# ALLEN BERRY & CO. (P) LTD v. UNION OF INDIA, NEW DELHI - **Citation:** [1971] 3 S.C.R. 282 - **Court:** Supreme Court of India - **Decided:** 1971-01-05 - **Case number:** Civil Appeal No. 2418 of 1966 - **Bench:** J. M. Shelat, C. A. Vaidialingam, P. Jaganmohan Reddy - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/allen-berry-co-p-ltd-v-union-of-india-new-delhi-5182 - **Pages:** 16 ## Headnote Arbitration Act ( 10 of 1940), s. 30-Setting aside award---Error apparent on the face of·award-What is. The Director General of Disposals, through corr~spoliedly incorporated the con•ract or •a clause in it whicheve1· be the case. Bu• a mere general reference {o the contract in the award is not to be h~ld a.ii incoroorating it. The-urinciole of reading contracts A B c D E F or o•her documents into the' a.wa~d is not to b~ encoura "~d or extende1. • (see Rrzhu R"m v. N,onhema/ & n • .,r•) The rule thus is that as the oar•ies choose their own arbitrator to be the 'c judge in 'tlie disnute between •hem, tiley cannot. when the .award is good on the facP. of it, object to th~ deci•in.-, either unon the law or the facts. Therefore. even .whel) "lln- arhitra!or commit, a mis•"lre either in law or in fact in determining th" m""ers referred to him, but such mistake does not appear on the face of the (1) [11 '9?3,AC.3'5 (2)(19051 1 KB. 18i. (3) [19331 A.C. 592. (4) [1962]2 All E.R. 53, 62 (5) C.A. N0.107of1966, Decided on 5-12-1968. H A B c D E F G H ALLEN BERRY & CO, v. UNION (She/at, J.) 289 award. or in a· document appended to or incorporated in it so as to form part of it, the award will neither be reJ;I1itted nor set aside notwithstanding the mistake. In the light of the principle above stated, the first question calling for determination is, is there an error apparent on the award, in the sense that the umpire misconstrued the contracts of sale inasmuch as though those contracts were contained in sale-notes as well as in several letters, he considered the sale-notes only as containing the contracts of sale disregarding the correspondence which had taken place between the company and the Director-General, Disposals and his officers ? Such a question would undoubtedly be one of law. But the disputes referred to the umpire contained disputes· both of fact and law. Ordinarily the decision of the umpire, even though it be on a question of law, would be binding on the parties. The court would only interfere if the case falls within the exceptions mentioned · by Williams, J. in Hodgkinson v. Fernie( 1) and reaffirmed by Diplock L. J., in Giacomo Costa Fu Andrea v. British Italian Trading Co. Ltd.('). Ther~were in all three separate sales to the appellant-compaay, whicl)., -according to the respondents were incorporated in sale1\Ptts Nos. 160, 161 and 197. Before the sale-note 160 wa~ issued on July 11, 1946, it is a fact !hat the company had written a letter dated July 10, 1946 which was also endorsed by t'W officers of the Director-General, Disposals. The lette.r containe~ three clauses, the first of which stated that "M/s. Allen Berry will buy the Moran Vehicles Depot · 'as is wi)ere is' for Rs. 1,80,00,000/". The two other clauses provided! the manner and time of payment of the sale price. But the letten commenced with the following words : "Pending detailed record of terms tomorrow the following are the broad heads of agreement, which will form the ])as is of sale of surplus vehicles : ". The next day, i.e., July 11, 1946, the Department issued salenote 160, which in .clear terms stated that what was purchased were "all vehicles and trailers lying in Moran Depot" which meant' that the vehicles sold were only those that W'Cre ~ctually lying in that depot on July 11, 1946, and not those outside it or those bome on the records of that depot, as contended by th~ company. It, however, appears from the judgment of the Trial Court (para 206) that on receipt of sale-note 160, the company wrote a letter on July 11, 1946 in which it contended that "We have purchased the entire vehicle depoLof Moran" (I) [1857} 3 C.B. (N.S. 189,202. 57) (2) [I 962] 2 All ER:SJ, 68. 5-807SupCl/71 290 SUPREME COURT REPORT~ [1971 J3 S.C.R. it appears that in view of this difference of opinion, a meeting A -of representatives of the parties was held on July 23, 1946, the minutes of which, as recorded by the Assam Controller, U.S.AS.S., read as follows : · "(2)(a) The vehicles and trailers sold to Messrs. Allen Berry and Co. Ltd., are deemed to B include all vehicles which were or should have been· held in Moran Depot on the 10th July, also those which have been issued on a Memorandum Receipt as follows :- (i) To' the Americans, left behind by them in various camps and depots and not yet turned in by us. C (ii) Vehicles issued on Mem9randum Receipt to military units assisting the U.S.A.S.S: Organisation. (iii) Any surplus vehicles originally allotted to U.S.A.S.S. Units-for operational purposes and now no longer required by them." Qn September 17, 1946, a secraphone message was sent from New Delhi to Calcutta which stated "We have sold U.S. Army surplus vehicles presumed to be borne on Moran list, that is those actually in Moran Vehicle Depot or those that were intended to be moved to that depot, which was meant' to be parking ·depot for surplus U.S. vehicles in Assam area." On September 26, 1946, the Director-General, Disposals, wrote to the company that "The vehicles sold to you in Assam are those U.S. Army surplus vehicles actually in Moran Vehicle Depot or those that were intended to be moved to· Moran Vehicle Depot. Any mobile engineering equipment, such as mobile cranes, tracked tractors are excluded from the sale to you." On December I 0, 1946, the Controller issued a release order in respect of : 1. All vehicles and trailers lying,in Moran Depot on 10th July 1946 includinf,;all United States Army Surplus Stores, excl!Jding land .and buildings lying within Moran Depot and transferred to the Government Qf .India from the Government of the United -States. 