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PETITIONER: B.V. RADHA KRISHNA

       Vs.

RESPONDENT: SPONGE IRON INDIA LTD.

DATE OF JUDGMENT:       04/03/1997

BENCH: CJI, K. VENKATASWAMI

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T K. VENKATASWAMI, J.      Leave granted      Heard  learned  counsel  for  the  parties.  The  short question that  arises for  out consideration  is whether the High Court  was justified  in interfering  with the award by reducing the amount for he work done as well as allowing the interest only  from the  date of  the notice  demanding  the amount.      The  appellant   contractor  undertook   the  work   of transportation of  waste and  finished products  within  the plan of  the respondent company commencing from 16.4.1982 to 31.3.1983. The  agreement in  respect of  that contract  was executed  by  both  the  parties  on  8.6.1982.  As  certain disputes  arose   between  the   parties   in   respect   of transportation work  the appellant  issued  notices  to  the respondent calling  upon them  to settle the bills and claim raised by him. As the respondent failed to settle the bills, the appellant  moved the  City Civil  Court Hyderabad  under Section 20  of the  Arbitration Act (hereinafter referred to as "the  Act") for  appointment of  the Sole  Arbitrator  to adjudicate upon the dispute between the parties. Mr. Justice K. Punnayya  (retired judge  of the  High  Court  of  Andhra Pradesh) was  appointed as  Sole Arbitrator  by order  dated dated 31.10.1985.  The learned Arbitrator by the award dated 1.8.1986, after  giving opportunity  to  both  the  parties, determined the  amount of  Rs. 5,29,864.55 as payable by the respondent Company to the appellant. In addition to that the Arbitrator also  awarded interest of the rate of 18 per cent per annum  on the said amount from 1.4.1983 till the date of award being made the rule of Court.      The appellant  moved the City Civil Court, Hyderabad by filling O.S.  No.1027 of  1986 for  making the  award of the Arbitrator as  rule of  the Court  and also  prayed for  the grant of  interest at the rate of 21 per cent per annum from the date  of decree  till the  date of  realisation  of  the amount. The  respondent company,  on the  other hand,  filed O.P. No 349/86 challenging the award. The learned judge City Civil Court by a common judgment dated 30.8.1988 decreed the suit filed  by the appellant for making the award as rule of

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the Court  by awarding  20% interest from the date of decree till the  date of realisation of the amount of dismissed the O.P. filed by the respondent  challenging the award.      Aggrieved by  the common judgment and order of the City Civil Court,  the respondent Company moved the High Court in C.M.A. No.  1277/88 and  C.R.P.No. 3695/88  against O.P. No. 349/86 and O.S. No.1027/86 respectively.      The Division Bench the High Court, by a common judgment dated 29.9.1995,  partly allowed  the appeal  as well as the Revision Petition by reducing the amount from 5,29,864.55 to Rs. 1,72,347/-  and interest  18% from  14.6.1984 instead of from 1.4.1983.  The  appellant  is  aggrieved  by  the  said judgment of the High Court.      Mr. K.  Madhava Reddy. learned Senior Counsel appearing for the appellant submitted that the High Court exceeded its jurisdiction in  interfering with  the well considered award of the  arbitrator by  examining the  matter  as  a  regular appellate court.  Learned counsel also invited out attention to the  discussion made  by the Arbitrator as well as by the High Court  regarding the  relevant clause  in the agreement and in  particular to  the  expression  one  ’One  Kilometre lead’. We  find from the Award that the Arbitrator has taken into account the oral evidence  of both the parties and also the documentary  evidence placed  before him  to come to the conclusion that  the version  of the respondent company ’one Kilometre lead’  means ’one  Kilometre by  one side’  in not correct by way of understanding it.      This finding  of the  Arbitrator was  upset by the High Court by  going into  the question as if sitting a appeal to render a  contrary view.  this,  according  to  the  learned counsel, is  not the  jurisdiction of the High Court as this is not  an error  apparent on  the face  of the  record.  He further argued  that it  is settled law that the Court while exercising power  under Section  30 of  the Arbitration  Act cannot re-appreciate all the materials on the record for the purpose of  recording a  finding whether  in the  facts  and circumstances of  a particular  case the  award in  question could have  been made.  In support  of  this  contention  he placed reliance  on Hindustan  Construction Company Ltd. Vs. Governor of Orissa and Others (1995) 3 SCC 8.      The  learned   counsel  for   the  respondent   however strenously argued supporting the judgment of the High Court. According to  him  the  High  Court  has  placed  a  correct interpretation on the clause in the agreement in question by referring to  various dictionary and other technical meaning to be  given to  the word  ’lead’ occuring in the clause. He also submitted  that the  High Court  has explained the oral evidence of R.W. 5 and therefore, the view taken by the High Court Should  be accepted in preference to the view taken by the Arbitrator.      We are  afraid we  cannot accept  the contention of the learned counsel appearing for the respondent Company. We are of the view of that the learned counsel for the appellant is right  in  contending  that  the  High  Court  exceeded  its jurisdiction under  Section 30  of the  Arbitration  Act  by dealing with  the issue as an appellate court. Regarding the issue in question, the Arbitrator has observed as follows :-      "The  next   point  that   requires      consideration is  whether R.W.- 1’s      contention that  one kilometre lead      mentioned  in  Ex.  R-1  means  one      kilometre by  one side  but not  to      and  fro   as  contended   by   the      claimant, is acceptable?           R.W.1 asserts  in his evidence

