Important points
1. The Court while exercising the power under Section 30 of the Arbitration Act cannot reappreciate the evidence or examine correctness of the conclusions arrived at by the Arbitrator. The jurisdiction is not appellate in nature and an award passed by an Arbitrator cannot be set aside on the ground that it was erroneous.
2. An Arbitrator has power and jurisdiction to grant interest for all the three stages provided the rate of interest is reasonable.

Headnote:(i) Arbitration Act, 1940—Sections 30 and 33—Arbitration Award—Prayer to set aside the award alleging that the Arbitrator misconducted himself—Allegations that the Arbitrator exceeded his jurisdiction and decided the questions not covered by Clause 12 of the Arbitration agreement—Respondent, HCL invited tender for supply of oxygen for its plant—Tender contained a condition that successful bidder will set up an oxygen plant in the vicinity of HCL—Agreement entered into between Bhagwati Oxygen Ltd. and HCL for supply of oxygen for a period of seven years—It was stated that purity of oxygen would be 99 percent—In accordance with the terms and conditions of the contract, BOL set up its oxygen producing plant in 1992 and commenced supply of oxygen to HCL—According to BOL, no payment was made by HCL to BOL on ground that oxygen supplied by BOL to HCL did not meet the purity standard as agreed between the parties—Arbitrator gave an award holding that the claim put forward by BOL was well founded—Counter claim filed by HCL was dismissed—Whether arbitrator was right in allowing claim of BOL—(Yes).
       Held : This Court has considered the provisions of Section 30 of the Act in several cases and has held that the court while exercising the power under Section 30, cannot re-appreciate the evidence or examine correctness of the conclusions arrived at by the Arbitrator. The jurisdiction is not appellate in nature and an award passed by an Arbitrator cannot be set aside on the ground that it was erroneous. It is not open to the court to interfere with the award merely because in the opinion of the court, other view is equally possible. It is only when the court is satisfied that the Arbitrator had misconducted himself or the proceedings or the award had been improperly procured or is ‘otherwise’ invalid that the court may set aside such award. (Para 23)
       In the instant case, the Arbitrator has considered the relevant evidence on record. He has observed that oxygen was supplied by BOL which was accepted by HCL. Certain letters were, no doubt, written by HCL to BOL complaining about the quantity and quality of oxygen gas. The Arbitrator also observed that the evidence disclosed that verbal complaints were made regarding purity of gas. He, however, recorded a finding that Clause 10.4 which allowed HCL to purchase oxygen from other sources at the cost and consequence of BOL was never invoked. The said clause which was “risk purchase” from elsewhere was not resorted to by HCL. The Arbitrator noted that in some of the letters, HCL stated that it would have no option but to purchase liquid oxygen at the cost of BOL during non-availability of oxygen from BOL, but ultimately it was a letter dated October 11, 1993 that HCL informed BOL that if BOL would not supply oxygen by October 26, 1993, it would be constrained to purchase oxygen from other sources. Thus, time was granted up to October 26, 1993 in view of letter dated October 11, 1993. In the light of such letter the Arbitrator concluded that HCL could not have purchased oxygen from other sources in August, 1993 and hence it was not entitled to put forward counter claim. The learned single Judge virtually reappreciated the evidence by referring to several letters and observed that the Arbitrator had not considered those letters and there was misconduct on his part. According to the learned single Judge, HCL informed BOL about the grievance and quantity and quality of oxygen supplied by BOL, about the ‘risk purchase agreement’ and also about its need, necessity and completion of purchase of oxygen gas from other sources. The learned single Judge also has referred to some of those letters in which the said fact was referred by HCL. In our opinion, however, the learned counsel for BOL is justified in submitting that really it was in realm of appreciation and re-appreciation of evidence. At the most all those letters go to show that HCL had some complaint against BOL and it had also disclosed its intention to purchase oxygen gas from other sources but as observed by the Arbitrator, it was not proved that HCL had in fact purchased oxygen from other sources under Clause 10.4. If in the light of such evidence, the Arbitrator did not think it fit to allow counter claim, it could not be said to a case of misconduct covered by Section 30 of the Act. The learned single Judge as also the Division Bench were, therefore, not justified in setting aside the award passed by the Arbitrator dismissing the counter-claim and hence the order of the learned single Judge as confirmed by the Division Bench deserves to be set aside by restoring dismissal of counter-claim of HCL by the Arbitrator. (Paras 31 to 33)
       (ii) Arbitration Act, 1940—Civil Procedure Code, 1908—Section 34—Grant of interest—Powers of Arbitrator—Section 34 CPC not applicable to arbitration proceedings—An Arbitrator has power and jurisdiction to grant interest for all the three stages provided the rate of interest is reasonable—Award of interest at eighteen per cent held justified as at that rate HCL had given advance to BOL—High Court was not justified in reducing the rate of interest.
       Held : The Arbitrator awarded interest to BOL at the universal rate of eighteen per cent for all the three stages, pre-reference period, pendente lite and post award period. It is not disputed that in the arbitration agreement there is no provision for payment of interest. The learned single Judge as well as the Division Bench were right in observing that the Arbitrator, in the facts and circumstances, could have awarded interest. The Arbitrator had granted interest at the rate of eighteen per cent on the ground of loan so advanced by HCL to BOL at that rate. Now Section 34 of the Code of Civil Procedure has no application to arbitration proceedings since Arbitrator cannot be said to be a ‘court’ within the meaning of the Code. But an Arbitrator has power and jurisdiction to grant interest for all the three stages provided the rate of interest is reasonable. (Paras 34 and 35)
       In our view, however, a relevant and germane factor weighed with the Arbitrator in awarding eighteen per cent interest that at that rate HCL had given advance to BOL. In view of the said circumstance, in our opinion, even that part of the award passed by the Arbitrator did not deserve interference and learned single Judge and the Division Bench were not right in reducing the rate of interest. (Para 40)

