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PETITIONER:

GOA, DAMAN AND DIU HOUSING BOARD

Vs.

RESPONDENT:

RAMAKANT V.P. DARVOTKAR

DATE OF JUDGMENT06/09/1991

BENCH:

RAY, B.C. (J)

BENCH:

RAY, B.C. (J)

KANIA, M.H.

SHETTY, K.J. (J)

SHARMA, L.M. (J)

VERMA, JAGDISH SARAN (J)

CITATION:

1991 AIR 2089 1991 SCR (3) 904

1991 SCC (4) 293 JT 1991 (3) 604

1991 SCALE (2)488

ACT:

Arbitration Act, 1940: Section 16--Award--When to be

remitted to Arbitrator--No allegation of bias or

illegality--High Court remanding awards for giving

reasons--Whether justified.

HEADNOTE:

The appellant-Housing Board, which had entered into four

contracts with the respondent for construction of tenements

within a certain time limit, terminated them after giving

notice on the ground that the respondent had failed to

complete the construction work despite several extensions

granted to him, and filed a suit in the Court of Civil Judge

claiming damages of over Rs.4 lakhs. The respondent filed

appllcations under Sections 34 and 20 of the Arbitration

ACt, 1940, for stay of the suit and for directions to the

appellant-Board for filing the arbitration agreement in the

Court and also for appointing arbitrator in terms of clause

25 of the agreement. As per Court's order, the appellant

filed the agreement in the Court and appointed the Arbitra-

tor.

The Arbitrator made four awards granting the claims of

the respondent to the extent of over Rs.8 lakhs and filed

them in the Court for making them Rule of the Court. The

appellant's objections for setting aside the awards on the

ground that the Arbitrator had misconducted himself by not

framing the main issue, viz., whether or not the claimant

abandoned the work and thereby committed the breach of the

agreement, by ignoring the letter of termination where in it

was clearly stated that the termination had been done on

account of the abandonment of the work by the claimant, and

failed to decide upon the question of the abandonment of

work and wholly side-tracked the issue and also by not

giving reasons for the award as required under the agree-

ment, under which he was appointed, were rejected by the

Civil Court, which confirmed the awards and made them the

Rule of the Court. The appellant's appeals against this

decision was allowed by the High Court, which set aside the

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Civil Court's order and sent back the awards to the arbitra-

tor for giving reasons, as required under clause 25 of the

agreement which specifically provided that in all cases

where amount of

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claim was Rs.50,000 and above, the Arbitrator was bound to

give

reasons.

In the appeal before this Court, on behalf of the

appellant Housing Board it was contended that having held

that the arbitrator was guilty of misconduct and the awards

were liable to be vitiated on that ground, the High Court

ought to have set aside the awards instead of sending them

back for recording reasons, which was totally unwarranted by

law.

On behalf of the respondent, it was contended that the

High Court's order remanding the awards for recording rea-

sons clearly fell within the purview of Sec. 16(1)(c) of the

Arbitration Act, as the objection to the legality of the

award was apparent on the face of it, and not within the

provisions of Sec. 30 of the Act, inasmuch as the arbitrator

had not misconducted himself or the proceedings and the

awards in question had not been improperly procured.

Dismissing the appeals and confirming the awards, this

Court,

HELD: 1.1 Section 16 empowers the Court to remit the

award to the Arbitrator for reconsideration only in three

cases specified therein. Clause (c) of Sub-Section (1)

provides that the award shall be remitted to the Arbitrator

by the Court where an objection to the legality of the award

is apparent on the face of it. [710D]

1.2 No doubt, in the instant case, the High Court has

come to a finding that the Arbitrator was guilty of miscon-

duct for his failure to give reasons as required but there

is nothing to show that the Arbitrator misconducted himself

or the proceeding in any other manner, nor is there anything

to show that the awards have been improperly procured nor

any allegation, far less, any finding, that the Arbitrator

was biased or unfair or he had not heard both the parties or

he had not fairly considered the submissions of the parties

in making the awards in question. [710E]

1.3 It is evident from the four awards made by the

Arbitrator that the Arbitrator has considered all the spe-

cific issues raised by the parties in the arbitration pro-

ceedings and came to his finding after giving cogent rea-

sons. The awards cannot under any circumstances be consid-

ered to be made by the Arbitrator without recording any

reasons for the same. In such circumstances, it cannot be

held that the Arbitrator has misconducted himself or in the

proceedings in the matter

906

of giving the awards. The decision of the High Court remit-

ting the awards back to the Arbitrator for giving reasons is

set aside and the awards made by the Arbitrator are upheld

and made Rule of the Court. [710F-G, 711A]

JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 3236-39

of 1984.

From the Judgment and Order dated 7.2. 1983 of the

Bombay High Court in F.C.A. Nos. 35/B, 36/B, 37/B & 38/B of

1981.

Ashok H. Desai, Solicitor General, Ravinder Narain,

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Aditya Narain, Rajan Narain, S. Sukumaran, D.N. Mishra and

Pallav Sishodia for the Appellant.

G.L. Sanghi, S.K. Mehta, Dhruv Mehta and Aman Vachher

for the Respondent.

