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CASE NO.: Appeal (civil)  5456-5457 of 2000

PETITIONER: Satna Stone & Lime Co. Ltd., M.P. etc.

RESPONDENT: Union of India & Another etc

DATE OF JUDGMENT: 08/05/2008

BENCH: Tarun Chatterjee & Dalveer Bhandari

JUDGMENT: JUDGMENT                                          NON-REPORTABLE

           IN THE SUPREME COURT OF INDIA

             CIVIL APPEALLTE JURISDICTION

         CIVIL APPEAL NOs.5456-5457 OF 2000.

Satna Stone & Lime Co. Ltd., M.P. etc.       .. Appellant(s)

         Versus

Union of India & Another etc.                .. Respondent(s)

                      JUDGMENT

Dalveer Bhandari, J.

1.   These appeals are directed against the judgment of the

Division Bench of the High Court of Madhya Pradesh at

Jabalpur dated 6.7.1999 delivered in Misc. Appeal No. 1058 of

1995 and Misc. Petition No.1 of 1991.

2.   Brief facts relevant to dispose of these appeals are as

under:-

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    The appellant Satna Stone & Lime Company Ltd., Satna

entered into an agreement with the General Manager, G.I.P.

Railway, Government of India, on 23.3.1897, whereby a siding

was provided to the company for clearance of its goods. The

agreement was revised from time to time and the last such

agreement was executed on 1.10.1942 (hereinafter called "the

agreement").

3.   The Railway administration on 24.8.1968 informed the

appellants that the maintenance charges would be levied at

the rate of 4=% per annum instead of 2=%. The respondent

Railway   administration   raised   the   bills   for   the   period

1.11.1963 to 31.3.1975.     The appellants paid the bill under

protest on 22.6.1976.      The appellants filed an application

under section 20 of the Arbitration Act, 1940. On the request

of the appellants, the matter was referred to the Arbitration.

The Arbitrator decided the claim in favour of the appellants.

The objections raised by the Railways under section 30 of the

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Arbitration Act, 1940 were rejected by the learned District

Judge and the award was made the rule of the court.

4.   The miscellaneous application was preferred by the

Railways before the Division Bench of the Madhya Pradesh

High Court against the said order of the District Judge. The

respondent    Railways   submitted   that   the   claim   of   the

appellants was clearly barred by limitation because the

demand crystallized on 1.5.1975 and the claim was made on

8.8.1978.

5.   This Court in Union of India v. L.K. Ahuja & Co. (1988)

3 SCC 76 that the arbitrator would decide unless, however, if

on admitted facts a claim is found at the time of making an

Order under Section 20 of the Arbitration Act, to be barred by

limitation.

6.   In Union of India v. Indian Sugar Mills Association,

Calcutta & Another AIR 1968 SC 22, the court dealt with

this aspect and came to the conclusion that Railway

administration was competent to increase the rate chargeable

for the services rendered.

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7.   This aspect of the matter was also ignored by the

arbitrator and the High Court rightly concluded that the

award is based on wrong principles of law. If the decision of

the arbitrator is contrary to law laid down by this Court then it

would be justified in interfering with the award.

8.   The learned counsel for the appellants has placed

reliance on the judgment of this Court in B.V. Radha

Krishna v. Sponge Iron India Ltd. (1997) 4 SCC 693 to

demonstrate that the High Court was not justified in

substituting its own view in place of arbitrator’s view as if it

was dealing with an appeal. This is forbidden by a series of

judgments of this Court.

9.   Learned counsel for the appellants has also placed

reliance on Food Corporation of India v. Joginderpal

Mohinderpal & Another (1989) 2 SCC 347. In this case, the

court relying on earlier judgment of this court in Puri

Construction Pvt. Ltd. v. Union of India (1989) 1 SCC 411

reiterated the legal position that the court cannot sit in appeal

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over    the    views   of   the   arbitrator   by    reexamining    and

reassessing the material.

10.    In Hindustan Construction Co. Ltd. v. Governor of

Orissa & Others (1995) 3 SCC 8 the court observed as

follows:-

      "It is well known that the Court while considering        the question whether the award should be set        aside, does not examine that question as an        appellate court. While exercising the said power,        the court cannot reappreciate all the materials on        the record for the purpose of recording a finding        whether in the facts and circumstances of a        particular case the award in question could have        been made. Such award can be set aside on any of        the grounds specified in Section 30 of the Act."

11.    There is no quarrel with the proposition canvassed by

the learned counsel for the appellants.                This scope of

interference by the court is limited and the court would not be

justified     in reappreciating     the   material    on   record   and

substituting its own view in place of arbitrator’s view.            This

exercise is not permissible by the court in view of the settled

legal position.

