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2023 Supreme(P&H) 2686
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
AVNEESH JHINGAN, J.
Vinod Kumar – Appellant
Versus
Union of India & Anr. – Respondents
FAO NO. 7573 of 2015 (O&M)
Decided On : 15-03-2023
Mr. S. K. Choudhary, Advocate; For the Appellant
Mr. Vipul Aggarwal, Senior Panel Counsel for UOI.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 34 and Section 37 - Appeal against dismissal of objections to an arbitral award - The award was ruled non-speaking due to lack of reasoning contrary to required statutory provisions. The appellant contested the calculations of payments not aligning with contractual terms. (Paras 2, 5, 7, 8)
(B) Legal Principles - The need for reasoned awards in arbitration reflects fair consideration of disputes; non-compliance leads to potential annulment under Sections 34 and 37. (Paras 6.1, 6.2, 6.5)
Facts of the case:
The appellant was awarded a tender for vehicle supply with payment terms based on distance. A dispute on payment calculations arose, leading to arbitration, which resulted in an award rejecting the appellant's claim. (Paras 2, 3)
Findings of Court:
The court identified that the arbitrator failed to provide necessary reasoning justifying the award, thus rendering it non-compliant with statutory requirements. (Paras 8, 9)
Issues: Whether the arbitrator's failure to provide reasons invalidates the award and whether the court rightly permitted the appeal. (Para 9)
Ratio Decidendi: The court emphasized the statutory obligation for arbitrators to justify their awards with reasons unless explicitly waived. Non-compliance with this requirement constitutes a basis for setting aside the award. (Paras 6, 8)
Result: Appeal allowed; the impugned order and award are set aside.
| Table of Content |
|---|
| 1. petitioner's tender and dispute background. (Para 1 , 2) |
| 2. appellant's claim of non-payment and non-speaking award. (Para 3 , 4) |
| 3. patent illegality as a ground for interference. (Para 5) |
| 4. requirement for awards to state reasons. (Para 6 , 7 , 8) |
| 5. appeal allowed; order and award set aside. (Para 9 , 10) |
JUDGMENT
Mr. Avneesh Jhingan, J. (Oral)
This appeal under section 37 of the Arbitration and Conciliation Act, 1996 (for short, 'the Act') is filed aggrieved of dismissal of objections under Section 34 of the Act.
2. The brief facts are that the petitioner was allotted a tender for supply of heavy vehicles and the payment was to be made on kilometer basis. There was a dispute with regard to the calculations and the amount to be paid as per para No. 9 of the terms and conditions of the contract. To decide the dispute, sole arbitrator was appointed and the proceedings culminated in award dated 21.3.2011 whereby the claim of the appellant was rejected. The objections filed by the appellant were dismissed on 10.2.2015, hence the present appeal.
3. Learned counsel for the appellant submits that for the vehicle hired for outstation duties payment was to be made for 80 kilometers/eight hours and kilometers beyond 80 kilometers were to be paid extra. He further submits that the amount was not paid in consonance with para No. 9 of the terms and conditions. The contention is that the arbitral award is non-speaking.
4. Learned counsel for the respondent defends the impugned order and the award.
5. There is no quarrel on the proposition that one of the ground for interference under Sections 34 and 37 of the Act is patent illegality. The contravention of a substantive law including the provisions of the Act brings the case within the ambit of patent illegality.
6. It would be gainful to cite following decisions.
6.1 In Tamilnadu Electricity Board v. M/s Bridge Tunnel Constructions , 1997 (4) SCC 121 , the Supreme Court observed:
"The Parliament has expressed the legislative judgement that the award shall state reasons upon which it is based unless parties have agreed otherwise or the award is covered on a greed terms under S ection 30 of the new Act.
Thus, the law on the award, as governed by the new Act, is other way about of the pre-existing law; it mandates that the award should state the reasons upon which it is based. In other words, unless (a) the parties have agreed that no reasons are to be given or (b) the award is an arbitral award on agreed terms under Section 30 of the new Act, the award should state the reasons in support of determination of the liability/non-liability. Thereby, legislature has not accepted the ratio of the Constitution Bench in the Chokhamal Contractor's case that the award, being in the private law field, need not be a speaking award even where the award relates to the contact of private parties or between person and the Government or public sector undertakings. The principle is the same, namely the award is governed by Section 31(3)."
6.2. The Supreme Court in Oil & Natural Gas Corporation Ltd. v. SAW Pipes Ltd. , 2003 (5) SCC 705 held:
"Similarly, if the award is non-speaking one and is in violation of Section 31(3), can such award be set aside? In our view, reading Section 34 conjointly with other provisions of the Act, it appears that the legislative intent could not be that if the award is in contravention of the provisions of the Act, still however, it could not be set aside by the court. If it is held that such award could not be interfered, it would be contrary to basic concept of justice. If the arbitral tribunal has not followed the mandatory procedure prescribed under the Act, it would mean that it has acted beyond its jurisdiction and thereby the award would be patently illegal which could be set aside under Section 34."
6.3 In M/s Som Datt Builders Ltd. v. State of Kerala , 2009 (10) SCC 259 , the Supreme Court held:
"25. The requirement of reasons in support of the award under S
