 1984.
From the Judgment and Order dated 7.2. 1983 of the
Bombay High Court in F.C.A. Nos. 35/B, 36/B, 37/B & 38/B of
1981.
Ashok H. Desai, Solicitor General, Ravinder Narain,
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Aditya Narain, Rajan Narain, S. Sukumaran, D.N. Mishra and
Pallav Sishodia for the Appellant.
G.L. Sanghi, S.K. Mehta, Dhruv Mehta and Aman Vachher
for the Respondent.
The Judgment of the Court was delivered by
RAY, J. The above four appeals on special leave by the
appellant were filed against the judgment and order dated
February 7, 1983 made by the Panaji Bench of the Bombay High
Court in First Civil Appeal Nos. 35/B to 38/B of 1981 dis-
posing of all the four appeals field by the appellant
against the judgment and order of the learned Civil Judge,
Senior Division, Panaji, Goa dated 26.8.1981 confirming four
different awards by an arbitrator appointed in pursuance to
the agreement between the parties. Appeal No. 35 of 1981
relates to the award, awarding to the respondent against the
appellant Rs.2,75,091.13. Appeal No. 36 of 1981 relates to
an award, awarding to the respondent a sum of
Rs.1,88,968.36. Appeal No. 37 of 1981 relates to an award,
awarding to the respondent Rs.3,36,230.36 and Appeal No. 38
of 1981 relates to an award, awarding to the respondent
Rs.46,321.32.
The facts leading to these appeals are as follows:
The appellant Goa, Daman & Diu Housing Board entered
into two contracts on 15.3.72, and one contract each on
11.7.73 and on 4.7.73 with the respondent for the construc-
tion of tenements at Vasgoda-Gama, Goa. The appellant ac-
cepted two tenders of the respondent on 9.3.72 and remaining
two on 24.2.73. There was a time limit in all the aforesaid
four contracts for the completion of the work referred to
therein. Several extensions were granted to the respondent
for completing the work out the respondent failed to com-
plete the construction
907
work undertaken by him under the said four contracts. On
July 1, 1975 the appellant issued a notice to the respondent
under clause 3 of the said contract for exercising the right
of termination in view of the fact that the respondent was
unable to fulfil the contractual obligation of completing
the construction work in spite of the various extensions
granted to the respondent. On July 14, 1975, the
Engineer-in-Charge of the appellant Board exercised its
unilateral right of terminating the contract under clause 3
of the agreement in view of the fact that the respondent did
not complete the work of construction undertaken by him in
spite of various extentions granted to him. On July 31,
1975, the Chairman of the appellant board confirmed that all
the four contracts stood rescinded. On May 17, 1976, the
respondent served a notice to the appellant on the ground
that the appellant had rescinded the work contracts. The
respondent stated therein various reasons why the work could
not be completed. Thereafter in April, 1978, the appellant
filed a suit claiming damages for a sum of Rs.4,38,786.96
with interest against the respondent in the Court of the
Civil Judge, Senior Division, Panaji, Goa. Subsequently, an
application was filed by the respondent under section 34 of
the Arbitration Act for stay of the suit. Respondent also
made another application to the Court under section 20 of
the Arbitration Act for directing the Housing Board to file
the arbitration agreement in Court and in pursuance of
clause 25 of the agreement to appoint an arbitrator. Accord-
ingly, the Court by its order dated 28.2.1979 had the agree-
ment between the parties filed in court and directed the
Housing Board to appoint an arbitrator. On March 29, 1979
Shri J.S. Pinto, retired Superintending Engineer w.as ap-
pointed as Arbitrator.
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The Arbitrator on March 23, 1981 submitted four awards
granting the claims of the respondent as stated hereinbefore
on the basis that the appellant was responsible for the slow
progress and non completion of work and the work could not
be completed as the contract was terminated by the appel-
lant, the Housing Board. The said award was filed in the
Court of Civil Judge, Senior Division, Panaji, by the Arbi-
trator on 31st March, 1981 for making the award Rule of the
Court. The appellant submitted his objections for setting
aside the awards on April 27, 1981 on the grounds inter alia
that the Arbitrator had misconducted himself by not framing
the main issue i.e. whether or not the claimant abandoned
the work and thereby committed breach of the agreement. The
Arbitrator misconducted himself by ignoring the letter of
termination wherein it Was clearly stated that the termina-
tion has been done on account of the abandonment of the work
by the claimants; the learned Arbitrator failed to decide
upon the
908
question of the abandonment of work and has wholly side
tracked the issue; the learned Arbitrator misconducted
himself by not giving reasons for the award as required
under the agreement under which he was appointed.
The learned Civil Judge, Senior Division, Panaji by his
Order dated 26th August, 1981 rejected all the objections
raised on behalf of the appellant against the said awards
and confirmed the same. All the four impugned awards have
been made Rule of the Court.
The appellant thereafter filed the aforesaid First Civil
Appeal Nos. 35/B, 36/B, 37/B and 38/B of 1981 against the
said Order of the learned Civil Judge, Senior Division,
Panaji, Goa on the ground that the Civil Judge did not
consider that the Arbitrator misconducted himself in making
the awards without recording any reasons for the same, even
though the claim was Rs.50,000 and above as provided in
clause 25 of the agreement between the parties and as such
the awards should have been set-aside by the Court.