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    that in  all transport contracts it      would be  mentioned  only  as  lead      which mean  by one  side... In fact      R.W.   1’s    version   that   "one      kilometre lead  means one Kilometre      by one  side"  is  contradicted  by      their own witness R.W.-5, to whom a      part of  P.W.-1’s present  contract      was  given  under  the  work  order      Ex.R-8  dated   14.3.1983.  R.W  -5      deposed  that  one  Kilometre  lead      includes to  and  fro.  He  further      clarified  that   though  the  word      "lead" does not mention the word to      and fro", it is meant or understood      as to  and fro.  R.W.-5’s  evidence      that the  lead of  1 k.m. means one      kilometre  to  and  fro.  falsifies      R.W.-1’s version  in  this  regard.      P.W.-1’s evidence on this aspect is      that  in   the  case   of  internal      transport the  word ’lead’  only is      mentioned and  it would mean to and      fro. If  the lead is only one side,      the     tender     notice     would      specifically mention as "one side".      In support  of  his  contention  he      relied  upon   Ex.C-2  the   Tender      Notice  issued   by  the  Singarani      Collaries  Co.   Ltd.  Bellampally,      dated 5.11.1985  published  in  the      Indian Express.  Hyderabad  edition      dated  19.11.1985.  Under  Ex.  C-2      Sealed  Tenders  are  invited  from      reputed transport  contractors  for      transport of  coal is  self dumping      lorried at the following place :      "One Way distance  Approx. quantity      in K.M.’s(Approx.) in tonnes                         by/month      SRP 2A to             9,000      RAP-I CSP           It is  therefore,  clear  that      Ex.C-2 which  relates to  transport      contract specifically  mentions  as      "one   way   distance",   Ex.   C-2      clarifies that  as the  lead is for      one   side,    it   is    mentioned      specifically as "one way distance".           R.W.-1  was   confronted  with      Ex.C-2 in the Cross-examination and      he admitted that Ex. C-2 relates to      the transport contract.           R.W.-1, of  course, says  that      Ex.C-2  relates   to  that  Company      (Singarani Collories).  It is  true      that Ex.  C-2 relates  to Singarani      Colleries,   but    it   is    also      Government   Company.    All    the      Government companies have to follow      the same  rules pertaining  to  the      transport  contracts.  Even  R.W.-1      stated in  his evidence that in all      the transport contracts it would be      mentioned as  lead only  and  would

