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PETITIONER: GOA, DAMAN AND DIU HOUSING BOARD

       Vs.

RESPONDENT: RAMAKANT V.P. DARVOTKAR

DATE OF JUDGMENT06/09/1991

BENCH: RAY, B.C. (J) BENCH: RAY, B.C. (J) KANIA, M.H. SHETTY, K.J. (J) SHARMA, L.M. (J) VERMA, JAGDISH SARAN (J)

CITATION:  1991 AIR 2089            1991 SCR  (3) 904  1991 SCC  (4) 293        JT 1991 (3)   604  1991 SCALE  (2)488

ACT:     Arbitration  Act,  1940: Section 16--Award--When  to  be remitted   to   Arbitrator--No   allegation   of   bias   or illegality--High   Court   remanding   awards   for   giving reasons--Whether justified.

HEADNOTE:     The appellant-Housing Board, which had entered into four contracts with the respondent for construction of  tenements within  a certain time limit, terminated them  after  giving notice  on  the  ground that the respondent  had  failed  to complete  the construction work despite  several  extensions granted to him, and filed a suit in the Court of Civil Judge claiming  damages of over Rs.4 lakhs. The  respondent  filed appllcations  under  Sections 34 and 20 of  the  Arbitration ACt,  1940, for stay of the suit and for directions  to  the appellant-Board for filing the arbitration agreement in  the Court and also for appointing arbitrator in terms of  clause 25  of  the agreement. As per Court’s order,  the  appellant filed the agreement in the Court and appointed the  Arbitra- tor.     The  Arbitrator made four awards granting the claims  of the  respondent to the extent of over Rs.8 lakhs  and  filed them  in  the Court for making them Rule of the  Court.  The appellant’s  objections for setting aside the awards on  the ground  that the Arbitrator had misconducted himself by  not framing  the main issue, viz., whether or not  the  claimant abandoned  the work and thereby committed the breach of  the agreement, by ignoring the letter of termination where in it was  clearly  stated that the termination had been  done  on account of the abandonment of the work by the claimant,  and failed  to  decide upon the question of the  abandonment  of work  and  wholly  side-tracked the issue and  also  by  not giving  reasons for the award as required under  the  agree- ment,  under  which he was appointed, were rejected  by  the Civil  Court, which confirmed the awards and made  them  the Rule  of  the Court. The appellant’s  appeals  against  this decision was allowed by the High Court, which set aside  the

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Civil Court’s order and sent back the awards to the arbitra- tor  for giving reasons, as required under clause 25 of  the agreement  which  specifically provided that  in  all  cases where amount of 905 claim  was Rs.50,000 and above, the Arbitrator was bound  to give reasons.     In  the  appeal  before this Court,  on  behalf  of  the appellant  Housing Board it was contended that  having  held that the arbitrator was guilty of misconduct and the  awards were  liable to be vitiated on that ground, the  High  Court ought  to have set aside the awards instead of sending  them back for recording reasons, which was totally unwarranted by law.     On  behalf of the respondent, it was contended that  the High  Court’s order remanding the awards for recording  rea- sons clearly fell within the purview of Sec. 16(1)(c) of the Arbitration  Act,  as the objection to the legality  of  the award  was  apparent on the face of it, and not  within  the provisions of Sec. 30 of the Act, inasmuch as the arbitrator had  not  misconducted himself or the  proceedings  and  the awards in question had not been improperly procured. Dismissing  the  appeals  and confirming  the  awards,  this Court,     HELD:  1.1  Section 16 empowers the Court to  remit  the award  to the Arbitrator for reconsideration only  in  three cases  specified  therein.  Clause (c)  of  Sub-Section  (1) provides that the award shall be remitted to the  Arbitrator by the Court where an objection to the legality of the award is apparent on the face of it. [710D]     1.2  No doubt, in the instant case, the High  Court  has come to a finding that the Arbitrator was guilty of  miscon- duct  for his failure to give reasons as required but  there is nothing to show that the Arbitrator misconducted  himself or the proceeding in any other manner, nor is there anything to  show that the awards have been improperly  procured  nor any  allegation, far less, any finding, that the  Arbitrator was biased or unfair or he had not heard both the parties or he had not fairly considered the submissions of the  parties in making the awards in question. [710E]     1.3  It  is  evident from the four awards  made  by  the Arbitrator  that the Arbitrator has considered all the  spe- cific  issues raised by the parties in the arbitration  pro- ceedings  and came to his finding after giving  cogent  rea- sons.  The awards cannot under any circumstances be  consid- ered  to  be made by the Arbitrator  without  recording  any reasons  for the same. In such circumstances, it  cannot  be held that the Arbitrator has misconducted himself or in  the proceedings in the matter 906 of giving the awards. The decision of the High Court  remit- ting the awards back to the Arbitrator for giving reasons is set  aside and the awards made by the Arbitrator are  upheld and made Rule of the Court. [710F-G, 711A]

