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PETITIONER: N.   CHELLAPPAN

       Vs.

RESPONDENT: SECRETARY, KERALA STATE ELECTRICITY BOARD &ANOTHER

DATE OF JUDGMENT21/11/1974

BENCH: MATHEW, KUTTYIL KURIEN BENCH: MATHEW, KUTTYIL KURIEN RAY, A.N. (CJ) UNTWALIA, N.L.

CITATION:  1975 AIR  230            1975 SCR  (2) 811  1975 SCC  (1) 289  CITATOR INFO :  D          1984 SC1072  (24)  R          1988 SC 205  (8)  R          1988 SC2045  (2)  RF         1990 SC1340  (8)  R          1990 SC1426  (22)

ACT: Arbitration  Act-Error apparent on the face of  the  record- Allowing time barred claims whether amount to error apparent on the face of the record Whether an umpire has jurisdiction to enter upon the reference in case arbitrators fail to make an  award  within the specified  time-Parties  Participating before  the Sole Arbitrator without demur whether  precluded from  challenging  the  jurisdiction of  the  Arbitrator  by acquiescence.

HEADNOTE: The appellant was a contractor entrusted to construct a  Dam by  the  Kerala  State Electricity  Board.   Disputes  arose between  the  appellant and the respondent  about  the  non- execution of the work. 5 points were referred for the  deci- sion of 2 arbitrators.  The arbitrators appointed an Umpire. The Arbitrator did not make the award within the time  limit which  was  extended  from  time  to  time.   Thereupon  the appellant filed an application for revoking the authority of the  arbitrators on the ground that the arbitrators did  not make  the  award within the time limit and  it  was  further prayed  that the Umpire might be directed to enter upon  the reference  to  proceed  with the arbitration.   One  of  the arbitrators  in  his  statement submitted  that  he  had  no objection to his being discharged as he no longer wished  to be an arbitrator.  The appellant also filed another applica- tion  praying to appoint the Umpire as a Sole Arbitrator  in place of the two arbitrators.  The Court by its order  dated the 22nd June, 1972 revoked the authority of the arbitrators and  directed the Umpire to enter upon the reference in  his capacity as Umpire and also appointed the Umpire as the sole arbitrator.   The  trial court noted in its order  that  the Umpire was directed to make the award by consent of parties. The  appellant  and  the  respondent  participated  in   the proceedings  before  the Umpire without demur.   The  Umpire

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made  an award in favour of the appellant for nearly Rs.  30 lacs.   The respondent filed an application challenging  the award  under sections 16, 30 and 33 of the  Arbitration  Act and praying to set aside the award.  The appellant field  an application  to  pass a decree in terms of the  award.   The Trial   Court  dismissed  the  application  filed   by   the respondent and passed decree in terms of the award. On an appealfiled by the respondent, the High Court  came to the conclusion that the Umpireas sole arbitrator had no jurisdiction  to pass the award as the orders  revoking  the authority of the arbitrators to pass an award and appointing the  Umpire  as sole Arbitrator was bad in law and  that  no sufficient  opportunity  was  given  to  the  respondent  to substantiate its objections to the award. On  appeal  by  special  leave  it  was  contended  by   the respondent  before  this  Court  that  the  Umpire  as  sole Arbitrator  had no jurisdiction to enter upon the  reference and  pass the award.  It was also contended that the  Umpire has  allowed  certain time barred claims  of  the  appellant without examining the grievances of the claims. Allowing the appeal, HELD  :  Since the order was passed by the  consent  of  the parties  the Umpire had the jurisdiction.  Even  apart  from the  consent of the parties rule 4 in the First Schedule  to the Arbitration Act authorities the Umpire to enter upon the reference in case arbitrators fail to make award within  the time specified.  The Umpire did notlose             his jurisdiction  to pass the award merely because he wanted  in order fromcourt by way of abundant caution  authorising him to enter upon the reference.[818E-G] HELD FURTHER : There is no doubt that the order was  consent order.  The respondent made no endeavour to have that  order vacated  by filing a review, if the statement in that  order that it was passed on the basis of consent proceeded on a 812 mistake  of  the  court.   On  the  other  hand   respondent participated  in  the proceedings before  the  Umpire.   The respondent is precluded from challenging the jurisdiction of the Umpire by acquiescence. [817G-H] HELD  FURTHER:  Negativing the contention  that  the  Umpire should  have  examined  the genuineness of  the  claims  and whether  the  claims  were time-barred.  In  the  award  the Umpire  has referred to the claims under this head  and  the arguments  of the respondent for disallowing the  claim  and thereafter awarded the amount without expressly aderoting to or  deciding the question of limitation.  From the  findings of  the  Umpire under this head it is not  seen  that  these claims were barred by limitation.  No mistake of law appears on the faze of the award.  The Umpire as sole arbitrator was not  bound  to give a reasoned award and if in  passing  the award  he makes a mistake of law or fact that is  no  ground for challenging the validity of the award.  It is only  when a  proposition of law is stated in the award and it  is  the basis of that award that is erroneous, can the award be  set aside or remitted on the grounds of error of law apparent on the face of the record.  An error of law on the face of  the award  means  that you can find in the award or  a  document actually  incorporated thereto stating the reasons  for  his judgment,  some legal proposition which is the basis of  the award and which you can say is erroneous.  The Court has  no jurisdiction to investigate into the merits of the case  and to  examine the documentary and oral evidence on the  record for the purpose of finding out whether or not the arbitrator has committed an error of law. [820F-H; 821E-D]                                  ARGUMENTS

