# PREMIER FABRICATORS, ALLAHABAD v. HEAVY ENGINEERING CORPN. LTD., RANCHI

- **Citation:** [1997] 3 S.C.R. 161
- **Court:** Supreme Court of India
- **Decided:** 1997-03-21
- **Bench:** A.M. Ahmadi Cji, M.M. Punch!, K. Ramaswamy
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/premier-fabricators-allahabad-v-heavy-engineering-corpn-ltd-ranchi-15476
- **Pages:** 23

## Headnote

Arbitration Act, 194(}-S.3(}-Non-speaking award of the Umpire passed
A
B
on nwits without deciding the preliminary question of arbitrability of the
claims-Held: Per majority,---lllegal---Umpire committed jurisdictional C
erro1~Without a separate order or statement on the preliminary issue of arbitrability of the claims, it could not be discemed that umpire had decided
the preliminary issue-Remanded the award to the umpire to decide denovo
the arbitrability of the claims-Held, Per minority.~Award valid and
legal-From the facts and circumstances it must be presumed that umpire had D
considered and decided preliminary question of arbitrability of the
claims-Hence no error apparent on the face of the record.
The appellant entered into a contract with the respondents for
execntion of certain works. Dispute arose between them during the coutse
of execution. Pursuant to clause 78 of the contract, disputes were referred E
to two arbitrators. One of the disputes was whether claims referred to at
items 2-5 were referable to arbitrations iu terms of the contract. Both the
arbitrators held that the claims were referable to arbitration but they
could not come to an agreement on the merits of the claim. Therefore, they
appointed an umpire. The umpire made a non-speaking award directing
the respondent to pay a lumpsum amount of Rs. 80,000 besides interest. F
On application made by the applicant the Civil Court made the award rule
of the Court.
The respondent preferred an appeal in the High Court challenging
the award to be illegal interalia on the ground that the same was passed G
by the Umpire on merits without deciding the preliminary question of
referabllity of the claims under items 2 to S. Both the judges of the Division
Bench concurrently agreed that the umpire must decide the preliminary
question of arbitrability before deciding the claims on merits.
But difference of opinion arose as to whether the umpire bad decided H
161
162
SUPREME COURT REPORTS
[1997] 3 S.C.R.
A the preliminary question of arbitrability of the claims before deciding them
on merits. One of the judges held that umpire must be deemed to have
decided the preliminary 11uestion in the affirmative and the award therefore must be accepted as valid. The other judge differed starting that in
the facts and circumstances of the case it was not possible to inferentially
B
hold that the umpire must have decided the question of referability while
making the award. The matter was referred to a third judge, who concurred with the latter view. As per the majority view, it was held that the
umpire did not decide the preliminary issue of referability of items 2-5
before deciding the claims un merits. Therefore, the award was set aside.
C
The appellant filed the present appeal against the judgment of the
High Court.
Allowing the appeal, this Court
HELD : (Per K. Ramaswamy, J. for himself and Ahmadi, CJI.):
b
1. The awarq is illegal as it was passed by the umpire on merits
without deciding the preliminary question of arbitrability of the claims.
The entire dispute including the arbitrability of the claims in items 2 to 5
had been referred to the umpire. Before proceeding to adjudicate the
claims on merits, the umpire was required to give his finding on the
E
preliminary issue of arbitrability of the claims and reasons in support
thereof. The umpire did not write a separate order nor indicated in the
award .that he had applied his mind to the aspect that the claims were
arbitrable. The award should have contained a statement that the claims
were arbitrable and that he had given a consolidated award. In view of the
F
admitted position that there was no statement or separate order in the
non-speaking award regarding the arbitrability of the claims, it can not be
construed by implication that the umpire had considered the same. The
umpire is enjoined to consider a preliminary question of his jurisdiction
as to arbitrability of claims in items 2 to 5. It being a jurisdictional issue,
G th

## Text

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PREMIER FABRICATORS, ALLAHABAD
v.
HEAVY ENGINEERING CORPN. LTD., RANCHI
MARCH 21, 1997
(A.M. AHMADI CJI., M.M. PUNCH! AND
K. RAMASWAMY, JJ.)
Arbitration Act, 194(}-S.3(}-Non-speaking award of the Umpire passed
A
B
on nwits without deciding the preliminary question of arbitrability of the
claims-Held: Per majority,---lllegal---Umpire committed jurisdictional C
erro1~Without a separate order or statement on the preliminary issue of arbitrability of the claims, it could not be discemed that umpire had decided
the preliminary issue-Remanded the award to the umpire to decide denovo
the arbitrability of the claims-Held, Per minority.~Award valid and
legal-From the facts and circumstances it must be presumed that umpire had D
considered and decided preliminary question of arbitrability of the
claims-Hence no error apparent on the face of the record.
