If the Arbitrator has not recorded any reasons in support of the award, and the same was disapproved

Chandigarh Construction Co. Pvt. Ltd.  v  State of Punjab & Anr., CIVIL APPEAL NOS.867­870 OF 2013 – February 14, 2020.

CORAM: Two judge bench comprising of Justice R. BANUMATHI and Justice A.S. BOPANNA

The appellant and the State of Punjab that is the respondent herein entered into a contract for construction of Sutlej Yamuna Link Canal (Punjab). During the execution of the said contract the scope of the work was considerably increased and the payment required for the said project was also increased which led to the arbitration dispute by the opposition party. The arbitrator ordered the respondent herein to pay the amount claimed by the claimant with the required interest rate. The respondent therefore filed objection before the learned Sub-Judge who accepted the objections to the extent of rejection of Claim No.1 and reduced the interest. The respondent continued to remain aggrieved insofar as the non-interference with regard to other claims and thus filed appeal before the District Judge. The learned District Judge rejected the cross appeal filed by the appellant and allowed the appeal filed by the respondent and set aside the amount awarded under other claims. The appellants thereafter filed appeal before the High Court which again rejected the remaining claim except Claim No.1. Thus the appellant is before this court for the appeal.

The counsel for the claimant contended that the First Appellate Court and the High Court were not justified in rejecting the award passed by the learned Arbitrator. According to the Note 6 in the schedule of work which is a part of the contract, the extra or other items of work shall be paid at the rate worked out on the basis of the relevant Punjab Common Schedule of Rates Basis Plus Sanctioned Premium.

The counsel for the appellant relied in the case of Indian Oil Corporation vs. Indian Carbon Ltd. (1988) 3 SCC 36 to contend that if the reason as to how the Arbitrator has drawn the inference is apparent the same would be sufficient. The case of  Ispat Engineering and Foundry Works, B.S. City, Bokaro vs. Steel Authority of India Ltd. B.S. City Bokaro (2001) 6 SCC 347 is relied, wherein it is held that in the event, however, there are reasons, interference would still not be available unless of course, there exist a total perversity in the Award or the judgment is based on wrong proposition of law. The decision in the case of D.C.M Ltd. vs. Municipal Corporation of Delhi & Anr. (1997) 7 SCC 123 is relied upon to contend that even in case of a non-speaking Award if the Arbitrator has proceeded without overlooking any term of the contract, the same cannot be considered as an error apparent on the face of the Award.  The counsel also referred to the decision of the High Court of Delhi in the case of M/s Naraindas R. Israni vs.Union of India DRJ (1993) 25 to point out that in respect of an agreement containing a similar clause the learned Judge had held that the learned Arbitrator is not required to give detailed reasons like a Civil Court but what is expected of the Arbitrator is that he must give out the trend of his thought process and it is not necessary for the Arbitrator to give any arithmetic computation.

The counsel for the respondent contended that the learned Arbitrator has not indicated any reason for arriving at the conclusion that the claim made is admissible. According to Clause 63 of the contract all the awards shall be in writing and in case of awards amounting to Rs.1 lakh and above shall state the reason for the amount awarded. When the contract between the parties is explicit with regard to award, it shall be passed in such a manner alone would be sustained. In this light it is clear in this case that the award does not indicate any reason. In this view the award shall not be sustained.

The case Indian Oil Corporation Ltd. (supra) relied upon by the learned senior counsel for the claimant that this Court in the said decision has also held that where an authority makes an order in exercise of a quasi-­judicial function it must record its reasons in support of the order it makes. Also the cases Raipur Development Authority & Ors. vs. M/s Chokhamal Contractors & Ors. (1989) 2 SCC 721, Gora Lal vs. Union of India (2003) 12 SCC 459 were referred by the counsel.

The court observed that there is no serious dispute between the parties with regard to the contract for construction. The issue according to this court is whether the learned Arbitrator had appropriately considered the matter in its correct perspective and in that light whether the award of premium would be justified and the manner of consideration by the learned Arbitrator without assigning reasons for his Award is sustainable. This court fully concurred with the consideration made by the First Appellant Court as also the High Court to arrive at the conclusion of the claim put forth by the claimant. The court has taken note of Clause 39 of the Contract Agreement, it cannot be considered as a statutory limitation or bar for the claim in all circumstances. The clause has prescribed a method by which the claim is to be put forth in the statement every month. The said requirement will have to be construed as being put in the agreement so as to ensure that the additional work has actually been done, the claim is put forth along with details so that baseless claim is not made at a distant point in time when it will not be possible to determine. It would not be just and proper to deny such claim only on the ground that it had not been indicated strictly in the manner as provided in the contract specially keeping in view the nature of work undertaken.

“The unreasoned award on being set aside by the First Appellate Court, the matter in a normal circumstance ought to have been remitted to the learned Arbitrator to redo the proceedings afresh in accordance with law. Such course ought to have been adopted by us as well. We had proceeded to examine the matter with regard to the validity of the claim keeping in view the time lapse and since the validity of the claim was to be taken note at the appropriate premium if not at the percentage of premium.”

Therefore, appeal allowed.

View/Download the Judgment: Chandigarh Construction Co. Pvt. Ltd. v State of Punjab & Anr.

– PRIYADHARSHINI R

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