1. Agreement for supply of electrical energy — Disputes arose — Matter referred to arbitration. (Para 1 )
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2001 Supreme(SC) 341
SUPREME COURT OF INDIA
S.N.Phukan : S.R.Babu
U.P.State Electricity Board
Versus
Searsole Chemicals Limited
Case No. : 10014 of 1995
Date of Decision : 2/21/01
Advocates Appeared: Choudhary Rohit : Kumar Ranjit : Mahipal T. : Menon B.Vijay Lakshmi : Menon P.B. : Mishra Pradeep
The court cannot reappraise evidence in an arbitration matter as if it were an appeal if the arbitrator's finding emanates from the contract and evidence, especially where the party challenging the award failed to produce the best evidence available.
Headnote:(A) Arbitration and Contract Law - Scope of Arbitrator's Award - Supply of electrical energy - Liability for damages - Use of contractual provisos to exclude liability - Findings based on failure to produce best evidence - Judicial review of arbitration awards - Court cannot reappraise evidence as if in an appeal where the arbitrator's view emanates from the contract and evidence. (Para 4)
(B) Evidence - Best evidence rule - Failure to produce logbooks to justify interruptions of service - Drawing adverse inference when evidence is not made available to the arbitrator. (Para 4)
Facts of the case:
An agreement for the continuous supply of electrical energy included a proviso exempting the supplier from liability for damages during accidental interruptions, government orders, or other causes beyond its control. Disputes arose over power interruptions, leading to arbitration. The arbitrator awarded refunds and damages for negligence, noting that the supplier failed to produce complete logbooks to justify the interruptions, and the reasons provided in available logs were untenable. The award was decreed by a civil court and affirmed by the High Court.
Findings of Court:
The court found that the arbitrators' conclusions were based on the available records and the supplier's failure to produce the best evidence. The lack of complete logbooks supported the arbitrator's view that the interruptions were not covered by the contractual exemptions.
Issues: Whether the arbitrator's award for damages exceeded the scope of the agreement and whether the court could reappraise the evidence to interfere with the arbitrator's findings.
Ratio Decidendi: The court held that it is not within the scope of the court to reappraise evidence as if it were an appeal when the arbitrator's view emanates from the agreement and evidence presented. If two views are possible, the arbitrator's view prevails. In this case, the arbitrator's view was reasonable based on the supplier's failure to provide evidence to prove the interruptions fell under the exempt categories of the contract.
Result: Appeal dismissed.
Legal Category Hierarchy
- practice and procedure
- contract law
Table of Contents
2. Appellant argued that no claim for damages arises except in circumstances stated in proviso to clause 1 of the agreement. (Para 3 )
3. Arbitrators applied mind to pleadings, evidence, and contract terms; their view after assessing evidence cannot be reappraised. (Para 4 , 6 )
4. Court cannot reappraise evidence as if in appeal; where two views are possible, arbitrator's view prevails. (Para 4 )
5. Appeal dismissed; parties to bear their own costs. (Para 8 )
6. Can a court reappraise evidence in an arbitration appeal as if it were a first appeal?
No, the court cannot reappraise the matter as if it were an appeal; where two views are possible, the arbitrator's view prevails. (Para 4 )
7. What is the effect of failure to produce the best evidence by a party in arbitration?
Failure to produce logbooks and best available evidence can lead to an adverse inference against that party. (Para 4 )
8. When does an award fall within the scope of an arbitration agreement excepting liability?
An award falls within the excepted part when the arbitrators consider the pleadings, evidence, and terms of the contract and find the exception not applicable. (Para 4 )
S.RAJENDRA BABU, J.
(1) AN agreement was entered into between the appellant and the respondent for supply of electrical energy and by virtue of clause 1 of the agreement, the supply of electrical energy was to be
"in the form of a three-phase alternating current at a pressure of approximately 400 volts between phases, a frequency of approximately 80 cycles per second and a power not exceedin_g 744.12 KVA and the supply shall be available continuously during the 24 hours of each day and throughout the whole period of this agreement, provided always that the supplier shall not be responsible for damages or otherwise on account of accidental interruption of supply or stoppage or deficiency of energy caused by any order or direction issued by the Government of Uttar Pradesh or resulting from fire, flood, tempest or any accident or from any strike or lockout of workman or from any other cause beyond the control of the supplier, but the supplier shall make every effort to restore the supply as soon as possible".
On the ground that disputes arose between the appellant and the respondent, the matter was referred to arbitration as provided in the agreement. The respondent in the claim statement made various claims for refund of the amounts paid under various bills and for various losses suffered on account of various acts of commission and omission of the appellant, details of which are set out therein. By their written statement the appellant refuted the various claims of the respondent.
(2) ON 6/4990 the arbitrators made an award for a sum of Rs 1,74,338.98 by way of refund, while in regard to losses suffered on account of interruption in the power supply as a result of the negligence and acts of omission and commission by the appellant a sum of Rs 24,00,000 was awarded with interest at 12% with effect from 12-11-1986 up to the date of the award and interest @ 6% per annum from the date of the award till the date of payment. In the Court of the Civil Judge the award was filed. Overruling the objections of the appellant, the Civil Judge made a decree in terms of. the award against which an appeal was preferred to the High Court and which appeal having been dismissed, this appeal by special leave is filed.
(3) SHRI Ranjit Kumar, the learned Senior Advocate for the appellant, submitted that the award made by the arbitrators is not within the scope of the agreement entered into between the parties inasmuch as the (sic no) claim for damages would arise except in the circumstances arising in the proviso to clause 1 of the terms of agreement, to which we have adverted to at the very outset. Damages would not arise on account of interruptions, stoppage and deficiency caused by (i) accident, or (ii) by any order or direction issued by the Government of Uttar Pradesh, or (iii) resulting from fire, flood, tempest or any accident or from any strike or lockout of workmen or from any other cause beyond the control of the supplier. Thus the principal contention addressed before us is that there is a guarantee of supply of electricity for 24 hours of a day but under the circumstances set out in the proviso supply could be interrupted without liability of paying damages and this aspect was not considered by the arbitrators. When this point was raised before the High Court, the High Court noticed the finding of the arbitrators that all logbooks were not made available and even where they were made available by the appellant were not complete and even did not give any reasons and, where they contained reasons, the same were not tenable. While recording findings in respect of Issues 1 and 2 after assessing the evidence, the arbitrators came to this conclusion.
(4) BEFORE us the extracts of the logbooks have been produced and the reasons noted therein, for instance, are "tripping, shutdown, grid failure, breakdown". The respondent wrote to the appellant seeking clarification regarding the interruption in
