# RAIPUR DEVELOPMENT AUTIIORITY ETC. ETC v. CHOKHAMAL CONTRACTORS ETC. ETC

- **Citation:** [1989] 3 S.C.R. 144
- **Court:** Supreme Court of India
- **Decided:** 1989-05-04
- **Case number:** Civil Appeal Nos. 3137-39 of 1985
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/raipur-development-autiiority-etc-etc-v-chokhamal-contractors-etc-etc-10527
- **Pages:** 38

## Headnote

A
RAIPUR DEVELOPMENT AUTIIORITY ETC. ETC.
v.
CHOKHAMAL CONTRACTORS ETC. ETC.
MAY 4, 1989
B
[R.S. PATHAK CJ., E.S. VENKATARAMIAH, RANGANATH
'r
,
MISRA, M.N. VENKATACHALIAH AND N.D. OJHA, JJ.]
Arbitration Act, 1940: Sections 16(J)(c), 20, 21 and JO(c), 32A ward-Whether liable to be set aside on ground that no reasons have
•
been given-Necessity to give reasons where statute or Court orders.
,.:
c
Government Contracts: Government and their instrumentalitiesShould as matter of policy and public interest-Ensure that arbitration
clause provides for speaking awards by arbitrators.
Administrative Law: Natural Justice-Principles of-Furnishing
reasons in support of decision-Not applicable to cases arising under
D
the law of arbitration which is intended for settlement of private disputes.
Practice And Procedure: Courts should be slow in taking decisions which will have effect of shaking rights/titles which have been
founded on particular interpretation of law.
The common question arising in the instant cases which was refer-
...l. ..
E
red to this larger Bench is whether an award passed under the provisions
of the Arbitration Act, 1940 is liable either to be remitted under section
16(1)(c) of the Act or liable to be set aside under section 30(c) thereof
merely on the ground that no reasons have been given by the arbitrator
or umpire, as the case may be, in support of the award.
It was urged that (i) subsequent to 1976 there has been a qualitative
J--..
F
change in the law of arbitration and that it has become necessary to insist
upon the arbitrator or the umpire to give reasons in support of the award
passed by him unless the parties to the dispute have agreed that no
reasons need be given by the arbitrator or umpire for his decision; (ii)
since under section 16(l)(c) of the Act the legality of an award can be
questioned in Court on the basis of an error apparent on the face of an
G
award, the only way of ensuring that an award is in accordance with law
is by insisting upon the arbitrator or umpire to give reasons for the award
r
and (iii) an arbitrator or an umpire discharges a judicial function while
functioning as an arbitrator or an umpire under the Act, and, therefore,
is under an obligation to observe rules of natural justice while discharging his duties, (iv) that the concept of natural justice had undergone a
H
great deal of change in recent years, and the requirement of giving
144
. R.D.A. v. CHOKHAMAL CONTRACTORS
145
reasons for a decision should be treated as a new rule of natural justice.
While answering the question in the negative and remitting the
cases to the Division Bench for disposal in accordance with law, this Court,
HELD: (I) 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. [161C-D]
(2) 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. [161D-E]
(I) University of New South Wales v. Max Cooper & Sons Pty.
Ltd. 35 Australian Law Reports p. · 219; (2) Hodgkinson v. Fernie
& Anr., [1857] 3 C.B. (N.S.) 189=140 English Reports p. 712; (3)
Champsey Bhara & Company v. Jivraj Ba/loo Spinning and Weaving
Company Ltd., A.LR. 1923 Privy Council 66, (4); Seth Thawardas
Pherumal v. The Union of India, [1955] 2 S.C.R. 48 (5) Jivarajbhai
Ujamshi Sheth & Ors. v. Chintamanrao Balaji & Ors., [1964] 5
SCR 480 (6) Bungo Steel Furniture Pvt. Ltd. v. Union of India,
[1967] I SCR 633, (7) Sta

## Text

_Characters 0–39,906 of 91,547. This is a partial read: ask again with offset=39906 for what follows._

A
RAIPUR DEVELOPMENT AUTIIORITY ETC. ETC.
v.
CHOKHAMAL CONTRACTORS ETC. ETC.
MAY 4, 1989
B
[R.S. PATHAK CJ., E.S. VENKATARAMIAH, RANGANATH
'r
,
MISRA, M.N. VENKATACHALIAH AND N.D. OJHA, JJ.]
Arbitration Act, 1940: Sections 16(J)(c), 20, 21 and JO(c), 32A ward-Whether liable to be set aside on ground that no reasons have
•
been given-Necessity to give reasons where statute or Court orders.
,.:
c
Government Contracts: Government and their instrumentalitiesShould as matter of policy and public interest-Ensure that arbitration
clause provides for speaking awards by arbitrators.
