Back
2010 Supreme(SC) 231
2010 (3) Supreme 184
SUPREME COURT OF INDIA
Markandey Katju and K.S. Radhakrishnan, JJ.
O.P. Pathrose — Appellant
versus
State of Kerala & Anr. — Respondents
Civil Appeal No.1256 of 2005
Decided on : 16-03-2010
IMPORTANT POINT
The unreasonableness of an Award is not a matter for the court to consider unless the award is per se preposterous or absurd.
Headnote:Arbitration Act,1940-Section 30- Agreement entered into between Appellant-contractor and Superintending Engineer, KIP LP Circle,Kottarakkara, for execution of work for formation of Kottayam Branch Canal including siphons and cross drainage works- Disputes and differences arose between parties and claim raised by appellant was referred to Arbitrator – Arbitrator passed a reasoned award whereby the claims Nos. a, b, c, d, g were allowed- Application preferred by respondents for setting aside award was rejected-On appeal by Respondents High Court set aside the claims Nos. ‘a’ to ‘d’ and decree was passed only in terms of claim ‘g’- Appeal against judgment of High Court whereby High Court interfered with an arbitration award -Held High Court had not stated any cogent reasons for upsetting findings recorded by Arbitrator- The unreasonableness of an Award is not a matter for the court to consider unless the award is per se preposterous or absurd-Primarily, it is for the Arbitrator to appraise the evidence adduced by the parties- Arbitrator had gone through the defence statement at length and the claims nos. a and b practically remain unopposed so recorded by the Arbitrator in the award itself- The Arbitrator had clearly stated in the award that the respondents had admitted in their pleadings that the changes were effected in order to suit the site conditions- Further, with regard to claim no. b it had been clearly stated by Arbitrator in the award that, during the course of arguments, it was submitted by respondents that unless the supplemental agreement is executed, payments would not be effected and no materials would be released- Again, it was pointed out that refusal to execute supplemental agreement would be considered as a default and the respondents would terminate the agreement under clause 45 of LCB condition- Those factual disputes had not been controverted by adducing any evidence- That being the factual position, no reason found to interfere with the award of Arbitrator in respect of claims (a) and (b)- In the absence of any specific terms of reference, held that the Arbitrator had committed an error in granting claims Nos. (c) and (d) and High Court had rightly set aside those claims especially when there were no materials to support those claims-Impugned judgment of the High Court in respect of claims (a) and (b) set aside and in respect of claims Nos. (c) and (d) held liable to be sustained-Appeal partly allowed. (Paras 12 to 14)
Facts of the Case :
Present Appeal has been filed against judgment of High Court whereby High Court interfered with arbitration award and set aside few claims allowed by Arbitrator.
Findings of the Court :
Findings recorded by the Arbitrator had not been controverted by the respondents by adducing any evidence. Finding was recorded by the Arbitrator after site inspection and perusing the measurement book High Court had not stated any cogent reasons for upsetting findings recorded by Arbitrator. The unreasonableness of an Award is not a matter for the court to consider unless the award is per se preposterous or absurd.Primarily, it is for the Arbitrator to appraise the evidence adduced by the parties. Arbitrator had gone through the defence statement at length and the claims nos. a and b practically remain unopposed so recorded by the Arbitrator in the award itself. The Arbitrator had clearly stated in the award that the respondents had admitted in their pleadings that the changes were effected in order to suit the site conditions. Further, with regard to claim no. b it had been clearly stated by Arbitrator in the award that, during the course of arguments, it was submitted by respondents that unless the supplemental agreement is executed, payments would not be effected and no materials would be released. Again, it was pointed out that refusal to execute supplemental agreement would be considered as a default and the respondents would terminate the agreement under clause 45 of LCB condition. Those factual disputes had not been controverted by adducing any evidence. That being the factual position, no reason was found to interfere with the award of Arbitrator in respect of claims (a) and (b). In the absence of any specific terms of reference, held that the Arbitrator had committed an error in granting claims Nos. (c) and (d) and High Court had rightly set aside those claims especially when there were no materials to support those claims. Impugned judgment of the High Court in respect of claims (a) and (b) was set aside and in respect of claims Nos. (c) and (d) was held liable to be sustained. Appeal was partly allowed.
