IN THE SUPREME COURT OF INDIA  CIVIL APPELLATE JURISDICTION  

CIVIL APPEAL No.        OF 2009 (Arising out of SLP ( C ) No.15915 of 2006)

M.P. Housing Board

    …Appellant  

Versus

Progressive Writers & Publishers       …Respondents

J U D G M E N T  

B.SUDERSHAN REDDY, J.

On February 18, 1975 the M.P. Housing Board (for

short  ‘the  Board’)  and  Progressive  Writers  and

Publishers,  New  Delhi  (hereinafter  called  as  the

‘depositor’) entered into an agreement whereunder the

Board  agreed  to  construct  a  building  called  the

1

‘Hitavada  Press  Complex’  on  the  land  admeasuring

33932 sq. ft. situated at T.T.Nagar, Bhopal.  The terms

of agreement, inter-alia, provided that the Board would

execute  the  construction  of  Hitavada  Press  Complex

and  charge  5%  supervision  charges  of  the  actual

expenditure on the project.  The cost of construction

was to be borne by the depositor.  The depositor was

required to place funds including supervision charges at

the disposal of the Board in advance as agreed upon.

The work was expected to be completed within 18-24

months.  The possession of the land was handed over

to  the  Board  for  the  purposes  of  construction  of

building.  In case of overrun of expenditure and funds,

the revised  estimates  were  to  be submitted  and the

administrative approval of the depositor was required

to be obtained.  In the event of any dispute, the matter

was  required  to  be  referred  to  the  Secretary,

Government of Madhya Pradesh for decision.

2

2. The cost of construction of the building was

estimated at Rs. 28 lakhs out of which the depositor

was required to deposit an amount of Rs. 14 lakhs at

the  outset  and  the  balance  thereafter.  The  initial

amount  of  Rs.14 lakhs  was accordingly  deposited  by

the depositor with the Board.  However, the depositor

failed  to  deposit  the  balance  amount.   In  the

meanwhile, the Board had paid the amounts from its

own funds in order to complete the construction of the

building.  The depositor expressed its desire to retain

only  that  portion  of  the  building  where  the  printing

press was located including mezzanine floor along with

two adjacent  halls  on  the  first  floor  and  accordingly

made a representation to the Board. The Board in its

turn agreed to the suggestion  and thereafter  parties

entered into the second building agreement dated May

4, 1977; under which it was expressly agreed between

the parties that the depositor would transfer the total

area of the land and building which was 33932 sq. ft.

3

and the Board would in turn re-transfer 7437 sq.ft. of

land along with hall  having Press portion constructed

thereon  for  which  the  depositor  would  pay  Rs.  3.50

lakhs  to  the  Board  in  15  equal  yearly  installments.

The  Board  agreed to grant  a loan of  Rs.  3.50 lakhs

repayable with interest against an equitable mortgage

of  the  Press  building  and  the  portion  of  the  land

thereon.  Out of the said amount,  Rs. 50,000/- was to

be paid by the Board to Punjab and Sind Bank as per

the instructions of the depositor.  It was also agreed

between the parties that the Board in order to acquire

full  ownership  of  the entire  complex  shall  return the

amount  of  Rs.  14  lakhs  and  for  that  purpose  the

original documents pledged by the depositor with the

Punjab  and Sind  Bank were  to  be  redeemed by the

Board upon payment of  Rs.13.50 lakhs to the Bank.

Upon fulfillment of the said conditions, the Board was

entitled to complete the construction of the building in

its possession and enjoy the same as the full owner.

4

3. The Board in terms of the second building

agreement had paid the agreed sum to the Bank and

obtained the original title deeds of the part of the plot

admeasuring  19319  sq.  ft  only.   However,  the  title

deeds of the residual area were not handed over to the

Board.  The construction  was completed by the Board.

4. For whatever be the reasons, the parties have

entered into third building agreement on May 31, 1980.