Administrative Law: Natural Justice-Principles of-Furnishing
reasons in support of decision-Not applicable to cases arising under
D
the law of arbitration which is intended for settlement of private disputes.
Practice And Procedure: Courts should be slow in taking decisions which will have effect of shaking rights/titles which have been
founded on particular interpretation of law.
The common question arising in the instant cases which was refer-
...l. ..
E
red to this larger Bench is whether an award passed under the provisions
of the Arbitration Act, 1940 is liable either to be remitted under section
16(1)(c) of the Act or liable to be set aside under section 30(c) thereof
merely on the ground that no reasons have been given by the arbitrator
or umpire, as the case may be, in support of the award.
It was urged that (i) subsequent to 1976 there has been a qualitative
J--..
F
change in the law of arbitration and that it has become necessary to insist
upon the arbitrator or the umpire to give reasons in support of the award
passed by him unless the parties to the dispute have agreed that no
reasons need be given by the arbitrator or umpire for his decision; (ii)
since under section 16(l)(c) of the Act the legality of an award can be
questioned in Court on the basis of an error apparent on the face of an
G
award, the only way of ensuring that an award is in accordance with law
is by insisting upon the arbitrator or umpire to give reasons for the award
r
and (iii) an arbitrator or an umpire discharges a judicial function while
functioning as an arbitrator or an umpire under the Act, and, therefore,
is under an obligation to observe rules of natural justice while discharging his duties, (iv) that the concept of natural justice had undergone a
H
great deal of change in recent years, and the requirement of giving
144
. R.D.A. v. CHOKHAMAL CONTRACTORS
145
reasons for a decision should be treated as a new rule of natural justice.
While answering the question in the negative and remitting the
cases to the Division Bench for disposal in accordance with law, this Court,
HELD: (I) 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. [161C-D]
(2) 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. [161D-E]
(I) University of New South Wales v. Max Cooper & Sons Pty.
Ltd. 35 Australian Law Reports p. · 219; (2) Hodgkinson v. Fernie
& Anr., [1857] 3 C.B. (N.S.) 189=140 English Reports p. 712; (3)
Champsey Bhara & Company v. Jivraj Ba/loo Spinning and Weaving
Company Ltd., A.LR. 1923 Privy Council 66, (4); Seth Thawardas
Pherumal v. The Union of India, [1955] 2 S.C.R. 48 (5) Jivarajbhai
Ujamshi Sheth & Ors. v. Chintamanrao Balaji & Ors., [1964] 5
SCR 480 (6) Bungo Steel Furniture Pvt. Ltd. v. Union of India,
[1967] I SCR 633, (7) State of Rajasthan v. Mis. R.S. Sharma & Co .•
[1988] 4 sec 353, referred to.
(3) The people in India as in other parts of the world such as
England, U.S.A. and Australia have become accustomed to the system
of settlement of disputes by private arbitration and have accepted
awards made against them as binding even though no reasons have
been given in support of the awards for a long time. ·They have attached
more importance to the element of finality of the awards than their
legality. [178D]
. (4) Courts should be slow in taking decisions which will have the
effect of shaking rights and titles which have been founded through
a long time upon the conviction that a particular interpretation of
law is the legal and proper one and is one which will not be departed
from. [179C-D]
·
Brownsea Havel Properties v. Pooje Corporation, [1958] Ch. 74
(C.A.), referred to.
•
A
B
c
D
E
F
G
H
146
SUPREME COURT REPORTS
[1989) 3 S.C.R.
A
(5) Even after the passing of the English Arbitration Act, 1979
unless a court requires the arbitrator to give reasons for the award, an
award is not liable to be set aside merely on the ground that no reasons
have beeu given in support ofil. [JSOA-B)
(6) The foundation of any arbitration proceeding is the existence
B of an arbitration agreement between the persons who are parties to the
dispute. It is not as if people are without any remedy at all in cases
where they find that it is in their interest to require the arbitrator to
give reasons for the award. In cases where reasons are re11uired, it is
open to the parties to the dispute to introduce a term either in the
arbitration agreement or in the deed of submission requiring the
C arbitrators to give reasons in support of the award. But there may be
many transactions in which parties lo the dispute may not relish the
disclosure of the reasons for the award. [ISIE!
Firm Madan/a/ Roshanlal Mahajan v. Hukumchand Mills Ltd.
Indore, [1967] I S.C.R. 105; N. Chelapan v. Secretary, Kera/a State
D Electricity Board & Anr., [1975] 2 S.C.R. 811, referred to.