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12.   In the instant case, where there is an error apparent on

the face of record or where the arbitrator has not followed the

statutory legal position, the court would be justified in

interfering with the award of the arbitrator.

13.   Learned counsel for the respondents placed reliance on

Trustees    of   the    Port   of   Madras      v.   Engineering

Constructions Corporation Limited (1995) 5 SCC 531

wherein this court observed as under:-

     "In the case of a reasoned award, the court can       interfere if the award is based upon a proposition of       law which is unsound in law. The error apparent       on the face of the award contemplated by Section       16(1) (c) as well as Section 30 (c) of the Arbitration       Act is an error of law apparent on the face of the       award and not an error of fact. An error of law on       the face of the award means an error of law which       can be discovered from the award itself or from a       document actually incorporated therein.           The       erroneous proposition of law must be established to       have vitiated the decision. The arbitrator being a       creature of the contract must operate within the       four corners of the contract. It is not permissible to       travel    beyond    and     consider   material    not       incorporated in or appended to the award."

14.   The learned counsel for the respondents has also placed

reliance on the case of Indian Sugar Mills Association

(supra).   In this case, this court laid down that the local

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administration was competent to increase the ‘rates of

charges’. The arbitrator ignored the settled legal position and

consequently the High Court was justified in interfering with

the award based on wrong principles of law.

15.   The learned counsel for the respondents also placed

reliance on Bungo Steel Furniture Pvt. Ltd. v. Union of

India (1967) 1 SCR 633. In this case, the court observed as

under:-

     "The arbitrator in fixing the amount of       compensation had not proceeded to follow any       principles, the validity of which could be tested on       the basis of laws applicable to breaches of contract.       He awarded the compensation to the extent that he       considered right in his discretion without indicating       his reasons. Such a decision by an Arbitrator could       not be held to be erroneous on the face of the       record."

     In that case, the court further held as under:-

     "It is now a well settled principle that if an       arbitrator, in deciding a dispute before him, does       not record his reasons and does not indicate the       principles of law on which he has proceeded, the       award is not on that account vitiated. It is only       when the arbitrator proceeds to give his reasons or       to lay down principles on which he has arrived at       his decisions that the court is competent to       examine whether he has proceeded contrary to law       and is entitled to interfere if such error in law is       apparent on the face of the award itself."

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16.   The Privy Council in Champsey Bhara & Co. v. Jivraj

Balloo Spg. & Wvg. Co. Ltd. AIR 1923 PC 66 observed as

under:-

     "An error in law on the face of the award means, in       their Lordships’ view, 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."

17.   In Raipur Development Authority & Others v. M/s.

Chokhamal Contractors & Others (1989) 2 SCC 721, a

Constitution Bench of this Court clarified that "the ground

arising out of an error of law apparent on the face of the award

prima facie appears to fall either under Section 16(1) (c) of the

Act, which empowers the Court to remit the award to the

arbitrator where an objection to the legality of the award

which is apparent upon the face of it is successfully taken, or

under Section 30 (c) of the Act which empowers the Court to

set aside an award if it is ‘otherwise invalid’."

18.   From the discussion of the aforementioned cases, it is

clear that the error apparent on the face of the award

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contemplated by Section 16(1)(c) as well as Section 30(c) of the

Arbitration Act is an error of law apparent on the face of the

award and not an error of fact.      Same principle has been

reiterated in Thawardas Pherumal v. Union of India (1955)

2 SCR 48.     The court reiterated the legal position that an

arbitrator cannot ignore the law or misapply it in order to do

what he thinks is just and reasonable. The legal position has

been crystallized in a series of judgments of this Court that

the arbitrator has got ample power in giving an award. 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 a task of being a judge of the evidence before the

arbitrator.   The court should approve the award with the

desire to support it, if that is reasonably possible rather than

to destroy it, by calling it illegal. This court has very limited

jurisdiction to interfere with the reasoned award. Only when

the award is based upon a proposition of law which is

unjustified in law, the error of law must appear from the

award itself or from any document or note incorporated in it or

appended to it.   It is not permissible to travel beyond and

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consider material not incorporated in or appended to the

award.

19.   In view of the clear legal position which has been

correctly appreciated by the High Court in the impugned

judgment, in our considered view, no interference is called for.

20.   The appeals are accordingly dismissed being devoid of

any merit.   In the facts and circumstances of the case, we

direct the parties to bear their own costs.

                                      ..................................J.                                        (Tarun Chatterjee)

                                     ..................................J.                                       (Dalveer Bhandari) New Delhi; May 8, 2008.