The appellant entered into a contract with the respondents for
execntion of certain works. Dispute arose between them during the coutse
of execution. Pursuant to clause 78 of the contract, disputes were referred E
to two arbitrators. One of the disputes was whether claims referred to at
items 2-5 were referable to arbitrations iu terms of the contract. Both the
arbitrators held that the claims were referable to arbitration but they
could not come to an agreement on the merits of the claim. Therefore, they
appointed an umpire. The umpire made a non-speaking award directing
the respondent to pay a lumpsum amount of Rs. 80,000 besides interest. F
On application made by the applicant the Civil Court made the award rule
of the Court.
The respondent preferred an appeal in the High Court challenging
the award to be illegal interalia on the ground that the same was passed G
by the Umpire on merits without deciding the preliminary question of
referabllity of the claims under items 2 to S. Both the judges of the Division
Bench concurrently agreed that the umpire must decide the preliminary
question of arbitrability before deciding the claims on merits.
But difference of opinion arose as to whether the umpire bad decided H
161
162
SUPREME COURT REPORTS
[1997] 3 S.C.R.
A the preliminary question of arbitrability of the claims before deciding them
on merits. One of the judges held that umpire must be deemed to have
decided the preliminary 11uestion in the affirmative and the award therefore must be accepted as valid. The other judge differed starting that in
the facts and circumstances of the case it was not possible to inferentially
B
hold that the umpire must have decided the question of referability while
making the award. The matter was referred to a third judge, who concurred with the latter view. As per the majority view, it was held that the
umpire did not decide the preliminary issue of referability of items 2-5
before deciding the claims un merits. Therefore, the award was set aside.
C
The appellant filed the present appeal against the judgment of the
High Court.
Allowing the appeal, this Court
HELD : (Per K. Ramaswamy, J. for himself and Ahmadi, CJI.):
b
1. The awarq is illegal as it was passed by the umpire on merits
without deciding the preliminary question of arbitrability of the claims.
The entire dispute including the arbitrability of the claims in items 2 to 5
had been referred to the umpire. Before proceeding to adjudicate the
claims on merits, the umpire was required to give his finding on the
E
preliminary issue of arbitrability of the claims and reasons in support
thereof. The umpire did not write a separate order nor indicated in the
award .that he had applied his mind to the aspect that the claims were
arbitrable. The award should have contained a statement that the claims
were arbitrable and that he had given a consolidated award. In view of the
F
admitted position that there was no statement or separate order in the
non-speaking award regarding the arbitrability of the claims, it can not be
construed by implication that the umpire had considered the same. The
umpire is enjoined to consider a preliminary question of his jurisdiction
as to arbitrability of claims in items 2 to 5. It being a jurisdictional issue,
G though the umpire can not conclusively clothe himself with his conclusion
of arbitrability of the claims which is to be decided ultimately by the Civil
Court as a condition to exercise his power to decide the claims on merits,
the umpire is required to decide arbitrability of the claims and then to
proceed to decide the claims on merit. (177-B-D; 167-H; 168-A-BJ
H
Raipur Development Authority v. Chokhmal Contractors, [1989) 2 SCC
PREMIERFABRICATORS v. HEAVYENGG.CORPN.LTD.
163
721; Champsey Bhara and Co. v. Sivraj Balloo Spinning and Weaving Co. A
Ltd., AIR (1923) PC 66; Hindustan Construction Co. Ltd. v. State of J & K.
[1992] 4 SCC 217; Tarapore and Co. v. Cochin Shipyard Ltd., [1984] 2 SCC
680; M/s. Sudarshan Trading Co. v. State of Kera/a, [1989] 2 SCC 38, U.P.
Rajkiya Ninnan Nigam Ltd. v. Indore Pvt. Ltd., [1996] 2 SCC 667; Union of
India v. G.S. Atwal and Co. (Asansole ), [1994] 3 SCC 568 and Gujarat Water B
Supply and Sewerage Board v. Unique Erectors, [1989] 1 SCC 532, referred
to.
T.N. Electn'city Board v. Blidge Tunnel Constluctiom~ [1997] 4 SCC
121, relied on.
Anthony Walton; "Russel on A1bitration'~ (19th Edition) and R.S.
Bachwat: "law of Arbitration" (2nd Edn, 1987), Pages 154-155, referred to.
1.2. Since the preliminary issue was not decided by the umpire, which
c
is a pre condition to proceed with adjudication of the claims or merits, he
committed misconduct in giving the award. Therefore, the matter will go D
back to the umpire for reconsideration of the same afresh. If for any
reason, the umpire is not available, the parties may choose a new umpire
and if the parties fail to do so, the Court may appoint a new umpire who
will decide the matter afresh, clearly expressing his views on the arbitrability of claims 2 to 5 while deciding the matter. [177-F-H]
E
Sudarshan Trading Co. v. Govt. of Kerala. [1989] 2 SCC 38; Union of
India v. G.S. Atwals Co. (Asansole), [1996] 3 SCC 568; Tarapore and Co.
v. State of M.P., [1994] 3 SCC 521 and T.N. Electlicity Board v. Bridge
Tunnel Constrnction, [1994] 4 SCC 121, relied on.