(7) The two well recognised principles of natural justice are (i)
that a Judge or an arbitrator who is entrusted with the duty to decide . a
dispute should be disinterested and unbiased (nemo judex in cause sua);
and (ii) that the parties to dispute should be given adeqnale notice and
E opportunity lo be heard by the authority (audi alteram partem). Giving
reasons in support of a decision was not considered to he a rule of
natural justice either under the law of arbitration or under administrative law. [I7ICJ
(IO) Payyavula Vengamma v. Payyavule Kasanna & Ors., [1953)
F S.C.R. 119; (II) Harvey v. Shelton, [1844] 7 Beav. 455 at p. 462; (12)
Haigh v. Haigh, [1861] 31 L.J. Ch. 420; (13) Som Datt Datta v. Union
of India & Ors., [1969) 2 S.C.R. 177; (14) Bhagat Payyavu/a v. The Union
of India & Urs., [1967) J S.C.R. 302; (15) Siemens Engineering &
Manufacturing Co. of India Ltd. v. Union of India & Anr., [1976)
Supp. S.C.R. 489; (16) Associated Cement Companies Ltd. v. P.N.
G Sharma & Anr., [1965) 2 S.C.R. 366; (16) A.K. Kraipak & Ors. v.
Union of India & Ors., [1970) I S.C.R. 457, referred to.
(8) A distinction has to be made between statutory arbitrations
and private arbitrations. What applies generally to settlement of disputes by authorities governed by public law need not be extended to all
H cases arising under private law such as those arising under the law of
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R.D.A. v. CHOKHAMAL CONTRACTORS
147
arbitration which is intended for settlement of private disputes. [ l 78A-B]
Rohtas Industries Ltd. & Anr. v. Rohtas Industries Staff Union &
Ors., [1976] 3 S.C.R. 12, referred to.
A
(9) It is no doubt true that in the decisions pertaining to Administrative Law, this Court in cases has observed that the giving of
B
reasons in an administrative decisions is a rule of natural justice by an
extension of the prevailing rule. It would be in the interest of the world
of commerce that the said rule is confined to the area of Administrative
Law. [1790-E]
(10) The trappings of a body which discharges judicial functions
C
and required to act in accordance with law with their concomitant
obligations for reasoned decisions, are not attracted to a private adjudication of the nature of arbitration as the latter is not supposed to exert
the State's sovereign judicial power. [ 180F-G]
(11) It will not be justifiable for Governments or their instruD
mentalities to enter into arbitration agreements which do not expressly
stipulate the rendering of reasoned and speaking awards. Governments
and their instrumentalities should, as a matter of policy and public and
private interest if not as a compulsion of law-ensure that wherever
they enter into agreements for resolution of disputes by resort to private
arbitration, the requirement of speaking awards is expressly stipulated E
and ensured. It is for Governments and their instrumentalities to
ensure in future this requirement as a matter of policy in the larger
public interest. Any lapse in that behalf might lend itself to or perhaps
justify the legitimate criticism that Government failed to provide
against possible prejudice to public-interest. [1818-D]
(12) A decision on the question involves a question of legislative
policy which should be left to the decision of Parliament. It is significant
that although nearly a decade ago the Indian Law Commission submitted
F
its report on the law of arbitration specifically mentioning therein that
there was no necessity to amend the law of arbitration requiring the arbitrator to give reasons, Parliament has not chosen to take any step in the G
direction of the amendment of the law of arbitration. [178H; I79G-H]
( 13) In the circumstances and particularly having regard to the
various reasons given by the Indian Law Commission for not recommending to the Government to introduce an amendment in the Act
requiring the arbitrators to give reasons for their awards, it may not be
H
148
SUPREME COURT REPORTS
[1989) 3 S.C.R.
A appropriate to take the view that all awards which do not contain
reasons should either be remitted or set aside. [l78GI
B
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos.
3137-39 of 1985 etc. etc.
From the Judgment and Order dated 10.4.1985 of the Madhya
Pradesh High Court in Misc. Appeal Nos. 176 to 178 of 1983.
F.S. Nariman, G.L. Sanghi, Aspi Chimoi, A.L. Pandiya, Rajan
Karanjawala, S.C. Sharma, Ms. Meenakshi Arora, Manik Karanjawala, N. Nettar, G.S. Narayana, R.K. Mehta, Shri Narain, Sandeep
C
Narain, D.P. Mohanty, Ashok Kumar Panda, R.K. Patri and Jatinder
Sethi for the Appellants.
Soli J. Sorabjee, A.K. Sen, M.H. Baig, Raja Ram Agarwalla,
P.A. Choudhary, A.K. Ganguli, M.C. Bhandare, S. Ganesh, P.S. ·
D Shroff, Randeep Singh, Shrjawala, R. Sasiprabhu, S.S. Shroff, S.A.
Shroff, Arnn Madan, R.K. Sahoo, J.D.B. Raju, M.M. Kshatriya,
T.V.S.N. Chari, T. Sridharan, Ms. Mridula Ray, S.K. Sahoo, N.D.B.