The Judgment of the Court was delivered by

RAY, J. The above four appeals on special leave by the

appellant were filed against the judgment and order dated

February 7, 1983 made by the Panaji Bench of the Bombay High

Court in First Civil Appeal Nos. 35/B to 38/B of 1981 dis-

posing of all the four appeals field by the appellant

against the judgment and order of the learned Civil Judge,

Senior Division, Panaji, Goa dated 26.8.1981 confirming four

different awards by an arbitrator appointed in pursuance to

the agreement between the parties. Appeal No. 35 of 1981

relates to the award, awarding to the respondent against the

appellant Rs.2,75,091.13. Appeal No. 36 of 1981 relates to

an award, awarding to the respondent a sum of

Rs.1,88,968.36. Appeal No. 37 of 1981 relates to an award,

awarding to the respondent Rs.3,36,230.36 and Appeal No. 38

of 1981 relates to an award, awarding to the respondent

Rs.46,321.32.

The facts leading to these appeals are as follows:

The appellant Goa, Daman & Diu Housing Board entered

into two contracts on 15.3.72, and one contract each on

11.7.73 and on 4.7.73 with the respondent for the construc-

tion of tenements at Vasgoda-Gama, Goa. The appellant ac-

cepted two tenders of the respondent on 9.3.72 and remaining

two on 24.2.73. There was a time limit in all the aforesaid

four contracts for the completion of the work referred to

therein. Several extensions were granted to the respondent

for completing the work out the respondent failed to com-

plete the construction

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work undertaken by him under the said four contracts. On

July 1, 1975 the appellant issued a notice to the respondent

under clause 3 of the said contract for exercising the right

of termination in view of the fact that the respondent was

unable to fulfil the contractual obligation of completing

the construction work in spite of the various extensions

granted to the respondent. On July 14, 1975, the

Engineer-in-Charge of the appellant Board exercised its

unilateral right of terminating the contract under clause 3

of the agreement in view of the fact that the respondent did

not complete the work of construction undertaken by him in

spite of various extentions granted to him. On July 31,

1975, the Chairman of the appellant board confirmed that all

the four contracts stood rescinded. On May 17, 1976, the

respondent served a notice to the appellant on the ground

that the appellant had rescinded the work contracts. The

respondent stated therein various reasons why the work could

not be completed. Thereafter in April, 1978, the appellant

filed a suit claiming damages for a sum of Rs.4,38,786.96

with interest against the respondent in the Court of the

Civil Judge, Senior Division, Panaji, Goa. Subsequently, an

application was filed by the respondent under section 34 of

the Arbitration Act for stay of the suit. Respondent also

made another application to the Court under section 20 of

the Arbitration Act for directing the Housing Board to file

the arbitration agreement in Court and in pursuance of

clause 25 of the agreement to appoint an arbitrator. Accord-

ingly, the Court by its order dated 28.2.1979 had the agree-

ment between the parties filed in court and directed the

Housing Board to appoint an arbitrator. On March 29, 1979

Shri J.S. Pinto, retired Superintending Engineer w.as ap-

pointed as Arbitrator.

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The Arbitrator on March 23, 1981 submitted four awards

granting the claims of the respondent as stated hereinbefore

on the basis that the appellant was responsible for the slow

progress and non completion of work and the work could not

be completed as the contract was terminated by the appel-

lant, the Housing Board. The said award was filed in the

Court of Civil Judge, Senior Division, Panaji, by the Arbi-

trator on 31st March, 1981 for making the award Rule of the

Court. The appellant submitted his objections for setting

aside the awards on April 27, 1981 on the grounds inter alia

that the Arbitrator had misconducted himself by not framing

the main issue i.e. whether or not the claimant abandoned

the work and thereby committed breach of the agreement. The

Arbitrator misconducted himself by ignoring the letter of

termination wherein it Was clearly stated that the termina-

tion has been done on account of the abandonment of the work

by the claimants; the learned Arbitrator failed to decide

upon the

908

question of the abandonment of work and has wholly side

tracked the issue; the learned Arbitrator misconducted

himself by not giving reasons for the award as required

under the agreement under which he was appointed.

The learned Civil Judge, Senior Division, Panaji by his

Order dated 26th August, 1981 rejected all the objections

raised on behalf of the appellant against the said awards

and confirmed the same. All the four impugned awards have

been made Rule of the Court.

The appellant thereafter filed the aforesaid First Civil

Appeal Nos. 35/B, 36/B, 37/B and 38/B of 1981 against the

said Order of the learned Civil Judge, Senior Division,

Panaji, Goa on the ground that the Civil Judge did not

consider that the Arbitrator misconducted himself in making

the awards without recording any reasons for the same, even

though the claim was Rs.50,000 and above as provided in

clause 25 of the agreement between the parties and as such

the awards should have been set-aside by the Court.

