Full Judgment Text
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PETITIONER:
M/S. PREMIER FABRICATORS, ALLAHABAD
Vs.
RESPONDENT:
HEAVY ENGINEERING CORPN. LIMITED, RANCHI
DATE OF JUDGMENT: 21/03/1997
BENCH:
CJI, K. RAMASWAMY
ACT:
HEADNOTE:
JUDGMENT:
J U D G M E N T
K. Ramaswamy, J.
We have the advantage to read the proposed judgment by
our esteemed brother Punchhi, J. Despite our deep and
abiding personal respects, we express our regards for our
inability to agree with the proposed judgment. Hence we are
constrained to right this separate judgment.
This appeal by special leave arises from the judgment
and order dated December 19, 1979 made in A.O.O. No.240 of
1975 by L.M. Sharma, J. (as he then was ) agreeing with the
dissenting opinion of one of the members of Division Bench
of Patna High Court, viz., B. S. Sinha, J. The result was
that the award of the umpire stood set aside.
The appellant had entered into an agreement with the
respondent on May 2, 1971 for execution of certain works.
During the course of their execution, certain disputes has
arisen between them. Clause 78 of the contract provided
resolution of the disputes by arbitration. In furtherance
thereof, the parties has referred the disputes in 1972 to
two arbitrators, one of the disputes referred to them was
"whether claims referred to at item 2,3,4 and 5 of Annexure-
A are or are not referable to arbitration in terms of the
contract". The total claim including items 2 to 5 was for
Rs. 2,55,600/-. The arbitrators held that the claim Nos. 2
to 5 were referable under arbitration agreement but they
could not come to an agreement on the merits of the claims.
Therefore, they had appointed an umpire by their letter
dated November 2, 1973. The umpire made a non-speaking award
directing the respondent to pay a lump sum of Rs.80,000/-
besides interest. On an application made by the appellant,
the Civil Court made the award rule of the court and the
application under Section 33 of Arbitration Act, 1940 (for
short, the "Act"] to set aside the award was dismissed. The
respondent preferred and appeal in the High Court.
When the matter came before the Division Bench
consisting of B.P. Jha and B.S. Sinha, JJ., both the learned
Judges agreed that one of the terms of the reference was
that the arbitrators were required to decide as to whether
the claim referred to under items 2 to 5 of Annexure-A are
or are not referable to arbitration in terms of the
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contract. They further held that the finding by the
arbitrator that the claims were arbitrable, was not an
interim award. The entire controversy including
arbitrability of items of to 5 was at large and the umpire
was to decide whether items 2 to 5 of Annexure-A were
arbitrable under contract. B.P. Jha, J. held that when the
matter was referred to an umpire, the whole dispute which
was referred to the umpire. If a part of the dispute was
decided by the arbitrators, the arbitrators could not refer
the other half of the dispute to the umpire. The learned
Judge observed that "In my opinion, the whole dispute is
referred to the umpire for the simple reason that the umpire
acts in lieu of the arbitrator. The umpire is entitled to
give a consolidated award instead of giving the award on
each point. While setting aside an award the court can look
at the award and not on any other extraneous evidence on the
record". Accordingly, the learned Judge dismissed the appeal
of the respondent, B.S. Sinha, J. held that if a dispute is
capable of being split into different parts and the
arbitrators agreed on one part and disagreed on the other
part. "I can see no reason whey the whole dispute must be
referred to the umpire. An interim award can be made in
terms of Section 27 of the Act. Of course, if the dispute is
not capable of being split up and the arbitrators do not
agree, the whole dispute will go to the umpire. In other
words, as far as I can see whether the whole dispute was
referred to the umpire or not depends upon the facts and
circumstances of each case for which no hard and fast rule
can be laid down." He held that the whole dispute had been
referred to the umpire. The arbitrators did not give an
interim award to say that items 2 to 5 were arbitrable and
then to further decide as to what amount was payable to the
respondent. It was not necessary to express the decision in
that behalf. "Therefore, the umpire had to consider firstly
whether items 2 to 5 were arbitrable or not. There is no
such statement in the award of the umpire. Therefore, to
hold that items 2 to 5 were arbitrable would be
speculative." Accordingly the learned Judge held that the
Judgment and decree of the Civil Court making the award as
rule of court is invalid and illegal. The award was held to
