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PETITIONER: FIRM MADANLAL ROSHANLAL MAHAJAN

       Vs.

RESPONDENT: HUKUMCHAND MILLS LTD., INDORE

DATE OF JUDGMENT: 19/08/1966

BENCH: BACHAWAT, R.S. BENCH: BACHAWAT, R.S. WANCHOO, K.N. SHAH, J.C.

CITATION:  1967 AIR 1030            1967 SCR  (1) 105  CITATOR INFO :  F          1967 SC1032  (6)  R          1972 SC1507  (31,32)  RF         1988 SC 734  (1,18)  D          1988 SC1520  (18)  R          1988 SC2018  (9)  R          1988 SC2045  (2)  RF         1990 SC1340  (8,3,16)  R          1990 SC1426  (22)  E          1992 SC 732  (10,24,26,30,33)

ACT: Indian  Arbitration Act, 1940 (Act 10  of  1940)-Arbitrator, powers   of--Lump  sum  award-Amendment  of   issue-Interest pendente lite.

HEADNOTE: The  respondent filed a suit against the appellant  claiming two  sums as losses in respect of two items and interest  on the  same.   The disputes were referred  to  an  arbitrator, before whom the respondent did not press for interest  prior to  the institution of the suit, but pressed its  claim  for the two sums and interests from the date of the  institution of  the suit till recovery.  At the time of writing  of  the award,  the arbitrator corrected one of the issues  to  show that  the  claim  was  for the  price  of  the  items.   The arbitrator passed a lump sum award in respect of both items, and awarded interest on that sum from the date of the  award till  the date of payment.  The award was filed  in  Court,, and  the appellants application for setting aside the  award was dismissed by the District Judge.  This was confirmed  by the High Court.  In appeal, this Court, HELD  : (i) The arbitrator could give a lump sum award.   He was not bound to, give a separate award for each claim.   He award  on  both fact and law is final.  There is  no  appeal from  his  verdict.  The court cannot review his  award  and correct any mistake in his adjudication, unless an objection to the legality of the award is apparent on the face of  it. [107 G] Champsey  Bhara  &  Company v.  Jivray  Ballo  Spinning  and Weaving Company Ltd., L.R. 50 I.A. 324, referred to. In  the present case the arbitrator gave no reasons for  the

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award  There is no legal proposition which is the  basis  of the award, far less a legal proposition which is  erroneous. [108 B] (ii) By amending an issue behind the back of the  appellant, the  arbitrator  was  not guilty  of  misconduct.   By  this amendment the appellant suffered no prejudice. [108 C-D] (iii) In an arbitration in a suit, the arbitrator has  power to award pendente lite interest. Though, in terms, s. 34 of the Code of Civil Procedure  does apply  to  arbitrations,  it  was an  implied  term  of  the reference  in the suit that the arbitrator would decide  the dispute  according  to law and would give such  relief  with regard to pendente lite interest as the Court could give  if it  decided the  dispute.  This power of the arbitrator  was not  fettered either by the arbitration agreement or by  the Arbitration  Act,  1940.   In  the  present  case,  all  the disputes in the suit were referred to the arbitrator and one of  the disputes in the suit was whether the respondent  was entitled to pendent lite interest. [109 D] Case law referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 878 of 1964. up CI/66 - 8 106 Appeal  by special leave from the judgment and decree  dated April  30,  1960 of the Madhya Pradesh High Court  in  Civil First Appeal No. 41 of 1960. K L. Gosain, S. K Mehta and K. L. Mehta, for the appellant.. S.  T. Desai, S. N. Prasad, J. B. Dadachanji, O.  C.  Mathur and Ravinder Narain, for the respondent. The Judgment of the Court was delivered by Bachawat,  J. The appellant and the respondent entered  into three contracts whereby the appellant agreed to buy and  the respondent  agreed to sell 352 bales of cloth.   Originally, the  contracts  provided  for  delivery  of  the  goods   in May/June, 1948.  The parties, subsequently agreed that  part of  the  goods  would be delivered in  June,  1948  and  the balance goods would be delivered in July, 1948.  The dispute between  the  parties  concerns an item  of  176  bales  and another  item of 46-1/2 bales.  The respondent claimed  from the  appellant  a sum of Rs. 1,72,856/- made up of  (1)  Rs. 84,006/2/for  loss  in respect of 176 bales  resold  by  the respondent  with  the consent of the appellant and  (2)  Rs. 88,849/14/-  for  the balance of the price of  46-1/2  bales bargained  and  sold  but  not  taken  delivery  of  by  the appellant.   On February 6, 1950, the respondent  instituted against  the  appellant Civil Suit No. 10-A of 1950  in  the Court  of the District Judge, Indore claiming the  aforesaid sum of Rs. 1,72,856/-, interest thereon from July 1, 1948 up to January 30, 1950, godown rent, interest from the date  of the institution of the suit and costs.  On or about May  15, 1950,  the  disputes in the suit were referred to  the  sole arbitration  of Sri S. M. Samvatsar, advocate.   Before  the arbitrator,  the  respondent  did not press  its  claim  for godown rent and for interest prior to the institution of the suit,  but  pressed its claim for the aforesaid sum  of  Rs. 1,72,856/and  for interest from the date of the  institution of  the suit till recovery of the amount and costs.  One  of the submissions of the appellant -before the arbitrator  was that  in view of a certain control order, it could not  take delivery of 46-1/2 bales, and in case it was held liable for the  contract price, it should be allowed a rebate  for  the

