# ' SUDARSAN TRADING CO v. GOVT. OF KERALA & ANR

- **Citation:** [1989] 1 S.C.R. 665
- **Court:** Supreme Court of India
- **Decided:** 1989-02-14
- **Case number:** Civil Appeal No. 840C 842of1989
- **Bench:** Sabyasachi Mukharji, Ands. Ranganatiian
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/sudarsan-trading-co-v-govt-of-kerala-anr-10258
- **Pages:** 24

## Headnote

Arbitration Act, 1940: s. 30---Non-speaking award-Validity ofNot open to court to probe the mental process of the arbitratorReasonableness of the reasons-Arbitrator the sole judge of quality and
quantity of evidence-Interpretation of contract by arbitrator-Court
cannot substitute its own decision-Setting aside of award-Grounds
for.
The appellant-contractor undertook construction of certain timebound projects. The work, however, could not be completed within the
scheduled time due to various reasons. The contract was consequently
cancelled at appellant's risk. The disputes arising therefrom between
the parties were referred to the arbitrator named in the agreement. He
made three awards allowing claim Nos. l(e), 2, 5, 7(a), 7(b), 7(c), 13,
14, and 15 preferred by the appellant aggregating to Rs.31.15 lakhs
under the several heads mentioned therein.
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Uyon these awards, an application was made 'before the court for
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passmg decrees in terms thereof. Objections were also filed.
The trial court took the view that it could not adjudicate upon the
justification for the conclusions arrived at by the arbitrator unless
such awards were the result of corruption, fraud or there were errors
apparent on the face of the award, that it was not necessary for the
arbitrator to give reasons for his award, that there was no jurisdiction
to investigate Into the merits of the case and to examine t}te documen-,
tary and oral evidence for the purpose of finding out whether or not the
arbitrator had committed an error of law or fact, that the arbitrator
had not incorporated in the award any materials for his conclusion nor
did he incorporate the terms of the contract between the parties. Under
such circumstances the award could not be set aside, especially when
there was no error apparent on the face of it and there was nothing to
show that the arbitrator had misconducted the proceedings or that the
award had been improperly procured.
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In appeal before the High Court it was contended for the responH
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SUPREME COURT REPORTS
[1989] 1 S.C.R.
dents that there were errors apparent on the face of the award, that the
arbitrator had misconducted himself and travelled beyond the terms of
the contract, and that the claims allowed were beyond and contrary to
the agreement between the parties, whereas for the appellants it was
contended that the award was a non-speaking award and, therefore, it
was not open to the court to go into the correctness or reasonableness of
the award.
The High Court set out the claims, noted the rival contentions and
referred to the various clauses and the conditions of the contract,
though the contract itself was made no part of the award, and concluded that there were errors apparent on the face of the award that the
arbitrator had misconducted himself and travelled beyond his power.
In the appeals by special leave, it was contended that the High
Court had exceeded its jurisdiction in acting in the manner it did on the
aforesaid aspects.
D
Allowing the appeals by special leave,
HELD: 1.1 The High Court fell into an error in deciding the
question on interpretation of the contract. It had no jurisdiction to
examine the different items awarded clause by clause by the arbitrator
and to hold-that under the contract these were not substainable in the
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facts found by the arbitrator. [688D, E]
1.2 Once there is no dispute as to the contract, what is the
interpretation of that contract, is a matter for the arbitrator and on
which the court cannot substitute its own decision. So also, the court
cannot substitute the decision of the arbitrator, as to what was meant by
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the contract, once a dispute under the contract is conceded to the
arbitrator. [687B, D]
1.3 In the instant case the court had examined the different
claims not to find out whether these claims were within the disputes
referable to the arbitrator, but to lind out whether in arriving at the
G decision, the arbitrator had acted correctly or incorrectly. This