be illegal and one which could not be acted upon. When the
matter was referred to L.M. Sharma, J. [as the then was], in
the first instance, the learned Judge indicated that since
the umpire could not clothe himself with jurisdiction to
decide conclusively whether items 2 to 5 were arbitrable or
not, the question was whether the learned Judge could go
into that question? Both the counsel had taken time and
after consultation had stated before the learned Judge that
as the scope of reference was limited to the question
whether the umpire had to decide the arbitrability of items
2 to 5, the learned Judge could not go into the question
whether the claims could have validly been referred to the
arbitrators or umpire and could conclusively decide the
arbitrability thereof or whether they were within the scope
of the agreement itself or within the scope of Section 36 of
the Act. On that submission, the learned Judge had proceeded
on the basis that both the learned Judges constituting the
Division Bench were agreed that it was for the umpire to
consider and decide as the preliminary question of
arbitrability of claim 2 to 5 under the contract. The
inference that the umpire "chose to give an award allowing
the claim partially" cannot be drawn. It was also held that
unless it was possible to draw only one inference from the
impugned award, it was not permissible in law to arrive at a
conclusion that on the basis of mere possibility of having
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arrived at the decision of preliminary question which was
not stated in the expressed terms in the award, to infer
that he considered the arbitrability of item 2 to 5.
Therefore, the learned Judge concluded thus : " I,
therefore, hold that the respondent, the application in the
court below, has failed to show that the umpire had decided
the preliminary question in its favour before proceeding to
consider the claims on merits. The award must, therefore, be
set aside. In accordingly agree with the conclusion arrived
at by Mr. Justice B.S. Sinha and regret to have taken a view
different from Mr. Justice B.P. Jha for whom I have great
respect ". The learned Judge thus allowed the appeal and set
aside the award.
The question, therefore, is: whether the umpire must be
deemed to have decided arbitrability of items 2 to 5 of
Annexure-A while giving a non-speaking consolidated award
including the claim of item I? It is seen that one of the
specific references to the arbitrators was whether items 2
to 5 of the claim of the appellant are arbitrable under the
agreement. In view of the finding recorded by all the
learned Judges that there is no express finding recorded by
the umpire on the arbitrability of the claim in items 2 to
5, the question emerges: whether the umpire must be deemed
to have decided arbitrability of items 2 to 5? It is seen
that both the learned Judges of the Division Bench came to a
positive finding that the reference itself is of the
arbitrability of the claims in items 2 to 5 under the
agreement. The arbitrators were required to decide the same
as a further step to decide them on merits. Though, the
arbitrators concluded that the claims 2 to 5 were
arbitrable, both the learned Judges held that it was not an
interim award. The third learned Judge also agreed with that
conclusion. The entire dispute including arbitrability of
claims in items 2 to 5 had thereby been referred to the
umpire. The reference clearly manifests the intention of the
parties, when they preferred their dispute for adjudication
by the arbitrators, that it was a condition precedent for
the umpire to proceed to decide the claim on merits to
decide the arbitrability of claim 2 to 5. he did not write a
separated order nor indicated in the wared that he had
applied his mind to that aspect that the claims are
arbitrable. The award should have contained a statement that
the claims were arbitrable and that he had given a
consolidated award. His finding on arbitrability is not
conclusive. It is for the court to ultimately decide the
controversy. The umpire is enjoined to consider a
preliminary question of his jurisdiction as to arbitrability
of claims in items 2 to 5 of Annexure-A. It being a
jurisdictional issue, though the umpire cannot conclusively
clothe himself with his conclusion of arbitrability of items
2 to 5 which decision is to be taken ultimately by the Civil
Court as a condition to exercise his power to decide the
claims on merits, he is required to decide arbitrability of
the claims is items 2 to 5 as preliminary issue and then to
proceed to decide the claims on merits. The award cannot be
split into two parts but should be one of integral whole, as
was opined by the learned Judges constituting the Division
Bench. In a way, L.M. Sharma, J. [as he then was also agreed
in that behalf.