2. Vehicles in operational use in Calcutta and Assam as and when no longer required by the U.S.A.S.S. Organis.ation." D E F G H ... A B ALLEN BERRY & co. v. UNION (She/at, !.) 291 The question raised by counsel is that the umpire failed to consider all these documents while considering the scope and content of the contract of sale and relied on only sale-note No. 160, dated July 11, 1946, that the contract was not contained in the said note 160 alone, and that therefore, he misconstrued the contract, and that that misconstruction, which is a point of law, is apparent on the face of the award, as it was made the very basis of the award. The first three issues raised by the umpire were : ( 1) whether the appellant was entitled to prove that any vehicles, stores etc. other than those menC tioned in the sale-notes were sold to it; (2) whether the Government was bound by the clarifications, representation, explanations or assurances made or given by any officer or officers of the Departm,ent regarding the subjectmatter of the contracts of sale except those D necessarily implicit in the sale-notes; and E F G H ( 3) whether the Government sold ·any vehicles except those lying in Moran Depot on July 11, 1946, or those intended to be moved t!rereto. The dispute between the parties, thus, clearly was that whereas the company claimed that the sale was of all vehicles borne on the records of Moran Depot, irrespective -of whether they were actually lying there on July 11, 1946 or not, the Government claimed that the company was entitled to those actually lying in the Depot. According to the respondents, the contract of sale was to be found in the sale-note, and therefore, any subsequent explanations or assurances given by any officer or officers of the Department could not vary or alter the terms of the contract. These expanations and assurances were given only to remove the misunderstanding of the company over the question of the' scope and extent of the sale made to it. The umpire set out part of the sale-notes 160 and 197 in the award and then observed : "the language used in these sale letters is to my mind perfectly clear, explicit anJ unambiguous and exclu~es the possibility of any vehicl~s, trailers o.r stores J:ymg on the dates in question outside the Iocaltons specified in the sale letters having been included in the two .sales. The 'contention that they in fact include all vehicular stores in Assam in one case and in Bengal area in the other has been made ~all seriousness and a good deal 292 SUPREME COURT REPORTS (1971 ]3 S.C.R. of evidence both oral and documentary has been produced in support of or against such contention. The point ·has also been argued at great lengt!l by learned counsel for the parties. 1. have given the whole matter my most serious and earnest consideration and my view is that apart from the language of the two saledeeds being against such a contention, the evidence too considered as a whole does not support it. Accordingly, I hold that the stores sold to the claimants in the case of Assam were those actually located in Moran Depot on July 10, 1946 and in the case of Bengal those actually located in Jodhpur and other depots specified in the sale letter on July 31, 1946." He next held : "The alleged clarifications or representations made or explantions or assurances given by any officer or officers of the Disposals Department either verbally or in writing have been very carefully examined by me and I am of opinion that neither are they, considered as whole, capable of the interpretation sought to be put upon them by the claimants nor are the respondems bound by them. They are not in accordance with law and do :not amount to legal contracts binding the respondents." These- passages clearly show that the umpire had considered, besides the sale-notes, the oral and documentary evidence led by the parties as also the contentions urged on and as regards them by counsel for the company. It is impossible, therefore, to uphold the contention that the. various documents, i.e., the letter of the company dated July 10, 1946, the subsequent correspondence, minutes of the meetings which too place after the salenote 160 was issued etc. were not taken into consideration by the umpire whild coming to his conclusion as to what actually was sold to the company. The dispute, amongst other disputes, referred to the umpire and crystallized by him in the form of issues on the pleadings of the parties involved, as already stated, the question first as to what was sold, and secondly, arising out of that, the questi9n whether besides the said sale-notes 160 and 197, the subsequent clarifications or explanations were binding on the Govefllment. Thes.e \\'.ei:e,. no doubt, questions partly of fact and partly of la:W. But questions 'both· of. fact and law were referred to the umpire and prima facie his findirigs on them would bind the parties unless, as explained earlier, the umpire has laid down any legal proposition, such as a construction which is made the basis of the award and is on the face of the award an error. A B c D E F G H A B c D E F G H ALLEN BERRY & CO. V. UNION (She/at, /.) 