The  recitals  in  the  agreement  disclose  that  certain

complications and disputes arose between the parties

after execution of the earlier two agreements resulting

in litigation between the parties which were pending as

on the date of third building agreement.  In the third

building agreement it is inter-alia stated that “on the

request  of  the  depositor  vide  their  letter  of  May  1,

1980,  expressing  their  desire  to  take  the  entire

Complex building on the following terms and conditions

and to end all litigation for all time to come, to which

5

the Board agrees…...”  Under the said agreement, the

depositor agreed to pay to the Board the total amount

of  cost  incurred  by  the  Board  for  construction  of

Complex undertaken by it under the first agreement of

February  18,  1975,  estimated  at  Rs.73.50  lakhs

including  architectural  fee,  capitalised  interest  and

supervision  charges.   The  depositor  was  required  to

pay interest on the principal amount at the rate of 15%

per annum from the date of completion of construction

of  the  building  (i.e.  01.01.1979)  upto  the  date  of

payment.   The  depositor  also  agreed  to  repay  the

entire loan amount of Rs. 3.50 lakhs paid to it under

the second agreement dated May 4, 1977 with interest

at the rate of 10½ % till the date of repayment.   

5.   The  dispute  centers  around the  interpretation  of

Clause  4  of  the  agreement  and  it  may  be  just  and

necessary to notice the same in its entirety.

“ Clause 4:  That the depositor agrees to pay the entire aforesaid amount of cost, loan and interest on execution of this agreement not later than 31st  October, 1980, failing which

6

this  agreement  shall  be  deemed   to  be cancelled.”    

The agreement further provides that as soon as the

aforesaid  amounts  are  paid  in  full,  the  parties  were

required to take follow up action and withdraw all suits

and appeals filed by the parties that were pending in

courts  and as  well  as  before  Property  Administrator,

M.P. Housing Board. The Board was required to hand

over possession and the title deeds by duly declaring

the depositor  as the owner of  the Complex.   It  was

expressly  provided  that  all  such  provisions  of  the

previous two agreements which were inconsistent with

the third agreement shall be deemed to be ineffective.

6. It is an admitted fact that the depositor did not

comply  with  Clause  4  of  the  third  agreement  which

required  the  payments  to  be  made  by  31st October,

1980.  It is equally an admitted fact that the depositor

made certain  representations  to  the Board that  they

7

were willing to perform their part but were unable to

do  so  for  want  of  proper  accounts  and other  details

from  the  Board  and  thus  required  further  time  for

payments of the amounts under the third agreement.

Exchange  of  correspondence  in  that  regard  between

the parties went on till 1986.

7. Since the parties failed in arriving at any agreed

settlement,  the Board filed  Suit  No.2A/87 before  the

court of IInd Additional  Judge,  Bhopal  for permanent

injunction  seeking  a  restraint  against  the  depositor

from  disturbing  their  possession  of  the  land  and

building  and  also  sought  a  further  restraint  order

restraining  the  depositor  from  demolishing  sheds

constructed  by  the  Board.   The  court  granted  a

temporary  injunction.   The depositor  filed  Misc.  First

Appeal  in  the  High  Court  challenging  the  order  of

temporary injunction granted by the trial  court.   The

High  Court  vacated  the  temporary  injunction  order.

8

The Board thereafter filed a comprehensive Civil  Suit

bearing RCS No.8A/90 in the court of IInd Additional

District  Judge,  Bhopal  for  declaration,  Specific

Performance of the Contract and Permanent Injunction.

The learned trial  court referred the disputes arising out

of RCS  No. 8A/90 (New No.63-A/94) and Regular Civil

Suit No.2A/87 (New No. 16A/94) to the sole arbitrator

Shri Justice K.K. Dubey (Retired) for determination of

disputes.   The said cases were registered before the

arbitrator as Reference Case  No.1/95 and Reference

Case  No.2/95.   The   arbitrator  by  his  award  dated

September 23, 1998 granted the following reliefs :

“1.  The  board  shall  give  immediate possession  of  the  building  to  the  society. This  should  be  done  within  a  week  of  the award being made the rule of the Court.