Per Minority by M.M. Punchhi, J.
F
1. The award must be upheld as there is no error appeared on the
face of the record which would justify its vitiation. It is implied that the
umpire as a substitute of the arbitrators must be presumed to have known
that before he entered upon reference to decide the claims under item 2 to G
5 on merits, he would have to decide whether those items were arbitrable
but the same need not be in express terms. It can not be presumed that he
considered himself bound by the joint decision of the arbitrators regarding
the preliminary issue of referability of the claims, absolving him of the
duty from going into the question. It would thus in the circumstances be H
164.
SUPREME COURT REPORTS
(1997] 3 S.C.R.
A seen that obligating the umpire to make a speaking award in so far as the
question of referability in concerned, lest it vitiates his non-speaking
award on merit, goes to the very root of the independence of arbitrator.
This is impermissible in law and against the spirit of Arbitration Act, 1940.
The award of the umpire, as is plain, is a nonspeaking award in entirety.
B He has preluded it with the recorded awareness that differences between
the parties arose and the matter stood referred to arbitration in.pursuance
of the contract. In doing so he is presumed to have read the terms of the
contract, the terms of reference and scope of items 2 to 5 of the claims. He
is also presumed to have examined whether those claims were referable to
arbitration in terms of the contract. He is further presumed to have read
C the respective files of the two arbitrators and to have heard both parties
at length screening all documents submitted, to come to the base finding
that items 2-5 were referable. All the items were thus held to be arbitrable
D
E
F
resulting in the award for a sum of Rs. 80,000/- in favour of the appellant.
The award therefore, is valid and legal. [182-F -H; 183-A-D]
CIVIL APPELLATE JURISDICTION : Civil Appeal No 1852 of
1981.
From the Judgment and Order dated 19.12.79 of the Patna High
Court in Appeal from original Order No. 240 of 1975.
Pramod Swarup, Praveen Swaroop and Mrs. Praveena Swaroop for
the Appellant.
Ranjit Kumar for the Respondent.
The Judgment of the Court was delivered by
K. RAMASWAMY, J. We have the advantage to read the proposed
judgment by our esteemed brother Punchhi, J. Despite our deep and
abiding personal respects, we express our regards for our inability to agree
with the proposed judgment. Hence we are constrained to write this
G separate judgment.
This appeal by special leave arises from the judgment and order
dated December 19, 1979 made in A.0.0. No. 240of1975 by L.M. Sharma,
J. (as he then was) agreeing with the dissenting opinion of one of the
members of Division Bench of Patna High Court, viz., B. S. Sinha, J. The
H Result was that the award of the umpire stood set aside.
t
1
PREMIER FABRICATORS v. HEAVY ENGG. CORPN. LTD. (K RAMASWAMY, J.)
165
The appellant had entered into an agreement with the respondent on A
May 2, 1971 for execution of certain works. During the course of their
execution, certain disputes had arisen between them. Clause 78 of the
contract provided resolution of the disputes by arbitration. In furtherance
thereof, the parties had referred the disputes in 1972 to two arbitrators.
One of the disputes referred to them "whether claims referred to at items B
2, 3, 4 and 5 of Annexure-A are or are not referable to arbitration in terms
of the contract". The total claim including ite~ 2 to 5 was for Rs.
2,55,600/-. The arbitrators held that the claim Nos. 2 to 5 were referable
under arbitration agreement but they could not come to an agreement on
the merits of the claims. Therefore, they had appointed an umpire by their C
letter dated November 2, 1973. The umpire made a non-speaking award
directing the respondent to pay a lump sum of Rs. 80,000/- besides interest.
On an application made by the appellant, the Civil Court made the award
rule of the court and the application under Section 33 of Arbitration Act,
1940 (for short, the "Act") to set aside the award was dismissed. The
reipondent preferred an appeal in the High Court.
D
When the matter came before the Division Bench consisting of B.P.
Jha and B.S. Sinha, JJ., both the learned Judges agreed that one of the
terms of the reference was that the arbitrators were required to decide as E
to whether the claims referred to ~nder items 2 to 5 of Annexure-A are or
are not referable to arbitration in terms of the contract. They further held
that the finding by the arbitrators that the claims were arbitrable, was not
an interim award. The entire controversy including arbitrability of items 2
to 5 was at large and the umpire was to decide whether items 2 to 5 of
Annexure-A were arbitrable under contract. B. P. Jha, J. Held that when F
the matter was referred to an umpire, the whole dispute which was referred
to the arbitrators by the parties stood referred to the umpire. If a part of
the dispute was decided by the arbitrators, the arbitrators could not refer
the other half of the dispute to the umpire. The learned Judge observed
that "In my opinion, the whole dispute is referred to the umpire for the G
simple reason that the umpire acts in lieu of the arbitrators. The umpire is
entitled to give a consolidated award instead of giving the award on each
point. While setting aside an award the court can look at the award and
not on any other extraneous evidence on the record". Accordingly, the
learned Judge dismissed the appeal of the respondent. B.S. Sinha, J. held H
166
SUPREME COURT REPORTS
(1997) 3 S.C.R.