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    not be  mentioned as  one way lead.      But Ex.  C-2 proves  that the  view      expressed by R.W.-1 is not correct.           Since  R.W.-5   who   is   the      witness of  the  respondent-company      and  who   transported  and  dumped      22,000 M.Ts.  of material  from out      of P.W. 1’s contract, unequivocally      stated  that   one  kilometre  lead      mentioned in tender notice is meant      and  understood  as  one  kilometre      lead to  and fro  and since Ex. C-2      also specifically  mentions as  one      side  lead   P.W.-1’s  version   is      accepted   and   R.W.-1’s   version      cannot be accepted.           From may  above discussion,  I      hold that  the claimant transported      10.195.80 M.Ts.  of material within      one kilometre  lead to  and fro. as      contended by  the claimant  but not      the entire  material  of  47,463.29      M.Ts.   as    contended   by    the      respondent Company."      As against  the above  discussion and conclusion of the Arbitrator, The  high Court  on the  same issue  observed as follow :-      "....(T)he learned  Arbitrator  did      not discuss the meaning of the term      ’lead’   used    in   ordinary   or      engineering parlance.  He relied on      two  factors,  namely,  the  tender      notice of  another Company (Ex.C-2)      and the so-called admission of R.W.      -5 which we shall refer to later.           What is  important is  to find      out whether  the world ’lead’ means      the distance covered from the point      of   origin   to   the   point   of      destination  only,  or  the  return      empty trip  form the destination to      the point  of origin should also be      taken  into   consideration.  If  a      distance of  say, 4  Kms was  to be      covered by way of ’lead’ whether it      would mean  that a distance of only      2 Km  from the  point of  origin to      the point  of destination  would be      taken into  account or  whether the      return trip  of 2  Km also would be      included within  the meaning of the      word ’lead’.  We have  no doubt  in      our mind  that,  that  is  not  the      meaning which  could be  attributed      to the  word ’lead’.  ’Lead’  means      and for  all practical  purposes it      is only  the one way distance to be      covered from the point of origin to      the  point  of  destination  unless      otherwise specified."           "The      concise       Oxford      Dictionary.  1990  Edition,  spells      out different  contexts. As  far as      the present  context  is  concerned      the meanings  of the word ’lead’ is

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    stated to be as follows           "Bring to a certain position      or destination"      In  Oxford   Universal   Dictionary      (Illustrated) the  meaning  of  the      word  ’lead’   under  the  sub-head      ’Engineering is given as follows"      "The distance to which ballet,coal,      soil etc. is to be  conveyed to its      estination."           This meaning attributed to the      word   ’lead’    in   the    Oxford      Dictionary  makes   it   abundantly      clear that  only one  way  distance      from the  point of  origin  to  the      point of destination is to be taken      into account.      The High Court further observed :           "We are  also of the view that      tit admits  of one and only meaning      and   the    Arbitrator,    on    a      consideration of irrelevant factor,      namely, tender  notice of Singarani      Colleries  and   going  by  a  non-      existent   admission    of   R.W.-5      understood the  word  ’lead’  in  a      sense   contrary   to   its   plain      meaning.  Without  any  factual  or      legal basis  and, therefore,  there      is an  error of law apparent on the      face of the award. The construction      of a  material portion  of document      is  a  question  of  law,  but  not      merely one  of fact.  There  is  no      basis at  all for  the Arbitrator’s      conclusion and  the legal  error is      therefore apparent.      The disposal  of the  matter by  the High  Court in the manner shown aboye does not come within the ambit of section 30 of  the Arbitration  Act. This Court, time and again, has pointed out the scope and ambit of section 30 of the Act. In State of Rajasthan vs Puri Construction Co. Ltd. and Another (1994) 6  SCC 485 after referring to decisions of this Court as well as English cases. The Court observed as follows:      "On the  scope  and  ambit  of  the      power of  interference by the court      with an award made by an arbitrator      in    a    valid    reference    to      arbitration,   various    decisions      have been made from time to time by      Law Courts  of India including this      court and also by the Privy Council      and the  English Courts.  Both  the      parties  have   referred  to   such      decisions  in   support  of   their      respective contentions. The factual      contentions   of   the   respective      parties   are    proposed   to   be      scrutinised and  then the facts are      proposed to  be tested  within  the      conspectus  of  judicial  decisions      governing the issues involved.      This Court again observed in paras 26-28 as follows :-      "The  arbitrator   is   the   final      arbiter fr the disputes between the

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    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.  Vs. Govt. of Kerala it      has been  held by  this Court  that      there  is   a  distinction  between      disputed as  to the jurisdiction of      the arbitrator  and the disputes as      to in  what way  that  jurisdiction      should be  exercised. There  may be      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. (exphasis  supplied) Where      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 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   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 takes  of being  a      judge on  the evidence  before  the      arbitrator.           In Municipal Corporation India      vs. Jagan  Nath Ashok Kumar, 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 that  the one arrived at      by  the   arbitrator  but  that  by      itself is  not ground  for  setting      aside the  award. It  has also been      held in  the said  decision that it      is  difficult  to  give  and  exact      definition     of      the     ward      ’reasonable’. Reason  varies in its      conclusions   according    to   the      idiosyncrasies  of  the  individual      and the  time and  circumstances in