JUDGMENT:     CIVIL APPELLATE JURISDICTION: Civil Appeal Nos.  3236-39 of 1984.     From  the  Judgment  and Order dated 7.2.  1983  of  the Bombay High Court in F.C.A. Nos. 35/B, 36/B, 37/B & 38/B  of 1981.     Ashok  H.  Desai, Solicitor  General,  Ravinder  Narain,

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Aditya  Narain, Rajan Narain, S. Sukumaran, D.N. Mishra  and Pallav Sishodia for the Appellant.     G.L.  Sanghi, S.K. Mehta, Dhruv Mehta and  Aman  Vachher for the Respondent. The Judgment of the Court was delivered by     RAY,  J. The above four appeals on special leave by  the appellant  were filed against the judgment and  order  dated February 7, 1983 made by the Panaji Bench of the Bombay High Court  in First Civil Appeal Nos. 35/B to 38/B of 1981  dis- posing  of  all  the four appeals  field  by  the  appellant against  the judgment and order of the learned Civil  Judge, Senior Division, Panaji, Goa dated 26.8.1981 confirming four different awards by an arbitrator appointed in pursuance  to the  agreement  between the parties. Appeal No. 35  of  1981 relates to the award, awarding to the respondent against the appellant Rs.2,75,091.13. Appeal No. 36 of 1981  relates  to an   award,   awarding   to  the   respondent   a   sum   of Rs.1,88,968.36.  Appeal No. 37 of 1981 relates to an  award, awarding to the respondent Rs.3,36,230.36 and Appeal No.  38 of  1981  relates to an award, awarding  to  the  respondent Rs.46,321.32. The facts leading to these appeals are as follows:     The  appellant  Goa, Daman & Diu Housing  Board  entered into  two  contracts on 15.3.72, and one  contract  each  on 11.7.73 and on 4.7.73 with the respondent for the  construc- tion  of tenements at Vasgoda-Gama, Goa. The  appellant  ac- cepted two tenders of the respondent on 9.3.72 and remaining two on 24.2.73. There was a time limit in all the  aforesaid four  contracts for the completion of the work  referred  to therein.  Several extensions were granted to the  respondent for  completing the work out the respondent failed  to  com- plete the construction 907 work  undertaken  by him under the said four  contracts.  On July 1, 1975 the appellant issued a notice to the respondent under clause 3 of the said contract for exercising the right of  termination in view of the fact that the respondent  was unable  to fulfil the contractual obligation  of  completing the  construction  work in spite of the  various  extensions granted   to   the  respondent.  On  July  14,   1975,   the Engineer-in-Charge  of  the appellant  Board  exercised  its unilateral right of terminating the contract under clause  3 of the agreement in view of the fact that the respondent did not  complete the work of construction undertaken by him  in spite  of  various extentions granted to him.  On  July  31, 1975, the Chairman of the appellant board confirmed that all the  four  contracts stood rescinded. On May 17,  1976,  the respondent  served a notice to the appellant on  the  ground that  the  appellant had rescinded the work  contracts.  The respondent stated therein various reasons why the work could not  be completed. Thereafter in April, 1978, the  appellant filed  a suit claiming damages for a sum  of  Rs.4,38,786.96 with  interest  against the respondent in the Court  of  the Civil Judge, Senior Division, Panaji, Goa. Subsequently,  an application was filed by the respondent under section 34  of the  Arbitration Act for stay of the suit.  Respondent  also made  another application to the Court under section  20  of the Arbitration Act for directing the Housing Board to  file the  arbitration  agreement  in Court and  in  pursuance  of clause 25 of the agreement to appoint an arbitrator. Accord- ingly, the Court by its order dated 28.2.1979 had the agree- ment  between  the parties filed in court and  directed  the Housing  Board to appoint an arbitrator. On March 29,   1979 Shri  J.S. Pinto, retired Superintending Engineer  w.as  ap- pointed as Arbitrator.

