(REPORTABLE)

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.8019 OF 2009 (Arising out of Special Leave Petition

(C) No. 3755 OF 2008)

M/s. RAVINDRA KUMAR GUPTA  & COMPANY ….APPELLANT(S)

VERSUS UNION OF INDIA         ……RESPONDENT(S)

J U D G M E N T

SURINDER SINGH NIJJAR, J.

1. Leave granted.

2. Challenge in this appeal is to the Judgment dated 10.7.2007  

of the Division Bench of the High Court of Uttrakhand at Nanital  

whereby the Appeal from Order (AO) No.322 of 1998 New No.242 of  

2001 filed by Union of India challenging the award of the arbitrator  

has been partly allowed.

3. The grievance made by the appellant before us is that the High  

Court  travelled  beyond  its  jurisdiction  in  re-appreciating  the  

evidence led by the parties before the arbitrator and by substituting  

its own conclusions for the conclusions recorded by the arbitrator.  

It  is submitted by the learned counsel  for the appellant that the  

award of the Labour Court had been made the rule of the court by  

the Court of Civil Judge, Sr. Division, Roorkee (hereinafter referred  

to as the Civil Court).  While considering the objections raised by  

the Union of India, the Civil Court took due notice of the evidence  

led by the parties before the arbitrator.    It  has been specifically  

held  that  the  arbitrator  has  not  acted  beyond  the  scope  of  the  

reference nor can it be said that the arbitrator has misconducted  

himself in law or procedure.   

4. We may notice here the relevant facts.  

The  appellant  (hereinafter  referred  to  as  a  contractor),  was  

allotted certain civil  works on 22.3.1988.  Initially, the work was  

scheduled to be completed on or before 28.06.1989. However by  

mutual agreement, the period of contract was extended from time to  

time  and  finally  till  5.11.1990.   The  work  was  completed  on  

3.11.1990.  

5.     Disputes arose between the parties after completion of the  

work regarding the work and payment for the same.  The contractor  

invoked  the  arbitration  clause  contained  in  Clause  70  of  the  

agreement, dated 22.3.1988.  Necessary claim was filed before the  

sole arbitrator under the Indian Arbitration Act, 1940 on 21.4.1994.  

Both the parties participated in the proceedings.   

6.     The arbitrator, after elaborate discussion of the entire evidence  

led by the parties, passed the award dated 30.10.96.

7.    Thereafter the contractor filed Original Suit No.184/96 in the  

Civil Court with a prayer for making the award of the sole arbitrator  

rule of the Court. The Union of India also filed Miscellaneous Suit  

No.147/96, with a prayer for setting aside the Award.  Both the  

suits were heard together by the Civil Court.  In the miscellaneous  

suit  it  was pleaded by the Union of  India that the award of  the  

arbitrator is infirm being against the law and available evidence. As  

such the arbitrator has misconducted himself  in law.  The main  

issue  between the  parties  is  with  regard  to  claim No.5.   It  was  

stated by Union of India that the arbitrator had acted beyond its  

jurisdiction by allowing claim No.5 of the contractor, contrary to the  

provision contained in Clause 11(c) of IAFW 2249, which is part of

the  agreement,  dated  22.3.1988.   The  Civil  Court  duly  framed  

issues.  It took due notice of the objections raised by the Union of  

India.   It  was  submitted  on  behalf  of  Union  of  India,  that  the  

arbitrator cannot accept any claim going beyond the scope of the  

dispute entrusted and referred to him.  The Civil Court specifically  

observed as follows:

   “In the present case, dispute of loss suffered  by  the  decree  holder  for  the  hold-ups  and  delay was referred to the arbitrator and the ld.  Arbitrator has decided this dispute within his  jurisdiction.”

8.     It has been specifically observed by the Civil Court that the  

parties had placed the case before the arbitrator on the point in  

issue.   It  is  further  observed that  the  arbitrator  has passed the  

award giving reasons in detail.  Therefore it cannot be said that the  

arbitrator has acted beyond the scope of reference.  

9.      The Civil Court took due notice of the settled propositions of  

law that at the time of hearing of objections under Section 30 of the  

Arbitration Act, 1940 the Court jurisdiction of the Court is limited.  

It has also been noticed that the Court cannot hear the objections  

against the award as an appellate court,  as the arbitrator is the

final arbiter of the dispute referred to him.  After noticing the legal  

position and after examining clauses of the agreement, the award  

has been made rule of the court.  

