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PETITIONER: HINDUSTAN STEEL WORKS CONSTRUCTION LTD.

       Vs.

RESPONDENT: C. RAJASEKHAR RAO

DATE OF JUDGMENT27/07/1987

BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) OZA, G.L. (J)

CITATION:  1987 SCR  (3) 653        1987 SCC  (4)  93  JT 1987 (3)   239        1987 SCALE  (2)218

ACT:     Arbitration  Act, 1940: Sections 3, 28 and  33--Arbitra- tion  proceedings-Not to be unduly prolonged--Whether  Court has  power  to extend time for giving award after  award  is made--Award--When  can  be set aside  Reasons not  given  by arbitrator--Whether  court entitled to speculate  and  probe mental process by which arbitrator reached conclusion.

HEADNOTE:     There was an Agreement between the respondent-contractor and the appellant-construction company in respect of certain works.  Differences and disputes arose and there  were  pro- ceedings  before the arbitrators named in the Agreement.  As the arbitrators could not agree and there were  differences, this  Court by an Order dated 16th June, 1983 directed  that the arbitrators appointed by each of the parties be appoint- ed  arbitrators  and if there was disagreement  between  the arbitrators, the matter was to be referred to the Umpire. In pursuance of the said directions the parties appeared before the  arbitrators who referred the matter to the  Umpire  and the  Umpire  after consideration made an  award  dated  15th July, 1985.     The  petitioner-construction company made a petition  to this  Court  for a decree in terms of the award,  which  was opposed by the respondent-contractor contending that (a) the Umpire  had made a speaking award and that the  validity  or otherwise  of the said award was justifiable in a  Court  of law, (b) that the Umpire had no jurisdiction to proceed with the  arbitration  on  or about 18th December,  1984  as  the period of two months from the date of his entering upon  the reference had expired and consequently the award was  beyond time,  and (c) that the award contained error of law on  the face of the award and there were inconsistent findings. The Court while confirming the award,     HELD: 1.1 The policy of law is that arbitration proceed- ings should not be unduly prolonged. The arbitrator,  there- fore,  has to give the award within the time prescribed,  or such extended time as the 654 court concerned may in its discretion extend, and the  Court alone had been given the power to extend the time for giving the award. [656E]

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   1.2  The Court has got power to extend time  even  after the  award has been given or after the expiry of the  period prescribed for the award. But the court has to exercise  its discretion  in a judicial manner. This power could be  exer- cised even by the appellate court. [656F]     1.3 The arbitrator gets the jurisdiction to enlarge  the time for making the award only in a case where after  enter- ing  on  the  arbitration, the parties  to  the  arbitration agreement consent to such enlargement of time. [657B]     In  the instant case, in view of the policy of law  that the  arbitration proceedings should not be unduly  prolonged and  in view of the fact that the parties have  been  taking willing part in the proceedings before the arbitrator  with- out  a demur and had all along been willing to extend  time, this  will be a fit case for the extension of time, and  the time  for giving the award is accordingly extended  and  the award will be deemed to have been given in time. [656F-G]     2.1  An  award might be set aside by the  court  on  the ground  of error on the face of the award, but an  award  is not  invalid  merely because by a process of  inference  and argument,  it might be demonstrated that the arbitrator  had committed some mistake in arriving at his conclusion. [657D]     Jivarajbhai  Ujamshi  Sheth and others  v.  Chintamanrao Balaji and others, [1964] 5 S.C.R. 480, followed.     2.2  Only in a speaking award the Court could took  into the  reasoning of the award. It is not open to the Court  to speculate, where no reasons are given by the arbitrator,  as to what impelled him to arrive at his conclusion. It is also not open to the Court to attempt to probe the mental process by which the arbitrator had reached his conclusion where  it is not disclosed by the terms of his award. [657D, H, 658A]     The  instant  case is not one of a speaking  award.  The Umpire  had not spoken his mind indicating why he has  done, what  he has done, he has narrated only how he came to  make the  award.  No reasons have been given for the  purpose  of making the award. There is no legal proposition in the award which  is  unsustainable or improper. The challenge  to  the award cannot, therefore, be accepted. [659G-H] 655     State  of  Punjab v. Sri Hardyal, [1985] 3  S.C.R.  649; H.K. Wattal v. V.N. Pandya, [1974] 1 S.C.R. 259 and Chempsay Bhara  and  Company v. Jivraj Balloo  Spinning  and  Weaving Company Ltd., L.R. 50 I.A. 324, referred to.     CIVIL  APPELLATE JURISDICTION: Civil Misc. Petition  No. 28356 of 1986. IN

JUDGMENT: CIVIL APPEAL No. 5579 of 1983.     From  the  Judgment  and Order dated  22.4.1983  of  the Andhra  Pradesh High Court in Civil Rev. Petn. No.  2626  of 1982. Dr. Shanker Ghose and P.P. Singh for the Appellant. S. Markandeya and C. Markandeya for the Respondent. The Judgment of the Court was delivered by     SABYASACHI MUKHARJI, J. This is an application filed  by the  Hindustan Steelworks Construction Company  Limited  for filing the award of the Umpire appointed by this Court, Shri Justice  Jaganmohan Reddy, retired Judge of this  Court  and for passing a decree in terms of the said award. It  appears that there was an agreement between Shri Rajasekhar Rao, the contractor and the Hindustan Steelworks Construction  Limit- ed, petitioner, in respect of certain works. Differences and

