Administrative Law: Judicial review – Scope of – Interference with the arbitral award – Held: Is limited – Award passed by an Arbitrator can be challenged only on grounds specified in ss.30 and 33 of the Arbitration Act, namely, when there is an error on the face of the Award or when the Arbitrator has mis-conducted himself or the proceedings – Nor can the Court substitute its own view on the conclusion of law or facts as against those drawn by the Arbitrator, as if it is sitting in appeal – Arbitration Act, 1940. Arbitration: Arbitrator is the final arbiter of the disputes between the parties and it is not open to a party to challenge the Award on the ground that he has drawn his own conclusions or has failed to appreciate certain facts – It is beyond the jurisdiction of the Appellate Court to assign to itself, the task of construing the terms and conditions of the contract and its provisions and take a view on certain amounts awarded in favour of a party – As long as the Arbitrator has taken a possible view, which may be a plausible view, simply because a different view from that taken in the Award, is possible based on the same evidence, would also not be a ground to interfere in the Award – In the instant case, the Sole Arbitrator had given certain cogent reasons for awarding the amount in favour of the appellant-claimant towards idle hire charges of the parts of the machineries and equipments and loss of machinery – It was beyond the domain of the Appellate Court to have examined the reasonableness of the said reasons by reappreciating the evidence to arrive at a different conclusion – Having regard to the fact that amounts have been awarded in favour of the appellant-claimant on the above heads, based on the Report submitted to the Court by the Court Commissioner for valuing the tools and machinery and premised on the formula offered by the appellant-claimant for arriving at the idle hire charges, both being undisputed, there is no good reason for the Appellate Court to have interfered in the manner it did – Arbitration Act, 1940.
Disposing the appeal, the Court
HELD: 1.1 Court does not sit in appeal over an Award passed by an Arbitrator and the only grounds on which it can be challenged are those that have been specified in Sections 30 and
33 of the Arbitration Act, namely, when there is an error on the face of the Award or when the Arbitrator has mis-conducted himself or the proceedings. [Para 10][619-F-G; 620-A] NTPC Ltd. v. Deconar Services Pvt. Ltd. (2021) SCC Online SC 498 Food Corporation of India v. Sreekanth Transport (1999) 4 SCC 491 : [1999] 3 SCR 699; Kwality Manufacturing Corporation v. Central
Warehousing Corporation (2009) 5 SCC 142; Assam State Electricity Board and Others v. Buildworth Private Limited (2017) 8 SCC 146 : [2017] 7 SCR 123–
referred to.
1.2 It is also a well-settled principle of law that challenge cannot be laid to the Award only on the ground that the Arbitrator has drawn his own conclusion or failed to appreciate the relevant facts. Nor can the Court substitute its own view on the conclusion of law or facts as against those drawn by the Arbitrator, as if it is sitting in appeal. As long as the Arbitrator has taken a possible view, which may be a plausible view, simply because a different view from that taken in the Award, is possible based on the same evidence, would also not be a ground to interfere in the Award. [Paras 12, 13][621-B-C; 622-B-C]
State of Rajasthan v. Puri Construction Co. Ltd. And Another (1994) 6 SCC 485 : [1994] 3 Suppl. SCR 616; Arosan Enterprises Ltd. v. Union of India and Another (1999) 9 SCC 449 : [1999] 2 Suppl. SCR 621,
Municipal Corporation of Delhi v. Jagan Nath Ashok Kumar and Another (1987) 4 SCC 497 : [1988] 1
SCR 180 – referred to.
2.1 Once the Sole Arbitrator had interpreted the clauses of the contract by taking a particular view and had gone to great length to analyse several reasons offered by the appellant-claimant to justify its plea that it was entitled for extension of time to execute the contract, the Division Bench of the High Court ought not to have sat over the said decision as an Appellate Court and seek to substitute its view for that of the Arbitrator. [Para 20][626-E-F]
2.2 In the instant case, having gone through the Award, the Sole Arbitrator was lucid in his reasoning for taking a particular view on the interpretation of the terms and conditions of the contract between the parties. It was for this very reason that the Single Judge had forbore from interfering with the arbitral Award and dismissed the petition filed by the respondent-Union of India under Sections 30 and 33 of the 1940 Act. By going into the minute details of the evidence led before the Sole Arbitrator with a magnifying glass and the findings returned thereon, the Appellate Court has clearly transgressed the limitations placed on it. In any case, the reasons offered for taking such a view, are neither justified nor called for for interfering with the arbitral Award. The findings returned by the Sole Arbitrator endorsed by the Single Judge are accepted that there was sufficient justification for the appellant-claimant to have sought extension of time for completing the work and that the decision of the respondent-Union of India to terminate the contract, was not for legitimate reasons. [Paras 21, 22][626-F-H; 627-A-B]
3.1 The second argument concerns the amount that was awarded in favour of the appellant-claimant on account of idle hire charges and the value of its machinery and equipment lying at the site, that has been set aside in the impugned judgment. Though the appellant-claimant had sought compensation under several heads, the Sole Arbitrator granted it an amount of 15,35,40,785/- towards idle hire charges and for the value of the machinery, inclusive of interest upto 31st May, 1999. The High Court appointed an Engineer to ascertain the availability of the different items and machineries and their value. The Engineer and Insurance Surveyor submitted a report, just after a year from the date of termination of the contract, stating inter alia that there were 21 items of machinery available at the site and their collective market value was 2,72,95,000/- and that the condition of most of the machineries had deteriorated and they were no longer usable. The High Court allowed the appellant-claimant to remove