Judgment

C.K. Thakker, J.—Leave granted.

2. All these appeals arise out of common judgment and order passed by the Division Bench of the High Court of Calcutta in APOT Nos. 721 of 2002 and 736 of 2002 on July 03, 2003 by which the Division Bench confirmed the order passed by learned single Judge on July 24, 2002 in A.P.No. 369 of 2002. That A.P. was filed by Hindustan Copper Limited against Arbitration award passed by Justice L.M. Ghosh (Retd.) on September 25, 2000, under the Arbitration Act, 1940 (hereinafter referred to as ‘the Act’).

3. To appreciate the controversy raised in the present appeals, relevant facts may be stated in brief. On March 10, 1988, Hindustan Copper Limited (‘HCL’ for short) invited tender for supply of oxygen for its plant at Ghatsila. The tender contained a condition that successful bidder will set up an oxygen plant in the vicinity of HCL. The tender of Bhagwati Oxygen Limited (‘BOL’ for short) was accepted and an agreement had been entered into between HCL and BOL on March 17/April 14, 1990. It was for a period of seven years from the date of commencement of supply of oxygen. The agreement stated that the supplier i.e. BOL will at its own cost install, operate and maintain an oxygen plant of 25 TPD capacity of pressure vacuum swing absorption type with suitable compressors for supply of high purity oxygen gas to HCL. It also stated that the purity of oxygen would be 99 per cent. The agreement further stated; “The oxygen plant should have the capacity to supply not less than 1,25,000 mm3 of gas of 99 per cent purity per week on a sustained basis as and when required by HCL”. Clause 2.3 clarified that the minimum acceptable purity of the oxygen gas should be 85 per cent for both flash furnace and converter. Meter readings for invoicing billing purpose were to be taken jointly by authorized representatives of HCL and BOL as and when the plant stopped/started. Provision was also made for periodical checking and calibration of meters. It was the duty of BOL to erect plant and pipe line system. A right to inspection and review was conferred upon HCL. Requirement of gas and supply thereof had been mentioned in Clause 2.1. Water supply required for the plant was to be arranged by BOL at its own cost but HCL agreed to supply water for operation of the plant. BOL had undertaken to erect and commission the plant and start supply of gas continuously to HCL within 18 months from the date of receipt of order or letter of intent whichever was earlier and the gas was to be made available to HCL in the requisite quality and quantity as per conditions agreed upon. Provisions had also been made with regard to price of gas and minimum off-take guaranteed. Time was the essence of the contract and penalty had been provided for in case of breach of contract.

Clauses 10.4 and 10.5 are relevant and they read as under:-

“10.4. In case BOL fail to supply oxygen from the Captive plant as per the contract terms after commissioning of the plant, it will be the responsibility of BOL to arrange liquid oxygen from other sources at contracted rates and keep HCL requirement feed uninterruptedly failing which HCL will have the right to procure the gas from elsewhere and the difference of such procurement cost and the agreed price subject to a limit of 80 of the total requirement as per NIT, will be recovered from BOL forthwith. However, HCL will give adequate chance to BOL to meet the HCL’s requirements by their own means from other sources at the contract price.

10.5. In case, for any period the quantity of Gas supplied goes down below the guaranteed purity or pressure, no payment will be made for that period or quantity unless specifically prior acceptance is obtained from HCL.”

4. A security deposit of Rs. 20 lacs (Rupees twenty lacs only) had been made by BOL to HCL in the form of bank guarantee issued by the Central Bank of India, New Delhi. There was an arbitration clause being Clause No.12. The said clause reads thus:

“Except where i

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2005 Supreme(SC) 572

Cases Referred (11)