The High Court held that having regard to the clause 25
of the terms of the agreement specifically providing that in
all cases where amount of claim in dispute is Rs.50,000 and
above the arbitrator was bound to give reasons for his
award. The statements that has been made by the Arbitrator
while giving his findings could not be considered to be the
reasoning for his finding of the award. The Court also held
that:
"The award no where contains any reasoning for
the same nor does it even obliquely mentions
that in giving his findings the Arbitrator has
even sought to adopt the reasoning of either
of the parties. In our view as the obligation
of the Arbitrator under Clause 25 of the
agreement stands, the reasons should appear to
be so in this case."
It was further held that as the arbitrator failed to
give reasons for the award it would be a misconduct on his
part and the award was liable to be vitiated on that ground.
The Court allowed all the appeals. The order of the lower
court was set-aside and the awards were remanded back to the
arbitrator for giving reasons for the same as required under
clause 25 of the arbitration agreement and thereafter to
file the same in the court of Civil Judge, Panaji, within
eight weeks after the order is served on him.
909
Against this judgment and order the impugned appeals by
special leave were filed.
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The learned counsel on behalf of the appellants has
contended that the High Court acted illegally in not consid-
ering at all that the arbitrator did not record any reasons
for making awards allowing the claims each of which exceeds
Rs.50,000 as provided under clause 25 of the arbitration
agreement and as such the arbitrator has misconducted him-
self in the proceedings and instead of sending the awards
made by the arbitrator to him for recording his reasons
ought to have set-aside the awards under section 30 of the
Arbitration Act. It has also been contended that the High
Court though it held that the arbitrator was guilty of
misconduct and the awards made by him were liable to be
vitiated on that ground yet inspite of setting aside the
awards they were sent to the arbitrator for recording rea-
sons which is totally unwarranted by law.
The learned counsel appearing on behalf of the respond-
ent, on the other hand, submitted that the awards made by
the arbitrator after hearing the parties cannot be said to
be illegal or unwarranted as the same were made after con-
sidering all papers and documents filed by the parties and
after duly hearing the parties. As such there was no ille-
gality nor any misconduct committed in making the awards.
The arbitrator has fairly considered the issues and made the
awards in question. The misconduct, if any, on the part of
the arbitrator does not concern with the probity and impar-
tiality of the arbitrator. The only allegation against the
arbitrator is that he has not recorded the reasons for the
awards made by him as per term of clause 25 of the arbitra-
tion agreement. It has, therefore, been contended by the
learned counsel on behalf of the respondent that the order
of the High Court in remanding the awards to the arbitrator
for recording reasons clearly fails within the purview of
section 16(1)(c) of the Arbitration Act, 1940 as the objec-
tion to the legality of the award is apparent on the face of
it. It does not fail within the provision of section 30 of
the said act in as much as the arbitrator has not miscon-
ducted himself or the proceedings and the awards in question
have not been improperly procured. Several decisions have
been cited at the bar in support of the respective conten-
tions advanced by the counsel for the parties.
Before considering the question whether the directions
made by the High Court in remitting the award to the Arbi-
trator for giving reasons do fall within the purview of
Section 16 of the Arbitration Act, 1940, it is appropriate
to set out the relevant provisions of section 16(1):-
910
"Sec. 16(1): The Court may from time to time
remit the award or any matter referred to
arbitration to the arbitrators or umpire for
reconsideration upon such terms as it thinks
fit--
(a) where the award has left undetermined any
of the matters referred to arbitration, or
where it determines any matter not referred to
arbitration and such matter cannot be separat-
ed without affecting the determination of
matters referred; or
(b) where the award is so indefinite as to be
incapable of execution; or
(c) where an objection to the legality of the
award is apparent upon the face of it."
Section 16 empowers the Court to remit the award to the
Arbitrator for reconsideration only in three cases specified
therein. Clause (c) of Section 16(1) provides that the award
shall be remitted to the Arbitrator by the Court where an
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objection to the legality of the award is apparent on the
face of it. Of course, the High Court has come to a finding
that the Arbitrator was guilty of misconduct for his failure
to give reasons as required. There is, however, nothing to
show that the Arbitrator misconducted himself or the pro-
ceedings in any other manner nor there is anything to show
that the awards have been improperly procured. There is no
allegation, far less, any finding, that the Arbitrator was
biased or unfair or he has not heard both the parties or he
has not fairly considered the submissions of the parties in
making the awards in question. In our opinion, it is evident
from the four awards made by the Arbitrator that the Arbi-
trator has considered all the specific issues raised by the
parties in the arbitration proceedings and came to his
finding after giving cogent reasons. The above awards cannot
under any circumstances be considered to be made by the
Arbitrator without recording any reasons for the same.
Therefore, in such circumstances, it is not proper to hold
that the Arbitrator has misconducted himself or in the
proceedings in the matter of giving the awards.
In these circumstances, we are unable to hold that the
four awards made by the Arbitrator are bad for not recording
reasons. We, therefore, uphold the said awards and we do not
think it necessary to decide the question as regards the
scope of Section 30 or Section 16of
911
the Arbitration Act. The decision of the High Court remit-
ting the awards back to the Arbitrator for giving reasons is
set aside and the awards made by the Arbitrator are upheld.
Let these awards be made rule of the Court. The appeals are,
therefore, dismissed. There will be no order as to costs.
N.P.V. Appeals dis-
missed.
912