21 items of the machinery lying at the site, subject to it furnishing a bank guarantee for a sum of 2.73 crores within three weeks. Though permission was granted to the appellant-claimant to take delivery of the said machineries after furnishing a bank guarantee, it did not do so on taking a plea that when the respondent-Union of India was approached for inspection of the machineries and to verify tampering/missing parts, the latter had refused to prepare any inventory and had stated that the machineries and equipments will be released on a “as is where is basis”. The Sole Arbitrator observed that after termination of the contract of the appellantclaimant, the balance contract work was got completed by the respondent-Union of India through the Border Road Organization [BRO] on 23rd December, 1995 and till that time, the tools and machinery had remained with the respondent-Union of India. [Paras 23, 24][627-B-C, E-H; 628-A-C]
3.2 Finding fault with the respondent-Union of India of having failed to mitigate the damages by handing back the tools and machineries to the appellant-claimant at least immediately after 23rd December, 1995, in the arbitral Award held that the appellant-claimant was entitled to idle hire charges from 2nd April, 1992, the date of termination of the contract, till 23rd December, 1995, the date of completion of the balance contract work by the BRO. Relying on the report of the Valuer appointed by the Court to give a Report relating to the machineries at the site and their condition and valuation and further, noting that both sides had accepted the said Report, the Sole Arbitrator held that it was fairly considered it safe to rely on the said Report for purposes of assigning valuation to the tools and machinery. Even for purposes of computing the idle hire charges of the machineries for the period between 2 nd April, 1992 to 23 rd December, 1995, the calculation given by the appellant-claimant based on a particular formula, was not objected to by the respondent-Union of India. Premised on the said formula, a sum of
6,77,41,386/- was
awarded in favour of the appellant-claimant towards idle hire charges of machineries and equipment with interest payable @ 18% p.a. and a sum of 2,72,95,000/- was granted to the appellantclaimant towards the value of the tools and machineries totalling to a sum of
15,35,40,785/- inclusive of interest. [Para 25] [628-D-H]
3.3 The Appellate Court has set aside the aforesaid claim by taking a view that the Sole Arbitrator lost sight of the fact that once the High Court had passed an order granting permission to the appellant-claimant to remove the equipment and machineries from the site in the proceedings initiated by it and still they were not removed, then it has none else to blame but itself for the situation. Holding that the Sole Arbitrator had misconducted himself by observing that the claimant “may be correct” in not taking the machineries without an inventory when they were available at the site, the Appellate Court held that the appellantclaimant was not entitled to any amount towards the value of the tools and machineries, having been awarded idle hire charges for the very same equipments. [Para 26][629-A-C]
3.4 The aforesaid conclusion drawn by the Appellate Court is manifestly erroneous and flies in the face of the settled legal position that the Arbitrator is the final arbiter of the disputes between the parties and it is not open to a party to challenge the Award on the ground that he has drawn his own conclusions or has failed to appreciate certain facts. It is beyond the jurisdiction of the Appellate Court to assign to itself, the task of construing the terms and conditions of the contract and its provisions and take a view on certain amounts awarded in favour of a party. The Sole Arbitrator had given certain cogent reasons for awarding the amount in favour of the appellant-claimant towards idle hire charges of the parts of the machineries and equipments and loss of machinery. It was beyond the domain of the Appellate Court to have examined the reasonableness of the said reasons by reappreciating the evidence to arrive at a different conclusion. Having regard to the fact that amounts have been awarded in favour of the appellant-claimant on the above heads, based on the Report submitted to the Court by the Court Commissioner for valuing the tools and machinery and premised on the formula offered by the appellant-claimant for arriving at the idle hire charges, both being undisputed, there is no good reason for the Appellate Court to have interfered in the manner it did. [Para 27][629-C-G]
4. The terms and conditions of the contract referred by the respondent-Union of India, namely, Clauses 7, 11, 54 and 70 have been duly noted, discussed and declared as inapplicable to the fact situation by the Sole Arbitrator, by relying on the facts of the case, the conduct of the parties and some other material terms and conditions of the contract, which in his view disentitled the respondent-Union of India from claiming that it was justified in refusing to extend the time as prayed for by the appellant-claimant, to complete the project. Therefore the submission made on behalf of the respondent-Union of India that the Sole Arbitrator had misconducted himself is rejected. Having held so, none of the decisions cited on the aspect of “excepted matters” would be of any assistance to the respondent-Union of India. [Para 29] [630-B-D]
Rajasthan State Mines and Minerals Ltd. v. Eastern Engineering Entereprises and Another (1999) 9 SCC
283 : [1999] 2 Suppl. SCR 710 – held inapplicable.
Grid Corporation of Orissa Ltd. And Another v. Balasore Technical School (2000) 9 SCC 552; General Manager, Northern Railway and Another v. Sarvesh Chopra (2002) 4 SCC 45 : [2002] 2 SCR 156; K.P.Poulose v. State of Kerala and Another (1975) 2 SCC 236 : [1975] Suppl. SCR 214 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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