## Text

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'
SUDARSAN TRADING CO.
v.
GOVT. OF KERALA & ANR.
FEBRUARY 14, 1989
[SABYASACHI MUKHARJI, ANDS. RANGANATIIAN, JJ.]
Arbitration Act, 1940: s. 30---Non-speaking award-Validity ofNot open to court to probe the mental process of the arbitratorReasonableness of the reasons-Arbitrator the sole judge of quality and
quantity of evidence-Interpretation of contract by arbitrator-Court
cannot substitute its own decision-Setting aside of award-Grounds
for.
The appellant-contractor undertook construction of certain timebound projects. The work, however, could not be completed within the
scheduled time due to various reasons. The contract was consequently
cancelled at appellant's risk. The disputes arising therefrom between
the parties were referred to the arbitrator named in the agreement. He
made three awards allowing claim Nos. l(e), 2, 5, 7(a), 7(b), 7(c), 13,
14, and 15 preferred by the appellant aggregating to Rs.31.15 lakhs
under the several heads mentioned therein.
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Uyon these awards, an application was made 'before the court for
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passmg decrees in terms thereof. Objections were also filed.
The trial court took the view that it could not adjudicate upon the
justification for the conclusions arrived at by the arbitrator unless
such awards were the result of corruption, fraud or there were errors
apparent on the face of the award, that it was not necessary for the
arbitrator to give reasons for his award, that there was no jurisdiction
to investigate Into the merits of the case and to examine t}te documen-,
tary and oral evidence for the purpose of finding out whether or not the
arbitrator had committed an error of law or fact, that the arbitrator
had not incorporated in the award any materials for his conclusion nor
did he incorporate the terms of the contract between the parties. Under
such circumstances the award could not be set aside, especially when
there was no error apparent on the face of it and there was nothing to
show that the arbitrator had misconducted the proceedings or that the
award had been improperly procured.
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In appeal before the High Court it was contended for the responH
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SUPREME COURT REPORTS
[1989] 1 S.C.R.
dents that there were errors apparent on the face of the award, that the
arbitrator had misconducted himself and travelled beyond the terms of
the contract, and that the claims allowed were beyond and contrary to
the agreement between the parties, whereas for the appellants it was
contended that the award was a non-speaking award and, therefore, it
was not open to the court to go into the correctness or reasonableness of
the award.
The High Court set out the claims, noted the rival contentions and
referred to the various clauses and the conditions of the contract,
though the contract itself was made no part of the award, and concluded that there were errors apparent on the face of the award that the
arbitrator had misconducted himself and travelled beyond his power.
In the appeals by special leave, it was contended that the High
Court had exceeded its jurisdiction in acting in the manner it did on the
aforesaid aspects.
D
Allowing the appeals by special leave,
HELD: 1.1 The High Court fell into an error in deciding the
question on interpretation of the contract. It had no jurisdiction to
examine the different items awarded clause by clause by the arbitrator
and to hold-that under the contract these were not substainable in the
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facts found by the arbitrator. [688D, E]
1.2 Once there is no dispute as to the contract, what is the
interpretation of that contract, is a matter for the arbitrator and on
which the court cannot substitute its own decision. So also, the court
cannot substitute the decision of the arbitrator, as to what was meant by
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the contract, once a dispute under the contract is conceded to the
arbitrator. [687B, D]
1.3 In the instant case the court had examined the different
claims not to find out whether these claims were within the disputes
referable to the arbitrator, but to lind out whether in arriving at the
G decision, the arbitrator had acted correctly or incorrectly. This the
court had no jurisdiction to do, namely, subs!ltution of its own evaluation of the conclusion of law or fact to come to the conclusion that the
arbitrator had acted contrary to the bargain between the parties.
Whether a particular amount was liable to be paid or damages liable to
be sustained, was a decision within the competency of the arbitrator. By
H purporting to construe the contract the court could not take upon itself
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SUDARSAN TRADING CO. v. GOVT. OF KERALA
667
the burden of saying that this was contrary to the contract and, as such,
beyond jurisdiction. [ 686D-F]
1.4 Furthermore, if on a view taken of a contract, the decision of
the arbitrator on certain amounts awarded, is a possible view though
perhaps not the only correct view, the award cannot be examined by the