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disputes arose, and there were proceedings before the  arbi- trator  named in the Agreement and there were  certain  pro- ceedings, the detail of which is not necessary to refer.  As the  arbitrators  could not agree, there  were  differences. This  Court  by an order dated 16th of June,  1983  directed that  arbitrators appointed by  each of the parties  be  ap- pointed  arbitrator to adjudicate upon the  dispute  between the  parties.  It was stipulated therein that  in  the  said order of this Court dated 16th of June, 1983, it would be no longer  open  to the party to question the validity  of  the appointment  of the arbitrators. In the event of  any  disa- greement between the two arbitrators, Shri Jaganmohan Reddy, a  former  Judge of this Court was directed to  act  as  the Umpire.  Further consequential directions were  also  given. Thereafter  the parties appeared before the arbitrators  and referred the matter to the umpire. The Umpire after  consid- eration  has made the award dated 15th of July,  1985  which has been filed in this 656 Court  and  the petitioner seeks a decree in  terms  of  the award.  The respondent-contractor, Shri Rajasekhar  Rao  ob- jects to the award being made a rule of the Court. He states in his objections that the umpire had made a speaking award, therefore according to his counsel the validity or otherwise of the said award was justifiable in a court of law.     He,  however, firstly contends that the award  was  made beyond  time.  He further contends that the  umpire  had  no jurisdiction  to  proceed with the arbitration on  or  about 18th of December, 1984 as the period of two months from  the date  of  his entering upon the reference viz,  October  20, 1984 had expired on December 18, 1984. According to the said objections,  the umpire became functus-officio. It was  con- tended  that the power to extend the period of  passing  the award was vested in the court alone under section 28 of  the Arbitration  Act and it was not permissible for the  parties to  extend the time. We are unable to accept this  position. Mr. Markendeya drew our attention to certain observations of this  Court in the case of State of Punjab v.  Sri  Hardyal, [1985]  3 S.C.R. 649. He relied on the observations  of  the Court at page 656 and emphasised that law precludes  parties from  extending time after the matter had been  referred  to the  arbitrator, it would be contradiction in terms to  hold that  the same result could be brought about by the  conduct of the parties. These observations, in our opinion, are  out of  the context. The policy of law is that  the  arbitration proceedings  should not be unduly prolonged. The  arbitrator therefore  has to give the award within the time  prescribed or  such  extended time as the court concerned  may  in  its discretion  extend  and the court alone has been  given  the power to extend time for giving the award. The court has got the power to extend time even after the award has been given or after the expiry of the period prescribed for the  award. But  the court has to exercise its discretion in a  judicial manner.  In that case this Court found that the  High  Court was  justified in taking the view that it did.  This  power, however, could be exercised even by the appellate court.  In view  of the policy of law that the arbitration  proceedings should not be unduly prolonged and in view of the fact  that the parties have been taking willing part in the proceedings before the arbitrator without a demur and had all along been willing  to  extend time, this will be a fit  case,  in  our opinion,  for the extension of time. We  accordingly  extend the  time for giving the award and the award will be  deemed to  have been given in time. In this case, it  appears  that under section 28 and in the light of section 3 of the  First

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Schedule the parties are allowed to extend the time. In this connection  reference  may be made to H.K.  Wattal  v.  V.N. Pandya, [1974] 1 S.C.R. 259, where this Court 657 reiterated that sub-section (2) of section 28 indicated  one exception  to  the above rule that the arbitrator could  not enlarge  the time, and that was when the parties  agreed  to such an enlargement. It is clear this Court reiterated  that the arbitrator gets the jurisdiction to enlarge the time for making the award only in a case where after entering on  the arbitration the parties to the arbitration agreement consent to  such  enlargement  of time. In this  case  precisely  it happened. Furthermore the parties have proceeded before  the umpire  on that basis which is just and proper and  further- more the time should be extended as was done in the case  of State  of Punjab v. Sri Hardyal, (supra). In  the  aforesaid view of the matter we are unable to accept the submission on behalf  of Shri Markendeya that the award of the umpire  was beyond time.      It was next contended that the award contained error of law  on  the face of the award and there  were  inconsistent findings.  It has to be borne in mind that it was only in  a speaking award that the court could look into the  reasoning of  the award. In the case of Jivarajbhai Ujamshi Sheth  and others  v. Chintamanrao Balaji and others, [1964]  5  S.C.R. 480, this Court observed that an award might be set aside by the  court on the ground of error on the face of the  award, but an award was not invalid merely because by a process  of inference  and  argument it might be demonstrated  that  the arbitrator  had  committed some mistake in arriving  at  his conclusion.  The  law  on this point  is  well-settled.  The Judicial  Committee in Chempsey Bhara and Company v.  Jivraj Balloo  Spinning and Weaving Company Ltd. L.R. 50  I.A.  324 clarified  that  an error of law on the face  of  the  award means, that one could find in the award or a document  actu- ally  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 one could then say was erroneous. It did not mean that if in narrating a reference was made to a contention of  one party,  that opened the door to seeing first what that  con- tention  was,  and then going to the contract on  which  the parties’  rights  depended  to see if  that  contention  was sound". It has been further reiterated by this Court in  the aforesaid  decision relying on Chempsey Bhara and  Company’s case  (supra)  that in dealing with an  application  to  set aside  an  award the court had not to consider  whether  the view of the arbitratorr  on the evidence was justified.  The arbitrator’s  adjudication was generally considered  binding between the parties, for he was the tribunal selected by the parties  and the power of the Court to set aside  the  award was  restricted to cases set out in section 30 of the  Arbi- tration   Act.  It is not open to the  court  to  speculate, where no reasons are 658 given by the arbitrator, as to what impelled the  arbitrator to arrive at his conclusion. It is not open to the Court  to attempt to probe the mental process by which the  arbitrator had reached his conclusion where it is not disclosed by  the terms  of  his award. In this case this is  not  a  speaking award. The learned Umpire has not spoken his mind indicating why he has done, what he has done, he has narrated only  how he came to make the award.     Counsel drew our attention to page 26 of the award where different items have been set out and referred to page 30 of