2. The board shall  be entitled  to a sum of Rs.37,70,309-87.  Half  of this amount shall be paid by the society as soon as the award is declared the rule of the court.  The rest of the  amount  shall  be  paid  in  monthly installments  of  Rs.2.4  lakhs  from  the monthly rental  income of the  building.   If there is any shortfall in the realization of the rent, it  shall  be made good by the society.

9

This amount shall be receivable by the board by the end of  the  month.   In  case of  any default,  the board shall  be entitled @ 18% per annum capitalized quarterly.

3. There shall be no interest payable to the board  for  the  interim  period,  that  is,  after passing of this award and the decree of the court making this award the rule of the court.

4. As regards unrealized rent, the parties shall  enter into an agreement to the effect assigning the rental debt to the board.

5. Both the parties shall take steps to withdraw all cases against each other before the court and before other authorities.

6. The relief of specific performance of the third agreement dated 31-5-80 as prayed by the society has been allowed subject to the relief under this award.”

8. Being aggrieved by the award passed by the

arbitrator, the Board initiated appropriate proceedings

for setting aside the award passed by the arbitrator.

The  trial  court  confirmed  the  award  passed  by  the

arbitrator  against  which  the  Board  preferred  appeals

under Section 39 of the Arbitration Act, 1940 (for short

10

‘the  Act’).   The  High  Court  dismissed  the  appeals

preferred  by  the  Board.  Hence  the  present  Special

Leave Petition.

9. Leave granted.

10. The present appeal is directed against the common

judgment and order dated July 27, 2006 passed by the

High Court of Madhya Pradesh judicature at Jabalpur

whereby the High Court dismissed the appeals of the

appellant filed under Section 39 of the Act.

11. Shri L.N. Rao, learned senior counsel for the

appellant submitted that the award of the arbitrator is

vitiated and required to be set aside.  The courts below

have committed a grave error in confirming the award

passed by the arbitrator.  The arbitrator has committed

gross misconduct which is apparent from the face of

the record.  The arbitrator disregarded the terms of the

11

contract  and  passed  his  award  on  events  and

circumstances  which  were  irrelevant  for  interpreting

the  terms  of  the  contract.   The  award  is  based  on

conjectures and surmises.  It was also submitted that

the arbitrator has exceeded his jurisdiction by framing

and deciding issues which were not referred to him by

either of the parties which reflects the predetermined

mind of the arbitrator.

12. Shri  C.A. Sundaram, learned senior counsel

appearing for the respondent submitted that the award

does  not  suffer  from  any  infirmities  whatsoever

requiring the interference of this Court in exercise of its

jurisdiction  under  Article  136  of  the  Constitution  of

India.  Learned senior counsel submitted that both the

courts below concurrently found that the award passed

by  the  arbitrator  is  just  and  reasonable  and  is  not

vitiated by any act of misconduct  on the part of the

arbitrator.   The  findings  so  recorded  by  the  courts

below  by  no  stretch  of  imagination  could  be

12

characterised as perverse and that being the position,

there is no scope for any interference with the award.

13. Shorn of all the details and embellishments, the

crucial  question  that  arises  for  our  consideration  is

whether  the third building agreement dated May 31,

1980 stood automatically cancelled on account of non-

compliance of the terms thereunder by the depositor

and whether the second agreement dated May 4, 1977

stood automatically revived?  In order to resolve the

controversy it is just and necessary to make a  detailed

analysis  of  terms  and  conditions  incorporated  in  the

third  building  agreement  dated  May  31,  1980.   The

intention  of  the  parties  is  to  be  gathered  for

determining  the  scope  of  the  agreement.   The  third

agreement as is evident from the recitals was entered

into mainly for the purpose of arriving at terms for the

payment of construction cost and other fees payable by

the depositor to the Board.  The depositor agreed to

13

pay to the Board the total amount of ‘cost of Complex’

incurred by the Board for the construction pursuant to

the  first  agreement  dated  February  18,  1975.   The

amount  was  quantified  at  Rs.73.50  lakhs  which

included the architectural fees, capitalised interest and

supervision charges etc.  The said agreement does not

speak about any transfer of land.  There is no doubt

that the depositor agreed to pay the entire amount of

cost of construction, loan and interest payable to the

Board on or before October 31, 1980.  The question is

whether non payment results in automatic cancellation

of the third agreement?  The nature and scope of the

said  agreement  is  entirely  different  from that  of  the

earlier  agreements  of  18.02.1975  and  04.05.1977

executed by and between parties.   