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For the appellants : 1.   The  High  Court of Kerala erred in  holding  that  the order of the Subordinates Judge, Trivandrum, dated the  22nd June  1972 in O.P. 11 of 1972 was made without  jurisdiction and  in  further  holding that the  Umpire  who  entered  on reference consequent upon the said order had no jurisdiction for the following reasons : (a)  The order in O.P. 11 of 1972 is by consent of  parties. The  consent given by the counsel for both sides before  the learned Sub Judge amounts to a fresh arbitration  agreement. Therefore,   the  Umpire  had  jurisdiction  to   enter   on reference. (b)  Before   the   learned  Subordinate  Judge   both   the arbitrators  expressed  their unwillingness to  continue  as arbitrators.  Admittedly, the arbitrators failed to make  an award  within  the prescribed time.  The  time  having  been extended  five  times  earlier  and the  last  date  of  the extended  period having expired on 18th December,  1971  the Umpires could have entered on the reference on any day after the   19th  December,  1971.   However,  as  the   appellant approached  the Court of Subordinate Judge on 28th  January, 1972 and as the respondent Board by its letter informed  the Umpire that they would be approaching the court for enlarge- ment  of  time,  the  Umpire  did  not  enter  on  reference forthwith.   After O.P. It was allowed as per the  agreement of  parties  and  after  O.P. 19  filed  by  the  Board  for enlargement of time of the arbitrators, was dismissed on the same  date,  the  Umpire was bound  to  enter  on  reference forthwith both under the order of the Court and under Rule 4 of  Schedule I of the Arbitration Act.  Therefore, all  that the court did in asking the Umpire to enter on reference  as Umpire was to parry out the provisions of Rule 4 of Schedule I to the Arbitration Act. (c)  The  Board is precluded from challenging the  authority of  the Umpire inasmuch as he entered on reference  pursuant to consent of parties.  The Respondent Board participated in the  proceedings without any protest.  Therefore, the  Board is  estopped from challenging the authority of  the  Umpire. The   Board  by  their  conduct  in  participating  in   the proceedings  before the Umpire is deemed to have waived  the objections, if any, against the jurisdiction of the  Umpire. There was no inherent lack of jurisdiction in the Umpire and therefore   the  participation  by  the  Board  amounts   to acquiescence.   They  are  estopped  from  challenging   his authority. (d)  After 18-12-1971 on which day the enlarged time for the arbitrators to make the award expired the arbitrators became functous officio. (e)  In  substance, the function of an ’Umpire’ and a  ’sole arbitrator’  is the same.  In fact the order of Court  under Section 12(2) is later in point of time and hence it can  be ignored if it was unnecessary. 813 2.The High Court was in error in exercising its suo  moto jurisdiction in setting aside the order dated the 22nd  June 1972 in O.P. 11 of 1972.  The learned Subordinate Judge  was the  competent authority to entertain an  application  under Sections  5, 11 and 12 of the Arbitration  Act.   Therefore, his  order asking the Umpire to enter on reference does  not suffier from jurisdictional errors enumerated in Section 115 of  the  C.P.C. The court could exercise suo moto  power  of revision  only if the order could be revised  under  Section 115. 3.The  award being an award of money and there  being  no reason  given for the award, there could be no error in  the