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    which  he   thinks.  In  cases  not      covered by  authority   the verdict      of  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 of  order in  the  social      life.  There  fore,  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.           In this  case,  claims  before      the  arbitrators   arise  from  the      contract between the parties. It is      well settled  that if a question of      law is  referred to  arbitrator and      the   arbitrator    comes   to    a      conclusion,  it   is  not  open  to      challenge the  award on  the ground      that an  alternative view of law is      possible.   In   this   connection,      reference  may   be  made   to  the      decisions of  this Court  in  Alopi      Parshad and  Sons Ltd. vs. Union of      India and  Kapoor  Nilokheri  coop.      Dairy Farm  Society. In  Indian Oil      Corpn. Ltd. vs. Indian Carbon Ltd.,      this Court  has held that the court      does  notsit  in  appeal  over  the      award and  review the  reasons. The      Court can  set aside the award only      it is  apparent from the award that      there is no evidence to support the      conclusions  or  if  the  award  is      based upon  any  legal  proposition      which is erroneous."      In Hindustan  Construction Co.  Ltd.  vs.  Governor  of Orissa and  other (1995)  3 SCC 8 this Court observed on the scope of interference by the court as follows:-      "It is  well known  that the  Court      while  considering   the   question      whether the  award  should  be  set      aside does not examine the question      as  and   appellate  court.   While      exercising   the  said  power.  The      court cannot  reappreciate all  the      materials on  the  record  for  the      purpose  of   recording  a  finding      whether   in    the    facts    and      circumstances of  a particular case      the award  in question  could  have      been made.  Such award  can be  set      aside  on   any  of   the   grounds

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    specified in Section 30 of the Act.      Bearing in mind, the principles laid down by this Court in the  above aid  cases. If  we took  into disposal  of the matter by  the High Court, it would be evident that the High Court  has   substituted  its  own  view  in  place  of  the Arbitrator’s view as if its was dealing with an appeal. That is exactly  what is forbidden by the decisions of this Court therefore, we  have no  hesitation to set aside the judgment of the High Court on this issue.      Learned counsel  for the  appellant also submitted that the High  Court went  wrong in  awarding interest  only from 14.6.1984 on the ground that the notice demanding the amount was issued on that date only an therefore, the appellant was not entitled  to any  interest prior to that date. According to the  learned counsel. Section 3(1)(b) or the interest Act 1978 in  unequivocal terms  specifies that interest would be available from  the date  mentioned in the demand notice and notice and  without noticing  that provision that High Court has wrongly given interest from the date of the notice.      On the  question  of  interest  we  think  the  learned counsel for  the appellant  is right  in placing reliance on Section 3(1)(b)  of the  Interest act. The appellant Company had issued  notice on  14.6.1984 demanding  payment  of  the specified amount and interest on the specified amount at the rate of  21% per  annum from  1.4.1983 till payment. Section 3(1)(b) of the Interest Act. 1978 reads as follow :-      "3.  Power   of  court   to   allow      interest. -  (1) In any proceedings      for the  recovery of  any  debt  or      damages or  in  any  proceeding  in      which  a   claim  for  interest  in      respect  of  any  debt  or  damages      already paid  is  made,  the  Court      may,  if   it  thinks   fit,  allow      interest to  the person entitled to      the  debt  or  damages  or  to  the      person making  such claim,  as  the      case may be, at a rate on exceeding      the current  rate of  interest, for      the whole  or part of the following      period, that is to say,----      (a) .........      (b)  If  the   proceedings  do  not      relate to any such debt, then, from      date mentioned  in this regard in a      written notice  given by the person      entitled or  the person  making the      claim to  the  person  liable  that      interest will  be claimed,  to  the      date   of    institution   of   the      proceedings :"      In view  of this, the learned counsel appearing for the respondent company  could not  support the order of the High Court in  awarding interest from the date of notice, namely, 14.6.1984 and not from the date mentioned in the notice viz. 1.4.1983.      In the  result, we  set aside  the judgment of the High Court had  restore the  Award of  the Arbitrator.  therefore will be no order to costs.