JUDGMENT
K.S. Radhakrishnan, J. —
1.This appeal arises out of the judgment of the Kerala High Court in M.F.A. No.45/1996 whereby the High Court has interfered with an arbitration award dated 2.4.1993 and set aside few claims allowed by the Arbitrator.
2.An agreement dated 14.9.1988 was entered into between the Appellant-contractor and the Superintending Engineer, KIP LP Circle, Kottarakkara, for execution of the work for the formation of Kottayam Branch Canal including siphons and cross drainage works. Later, a supplementary agreement No.1 was executed between the parties on 16.6.1989 extending the time for completion of work by six months from 7.4.1989 to 6.10.1989. The appellant vide letter dated 25.9.1989 sought further extension of time for completion of work without prejudice to his rights and claims. On 29.11.1989, supplemental agreement No.2 for extension of time was executed between the parties whereby the period of completion of work was extended from 6.10.1989 to 31.3.1990. Supplemental agreement No.3 was also signed between the parties on 29.11.1989 for carrying out the extra work. During the pendency of the extended period of contract, the appellant addressed a letter to Respondent No.2 enumerating the various extra payments due and payable to him and further stated that execution of work by the appellant within the extended time would be without prejudice and subject to his rights for all claims and compensation for all losses and damages sustained. It was stated that the work was completed on 31.3.1990 within the extended period in terms of the supplemental agreement No.2. On 5.7.1990, the appellant addressed a letter to Respondent No.2 informing him that the supplemental agreements as aforesaid were executed by him under pressure and coercion. Supplemental agreement No.4 was signed between the parties on 9.7.1990 for carrying out the extra work, which according to the appellant was beyond the terms of the original agreement. On 18.7.1990, the appellant had sent a letter to Respondent No.2 stating that he had signed the final bill under coercion, duress and undue influence.
3.Disputes and differences arose between the parties and the claim raised by the appellant was referred to the Arbitrator who was the Superintending Engineer of the Department. Before the Arbitrator, the appellant raised claims Nos. a to l. The Arbitrator passed a reasoned award on 2.4.1993 whereby the claims Nos. a, b, c, d, g were allowed. Award was made rule of the Court by the Subordinate Judge’s Court, Thiruvananthapuram on 26.10.1993 and the application preferred by the respondents for setting aside the award under Section 30 of the Arbitration Act, 1940 was rejected.
4.The Respondents took up the matter in appeal before the High Court by filing M.F.A. No.45/1996. A Division Bench of the High Court set aside the claims Nos. ‘a’ to ‘d’ and decree was passed only in terms of claim ‘g’. Aggrieved by the judgment of the High Court, this appeal was preferred by the appellant.
5.Mr. L.Nageswara Rao, learned senior counsel appearing for the appellant submitted that the High Court has committed a grave error in interfering with the reasoned award passed by the Arbitrator and setting aside the claims a to d. Learned senior counsel submitted that the Arbitrator has given cogent reasons for allowing the claims in respect of losses and damages suffered due to breach of contract by the respondents. Learned senior counsel submitted, in any view, the unreasonableness of an Award is not a matter for the court to consider unless the award is per se preposterous or absurd. Learned senior counsel referred to the judgments of this Court in Indian Oil Corporation Ltd. v. Indian Carbon Ltd.,1 (1988) 3 SCC 36, Arosan Enterprises Ltd. v. Union of India & Anr.2 (1999) 9 SCC 449, Md. Salamatullah & Ors. V. Government of Andhra Pradesh,3 (1977) 3 SCC 590.
6.Learned senior counsel further submitted that with regard to claim No.(b), the Arbitrator derives his jurisdictio