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award  much less on the face of it.  The arbitrator  is  not bound  to give reason for the award and he has  given  none. The  court  is  not competent to enter  into  an  elaboratre discussion  of  the  evidence etc., in  order  to  find  out whether  there is any error in the award.  The  synopsis  of contesting parties does not form part of an award. The  High  Court has proceeded as though it  is  sitting  in appeal on the award. The arbitration agreement specifically states that no  other question  of dispute, or difference,  arisings,  settlements except  those  detailed in the agreement remains.   So,  the dispute  as  to who caused the breach of contract  has  also been  given up.  Since there is no dispute as to who  caused the  breach  of  contract  the  security  amount  which   is appellant’s  own money is liable to be refunded without  any protest.   Hence the Umpire was competent to make the  award in respect of the said sum and has rightly awarded it to the appellant.  The ’retention amount’ and the "amount withheld" are clearly in respect of the ’work’. The claim of the appellant was to the extent of about Rs. 78 lakhs.   The Umpire, after considering the objection of  the respondent disallowed claims upto about Rs. 48 lakhs on  the ground  that they are outside the scope of  the  arbitration agreement.   After this, the respondent participated in  the arbitration  without  protest.  They are now  estopped  from challenging   the   award  on  the  ground  of   excess   of jurisdiction. The  Umpire, being a Judge, both in respect of questions  of law  and  fact is competent to decide even the  question  of limitation.  From the synopsis of arguments narrated by  the Umpire  it  is  clear that he has  considered  the  plea  of limitation  raised  by  the Respondent. If  the  Umpire  has considered the question the court cannot be asked to  reopen the matter. The  appellant  has  withdrawn  O.S.  33  in  the  Court  of Subordinate  Judge,  Badagara pursuant  to  the  arbitration agreement.   The suit was within the period  of  limitation. Therefore, the claim is within the period of limitation. Since the claim under Item No. 1 specifically formed part of the  arbitration  agreement  the  Board  is  precluded  from raising the plea of limitation.  The Board was competent  to contract and admit even time-barred claims under Section  25 of the Contract Act. Therefore, the award is not liable to be set aside either on the  ground of limitation or on the ground that  the  matter relating  to security deposit etc., falls outside the  scope of  reference.   At  any rate, both  the  above  claims  are distinct and severable from the rest of the award. 3.The  court has to decide the application under  Section 33  only on affidavits.  It is only if the court feels  that evidence  is  required it can permit adducing  of  evidence. The  court  in  this  case  considered  the  affidavits  and arguments  and found that no ground is made out  to  require oral  evidence being adduced.  The application filed by  the respondent  to  set  aside the award and  the  affidavit  in support  of  it  clearly show that on none  of  the  grounds mentioned  therein the award can be set  aside.   Therefore, the court was right in not permitting adducing of evidence. The  respondent had sufficient opportunity to  convince  the court that the award suffers from error apparent on the face of the award. Arguments for Respondent No. 1 1.The  High Court, was right in holding that  the  Umpire had no jurisdiction to make the award and that the award  is therefore  invalid.  The order passed by the trial court  on