A if a dispute is capable of being split into different parts and the arbitrators
agreed on one part and disagreed on the other part, "I can see no reason
why the whole dispute must be referred to the umpire. An interim award
can be made in terms of Section 27 of the Act. Of course, if the dispute is
not capable of being split up and the arbitrators do not agree, the whole
B dispute will go to the umpire. In other words, as far as I can see, whether
the whole dispute was referred to the umpire or not depends upon the facts
and circumstances of each case for which no hard and fast rule can be laid
down." He held that the whole dispute had been referred to the umpire.
The arbitrators did not give an interim award to say that items 2 to 5 were
C arbitrable and then to further decide as to what amount was payable to the
respondent. It was not necessary to express the decision in that behalf.
"Therefore, the umpire had to consider firstly whether items 2 to 5 were
arbitrable or not. There is no such statement in the award of the umpire.
Therefore, to hold that items 2 to 5 were arbitrable would be speculative."
D Accordingly the learned Judge held that the judgment and decree of the
Civil Court making the award as rule of court is invalid and illegal. The
award was held to be illegal and on which could not be acted upon. When
the matter was referred to L.M. Sharma, J. [as he then was], in the first
instance, the learned Judge indicated that since the umpire could not
clothe himself with jurisdiction to decide conclusively whether items 2 to 5
E were arbitrable or not, the question was whether the learned Judge could
go into that question? Both the counsel had taken time and after consultation had stated before the learned judge that as the scope of reference
was limited to the question whether the umpire had to decide the arbitrability of items 2 to 5, the learned Judge could not go into the question
F whether the claims could have validly been referred to the arbitrators or
umpire and could conclusively decide the arbitrability thereof or whether
they were within the scope of the agreement itself or within the scope of
Section 36 of the Act. On the submission, the learned Judge had proceeded
ort the basis that both the learned Judges constituting the Division Bench
G were agreed that it was for the umpire to conside.r and decide as the
preliminary question of arbitrability of claims 2 to 5 under the contract.
The inference that the umpire "chose to give an award allowing the claim
partially" cannot be drawn. It was also held that unless it was possible to
draw only ?11~ inference from the impugned award, it was not permissible
H in law to arrive at a conclusion that on the basis of mere possibility of
_J
PREMIER FABRICATORS v. HEAVY ENGG. CORPN. LTD. [K RAMASWAMY, J.f
167
having arrived at the decision of preliminary question which was not stated A
in the expressed terms in the award, to infer that he considered the
arbitrability of items 2 to 5. Therefore, the learned Judge concluded thus:
"I, therefore, hold that the respondent, the applicant in the court below,
has failed to show that the umpire had decided the preliminary question
in its favour before proceeding to consider the claims on merits. The award B
must, therefore, be set aside. I accordingly agree with the conclusion
arrived at by Mr. Justice B.S. Sinha and regret to have taken a view
different from Mr. Justice B.P. Jha for whom I have great respect". The
learned Judge thus all-Owed the appeal and set aside the award.
The question, therefore, is : whether the umpire must be deemed to C
have decided arbitrability of items 2 to 5 of Annexure-A while giving a
non-speaking consolidated award including the claim of item I? It is seen
that one of specific references to the arbitrators was whether items 2 to 5
of the claim of the appellant are arbitrable under the agreement. In view
of the finding recorded by all the learned Judges that there is no express D
finding recorded by the umpire on the arbitrability of the claims in items
2 to 5, the question emerges : whether the umpire must be deemed to have
decided arbitrability of items 2 to 5? It is seen that both the learned Judges
of the Division Bench came to a positive finding that the reference itself
is of the arbitrability of the claims in items 2 to 5 under the agreement. E
The arbitrators were required to decide the same as a further step to
decide them on merits. Though, the arbitrators concluded that the claims
2 to 5 were arbitrable, both the learned Judges held that it was not an
interim award. The third learned Judge also agreed with that conclusion.
The entire dispute including arbitrability of claims in items 2 to 5 had F
thereby been referred to the umpire. The reference clearly manifests the
intention of the parties, when they preferred their dispute for adjudication
by the arbitrators, that it was a condition precedent of the umpire to
proceed to decide the claims on merits to decide the arbitrability of claims
2 to 5. He did not write a separate order nor indicated in the award that G
he had applied his mind to that aspect that the claims are abritrable. The
award should have contained a statement that the claims were arbitrable
and that he had given a consolidated award. His finding on arbitrability is
not conclusive. It is for the court to ultimately decide the controversy. The
umpire is enjoined to consider a preliminary question of his jurisdiction as H
168
SUPREME COURT REPORTS
(1997] 3 S.C.R.
