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CASE NO.: Appeal (civil)  2668 of 2007

PETITIONER: Markfed Vanaspati & Allied Industries

RESPONDENT: Union of India

DATE OF JUDGMENT: 14/09/2007

BENCH: Tarun Chatterjee & Dalveer Bhandari

JUDGMENT: J U D G M E N T

DALVEER BHANDARI, J.

1.      This appeal is directed against the judgment of the  Division Bench of the Delhi High Court dated 17.4.2006  passed in FAO (OS) No. 206/2006.                2.      The respondent, Union of India, issued tender dated  29th June, 1989 for purchase of oil. The appellant offered  to supply 1600 metric tons of different categories of oil  vide quotation dated 15th July, 1989, the details of which  are as under:- 1.      200 MT @ 24,150/- per MT by 31.8.89  (Refined Cotton Seed Oil)

2.      500 MT @ Rs.21,500/- per MT by  31.8.1989 (Rapeseed Oil)  

3.      300 MT @ Rs.24,550/- per MT by  30.9.1989 (Refined Soyabeen Oil)

4.      500 MT @ Rs.22,000/- per MT by  30.9.1989 (Rapeseed Oil).             3.      The respondent-Union of India accepted the offer  given by the appellant and consequently the respondent  issued tender in the form of a letter dated 22nd August,  1989.  The appellant failed to supply the oil as per the  delivery schedule.  The time for supply was extended,  reserving the respondent\022s right to levy liquidated  damages.  All the supplies could not be delivered.  The  contract was cancelled and the appellant resorted to force  majeure clause.        4.      The dispute was referred to an arbitrator.  The sole  arbitrator made and published his award on 20th June,  1995.  The appellant prayed before the arbitrator that in  view of the extension of time on various occasions, the  time was not the essence of the contract.  The appellant  has admitted various delays including in furnishing  security, but stated that the same were unintentional.        5.      It may be pertinent to mention that the objections  regarding limitation and jurisdiction were given up by the

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appellant before the Division Bench of the High Court.   Before the Division Bench, the appellant sought the  benefit of the force majeure clause because the  government had banned the use and process of rapeseed  oil by manufacturers.  The Division Bench specifically  noted in the impugned judgment that no other argument  was advanced by the learned counsel appearing for the  appellant. Therefore, we requested the learned counsel  for the appellant to confine his submissions only with  regard to force majeure clause argued before the Division  Bench of the High Court in this case.  On the basis of the  documents referred to the court by the learned counsel  for the appellant, it is clear that the ban was imposed for  the use of rapeseed oil for manufacturing Vanaspati but  manufacturing of rapeseed oil was not debarred or  restricted.  Therefore, even the plea of force majeure  clause taken by the appellant was found to be totally  devoid of any merit.

6.      The arbitrator in the instant case gave a non- speaking award, which was made rule of the court by the  order of the learned Single Judge on 21st February, 2006.   The appellant preferred FAO (O.S.) No.206/2006, before  the Division Bench of the High Court, which was also  dismissed on 17th April, 2006.  The appellant has  preferred special leave petition against the said impugned  judgment of the Division Bench.  This Court granted  leave on 14th May, 2007.          7.      The Division Bench, in the impugned judgment,  while affirming the judgment of the learned Single Judge  has correctly observed that the ban was on the use of  rapeseed oil for manufacturing Vanaspati but  manufacture of rapeseed oil was not debarred or  restricted.

8.      We have heard Mr. L. Nageshwar Rao, the learned  senior counsel for the appellant, and Mr. Vikas Singh,  the learned Addl. Solicitor General for the respondent,  Union of India.  In this case, the award has been made  rule of the court by the learned Single Judge of the High  Court and the findings of learned Single Judge have been  affirmed by the Division Bench.  The Court in the  impugned judgment held that the force majeure clause  could not be attracted in the facts and circumstances of  this case.  This was so because the ban covered the use  of rapeseed oil for manufacturing Vanaspati, yet  manufacturing rapeseed oil was not debarred or  restricted.  We concur with the learned Single Judge\022s  findings, which were affirmed by the Division Bench.

