INDIAN RARE EARTHS LTD. Vs. UNIQUE BUILDERS LTD.

Supreme Court of India (Division Bench (DB)- Two Judge)

Appeal (Civil), 3209 of 2007, Judgment Date: Aug 05, 2015

                                                                  Reportable
                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO.3209  OF 2007


INDIAN RARE EARTHS LTD.                                       .....APPELLANT

                                   VERSUS

UNIQUE BUILDERS LTD.                                          ....RESPONDENT
                                  O R D E R

      The appellant has preferred this appeal by special leave  against  the
impugned judgment and order dated 05.08.2005 passed by  the  High  Court  in
ARBA No.2 of 2002 dismissing the appeal and  civil  revision  filed  by  the
parties against the order dated 29.04.2002 passed by    the  1st  Additional
Civil Judge  (Senior  Division),  Cuttack,  in  Misc.  Case  No.78  of  2000
dismissing the application filed by the present appellant under  section  30
read with section 33 of the Arbitration Act, 1940  (for  short  the  'Act'),
for setting aside the Award passed by the learned Arbitrator in  Misc.  Case
No.671/93(117/83) dated 19.12.1996.
      The facts of the case lie in narrow compass.
      The appellant  being  a  government  company,  entered  into  a  works
contract with the respondent-company for structural steel and cladding  work
for 4 bulk warehouses. The work was to be completed within  18  months  from
the date of the award of the work order  i.e.  14.12.1979.  A  contract  was
signed between the parties wherein there was a provision for arbitration  in
case of dispute that may arise between the parties. From perusal of  general
conditions of the contract, we found that there was a clause to  the  effect
that any  increase  in  statutory  levies  such  as  taxes  and  duties  and
statutory increase in steel prices shall be paid by  the  appellant.  Before
the work was completed,  a  dispute  arose  and  ultimately,  the  same  was
referred to the Arbitration.
       The  respondent-contractor  made  a  claim  of   Rs.97,54,143.78   on
different heads which have been noted  by the High Court  and  the  same  is
extracted hereinbelow:

“STATEMENT OF CLAIM OF M/S  UNIQUE  BUILDERS  LIMITED  AGAINST  INDIAN  RARE
EARTHS LIMITED FOR CONSTRUCTION OF OSCOM/S-3 STRUCTURAL STEEL  AND  CLADDING
WORK IN BULKWAREHOUSES, BEFORE THE HON'BLE ARBITRATOR JUSTICE B.K. RAY.

|1    |Escalation                             |Rs.22,13,368.38   |
|     |as per annexure and the same submitted |                  |
|     |to M/s Dastur & Co.                    |                  |
|2    |40% of the overheads as per enclosed   |Rs.2,00,672.48    |
|     |statement (Annexure-2)                 |                  |
|3    |Encashment of bank guarantee           |Rs.2,50,000.00    |
|     |(Letter at Annexure-3)                 |                  |
|4    |Loss due to complete damage of workshop|Rs.2,40,000.00    |
|     |and store shed made of steel column,   |                  |
|     |trusses with A.C. Sheet-1,200 sq.ft. @ |                  |
|     |Rs.200/- per sq. ft.                   |                  |
|5    |Loss of Welding Machine, Drilling      |Rs.1,30,000.00    |
|     |Machine, Jigs, Tools, Tackles,         |                  |
|     |Electrodes, Store items                |                  |
|     |(As per Annexure-5)                    |                  |
|6    |Legal expenses for fighting the        |Rs.   75,000.00   |
|     |                                       |Rs.31,09,040.86   |
|7    |Interest @ 18% from 11.8.82 to 31st    |Rs.58,13,991.42   |
|     |December, 1992 (Annx.7)                |                  |
|8    |Loss for extra liability for payment of|Rs.8,31,111.50    |
|     |Income Tax by not availing of the      |                  |
|     |adjustment of loss of Rs.16,62,223.00  |                  |
|     |upto previous eight years from the     |                  |
|     |account year starting from Accounting  |                  |
|     |year 82-83, i.e. 50% of the above loss |                  |
|     |of Rs.16,62,223 (Annx.8)               |                  |
|     |                                       |Rs.97,54,143.78   |