A to arbitrability of claims in items 2 to 5 of Annexure-A. It being a jurisdictional issue, though the umpire cannot conclusively clothe himself with his
conclusion of arbitrability of items 2 to 5 which decision is to be taken
ultimately by the Civil Court as a condition to exercise his power to decide
the claims on merits, he is required to decide arbitrability of the claims in
B items 2 to 5 as preliminary issue and then to proceed to decide the claims
on merits. The award cannot be split into two parts but should be one of
integral whole, as was opined by the learned Judges constituting the
Division Bench. In a way, L.M. Sharma, J. [as he then was] also agreed in
that behalf.
c
The sole question for consideration, therefore, is : whether the
umpire having indicated the consolidated sum in his non-speaking award,
could be deemed to have decided the preliminary issue of arbitrability of
claims 2 to 5? We may, at the outset, state that the Constitution Bench in
D Raipur Development Authority v. Chokhamal Contractors, [1989] 2 SCC 721,
had held that unless the parties expressly agree, the arbitrator is not
required to give reasons in support of his award. The Court pointed out
the distinction between. the private award and the award touching the
coffers of the public exchequer and observed that in case the contracts
were entered into by and between the Government or instrumentality of
E the State on the one hand and private party on the other, they should
incorporate in the contract that the arbitrator should give reasons in
support of the award. In other cases it may not be incumbent upon the
arbitrator to give reasons in the award. In the Arbitration and Conciliation
Act, 1996 repealing the 1940 Act, it is indicated in Section 31 (3) that the
F
arbitral award shall state reasons upon which it is based unless the parties
agree that no reasons have to be given or the award is an arbitral award
on agreed terms under Section 30 thereof. In other words, under the 1996
Act, it is incumbent upon the arbitrator to give reasons in support of the
award unless the parties otherwise agree or give consent to the terms under
G Section 30.
In Champsey Bhara & Co. v. Jivraj Ba/loo Spinning & Weavfng Co.
Ltd., LR (1922) 50 IA 324 : AIR (1923) PC 66 the Privy Council held that
"(A)n error is law on the face of the award means that you can find in the
H
award or a document actually incorporated thereto, as for instance a note
t1
I
t:f
-
PREMIER FABRICATORS v. HEAVY ENGG. CORPN. LID. (K. RAMASWAMY, J.]
169
appended by the arbitrator stating the reasons for the judgment, some legal A
proposition which is the basis of the award and which you can then say is
erroneous. It does not mean that if in a narrative a reference is made to a
contention of one party, that opens the door to seeing first what that
contention is, and then going to the contract on which the parties" right
depend to see if that contention is sound. Here it is impossible to say, from B
what is shown on the face of the award, what mistake the arbitrators made.
The only way that the learned judges have arrived at finding what the
mistake was is by saying : ' inasmuch as the arbitrators awarded so and so,
and inasmuch as the letter shown that the buyer rejected the cotton, the
arbitrators can only have arrived at that result by totally misinterpreting
Rule 52.' But they were entitled to give their own interpretation to Rule 52 C
or any other article, and the award will stand unless, on the face of it, they
have tied themselves down to some special legal proposition which then,
when examined, appears to be unsound." Thus on the face of the award if
an erroneous proposition of law or an indication in that behalf is found
which under the law is not sustainable, it cannot be said that there is an D
error on the face of the award. This view was followed by this Court in
Hindustan Construction Co. Ltd. v. State of J & K., [1992] 4 SCC 217.
In Tarapore and Co. v. Cochin Shipyard Ltd. Cochin, [1984] 2 SCC
680, this Court was called upon to consider error of jurisdiction on the
arbitrability of the claims as a question of law. A two-Judge Bench had E
gone into the question of jurisdiction of the arbitrator to decide the
arbitrability of the dispute and held in para 10 that undoubtedly the
respondent proceeded to formulate the point in dispute between the
parties'On which the arbitrator was to be invited to give his award without
\
prejudice,to his right to contend that the dispute was not covered by the
F
arbitration clause and that the appellant was not entitled to any compensation in respect of the increase in the cost of imported pile driving
equipment and technical know-how fees. At page 692, this Court consider~d whether the arbitrator committed error within his jurisdiction or
exceeded his jurisdiction and pointed out thus :
"What is the effect of referring the specific question of law to
arbitration without prejudice to one's right to contend to the
contrary will be presently examined."
G
"If this issue specifically raises a question as to jurisdiction of H
170
A
B
c
D
E
F
G
H
SUPREME COURT REPORTS
[ 1997) 3 S.C.R.
the arbitrator to arbitrate upon the dispute set out in Point No. 2,
it appears to have been specifically referred to the arbitrator for
his decision. Parties, therefore, agreed to submit the specific question even with regard to the scope, ambit width and the construction of the arbitration clause so as to define its parameters and
contours with a view to ascertaining whether the claim advanced
by the appellant and disputed by the respondent would be covered
by the arbitration clause. Whether upon its true construction the
arbitration clause would include within its compass the dispute
thus raised between the parties was specifically put in issue because
parties were at variance about it."
