1. Construction contract dispute — rescission of contract — arbitration proceedings — challenge to the arbitral award. (Para 2 , 4 , 5 , 6 , 9 )
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1997 Supreme(SC) 419
1997(2) Supreme 748
SUPREME COURT OF INDIA
A.S. Anand & K. Venkataswami, JJ.
M/s. Steeman Ltd. -Applicant/Petitioner
versus
State of Himachal Pradesh & Ors. -Respondents
Interlocutory Application No. 1
In
Transfer Petition (C) No. 233 of 1980
With
Special Leave Petition (C) No. 15978 of 1986
Decided on 6-3-1997
Counsel for the Parties :
For the Applicant/Petitioner : M.L. Verma, Sr. Adv., S.K. Gambhir, Advocate.
For the Respondents : B. Dutta, Sr. Adv., L.R. Nath and J.S. Attri, Advocates.
Important Points
The court affirmed that an arbitration award cannot be set aside for failing to address issues not part of the final agreed-upon reference or for awarding a lower interest rate, provided reasonable opportunity was given to parties and the challenge falls outside the statutory grounds under Section 30 of the Arbitration Act.
Subject
Arbitration Law - Award
Act Referred
Headnote
(i) ARBITRATION-Arbitration proceedings-Order rescinding contract - Petitioner raised question of law whether respondent was competent to rescind contract when matter in dispute was subjudice before arbitrator during pendency of case -Matter referred to High Court- Substitution of arbitrator-Challenged-This Court appointed an arbitrator to go into disputes-Question of law raised loses its relevance-No act of rescinding the contract took place after this appointment. (Para 11)
(ii) ARBITRATION-Award-Challenged on ground of want of reasonable opportunity to parties-Arbitrator had given full and reasonable opportunity to both parties-Petitioner was called upon time and again to furnish documents to support the claims-Petitioner has only partly complied with directions-Award not vitiated. (Paras 15, 16)
(iii) ARBITRATION-Interest-Award of-No clause in agreement regarding interest-Both parties agreed on the rate of interest at 18%-Arbitrator in facts and circumstances of the case awarded interest at 6%-No ground to interfere with award-(Arbitration Act, 1940-Section 30). (Para 17)
Legal Category Hierarchy
Table of Contents
2. Challenge to arbitral award — failure to decide question of law — non-speaking award — denial of reasonable opportunity — inadequate interest rate. (Para 10 )
3. Arbitrator's award based on consented issues — reasonable opportunity provided via multiple sittings — interest rate within arbitrator's discretion and outside court's interference scope. (Para 11 , 14 , 15 , 16 , 17 )
4. Court's jurisdiction to interfere with an arbitral award is limited to the grounds enumerated in Section 30 of the Arbitration Act. (Para 17 )
5. Interlocutory Application and Special Leave Petition dismissed. (Para 18 )
6. Does a successor arbitrator need to answer a question of law referred to a court by a predecessor arbitrator?
Not if the arbitrator was appointed to resolve disputes and the parties consented to specific issues that did not include that question of law, or if the question lost relevance after the new appointment. (Para 11 )
7. When is an arbitral award considered to have been passed after providing reasonable opportunity to the parties?
An award is valid if the arbitrator held multiple sittings, meticulously recorded minutes, and repeatedly called for supporting documents, even if a party only partially complied with those directions. (Para 15 , 16 )
8. Can a court interfere with an arbitrator's decision to award a lower interest rate than claimed by a party?
No, provided the arbitrator considered the relevant facts and circumstances, as the court's jurisdiction to interfere with an award is strictly confined to the grounds enumerated in Section 30 of the Arbitration Act. (Para 17 )
JUDGMENT
Venkataswami, J.-On a close and careful scrutiny of the facts we find that the dispute in these matters lies in a very narrow compass, but longwinding arguments were addressed by referring to matters which have no real relevance to the actual disputes in these matters.
2. Brief facts leading to the filing of these two matters are the following :
The work of construction of Sitla Bridge over river Ravi at Champa was awarded after negotiation to the applicant/petitioner (M/s. Steeman Ltd.) on 31.12.1969. We are not giving details as they are not necessary. As there was some dispute between the parties regarding the progress of the work and payments for the same, the petitioner Company submitted disputes/differences for adjudication by an arbitrator as per clause 29 of the agreement. While so, the Executive Engineer, Champa Division imposed penalty of Rs. 63,000/- in addition to rescinding the contract on 5.7.1971. Against the order rescinding the contract and imposing penalty, the petitioner Company successfully appealed to the Government of Himachal Pradesh. Consequently, the Company was allowed to proceed with the work and the disputes were referred to an arbitrator.
3. As Arbitrator originally appointed was not acceptable to the petitioner Company one, Mr. R.K. Sarkar was appointed as arbitrator by mutual consent of parties. The said arbitrator entered upon the reference.
4. While the arbitration proceedings were going on, the respondents again rescinded the contract finally on 7.6.1972.
5. On 7.10.1972, the petitioner Company submitted additional claims before the arbitrator consequent upon the rescinding of the contract finally. The petitioner Company also raised a question of law before the arbitrator, namely, whether the respondent was competent to rescind the contract on the ground of slow progress when the matter in dispute was subjudice before the arbitrator during the pendency of the case . The arbitrator referred that question for opinion of the Himachal Pradesh High Court under Section 13(b) of the Indian Arbitration Act. While that was pending, it appears that in the place of Mr. R.K. Sarkar one Mr. O.B. Sablok was appointed as arbitrator. The petitioner challenged the substitution of the arbitrator before the High Court. The High Court while setting aside the removal of Mr. R.K. Sarkar and the appointment of Mr. O.B. Sablok as arbitrator, did not continue Mr. R.K. Sarkar as arbitrator. Since, no orders were passed by the High Court for proceeding further with the arbitration matter, the petitioner Company moved this Court by filing Transfer Petition No. 233 of 1980 for transfer of the cases to some other High Court. This Court disposed of the Transfer Petition on 12.3.1984 by appointing one Mr. G.N. Ramaswamiah, Chief Engineer (IPH) H.P. P.W.D. with the mutual consent of the parties with a direction to the said arbitrator to enter upon the reference and directing both the parties to appear before him on 3.9.1984.
6. The said arbitrator duly entered upon the office, held as many as 10 sittings/hearings and drew minutes of every meeting in detail. Based on that an award has been passed 14.6.1985.
7. The High Court (before which the question of law above mentioned, was referred to by Mr. R.K. Sarkar, the previous Arbitrator) disposed of the matter on 3.7.1986 stating that since the successor Arbitrator had made the award, there was no need to answer the question. On that view, the High Court dismissed the reference matter. Aggrieved by that the above special leave petition has been filed.
8. When we asked the learned Senior Counsel appearing for the petitioner whether anything survives in the special leave petition not only in view of the issues raised before the Arbitrator for adjudication but also having regard to the arbitrator appointed by this Court passing the award, the learned counsel frankly submitted that the special leave petition has become infructuous. Accordingly, we dismiss the same as having become in