14. Whether time is the essence of the agreement

dated May 31, 1980 :

It is true that Clause 4 of the third agreement provides

that  the  depositor  to  make  all  the  payments  on  or

14

before October 31, 1980 on the pain of cancellation of

agreement.   But  the  question  is  what  are  those

amounts that were required to be paid?    

15. The arbitrator in this regard upon consideration of

the  material  available  on  record  found  that  the

depositor was under confusion and rightly so as to the

amount  of  actual  cost  of  construction.   It  was  also

found that the amount actually paid to the architect as

his fees and the fees as the Board has included in the

cost  of  construction  was  different.   The  duration  of

period  of  construction  was  also  not  clear  from  the

records  produced  by  the  Board.   Therefore,  the

depositor was not in a position to know the capitalised

interest. It is an admitted fact that the Board had been

realising rents from the lessees of the building.   The

same has not been taken into account and it is under

those circumstances the depositor went on requesting

the Board to provide the detailed accounts as regards

15

the actual cost and also details as to the rent collected

by the Board in order to enable them to pay the exact

amount  to  the  Board.    The  arbitrator  found  that

despite  such  request  the  account  books  were  not

shown to them and in fact the account books were not

maintained  in  terms  of  the  first  agreement.   The

arbitrator  found  that  the  Board  always  assured  the

depositor that it would provide the details as required

after complete verification as regards the amounts of

cost  incurred  by  the  Board  for  construction  of  the

building.   The  arbitrator  found  that  the  Board  has

realised  rents from the building which had not been

set off against the amount of Rs.73.50 lakhs shown in

the agreement as cost of construction.  The arbitrator

after  taking  the  sequence  of  events  and

correspondence  between  the  parties  even  after  31st

October,  1980  into  consideration  arrived  at  a

conclusion that the figure of Rs.73.50 lakhs as cost of

construction was tentatively shown in the agreement.

16

16. The arbitrator found that the Board had itself

waived  the  time  clause  and  was  willing  to  accept

money  from  the  depositor  even  after  31st October,

1980  as  is  evident  from  the  negotiations  which

continued between the parties  till  the year  1985-86.

The  arbitrator  relied  on documentary  evidence  made

available  by the parties  in  arriving  at  the conclusion

that in the present case the time is not essence of the

agreement.

17. It is fairly well settled that the time is not normally

an  essence  of  any  agreement  qua  immovable

properties and even there was an express covenant of

time being an essence, the overall agreement have to

be looked at to determine whether the time was the

essence.   Whether  the  time  is  the  essence  of  the

contract would, therefore, be a question of fact to be

determined in each case and merely expression of the

17

stipulated time would not make time an essence of the

contract. The finding arrived at by the arbitrator in this

regard  is  not  even  challenged  by  the  Board  in  the

proceedings initiated by it under Section 30 of the Act.

18. It is fairly well settled and needs no restatement

that the award of the arbitrator is ordinarily final and

the courts  hearing  applications  under  Section  30 the

Act  do  not  exercise  any  appellate  jurisdiction.

Reappraisal of evidence by the court is impermissible.

