2014 (10) TMI 550 - SC - Indian Laws

Validity of Arbitral award - High court set aside order holding that Arbitrator had not recorded his findings as required under Clause 70 of the General Conditions of Contract - Held that - Clause 70 makes a clear distinction between findings on each individual item of dispute on the one hand and the sum, if any, awarded in regard to the same on the other. That the Arbitrator had made his award in regard to each item of dispute raised by the appellant before it, is evident from a reading of the award. The question is whether the Arbitrator had recorded his findings on each such items. The High Court has, as noted above, answered that question in the negative; and set aside the award holding that the expression findings must include the reasons for the ultimate conclusion arrived at by the Arbitrator. That view was assailed by learned counsel for the appellant who contended that the expression findings should not imply the process of reasoning adopted by the Arbitrator for recording his conclusions. A finding howsoever cryptic would, according to the submission of the learned counsel for the appellant, satisfy the requirement of Clause 70 for otherwise the Clause would have been differently worded so as to make it mandatory for the Arbitrator to make what is called a speaking award giving reasons for the conclusions arrived at by him. Court declared that Government and their instrumentalities should - as a matter of policy and public interest - if not as a compulsion of law, ensure that whenever they enter into an agreement for resolution of disputes by way of private arbitrations, the requirement of speaking awards is expressly stipulated and ensured. Any laxity in that behalf might lend itself and perhaps justify the legitimate criticism that government failed to provide against possible prejudice to public interest. The predominant use of the expression is in relation to determination by a Judge, Jury, Administrative Agency, Arbitrator or a Referee. The determination is described either as a finding, decision or conclusion; upon disputed facts. It is also described as a determination of a fact supported by evidence on the record. It is interchangeably used as a conclusion or decision a term used by the legal profession and by Courts. In Build India Construction System (2002 (5) TMI 842 - SUPREME COURT) this Court noted in no uncertain terms that the validity of the award had not been specifically questioned on the ground of its having been given in breach of any obligation of the Arbitrator to give reasons as spelled out by the arbitration clause. The judgment of the learned Single Judge did not show, observed this Court, that such a plea was urged before him. The objection petition filed to challenge the award was also found by this Court to be vague and general hence insufficient to give rise to an effective challenge to the award on the ground of it being non-speaking. The plea regarding the Award being non-speaking was raised for the first time before the Division bench in appeal. This Court in that backdrop held that the Division Bench fell in error in entertaining and upholding such a plea at such a late stage. Consequent upon the orders passed by the High Court the Arbitrator shall conclude the proceedings in terms of the provisions of the Arbitration Act of 1940 expeditiously. We further make it clear that in case the Arbitrator already nominated is for any reason unable to take up the assignment the respondents shall within six weeks from today appoint a substitute Arbitrator who shall then enter upon the reference and conclude the proceedings as early as possible. - Decided against appellant.

Issues Involved:
1. Validity of a non-speaking arbitral award under Clause 70 of the General Conditions of Contract.
2. Interpretation of the term "findings" in Clause 70.
3. Applicability of the Arbitration and Conciliation Act, 1996 versus the Arbitration Act, 1940.
4. Directions for the appointment of a new arbitrator and expeditious conclusion of proceedings.

Detailed Analysis:

1. Validity of a Non-Speaking Arbitral Award:
The Supreme Court examined whether a non-speaking arbitral award, which did not provide reasons for the arbitrator's conclusions, was valid under Clause 70 of the General Conditions of Contract. The High Court of Delhi had set aside the award on the grounds that the arbitrator failed to record his "findings" as required. The Supreme Court affirmed the High Court's view, stating that the term "findings" implies more than just conclusions; it necessitates the inclusion of reasons supporting those conclusions. This interpretation aligns with the Court's previous decisions, such as in Gora Lal v. Union of India, where it was held that findings must include reasons.

2. Interpretation of the Term "Findings":
The Court delved into the meaning of "findings" in Clause 70, which requires the arbitrator to indicate his findings along with sums awarded on each item of dispute. The Court referenced various dictionaries and legal lexicons, concluding that "findings" encompass both the ultimate conclusions and the reasoning process leading to those conclusions. The Court emphasized that a finding, whether of fact or law, must be supported by reasons to demonstrate the application of the arbitrator's mind. This ensures transparency and accountability in the adjudicatory process.

3. Applicability of the Arbitration and Conciliation Act, 1996 versus the Arbitration Act, 1940:
The appellant contended that the High Court erred in directing the arbitrator to make an award under the Arbitration and Conciliation Act, 1996, since the proceedings were conducted under the old Arbitration Act, 1940. The respondent did not dispute this position, and the Supreme Court clarified that the arbitrator should conduct the proceedings under the provisions of the Arbitration Act, 1940.

4. Directions for the Appointment of a New Arbitrator and Expeditious Conclusion of Proceedings:
The appellant highlighted the delay in the proceedings and requested the Court to direct the arbitrator to expedite the process. The Court noted that the respondents had already appointed a new arbitrator, Shri Dharma Sheel, to replace the previous arbitrators who were unable to continue. The Court directed that if the newly appointed arbitrator is also unable to take up the assignment, the respondents must appoint another arbitrator within six weeks. The arbitrator is to conclude the proceedings as early as possible, ensuring expeditious resolution of the dispute.

Conclusion:
The Supreme Court dismissed the appeal, upholding the High Court's decision to set aside the non-speaking arbitral award and remitting the matter for fresh determination. The Court emphasized the necessity for arbitrators to provide reasons for their findings, aligning with the principles of transparency and accountability in arbitration. The proceedings are to be conducted under the Arbitration Act, 1940, with directions for the expeditious appointment of a new arbitrator if required.

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