9.      The consistent and settled legal position is that the  scope of interference is extremely limited in a non- speaking award. The legal position has been consistently  followed in number of judicial decisions.  The findings of  some of those judgments are recapitulated as under.           10.     In M/s Sudarsan Trading Co. v. Govt. of Kerala  & Another (1989) 2 SCC 38 in para 29 at page 53,  Sabyasachi Mukharji, J. speaking for the Court observed  that the court in a non-speaking award cannot probe into  the reasoning of the award.  The Court further observed  that only in a speaking award the court may look into the  reasoning of the award, and it is not open to the court to  probe the mental process of the arbitrator and speculate,

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where no reasons are given by the arbitrator as to what  impelled him to arrive at his conclusion. Furthermore,  the reasonableness of the arbitrator\022s reasons cannot be  challenged. The arbitrator\022s appraisement of the evidence  is never a matter for the court to entertain.       11.     This Court in State of A.P. v. R.V. Rayanim (1990)  1 SCC 433 in para 6 at page 437, dealt with a non- speaking award.  The court observed that it is not open  to the court to probe the mental process of the arbitrator  where he has not provided the reasoning for his decision.        12.     This Court, in Bijendra Nath Srivastava v.   Mayank Srivastava & Others (1994) 6 SCC 117 in para  20 at page 133 and para 31 at page 138, observed that  the arbitrator is under no obligation to give reasons in  support of the decision reached by him, unless the  arbitration agreement or deed of settlement so required.  If the arbitrator or umpire chooses to give reasons in  support of his decision, then it would be open to the  court to set aside the award upon finding an error of law.  The reasonableness of the reasons given by the arbitrator  cannot, however, be challenged.  It is not open to the  court to look for the reasons and proceed to examine  whether they were right or erroneous.  The arbitrator is  the sole judge of the quality as well as the quantity of the  evidence.  It will not be for the court to take upon itself  the task of being a judge of the evidence before the  arbitrator.  The Court should approach an award with a  desire to support it, if that is reasonably possible, rather  than to destroy it by calling it illegal.       13.     In New India Civil Erectors (P) Ltd. v. Oil &  Natural Gas Corporation (1997) 11 SCC 75 in para 7 at  page 78, the Court observed while dealing with a non- speaking award that the attempt of the court should  always be to support the award within the letter of law.       14.     In Rajasthan State Mines & Minerals Ltd. v.  Eastern Engineering Enterprises & Another (1999) 9  SCC 283 in para 44 at page 309, the Court observed that  in a non-speaking award the jurisdiction of the court is  limited.  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.  It is also not  possible to admit to probe the mental process by which  the arbitrator has reached his conclusion where it is not  disclosed by the terms of the award.  Similar view has  been taken in the following cases, namely,  State of  Bihar & Others v. Hanuman Mal Jain (1997) 11 SCC  40, P.V. Subha Naidu & Others v. Govt. of A.P.  &  Others (1998) 9 SCC 407, Star Construction and  Transport Co. & Others v. India Cements Ltd. (2001) 3  SCC 351 and D.D. Sharma v. Union of India (2004) 5  SCC 325.       15.     The decided cases of this Court demonstrate that  this Court has consistently taken the view that scope of  interference in a non-speaking award is extremely  limited.  The Court cannot probe into the mental process  of the arbitrator.  The court should endeavour to support  a non-speaking arbitration award provided it adhered to  the parties\022 agreement and was not invalidated due to  arbitrator\022s misconduct.      

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16.     Russell on Arbitration 19th Edition at Pages 110-111  described the entire genesis of arbitration as under:- \023An arbitrator is neither more or less than a  private judge of a private court (called an  arbitral tribunal) who gives a private judgment  (called an award).  He is a judge in that a  dispute is submitted to him; he is not a mere  investigator but a person before whom  material is placed by the parties, being either  or both of evidence and submissions; he gives  a decision in accordance with his duty to hold  the scales fairly between the disputants in  accordance with some recognized system of  law and rules of natural justice.  He is private  in so far as (1) he is chosen and paid by the  disputants (2) he does not sit in public (3) he  acts in accordance with privately chosen  procedure so far as that is not repugnant to  public policy (4) so far as the law allows he is  set up to the exclusion of the State Courts (5)  his authority and powers are only whatsoever  he is given by the disputants\022 agreement (6)  the effectiveness of his powers derives wholly  from the private law of contract and  accordingly the nature and exercise of those  powers must not be contrary to the proper law  of the contract or the public policy of England  bearing in mind that the paramount public  policy is that freedom of contract is not lightly  to be inferred with.\024

17.     Whatever has been mentioned by Russell in this  paragraph is equally true for Indian Arbitrators.       18.     Arbitration is a mechanism or a method of  resolution of disputes that unlike court takes place in  private, pursuant to agreement between the parties.  The  parties agree to be bound by the decision rendered by a  chosen arbitrator after giving hearing.  The endeavour of  the court should be to honour and support the award as  far as possible.

19.     We have perused the award and the judgment of the  learned Single Judge by which the award has been made  the rule of the Court and the impugned judgment of the  Division Bench of the High Court.  In our considered  view, no interference is called for.  The appeal being  devoid of any merit is accordingly dismissed.  In the facts  and circumstances of the case, we direct the parties to  bear their own costs.