2004 Supreme(J&K) 233

IN THE HIGH COURT OF JAMMU AND KASHMIR AT JAMMU
Y.P. Nargotra, J.
R.B. Jodhamal - Appellant
Versus
State & Ors. - Respondent
Acquittal Appeal No. 104/1993, CMP No. 420/1993, CMP No. 388/1993 And CMP No. 392/1993
Decided On : 06 August, 2004

The arbitrator has no jurisdiction to travel beyond the scope of the agreement and ignore its express provisions while making the award.

Headnote:

ARBITRATION - AWARD - SETTING ASIDE - JURISDICTION OF ARBITRATOR - INTERPRETATION OF CONTRACT - ERROR OF LAW APPARENT ON THE FACE OF THE AWARD - SCOPE OF JUDICIAL REVIEW - CONTRACT ACT, 1872, SEC. 72 - ARBITRATION ACT, 1940, SECS. 30, 33.

Fact of the Case:

The petitioner, a forest lessee, entered into an agreement with the State of Jammu and Kashmir for extraction of timber. The agreement was extended several times, but the petitioner failed to complete the work within the extended period. The petitioner applied for further extension, but the State refused. The petitioner filed a writ petition in the High Court, which allowed the petition and directed the State to grant further extension. The State went in Letters Patent Appeal before the Division Bench, and during the pendency of the appeal, a settlement was arrived at between the parties pursuant to which the Government passed an order stating that no forest lessee would be allowed to work on the existing leases including those ordered by the courts up to December, 1984. Consequently, a fresh supplementary agreement was executed between the parties, extending the time for completion of the work up to 31.12.1984. The petitioner again failed to complete the work and handed back the forest to the State on 10.12.1984. The petitioner invoked the arbitration clause and filed an application under Section 20 of the Arbitration Act, 1940 for appointment of an arbitrator. The State did not file any objection and the High Court appointed an arbitrator. The arbitrator passed an award in favor of the petitioner, holding that the petitioner was entitled to compensation for the left over trees which could not be felled and removed within the time allowed under the agreement. The State filed an application under Section 30/33 of the Arbitration Act, challenging the award.

Finding of the Court:

The High Court held that the award of the arbitrator was without jurisdiction and liable to be set aside. The Court held that the arbitrator had traveled beyond the scope of the agreement by ignoring clause (1) of the supplementary agreement, which expressly provided that in case the petitioner failed to remove the timber after felling the remaining marked standing trees by 31.12.1984, those trees shall automatically deem to have reverted to the Government along with the timber, if any extracted and lying over in the forest, without any compensation whatsoever. The Court further held that the petitioner was not entitled to claim compensation for the left over trees on the ground that he was disabled because of unanticipated turn of events, as the parties had agreed that in case of failure to remove the timber within the stipulated time, the left over trees would automatically become the property of the State without any compensation.

Issues: 1. Whether the application under Section 30/33 of the Arbitration Act is within time? 2. Whether the arbitrator has misconducted himself as well as the proceedings for the reasons given in grounds (A), (b), (d), (g), (i) and (j)? 3. For the reasons stated in ground (c) is the award without application of mind? 4. Whether the petitioner can question the validity of the reference made to the Arbitrator at this stage? 5. Is the award not covered by any clause of the agreement? If so how and what is its effect? 6. Whether the arbitrator failed to consider subject matter of ground (f)? If so how and what is its effect? 7. Whether the amount of compensation awarded by the arbitrator and the interest allowed on the same was not permissible under law? If so how?

Ratio Decidendi: 1. An award can be set aside under Section 30 of the Arbitration Act if there is an error apparent on the face of the award, or if the arbitrator is found to have traveled out side the agreement. 2. An error apparent on the face of award would arise when the reasons given for decision by the Arbitrator either in the award or in any document incorporated with it, are based upon an erroneous legal proposition. 3. If a question of law is specifically referred and it becomes evident that the parties desired to have a decision on the specific question from the arbitrator about that rather than one from court, then the court will not interfere with the award of the arbitrator on the ground that there is an error of law apparent on the face of the award even if the view of law taken by the arbitrator does not accord with the view of the court. 4. The arbitrator is the sole Judge of the case of the parties having been chosen by them. His decision is final and binding on the parties and can be challenged only on the grounds specified in Section 30/33 of the Arbitration Act. 5. For deciding the dispute between parties it is within the domain of jurisdiction of the Arbitrator to interpret various clauses of the agreement. 6. If the interpretation of the various clauses of the agreement is within the jurisdiction of the Arbitrator it can be argued and in fact has been argued that where in exercise of the power interprets the various clauses of the agreement including the exemption clauses then where is the scope for the court to look into the various clauses of the agreement to say that Arbitrator has committed the error apparent on the fact of the award and has traveled outside the contract.

Final Decision: The High Court allowed the application of the State under Section 30/33 of the Arbitration Act and set aside the award of the arbitrator. The Court also dismissed the petitioner's application for making the award rule of the court and for rectification of the arithmetic mistake, as well as the reference of the arbitrator for making correction of the arithmetic mistake.