The sole question for consideration, therefore, is:
whether the umpire having indicated the consolidated sum in
his non-speaking award, could be deemed to have decided the
preliminary issue of arbitrability of claims 2 to 5? We may,
at the outset, state that the Constitution Bench in Raipur
Development Authority v. Chokhamal Contractors [(1989) 2 SCC
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721], had held that unless the parties expressly agree, the
arbitrator is not required to give reasons in support of his
award and the award touching the coffers of the public
exchequer and observed that in case the contracts were
entered into by and between the Government or
instrumentality of the State on the one hand and private
party on the other, they should incorporate in the contract
that the arbitrator should give reasons in support of the
award. In other case it may not be incumbent upon the
arbitrator to give reasons in the award. In the Arbitration
and Conciliation Act, 1996 repealing the 1940 Act, it is
indicated in Section 31(3) that the arbitral award shall
state reasons upon which it is based unless the parties
agree that on reasons have to be given or the award is an
arbitral award on agreed terms under Section 30 thereof. In
other words, under the 1996 Act, it is incumbent upon the
arbitrator to give reason in support of the award unless the
parties otherwise agree or give consent to the terms under
Section 30.
In Champsey Bhara & Co. v. Jivraj Balloo Spinning &
Weaving Co. Ltd. [LR (1922) 50 IA 324 : AIR 1923 PC 66] the
Privy Council held that "(A)n 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’ right depend to see if that contention is
sound. Here it is impossible to say, from what is shown on
the face of the award, what mistake the arbitrators made.
The only way that the learned judges have arrived at finding
what the mistake was is by saying: ‘inasmuch as the
arbitrator awarded so and so, and inasmuch as the letter
shows that the buyer rejected the cotton, the arbitrators
can only have arrived at that result by totally
misinterpreting Rule 52’. But they were entitled to give
their own interpretation to Rule 52 or any other article,
and the award will stand unless, on the face of its, they
have tied themselves down to some special legal proposition
which then, when examined, appears to be unsound." Thus on
the face of the award if an erroneous proposition of law or
an indication in that behalf is found which under the law is
not sustainable, it cannot be said that there is an error on
the face of the award. This view was followed by this Court
in Hindustan Construction Co. Ltd. v. State of J & K.
[(1992) 4 SCC 217].
In Tarapore and Co. v. Cochin Shipyard Ltd., Cochin
[(1984) 2 SCC 680], this Court was called upon to consider
error of jurisdiction on the arbitrability of the claims as
a question of law. A two-Judge Bench had gone into the
question of jurisdiction of the arbitrator to decide the
arbitrability of the dispute and held in para 10 that
undoubtedly the respondent proceeded to formulate the point
in dispute between the parties on which the arbitrator was
to be invited to give his award without prejudice to his
right to contend that the dispute was not covered by the
arbitration clause and that the appellant was not entitled
to any compensation in respect of the increase in the cost
of imported pile driving equipment and technical know-how
fees. At page 692, this Court considered whether the
arbitrator committed error within this jurisdiction or
exceeded his jurisdiction and pointed out thus:
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"What is the effect of referring
the specific question of law to
arbitration without prejudice to
one’s right to contend to the
contrary will be presently
examined."
"If this issue specifically raises
a question as to jurisdiction of
the arbitrator to arbitrate upon
the dispute set out in Point No.2,
it appears to have been
specifically referred to the
arbitrator for his decision.
Parties, therefore, agreed to
submit the specific question even
with regard to the scope, ambit
width and the construction of the
arbitration clause so as to define
its ascertaining whether the claim
advanced by the appellant and
disputed by the respondent would be
covered by the arbitration clause.
Whether upon its true construction
the arbitration clause would
include within its compass the
dispute thus raised between the
parties was specifically put in
issue because parties were at
variance about it."