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   The  Arbitrator on March 23, 1981 submitted four  awards granting the claims of the respondent as stated hereinbefore on the basis that the appellant was responsible for the slow progress  and non completion of work and the work could  not be  completed as the contract was terminated by  the  appel- lant,  the  Housing Board. The said award was filed  in  the Court of Civil Judge, Senior Division, Panaji, by the  Arbi- trator on 31st March, 1981 for making the award Rule of  the Court.  The appellant submitted his objections  for  setting aside the awards on April 27, 1981 on the grounds inter alia that the Arbitrator had misconducted himself by not  framing the  main issue i.e. whether or not the  claimant  abandoned the work and thereby committed breach of the agreement.  The Arbitrator  misconducted himself by ignoring the  letter  of termination wherein it Was clearly stated that the  termina- tion has been done on account of the abandonment of the work by  the claimants; the learned Arbitrator failed  to  decide upon the 908 question  of  the abandonment of work and  has  wholly  side tracked  the  issue;  the  learned  Arbitrator  misconducted himself  by  not giving reasons for the  award  as  required under the agreement under which he was appointed.     The learned Civil Judge, Senior Division, Panaji by  his Order  dated 26th August, 1981 rejected all  the  objections raised  on behalf of the appellant against the  said  awards and  confirmed the same. All the four impugned  awards  have been made Rule of the Court.     The appellant thereafter filed the aforesaid First Civil Appeal  Nos. 35/B, 36/B, 37/B and 38/B of 1981  against  the said  Order  of the learned Civil  Judge,  Senior  Division, Panaji,  Goa  on  the ground that the Civil  Judge  did  not consider that the Arbitrator misconducted himself in  making the awards without recording any reasons for the same,  even though  the  claim was Rs.50,000 and above  as  provided  in clause  25 of the agreement between the parties and as  such the awards should have been set-aside by the Court.     The High Court held that having regard to the clause  25 of the terms of the agreement specifically providing that in all cases where amount of claim in dispute is Rs.50,000  and above  the  arbitrator  was bound to give  reasons  for  his award.  The statements that has been made by the  Arbitrator while giving his findings could not be considered to be  the reasoning for his finding of the award. The Court also  held that:               "The award no where contains any reasoning for               the  same nor does it even obliquely  mentions               that in giving his findings the Arbitrator has               even  sought to adopt the reasoning of  either               of the parties. In our view as the  obligation               of  the  Arbitrator  under Clause  25  of  the               agreement stands, the reasons should appear to               be so in this case."     It  was  further held that as the arbitrator  failed  to give  reasons for the award it would be a misconduct on  his part and the award was liable to be vitiated on that ground. The  Court allowed all the appeals. The order of  the  lower court was set-aside and the awards were remanded back to the arbitrator for giving reasons for the same as required under clause  25  of the arbitration agreement and  thereafter  to file  the same in the court of Civil Judge,  Panaji,  within eight weeks after the order is served on him. 909     Against this judgment and order the impugned appeals  by special leave were filed.

