2005 (10) TMI 559 - SC - Indian Laws

Summary

Issues Involved:
1. Bias of the Umpire
2. Jurisdiction of the Umpire over claims not referred to arbitration
3. Requirement for a reasoned award
4. Misconduct by the Umpire in ignoring contract terms
5. Excessive interest awarded

Detailed Analysis:

1. Bias of the Umpire:
The appellants argued that the Umpire was biased as he regularly appeared for the respondent in arbitration matters. They cited the case of Ranjit Thakur vs. Union of India, which emphasizes the test of real likelihood of bias. However, the court found no substance in this claim, noting that the appellants had previously failed in their attempt to remove the Umpire for bias, and no concrete evidence was provided to substantiate the allegations.

2. Jurisdiction of the Umpire Over Claims Not Referred to Arbitration:
The appellants contended that the Umpire exceeded his jurisdiction by awarding claims not referred to arbitration. The court noted that the original applications referred to 28 claims, but the Umpire awarded 39 claims. The court emphasized that claims not included in the original applications could not be arbitrated upon. This matter was referred back to the Umpire to determine if the 39 claims were part of the original applications.

3. Requirement for a Reasoned Award:
The appellants argued that the Umpire was required to provide a reasoned award, especially since one of the arbitrators had given a reasoned award. The court held that under the Arbitration Act 1940, unless the contract required it, reasons were not necessary. The court cited the case of Raipur Development Authority vs. M/s Chokhamal Contractors, affirming that an award cannot be set aside merely because it is non-speaking. The court clarified that the newly appointed Umpire need not provide a reasoned award.

4. Misconduct by the Umpire in Ignoring Contract Terms:
The appellants argued that the Umpire misconducted himself by ignoring the contract terms and awarding contrary to them. The court reviewed several contract clauses and claims, including Claim No. 2 for chisel dressed face stones and Claim No. 26 for increased minimum labor wages. The court found these claims to be contrary to the contract terms. The court cited the case of Bharat Coking Coal Ltd. vs. L. K. Ahuja & Co., emphasizing that an arbitrator cannot award contrary to the contract terms. The court decided to set aside the award and refer the matter back to an independent Umpire to ensure that claims contrary to the contract terms are not allowed.

5. Excessive Interest Awarded:
The appellants argued that the interest awarded was excessively high. The court did not specifically address this issue in detail but left the question of interest open to be decided by the newly appointed Umpire in accordance with the law.

Conclusion:
The court set aside the award and appointed Justice N. Santosh Hegde as the new Umpire. The Umpire is to decide based on the materials already placed before the previous Arbitrators and Umpire, ensuring that only claims covered by the original applications are considered and that the terms of the contract are adhered to. The Umpire is requested to provide the award within four months, and the Arbitration Act 1940 will continue to apply. The appeals were disposed of with no order as to costs.