In  Ispat Engineering & Foundry Works, B.S. City,

Bokaro  vs.   Steel  Authority  of India,  B.S.  City,

Bokaro [(2001) 6 SCC 347], it is held :

“ 4.   Needless to record that there exists a long catena of cases  through  which  the  law  seems  to  be  rather  well settled that the reappraisal of evidence by the court is not permissible.  This  Court  in  one  of  its  latest  decisions [Arosan Enterprises Ltd. v.  Union of India (1999) 9 SCC 449] upon consideration of decisions in Champsey Bhara & Co. v. Jivraj Balloo Spg. & Wvg. Co. Ltd. [AIR 1923 PC 66], Union of India v.  Bungo Steel Furniture (P) Ltd.[ (1967 1 SCR 324],  N. Chellappan v.  Secy., Kerala SEB [(1975) 1 SCC 289], Sudarsan Trading Co. v. Govt. of Kerala [(1989) 2 SCC 38], State of Rajasthan v. Puri Construction Co. Ltd. [(1994) 6 SCC 485] as also in  Olympus Superstructures (P) Ltd. v.  Meena Vijay Khetan [(1999) 5 SCC 651] has

18

stated  that  reappraisal  of  evidence  by  the  court  is  not permissible and as a matter of fact, exercise of power to reappraise the evidence is unknown to a proceeding under Section  30  of  the  Arbitration  Act.  This  Court  in  Arosan Enterprises categorically stated that in the event of there being no reason in the award, question of interference of the court  would not arise at all.  In the event, however, there are reasons, interference would still be not available unless of course, there exist a total perversity in the award or the judgment is based on a wrong proposition of law. This Court went on to record that in the event, however, two  views  are  possible  on  a  question  of  law,  the  court would not be justified in interfering with the award of the arbitrator if the view taken recourse to is a possible view. The  observations  of  Lord  Dunedin  in  Champsey  Bhara stand accepted and adopted by this Court in  Bungo Steel Furniture to the effect that the court had no jurisdiction to investigate into the merits of the case or to examine the documentary  and  oral  evidence  in  the  record  for  the purposes of finding out whether or not the arbitrator has committed an error of law. The court as a matter of fact, cannot  substitute  its  own  evaluation  and  come  to  the conclusion  that  the  arbitrator  had acted contrary  to the bargain between the parties.”

19. Interpretation of a contract, it is trite, is a matter

for the arbitrator to determine.  Even in a case where

the  award  contained  reasons,  the  interference

therewith  would  still  be  not  available  within  the

jurisdiction of the court unless, of course, the reasons

are  totally  perverse  or  award  is  based  on  wrong

proposition of law.  An error apparent on the face of

19

the  records  would  not  imply  closed  scrutiny  of  the

merits of documents and materials on record.  “Once it

is found that the view of the arbitrator is a plausible

one, the court will refrain itself from interfering.” [see

Sudarsan Trading Co. vs. Govt. of Kerala (1989) 2

SCC 38 and  State of U.P. vs. Allied Constructions

(2003) 7 SCC 396].

20. In the present case, on the material available and

upon appreciating  the same the arbitrator  arrived at

the finding that the time was not of the essence and

the agreement subsisted even after 31st October, 1980.

The finding cannot be said to be perverse to give rise

to  legal  misconduct  deserving  intervention  under

Section 30 of the Act.

21. In any event, even the time was the essence of the

agreement,  the  same  was  not  insisted  upon  by  the

parties in the present case.  The material available on

20

record disclose that even after October, 1980, parties

continued negotiations as regards the actual amounts

payable based on what the construction cost would be

on  reconciliation  of  accounts  and  the  same  would

indicate  that  the  parties  were  still  working  out  their

rights  and  obligations  under  the  agreement.  The

parties would not have acted in such a manner had the

agreement had come to an end.  Be it noted that the

Board  never  took  any  stand  during  the  negotiations

that the agreement stood cancelled or took any steps

to terminate the same.  It did not raise any objection

contending that the cost of construction was quantified

at Rs.73.50 lakhs after negotiation and verification of

the accounts  by the parities  to their  satisfaction.   It

was  not  the  case  of  the  Board  that  the  quantified

amounts towards cost of construction of complex was

non negotiable.   It  is  under  those circumstances the

arbitrator accepted the case set out by the depositor

that the Board was always assuring them to furnish the

21

correct  figure  and  the  accounts  of  cost  incurred  by

them but refused to do so.   The arbitrator took into

consideration variety of circumstances in arriving at the

conclusion that the figure of Rs.73.50 lakhs stipulated

in the agreement was tentative and not a final figure.