      Although the respondent made a  claim  of  Rs.97,54,143.78/-  but  the
Arbitrator after hearing the parties and considering all  objections  raised
by the appellant, passed an Award  for  Rs.19,55,368/-  with  pendente  lite
interest at the rate of 15% per annum from the date of  institution  of  the
suit till the date of the Award.  The  said  Award  was  challenged  by  the
appellant before the 1st Additional Civil Judge (Senior  Division),  Cuttack
on various grounds by filing an application under  section  30  of  the  Act
being Misc. Case No.78 of 2000, for setting aside the said  Award.  The  1st
Additional Civil  Judge  (Senior  Division),  Cuttack,  dismissed  the  said
application. Aggrieved by  the  same,  the  appellant  preferred  an  appeal
before the High Court. The High Court after  considering  the  case  of  the
appellant and the respondent  and  referring  to  the  claims  made  by  the
respondent, finally upheld the Award passed by the learned Arbitrator.
      Mr.  Vinoo  Bhagat,  learned  counsel  appearing  for  the  appellant,
assailed the said Award and the impugned order passed by the High  Court  on
various grounds inter alia  the jurisdiction of the Arbitrator in passing  a
non-speaking Award when arbitrability of the disputes  was  questioned.  Mr.
Bhagat, learned counsel, also  submits  that  in  absence  of  any  specific
provision, the claim against the escalation of  prices  ought  not  to  have
been awarded. In this connection, Mr. Bhagat relied upon  various  decisions
of this Court in the case of T.  N.  Electricity  Board  vs.  Bridge  Tunnel
Constructions & Ors. - (1997) 4 SCC  121;  V.  G.  George  vs.  Indian  Rare
Earths Ltd. & Anr. - (1999) 3 SCC 762; and Associated  Engineering  Co.  vs.
Government of Andhra Pradesh & Anr. - (1991) 4 SCC 93.
      We have gone through the decisions relied upon by Mr. Bhagat,  learned
counsel  appearing  for  the  appellant.   The  ratios  decidendi  in  those
decisions are based on different facts of the cases.
       In  the  instant  case,  the  only  question  that  arises  for   our
consideration  is  as  to  whether  the  non-speaking  Award  given  by  the
Arbitrator can be set aside on the grounds asserted by the appellant.
      A five-Judge Constitution Bench of this Court in the  case  of  Raipur
Development Authority etc. etc. vs. M/s Chokhamal Contractors  etc.  etc.  -
AIR 1990 SC 1426, considered the scope of  section  30  of  the  Arbitration
Act, 1940 and held as under :


“It is now well settled that an award can neither be remitted nor set  aside
merely on the ground that it does not contain  reasons  in  support  of  the
conclusion  or  decisions  reached  in  it  except  where  the   arbitration
agreement or the deed of submission  requires   him  to  give  reasons.  The
arbitrator or umpire is under no obligation to give reasons  in  support  of
the decision reached by him unless under the  arbitration  agreement  or  in
the deed of submission he is required  to  give  such  reasons  and  if  the
arbitrator or umpire chooses to give reasons in support of his  decision  it
is open to the Court to set aside the award if it finds  that  an  error  of
law has been committed by the arbitrator  or  umpire  on  the  face  of  the
record on going through such reasons. The arbitrator or  umpire  shall  have
to give reasons also where the court has directed in any order such  as  the
one made under section 20 or section 21  or  section  34  of  the  Act  that
reasons should be given or where the statute which  governs  an  arbitration
requires him to do so.

      A three-Judge Bench of this Court in another  case  of   S.  Harcharan
Singh vs. Union of India – (1990) 4 SCC 647,  reiterated  its  earlier  view
that the arbitrator's adjudication is generally considered  binding  between
the parties for he is a tribunal selected by the parties and  the  power  of
the court to set aside the award is restricted to cases set out  in  section
30 of the Act.
       As  notice  above,  although  the  respondent  claimed   a   sum   of
Rs.97,54,143.78/- but the Arbitrator only awarded a  sum  of  Rs.19,55,368/-
(Rupees nineteen lakh fifty five thousand  three  hundred  and  sixty  eight
only) with pendente lite interest at the rate of  15%  per  annum  from  the
date of institution of the suit till the date of the Award. Admittedly,  the
Award is a non-speaking award. Hence, it is not permissible  for  the  court
to probe into the mental process of the learned Arbitrator  especially  when
the Arbitrator rejected major portion of the claim made by the respondent.
      In the background of all these facts, we do not  find  any  reason  to
interfere either with the Award passed by the  learned  Arbitrator  or  with
the impugned  order  passed  by  the  High  Court.  Hence,  this  appeal  is
dismissed.


                                                      .....................J
                                                               [M. Y. EQBAL]



                                                      .....................J
                                                               [ARUN MISHRA]

NEW DELHI;
AUGUST 05, 2015.