Raju, Aruneshwar Gupta, P.P. Juneja, S.K. Bagga, P.N. Mishra, H.J.
Zaveri and B.S. Chauhan for the Respondents.
.l
E
Milan Banerjee, P.P. Rao, A. Mariarputham, C.M. Nayar,
A.K. Chakravorty, Mrs. J. Wad. Mrs. Aruna- Mathur for the
Intervener.
The Judgment of the Court was delivered by
F
VENKATARAMIAH, J. The common question which arises for
consideration in these cases which are very neatly argued by learned
counsel on both the sides is whether an award passed under the provisions of the Arbitration Act, 1940 (hereinafter referred to as 'the Act')
is liable either to be remitted under section 16( 1)( c) of the Act or liable
to be set aside under section 30( c) thereof merely on the ground that
G no reasons have been given by the arbitrator or umpire, as the case
may be, in support of the award.
Ordinarily all disputes arising under a contract have to be settled
by courts established by the State. Section 28 of the Indian Contract
Act, 1872 provides that every agreement by which any party thereto is
H restricted absolutely from enforcing his rights under or in respect of
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R.D.A. v. CHOKHAMAL CONTRACTORS [VENKATARAMIAH, J.l
149
any contract, by the usual legal proceedings in the ordinary tribunals,
A
or which limits the time within which he may thus enforce his rights, is
void to that extent. Exception 1 to the said section 28, however, provides that the said section shall not render illegal a contract by which
two or more persons agree that any dispute which may arise between
them in respect or any subject or class of subjects shall be referred to
arbitration, and that only the amount awarded in such arbitration shall
B
be recoverable in respect of the dispute so referred.
A brief history of the English Law of Arbitration, is given in the
learned treatise~ The Law and Practice of Commercial Arbitration in
England by Sir Michael J .. Mustill and Stewart C. Boyd. For
centuries commercial men preferred to use arbitration rather than the C
courts to resolve their business disputes on account of the inherent
advantages in the settlement of disputes by arbitration. They preferred
this alternative method of settlement of disputes to the ordinary
method of settlement through courts because arbitration proceedings
were found to be cheap and quick. It was no doubt true that the courts
repeatedly expressed doubts as to the wisdom of this preference as
D
refiected by the current opinion that arbitration was an ineffective
procedure, not that it was undesirable in itself. The commercial
community, has been however, insisting on the right to arbitration and
has always exhibited an interest in seeing that the system is made to
work as well as possible. This led to repeated statutory intervention.
Accordingly laws were passed from time to time to make the arbitraE
tion proceedings effective. The English Arbitration Act of 1950 and
the English Arbitration Act, 1979 are the two major pieces of legislation which now control the arbitration proceedings in England. The
legal requirements of an award under English Law are succinctly given
in 'the Hand Book ·of Arbitration Practice' by Ronald Bernstein
(1987). English Law does not impose any legal requirement as to the F
form of valid award but if the arbitration agreement contains any
requirement to the form of the award the award should meet those
requirements. The award must be certain. It could be either interim or
final. An award without reasons is valid. "The absence of reasons does
not invalidate an award. In many arbitrations the parties want a
speedy decision from a tribunal whose standing and integrity they G
respect, and they .are content to have an answer Yes or No; or a figure
of X. Such an award is wholly effective; indeed, in that it cannot be
appealed as being wrong in law it may be said to be more effective than
a reasoned award."
Section 1 of the English Arbitration Act, 1979, however, proH
A
150
SUPREME COURT REPORTS
[1989] 3 S.C.R.
vides that if it appears to the High Court that an award does not or
does not sufficiently set out the reasons for the award in sufficient
detail to enable the court to consider any question of law arising out of
it, the court has power to order the arbitrator or umpire to give
reasons or further reasons.
B
In the United States of America as a general rule an arbitration
c
D
award must contain the actual decision which results from an arbitrator's consideration of the matter submitted to them but the
arbitrator need not write opinion with any specificity as a court of law
does unless otherwise provided by a statute or by the submission itself.
Arbitrators are not required to state in the award each matter considered or to set out the evidence or to record findings of facts or
conclusions of law. They need not give reasons for their award and
conclusions or the grounds which form the basis for the arbitration
determination, describe the process by which they arrived at their
decision or the rationale of the award. Although such matters are not
required, the award is not necessarily invalidated because it sets out
the reasons or the specific findings, matters, or conclusions on which it
is based and faulty reasoning if disclosed does not by itself vitiate the
award. (See Corpus Juris Secundum, Vol. VI pp. 324-325).
In Australia too an arbitrator, unless required under section 19
of the Australian Arbitration Act, 1902 to state in a special case a
E question of law is under no obligation in law to give his reasons for his
decision (vide University of New South Wales v. Max Cooper & Sons
Pvt. Ltd., 35 Australian Law Reports p. 219).