"The arbitrator was thus required
and called upon first to decide
whether the dispute is arbitrable
as falling within the width and
answer is in the affirmative, then
alone the second point need be
examined. If the answer to the
first point of reference is in the
negative in that if the arbitrator
were of the opinion that the
dispute is not arbitrable as it
would not fall within the scope,
width and ambit of the arbitration
agreement, it would not be
necessary for him to determine
whether the appellant was entitled
to recover anything by way of
compensation. This aspect is being
analysed in depth to point out that
the parties specifically referred
the question of construction of
arbitration agreement, its width,
ambit and parameters vis-a-vis the
dispute raised so as to decide
whether the dispute would fall
within the purview of the
arbitration agreement, in other
words the jurisdiction of the
arbitrator."
In para 12 of the judgment it was further elaborated
that :
"The first point extracted
hereinbefore would clearly show
that the specific question about
the jurisdiction of the arbitrator
to arbitrate upon the dispute set
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out in Point Nos.2, 3 and 4 was
specifically referred to the
arbitrator. On the first point, the
arbitrator had to decide whether
the claim made by the appellant and
disputed by the respondent would be
covered by clause 40, i.e. the
arbitration clause. In other words,
the specific question referred to
the arbitrator was about his
jurisdiction to arbitrate upon the
disputes covered by Points Nos.2, 3
and 4, if and only if, upon a true
construction of the arbitration
clause that is first paragraph of
Clause 40, would cover the disputed
claim for compensation he can enter
into the merits of the dispute and
decide it."
In M/s. Sudarshan Trading Co. v. State of Kerala
[(1989) 2 SCC 38] a Bench of two Judges had held that in
order to establish whether the jurisdiction has been
exceeded or not "it has to be reiterated that an arbitrator
acting beyond his jurisdiction - is a different ground from
the error apparent on the face of the award. In Halsbury’s
Laws of England II, 4th edn., Vol.2 para 622 one of the
misconducts enumerated, is the decision by the arbitrator on
a matter which is not included in the agreement or
reference. But in such a case one has to determine the
distinction between an error within the jurisdiction and an
error in excess of the jurisdiction. Whether a particular
amount was liable to be paid or damages liable to be
sustained, was a decision within the competency of the
arbitrator in this case. By purporting to construe the
contract the court could not take upon itself the burden of
saying that this was contrary to the contract and, as such,
beyond jurisdiction. It has to be realised that there is a
distinction between disputes as to the jurisdiction of the
arbitrator and the disputes as to the exercise of that
jurisdiction. There may be a conflict as to the power of the
arbitrator to grant a particular remedy. Therein, it was
held that the arbitrator had jurisdiction to award the
amount and that, therefore, it was not a case of
jurisdictional error but an error within his jurisdiction.
In U.P. Rajkiya Nirman Nigam Ltd. v. Indure Pvt. Ltd.
[(1996) 2 SCC 667] a Bench of three Judges [to which one of
us, K. Ramaswamy, J., was member] had gone into the question
whether there emerged any concluded contract and the claim
are arbitrable and whether he can get exclusive jurisdiction
to decide those questions by himself. It was held in para 13
that "the arbitrability of a claim depends on the
construction of the clause in the contract. The finding of
the arbitrator/arbitrators on arbitrability of the claim is
not conclusive as under Section 33, ultimately it is the
court that decides the controversy. It being a
jurisdictional issue, the arbitrator/arbitrators cannot
clothe themselves with jurisdiction to conclusively decide
the issue." In para 15 it was held thus:
"The clear settled law thus is that
the existence or validity of an
arbitration agreement shall be
decided by the court alone.