10.       The findings of the Civil Court were challenged by the Union  

of  India in appeal  before the High Court,  which has been partly  

allowed. In partly allowing the appeal the Division Bench has set  

aside the finding recorded by the arbitrator by merely stating as  

follows:

“So  far  as  the  contention  of  learned  counsel for the appellant that claim No.5 is  against clause 11(c) of IAFW, which is part of  the  agreement,  is  concerned,  we  have  carefully  perused  the  award  given  by  the  Arbitrator as well as the impugned judgment  of the Court below.  Claim 5 was for loses due  to  hold-ups  and  delay  in  the  work.   The  Union of India in reply before the Arbitrator  stated  that  the  delay  in  execution  of  work  was due to default of the contractor himself.  He  had  not  employed  sufficient  manpower  and resources to complete the work in time.  There  is  no  reason  to  disregard  this  statement  on  behalf  of  Union  of  India/appellant.  We find that the Arbitrator  acted  unreasonably  and  irrationally  in  ignoring the limits and the provisions of the  contract as submitted by the learned counsel  for the appellant.”  

11.     We  are  of  the  considered  opinion  that  the  High  Court  

committed a serious error in re-appreciating the evidence led by the

parties before the arbitrator.   This evidence was duly scrutinized  

and evaluated by the arbitrator.   With regard to claim No.5,  the  

arbitrator has given elaborate reasons.  Therefore, finding recorded  

by the arbitrator cannot said to be either perverse or based on no  

evidence.  A firm finding has been recorded that under claim No.5  

there  was  default  and delay  on the  part  of  Union of  India  with  

respect to:

(i) The payment of RARs final bill.

(ii) Delay in appointing agency for ATT.

(iii) Delay in giving decision.

(iv) Increase in height of Tent plinth (given late).

12.     This conclusion has been erroneously substituted by the  

High Court with its own opinion on appreciation of the evidence.  

Such  a  course  was  not  permissible  to  the  High  Court  while  

examining  objections  to  the  award  under  Section  30  of  the  

Arbitration Act, 1940.  

13.    The law with regard to scope and ambit of the jurisdiction of  

the courts to interfere with an arbitration award has been settled in  

a catena of judgments of this Court.  We may make a reference here

only to some of the judgments. In the case of State of Rajasthan  

vs. Puri Construction Company Limited. and Anothers  .   (1994) 6  

SCC 485, this Court observed as follows:

“The arbitrator is the final arbiter for the  dispute between the parties and it is not open  to challenge the award on the ground that the  arbitrator  has  drawn  his  own  conclusion  or  has failed to appreciate the facts.  In Sudarsan  Trading Co. v. Govt. of Kerala 1989 Indlaw SC  463 it has been held by this Court that there is  a  distinction  between  disputes  as  to  the  jurisdiction of the arbitrator and the disputes  as to in what way that jurisdiction should be  exercised.  There may be a conflict as to the  power  of  the  arbitrator  to  grant  a  particular  remedy.  One has to determine the distinction  between an error  within  the jurisdiction  and  an error in excess of the jurisdiction.  Court  cannot  substitute  its  own  evaluation  of  the  conclusion  of  law  or  fact  to  come  to  the  conclusion  that  the  arbitrator  had  acted  contrary  to  the  bargain  between the  parties.  Whether a particular amount was liable to be  paid is a decision within the competency of the  arbitrator.   By  purporting  to  construe  the  contract the court cannot take upon itself the  burden of saying that this was contrary to the  contract and as such beyond jurisdiction.  If  on a view taken of a contract, the decision of  the arbitrator on certain amounts awarded is a  possible  view  though  perhaps  not  the  only  correct view, the award cannot be examined by  the court.  Where the reasons have been given  by  the  arbitrator  in  making  the  award  the  court  cannot  examine  the  reasonableness  of  the reasons. If the parties have selected their  own  forum,  the  deciding  forum  must  be  conceded  the  power  of  appraisement  of

evidence.  The arbitrator is the sole judge of  the quality as well as the quantity of evidence  and it will  not be for the court to take upon  itself the task of being a judge on the evidence  before the arbitrator.     

