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CASE NO.: Appeal (civil)  266 of 2007

PETITIONER: M/S. ENGINEER SYNDICATE                           ....APPELLANT(S)

RESPONDENT: STATE OF BIHAR & ORS.                               ...RESPONDENT(S)

DATE OF JUDGMENT: 17/01/2007

BENCH: Dr.AR.LAKSHMANAN & V.S. SIRPURKAR

JUDGMENT: J U D G M E N T

(Arising out of SLP(C) No.4129/2005)

Dr.AR.LAKSHMANAN, J.          Leave granted.         The case on hand arise under the Arbitration Act, 1940.          This appeal is directed against the final judgment dt.30.09.2004 passed  by the High Court of Judicature at Patna in C.R.No.2035 of 2001.           The short facts leading to the filing of this appeal are as under :-         The appellant made an agreement No.58 F-2 of 1980-81 with respondent  No.2 acted on behalf of respondent No.1 for the construction of ‘C’ type six  blocks quarters at Sherpur Colony Gandak Project Muzaffarpur for the total  consideration of an amount of Rs.19,02,428.21.  Since there is dispute between  the parties, the appellant had to resort to the court of Subordinate Judge,  Muzaffarpur to invoke the arbitration clause of the aforesaid agreement.  The 1st  Subordinate Judge vide its order  dt. 02.04.1988  in  Misc. Case No. 5/86   appointed  the  

respondent No.4 as an arbitrator to arbitrate and adjudicate the dispute and to  pass the award.  The appellant laid the total claim of Rs.15,77,073/- before the  arbitrator.         The arbitrator made the award on 04.07.1988 in favour of the appellant  for Rs.8,53,837/- only as consolidated and lump sum amount for all claims of  the appellant and against the respondents along with interest at the rate of 12%  per annum till the date of realisation.           The High Court on 30.09.2004, affirmed the award passed by the  Subordinate Judge and rejected the appeal filed by the respondents against  which the respondent preferred an appeal in this Court.  This Court vide its  Order dt.16.08.1996, directed the learned Subordinate Judge to dispose of the  objection of the State (the respondent herein) on merits.  Pursuant to this  Order, the learned Subordinate Judge set aside the impugned order on the  ground that the award was non-speaking and the award failed to refer the claim  item wise and objection of the respondents.  The High Court affirmed the  impugned judgment of the  learned Subordinate Judge.  Aggrieved against the  said order, the appellant has come before this Court by way of a SLP.         We have heard Mr.U.U.Lalit, learned senior counsel appearing for the  appellant and Mr.Nishakant Pandey, learned counsel for the respondents.   Mr.Lalit, learned senior counsel submitted that the order passed by the  learned  Subordinate Judge as affirmed by the High Court is not correct and that the  

award can be set aside on the ground of error of law apparent on the face of the  record under Section 30 of the Act but it qualified the above legal position that  the court while dealing with the application for setting aside an award has no  power to consider whether the view of the arbitrator on the evidence was  justified.           In support of the said contention, the learned senior counsel placed  strong reliance on the Judgment of this Court in Raipur Development Authority  and others vs.M/s Chokhamal Contractors and others reported in (1989) 2 SCC

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721 (Five Judges Bench).  The learned senior counsel invited our attention to  some of the Judgments referred to in the said Judgment and in particular para  14, 16, 17, 19 and 38 also.  This Court, in the above Judgment has categorically  held that it was not open to the High Court to speculate where no reasons are  given by the arbitrator, as to what impelled the arbitrator to arrive at  his  conclusion.  The court declined to recognise the power of the court to attempt  to probe the mental process by which the arbitrator had reached his conclusion  where it was not disclosed by the terms of his award.  It is also further  observed in the said judgment that the court in dealing with an application to  set aside an award has not to consider whether the view of the arbitrator on the  evidence is justified and that the arbitrator’s adjudication is generally  considered binding between the parties, for he is a tribunal selected by the   parties  and the power of the court to set aside the award  

is restricted to cases set out in Section 30.  It is also further observed that it is  not open to the court to speculate, where no reasons are given by the arbitrator,  as to what impelled the arbitrator to arrive at his conclusion.  This Court in para  19 of the above Judgment has also observed as under :-         "It is now well settled that an award can neither be remitted nor set  aside merely on the ground that it does not contain reasons in support  of the conclusion or decisions reached in it except where the  arbitration agreement or the deed of submission requires him to give  reasons.  The arbitrator or umpire is under no obligation to give  reasons in support of the decision reached by him unless under the  arbitration agreement or in the deed of submission he is required to  give such reasons and if the arbitrator or umpire chooses to give  reasons in support of his decision it is open to the court to set aside  the award if it finds that an error of law has been committed by the  arbitrator or umpire on the face of the record on going through such  reasons.  The arbitrator or umpire shall have to give reasons also  where the court has directed in any order such as the one made under  Section 20 or Section 21 or Section 34 of the Act that reasons should  be given or where the statute which governs an arbitration requires  him to do so."   

       The learned senior counsel then relied upon the Judgment of this Court  in Rajendra Construction Co. vs. Maharashtra Housing & Area Development  Authority and others reported in (2005) 6 SCC 678 in which similar question  arose for consideration by this Court.  In the said case, the High Court  concluded that the awards were vitiated under Section 30 of the Act and  observed that the view taken by the sole arbitrator which has been made rule of  the court by the trial court is unsustainable   on  the  ground  that  it  suffers   from errors  

apparent on the face of the record and the sole arbitrator misdirected the  proceedings, in as much as, he was required to adjudicate upon the issues  framed by the trial court and give reasons  thereof in respect of the claims  allowed by him.  The said observation made by the High Court was not  countenanced by this Court as could be seen from para 23 of the said  Judgment at page 687.  This Court also observed that the present awards are  not under the new Act but under the old Act and it is, therefore, obvious that  they could not have been set aside by the High Court on the ground that they  were not supported by reasons and were not speaking awards.         Learned counsel appearing for the respondents placed his reliance on a  Judgment in Bharat Coking Coal Ltd. vs. Annapurna Construction reported in  (2003) 8 SCC 154.  This judgment was rendered on 29.08.2003 by a Division  Bench comprising of two Judges of this Court.  Before the Bench, the  Judgment reported in (1989) 2 SCC 721 (supra) was also cited.  However, the  Court has not followed the said principle laid down in (1989) 2 SCC 721 (supra)  on the ground that the case on hand reported in (2003) 8 SCC 154 stands on a  different footing, namely, that the arbitrator while passing the award in relation  to some in terms failed and/or neglected to take into consideration the relevant  clauses of the contract, nor did he take into consideration the relevant  materials for the purpose of arriving at a correct finding and that such an order  would amount  to  misdirection  in  law.  The  said  question was not

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involved in the present case.  The Judgment reported in (2003) 8 SCC 154 is not  a case of silent or non-speaking award.  Following the principles laid down in  (1989) 2 SCC 721, we allow the appeal filed by the appellant herein and set  aside the order passed by the learned Subordinate Judge and as affirmed by  the High Court.  In the result, the award passed by the arbitrator dt.04.07.1988  is restored and the appellant will be entitled to the amount awarded by the said  award.  The award of the arbitrator dt.04.07.1988 is made a rule of court.         No costs.