1999 (4) TMI 586 - SC - Companies Law

Whether the award is incomplete? Whether the award is in excess of the jurisdiction ? If so, what is its effect ? Whether the award is otherwise also invalid and liable to be set aside ? Whether the award sufferes from legal misconduct on the part of the arbitration ? Held that - The dispute before the arbitrators, therefore, clearly related to the interpretation of the terms of the contract. The said contract was being read by the parties differently. The arbitrators were. therefore, clearly called upon to construe or interpret the terms of the contract. The decision thereon, even if it be erroneous, cannot be said to be without jurisdiction. It cannot be said that the award showed that there was an error of jurisdiction even though there may have been an error in the exercise of jurisdiciton by the arbitrators. present case it is not possible to say that the arbitrator in the present case travelled outside the bounds of the contract. Correspondence exchanged between the parties prior to the making of the reference shows that the arbitrators were called upon to construe the contract in order to determine whether the contractor was entitle to claim revision of rates and if so what should be the revised rates. The construction placed on the contract by the contractor cannot be said to an implausible one. Even if the arbitrators construed the terms of the contract incorrectly it cannot be said that the award was in excess of their jurisdiction. Their jurisdiction clearly was to construe the terms of the contract and their decision thereon is final and binding on the parties. Thus the High Court was right in not setting aside the award relating to the decision of the arbitrators in respect of dispute No. 1,2 and 4 in the present case.

Summary

Issues Involved:
1. Jurisdiction of arbitrators to revise rates based on overall contract value exceeding 20%.
2. Validity of non-speaking award.
3. Award of interest by arbitrators.

Issue-wise Detailed Analysis:

1. Jurisdiction of Arbitrators to Revise Rates:
The primary contention was whether the arbitrators had jurisdiction to revise rates when the overall contract value exceeded the deviation limit of 20%. The appellant argued that Clause 12A of the contract allowed for rate revision only when individual items exceeded the deviation limit, not the overall contract value. The respondent contended that the contract permitted rate revision if the total contract value increased by more than 20%, based on Clause 3.2(e)(ii). The arbitrators were called upon to interpret the contract terms, and their decision, even if erroneous, was within their jurisdiction. The Supreme Court upheld the arbitrators' jurisdiction, stating that the interpretation of contract terms was within their purview and their award could not be set aside merely because the court might have interpreted the contract differently.

2. Validity of Non-Speaking Award:
The arbitrators provided a non-speaking award, which means they did not provide reasons for their decisions. The appellant challenged this, arguing that the arbitrators had exceeded their jurisdiction. The Supreme Court held that non-speaking awards are valid as long as the arbitrators act within their jurisdiction. The Court emphasized that arbitrators' decisions on contract interpretation are binding unless they act outside the contract's terms. The Court cited various precedents, including "Tarapore and Company v. Cochin Shipyard Ltd." and "Sudersan Trading Company v. Government of Kerala," to support the principle that errors in contract interpretation by arbitrators do not amount to jurisdictional errors.

3. Award of Interest by Arbitrators:
The appellant contended that the arbitrators had no authority to award interest as no specific claim for interest was made. The respondent argued that the arbitrators had implied authority to award interest. The Supreme Court referred to its decisions in "Secretary, Irrigation Department, Government of Orissa v. G.C. Roy" and "State of Orissa v. B.N. Agarwalla," which established that arbitrators could award interest. Consequently, the Court found no merit in the appellant's contention and upheld the award of interest.

Conclusion:
The Supreme Court dismissed the appeal, affirming the arbitrators' jurisdiction to interpret the contract and revise rates based on overall contract value exceeding 20%. The non-speaking award was held valid, and the arbitrators' decision to award interest was upheld. The parties were ordered to bear their own costs.