"The arbitrator was thus required and called upon first to
decide whether the dispute is arbitrable as falling within the width •
and answer is in the affirmative, then alone the second point need
be examined. If the answer to the first point of reference is in the
negative in that if the arbitrator were of the opinion that the dispute
is not arbitrable as it would not fall within the scope, width and
ambit of the arbitration agreement, it would not be necessary for
him to determine whether the appellant was entitled to recover
anything by way of compensation. This aspect is being analysed in
depth to point out that the parties specifically referred the question
of construction of arbitration agreement, its width, ambit and
parameters vis-a-vis the disputes raised so as to decide whether
the dispute would fall within the purview of the arbitration agreement, in other words the jurisdiction of the arbitrator".
In para 12 of the judgment it was further elaborated that:
"The first point extracted hereinbefore would clearly show that the
specific question about the jurisdiction of the arbitrator to arbitrate
upon the dispute set out in Points Nos. 2, 3 and 4 was specifically
referred to the arbitrator. On the first point, the arbitrator had to
decide whether the claim made by the appellant and disputed by
the respondent would be covered by clause 40, i.e. the arbitration
clause. In other words, the specific question referred to the arbitrator was about his jurisdiction to arbitrate upon the disputes
covered by Points Nos. 2, 3, and 4, if and only if, upon a true
construction of the arbitration clause that is first paragraph of
PREMIER FABRICATORS v. HEAVY ENGG. CORPN. LTD. [K RAMASWAMY, J.]
171
Clause 40, would cover the disputed claim for compensation he A
can enter into the merits of the dispute and decide."
In Mis. Sudarshan Trading Co. v. State of Kerala, [1989] 2 SCC 38 a
Bench of two Judges had held that in order to establish whether the
jurisdiction has been exceeded or not "it has to be reiterated that an
arbitrator acting beyond his jurisdiction - is a different ground from the B
error apparent on the face of the award. In Halsbruy's Laws of England
II, 4th edn., Vol. 2 para 622 one of the misconducts enumerated, is the
decision by the arbitrator on a matter which is not included in the agreement or reference. But in such a case one has to determine the distinction
between an error within the jurisdiction and an error in excess of the C
jurisdiction. Whether ·a particular amount was liable to be paid or damages
liable to be sustained, was a decision within the competency of the arbitrator in this case. But purporting to construe the contract the court
could not take upon itself the burden of saying that this was contrary to
the contract and, as such, beyond jurisdiction. It has to be realised that D
there is a distinction between disputes as to the jurisdiction of the arbitrator and the disputes as to the exercise of that jurisdiction. There may
be a conflict as to the power of the arbitrator to grant a particular remedy.
Therein, it was held that the arbitrator !iad jurisdiction tq award the
amount and that, therefore, it was not a case of jurisdictional error but an
error within his jurisdiction.
E
In. U.P. Rajkiya Ninnan Nigam Ltd. v. lndure Pvt. Ltd., [1996) 2 SCC
667 a bench of three Judges [to which one of us, K. Ramaswamy, J., was a
member] had gone into the question whether the arbitrator can go into the
question whether there emerged any concluded contract and the claims are
F
arbitrable and whether he can get exclusive jurisdiction to decide those
questions by himself. It was held in para 13 that "the arbitrability of a claim
depends on the construction of the clause in the contract. The finding of
the arbitrator/arbitrators on arbitrability of the claim is not conclusive as
under Section 33, ultimately it is the court that decides the controversy. It
being a jurisdictional issue, the arbitrator/arbitrators cannot clothe them- G
selves with jurisdiction to conclusively decide the issue." In para 15 it was
held thus:
"The clear settled law thus is that the existence of validity of an
arbitration agreement shall be decided by the court alone. Ar- H
A
B
c
D
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[1997) 3 S.C.R.
bitrators, therefore, have no power or jurisdiction to decide or
adjudicate conclusively by themselves the question since it is the
very foundation on which the arbitrators proceed to adjudicate the
disputes. Therefore, it is rightly pointed out by Shri Adarsh Kumar
Goel, learned counsel for the appellant that they had by mistake
agreed for reference and that arbitrators could not decide the
existence of the arbitration agreement or arbitrability of the disputes without prejudice to the stand that no valid agreement
existed. Shri Nariman contended that having agreed to refer the
dispute, the appellant had acquiesced to the jurisdiction of the
arbitrators and, therefore, they cannot exercise the right under
Section 33 of the Act. We find no force in the contention. As seen,
the appellant is claiming adjudication under Section 33 which the
court alone has jurisdiction and power to decide whether any valid
agreement is existing between the parties. Mere acceptance or
acquiescing to the jurisdiction of the arbitrators for adjudication
of the disputes as to the existence of the arbitration agreement or
arbitrability of the dispute does not disentitle the appellant to have
the remedy under Section 33 through the court. In our considered
view the remedy under Section 33 is the only right royal way for
deciding the controversy."