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   The  learned  counsel on behalf of  the  appellants  has contended that the High Court acted illegally in not consid- ering at all that the arbitrator did not record any  reasons for making awards allowing the claims each of which  exceeds Rs.50,000  as  provided under clause 25 of  the  arbitration agreement  and as such the arbitrator has misconducted  him- self  in the proceedings and instead of sending  the  awards made  by  the arbitrator to him for  recording  his  reasons ought  to have set-aside the awards under section 30 of  the Arbitration  Act. It has also been contended that  the  High Court  though  it  held that the arbitrator  was  guilty  of misconduct and the awards made by him were liable to be vitiated  on  that ground yet inspite of setting  aside  the awards  they were sent to the arbitrator for recording  rea- sons which is totally unwarranted by law.     The learned counsel appearing on behalf of the  respond- ent,  on the other hand, submitted that the awards  made  by the  arbitrator after hearing the parties cannot be said  to be  illegal or unwarranted as the same were made after  con- sidering  all papers and documents filed by the parties  and after  duly hearing the parties. As such there was no  ille- gality  nor any misconduct committed in making  the  awards. The arbitrator has fairly considered the issues and made the awards  in question. The misconduct, if any, on the part  of the arbitrator does not concern with the probity and  impar- tiality  of the arbitrator. The only allegation against  the arbitrator  is that he has not recorded the reasons for  the awards made by him as per term of clause 25 of the  arbitra- tion  agreement.  It has, therefore, been contended  by  the learned  counsel on behalf of the respondent that the  order of the High Court in remanding the awards to the  arbitrator for  recording reasons clearly fails within the  purview  of section 16(1)(c) of the Arbitration Act, 1940 as the  objec- tion to the legality of the award is apparent on the face of it.  It does not fail within the provision of section 30  of the  said act in as much as the arbitrator has  not  miscon- ducted himself or the proceedings and the awards in question have  not been improperly procured. Several  decisions  have been  cited at the bar in support of the respective  conten- tions advanced by the counsel for the parties.     Before  considering the question whether the  directions made  by the High Court in remitting the award to the  Arbi- trator  for  giving reasons do fall within  the  purview  of Section  16 of the Arbitration Act, 1940, it is  appropriate to set out the relevant provisions of section 16(1):- 910               "Sec.  16(1): The Court may from time to  time               remit  the  award or any  matter  referred  to               arbitration  to the arbitrators or umpire  for               reconsideration  upon such terms as it  thinks               fit--               (a) where the award has left undetermined  any               of  the  matters referred to  arbitration,  or               where it determines any matter not referred to               arbitration and such matter cannot be separat-               ed  without  affecting  the  determination  of               matters referred; or               (b) where the award is so indefinite as to  be               incapable of execution; or               (c) where an objection to the legality of  the               award is apparent upon the face of it."     Section 16 empowers the Court to remit the award to  the Arbitrator for reconsideration only in three cases specified therein. Clause (c) of Section 16(1) provides that the award shall  be remitted to the Arbitrator by the Court  where  an

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objection  to the legality of the award is apparent  on  the face of it. Of course, the High Court has come to a  finding that the Arbitrator was guilty of misconduct for his failure to  give reasons as required. There is, however, nothing  to show  that the Arbitrator misconducted himself or  the  pro- ceedings  in any other manner nor there is anything to  show that  the awards have been improperly procured. There is  no allegation,  far less, any finding, that the Arbitrator  was biased or unfair or he has not heard both the parties or  he has not fairly considered the submissions of the parties  in making the awards in question. In our opinion, it is evident from  the four awards made by the Arbitrator that the  Arbi- trator has considered all the specific issues raised by  the parties  in  the  arbitration proceedings and  came  to  his finding after giving cogent reasons. The above awards cannot under  any  circumstances be considered to be  made  by  the Arbitrator  without  recording  any reasons  for  the  same. Therefore,  in such circumstances, it is not proper to  hold that  the  Arbitrator  has misconducted himself  or  in  the proceedings in the matter of giving the awards.     In  these circumstances, we are unable to hold that  the four awards made by the Arbitrator are bad for not recording reasons. We, therefore, uphold the said awards and we do not think  it  necessary to decide the question as  regards  the scope of Section 30 or Section 16of 911 the  Arbitration Act. The decision of the High Court  remit- ting the awards back to the Arbitrator for giving reasons is set aside and the awards made by the Arbitrator are  upheld. Let these awards be made rule of the Court. The appeals are, therefore, dismissed. There will be no order as to costs. N.P.V.                                        Appeals   dis- missed. 912