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the award where the arbitrator noted as under:                         "The  Respondent demurs to this  and               its officers have denied having received  them               in their affidavits and in their oral testimo-               ny.  No officer of the Post Office from  which               the  letter was sent by Registered Post or  of               the Post Office through which delivery of that               Registered letter was effected to the address-               ee  has been summoned to establish that  these               letters  did not emanate from their  Post  Of-               fices or that the Post Office seals affixed on               the  "Certificates  of  Posting"  and  "Postal               Acknowledgements"  were  not  of  those   Post               Offices  which delivered them to HSCL or  that               they  were forged or fraudulent, nor was  any-               thing  produced  to show that these  were  not               posted  or  registered from the  Post  Offices               from which they emanated".     Counsel  further drew our attention to the statement  at page  33 of the award about the losses. Mr. Markandeya  con- tended  that  these were the reasons given  by  the  learned umpire. We are unable to accept. What the learned umpire did in  the  aforesaid paragraphs was to narrate the  facts  and state the history and state of pleadings. The umpire in  the operative part of the award observed as under:                        "WHEREAS I perused and considered the               entire  record with great care  including  the               record  of affidavits, the oral evidence  ten-               dered before me, the statement of claim  dated               12.10.1983;   the   counter-statements   dated               27/31-101983 and the Rejoinder of the claimant               and considered the documents filed in  support               of the case of the respective parties as  also               the  written and oral submissions made  before               me  by counsel for the parties in  support  of               their  respective  cases of  the  parties  for               which they have               659               appeared;  and  having  duly  considered   the               dispute in its varied aspects placed before me               by the parties and in the light of the  entire               material in the case as above narrated.                        I.P.JAGANMOHAN  REDDY,  the   Umpire,               nominated  by  the Supreme Court of  India  as               aforesaid, and having jurisdiction to  adjudi-               cate  the dispute between the parties  in  the               claims  and  counter-claims relating  to  Work               Orders  Nos. 3, 4, 5, 6 and 8  concerning  the               Glass  Factory and Works Orders Nos. 9 and  10               concerning Lamp Factory and the contention  of               the claimant and the respondent in respect  of               the said Claims and counter claims.                        (1) I DO HEREBY MAKE MY AWARD,  order               and  direct that the Respondent do pay to  the               claimant  a  sum  of  Rs.31,740-30p.   (Rupees               thirty  one thousand seven hundred  and  forty               and thirty paise) only in full satisfaction of               its liability for the claim made by the Claim-               ant-Contractor  against  the  Respondent  with               interest at the rate of six per cent per annum               from the date of Award.                        (2)  I further award and direct  that               the  counter-claims made by the respondent  do               stand dismissed.                        (3)  I further award and direct  that

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             the  parties  do bear their  respective  costs               incidental to these proceedings.                        (4) I further direct that the amounts               paid  by the parties towards the heating  fees               etc.,  from  time to time in  respect  of  the               several heatings of these arbitration proceed-               ings and the amount in deposit be appropriated               and  has/ have accordingly  been  appropriated               towards the remuneration of the Umpire".     Therefore, in his award as a whole no reasons have  been given  for the purpose of making the award. In other  words, it  is not a speaking award at all. The Award did not  speak as  to  why the umpire has awarded as he did.  It  does  not speak the mind of the umpire. It mentions the events leading to the making of the award. In the award, there is no  legal proposition which is unsustainable or improper. In that view of the matter the challenge to the award cannot be accepted. 660     In the premises, the objections are rejected. There will be  decree  in  terms of the award of the  Umpire,  Shri  P. Jaganmohan Reddy. There will be interest on the judgment  at 9%  until realisation. The applicant will have the costs  of this application. N.P.V.                                      Award Confirmed. 661