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O.P.  11 of 1972 on 22-6-1972, revoke the authority  of  the two 814 arbitrators, was wholly outside the scope of Sections 5  and 11  of  the Arbitration Act, 1940.  In the trial  court  the appellant’s advocate had expressly given up all  contentions of fact including the contention that the said order on O.P. 11  of 1972 was a consent order.  He must also be deemed  to have given up the contention that the respondent Electricity Board  had acquiesced in the proceedings before  the  Umpire and   is   estopped  from  challenging   the   award.    The correspondence  between the Umpire and the  appellant  shows that  the  Umpire  had  rightly  refused  to  enter  on  the reference  under clause 4 of Schedule I of  the  Arbitration Act.  If the trial court had not wrongly allowed O.P. 11  of 1972, it was bound to allow the respondent’s application for extension  of  time of the arbitrators, being O.P.  1  9  of 1972.  The Umpire’s purported jurisdiction must therefore be traced  only to the trial court’s order on O.P. 11  of  1972 which was clearly invalid. 2.Supposing that the Umpire had jurisdiction to make  the award, the order of thetrial court passed on 10-4-1973  in O.P. 21 of 1973 (dismissing the respondent’sapplication for setting  aside  the  award  and  granting  the   appellant’s application  for  passing a decree in terms  of  the  award) deserves  to be set aside and the  respondent’s  application for  setting  aside the award restored.  The  trial  court’s order   dated  10-4-1973  is  vitiated  because  the   court arbitrarily  refused  to allow the respondent  to  lead  any evidence  and even to file an affidavit in rejoinder.   This had caused injustice to the respondent. 3.Without  prejudice  to  the above  contentions,  it  is submitted  that  in  any case the award is  clearly  bad  in respect of the following :               (a)   The arbitrator acted beyond the scope of               reference in awarding to the appellant the sum               of Rs. 1,81,500/- which was paid by him by way               of  security  for the due performance  of  the               contract.  Under item 2(a) of the agreement of               reference  the appellant was only entitled  to               be paid for the value of the work done by him;               this  item  did  not  include  the  amount  of               security  which could be refunded to him  only               if  he  had  duly performed his  part  of  the               contract.  The question whether the  appellant               had  duty performed his part of  the  contract               and was entitled to a refund of the  security,               was  not  referred  to  arbitration,  and  the               arbitration    agreement   had    specifically               provided  that points of dispute not  referred               to arbitration were "deemed to be abandoned".               (b)   The   four  claims  amounting   to   Rs.               4,95,000/-  which were covered by point  I  of               the  points of reference were patently  barred               by  limitation.  The award on its  face  shows               that these claims had arisen before the end of               March 1966 that the agreement of reference was               made more than three years thereafter on 22-8-               1970 and that there was not even a  contention               raised  by  the appellant that there  was  any               acknowledgement  or  part  payment  so  as  to               extend the period of limitation.  The award of               Rs. 4,95,000/- was thus clearly based upon  an               erroneous  assumption of law and the award  is               to  that  extent vitiated by in error  of  law

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             apparent in the face thereof.

JUDGMENT: CIVIL   APPELLATE  JURISDICTION : Civil Appeal  No.  682  of 1974. Appeal by Special Leave from the judgment & decree dated the 10th October, 1973 of the Kerala High Court in A. S. No. 153 of 1973. B. Sen, C. Krishnan Nair and K. N. Bhat, for the Appellant. V, M. Tarkunde and A. G. Pudissery, for the Respondents. The Judgment of the Court was delivered by MATHEW,  J.-This  is an appeal, by special leave,  from  the judgment of the Kerala High Court reversing an order  passed by the District Judge making an award passed by the umpire a rule  of  the court after dismissing an application  to  set aside the award. 815 By  a  contract  dated 21-4-1964, the  construction  of  the Kuttiyadi Dam was entrusted by the Kerala State  Electricity Board  (for  short  the ’Board’)  to  Shri  Chellappan,  the appellant,  The  work  was  left  unfinished  and  therefore dispute arose between the appellant and the Board by  reason of the non-execution of the work.  While these disputes were pending, a second contract dated 15-7-1967 was entered  into between the appellant and the Board for the execution of the remaining part of the work on or before 31-5-1969.  On  4-6- 1968, the appellant stopped the work and the Chief  Engineer terminated  the  second contract on 15-10-1968.   The  Board thereafter  carried on with the unfinished work.   On  22-8- 1970,  five  points were referred for the  decision  of  two arbitrators   both  retired  Chief  Engineers,  one  to   be nominated by the Board and the other by the appellant.   The arbitrators entered on the reference and they nominated Shri G.  Kumara Pillai, a retired judge of the Kerala High  Court as  umpire.  the arbitrators did not make the  award  within the’  time  limit which was extended from time to  time  and which expired on 18-12-1971.  Thereupon the appellant  filed O.P. No. 11 of 1972 on 28-1-1972 for revoking the  authority of the arbitrators under section 5 and 11 of the Arbitration Act.   The  grounds  for  the  application  were  that   the arbitrators did not make the award within the time limit for submission  of the award and that they were disqualified  by bias  from proceeding with the arbitration.  The  prayer  in the application was that Shri Kumara Pillai may be  directed to enter upon the reference in his capacity as umpire and to proceed   with  the  arbitration.   The  arbitrators   filed statements  explaining the reasons for the delay  in  making the  award and denying the bias attributed to them.  One  of the  arbitrators in his statement submitted that he  has  no objection to- his being discharged as he no longer wished to be an arbitrator.  In this O.P. the appellant filed  another application on 31-3-1972 to appoint Shri Kumara Pillai as  a sole  arbitrator  in place of the two  arbitrators.   By  an order dated 22-6-1972, the court allowed O.P. 11 of 1972 and revoked  the authority of the arbitrators and  directed  the umpire to enter upon the reference in his capacity as umpire and  also  ’allowed’  the  application  (I.A.  1918/’72)  to appoint Shri Kumara Pillai as the sole arbitrator.  On  5-3- 1972,  the Board filed O.P. No. 19 of 1972 for extension  of time  for passing the award by the. arbitrators.   This  was disposed  of by an order dated 22-6-1972 stating that  since O.P.  11  of  the  1972 bad  been  allowed,  it  had  become unnecessary  to  extend the period.  The umpire  entered  on

