2001 (1) TMI 902 - SC - Indian Laws

Power of Court to set aside arbitration award - Held that - Appeal dismissed. Having regard to the facts and circumstances of the case we consider it just and appropriate to award future interest at the rate of 12 per cent per annum from the date of decree till payment. The award of interest from 28-9-1982 to 10-1-1985 was justified by the High Court in the impugned judgment. The contention that there was no basis for choosing the date 28-9-1982 is answered in the judgment of the High Court itself stating that it was on 28-9-1982 that the trust repudiated the contract and forfeited the deposit made by the company and that the Arbitrator entered into reference on 10-1-1985. We agree with the reasons recorded by the High Court in this regard. Further as already noticed above the award is made in lump sum. As rightly observed by the High Court unless there appears to be a mistake on the face of the award and the documents appended or incorporated thereto which form part of the award it cannot be set aside even with respect to interest part of it. In this view of the matter we hold that the company is entitled for interest at the rate of 18 per cent per annum from 28-9-1982 to 10-1-1985 and future interest at the rate of 12 per cent per annum from the date of decree till payment.

Summary

Issues Involved:
1. Violation of principles of natural justice.
2. Scope of arbitration agreement and claims.
3. Arbitrator's award being arbitrary or unsustainable.
4. Award of interest pendente lite and future interest.

Detailed Analysis:

1. Violation of Principles of Natural Justice:
The trust argued that the Arbitrator violated natural justice principles by accepting documents without notifying the trust after closing the proceedings. The High Court found that adequate opportunities were given to both parties at each stage, and this argument was abandoned by the trust. The Supreme Court upheld this finding, noting that the parties did not lead any oral evidence and relied on the documents placed before the Arbitrator. Thus, the contention of violation of natural justice was rejected.

2. Scope of Arbitration Agreement and Claims:
The arbitration clause in the agreement was broad enough to cover all disputes between the parties. The trust contended that certain claims (Nos. 2 and 7) were beyond the scope of the agreement. However, the Arbitrator awarded a lump sum amount of Rs. 8,51,315 against a total claim of Rs. 12,93,260, making it impossible to determine if these specific claims were included. The Supreme Court held that the award was within the scope of the arbitration clause and the terms of the contract, rejecting the argument that the award was beyond the scope or arbitrary.

3. Arbitrator's Award Being Arbitrary or Unsustainable:
The Supreme Court reiterated that an Arbitrator's award is binding and can only be set aside under specific circumstances outlined in sections 30 and 33 of the Arbitration Act, 1940. The Court emphasized that it is not open to speculate on the reasons for a non-reasoned award or to investigate the Arbitrator's mental process. The award was found to be neither arbitrary nor unsustainable, and the trust's contention was dismissed.

4. Award of Interest Pendente Lite and Future Interest:
The High Court denied interest pendente lite based on a precedent, which was later overruled by a Constitution Bench. The Supreme Court agreed that the Arbitrator had the power to award such interest but upheld the High Court's denial due to the lack of a specific claim or argument for it. However, the Supreme Court found no valid reason to deny future interest and awarded it at 12% per annum from the date of the decree until payment. The award of interest from 28-9-1982 to 10-1-1985 at 18% per annum was justified, as the trust repudiated the contract on the former date.

Conclusion:
The Supreme Court dismissed Civil Appeal No. 3683 of 1996 filed by the trust, finding no merit in the arguments presented. Civil Appeal No. 4144 of 1996 filed by the company was allowed to the extent of awarding future interest, modifying the High Court's order accordingly. Each party was ordered to bear its own costs.