In  the  case of  Municipal  Corpn.  Of  Delhi v. Jagan Nath Ashok Kumar 1987(4) SCC  497,  it  has  been  held  by  this  Court  that  appraisement of evidence by the arbitrator is  ordinarily  never  a  matter  which  the  court  questions and considers.  It  may be possible  that on the same evidence the court may arrive  at a different conclusion than the one arrived  at  by  the  arbitrator  but  that  by  itself  is  no  ground for setting aside the award.  It has also  been held in the said decision that it is difficult  to  give  an  exact  definition  of  the  word  ‘reasonable’.  Reason varies in its conclusions  according  to  the  idiosyncrasies  of  the  individual and the time and circumstances in  which  thinks.   In  cases  not  covered  by  authority, the verdict of a jury or the decision  of a judge sitting as a jury usually determines  what  is  ‘reasonable’  in  each  particular  case.  The  word  reasonable  has  in  law  prima  facie  meaning  of  reasonable  in  regard  to  those  circumstances of which the actor, called on to  act reasonably knows or ought to know.  An  arbitrator acting as a judge has to exercise a  discretion  informed  by  tradition,  methodized  by  analogy  disciplined  by  system  and  subordinated  to  the  primordial  necessity  or  order  in  the  social  life.  Therefore,  where  reasons  germane  and  relevant  for  the  arbitrator to hold in the manner he did, have  been  indicated,  it  cannot  be  said  that  the  reasons are unreasonable.”  

14.      In the case of Arosan Enterprises Ltd. vs. Union of India,  

(1999) 9 SCC 449, this Court upon analysis of numerous earlier  

decisions, held as follows:

“Be it noted that by reasons of a long catena  of  cases,  it  is  now a well-settled principle  of  law that re-appraisal of evidence by the court  is  not  permissible  and  as  a  matter  of  fact  exercise  of  power  by  the  court  to  reappraise  the evidence is unknown to proceedings under  section 30 of the Arbitration Act.  In the event  of  there  being  no  reasons  in  the  award,  question of interference of the court would not  arise at all.  In the event, however, there are  reasons,  the  interference  would  still  be  not  available  within the jurisdiction  of  the  Court  unless of course, there exist a total perversity  in the award or the judgment is  based on a  wrong proposition of law.  In the event however  two views are possible on a question of law as  well,  the  court  would  not  be  justified  in  interfering with the award.

The common phraseology “error apparent on  the face of the record” does not itself, however,  mean and imply closer scrutiny of the merits of  documents  and  materials  on  record.   The  Court as a matter of fact cannot substitute its  evaluation and come to the conclusion that the  arbitrator  had  acted  contrary  to  the  bargain  between  the  parties.   If  the  view  of  the  arbitrator is a possible view the award or the  reasoning  contained  therein  cannot  be  examined………”.  

15.       This view has been reiterated by this Court in the case of  

Oil  &  Natural  Gas  Corporation  Ltd. vs. SAW Pipes  Ltd.     as  

follows:

“In the light of the aforesaid decisions, in our  view, there is much force in the contention raised  by  the  learned  counsel  for  the  appellant.  However,  the  learned  senior  counsel  Mr.  Dave  submitted that even if the award passed by the  arbitral  tribunal  is  erroneous,  it  is  settled  law  that when two views are possible with regard to  interpretation  of  statutory  provisions  and  or  facts,  the  Court  would  refuse  to  interfere  with  such award.

It  is  true  that  if  the  arbitral  tribunal  has  committed mere error of fact law in reaching its  conclusion on the disputed question submitted to  it for adjudication then the Court would have no  jurisdiction to interfere with the award.  But, this  would  depend  upon  reference  made  to  the  arbitrator : (a) if there is a general reference for  deciding  the  contractual  dispute  between  the  parties and if  the award is based on erroneous  legal proposition, the Court could interfere; (b) It  is  also  settled  law  that  in  a  case  of  reasoned  award, the Court can set aside the same if it is,  on the face of it,  erroneous on the provision of  law or its application; (c) If a specific question of  law  is  submitted  to  the  arbitrator,  erroneous  decision in point of law does not make the award  bad, so as to permit of its being set aside, unless  the  Court  is  satisfied  that  the  arbitrator  had  proceeded illegally.”   