An instructive survey of the Indian Law of Arbitration is to be
found in the learned lecture delivered by Nripendra Nath Sircar in the
F
Tagore Law Lectures series of the Calcutta University entitled "Law
of Arbitration in British India". After referring to the provisions of the
Bengal Regulation Act and the Madras Regulation Act, the learned
lecturer traces the history of the Law o( Arbitration in India in detail
commencing with Act VIII of 1859 which codified the procedure of
civil courts. Sections 312 to 325 of Act VIII of 1859 dealt with arbitraG
tion between parties to a suit while sections 326 and 327 dealt with
arbitration without the intervention of a court. These provisions were
in operation when the Indian Contract Act, 1872, which permitted
settlement of disputes by arbitration under section 28 thereof as stated
at the commencement of this judgment came into force. Act VIII of
1859 was followed by later codes relating to Civil Procedure, namely,
H Act X of 1877 and Act XIV of 1882 but not much change was brought
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R.D.A. v. CHOKHAMAL CONTRACTORS IVENKATARAMIAH, J.]
151
about in the law relating to arbitration proceedings. It was in the year
1899 that an Indian Act entitled the Arbitration Act of 1899 came to be
passed. It was based on the model of the English Act of 1889. The 1899
Act applied to cases where if the subject-matters submitted to arbitration were the subject of a suit, the suit could whether with leave or
otherwise, be instituted in a Presidency town. Then came the Code of
Civil Procedure of 1908. Schedule II to the said Code contained the
provisions relating to the law of arbitration which extended to the
other parts of British India. The Civil Justice Committee in 1925
recommended several changes in the arbitration law and on the basis
of the recommendations by the Civil Justice Committee, the Indian
Legislature passed the Act, i.e., the Arbitration Act of 1940, which is
currently in force. The salient provisions of the Act which are relevant
for purposes of this case are these.
The Act as its preamble indicates is a consolidating and amending Act and is an exhaustive code in so far as the law relating to
arbitration is concerned. An arbitration may be without intervention
of a court or with the intervention of a court where there is no suit
pending or it may be an arbitration in a suit. Unless there is an arbitration agreement to submit any present and future differences to arbitration to which a person is a party, he cannot be compelled to have a
dispute in which he is concerned settled by arbitration. The foundation
of any arbitration proceeding is therefore the existence of an arbitration agreement between the persons who are parties to the dispute.
Every arbitration agreement unless a different intention is expressed
therein, shall be deemed to include the provisions set out in the First
Schedule to'the Act in so far as they are applicable to the reference.
The parties to an arbitration agreement may agree that any reference
thereunder shall be to an arbitrator or arbitrators to be appointed by a
person designated in the agreement either by name or as the holder for
the time being of any office or appointment. The authority of an
appointed arbitrator or umpire cannot be revoked except with the
leave of the court, unless a contrary intention is expressed in the
arbitration agreement. An arbitration agreement does not come to an
end by death of parties thereto but shall in such event be enforceable
by or against the legal representative of the deceased. The authority
of an arbitrator does not stand revoked by the death of any party by
whom he was appointed. In any of the following cases (a) whe;e an
arbitration agreement provides that the reference shall be to one or
more arbitrators to be appointed by consent of the parties, and all the
parties do not after differences have arisen, concur in the appointment
or appointments; or (b) if any appointed arbitrator or umpire neglects
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152
SUPREME COURT REPORTS
[1989] 3 S.C.R.
A or refuses to act, or is incapable of acting, or dies, and the arbitration
agreement does not show that it was intended that the vacancy should
Ill)! be supplied and the parties or the arbitrators, as the case may be,
do not supply the vacancy; or ( c) where the parties or the arbitrators
are required to appoint an umpire and do not appoint him any party
may serve the other parties or the arbitrators, as the case may be, with
B a written notice to concur in the appointment or appointments or in
supplying the vacancy. If the appointment is not made within fifteen
clear days after th.e service of the said notice, the court may on the
application of the party who gave the notice and after giving the other
parties an opportunity of being heard, appoint an arbitrator or
arbitrators or umpire, as the case may be, who shall have like power to
C act on the reference, and to make an award as if he or they bad been
appointed by consent of all parties. The Court may on an application
of any party to a reference remove an arbitrator or umpire who fails to
use all reasonable dispatch in entering on and proceeding with the
reference and making an award. The court may remove an arbitrator
or umpire who has misconducted himself or the proceedings. Where
D the court removes an umpire who has not entered on the reference or
one or more arbitrators (not being all the arbitrators), the court may
on the application of any party to the arbitration agreement, appoint
persons to fill the vacancies. The arbitrators or umpire shall, unless a
different intention is expressed in the agreement have power to
administer oath to the parties and witnesses appearing; state a special
E case for the opinion of the court on any question of law involved, or
state the award, wholly or in part, in the form of a special case of such
question for the opinion of the court; make the award conditional or in
the alternative; correct in an award any clerical mistake'or error arising from any accidental slip or omission; and administer to any party to
the arbitration such interrogatories as may, in the opinion of the
F arbitrators or umpire, be necessary. Section 14 of the' Act provides
that when the arbitrators or umpire have made their award, they shall
sign it and shall give notice in writing to the parties of the making and
signing thereof and of the amount of fees and charges payable in
respect of the arbitration and award. While an award should contain
the decision of the arbitrators or umpire of the case, as the case may
G be, the Act does not say in express terms that an award should contain
the reasons in support of the decision. The arbitrators or umpire shall
at the request of any party to the arbitration agreement or any person
claiming under such party or if so directed by the court and upon
payment of the fees and charges due in respect of the arbitration and
award and of the costs and charges of filing the award, cause the award
H or a signed copy of it, together with any depositions and documents
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R.D.A. v. CHOKHAMAL CONTRACTORS [VENKATARAMIAH, J.)