The arbitrator has fully discussed the issue as to how

the non-payment  of  the amounts  was on account  of

the Board’s action in not furnishing the accounts even

at the stage of arbitration and, therefore, held that the

Board  could  not  seek  to  wriggle  out  of  1980

agreement.

22. The courts below found conclusions drawn and

findings arrived at by the arbitrator that non payment

of amounts by the depositor by 31st October, 1980 as

provided for did not result in automatic cancellation of

the agreement were plausible and accordingly refused

to interfere in the matter.  The courts below upheld the

22

findings that the depositor continued to be the owner

of the property.  

23. The decision in Swarnam Ramachandran and

Anr.  Vs.  Aravacode  Chakungal  Jayapalan,  [2004

(8) SCC 689], upon which reliance has been placed by

the learned senior counsel, in our considered opinion,

in  no  manner,   supports  the  contention  advanced

before us.  In the said decision the Court took the view

that the time is presumed not to be of the essence of

the contract relating to immovable property, but it is of

the essence in contracts of reconveyance or renewal of

lease.   It is further held that whether time is  of the

essence is a question of fact and the real test is the

intention of the parties.  It depends upon the facts and

circumstances of each case.  In cases where notice is

given making time of the essence, it is the duty of the

court to examine the real intention of the party giving

23

such notice by looking at the facts and circumstances

of each case. The intention can be ascertained from:

(i) the express words used in the contract;

(ii) the nature of the property which forms the subject matter of the contract;

(iii) The nature of the contract itself; and

(iv) The surrounding circumstances.

24. The onus to plead and prove that time was of the

essence of the contract is on the person alleging it.  In

the present case, the Board never took the plea before

initiating the legal proceedings that the time was of the

essence of the contract.  The arbitrator after taking all

the relevant facts into consideration in the present case

found  that  there  was  no  justification  in  claiming  to

treat time as of the essence of the contract.

25. Mr. Nageshwar Rao, learned senior counsel for the

appellant submitted that amongst the issues submitted

by  the  parties  to  the  arbitrator  there  was  no  issue

24

regarding  the  non-execution  of  the  contract  or  with

regard  to  whether  the  non-performance  of  the  third

agreement was due to  non-supply  of   accounts by

the  Board.   The  contention  was  that  the  arbitrator

himself framed a specific issue, being issue No. 13 to

the effect whether the Board thwarted the fulfillment of

the condition of the payment within the period of time

by not supplying the proper accounts of the costs of

the  building,  thus,  denying  the  depositor  the

opportunity  to  deposit  the  amount.   The  submission

was  that  the  arbitrator  exceeded  his  jurisdiction  in

framing such an issue and thus committed grave legal

misconduct.  It was submitted that in the present case

both the parties acted in accordance with the terms of

the 1980 agreement and upon admitted failure of the

depositor  to  pay  the  stipulated  amounts  within  the

agreed  period,  the  contract  stood  automatically

terminated  and  the  1977  contract  automatically

revived.

25

26. We cannot accept the contention of the Board that

no  additional  issue  could  have  been  framed  by  the

arbitrator on his own for its decision.  In a reference

made  under  Section  23,  arbitrator’s  power  to

determine the lis between the parties is much wider.

The arbitrator has all the powers which the court itself

would  have  in  deciding  the  issues  in  the  suit.   The

court’s power to frame an additional issue if its is just

and  necessary  for  deciding  the  matter  in  dispute

cannot be denied and so also of the arbitrator where

disputes between the parties pending adjudication on

suits have been referred to arbitrator for determination

[See:  Jugal Kishore Prabhatilal  Sharma and Ors.

Vs. Vijayendra Prabhatilal Sharma and Anr. [1993

(1) SCC 114)].  

