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1995 Supreme(AP) 408

Andhra Pradesh High Court
Judges : C.V.N.SASTRY, P.S.MISHRA
Hemadri Cements Pvt.Ltd. - Appellant
Versus
Walchandnagar Industries Ltd - Respondent
Decided On : 08-01-95

Amendments to the Arbitration Act, which require arbitrators to give reasons for their awards, are valid and can be applied retrospectively. An award that does not contain reasons is invalid and cannot be made a rule of the court.

Headnote:

ARBITRATION - AMENDMENT TO ARBITRATION ACT - VALIDITY - RETROSPECTIVE EFFECT - SECTION 14 AND 17 OF THE ARBITRATION ACT - INTERPRETATION - AWARD WITHOUT REASONS - INVALIDITY - REMISSION OF AWARD FOR GIVING REASONS - FRESH ARBITRATION.

Fact of the Case:

A dispute arose between the petitioner-respondent and the appellant in the course of the execution of a contract for the sale of cement manufacturing machinery. In accordance with the arbitration Clause 12 (2) of the agreement, the parties nominated their respective arbitrators and the arbitrators appointed the umpire. The arbitrators, however, gave an award on 2. 2. 1987 granting to the petitioner-respondent Rs. 17,74,858. 00 together with interest of Rs. 3,05,000. 00. They, however, gave no reasons to support their award. The petitioner-respondent filed O. S. No. 249 of 1987 in the court of Additional Chief Judge (Temporary), Hyderabad, under Section 14 (2) of the Arbitration Act (for short the Act ) to make the award rule of the court. The appellant filed O. S. No. 387 of 1987 re-numbered as O. P. No. 41 of 1988 under Section 33 of the Act, read with Section 30 thereof. The learned Additional Chief Judge, however, delivered an ex parte judgment on 8. 11. 1988 which was set aside, however, in I. A. No. 453 of 1988 at the instance of the appellant on 1. 2. 1989. A civil revision against the said order in I. A. No. 453 of 1988 was also dismissed on 24. 11. 1989. While the award thus, was pending in the City Civil Court, A. P. Amendment Act 1 of 1990 came into force with effect from 19. 2. 1990.

Finding of the Court:

The court held that the amendments to Sections 14 and 17 of the Arbitration Act, which require arbitrators to give reasons for their awards, are valid and can be applied retrospectively. The court also held that an award that does not contain reasons is invalid and cannot be made a rule of the court. However, the court directed the parties to initiate fresh arbitration in accordance with the terms of the agreement since one of the arbitrators had died and it was not possible to remit the case to the same arbitrators.

Issues: 1. Whether the amendments to Sections 14 and 17 of the Arbitration Act are valid? 2. Whether the amendments can be applied retrospectively? 3. Whether an award that does not contain reasons is invalid? 4. What are the consequences of an invalid award?

Ratio Decidendi: 1. The amendments to Sections 14 and 17 of the Arbitration Act are valid because they are procedural in nature and do not affect any vested rights. 2. The amendments can be applied retrospectively because they do not create any new rights or obligations, but merely clarify the existing law. 3. An award that does not contain reasons is invalid because it does not comply with the mandatory requirements of Section 14 of the Act. 4. The consequences of an invalid award are that it cannot be made a rule of the court and the parties must initiate fresh arbitration.

Final Decision: The court allowed the appeal and set aside the judgment and order of the learned Single Judge in W. P. No. 11049 of 1990. The writ petition was dismissed, but without costs.

P. S. MISHRA, J.

( 1 ) THE instant appeal is preferred against the judgment in W. P. Nos. 11049 and 12938 of 1990 by a learned Single Judge of this court. Facts leading to the petitioner-respondent invoking this court s jurisdiction under Article 226 of the Constitution of India are in nutshell as follows : A dispute arose between the petitioner-respondent and the appellant herein in course of the execution of a contract for sale of cement manufacturing machinery. In accordance with the arbitration Clause 12 (2) of the agreement the parties, nominated their respective arbitrators and the arbitrators appointed the umpire. The arbitrators, however, gave an award on 2. 2. 1987 granting to the petitioner-respondent Rs. 17,74,858. 00 together with interest of Rs. 3,05,000. 00. They, however, gave no reasons to support their award. The petitioner-respondent filed O. S. No. 249 of 1987 in the court of Additional Chief Judge (Temporary), Hyderabad, under Section 14 (2) of the Arbitration Act (for short the Act ) to make the award rule of the court. The appellant filed O. S. No. 387 of 1987 re-numbered as O. P. No. 41 of 1988 under Section 33 of the Act, read with Section 30 thereof. The learned Additional Chief Judge, however, delivered an ex parte judgment on 8. 11. 1988 which was set aside, however, in I. A. No. 453 of 1988 at the instance of the appellant on 1. 2. 1989. A civil revision against the said order in I. A. No. 453 of 1988 was also dismissed on 24. 11. 1989. While the award thus, was pending in the City Civil Court, A. P. Amendment Act 1 of 1990 came into force with effect from 19. 2. 1990. The amendments in Sections 14 and 17 of the Act introduced a proviso to Section 14 (1) and three provisions to Section 17 of the Act. The relevant provisions after amendment read as follows : (1) 14. (1 ). When the arbitrator or umpire have made their award, they shall sign and shall give notice in writing to the parties of the making and signing thereof and of the amount of fees and charges payable in respect of the arbitration and award. Provided that the arbitrator or umpire shall give reasons for any award made under this Section and no award shall be valid unless reasons therefore are given as aforesaid. " (2) 17. "where the court sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award, the court shall, after the time for making an application to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow, and no appeal shall lie from such decree except on the ground that it is in excess of, or not otherwise in accordance with the award. Provided that where an award pending in the court at the commencement of the Arbitration (Andhra Pradesh Amendment) Act, 1990 or an award filed in the court, thereafter, does not contain reasons therefore as required by the proviso to Sub-section (1) of Section 14 the court shall not proceed to pronounce the judgment according to the award, but shall remit the award to the arbitrators or the umpire for giving reasons therefore as required by the said proviso and thereupon the arbitrator or umpire, shall within thirty days from the date of remittance of the award to them by the court give reasons for the award and file the same in the court. Provided further that on the application of the arbitrators or the umpire and for reasons to be recorded in writing, it shall be competent for the court, to extend the period of thirty days aforesaid for a further period not exceeding fifteen days : Provided also that where an award pending in the court as aforesaid does not contain any reasons and there is no possibility to remit the award to the arbitrator or panel of arbitrators or umpire due to their incapacity, negligence, refusal to act or death, the court shall set aside the award and direct t
















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