Arbitrators, therefore, have no
power or jurisdiction to decide or
adjudicate conclusively by
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themselves the question since it is
the very foundation on which the
arbitrators proceed to adjudicate
the disputes. Therefore, it is
rightly pointed out by Shri Adarsh
Kumar Goel, learned counsel for the
appellant that they had by mistake
agreed for reference and that
arbitrator cold not decide the
existence of the arbitration
agreement or arbitrability of the
disputes without prejudice to the
stand that no valid agreement
existed. Shri Nariman contended
that having agreed to refer the
dispute, the appellant had
acquiesced to the jurisdiction of
the arbitrators and, therefore,
they cannot exercise the right
under Section 33 of the Act. We
find no force in the contention. As
seen, the appellant is claiming
adjudication under Section 33 which
the court alone has jurisdiction
and power to decide whether any
valid agreement is existing between
the parties. Mere acceptance or
acquiescing to the jurisdiction of
the arbitrators for adjudication of
the disputes as to the existence of
the arbitration agreement or
arbitrability of the dispute does
not disentitle the appellant to
have the remedy under Section 33
through the court. In our
considered view the remedy under
Section 33 is the only right royal
way for deciding the controversy."
Accordingly, it was held that the arbitrator cannot
decide the arbitrability of the claim by himself and it was
to be decided by the court. In Union of India v. G.S. Atwal
& Co. (Asansole) [(1996) 3 SCC 568] a Bench of two Judges,
to which one of us, K. Ramaswamy, J. was a member, the
question was whether the arbitrator, when he enlarged his
scope of the award in a non-speaking award, could
conclusively decide the dispute and award a consolidated
sum. After elaborate consideration it was held in paragraph
6 thus:
"To constitute an arbitration
agreement, there must be an
agreement that is to say the
parties must be ad idem.
Arbitrability of a claim depends
upon the dispute between the
parties and the reference to the
arbitrator. On appointment, he
enters upon that dispute for
adjudication. The finding of the
claim is not conclusive, as under
Section 3 ultimately it is the
court that decides the controversy.
IT can hardly be within the
arbitrator’s jurisdiction to decide
whether or not a condition
precedent to his jurisdiction has
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been fulfilled. The arbitrator had
no power to decide his own
jurisdiction. The arbitrator is
always entitled to inquire whether
or not he has jurisdiction to
decide the dispute. He can refuse
to deal with the matter at all and
leave the parties to go to the
court if he comes to the conclusion
that he has no power to deal with
the matter, or he can consider the
matter and if he forms the view
that the contract upon which the
claimant is relying on and from
which, if established, he alone has
jurisdiction, he can proceed to
decide the dispute accordingly.
Whether or not the arbitrator has
jurisdiction and whether the matter
is referred to or is within the
ambit of clause for reference of
any difference or dispute which may
arise between the parties, it is
for the court to decide it. The
arbitrator by a wrong decision
cannot enlarge the scope of the
submission. It is for the court to
decide finally the arbitrability of
the claim in dispute or any clause
or a matter or a thing contained
therein or the construction
thereof."
Accordingly, the award was found to be in excess of
jurisdiction and was set aside.
In Tarapore Company case (supra), the arbitrator had
indicated his mind in his non-speaking award thus:
"It has to be seen whether the term
of the agreement permitted
entertainment of the claim by
necessary implication. It may be
stated that we do not accept the
broad contention of Shri Nariman
that whatever is not excluded
specifically by the contract can be
subject-matter of claim by a
contractor. Such a proposition will
mock at the terms agreed upon.
Parties cannot be allowed to depart
from what they had agreed. Of
course, if something flows as a
necessary concomitant to what was
agreed upon, courts can assume that
too as a part of the contract
between the parties."
On that basis, this Court had held that he had decided
the arbitrability of the claim by his express indication in
that behalf and that, therefore, the award was held to be
valid.
In Tarapore & Co. V/s. State of M.P. [(1994) 3 SCC 521]
it was held that an award rendered by going beyond the terms
of the arbitration agreement is without jurisdiction. On the
facts in that case, it was held that the dispute was within
the terms of the agreement and hence the award was not
without jurisdiction. This Court Pointed out latent and
patent errors and that patent error was always amenable to
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correction. In Gujarat Water Supply and Sewerage Board v.
