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PETITIONER: COIMBATORE DISTRICT PODU THOZILLAR SAMGAMREPRESENTED BY ITS

       Vs.

RESPONDENT: BALA SUBRAMANIA FOUNDRY AND ORS.

DATE OF JUDGMENT11/08/1987

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

CITATION:  1987 AIR 2045            1987 SCR  (3) 852  1987 SCC  (3) 723        JT 1987 (3)   273  1987 SCALE  (2)302  CITATOR INFO :  RF         1989 SC 268  (17)  RF         1989 SC 606  (6)

ACT:     Arbitration Act, 1940: Section 14(1)--Award of  arbitra- tor-Interference--When arises.

HEADNOTE:     There were disputes between the partners of the respond- ent  firm  and several legal proceedings were taken  in  the courts  below,  which ultimately came to  this  Court.  This Court  by an order dated 2nd of November, 1982 referred  the disputes to an Arbitrator. An application for appointment of Receiver  was also directed to be disposed of by  the  trial court.     The Arbitrator duly filed the award dated 3rd of  April, 1985  in this Court under Section 14(1) of  the  Arbitration Act.     The  petitioner in the special leave petitions filed  an affidavit  alleging that the Arbitrator was guilty of  legal misconduct,  and that there were errors which were  amenable to correction by this Court, that the award was inconsistent and,  therefore, the award should be set aside so far as  it was against the applicant.     On  behalf of the Respondent-Workers an application  was filed  and it was contended that their claims have not  been fully  protected, and that the workers’ claim on account  of gratuity would come to about Rs.7 lakhs while the Arbitrator had  estimated  it erroneously at Rs.4 lakhs, and  had  also made no sufficient provision in respect thereof. Disposing of the Civil Miscellaneous Petitions, the Court,     HELD: There is no legal proposition either in the  award or  in any document annexed therewith which  was  erroneous. The  alleged mistake or alleged errors, if there be any,  of which grievances are made, are mistakes of fact, if at  all. The  grievances,  even if true, do not amount  to  an  error apparent on the face of the record. [857A, B, D]  853     Sufficient  provisions have been made in the  award  for the existing liabilities of the workers and for any  further contingencies  is  respect  of their claims.  The  right  of

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gratuity has been recognised. It cannot, therefore, be  said that the award of the arbitrator is left incomplete and this dispute left undetermined. [855C-D]     The  objection to the award cannot be  sustained.  There will,  therefore, be judgment in terms of the  award.  There will be no interim interest. There will, however, be  inter- est on judgment at 9%. [857E]     Union of India v. A.L. Raffia Ram, [1964] 3 S.C.R.  164; Champsey  Bhara  and Company v. Jivraj Balloo  Spinning  and Weaving Company Ltd., [1932] L.R. 50 I.A. 324; Kanpur  Nagar Mahapalika v. M/s Narain Das Haribansh, [1970] 2 S.C.R.  28; Allen  Berry and Co. (P) Ltd. v. Union of India, New  Delhi, [1971]  3 S.C.R. 282 and Hindustan Tea Co. v.  K.  Sashikant Co. and another, [1986] Suppl. S.C.C. 506, referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION: C.M.P. No. 46931 of 1985. IN W.P. Nos. 11361-62 of 1983 etc. (Under Article 32 of the Constitution of India). A.K. Ganguli and K. Swami for the Petitioners.     Shankar  Ghosh,  S. Padmanabhan,  K.K.  Venugopal,  C.S. Vaidyanathan,  A.T.M. Sampath, P. Choudhary, S.R. Setia  and S.R. Bhatt for the Respondents. The Judgment of the Court was delivered by     SABYASACHI MUKHARJI, J. There were disputes between  the partners  of  the firm Balasubramania  Foundry  (hereinafter called ’the firm’) and several legal proceedings were  taken in  the courts of Coimbatore, these ultimately came to  this Court.  This Court by an order dated 2nd of  November,  1982 referred  the disputes to the Arbitrator. The  order  stated that  the  disputes were referred to  the  sole  Arbitrator, Justice  K.S. Palaniaswamy failing him Justice  C.J.R.  Paul and the respective parties including the firm were  directed to file their 854 joint  memos in all the courts where  the  suits/proceedings were  pending  before  the Arbitrator.  The  Arbitrator  was directed1 to proceed in accordance with the Arbitration Act. In order to complete the narration, there was an application for  appointment of Receiver which was directed to  be  pro- ceeded with in the trial court. This Court, however, by  the said  order  directed  the trial court to  dispose  of  that application.     By  the  said  order as mentioned  hereinbefore  in  the absence  of Justice K.S. Palaniaswamy, Justice  C.J.R.  Paul duly heard and considered the matter and published the award on 3rd April, 1985.     It  is  claimed  by Mr. Ghosh, appearing  on  behalf  of respondent  no.  1 as well as Mr.  Venugopal,  appearing  on behalf  of other respondents supporting that the said  award be made a rule of the court and the judgment in terms of the said  award be passed. It may be mentioned that the  Coimba- tore District Podu Thozillar Munnetra Samgam represented  by its Secretary being a union of the workers filed writ  peti- tions  in this Court being writ petitions Nos.  11361-62  of 1983. Later on another special leave petition being  special leave  petition  No.  2271 of 1983 was  filed  by  the  firm against the order of the High Court confirming the order  of appointment  of Receiver’of the firm. In  those  proceedings the Court was pleased to pass an order on 17th of  February, 1984 that all the claims of the workers for their past  dues

