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TMI Blog2019 (12) TMI 842X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of compensation for the losses suffered due to unproductive use of machineries. 3. Brief facts of the case are that a contract was entered into between DCM Shriram Aqua Foods Limited (hereinafter referred to as 'DCM' in short) and M/s. Crompton Greaves Limited (hereinafter referred to as "CGL" in short) for an aquaculture unit to be set up by such Principal, namely, DCM. CGL invited tenders for carrying out certain works for construction of ponds, channels, drains and associated works. The appellant M/s Dyna Technologies Pvt. Ltd. gave its proposal, estimate and quotation for carrying out the work. Thereafter, the respondent CGL placed a letter of intent dated 25th July, 1994, relevant portions of which are as under: "10. In the event that you are forced to keep your equipment and manpower idle due to non availability of work fronts due to reasons attributable to DCM or due to legal disturbances not connected with you, you shall be compensated as follows: (i) Maximum seven days of stoppage of work without any compensation. (ii) CGL reserves the right to advice you to demobilize partially or fully in lieu of paying compensation for such delays. Under such circumstance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant company claimed compensation for such premature termination of the contract and ultimately the dispute was referred to Arbitral Tribunal consisting of three Arbitrators. 7. The appellant-claimant made the following claims: (1) Losses due to idle charges. (2) Losses due to unproductivity of the men and machineries which could not work due to hindrances. (3) Loss of profit as the contract got dissolved and (4) Interest on the above claims and (5) Costs. 8. The aforementioned claims are listed in the statement of claims totalling to Rs. 54,21,170.45 initially on 21st June, 1997 and revised to Rs. 53,83,980.45 on 5th July, 1997. 9. The following is a summary of the final claims: (1) Idle Charges for machineries and demobilisation as approved by Respondent ...Rs. 4,18,551.50 (2) Losses due to unproductive use of machineries ...Rs. 45,85,286.00 (3) Loss of profit ...Rs. 20,89,925.00 (4) And (5) Interest and Costs ... to be assessed Rs. 70,93,763.33 Deduct Payment already received Rs. 17,09,782.88 Balance due Rs. 53,83,980.45 + Interest and costs 10. It may be relevant to note at this stage that so far as claim no. 1 in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible on the available materials. The arbitrator is a Judge of choice of parties and this Court cannot set aside unless it suffers from error apparent on the face of the record. It cannot be set aside even if the Court can come to different conclusion on the same facts. The learned counsel for the petitioner has not pointed out any such ground. It cannot also be said that the Award is perverse or has error apparent on the face of the record. Therefore, the Award passed by the Arbitrator is not illegal or invalid and cannot be set aside. Therefore, the petition is dismissed." (emphasis supplied) 14. Aggrieved by the aforesaid decision of the learned Single Judge, the respondent appealed before the Division Bench in O.S.A No. 234 of 2001. As aforementioned, the High Court vide impugned order partly allowed the appeal and set aside the award of the Tribunal relating to claim no. 2. The High Court was of the opinion that the award does not contain sufficient reasons and the statements contained in paragraph 3.1 (a) to 3.1 (g) of the award does not provide any reasons, discussions or conclusion. The High Court has observed in the following manner: "18. It is of course true that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly exclude the possibility of payment of any compensation on account of premature termination of the contract as envisaged in para C. 2(a)." 16. Thereafter, the High Court proceeded further to note that the arbitral proceeding was beyond the competence of the Tribunal by considering the conditions under the work order. 17. Learned counsel for the appellant submits that the Arbitral Tribunal comprising of three Arbitrators has looked into the entire material available on record and recorded a finding in reference to claim no. 2 (losses suffered due to unproductive use of machineries) based on the case set up by the parties taking note of Section 73 of the Indian Contract Act, 1872 (hereinafter "Contract Act") and relying on the evidence including appraisal of the log books approved by the respondent and held that actual losses/expenses were incurred by the appellant. In the given circumstances it was not open for the High Court in appeal to reappraise and substitute its own view in contravention of the clause of the agreement pursuant to which the arbitral dispute was raised and a finding came to be recorded in acceptance of the claim with regard to the losses suffered by the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss which has been suffered by it and established before the Arbitral Tribunal and which the respondent is under an obligation to reimburse. In the given circumstances, claim no. 2 which has been set aside by the High Court needs interference by this Court. The learned counsel in support has placed reliance on the judgment of this Court in K.N. Sathyapalan (Dead) by Lrs. v. State of Kerala, (2007) 13 SCC 43. 