Unique Erectors [(1989) 1 SCC 532] one of the questions
referred was arbitrability of one of the items. The
arbitrator in his award had indicated thus:
"In the instant case, the
arbitrator by virtue of the terms
mentioned in the order of this
Court had to decide which of the
disputes were arbitrable and which
were not. It is true that the
arbitrator has not specifically
stated in the award that he had to
decide the question of
arbitrability. The arbitrator has
rested by stating that he had heard
the parties on the point of
arbitrability of the claim and the
counter-claim. He has further
stated that after ’considering all
the above aspects’ and ’the
question of arbitrability or non-
arbitrability’ he had made the
award on certain aspects."
It was held that since the arbitrator had indicated his
mind in the award by awarding consolidated sum the validity
of the non-reasoned award was upheld.
In "Russel on Arbitration" [Nineteenth Edition] by
Another Walton, page 99, it is stated as under:
"it can hardly be within the
arbitrator’s jurisdiction to decide
whether or not a condition
precedent to his jurisdiction has
been fulfilled. It has indeed
several times been said bluntly
that an arbitrator has no power to
decided his own jurisdiction and in
one case where rules of an
institution prepared to conduct
arbitrations gave the arbitrator
such power, the court will ignore
this when asked to enforce the
award, and decide the question
itself. However, an arbitrator is
always entitled to inquire whether
or not he has jurisdiction. An
umpire faced with a dispute whether
or not there was a contract from
which alone his jurisdiction, if
any, can arise can matter at all
and lease the parties to go to
court, or he can consider the
matter and if he forms the view
that the contract upon which the
claimant is relying and from which,
if established, alone his
jurisdiction can arise is in truth
the contract, he can proceed
accordingly."
In "Law of Arbitration" by R.S. Bachawat [2nd (1987)
Edition] at pages 154-55, it is stated thus:
"An arbitrator cannot by mistake
assume jurisdiction over a matter
on which he has no jurisdiction. If
it is shown by the terms of the
submission or by extrinsic evidence
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that the arbitrator has adjudicated
upon matters outside the scope of
his authority the award cannot
stand, however well meaning and
honest the mistake might have been.
An arbitrator cannot give himself
jurisdiction by a wrong decision
collateral to the merits as to
facts on which the limits of his
jurisdiction depends. Where it was
a condition precedent to his
jurisdiction that the dispute
should have arisen during a tenancy
between the plaintiff and the
defendant or in the event of a
collusion if certain works had been
completed, the if certain works had
been completed, the arbitrator
could not clothe himself with
arbitrator could not clothe himself
with arbitrator could not clothe
himself with jurisdiction by a
wrong decision on the preliminary
. The question is not concluded
against any party by a finding of
the arbitrator that he has
jurisdiction. It is for the court
and not for the arbitrator to
decide finally whether or not the
arbitrator has jurisdiction and
that is the law both in India and
in England/"
"...The question whether the
matters referred were within the
ambit of the clause for reference
of "any difference or dispute which
may arise between the partners is
for the court to decide".
"...Disputes about the existence or
validity of the contract and as to
the existence of facts which render
it illegal must be determined by
the court and not by the
arbitrator. The arbitrator cannot
by his own finding clothe himself
with jurisdiction. Supposing he
finds that the arbitration
agreement is valid such a finding
cannot bind the parties."
In Tamil Nadu electricity Board V/s. M/s. Bridge Tunnel
Constructions & Ors. [1997 (2) SCALE 653] A two-Judge Bench,
to which one of us, K. Ramaswamy, J., was a member, a
similar question, as in the present case, had directly
arisen for consideration. Therein, in a dispute raised under
Section 33 of the Act, one of the contentions raised was as
to the arbitrability of the claims put up by the respondent.
The Court left open that question and held that in the event
of the dispute raised by the appellant therein, the
arbitrator was required to go into the question and if it
decided that question against it, it would be open to the
appellant to have the award challenged in the civil Court.
The arbitrators differed on the question of arbitrability
and an umpire came to be appointed for decision on the point
of arbitrability. The umpire without deciding the
arbitrability of the claim gave consolidated sum in his non-
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speaking award. Considering the entire case law, this Court
held: "(T)hus, it could be seen that prior to the
proceedings under Section 33, the court held left open the
point of the non-arbitrability of the dispute and the umpire
had to decide the dispute. In the event of the decision
going against the Board, the same is also entitled to
question the correctness of the award in a court of law".