16. In the M/s. Kwality Manufacturing Corporation vs.  

Central Warehousing Corporation it was held:

“At the outset, it should be noted that the scope  of  interference  by  courts  in  regard  to  arbitral  awards  is  limited.  A  court  considering  an  application  under  Section  30 or  33 of  the  Act,  does  not  sit  in  appeal  over  the  findings  and  decision of the arbitrator.  Nor can it re-assess or  re-appreciate evidence or examine the sufficiency  or otherwise of the evidence.  The award of the  arbitrator is final and the only grounds on which  it  can  be  challenged  are  those  mentioned  in  Sections 30 and 33 of the Act.  Therefore, on the  contentions urged, the only question that arose  for  consideration  before  the  High  court  was,  whether there was any error apparent on the face  of  the  award  and  whether  the  arbitrator  misconducted himself or the proceedings.”   

17. Again  it  is  reiterated  in  the  judgment  of  Madhya  

Pradesh  Housing  Board  vs.  Progressive  Writers  and  

Publishers (2009) 5 SCC as follows:

“The finding arrived at by the arbitrator in  this regard is not even challenged by the Board in  the proceedings initiated by it under Section 30  of the Act.  It is fairly well settled and needs no  restatement  that  the  award of  the  arbitrator  is  ordinarily  final  and  the  courts  hearing  applications under Section 30 of the Act do not  exercise any appellate jurisdiction. Reappraisal of  evidence by the court is impermissible.”  

18.     In this case, the Supreme Court notice the earlier judgment  

in the case of  Ispat Engineering & Foundry Works, B.S. City,

Bokaro vs. Steel Authority of India, B.S. City, Bokaro [(2001) 6  

SCC 347] wherein it was held as follows:

“4.  Needless  to  record  that  there  exists  a  long  catena of cases through which the law seems to  be  rather  well  settled  that  the  reappraisal  of  evidence  by the  court  is  not  permissible.   This  Court  in  one  of  its  latest  decisions  [Arosan  Enterprises Ltd. v. Union of India (1999) 9 SCC  449]  upon  consideration  of  decisions  in  Champsey Bhara & Co.  v.  Jivraj  Balloo Spg. &  Wvg. Co. Ltd. [Air 1923 PC 66], Union of India v.  Bungo Steel Furniture (P) Ltd. [1967 1 SCR 324],  N. Chellappan v. Secy., Kerala SEB [(1975) 1 SCC  289],  Sudarshan Trading Co. v. Govt.  of  Kerala  [(1989)  2  SCC  38],  State  of  Rajasthan  v.  Puri  Construction Co. Ltd. [(1994) 6 SCC 485] as also  in  Olympus  Superstructures  (P)  Ltd.  v.  Meena  Vijay Khetan [(1999) 5 SCC 651] has stated that  reappraisal  of  evidence  by  the  court   is  not  permissible and as a matter of fact,  exercise of  power to reappraise the evidence is unknown to a  proceeding  under  Section  30  of  the  Arbitration  Act,  1940.   This  court  in  Arosan  Enterprises  categorically  stated  that  in  the  event  of  there  being  no  reason  in  the  award,  question  of  interference of the court would not arise at all.  In  the  event,  however,  there  are  reasons,  interference would still be not available unless of  course, there exist a total perversity in the award  or the judgment is based on a wrong proposition  of law.  This Court went on to record that in the  event,  however,  two  views  are  possible  on  a  question of law, the court would not be justified  in interfering with the award of the arbitrator if  the view taken recourse to is a possible view.  The  observations  of  Lord  Dunedin  in  Champsey  Bhara stand accepted and adopted by this Court

in  Bungo Steel  Furniture  to the  effect  that  the  court had no jurisdiction to investigate into the  merits of the case or to examine the documentary  and oral evidence in the record for the purposes  of finding out whether or not the arbitrator has  committed an error of law.  The court as a matter  of fact, cannot substitute its own evaluation and  come to  the conclusion that  the  arbitrator  had  acted  contrary  to  the  bargain  between  the  parties.”  

19.     In our opinion, the impugned judgment of the High Court  

does not fall within the limited jurisdiction available to the Court for  

interference in the award of an arbitrator.

20.     For  the  aforesaid  reasons  the  appeal  is  allowed.   The  

impugned judgment of the High Court is set aside.   

………….……………………….J    (TARUN CHATTERJEE)

      .…………………………………J            (SURINDER SINGH NIJJAR)

NEW DELHI DECEMBER 03, 2009