2005 Supreme(SC) 1039

2005(6) Supreme 292
Supreme Court of India
(From Bombay High Court)
C.K. Thakker & P.K. Balasubramanyan, JJ.
Rajendra Construction Company —Appellant
versus
Maharashtra Housing and Area Development Authority and Ors. —Respondents
Civil Appeal Nos. 5045-5046 of 2005
(Arising out of S.L.P. (C) Nos. 10963-10964 of 2003)
Decided on 12-8-2005
Counsel for the Parties :
For the Appellant : Uday U. Lalit, Sr. Advocate, Atul Karad, Gautam Godara, Ravindra Keshavrao Adsure, Advocates.
For the Respondents : Ramesh P. Bhatt, Sr. Advocate, Chirag M. Shroff, M.S. Girish and M.N. Shroff, Advocates.

Important point
An arbitration award is not liable to be set aside or remitted only on the ground that no reasons had been recorded in support of such award.

Headnote:(i) Arbitration Act, 1940—Sections 16, 17, 21 and 30—Arbitration Award —Whether the sole Arbitrator was required to record reasons in support of the awards made by him—(No)—An award passed was not liable to be set aside or remitted only on the ground that no reasons had been recorded in support of such award—Works contract—Maharashtra Authority issued a Tender Notice calling offers from registered contractors for construction of tenements—Work orders were issued in favour of appellant company—Appellant’s case that its claim was not properly worked out—Appointment of sole Arbitrator—After hearing parties, Arbitrator passed awards—Appellant filed application u/s 17 of the Act for making awards of the Arbitrator as rule of the Court—Civil Judge made Arbitrator’s awards as rule of Court—However, High Court set aside the order passed by the trial Court and remitted arbitration proceedings to the sole arbitrator to pass fresh awards—According to the High Court, awards passed by the sole Arbitrator were not speaking awards, therefore, not in accordance with law—Whether High Court was justified in holding that the awards were vitiated u/s 30 of the Act—(No)—Awards passed by the Arbitrator cannot be held illegal or unlawful—Maharashtra Housing & Area Development Act, 1976—Section 173.

       Held : Having given anxious and thoughtful consideration to the rival contentions of the parties, in our opinion, the appeals deserve to be allowed partly. The main question, according to us, is as to whether the sole Arbitrator was required to record reasons in support of the awards made by him. If that was the duty on the part of the Arbitrator, the contention of MHADA must be upheld by holding that the order passed by the High Court was in accordance with law and no fault can be found against the decision. If, on the other hand, there was no such requirement of law and Arbitrator was not bound to record reasons in support of the awards, they could not have been set aside ‘merely’ on the ground of non-recording of reasons and the High Court ought not to have interfered with the said awards and set them aside reversing the judgment and order passed by the trial court. (Para 11)

       In the opinion of this Court, it could not be disputed that in India, it has been ‘firmly established’ that it was not obligatory on the Arbitrator or Umpire to record reasons in support of the award when “neither any arbitration agreement nor any deed of submission” required reasons to be recorded. In that case also, it was urged, as has been done in the instant case, that if no reasons are disclosed by the Arbitrator, it would not be possible for the court to find out whether the award passed is in accordance with law. The Court, however, negatived the contention observing that if the parties wanted reasons to be recorded in support of the award to be passed by Arbitrator or Umpire it was open to them to make a provision in the agreement/contract itself to that effect. But in the absence of any stipulation in the contract, the court could not say that Arbitrator was duty bound to record reasons and if reasons are not recorded in support of the award, the award was vulnerable and liable to be set aside or should be remitted to the Arbitrator. According to this court, such an order would amount to virtually introducing by judicial verdict an amendment to the Act. No doubt, if the reasons are recorded by the Arbitrator or Umpire in support of the award, they can be considered by the court and if those reasons disclose an error apparent on the face of the record, the award can be set aside by a competent court of law. But in the absence of such requirement under the agreement itself, the party could not insist for reasons in support of the award nor a court of law can interfere with non speaking award. (Para 14)

       It was, however, urged that recording of reasons in support of the order is part and parcel of ‘natural justice’ and on that count also, unreasoned award should be treated as null and void and ineffective. We are unable to uphold the argument. A similar contention was raised in Chokhamal and negatived by this Court observing that the said doctrine applies to Administrative Law field. In the decisions pertaining to Administrative Law, this Court has always insisted for recording of reasons in support of the order or decision. (Para 15)

       The present awards are not under the new Act but under the old Act. It is, therefore, obvious that they could not have been set aside by the High Court on the ground that they were not supported by reasons and were not speaking awards. (Para 19)

       For the foregoing reasons, the awards passed by the sole Arbitrator cannot be held illegal or unlawful. In making such awards the rule of the court, the Court of Civil Judge, (Senior Division), Aurangabad had not committed any illegality which vitiated the awards and the High Court could not have set aside them. (Para 25)

       (ii) Arbitration Act, 1940—Arbitration award—Interest—Arbitrator awarded interest at the rate of 18 p.a. on the principal amount from the date of the suits to the date of awards and also from date of awards to the date of payment or upto the date of decrees—Works contract was entered into in 1987—Work was completed in 1990—Arbitrator passed awards in 1995—It would be proper, equitable and in interest of justice if rate of interest is reduced to 10 percent per annum. (Para 26)