293 The point is, is this such a case ? True it is that this is not a case whe_re a question of law is specifically referred to. It is clearly a case falling in the category of cases, like Ka/anton v. Duff Development Co. Ltd.( 1) wherein deciding the questions referred to him the umpire has to decide a point of law. ln doing . so, the umpire, no doubt, laid down the legal propsition that the clarifioations or assurances given subsequent to the dates of the said sale-notes by an officer or officers of the department were not binding on the respondents nor could they affect the scope of the sales. That an~wer the umpire was entitled to give. But the fact that he answered a legal point does not mean that he has incorporated into the award or made part of the award a docu- .iuent or documents, the construction of which, right or wrong, is the basis of the award. The error, if any, in such a case cannot be said to be an error apparent on the face of the award entitling the court to consider the various documents placed in evidence before the umpire but not incorporated in the award so as to form . part of it and then to make a search if they have been misconstrued by him. This, in our understanding, is the correct principle emerging from the decisions which counsel placed before us. In any event, this is not a case where the umpire, in the words of Lord Dunedin, "tied himself down to a legal proposi-_ tion" which on the face of the award. was unsound. The award makes it clear in so many words that he took into account the entire evidence, including the documents relied on by counsel and then only came to the conclusion that it did not assist the company in its contentio'l as to the scope of the sales. Contentions I and 2 raised by Mr. Agarwal, therefore, cannot be i;pheld. Contention No. 3 relates to 54 7 vehicles said to have been sold to the company under sale-note 197, dated August 2/6, 1946., There is no dispute that out of these vehicles the company removed 291 vehicles alleging that the delivery of the balance of 256 vehicles was withheld. The company made a claim being claim No. VI for the price of these 256 undelivered vehicles. The respondents' contention was that the sale . to the company was confined onlv to 'the U.S.A. Surplus Stores. that these vehicles did not fall within that category, but were Reverse Land Lease vehicles belonging to the Government of India under an agreement between the U.S.A. and India. On these allegations the respondents laid counter-claim No. VI claiming the price of the 291 vehicles admittedly removed by the company when they were lying in Jodhpur Depot, Calcutta. The umoire found that the expression "Reverse Land LeliSe" related to the reciprocal aid articles referred to in the said agr~e ment. A reciprocal aid article. according to that agreement, -(i)[T92l] A.C. 395. 294 SUPREME COURT REPORTS [1971 J3 s.c.R. meant an article transferred by the India Government to tlie U.S. Government under reciprocal aid under para 4-C of that agreement. The U.S.A. Government was deemed to have acquired as on September 2, 1945 full title over such articles except that such reciprocal aid articles incorporated into installations in India were deemed to have been rreturned to India Government from the date when the U.S.A. forces relinquished possession of such installations. From the inventories produced before him, the umpire held that these 54 7 vehicles were incorporated into installations in India, and therefore, ownership in them vested in India Government on and after the U.S.A. forces relinquished possession of those installations. They could not, therefore, be regarded as U.S. Surplus Stores which alone were and could be the subject-matter of sale-note 197. Consequently, the company was not entitled to remove the said 291 vehicles which it did, much .less could the company claim compensation for 256 vehicles , which it alleged were not delivered to it.. In the result, t)J.e. umpire allowed the Government's counter-claim No. VI, which was for the price of 291 vehicles unauthorisedly remowd by t)1e company from Jodhpur Depot. The argument in connection with this paPt of th~ award was. fiNly, that the fi 0 ~·~gs of the umnire were vitiated as there was tow! lack of evidence on which they could be based, and secondly that in any event, the umpire had no jurisdiction 10 award compensation to the Government in respect of counterclaim No. VI. The first part of the argument need not detain us as the finding that these vehicles formed part o' reciprocal aid articles, the ownership in which vested in the · Government of India and were 'tl\.~refore not U.S.A.S.S. was !Jased on the agreement between the two Governments and the inventories produced before the umpire from which he could hold that they belonged to the Government of India from the date when the installations in which they were incorporated were relinqmshed by the U.S. forces, and that therefore, they could not form the subject-ma;ter of sale-note 197 which related only to the U.S. Surplus Sfores. The second part of the argument, however, requires consideration. The question is whether the arbitration clause included a dispute relating to compensation in respect of the said 291 vehicles unauthorisedly removed by the company. Cl. 13 ill the General Conditions of Contract, quoted earlier, provides for reference to arbitration of all questions or disputes "arising under these conditions" or "in connection with this contract". Dr. Singhvi referred us to cl. I 0. of these Conditions also but ' it is clear that it can in no sense apply to the dispute relating to· · compmi;;ation, _But the words "arising under these conditiom:•· A B c D E F G A B c D E F G H ALLEN ,BERRY & co. v. UNION (Shefat, !.) 