The High Court held that having regard to the clause 25

of the terms of the agreement specifically providing that in

all cases where amount of claim in dispute is Rs.50,000 and

above the arbitrator was bound to give reasons for his

award. The statements that has been made by the Arbitrator

while giving his findings could not be considered to be the

reasoning for his finding of the award. The Court also held

that:

"The award no where contains any reasoning for

the same nor does it even obliquely mentions

that in giving his findings the Arbitrator has

even sought to adopt the reasoning of either

of the parties. In our view as the obligation

of the Arbitrator under Clause 25 of the

agreement stands, the reasons should appear to

be so in this case."

It was further held that as the arbitrator failed to

give reasons for the award it would be a misconduct on his

part and the award was liable to be vitiated on that ground.

The Court allowed all the appeals. The order of the lower

court was set-aside and the awards were remanded back to the

arbitrator for giving reasons for the same as required under

clause 25 of the arbitration agreement and thereafter to

file the same in the court of Civil Judge, Panaji, within

eight weeks after the order is served on him.

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Against this judgment and order the impugned appeals by

special leave were filed.

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The learned counsel on behalf of the appellants has

contended that the High Court acted illegally in not consid-

ering at all that the arbitrator did not record any reasons

for making awards allowing the claims each of which exceeds

Rs.50,000 as provided under clause 25 of the arbitration

agreement and as such the arbitrator has misconducted him-

self in the proceedings and instead of sending the awards

made by the arbitrator to him for recording his reasons

ought to have set-aside the awards under section 30 of the

Arbitration Act. It has also been contended that the High

Court though it held that the arbitrator was guilty of

misconduct and the awards made by him were liable to be

vitiated on that ground yet inspite of setting aside the

awards they were sent to the arbitrator for recording rea-

sons which is totally unwarranted by law.

The learned counsel appearing on behalf of the respond-

ent, on the other hand, submitted that the awards made by

the arbitrator after hearing the parties cannot be said to

be illegal or unwarranted as the same were made after con-

sidering all papers and documents filed by the parties and

after duly hearing the parties. As such there was no ille-

gality nor any misconduct committed in making the awards.

The arbitrator has fairly considered the issues and made the

awards in question. The misconduct, if any, on the part of

the arbitrator does not concern with the probity and impar-

tiality of the arbitrator. The only allegation against the

arbitrator is that he has not recorded the reasons for the

awards made by him as per term of clause 25 of the arbitra-

tion agreement. It has, therefore, been contended by the

learned counsel on behalf of the respondent that the order

of the High Court in remanding the awards to the arbitrator

for recording reasons clearly fails within the purview of

section 16(1)(c) of the Arbitration Act, 1940 as the objec-

tion to the legality of the award is apparent on the face of

it. It does not fail within the provision of section 30 of

the said act in as much as the arbitrator has not miscon-

ducted himself or the proceedings and the awards in question

have not been improperly procured. Several decisions have

been cited at the bar in support of the respective conten-

tions advanced by the counsel for the parties.

Before considering the question whether the directions

made by the High Court in remitting the award to the Arbi-

trator for giving reasons do fall within the purview of

Section 16 of the Arbitration Act, 1940, it is appropriate

to set out the relevant provisions of section 16(1):-

910

"Sec. 16(1): The Court may from time to time

remit the award or any matter referred to

arbitration to the arbitrators or umpire for

reconsideration upon such terms as it thinks

fit--

(a) where the award has left undetermined any

of the matters referred to arbitration, or

where it determines any matter not referred to

arbitration and such matter cannot be separat-

ed without affecting the determination of

matters referred; or

(b) where the award is so indefinite as to be

incapable of execution; or

(c) where an objection to the legality of the

award is apparent upon the face of it."

Section 16 empowers the Court to remit the award to the

Arbitrator for reconsideration only in three cases specified

therein. Clause (c) of Section 16(1) provides that the award

shall be remitted to the Arbitrator by the Court where an

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objection to the legality of the award is apparent on the

face of it. Of course, the High Court has come to a finding

that the Arbitrator was guilty of misconduct for his failure

to give reasons as required. There is, however, nothing to

show that the Arbitrator misconducted himself or the pro-

ceedings in any other manner nor there is anything to show

that the awards have been improperly procured. There is no

allegation, far less, any finding, that the Arbitrator was

biased or unfair or he has not heard both the parties or he

has not fairly considered the submissions of the parties in

making the awards in question. In our opinion, it is evident

from the four awards made by the Arbitrator that the Arbi-

trator has considered all the specific issues raised by the

parties in the arbitration proceedings and came to his

finding after giving cogent reasons. The above awards cannot

under any circumstances be considered to be made by the

Arbitrator without recording any reasons for the same.

Therefore, in such circumstances, it is not proper to hold

that the Arbitrator has misconducted himself or in the

proceedings in the matter of giving the awards.

In these circumstances, we are unable to hold that the

four awards made by the Arbitrator are bad for not recording

reasons. We, therefore, uphold the said awards and we do not

think it necessary to decide the question as regards the

scope of Section 30 or Section 16of

911

the Arbitration Act. The decision of the High Court remit-

ting the awards back to the Arbitrator for giving reasons is

set aside and the awards made by the Arbitrator are upheld.

Let these awards be made rule of the Court. The appeals are,

therefore, dismissed. There will be no order as to costs.

N.P.V. Appeals dis-

missed.

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