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reference in his capacity as umpire on 30-6-1972.  Both  the appellant  and  the Board participated  in  the  proceedings before  the  umpire without demur and the  umpire  made  the award in favour of the appellant for nearly Rs. 30 lakhs  on 15-2-1973.    The  umpire  field  the  award  in  court   on 30--2-1973 and prayed by O.P. 21 of 1973 that notice of  the filing  of the award be issued to the parties and  that  the award  be made a rule of the court.  Notice was  ordered  on the   application   on  21-2-1973.   The  Board   filed   an application on 22-3-1973 [I.A. 895(a)] challenging the award under  sections  16, 30 and 33 of the  Arbitration  Act  and praying  to  set  aside  the  award.   On  24-3 1973,  the appellant filed an application to pass a decree in terms  of the award for interest 816 at 15 per cent from the, date of the decree.  The  appellant filed his objection on 26-3-1973 to the Board’&  application to set aside the award.  The case was posted for hearing  on 4-4-1973.  On that day, the Board filed an  application-I.A. 1176  of  1973-stating  that  it was  necessary  to  file  a detailed  affidavit in rejoinder to the objections filed  by the  appellant to the application of the Board to set  aside the  award  and praying for an adjournment of  the  hearing. The  application  for adjournment was allowed.   The  matter came,  up for hearing on 6-4-1973.  On that day,  the  Board filed  I.A.  1223 of, 1973 praying for time for  filing  the affidavit in rejoinder.  On the same day, the appellant’s counsel stated "I  submit  that I shall not be pressing  the  fresh  points raised   in  the  affidavit  for  the  purpose  of   today’s arguments." In  I.A.  1223  of 1973, the Board had stated  that  it  was prepared  to  satisfy the court that the  application  under sections   16,  30  and  33  of  the  Arbitration  Act   was prima.facie  maintainable  and  that  it  was  necessary  to adjourn  the  hearing for evidence and for  final  argument. The  endorsement on the petition dated 6-4-1973 is "Call  on the  adjourned date".  On 10-4-1973 the court  passed  final orders dismissing the application filed by the Board to  set aside  the award and passed a decree in terms of  the  award with interest at 6 per cent from the date of the decree till the realisation of the amount.  All these orders were passed in  O.P.  21 of 1973.  On I.A. No. 1223 of 1973,  the  Court passed the order "rejected" on 10-1973. In  the  appeal filed by the Board against the  decree,  the High  Court came to the conclusion that the umpire  as  sole arbitrator  had  no jurisdiction to pass the  award  as  the orders  revoking the, authority ,of the arbitrators to  pass an  award and appointing the umpire as sole arbitrator  were bad  in law and that no sufficient opportunity was given  to the  Board to substantiate its objection to the award.   The Court further held that the umpire made a mistake in respect of  two matters referred.  The Court, therefore,  set  aside the  order in O.P. 11 of 1972 as well as the Award  and  the decree  and remitted the case to the Court below  for  fresh disposal according to law. The main point which arises for consideration is whether the umpire as sole arbitrator had jurisdiction to enter upon the reference and pass the award.  To decide the question it  is necessary  to  see  whether the order in  O.P.  11  of  1972 appointing the umpire as sole arbitrator was passed  without jurisdiction  or was vitiated by an error which made it  bad in law.  In paragraph 5 of that order, the court has  stated :               "When the, matter came up for enquiry, it was

