http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 3  

PETITIONER: FOOD CORPORATION OF INDIA & ANR.

       Vs.

RESPONDENT: GREAT EASTERN SHIPPING CO. LTD.

DATE OF JUDGMENT28/03/1988

BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) RANGNATHAN, S.

CITATION:  1988 AIR 1198            1988 SCR  (3) 366  1988 SCC  (3) 291        JT 1988 (2)   143  1988 SCALE  (1)786

ACT:      Arbitration Act,  1940: Sections  2,  14,  30  and  33- Charter Party  agreement-Arbitrators-Men of  commerce-Letter written by one party to its Arbitrator to record reasons for award-Copy to  arbitrator appointed  by other  party-Whether amounts to  mandate from  both parties  to both arbitrators- Arbitrators award lump sum amount-Whether legal misconduct.

HEADNOTE: %      A Charter  Party agreement was entered into between the appellant-Food Corporation  of India,  and  the  respondent- Shipping Company  for  transportation  of  bulk  cargo  from Australia to  India. After  the  cargo  was  delivered,  the respondent Company  raised disputes  regarding certain items and claimed  demurrage and  overtime  charges.  As  per  the agreement, the  disputes were  referred to joint arbitration by two  Arbitrators, one  each  appointed  by  each  of  the parties. The  appellant  appointed  its  Arbitrator  with  a specific condition  that he  should  give  reasons  for  his award, and  sent a  copy of  this letter  to the  arbitrator appointed by  the respondent.  The award  was made  and duly signed  by  the  two  Arbitrators  at  Calcutta  and  Bombay respectively. The  award, which  was a  non-speaking one and did not  contain reasons  for the  award  but  directed  the appellant Corporation  to pay  a  lump  sum  amount  to  the respondent Company, was filed in the High Court of Bombay.      The High Court rejected the objection petition filed by the appellants for setting aside the award.      In the appeals, by special leave, it was contended that the High  Court of  Bombay had  no jurisdiction to entertain the filing  of the  award since  no cause of action arose in Bombay and  that the  Arbitrators had  not complied with the mandate given  to them  to state the reasons and, therefore, the award  was  liable  to  be  set  aside  for  reasons  of misconduct, irregularity and lack of competence.      Dismissing the appeals, by special leave, 367 ^      HELD: There was no mandate given by both the parties to the arbitration  agreement to  both the arbitrators to state

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 3  

reasons. The arbitrators could not act on the mandate of one of the parties. [368G]      Unreasoned award  is bad.  Though the  recent trend  is that there  should be a reasoned award, and that would be in consonance with the principles of natural justice, in a case where two  men  of  commerce  entered  into  arbitration  in respect of money claim under the Charter Party Agreement and the award has awarded a lump sum amount, the reasons are not far too seek. It is really an accounting of the rival claims of the parties. [368H, 369A-B]      Therefore, on  the facts of the case, there is no legal misconduct as such in not giving reasons. [369B-C]      There is  a specific finding by the Single Judge of the High Court that the agreement was signed at Bombay which was affirmed by the Division Bench. Hence the High Court had the jurisdiction to entertain the filing of the award. [368E-F]

JUDGMENT:      CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1500-01 of 1988.      From the  Judgment and  Order dated  26.10.1987 of  the Bombay High Court in Appeal No. 1207 and 1206 of 1987.      Y.P. Rao for the Appellants.      H.N. Salve, Hardeep Singh and Raian Karanjawala for the Respondent.      The Judgement of the Court was delivered by      SABYASACHI MUKHARJI,  J. Special  leave granted and the appeals are disposed of by the judgment herein.      These two appeals are directed against the judgment and order of  the Division  Bench of  the High  Court of  Bombay confirming  the   decision  of   the  learned  single  Judge dismissing the  application for  setting aside the award. It appears that  there was  a Charter  Party Agreement  entered into between  the parties  in December,  1981 signed  by the representative of  the President of India and the respondent Shipping Company  for  transportation  of  bulk  cargo  from Australia to 368 India. Thereafter  in February,  1982 the agreement was sent to the  President’s representative  at New Delhi for signing the same.  The said  cargo was  delivered  at  the  port  of Tuticorin and not at Calcutta. The respondent company raised disputes regarding  several items  and claimed  an amount of Rs.9,06,854.86 as demurrage and Rs.7881.43 against over time charges. As  per  the  said  agreement,  the  disputes  were referable  to   arbitration  by  joint  arbitration  of  two Arbitrators one each to be appointed by each of the parties. The appellant appointed one Shri J.L. Puri as its arbitrator with a specific condition that he shall give reasons for the award.  The  respondent  company  appointed  one  Shri  P.S. Gokhale as its arbitrator. Thereafter the award was made and the same  was signed by Shri Gokhale at Bombay on 11th June, 1986 and Shri J.L. Puri at Calcutta on 18th of June, 1986.      The award  did not  speak. As  such there  is no reason apparent from  the award.  The award,  however, directed the appellant Corporation  to pay  lumpsum amount of Rs.6,22,589 to the  respondent company.  The award was filed in the High Court of  Bombay. Notice  of such filing was received by the appellant  Corporation   at  Delhi.   The  appellants  filed objection petition  before the  High  Court  of  Bombay  for setting aside  the award.  It was  contended that  the  High Court of  Bombay had no jurisdiction to entertain the filing of the  award since  no cause of action arose at Bombay. The

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 3  

appellants contended  that the  award was  liable to  be set aside for  reasons of  misconduct, irregularity  and lack of competence.      In both  the appeals  similar claims have been made. It appears, however,  that there  is a specific finding made by the learned  single Judge  that the  agreement was signed at Bombay which  was affirmed by the Division Bench. We find no material to  impeach this  finding. It was next contended as it has  been contended  before the Division Bench that there was a  mandate given to the arbitrators to state reasons for the award  but it was not complied with. It is true that the appellants had  written a letter to their arbitrator stating that he  should record reasons for the award. Copies of this letter were  also sent  to the  arbitrator appointed  by the respondents. There  was, therefore, no mandate given by both parties to  the arbitration agreement to both arbitrators to state reasons.  The arbitrators could not act on the mandate of one  of the  parties. This  contention of  the appellants cannot  be   accepted.  It   was  next  contended  that  the arbitrators should  have given  reasons. Unreasoned award is bad. It  is true  that the  recent trend is to have reasoned awrds. Indeed  a matter  is pending  in this  Court on  this aspect. The  appointed arbitrators  were men of commerce and they 369 arrived at  a consensual  figure. Though the recent trend is that the  award should be a reasoned award and that would be in consonance  with the  principles of  natural jusice, in a case of  this nature where two men of commerce in respect of money claim  under  Charter  Party  Agreement  entered  into arbitration and  the award  has awarded a lumpsum amount, it appears to  us, that  the reasons are not far to seek. It is really an accounting of the rival claims of the parties.      In that  view of  the matter  and in  the facts of this case, we  find that  there is no legal misconduct as such in not giving  reasons. In  the premises,  the High  Court  was right in  dismissing the  objections. Both  the appeals  are disposed of accordingly. There will be no order as to costs. N.P.V.                                    Appeals dismissed. 370