After considering the question, this Court held: "(I)t would
thus be clear that the arbitrator cannot clothe himself
conclusively with the jurisdiction to decide or omit to
decide the arbitrability of a particular item or the claim
made by the parties. When a specific reference has been made
to the arbitrator and the parties raise the dispute of
arbitrability, with the leave of the court/by a direction of
the court in a proceedings under Section 33, he is to decide
the arbitrability of the dispute and make a decision while
giving reasons in support thereof. The decision of the
arbitrator in granting a particular sum by a non-speaking
award, therefore, hinges upon the arbitrability of a dispute
arising under the contract or upon a particular item claimed
thereunder. The question of decision by implication does not
arise since his jurisdiction to decide the dispute on merits
hinges upon his jurisdiction to decide the arbitrability of
the dispute. In this case, in view of the finding recorded
by the court, which has become final, as referred to
earlier, the arbitrator/umpire was enjoined to decide the
arbitrability of the claims set up by the respondent and
disputed by the appellant. Admittedly, the award of the
umpire does not contain any decision on arbitrability of the
claims". Since the award contains the claims, in a non-
speaking award where the claims consist of arbitrable and
non-arbitrable claims, it was held that it would be
difficult to discern as to what extent the umpire had
considered the admissible and inadmissible claims which he
adjudged. In such a situation, it would not be possible to
discern to what extent he had exercised his jurisdiction
vis-a-vis of the admissible claims and disallowed the non-
arbitrable claims. Thus it was not clear whether he
exercised his authority in abdication of or in excess of his
jurisdiction. Therefore, it was held to be an error of
jurisdiction, the very foundation for his decision. The
award was held to be in excess of his jurisdiction and was
accordingly set aside. The umpire having been invested with
jurisdiction to decide the arbitrability of the claim, he
has committed error of jurisdiction in not considering the
arbitrability of the claims and passed a non-speaking award.
Accordingly, the award was set aside.
In view of the admitted position that the umpire in the
present case has not considered the arbitrability of items 2
to 5 of the claims in the non-speaking award, it cannot be
construed that by implication he had considered the
arbitrability of the claims. The preliminary question raised
by the parties was as to the arbitrability of items 2 to 5
of the claims and whether they ar within the scope of the
contract. Before proceeding to adjudicate the claims 2 to 5
on merits, the umpire was required to give his finding on
the issue of arbitrability of claims 2 to 5 and reasons in
support thereof. The third learned Judge (L.M. Sharma, J. as
he then was) and Sinha, J. have rightly held that the umpire
cannot conclusively decide for himself in a non-speaking
award of the arbitrability of the claims and that,
therefore, the umpire was required to decide as a
preliminary issue of the arbitrability of the claims 2 to 5.
We agree with the learned judges on that finding that the
award is illegal.
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The question that found that remains to be considered
is what procedure in such a situation is required to be
adopted? In M/s. Sudarshan Trading Company Case, Tarapore
Co. Case, G.S. Atwal case and Tamil Nadu Electricity Board
case (supra) this Court pointed out that in such a situation
two corses are open to the Court, viz., either to set aside
the award in toto and relieve the parties from the
arbitration or to remit the a ward to the umpire/arbitrator
for de novo consideration. In G.S. Atwal case and Tamil Nadu
Electricity board cases this Court had set aside the award
and thereby put the lis in quietus. But in view of the fact
in this case we think that since the preliminary issue
raised by the parties was not decided by the umpire which is
condition precedent to proceed with adjudication of the
Clair on merits, he committed misconduct in giving the award
We, therefore, direct that the matter will go back to the
Umpire for reconsideration of the same afresh in the light
of what we have stated hereinbefore. If for any reason, the
Umpire is not available the parties may choose a new Umpire
and if the parities fail to do so, the Court may appoint a
new Umpire who will decide the matter afresh, clearly
expressing his views on the arbitrability of claims 2 to 5
while deciding the matter.
The appeal accordingly is allowed with the above
directions. No casts.