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             represented  by  both sides,  that  since  the               petitioner  (appellant)  has expressed  in  so               many  words  his  want of  confidence  in  the               arbitrators   and   since   the    arbitrators               themselves have expressed their willingness to               be  relieved of their duties as  ’arbitrators,               they, may be dispensed with.  In view of  this               agreement,  it has become necessary to  revoke               the authority                                    817               of  respondents 2 and 3 (arbitrators)  and  to               appoint  the 4th respondent as umpire  and  to               direct him to make the award". We  find it difficult to accept the, reasoning of  the  High Court that the umpire had no jurisdiction to enter upon  the reference.   In  the first place, the orders in O.P.  11  of 1972 was an order passed on consent of the appellant and the Board.  Quite apart from this, rule 4 in the first  schedule to  the, Arbitration Act authorises an umpire to enter  upon the  reference  in case, the arbitrators fail  to  make  the award  within the time specified.  Whatever be  the  reason, since  the  arbitrators did not make, the award  within  the extended  time,  the umpire, by virtue of the  provision  of rule  could  have entered upon the reference  and  made  the award.  It is, no doubt, true that the umpire expressed  his unwillingness  to enter upon the reference without an  order of  the  court.   That was because the Board  had  filed  an application  for  extension of time for the  arbitrators  to pass  the award.  We do not think that the umpire  lost  his jurisdiction  to pass the award merely because he wanted  an order from court by way of abundant caution authorizing  him to enter upon the reference. Mr.  Tarkunde for the respondent contended that the  learned Judge  who passed the order in O.P. 11 of 1972 has  said  in his  order  making  the  award a rule  of  the  court  after rejecting  the  application of the Board to  set  aside  the award,  that  the  order passed in O.P. 11  of  1972  was  a considered  order  and that the Board should  have  appealed against  that order if it felt aggrieved by it and that  the order  had  become final.  Counsel submitted that  when  the Judge  who passed the order in O.P. 1 1 of 1972 has  himself stated  that it was an order passed on merits in  his  order making  the  award a rule of the court and  that  the  Board should  have  appealed against the order, it can  only  lead the conclusion that the order in O.P. 1 1 of 1972 was not  a consent  order.   Counsel also submitted that  although  the appellant filed an objection to the application of the Board to  set aside the award, that objection was  withdrawn  when the  respondent sought to file an affidavit in rejoinder  to that  objection,  and the effect of the, withdrawal  of  the objection  by  the appellant was that the averment  in  the application filed by the Board to set aside- the award  that the order in O.P. 11 of 1972 was not passed on the basis  of consent, stood uncontradicted. As  we already said, paragraph 5 of the order in O.P. 11  of 1972  leaves no room for doubt that it was a consent  order. The  Board made no endeavour to have that order  vacated  by filing a review, if the statement in that order that it  was passed  on the basis of consent proceeded from a mistake  of the  court.   On  the other hand, we  find  that  the  Board participated  in the proceedings before the  umpire  without any demur to his jurisdiction.  The only inference from this conduct  on  the  part  of the Board  is  that  it  had  not objection  to  the  order  revoking  the  authority  of  the arbitrators.   Therefore,  by  acquiescence  the  Board  was

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precluded from challenging the jurisdiction of the umpire. 818               "If the parties to the reference either  agree               before  hand to the method of appointment,  or               afterwards acquiesce in the appointment  made,               with full knowledge of all the  circumstances,               they will be precluded from objecting to  such               appointment    as   invalidating    subsequent               proceedings.  Attending and taking part in the               proceedings   with  full  knowledge   of   the               revelant fact will amount to such acquiesence"               (see  Rusesell on Arbitration", 17th  ed.,  p.               215).               In  Chowdhri Murtaza Hossin v.  Mussumat  Bibi               Bachunnissa(1) the Privy Council said :               On the whole, therefore, their Lordships think               that that appellant, having a clear  knowledge               of  the circumstances on which he  might  have               founded   an  objection  to  the   arbitrators               proceeding to make their award, did submit  to               the arbitration going on; that he allowed  the               arbitrators to deal with the case as it  stood               before them, taking his chance of the decision               being more or less favourable to himself;  and               that it is too late for. him, after the  award               has been made, and on the application to  file               the award, to insist on this objection to  the               filing of the award." The  High  Court  said that acquiescence  of  the  Board  by participating  in the proceeding before the umpire  as  sole arbitrator  would  not  confer  jurisdiction  as  there  was inherent  lack of jurisdiction in that the order in O.P.  11 of 1972 was bad in law and that it did not clothe the umpire with  any  jurisdiction.  We are of the view that  even  and suming  that the order in O.P. 11 of 1972 was not passed  on consen the umpire had power to pass the award.  As we  said, the umpire could have entered upon the reference under  rule 4 of the First Schedule when the arbitrators failed to, make the  award within the extended time.  Neither the fact  that the umpire wanted an order from the court to enter upon  the reference  nor the fact that an application was made by  the Board on 5-2-1972 to extend the time for the arbitrators  to make  the award would denude the umpire of his  jurisdiction to  enter upon the reference and pass an award under rule  4 of  the First Schedule.  Therefore, when the  Board  without demur participated in the proceedings before the umpire  and took  the chance of an award in its favour, it  cannot  turn round  and say that the umpire had no inherent  jurisdiction and therefore its participation in the precedings before the umpire  is  of no avail.  The fact that the umpire  did  not purport  to  act in the exercise of his  jurisdiction  under rule  4  of the First Schedule but under the  order  of  the Court,  would  not make any difference when we  are  dealing with the question whether he had inherent jurisdiction.   As the  umpire  became  clothed  with  jurisdiction  when   the extended period for making the award by arbitrators expired, it cannot be said that he bad no inherent jurisdiction.   As we  said,  neither the fact that the  umpire  expressed  his unwillingness to enter upon the reference without an  order of the court nor (1)  3 I.A. 209 at 220.                             819 the fact that an application to extend the period for making the  award by the arbitrators long after the expiry  of  the period for making the award had the effect of depriving  him

