Arbitral award predicated on cryptic, unreasoned findings and apparent bias is patently illegal and unsustainable.

NTPC awarded a contract valued at Rs. 6.57 crores to Tarapore for the construction of an Ash Bund Structure at the Farakka Project

Disputes arose regarding delays, with Tarapore alleging local labor interference and bomb attacks, while NTPC alleged unilateral abandonment after only 19% completion

Arbitration was invoked in 1990 under the 1940 Act, but the proceedings continued under the 1996 Act following a 1996 court order

The Arbitrator, a serving official of NTPC, issued an award on 14.03.2008, largely favoring NTPC by awarding it Rs. 2.43 crores after adjustments

Both parties challenged the award under the Arbitration and Conciliation Act, 1996

1. Whether the Arbitral Award was vitiated by bias due to the appointment of serving NTPC officials as arbitrators

2. Whether the findings on preliminary issues regarding delay and abandonment were "reasoned" as mandated by Section 31(3) of the 1996 Act

3. Whether the Arbitrator acted within his jurisdiction by deciding claims based on equity rather than the specific terms of the contract

The court applied Section 31(3) of the Arbitration and Conciliation Act, 1996, which mandates that an arbitral award must state the reasons upon which it is based

It relied on Associate Builders v. DDA to define "patent illegality" and "fundamental policy of Indian law," noting that awards shocking the conscience or violating statutes are void

The "intelligible and adequate reasons" standard from Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd. and OPG Power Generation v. Enexio Power was applied.

Section 28(2) of the 1996 Act was invoked, which prohibits arbitrators from deciding ex aequo et bono (on equity) unless expressly authorized by the parties

The appointment of serving General Managers of NTPC, particularly after previous allegations of misconduct and venue manipulation to Farakka, created a reasonable apprehension of bias

The Arbitrator failed to provide "reasons" for preliminary findings; he verbatim reproduced 30 pages of pleadings but offered only cryptic conclusions that failed to address specific evidence of "bomb attacks" or "kidnappings"

The court noted that a link between material and conclusion was absent

Regarding Claim No. 2 (escalation) and Claim No. 4 (DG charges), the Arbitrator ignored contractual bars and awarded 50% of the amounts on "equitable grounds"

By acting as an amiable compositeur without party authorization, the Arbitrator violated Section 28(2) and committed "patent illegality"

The court allowed both the suit and the petition, setting aside the Arbitral Award dated 14.03.2008 in its entirety. All claims and counter-claims were consequently set aside.