E
Accordingly, it was held that the arbitrator cannot decide the arbitrability of the claim by himself and it was to be decided by the court. In
Union of India v. G.S. Atwal & Co. (Asanso/e), [1996) 3 SCC 568 a Bench
of two Judges, to which one of us, K. Ramaswamy, J. was a member, the
question was whether the arbitrator, when he enlarged his scope of the
F award in a non-speaking award, could conclusively decide the dispute and
award a consolidated sum. After elaborate consideration it was held in
paragraph 6 thus:
G
H
"To constitute an arbitration agreement, there must be an agreement that is to say the parties must be ad idem. Arbitrability of a
claim depends upon the dispute between the parties and the
reference to the arbitrator. On appointment, he enters upon that
dispute for adjudication. The finding of the arbitrator on the
arbitrability of the claim is not conclusive, as under Section 33
ultimately it is the court that decides the controversy. It can hardly
be within the arbitrator's jurisdiction to decide whether or not a
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PREMIER FABRICATORS v. HEAVYENGG.CORPN.LTD.[KRAMASWAMY,J.]
173
condition precedent to his jurisdiction has been fulfilled. The A
arbitrator had no power to decide his own jurisdiction. The arbitrator is always entitled to inquire whether or not he has jurisdiction to decide the dispute. He can refuse to deal with the matter
at all and leave the parties to go to the court if he comes to the
conclusion that he has no power to deal with the matter, or he can
consider the matter and if he forms the view that the contraction B
upon which the claimant is relying on and from which, if established, he alone has jurisdiction, he can proceed to decide the
dispute accordingly. Whether or not the arbitrator has jurisdiction
and whether the matter is referred to or is within the ambit of
clause for reference of any difference or dispute which may arise C
between the parties, it is for the court to decide it. The arbitrator
by a wrong decision cannot enlarge the scope of the submission.
It is for the court to decide finally the arbitrability of the claim in
dispute or any clause cir a matter or a thing contained therein or
the construction thereof."
Accordingly, the award was found to be in excess of jurisdiction and
was set aside.
In Tarapore Complex case (supra), the arbitrator had indicated his
D
mind in his non-speaking award thus:
E
"It has to be seen whether the term of the agreement permitted
entertainment qf the claim by necessary implication. It may be
stated that we do not accept the broad contention of Shri Nariman
that whatever is not excluded specifically by the contract can be
subject-matter of claim by the contractor. Such a proposition will F
mock at the terms agreed upon. Parties cannot be allowed to
depart from what they had agreed. Of course, if something flows
as a necessary concomitant to what was agreed upon, courts can
assume that too as a part of the contract between the parties."
On that basis, this Court had held that he had decided the ar- G
bitrability of the claims by his express indication in that behalf and that,
therefore, the award was held to be valid.
In Tarapore & Co. v. State of MP., [1994] 3 SCC 521 it was held that
an award rendered by going beyond the terms of the arbitration agreement H
174
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[1997] 3 S.C.R.
A is without jurisdiction. On the facts in that case, it was held that the dispute
was within the terms of the agreement and hence the award was not without
jurisdiction. This Court pointed out latent and patent errors and that
patent error was always amenable to correction. In Gujarat Water Supply
and Sewerage Board v. Unique Erectors, [1989] 1 SCC 532 one of the
B
c
D
questions referred was arbitrability of one of the items. T4i;: arbitrator in
his award had indicated thus:
"In the instant case, the arbitrator by virtue of the terms mentioned
in the order of this Court had to decide which of the disputes were
arbitrable and which were not. It is true that the arbitrator has not
specifically stated in the award that he had to decide the question
of arbitrability. The arbitrator has rested by stating that he had
heard the parties on the point of arbitrability of the claim and the
counter-claim. He has further stated that after 'considering all the
above aspects' and 'the question of arbitrability or nonarbitrability' he had made the award on certain aspects."
It was held that since the arbitrator had indicated his mind in the
award by awarding consolidated sum the validity of the non-reasoned
award was upheld.
E
In "Russel on Arbitration" [Nineteenth Edition] by Anthony Walton,
page 99, it is stated as under:
F
G
H.
"It can hardly be within the arbitrato(s jurisdiction to decide
whether or not a condition precedent to his jurisdiction has been
fulfilled. It has indeed several times been said bluntly that an
arbitrator has no power to decide his own jurisdiction and in one
case where rules of an institution prepared to conduct arbitrations
gave the arbitrator such power, the court will ignore this when
asked to enforce the award, and decide the question itself. However, an arbitrator is always entitled to inquire whether or not he ·
has jurisdiction. An umpire faced with a dispute whether or not
there was a contract from which alone his jurisdiction, if any, can
arise can matter at all and lease the parties to go to court, or he
can consider the matter and if he forms the view that the contract
upon which the claimant is relying and from which, if established,
alone his jurisdiction can arise is in truth the contract, he can
proceed accordingly."
