Important Point
If the award is non-speaking, the Court can look into the question as to whether arbitrator has travelled beyond the scope of the contract as he derives his jurisdiction from the contract and if the arbitrator exceeds his jurisdiction the award can be set aside. An award can also be set aside in case of misconduct apparent on the face of the award.

Headnote:Arbitration Act, 1940-Section 30(a)-Grounds for setting aside award-Legal misconduct of arbitrator-Contract stipulated it was duty of contractor-claimant to settle dispute if any raised by anyone over land on which mining contract allotted to contractor-Arbitrator framed issue on that aspect and gave finding but award passed in favour of claimant awarding amount for loss suffered on account of delay caused due to dispute raised by local residents-Amount awarded beyond scope of agreement - Arbitrator misconducted himself in the proceedings-Award set aside on ground of legal misconduct.
       Held : Law is well settled that if the award is non-speaking, the Court can look into the question as to whether arbitrator has travelled beyond the scope of the contract as he derives his jurisdiction from the contract and if the arbitrator exceeds his jurisdiction the award can be set aside. An award can also be set aside in case of misconduct apparent on the face of the award. It can also be interfered with if the arbitrator has given reasons for the award disclosing an error apparent on the face of it. (Para 11)
       Coming to the present appeal we find that in the impugned award the arbitrator has stated the case of the parties, issues framed by him, his findings on each issue and the amount awarded. We may also state here that in the counter affidavit dated 23rd May, 1983 filed by the present appellant before the learned sub-Judge it had been clearly stated that the contract is evidenced by three integrated documents namely: (i) Tender dated 3.5.79 (ii) Work order dated 15.5.79 and (iii) Agreement dated 24.3.79. Out of claims under 10 heads the arbitrator awarded amount under claims Nos. 3 and 9 of the appellant. Out of 51 issues framed by the arbitrator, issues Nos. 15 to 18 were in respect of claim No. 3 and issues Nos. 31 to 37 were in respect of claim No. 9. The arbitrator has come to the findings that the entire mining area covered with tender was made available to the appellant but according to the arbitrator mining was not possible in some days in the month of April, 1980 and whole month of May, 1980 on account of obstructions by kudikidappukars and local public. The above finding of the arbitrator is in respect of the issue No. 15 which forms part of the award. While awarding the amount the arbitrator did not take note of the above Clause (c) of the tender notice which is a part of the agreement and under which the respondent would not be liable for such obstruction. Therefore, we hold that the amount awarded under Claim No. 3 is beyond the scope of the agreement entered into between the parties and, therefore, the awarded amount in respect of Claim No. 3 cannot be sustained. Claim No. 9 is in respect of escalation. It is not disputed at bar that in the agreement entered into between the parties there was no escalation clause. The arbitrator has come to the clear finding that the present appellant was not pressurised by respondent No. 1 to agree 10% hike in the wages of the mining workers as recorded in the findings in respect of issue No. 34. In issue No. 35 the arbitrator has recorded that the present appellant acceded to for raise in the wages of mining workers. The amount awarded under Claim No. 9 is not only beyond the scope of the agreement but also contrary to the findings recorded by the arbitrator. Therefore, we hold that the arbitrator has misconducted himself in the proceedings and, therefore, the award is liable to be set aside on the ground of legal misconduct on the part of the arbitrator under Section 30 of the Act. (Paras 12, 13 & 17 to 20)

Judgment

S.N. Phukan, J.-This appeal is directed against the common judgment and order dated 25.5.1987 passed in M.F.A. No. 161 of 1986 and 781 of 1986 by the High Court of Kerala.

2. For the purpose of appreciating the points urged in this appeal we may briefly state the facts.

3. The appellant herein, who is a mining contractor entered into an agreement with respondent No. 1 namely Indian Rare Earths Ltd. for mining, collection and supply of raw-sand during the period from 1.6.1979 to 31.5.1980. It was agreed between the parties that appellant would supply 2,02,000 tonnes of raw-sand at the average rate of 920 tonnes per day. The appellant failed to supply entire quantity and supplied only 1,72,489.24 tonnes. The disputes between the parties were referred to the arbitrator, who has been made a party in the present appeal namely respondent No. 2.

4. Before the arbitrator the appellant claimed Rs. 24,02,272/- under 10 heads along with interest. A counter claim was also filed by respondent No. 1 for Rs. 3,29,648.99 paise alongwith interest. The arbitrator framed as many as 51 issues and after recording his findings a sum of Rs. 5,40,191.10 paise with interest @ 15% per annum from 11.11.82 upto the date of decree was awarded in favour of the appellant. The award was made a rule of the Court on a petition filed by the appellant under Section 17 of the Arbitration Act, 1940 (for short the Act). The respondent No. 1 also filed a petition under Section 30 of the Act which was dismissed.

5. The appeals were filed before the High Court and the High Court by the common impugned judgment and order held that there was legal misconduct on the part of the arbitrator and accordingly set aside the award except the finding that the present appellant was entitled to refund of the earnest money deposited. Hence the present appeal.

6. We have heard Mr. T.L. Vishwanatha Iyer, Sr. learned counsel for the appellant and Mr. G.B. Pai, Sr. learned counsel for the respondents.

7. Before we enter into the contentions raised in the case in hand, we may refer to the decisions of this Court. The case in hand it has to be stated that we are concerned with Clause (a) of Section 30 of the Arbitration Act which empowers the Court to set aside an award on the ground that an arbitrator or umpire has misconduct himself or the proceedings.

8. In State of Orissa & Ors. v. M/s. Lall Brothers1 this Court inter alia held that an award may be set aside on the ground of error on the face of the it but an award is not invalid merely because by a process of inference and argument it may be demonstrated that the arbitrator has committed some mistake in arriving at his conclusion and it is also not open to the Court to speculate, where no reasons are given by the arbitrator, as to what impelled him to arrive at his conclusions.

9. In State of Andhra Pradesh & Ors. v. R.V. Rayanim & Ors.2 it was held that in matter of challenging the award there are often two distinct and different grounds-one is an error apparent on the face of the record and the other is that the arbitrator has exceeded his jurisdiction. In the latter case the Court can look into the arbitration agreement but under the former it cannot.

10. In Associated Engineering Co. v. Government of Andhra Pradesh & Anr.3 it was held that the arbitrator cannot act arbitrarily, irrationally, capriciously or independently of the contract and his sole function is to arbitrate in terms of the contract as his authority is derived from the contract. It was also held that if he has remained inside the parameters of the contract and has construed the provisions of the contract, his award cannot be interfered with unless he has given reasons for the award disclosing an error apparent on the face of it.

11. Thus, law is well settled that if the award is non-speaking, the Court can look into the question as to whether arbitrator has travelled beyond the scope of the contract as he derives his jurisdiction from the contract and if t

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1999 Supreme(SC) 456

Cases Referred (2)