2001 (7) TMI 1182 - SC - Companies Law

Whether or not the Arbitrator has committed an error of law? Held that - Appeal allowed. Presently in the contextual facts, there is no evidence on record that the umpire has overstepped his jurisdiction or has travelled beyond the agreement and it is in this perspective that the court ought not to have entertained the objection and set aside the award as passed by the chosen forum of the parties. The High Court thus was in manifest error in entertaining the appeal and setting aside the award. The order as passed by the High Court cannot be sustained and the law being well settled on the score should not have been misread and misapplied by the High Court.

Issues Involved:
1. Interference of the court under sections 30 and 33 of the Arbitration Act, 1940.
2. Validity and finality of a non-speaking arbitration award.
3. Jurisdiction of the court in reappraising evidence and setting aside an arbitration award.

Issue-wise Detailed Analysis:

1. Interference of the Court under Sections 30 and 33 of the Arbitration Act, 1940:
The appeal concerns the court's interference under sections 30 and 33 of the repealed Arbitration Act, 1940. The award in question, a non-speaking award by a former High Court Judge acting as an Umpire, was made a rule of court by a judgment dated 20-4-1995, rejecting the petition under sections 30 and 33. The High Court, however, set aside the award, deeming it invalid under section 30(a), leading to this special leave petition.

2. Validity and Finality of a Non-Speaking Arbitration Award:
Section 30 of the Act is restrictive, mandating that an award shall not be set aside except for specific reasons: misconduct by the Arbitrator or Umpire, the award being made after the arbitration proceedings became invalid, or the award being improperly procured or otherwise invalid. The law is well settled that reappraisal of evidence by the court is not permissible. This principle was reinforced by various decisions, including Arosan Enterprises Ltd. v. Union of India, which stated that the court cannot interfere with an award unless there is a total perversity or a wrong proposition of law. The court cannot substitute its evaluation for that of the Arbitrator.

3. Jurisdiction of the Court in Reappraising Evidence and Setting Aside an Arbitration Award:
The award of the Arbitrator is ordinarily final and conclusive unless a contrary intention is disclosed in the agreement. As stated in Union of India v. A.L. Ralliaram, the decision of the Arbitrator is binding except in cases of an error of law on the face of it. The court cannot investigate the merits of the case or examine the evidence to find errors. This principle was reiterated in Jivraj Bhai U.S. v. Chintaman Rao Balaji, where it was held that the court cannot speculate on the Arbitrator's mental process if no reasons are given.

Factual Matrix:
The appellant invoked the arbitration clause due to certain disputes, leading to an ex parte award of Rs. 2,76,000 by the Umpire. This award was challenged and set aside by the Civil Court, which remitted the matter back to the Umpire. The Umpire resigned due to ill health, and a new Umpire was appointed by the Civil Court. The new Umpire passed an award of Rs. 2,44,000, which the Civil Court made a rule of court, including interest for different periods. The High Court, however, set aside the award, deeming it invalid under section 30(c), stating that the Umpire could not have awarded any amount to the plaintiff and that the defendant was entitled to a sum for risk purchase differential.

Arguments and Court's Decision:
The appellant argued that the High Court lacked authority to interfere with the award, relying on Arosan Enterprises Ltd. The respondent contended, based on State of Andhra Pradesh v. R.V. Rayanim, that the award could be set aside for errors apparent on the face of the award or if the Arbitrator exceeded his jurisdiction. However, the court found that the judgment in R.V. Rayanim was misread and not applicable since it concerned a speaking award, whereas the present case involved a non-speaking award.

The court also distinguished the present case from V.G. George v. Indian Rare Earths Ltd., where the Arbitrator had given reasons for the award, and Associated Engineering Co. v. Government of Andhra Pradesh, where the Arbitrator had acted beyond the contract terms. In the present case, there was no evidence that the Umpire overstepped his jurisdiction or went beyond the agreement.

Conclusion:
The High Court erred in setting aside the award. The appeal was allowed, and the order of the Ist Sub-Divisional Judge, Bokaro, was restored. The law being well settled, the High Court should not have misread and misapplied it. The finality of the Arbitrator's decision was upheld, and there was no order as to costs.

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