153
which may have been taken and proved before. them, to be filed in
court, and the court shall thereupon give notice to the parties of the
filing of the award. Sections 15, 16, 17 and 30 of the Act which. are
relevant for purposes of this case read as follows:
15.
Power of the Court to modify award.-The Court
may by order modify or correct an award-
(a) where it appears that a part of the award is upon c
matter not referred to arbitration and such part'
can be separated from the other part and does noi
affect the decision on the matter referred, or
A
B
(b) where the award is imperfect in form, or contains C
any obvious error which can be amended without
affecting such decision; or
(c) where the award contains a clerical mistake or an
error arising from an accidental slip or omission.
D
16. Power to remit award. (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 separated without
affecting the determination of the matters; 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.
(2) Where an award is remitted under sub-section (1) the
Court shall fix the time within which the arbitrator or
umpire shall submit his decision to the Court.
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(3) An award remitted under sub-section (1) shall become
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it and submit his decision within the time fixed.
17. Judgment in terms of award. Where the Court sees no
cause to remit the award or any of the matters rekrred to
arbitration for reconsideration or to set aside the award,
the Court shall, after the time for making an application to
set aside the award has expired, or such application having
been made, after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so
pronounced a decree shall follow and no appeal shall lie
from such decree except on the ground that it is in excess
of, or not otherwise in accordance with, the award.
30. Grounds for setting aside award.-An award shall not
be set aside except on one or more of the following
grounds, namely:
(a) that an arbitrator or umpire has misconducted
himself or the proceedings;
y
(b) that an award has been made after the issue of an
order by the Court superseding the arbitration or
after arbitration proceedings have become in_..l
valid under section 35;
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( c) that an award has been improperly procured or is
otherwise invalid.
Section 15 of the Act deals with the power of the Court to modify
award. Section 16 of the Act deals with its power to remit an award
F
and section 30 of the Act deals with the power of the Court to set aside
an award. Section 17 of the Act provides that where the court sees no
cause to remit the award or any of the matters referred to arbitration
for recon~ideration or to set aside the award, the court shall, after the
time for making an application to set aside the award has expired, or .
such application having been made, after refusing it, proceed to proG
nounce judgment according to the award, and upon the judgment so
pronounced a decree shall follow and no appeal shall lie from such
decree except on the ground that it is in excess of, or not otherwise in
accordance with, the award. The period for getting an award remitted
for reconsideration or for setting it aside is prescribed under Article 119
of the Limitation Act, 1963. Section 39 of the Act provides that an
H appeal shall lie from the following orders passed under the Act; (!)
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R.D.A. v. CHOKHAMAL CONTRACTORS {VENKATARAMIAH, J.l
155
superseding an arbitration; (2) on an award stated in the form of a
special case; (3) modifying or correcting an award; (4) filing or refusing to file an arbitration agreement; (5) staying or refusing to stay legal
proceedings where there is an arbitration agreement; and (6) setting
aside or refusing to set aside an award and from no others to the court
authorised by law to hear appeals from original decree of the court
' '(. passing the orders. Section 46 of the Act makes the Act applicable to
statutory arbitrations, save in so far as is otherwise provided by any
law for the time being in force, the provisions of the Act apply to all
~ statutory arbitrations. These are broadly the provisions of the Act
;;:...__which govern an arbitration proceeding.