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of his jurisdiction under rule 4 of the First Schedule.  The High  Court was, therefore, clearly wrong in  thinking  that acquiescence did not preclude the Board from challenging the jurisdiction  of the umpire as sole arbitrator.  We  do  not find  any substance in the contention of the Board that  the application  for setting aside the award was not posted  for evidence as normally such an application should be  disposed of  on the basis of affidavits.  We do not think that  there was  any exceptional circumstance in this case so  that  the court  should  have  allowed.  the  Board  to  adduce  other evidence (see s. 33 of the Arbitration Act). The  next  question for consideration is  whether  the  High Court was right in its view that the claim of the  appellant in  respect of the two matters dealt with by it was  validly allowed by the umpire. The  terms of the agreement for reference to arbitration  be between the appellant and the Board provided : "It  is agreed that the Contract Agreement No.  15/CEC/67/68 stands terminated by letter No. C2F.359/66, dated 15-11-1968 of  the  Chief Engineer, Civil.  The  Contractor  agrees  to withdraw  the  Suit No. O.S. 38/1970 filed in  the  Badagara Sub-Court by him. It  is agreed that there is no other question of dispute  or difference arising for settlement except those  specifically detailed below in respect of the above contract. All other questions or claims of contractor, if any, whether existing, now or if arising from findings in the award under this   reference  or  during  arbitration   proceedings   or otherwise  are  hereby  withdrawn  and  are  deemed  to   be abandoned. Points of Reference 1.   Regarding  the  first  contract,  i.e.  Agreement   No. CEC/4/64-65. Whether the claim to the sum ’reserved by the contractor  to be  enforced’ in his letter dated 1-7-1967 to the  Chairman, or  any other lesser sum, is tenable and if so, whether  the same is recoverable from the Board. Regarding the second contract, Agreement No. 15CEC/67-68, Jr  dated 15-7-1967.               (a)   What  is the sum still payable  for  the               work under the said Agreement and Departmental               Instructions.               (b)   What is the sum payable to the Board  in               respect  of supplies and/or services  rendered               to the Contractor by the Board in respect  of,               the Contract.               (c)   What  is  the  price,  payable  to   the               Contractor  for such of the materials at  site               of Contract as were taken by the Board.  820               (d)  What  are     the  claims  of  the  Board               against  the Contractor in  respect of  and/or               under the provisions of   the said Agreement." The,  contention  of  the Board before the  High  Court  was that the  claim  reserved  by the appellant  by  his  letter dated 1-7-1967 to the    Chairman  had not been agreed to  & reserved for adjudication by the   Board   but   had    been rejected by it definitely and unequivocally by the   letters prior to 1967, that the appellant’s letter of. 1-7-1967  had not  been  incorporated in the contract  and  therefore  the claim referred under point I had been barred by limitation. The  gist  of the correspondence evidenced  by  the  letters which  passed between the parties would show that while  the Board  was  insisting that the appellant’s  claim  for  rain damage flood damage and power failure had all been  rejected