21. Per contra, learned counsel for the respondent, while supporting the findings recorded by the High Court in the impugned judgment, submits that the claim which has been disallowed by the High Court in the impugned judgment is basically a claim for payment of compensation or damages on account of premature termination of contract and neither the Arbitral Tribunal nor the learned Single Judge of the High Court has considered/examined the terms of the contract in appreciating the right of the claimant to claim compensation of damages and the corresponding liability of the respondent to pay/settle the claim. According to him, as per the terms of contract, no such compensation was payable. 22. Learned counsel further submits that it is well settled that the Arbitral Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or (b) the Court finds that- (i) the subject matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) the arbitral award is in conflict with the public policy of India. Explanation. -Without prejudice to the generality of Sub-clause (ii) it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act. 28. Having established the basic jurisprudence behind Section 34 of the Arbitration Act, we must focus on the analysis of the case. The primary contention of the learned counsel appearing on behalf of the appellant is that the award by the learned Tribunal was perverse for want of reasons. The necessity of providing reasons has been provided under Section 31 of the Arbitration Act, which reads as under: "31. Form and contents of arbitral award.... (3) The arbitral award shall state the reasons upon which it is based, unless- (a) the parties have agreed that no reasons are to be given, or (b) the award is an arbitral award on agreed terms under section 30." (emphasis supplied) Under the UNCITRAL Model Law the aforesaid provision is provided as under: "(2) The award shall state the reasons upon which it is based, unless the parties have agreed that no reasons are to be given or the award is an award on agreed terms under article 30." 29. Similar to the position under the Model Law, India also adopts a default rule to provide for reasons unless the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Legislature, and accordingly Section 31(3) has been enacted in the Arbitration Act. This Court in Som Datt Builders Ltd. v. State of Kerala, (2009) 4 ARB LR 13 SC, a Division Bench of this Court has indicated that passing of a reasoned award is not an empty formulation under the Arbitration Act. 34. It may be relevant to note Russell on Arbitration, 23rd edn. (2007), wherein he notes that: "If the Court can deduce from the award and the materials before it, which may include extracts from evidence and the transcript of hearing, the thrust of the tribunal's reasoning then no irregularity will be found....Equally, the court should bear in mind that when considering awards produced by nonlawyer arbitrators, the court should look at the substance of such findings, rather than their form, and that one should approch a reading of the award in a fair, and not in an unduly literal way." (emphasis supplied) 35. The mandate under Section 31(3) of the Arbitration Act is to have reasoning which is intelligible and adequate and, which can in appropriate cases be even implied by the Courts from a fair reading of the award and documents referred to thereunder, if the need be. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer vested under Section 34 (4) of the Arbitration Act to cure defects can be utilized in cases where the arbitral award does not provide any reasoning or if the award has some gap in the reasoning or otherwise and that can be cured so as to avoid a challenge based on the aforesaid curable defects under Section 34 of the Arbitration Act. However, in this case such remand to the Tribunal would not be beneficial as this case has taken more than 25 years for its adjudication. It is in this state of affairs that we lament that the purpose of arbitration as an effective and expeditious forum itself stands effaced. 39. It may be noted that when the High Court concluded that there was no reasoned award, then the award ceased to exist and the Court was functus officio under Section 34 of the Arbitration Act for hearing the challenge to the award under the provisions of Section 34 and come to a conclusion that the arbitration award was not in terms of the agreement. In such case, the High Court ought to have considered remanding the matter to the Tribunal in the usual course. However, the High Court analyzed the case on merits, but, for different reasons and we need not go into the validi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been actually mobilized from the letter R3, R8 and R10 issued by DCM reporting on the number of machineries deployed by Claimant. The Claimants have produced the log books and bills for the various machineries and modified their claims. The tribunal had perused the log books and idle wages approved in C7 by Respondent and the claims made in R17." (emphasis supplied) 43. From the facts, we can only state that from a perusal of the award, in the facts and circumstances of the case, it has been rendered without reasons. However, the muddled and confused form of the award has invited the High Court to state that the arbitrator has merely restated the contentions of both parties. From a perusal of the award, the inadequate reasoning and basing the award on the approval of the respondent herein cannot be stated to be appropriate considering the complexity of the issue involved herein, and accordingly the award is unintelligible and cannot be sustained. 44. In any case, the litigation has been protracted for more than 25 years, without any end for the parties. In totality of the matter, we consider it appropriate to direct the respondents to pay a sum of Rs. 30,00,000/( Rupees Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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