A
B
In many of the cases in which awards are passed by arbitrators
~-under auspices of institutions like Chambers of Commerce it may not
C
be necessary for the parties to the disputes to go to the Court to get
rules issued in terms of the awards since persons against whom awards
are mad.e would be willingly complying with the awards for it would be
in their interest to do so in order to maintain their prestige iii the
business world. But in other cases where there is no guarantee of ready
D
compliance with the awards by those against whom they are made it
becomes necessary to take appropriate steps under the Act to get the
awards filed in the Court under section 14 of the Act and to seek the
__,C. assistance of the Court in getting decrees passed in terms of the awards
·
'so that the decrees can be executed through court for the realisation of
the fruits of the award. At the same time the Act provides the necesE
sary machinery for getting the award remitted to the arbitrators or the
umpire, _as the case may be, for reconsideration or for getting the
award set aside in cases falling under section 30 thereof. Under -the
1 Indian Arbitration Act, 1899 which applied to areas lying within the
_)Presidency towns section 14 provided as follows:
"14. Where an arbitrator or umpire has misconducted
himself, or an arbitration or award has been improperly
procured, the Court may set aside the award."
F
This section was couched in the same language in which section
11(2) of the English Arbitration Act, 1889 was couched. Para 15 of the G
'-'(·Second Schedule to the Code of Civil Procedure, 1908 which was
applicable to the rest of British India read as follows:
"15. . ...... But no award shall be set aside except on one
of the following grounds, namely:
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(a) corruption or misconduct of the arbitrator or
umpire:
(b) either party having been guilty of fraudulent concealment of any matter which he ought to have disclosed,
or of wilfully misleading or deceiving the arbitrator or
umpire;
·y ·
( c) the award having been made after the issue of an
order by the Court superseding the arbitration and pro-
. ,.__
ceeding with the suit or after the expiration of the period 1',
allowed by the Court, or being otherwise invalid."
'
Then followed the Act, i.e., the Indian Arbitration Act, 1940~
which extended to the whole of the British India w.e.f. July 1, 1940
superseding the Indian Arbitration Act, 1899 and the Second Schedule
to the Code of Civil Procedure, 1908. Section 30 of the Act provides
that an award shall not be set aside except on one or more of the
following grounds, namely:
(a) that an arbitrator or umpire has misconducted himself or the
proceedings;
(b) that an award has been made after the issue of an order by
,_,,l,
E
the Court superseding the arbitration or after arbitration proceedings have become invalid under section 35; .
( c) that an award has been improperly procured or is otherwise
invalid.
F
It may be noticed that the general ground, namely, the award
G
being 'otherwise invalid' for setting aside an award which appeared for
the first time in the Second Schedule to the Civil Procedure Code, 1908
was not to be found either in the Indian Arbitration Act, 1899 or in the
English Arbitration Act, 1889 which contained inter alia two grounds
for setting aside an award, namely:
.\
(i) that an arbitrator or an umpire had misconducted himself; y
and
·
(ii) the award had been improperly procured.
H In connection with the English Arbitration Act, 1889 and the Indian
R.D.A. v. CHOKHAMAL CONTRACTORS [VENKATARAMIAH, J.l
157
- "'(
, Arbitration Act, 1899 certain principles had become well-settled
A
although neither of these statutes made reference to illegality or error
apparent on the face of the award. In one of the cases frequently
referred to in later decisions, namely, Hodgkinson v. Fernie and
another, [1857] 3 C.B. (N.S.) 189=140 English Reports. p. 712 it was
recognised that the principle had been firmly established that where an
·y error of law appeared on the face of the· award or upon some paper
B
,,:._.,
accompanying or forming part of the award that constituted a ground
for setting aside the award. Williams, J. who agreed with Cockburn,
C.J. in the said decision observed thus:
_J__
"I am entirely of the same opinion. The law has for many
years been settled, and remains so at this day, that, where a
cause or matters in difference are referred to an arbitrator,
whether a lawyer or a layman, he is constituted the sole and
final judge of all questions both of law and of fact. Many
cases have fully established that position, where awards
have been attempted to be set aside on the ground of the
admission of an incompetent witness or the rejection of a
competent one. The court has invariably n1et those applications by saying, 'You ha·;e constituted your own tribunal;
you are bound by its decision.' The only exceptions to that
rule, are cases where the award is the result of corruption
or fraud, and one other, which, though it is to be regretted,
is now, I think, firmly established, viz. where the question
of law necessarily arises on the face of the award, or upon
some paper accompanying and forming part of the award.
Though the propriety of this latter may very well be
doubted, I think it may be considered as established."
J.
In Champsey Bhara & Company v. Jivraj Balloo Spinning and
Weaving Company Ltd., A.I.R. 1923 Privy Council, 66 which was a
case arising from the High Court of Bombay, the Privy Council following the decision in Hodgkinson v. Fernie, (supra) observed thus:
"Now the regret expressed by Williams, J., in Hodgkinson
v. Ferme, (2) has been repeated by more than one learned
Judge, and it is certainly not to be desired that the exception should be in any way extended. An error in law on the
face of the award means, in their Lordships' view, that you
can find in the award or a document actually incorporated
thereto, as for instance, a note appended by the arbitrator
stating the reasons for his judgment, some legal proposic
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tion which is the basis of the award and which you can then
say is erroneous."