27. In the light of the settled legal principle, we are of

the opinion that the arbitrator was not bound to adopt

26

only the issues submitted by the parties but was well

within  his  jurisdiction  to  frame  such  other  issue  or

issues as may be just and necessary for the purpose of

disposal of the reference made under Section 23 of the

Act.  We accordingly find no merit in the submissions

made by the learned senior counsel that the arbitrator

exceeded  his  jurisdiction  and  committed  grave  legal

misconduct in framing said issue and determining the

same.

28. It is true that the arbitrator took judicial note of

certain facts which were in the realm and conjectures

and surmises to conclude that the second agreement

1977  was  entered  into  under  political  pressure  and

depositor  was  compelled  to  execute  the  said

agreement  under  such  pressure.  But  the  question  is

what  is  the  effect  of  the  same.   In  our  considered

opinion  even  this  surmise  and  conjecture  is  ignored

and  not  taken  into  consideration,  the  award  of  the

arbitrator  continues  to  be  valid  and  binding  on  the

27

parties.   The findings recorded by the arbitrator that

the specific  performance of  the second agreement  is

barred  by  limitation;  that  the  agreement  is  itself

unconscionable; that the agreement ceases to subsist

after the 1980 agreement and was not revived are not

based on the sole ground that the second agreement

came to be executed under political pressure. There is

enough material available on record to arrive at such

conclusion as the one arrived at by the arbitrator.  All

the  said conclusions  were  not  arrived  solely  on the

basis of conjectures and surmises.  In Gujarat Water

Supply and Sewerage Board vs. Unique Erectors

(Gujarat) (P) Ltd. and Anr. [1989 (1) SCC 532], this

Court held that “an award of an arbitrator should be

read reasonably as a whole to find out the implication

and the meaning thereof.  Even in a case where the

arbitrator has to state reasons, the sufficiency of the

reasons depends upon the facts and circumstances of

the case.  The Court, however, does not sit in appeal

28

over the award and review the reasons.  The court can

set  aside  the  award  only  if  it  is  apparent  from  the

award  that  there  is  no  evidence  to  support  the

conclusion  or  if  the  award  is  based  upon  any  legal

proposition  which  is  erroneous.”   The  award  under

challenge is not the one which is based on no evidence.

29. In  Food Corporation Vs. Joginder Pal  [ 1989

(2) SCC 347] this Court reiterated the principle that an

award of an arbitrator can only be interfered with or

set  aside  or  modified  within  four  corners  of  the

procedure  provided by the Act.  It is not misconduct

on the part of an arbitrator to come to an erroneous

decision, whether error is one of the fact or law, and

whether  or  not  his  findings  of  fact  are supported by

evidence.  In case of errors apparent on the face of the

award it can only be set aside if in the award there is

any proposition of law which is apparent on the face of

the award, namely, in the award itself or any document

29

incorporated in the award. Errors of law as such are

not to be presumed.

30. Learned senior  counsel  for  the  appellant  further

contended that the arbitrator in the instant case has

committed grave error in going beyond the terms of

the contract  admittedly entered into by and between

the  parties.   The  question  is  what  is  the  legal

misconduct committed by the arbitrator in the instant

case? Whether the award by the arbitrator perpetrates

gross miscarriage of justice?  Is it reduced to mockery

of a fair decision of the lis between the parties to the

arbitration?   The  erroneous  application  of  law

constituting the very basis of the award and improper

and incorrect findings of fact, which without closer and

intrinsic scrutiny, are demonstrable on the face of the

materials  on  record,  have  been  held  as  legal

misconduct rendering the award as invalid but at the

same time the court could not reappraise the evidences

intrinsically  with a close scrutiny  for  finding  out  that

30

the conclusion drawn from some facts, by the arbitrator

is  according  to  the  understanding  of  the  court,

erroneous.   Such  exercise  of  power  which  can  be

exercised by an Appellate Court with power to reverse

the finding of fact, is alien to the scope and ambit of

challenge of an award under the Arbitration Act. [See:

State of Rajasthan vs. Puri Construction Co. Ltd.

and Anr.  [1994 (6) SCC 485].  In the present case

there  is  no  erroneous  application  of  law  by  the

arbitrator or any improper and incorrect finding which

is demonstrable on the face of the material on record.  