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and  could  no longer be re-agitated, and  that  the  second contract should be executed without any reference to  these, the appellant was insisting on his claims under these  heads being reserved for adjudication in such ways as may be  open to  him  under law.  Counsel for the  Board  contended  that there  was  nothing  to show that the Board  agreed  to  the reservation of these claims or that it had acknowledged  its liability  in  respect of these claims,  and  that,  without considering   these  aspects  and  examining  the   relevant correspondence  and  documents, the umpire, found  that  the claims had been substantiated and awarded a sum of about Rs. 5  lakhs  to the appellant in respect of these  claims.   In other words, the contention was that the umpire should  have examined  the  genuineness  of  the  claims  and  considered whether the claims had been rejected by the Board and if so, when,  and whether at any subsequent stage, the  claims  had been  kept alive by any acknowledgement by the Board, or  in any  other manner known to law and in so far as  the  umpire did  not address himself at all to the plea  of  limitation, the  award was vitiated by an error of, law apparent on  the face of the record. The  High  Court did not make any  pronouncement  upon  this question in view of the fact that it remitted the whole case to  the arbitrators for passing a fresh award by its  order. We  do  not  think  that  there  is  any  substance  in  the contention  of  the  Board.  In the award,  the  umpire  has referred to the claims under this head and the arguments  of the  Board  for disallowing the claim and then  awarded  the amount  without  expressly  adverting  to  or  deciding  the question  of  limitation.  From the findings of  the  umpire under this head it is not seen that these claims were barred by limitation.  No mistake of law appears on the face of the award.  The umpire as sole arbitrator was not bound to  give a  reasoned  award and if in passing the award  he  makes  a mistake of law or of fact, that is no ground for challenging the validity of the award.  It is only when a proposition of law  is  stated in the award and which is the basis  of  the award, and that is erroneous, can the award be set aside  or remitted on the ground of error of law apparent on the  face of the record.               "Where an arbitrator makes a mistake either in               law  or  in fact in  determining  the  matters               referred, but such mistake               8 21               does not appear on the face of the award,  the               award is good notwithstanding the mistake, and               will not be remitted or set aside.               The  general  rule is that,  ’as  the  parties               choose their own arbitrator to be the judge in               the  disputes between them, they cannot,  when               the  award is good on its face, object to  his               decision,  either upon the law or the  facts."               (see  "Russell  on Arbitration", 17th  ed.  p.               322). An error of law on the face of the award means that you  can find  in  the  award or  a  document  actually  incorporated thereto, as, for instance, a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which  is the basis of the award and which you can then  say is  erroneous (see Lord Dunedin in Champsey Bhara &  Co.  v. Jivraj  Balco  Co.(").  In Union of  India  v.  Bungu  Steel Furniture Pvt.  Ltd.(2), this Court adopted the  proposition laid  down by the Privy Council and applied it.   The  Court has  no jurisdiction to investigate into the merits  of  the case and to examine the documentary and oral evidence on the

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record  for the purpose of finding out, whether or  not  the arbitrator has committed an error of law. The  only  other point which remains  for  consideration  is whether  the direction in the award to return  the  security deposit of Rs. 1,81,000 to the appellant can be said to be a matter  arising, out of the second contract and referred  to arbitration, under point 2(a) or point 2(d) of the  points of reference. Counsel  for  the  appellant contended  that  the  security, though  given  in connection with the  first  contract,  was transferred  to and treated as part of, the second  contract and,  therefore,  the  return  of the  said  amount  to  the appellant which had been directed by the umpire was  covered by point 2(a) or 2(d) of the reference. On the other hand, it was contended for the Board that point 2(a) of the reference related only to the sum still  payable for  the work done under the second contract  and  therefore the  return of the security amount would not be  covered  by point  2(a).  And, as regards point 2(d), the contention  of the,  Board was that it related to the claims of  the  Board against the respondent in respect of or under the agreement. The  Board,  therefore, contended that the  matter  was  not referred to the arbitrators either under point 2(a) or 2(d). The  High  Court did not express any final opinion  on  this question.   No doubt, the agreement to refer makes it  clear that there (1)  [1923] A. C.480. (2) [1967] 1 S.C.R. 3.24 822 were no other questions of dispute or difference arising for settlement except those which were specifically detailed  in the  agreement and it was also stated in the agreement  that all  other  questions  and claims  of  the  respondent  were withdrawn and should be deemed to be abandoned.  Whether the return  of the security amount would fall under  point  2(c) would depend upon the answer to the question whether it is a claim of the Board.  The question whether the Board can  re- tain  the amount under the contract is a claim of the  Board failing within point 2(d). We  allow the appeal and set aside the judgment of the  High Court,  but,  in the-circumstances, we make no order  as  to costs. P.H.P.                                                Appeal allowed. 82 3