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would  be  referred for arbitration to  the  Arbitrator  and considered  by  him. On 27th of July, 1984  this  Court  was pleased to refer the money claims of one Velmurugan  Factory and the money claims of the workers who were members of  the Coimbatore District Engineering and General Workers Union to the Arbitrator for adjudicating by arbitration.     The Arbitrator has duly filed the award dated 3rd April, 1985  in this Court under section 14(1) of  the  Arbitration Act.     A.  Rangaswamy, the petitioner herein for whom Mr.  Gan- guly  is appearing has filed an affidavit alleging that  the arbitrator  was  guilty of legal misconduct and  there  were errors which were amenable to corrections by this Court.  It was  contended  on  behalf of the workers  also  that  their claims had not been fully protected. Mr. Sampath,  appearing on their behalf has contended that the claims of the workers would amount to about rupees seven lakhs while provision had been  made only for rupees three lakhs and even, then  there was not sufficient provision. The workers, gratuity, it  was contended  would come to about rupees seven lakhs while  the Arbitrator had really estimated  855 erroneously  rupees four lakhs and provisions had been  made only  for  Rs.3,10,000 which according to Mr.  Sampath  have been further diminished by payments made by the Receiver  in the meantime. There is also an application on behalf of  the workers’ union on these grounds.     It  appears, however, that this objection on  behalf  of the workers on ground of imperfect protection of workers was under  a misconception on behalf of the respondents. It  was stated  and  brought before us that in the  last  two  years there had been sufficient profit to cover the claims of  the workers.  Indeed  it appears that of the  27  workers  whose claims  had  to be settled on account of  gratuity,  14  had received the same and a document indicating the payments  to them was sought to be filed before us. We are satisfied that sufficient  provisions have been made for the  existing  li- abilities  of the workers and for any further  contingencies in respect of the workers’ claims. It cannot be said, there- fore,  that  the award of the Arbitrator is  incomplete  and left  undetermined this dispute. The right to  gratuity  has been  recognised and provision for the same has  been  made. The  respondents Nos. 2, 3, and 5 pleaded before us  through counsel  that they had no objection to the award being  made the  rule  of the court. The respondent no. I  as  mentioned hereinbefore  is arguing that the award be made the rule  of the  court. Respondent no. 4 is also supporting that  claim. It  is  only the petitioner A. Rangaswamy who  is  the  only party opposing the award. It was submitted by Mr. Ganguly in support  of his objection that the Arbitrator while  holding that  the  lease in favour of the firm was bad  had  awarded substantial  sum on the basis of the lease. It  was  further submitted  that the Arbitrator while noting the reasons  and recording the formal award had applied a reasoning altogeth- er  unconnected  with the merits of  the  controversy  which amounted  to legal misconduct. It was further  alleged  that the  award was inconsistent. In those circumstances, it  was submitted that the award so far as it was against the appli- cant.  A. Rangaswami should be set aside. It  was  submitted that in spite of the alleged lapses in the illegal leases it was  Palaniappan who was continuing to manage the  business, sometimes  as the Managing Partner of the firm and at  other times as the proprietor or partner of the lessee company and recognition and rewarding him on that basis was perverse. It was  further submitted that reliance placed on Exhibit  A-46