31. It  was  submitted  that  when  there  has  been

quantification  of  the  costs  of  the  construction  of  the

building  and  incorporation  of  the  same  in  the  third

agreement the same could not be re-determined by the

arbitrator  by  rewriting  the  terms  of  the  agreement

entered into between the parties.  We find no merit in

the  submission.   There  is  no  dispute  with  the

proposition  that the intention  of  the  parties  is  to  be

31

gathered from the words used in the agreement. If the

words are clear, there is very little that the Court can

do about it.  In the present case, the parties entered

into  three  agreements  one  after  the  another.  The

arbitrator  while  interpreting  clause  I  of  the  third

building agreement whereunder the figure of Rs.73.50

lakhs being the amount of cost of complex arrived at

the conclusion that the figure has been given by the

Board.  The arbitrator upon appreciation of the material

available on record found that the depositor repeatedly

requested the Board to provide the details of accounts

of  the  cost  as  also  the  rent  realization  in  order  to

enable  them to pay the exact  amount  to the Board.

The arbitrator after taking  all  the relevant facts and

circumstances  into  consideration  found  that

determination as to the actual cost of the construction

was  absolutely  imperative  to  determine  the  exact

amount  payable  and  found  that  the  figure  of  73.50

lakhs as stated in clause 1 of the third agreement was

32

only  indicative.   The arbitrator  derived  support  from

the  numerous  documents  filed  before  him  which

revealed that the cost of construction was stipulated in

clause 1 of the agreement was tentative,  the matter

was  kept  open  till  1990  for  settlement  of  accounts.

Interpretation  of  the  terms  of  the  agreement

concerning the quantification of cost of construction in

the present case, in our considered opinion, does not

amount to rewriting the terms of the contract.

32. The  arbitrator  having  considered  the  overall

situation and having arrived at a conclusion that the

second building  agreement  was  not  enforceable  held

that  the  property  would  continue  to  vest  with  the

depositor.   But  the  arbitrator  did  not  ignore  the

legitimate  right  of  the  Board  to  realize  the  amounts

spent  by  it  for  putting  up  the  construction.   The

arbitrator  considered  the  matter  and  worked  out  a

reasonable, just and fair solution and accordingly held

that the depositor was bound to pay the amounts spent

33

by  the  Board  for  construction  whether  or  not  they

wanted  such  a  construction  to  have  come  up  or

whether or not the Board could have expended monies

to pay for the construction without the consent of the

depositor as provided in the 1975 agreement.

33. The  arbitrator  accordingly  passed  the  award

declaring that the Board shall be entitled to a sum of

Rs.37,70,309.85 and directed the depositor to pay half

of the amount as soon as award is declared a Rule of

the  Court.   The  rest  of  the  amount  to  be  paid  in

monthly  installments  of  2.4  lakhs  from  the  monthly

rental income of the building.  In case of any default

the  Board  shall  be  entitled  to  interest  @  18%  per

annum  capitalized  quarterly.   Relief  granted  by  the

arbitrator, in our considered view is fair and equitable

one.  The arbitrator awarded the amounts towards cost

of  construction  plus  supervision  and  other  charges

payable to the Board together with a hefty interest @

34

15% compound from the date of  expenditure by the

Board till the date of payment.   

34. In our considered opinion, there is nothing in the

award requiring intervention by the courts.  The courts

below  rightly  refused  to  interfere  with  the  award

passed  by  the  arbitrator.   It  is  not  a  case  which

warrants  our  interference  in  exercise  of  jurisdiction

under Article 136 of the Constitution of India.   

35. Appeal fails and is accordingly dismissed with no

order as to costs.

……………………………………J.      (Lokeshwar Singh Panta)

……………………………………J.      (B. Sudershan Reddy)

New Delhi;  March 20, 2009

35