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current  market  price  on its giving up its  claim  to  the bales.   After hearing the parties, the arbitrator made  his award on November 30, 1961.  The award recited the  disputes between  the  parties and their respective  contentions  and submissions and then directed that "the defendant should pay Rs.  1,17,108-7-9  in all to the plaintiff and  to  give  up claim to 46-1/2 bales.  The defendant should pay interest on the above sum to the plaintiff at the rate of six annas  per cent per month from this day till the day of payment.   Both the  parties  to  bear their own costs.   The  plaintiff  to deposit  arbitration fees which amount to Rs. 1740/- and  to recover half of its amount, Rs. 870/from the defendant." The award was filed in Court.  The appellant 107 filed  an application to set aside the award.  By its  order dated  December  22,  1952,  the  District  Judge,   Indore, dismissed the application, and passed a decree on the award. An  appeal  from this order preferred by the  appellant  was dismissed  by  the High Court of Madhya  Pradesh,  Jabalpur. The  correctness  of  the  judgment of  the  High  Court  is challenged in this appeal by special leave. Counsel for the appellant submitted that the award should be set  aside  for three reasons: He submitted,  firstly,  that there were errors of law apparent on the face of the  award. Now,  the  claim of the respondent consisted of  two  items. The first item of claim was 84,006/2/- for loss on resale of 176  bales.  The respondent’s case was that 176  bales  were resold  with  the  consent of the appellant  and  under  the authority given by it in a letter dated July 10, 1948.   The appellant’s case was that no authority for the resale of all the 176 bales was given by the letter and the resale was not made with its consent.  The second item of claim was for Rs. 88,849/14/-  on  account  of the price  of  46  bales.   The respondent’s  case was that 46-1/2 bales were sold  and  the property  in the goods had passed to the appellant  on  June 30, 1948 and yet the appellant had not taken delivery of the bales.   The  appellant’s  case was  that  the  contract  in respect  of  461  bales  remained  executory  and  it   stoo cancelled  on the passing of the freezing order  dated  July 30, 1948 by the Textile Commissioner, Indore under el. 25(b) of the Indore Cotton Textiles (Control) Order, 1948, whereby the respondent was directed not to deliver any cloth or yarn from  the Mills’premises.  The appellant submitted that,  in any  event, having regard to this. freezing order it  should not be held liable for the full price of 46-1/2 bales and on its giving up its claim to the bales, should be made  liable for  only the difference between the contract price and  the market  price.   On a consideration of the  contentions  and submissions  of  the parties, the  arbitrator  directed  the appellant  to pay Rs. 1,17,108/7/9 and to give up its  claim to  46-1/2 bales.  As the respondent was allowed  to  retain the  bales, the arbitrator passed a lump sum award  for  Rs. 1,17,108/7/9   only  in  respect  of  both  items   of   the respondent’s  claim.  The arbitrator could give a  lump  sum award.He  was  not bound to give a separate award  for  each claim.His award on both fact and law is final.  There is  no appeal from his verdict.  The Court cannot review his  award and  correct  any  mistake in his  adjudication,  unless  an objection  to the legality of the award is apparent  on  the face of it.  In Champsey Bhara & Company.V V.  Jivraj Balloo Spinning  and  Wearing Company Ltd.(1),  the  Privy  Council stated:               "An  error  in law on the face  of  the  award               means, in their Lordship’s view, that you  can               find  in  the  award or  a  document  actually