29S and "in connection with this contract" are undoubtedly wide and comprehensive. It is, nonetheless, a question whether the dispute as to compensation on the ground of unauthorised appropriation of these vehicles by the company falls within cl. 13. In Vidya Sagar Joshi v. Surinder Nath Gautam(') the words "expenditure in connection with election" used in s. 77 of the Representation of the People Act, 1951 were construed to mean "having to do with". An arbitration clause wherein the words "in relation to or in connection with the contract" were construed not to contemplate a dispute raised by a contractor that he could avoid the contract on the grour.d .that it was obtained by a fradulent. mis· representation. (see Monro v. Bognor Urban District Council('). But a claim for damages on the ground of negligence on the part of the defendant in removing the plaintiff's furniture against a clause for due diligence in removing it was held to fall within the arbitration claus·~. [Woolf v. Collis Removal Service( 8 )] •. Counsel conceded that a dispute as to the interpretation or sale-note 197 would fall under the arbitration clause.. If that is so, it must follow that the umpire 'was competent to decide whether the said 547 vehicles fell within the purview of the sale-note or not. E in determiniing that question he came to the conclusion that they did not, the obvious conclusion would be that the company was not entitled to talce away 291 vehicles admittedly removed by it from the Depot. If the company did that, would the question as to the return or of compensation in lieu of such vehicles, to which it was not entitled under the sale, be a question which arises out of or in connection with the contract ? Counsel went as far as to say that •the umpire in deciding the company's claim No. VI and the Government's counter-claim No. VI could decide that the company was not entitled to those vehicles, but could not take the next step either to direct the return of them or payment of compensation in lieu of those vehicles. In Oljr view, such an argument cannot be accepted. The reason is that once it is found that he was competent to decide the dispute as to whether the said 54 7 vehicles were not the subject-matter of the sale and 291 of them were removed unauthorisedly, he must, to do justice !>etween the parties in respect of disputes referred to him, order the company either to return them or to pay compensation for them. Since the first course was not possible after all these years, the second was the only and the obvious course. The d,jspute raised by the respondents that 291 vel:iicles were not included in the sale was co-extensive with and connected with the dispute that the com- (!) A.LR. 1969 S.C. 288. (2) [1915](3) K.B. 167. (3) [1947] 2 All E.R. 260. 296 SUPREME COURT REPORTS. [1971 ]3 S.C.R. pany was bound to return them if it was found that they were not covered by the sale. On this reasoning it is not possible . to say that the umpire went beyond his jurisdiction either in rejecting the company's claim No. VI or in accepting the corresponding counter-claim No. VI of the respondents. Contention 4 relates to 600 vehicles which had been taken out of Moran Depot. for operational pm;poses, but which the company claimed were part of the sale under sale-note 160. The umpire held (I) that those vehicles having been taken out of the Depot for operational purposes did not fall within the sale, and ( 2) in the alternative, that the evidence disclosed that a substantial number of vehicles in operational use were delivered to the company even though strictly speaking it was not entitled to them as they were not lying in the Depot on July l 0, 1946. The umpire further held that if some of them per chance were not handed over, the respondents had sufficiently compensated the company by handing over several non-operational vehicles from 1outside the depot to which the company was not entitled. . Counsel argued that this part of the award was vague and without any evidence to support it, and therefore, the umpire behaved in this respect more like a concilliator than as an arbitrator. Having held that sale-note 160 covered only those vehicles which were actually lying in Moran Depot on July IO, 1946, it was not incumbent on the umpire to deCide the number of operational vehicles ou•side the depot. Conseque1_:iy, if he was satis1ied that even though the company was not entitled to the said 600 vehicles claimed by it, yet the authorities had delivered a substantial number ol them, and for any deficiency, had also delivered non-operational vehicles, there would be no -purpose in going into the details_ of vehicles delivered to the company. Even though, as the judgment of the Trial Court discloses (para 223), there was evidence, both oral and documentary, that the company had collected a number of vehicles lying at places outside the Depot, and· the vehicl~s so collected were recorded by the company, yet the company had withheld the production of those records.