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for the purpose of allotting the articles was perverse and a grave  error  apparent  on the face of the  record.  It  was submitted  that  the Arbitrator committed a grave  error  in rejecting   the  claim  of  the  applicant  for  a  sum   of Rs.39,27,940.11 which was due from Palaniappan and Doraiswa- my as suppressed profits. It was submitted by Mr. Ganguly 856 that at least rupees nine lakhs should have been left out in item  No, 9. This was not duly noted. On the other hand,  it was  urged that the alleged errors were not amenable  to  be corrected  in  this application by this Court.  Mr.  Ganguly submitted  that on the whole the award was wholly  inequita- ble.     The law on this aspect is, however, settled. In Union of India  v. A.L. Rallia Ram, [1964] 3 S.C.R. 164,  this  Court reiterated  that in order to make arbitration effective  and the  awards enforceable, machinery was devised by the  Arbi- tration  Act  for  lending the assistance  of  the  ordinary courts.  The  Court was also entrusted with  .the  power  to modify or correct the award on the ground of imperfect  form or  clerical errors, or decision on questions not  referred, which were severable from those referred. The Court had also power  to  remit  the award when it had  left  some  matters referred  undetermined,  or when the award  was  indefinite, where the objection to the legality of the award was  appar- ent on the face of the award. The Court might also set aside an award on the ground of corruption or misconduct of the ’ arbitrator, or that a party had been guilty of  fraudulent concealment  or  wilful deception. But the Court  could  not interfere  with the award if otherwise proper on the  ground that the decision appeared to it to be erroneous. The  award of  the  arbitrator  was ordinarily  final  and  conclusive, unless a contrary intention was disclosed by the  agreement. The award was the decision of a domestic tribunal chosen  by the parties, and the civil courts which were entrusted  with the  power to facilitate arbitration and to  effectuate  the awards,  could not exercise appellate powers over the  deci- sion.  Wrong  or right the decision was binding,  if  it  be reached  fairly  after giving adequate  opportunity  to  the parties to place their grievances in the manner provided  by the arbitration agreement. This Court reiterated in the said decision  that it was now firmly established that  an  award was  bad  on the ground of error of law on the face  of  it, when in the award itself or in a document actually  incorpo- rated  in it, there was found some legal  proposition  which was  the  basis of the award and which was  erroneous.  This view  had  been  enunciated’ by the  Judicial  Committee  in Champsey  Bhara  and Company v. Jivraj Balloo  Spinning  and Weaving Company Ltd., [1932] L.R. 50 I.A. 324. This view was again  reiterated  and emphasised by this  Court  in  Kanpur Nagar Mahapalika v. M/s. Narain Das Hari [1970] 2 S.C.R. 28, where Ray, J. as the learned Chief Justice then was observed at  page 30 of the report relying on Champsey  Bhara’s  case (supra) "an error of law on the face of the award meant that one  could  find  in the award, or in  a  document  actually incorporated  thereto, as, for instance a note  appended  by the arbi-  857 trator  stating  the reasons for his  judgment,  some  legal proposition  which was the basis of the award and which  one can say is erroneous." In the instant case there is no legal proposition  either in the award or in any document  annexed with  the award which was erroneous. In Allen Berry and  Co. (P) Ltd. v. Union of India, New Delhi, [1971] 3 S.C.R.  282, this  Court reiterated that the principle was that an  award

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could only be set aside where there is an error on its face. In the instant case, the alleged mistakes or alleged errors, if  there  be any of which Mr. Ganguly made  grievances  are mistakes of fact if at all. Mr. Ganguly’s grievances have  a ring  of similarity with the grievances which were  agitated before  this Court in Hindustan Tea Co. v. K. Sashikant  Co. and another, [1986] Suppl. S.C.C. 506, and this Court  reit- erated  that it was an error of law and not mistake of  fact committed  by  the arbitrator which was justiciable  in  the application before the court. It was an error of law and not mistake of fact committed by the arbitrator which was amena- ble  to  corrections by this Court. The  grievances  of  Mr. Ganguly’s  client even if true, which as at present  advised we are not inclined to accept, do not amount to error appar- ent on the face of the record.     In  the  aforesaid view of the matter we are  unable  to sustain, the objections to the award. There will, therefore, be  judgment  in terms of the award, there will  no  interim interest.  There will, however, be interest on  judgment  at 9%. The objections are dismissed and the workers’ objections are disposed of by stating that there are sufficient  provi- sions in the award to meet the claim of the gratuity of  the workers and they should have the right to be met out of  the award. In that view of the matter the award is made the rule of  the Court and the judgment be in terms of the award.  No order as to costs. N.P.V.                                       Petitions  dis- posed of. 858