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             incorporated thereto, as for instance a note               (1) L. R. 50 1. A. 324.               108               appended by the arbitrator stating the reasons               for his judgment, some legal proposition which               is  the basis of the award and which  you  can               then say is erroneous." In  the present case, the arbitrator gave no reason for  the award.   We do not find in the award any  legal  proposition which  is  the  basis  of  the  award,  far  less  a   legal proposition  which is erroneous.  It is not possible to  say from the award that the arbitrator was under a misconception of law.  The contention that there are errors of law on  the face of the award is rejected. Counsel then submitted that by amending an issue behind  the back  of  the  appellant,  the  arbitrator  was  guilty   of misconduct,  This contention has no force.   The  arbitrator had  raised  two issues.  The second issue referred  to  the respondent’s claim in respect of 46-1/2 bales -s a claim for loss in respect of the bales.  At the time of the writing of the award, the arbitrator corrected this issue so as to show that  the  claim was for the price of the  bales.   By  this amendment, the appellant suffered no prejudice.  The parties well  knew that the respondent claimed the price  of  46-1/2 bales  and  fought the case before the  arbitrator  on  that footing. The  last objection to the award is that the arbitrator  had no power to award interest during the pendency of the  suit. In  support  of this objection, counsel  for  the  appellant relied  upon the following observations of Bose, J. in  Seth Thawardas Pherumal v. The Union of India (1):               "It was suggested that at least interest  from               the  date  of suit’ could be  awarded  on  the               analogy  of section 34 of the Civil  Procedure               Code,  1908.   But section 34 does  not  apply               because an arbitrator is not a ’court’  within               the  meaning  of the Code nor  does  the  Code               apply to arbitrators, and, but for section 34,               even a Court would not have the power to  give               interest after the suit.  This was, therefore,               also rightly struck out from the award." These observations divorced from their context, lend  colour to  the argument that the arbitrator has no power  to  award pendente lite interest.  But, in later cases, this Court has pointed  out that the observations in Seth Thawardas’s  case (1)  were  not  intended  to  lay  down  such  a  broad  and unqualified   proposition,   see   Nachiappa   Chettiar   v. Subramaniam Chettiar (2), Satinder Singh v. Amrao Singh (3). The relevant facts regarding the claim for interest in  Seth Thawardas’s  case(1)  will be found at pp. 64 to 66  of  the Report and in paragraphs 2, 17 and 24 of the judgment of the Patna  High  Court reported in Union of India  v.  Premchand Satram  Das  (4).  The arbitrator  awarded  on  unliquidated damages for a (1) [1955] 2 S. C. R. 48,65. (3) [1951] 3 S. C. R. 676, 695. (2)  [1960] 2 S. C. R. 209, 238. (4)  A. I. R. 1951 Pat. 201, 204-205. 109 period  before the reference to arbitration and also  for  a period  subsequent  to the reference.  The  High  Court  set aside  the award regarding interest on the ground  that  the claim  for interest was not referred to arbitration and  the arbitrator  had no jurisdiction to entertain the claim.   In this  Court,  counsel for the claimant  contended  that  the

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arbitrator  had  statutory power under the Interest  Act  of 1839  to award the interest and, in any event, he had  power to  award  interest during the pendency of  the  arbitration proceedings  under  s. 34 of the Code  of  Civil  Procedure, 1908.   Bose,  J.  rejected this  contention.   It  will  be noticed that the judgment of this Court in Seth  Thawardas’s case(1) is silent on the question whether the arbitrator can award   interest   during  the   pendency   of   arbitration proceedings  if the claim regarding interest is referred  to arbitration.   In the present case, all the disputes in  the suit were referred to the arbitrator for his decision.   One of  the disputes in the suit was whether the respondent  was entitled  to pendente lite interest.  The  arbitrator  could decide the dispute and he could award pendente lite interest just as a Court could do so under s. 34 of the Code of Civil Procedure.   Though,  in terms, s. 34 of the Code  of  Civil Procedure does not apply to arbitrations, it was an  implied term of the reference in the suit that the arbitrator  would decide  the  dispute according to law and  would  give  such relief  with regard to pendente lite interest as  the  Court could  give  if it decided the dispute.  This power  of  the arbitrator  was  not  fettered  either  by  the  arbitration agreement  or by the Arbitration Act, 1940.  The  contention that in an arbitration in a suit the arbitrator had no power to award pendente lite interest must be rejected. In the result, the appeal is dismissed with costs. Y. P.                            Appeal dismissed. (1) [1955] 2 S.C.R.48,65. 110