PREMIERFABRICATDRS v. HEAVYENGG. CORPN.LTD.(KRAMASWAMY,J.]
175
In "Law of Arbitration" by R.S. Bachawat (2nd (1987) Edition] at A
pages 154-55, it is stated thus:
"An arbitrator cannot by mistake assume jurisdiction over a matter
on which he has no jurisdiction. If it is shown by the terms of the
submission or by extrinsic evidence that the arbitrator has adjudicated upon matters outside the scope of this authority the award B
cannot stand, however well meaning and honest the mistake might
have been. An arbitrator cannot give himself jurisdiction by a
wrong decision collateral to the merits as to facts on which the
limits of his jurisdiction depends. Where it was a condition precedent to his jurisdiction that the dispute should have arisen during C
a tenancy between the plaintiff and the defendant or in the event
of a collusion if certain works had been completed, the arbitrator
could not clothe himself with jurisdiction by a wrong decision on
the preliminary point. The question is not concluded against any
party by a finding of the arbitrator that he has jurisdiction. It is
for the court and not for the arbitrator to decide finally whether D
or not the arbitrator has jurisdiction and that is the law both in
India and in England."
" ... The question whether the matters referred were within the
ambit of the clause for reference of "any difference or dispute E
which may arise between the partners is for the court to decide."
" ... Disputes about the existence or validity of the contract and
as to the existence of facts which render it illegal must be determined by the court and not by the arbitrator. The arbitrator cannot
by his own finding clothe himself with jurisdiction. Supposing he F
finds that the arbitration agreement is valid such a finding cannot
bind the parties."
In Tamil Nadu Electricity Board v. Mis Bridge Tunnel Constructions
& Ors., (1997) 2 SCALE 653 a two-Judge Bench, to which one of us, K.
Ramaswamy, J., was a member, a similar question, as in the present case, G
had directly arisen for consideration. Therein, in a dispute raised under
Section 33 of the Act, one of the contentions raised was as to the ar•
bitrability of the claims put up by the respondent. The Court left open that
question and held that in the event of the dispute raised by the appellant
therein, the arbitrator was required to go into the question and if it decided H
176
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[1997] 3 S.C.R.
A
that question against it, it would be open to the appellant to have the award
challenged in the civil Court. The arbitrators differed on the question of
arbitrability and an umpire came to be appointed for decision on the point
of arbitrability. The umpire without deciding the arbitrability of the claim
gave consolidated sum in his non-speaking award. Considering the entire
B case law, this Court held : "(T)hus, it could be seen that prior to the
proceedings under Section 33, the court had left open the point of the nonarbitrability of the dispute and the umpire had to decide the dispute. In
the event of the decision going against the Board, the same is also entitled
to question the correctness of the award in a court of law". After considering the question, this Court held: "(I)t would thus be clear that the
C
arbitrator cannot clothe himself conclusively with the jurisdiction to decide
or omit to decide the arbitrability of a particular item or the claim made
by the parties. When a specific reference has been made to the arbitrator
and the parties raise the dispute of arbitrability, with the leave of the
court/by a direction of the court in a proceedings under Section 33, he is
D to decide the arbitrability of the dispute and make a decision while giving
reasons in support thereof. The decision of the arbitrator in granting a
particular sum by a non-speaking award, therefore, hinges upon the arbitrability of the dispute arising under the contract or upon a particular
item claimed thereunder. He is required to give. the decision thereon. The
question of decision by implication does not arise since his jurisdiction to
E
decide the dispute on merits hinges upon his jurisdiction to decide the
arbitrability of the dispute. In this case, in view of the finding recorded by
the court, which has become final, as referred to earlier, the arbitrator/umpire was enjoined to decide the arbitrability of the claims set up by the
respondent and disputed by the appellant. Admittedly, the award of the
p
umpire does not contain any decision on arbitrability of the claims". Since
the award contains the claims, in a non-speaking award where the claims
consist of arbitrable and non-arbitrable claims, it was held that it would be
difficult to discern as to what extent the umpire had considered the
admissible and inadmissible claims which he adjudged. In such a situation,
it would not be possible to discern to what extent he had exercised his
G jurisdiction vis-a-vis of the admissible claims and disallowed the non-arbitrable clai,rns. Thus it was not clear whether he exercised his authority in
abdiction of or in excess of his jurisdiction. Therefore, it was held to be an
error of jurisdiction, the very foundation for his decision. The award was
held to be in excess of his jurisdiction and was accordingly set aside. The
H umpire having been invested with jurisdiction to decide the arbitrability of
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PREMIER FABRICATORS v. HEAVY ENGG. CORPN. LTD.