2001 (7) TMI 1169 - SC - Companies Law

Whether the appellant, on the evidence on record, is entitled to the price of hard coke supplied by it to the respondent at the enhanced rate? Held that - The Division Bench of the High Court erred in setting aside the award passed by the arbitrator which was made rule of the Court by the Single Judge. As under the agreement, a specified quantity of the commodity was to be supplied by the appellant to the respondent within the period specified in the agreement and the appellant, while submitting its tender, had made it clear that any subsequent upward change in price of the commodity will entitle it to claim at such rate and subsequently, the price escalation clause was modified in a manner not relevant for deciding the dispute referred to the arbitrator, the question of the price escalation clause having prospective effect was of no consequence. If the claimant was entitled to the enhanced price, the respondent was liable to pay the same for the entire stock supplied. If the position was otherwise, the claim of the appellant was to be rejected in toto.

Issues Involved:
1. Entitlement to the enhanced price of hard coke.
2. Validity of the arbitrator's award.
3. Jurisdiction of the court to interfere with the arbitrator's award.

Issue-wise Detailed Analysis:

1. Entitlement to the Enhanced Price of Hard Coke:
The primary controversy was whether the appellant was entitled to an enhanced price for hard coke supplied to the respondent. The appellant's tender included a price escalation clause, which stated that any upward revision in the prices of pig iron, hard coke, and ferro-silicon would correspondingly affect their prices. The respondent accepted the tender with modifications, specifically maintaining the escalation clause for premium hard coke and pig iron. The appellant submitted bills for the enhanced price following a price escalation announced on 14-2-1981. The respondent denied liability for the enhanced price of hard coke, leading to a dispute.

2. Validity of the Arbitrator's Award:
The arbitrator, after considering the evidence, accepted the appellant's claim for the enhanced price of hard coke. The respondent objected, but a Single Judge of the High Court upheld the arbitrator's award. The Division Bench of the High Court later reversed this decision, claiming there was no evidence supporting the arbitrator's award for the escalated price. The Supreme Court, however, emphasized that the arbitrator's award should not be lightly interfered with, as the arbitrator is a judge appointed by the parties. The Court noted that the arbitrator's view was plausible and did not suffer from any manifest error or perversity. Therefore, the Single Judge was correct in making the award the rule of the court.

3. Jurisdiction of the Court to Interfere with the Arbitrator's Award:
The Supreme Court highlighted the limited scope for court interference with an arbitrator's award under Section 30 of the Arbitration Act, 1940. The grounds for setting aside an award include misconduct by the arbitrator, the award being made after the arbitration proceedings became invalid, or the award being improperly procured or otherwise invalid. The Court reiterated that an arbitrator's decision on a specific question of law submitted to him is binding, even if erroneous. The Division Bench exceeded its jurisdiction by reinterpreting the agreement and the facts, which is not permissible. The arbitrator's award should stand unless it is shown to have a manifest error or to be wholly improbable or perverse.

Conclusion:
The Supreme Court concluded that the Division Bench erred in setting aside the arbitrator's award. The judgment of the Division Bench was set aside, and the order of the Single Judge, which made the arbitrator's award the rule of the court, was confirmed. The appeal was allowed, and no costs were awarded.

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