The ground arising out of an error of law apparent on the face of
the award prima facie appears to fall either under section 16{l)(c) of
the Act, which empowers the Court to remit the award to the arbitrator where an objection to the legality of the award which is apparent upon the face of it is successfully taken, or under section 30(c) of
the Act which empowers the Court to set aside an award if it is
'otherwise invalid'. The following two decisions relied on the said two
provisions of law respectively.
This Court in Seth Thawardas Pherumal v. The Union of India,
[ 1955] 2 SCR 48 approved the view expressed in the case of Champsey
Bhara & Company (supra) in the following words at pages 53-54 thus:
"In India this question is governed by section 16( 1 )( c) of
the Arbitration Act of 1940 which empowers a Court to
remit an award for reconsideration 'where an objection to
the legality of the award is apparent upon the face of it'.
This covers cases in which an error of law appears on the
face of the award. But in determining what such an error is,
a distinction must be drawn between cases in which a question of law is specifically referred and those in which a
decision on a question of law is incidentally material {however necessary) in order to decide the question actually
referred. If a question of law is specifically referred and it is
evident that the parties desire to have a decision from the
arbitrator about that rather than one from the Courts, then
the Courts will not interfere, though even there, there is
authority for the view that the Courts will interfere if it is
apparent that the arbitrator has acted illegally in reaching
his decision, that is to say, if he has decided on inadmissible
evidence or on principles of construction that the law does
not countenance or something of that nature. See the
speech of Viscount Cave in Kelantan Government v. Duff
Development Co., [1923] A.C. 395 at page 409. But that is
not a matter which arises in this case.
The law about this is, in our opinion, the same in
England as here and the principles that govern this class of
case have been reviewed at length and set out with clarity
by the House of Lords in F.R. Absalom Ltd. v. Great
'y
y
·""
r-
,.,,
·~
).._
'
1 ..
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R.D.A. v. CHOKHAMAL CONTRACTORS IVENKATARAMIAH, J.]
159
. '-(
Western (London) Garden Village Society, [1933] A.C. 592
A
and in Kelantan Government v. Duff Development Co.,
[1923] A.C. 395. In Durga Prasad v. Sewkishendas, 54
C.W.N. 74, 79) the Privy Council applied the law expounded in Absalom's case [1933] A.C. 592 to India: see also
-.,...
Champsey Bhara & Co. v. Jivraj Balloo Spinning and
Weaving Co., 50 I.A. 324, 330 & 331 and Saleh Mahomed
B
Umer Dossal v. Nathoomal Kessamal, 54 I.A. 427, 430.
The wider language used by Lord Macnaghten in Chu/am
""-
Jilani v. Muhammad Hassan, 29 I.A. 51, 60 had reference
~
to the revisional powers of the High Court under the Civil
Procedure Code and must be confined to the facts of that
'
case where the question of law involved there, namely limi- c
'.>-·
talion, was specifically referred. An arbitrator is not a conciliator and cannot ignore the law or misapply it in order to
do what he thinks is just and reasonable. He is a tribunal
selected by the parties to decide their disputes according to
law and so is bound to follow and apply the law, and if he
does not, he can be set.right by the Courts provided his
D
error appears on the face of the award. The single exception to this is when the parties choose specifically to refer a
~
question of law as a separate and distinct matter."
In Jivarajbhai Ujamshi Sheth and Others v. Chintamanrao Balaji
and Others, [1964] 5 SCR 480 this Court held that an award can be set
E
aside on the ground of error of law apparent on the face of the record
under section 30 of the Act but it qualified the above legal position by
saying that the Court while dealing with the application for setting
I
aside an award has no power to consider whether the view of the
)
arbitrator on the evidence was justified according to this Couri. The
arbitrator's justification was generally considered binding between the
F
parties for it was a tribunal selected by the parties and the power of the
Court to set aside the award was restricted to cases set out in section
30. The Court further observed that it was not open to it to speculate,
where no reasons are given by the arbitrator, as to what impelled the
arbitrator to arrive at his conclusion. The Court declined to recognise
the power of the Court to attempt to probe the mental process by
G
·y which the arbitrator had reached his conclusion where it was not
'
disclosed by the terms of his award. The relevant part of the above
decision reads thus:
"An award made by an arbitrator is conclusive as a
judgment between the parties and the Court is entitled to
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set aside an award if the arbitrator has misconducted himself ih the proceedings or when the award has been made
after the issue of an order by the Court superseding the
arbitration or after arbitration proceedings have become
invalid under section 35 of the Arbitration Act or where an
award has been improperly procured or is othernise
invalid: s. 30 of the Arbitration Act.