court in the manner done by the High Court in the instant case. [688DI
F.R. Absalom, Ltd. v. Great Western (London) Garden Village
Society, Ltd., [1933] AC 592; Heyman & Anr. v. Darwins, Ltd. [1942]
AC 356 and Attorney General for Manitoba v. Kelly & Ors., [1922] I
AC 268 distinguished.
State of Kera/av. Poulose, [1987] l KLT 781 and State of Kera/a
v. Raveendranathan, [1987] l KLT 604 partly overruled.
2.1 Where there are errors apparent on the face of the award it
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can only be set aside if in the award there is any proposition of law
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which is apparent on the face of the award, namely, in the award itself
or any document incorporated in the award. But where a specific question is referred, the award is not liable to be set aside on the ground of
an error on the face of the award even ·'if the answer to the question
involves an erroneous decision on a point oflaw. [684D-E]
Champsey Bhara & Co. v. Jivraj Ba/loo Spinning & Weaving Co.
Ltd. (L 1922 IA 324; Mis Alopi Parshad & Sons, Ltd. v. The Union of
India, [1951] S.C.R. 793; Jivarajbhai Ujamshi Sheth & Ors. v.
Chintamanrao Balaji & Ors., [1964] S SCR 480 and Upper Ganges
Valley Electricity Supply Co. Ltd. v. U.P. Electricity Board., [1973]
3 SCR 107 referred to.
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2. 2 An award can also be set aside if the arbitrator had misconducted himself or the proceedings. One of the misconducts could be 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 G
excess of the jurisdiction. l686C]
i.-
Anisminic Ltd. v. Foreign Compensation Commission, [1969] 2
AC 147; Regina v. Noseda, Field, Knight & Fitzpatrick, [1958] I WLR
793 and Ha/soury's Laws of England, 4th Edn. Vol. para 622 referred
~.
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SUPREME COURT REPORTS
11989] 1 S.C.R.
2.3 An award may be remitted or set aside on the ground that the
arbitrator in making it had exceeded his jurisdiction and evidence of
matters not appearing on the face of it will be admitted in order to
establish whether the jurisdiction had been exceeded or not, be because
the nature of the dispute is something which has to be determined
outside the award-whatever might be said about it in the award or by
the arbitrator. l685H; 686A-B]
Christopher Brown Ltd. v. Genossenschaft Oesterreighischer etc.,
[1954] I QB 8; Dalmia Dairy Industries Ltd. v. National Bank of
Pakistan, [1978] 2 Lloyd's Rep, 223 and Russell on The Law of Arbitration, 20th Edn. 427 referred to.
2.4 An arbitrator acting beyond his jurisdiction, however, is a
different ground from the error apparent of the face of the award. In
the former case the court can look into the arbitration agreement but in
the latter it cannot unless the agreement was incorporated or recited in
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the award. In the instant case the contract in question was not incorporated or referred to in the award. l686B-C]
2.5 However, there is a distinction between disputes as to the
jurisdiction of the arbitrator and the disputes as to in what way that
jurisdiction should be exercised. There may be a conflict as to the power
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of the arbitrator to grant a particular remedy. The nature of the dispute
has to be determined. l686F-G]
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Commercial Arbitration by Sir M.J. Mustill & Steward G. Soyd
page 84, referred to.
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3.1 The court look into the reasoning only in a speaking award. It
is not open to the court to probe the mental process of the arbitrator
and speculate, where no reasons are given by the arbitrator, as to what
impelled the arbitrator to arrive at his conclusion. l683G-H]
3.2 Furthermore, in any event, reasonableness of the reasons
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given by the arbitrator, cannot be challenged. Appraisement of evidence by the arbitrator is never a matter which the court questions and
considers. If the parties have selected their own forum, the d~ciding
forum must be conceded the power of appraisement of the evidence.
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The arbitrator is the sole judge of the quality as well as the quantity of
evidence and it will not be for the court to take upon itself the task of
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being a judge on the evidence before the arbitrator. [684B-C]
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SUDARSAN TRADING CO. v. GOVT. OF KERALA [MUKHARJI, J.J
669
3.3 In the instant case, the award was not a speaking award. The A
arbitrator had merely set out the claims and given the history of the
claims and then awarded certain amount. He had not spoken his mind
indicating why he had done what he had done; he had narrated only
how he came to make the award. In the absence of any reasons for
making the award, it was not open to the court to interfere with the B
award. [684A-B]
Hindustan Steel Works-Construction Ltd. v. C. Rajasekhar Rao,
[1987] 4 SCC 93 and Municipal Corporation of Delhi v. Mis Jagan Nath
Ashok Kumar & Anr., [1987] 4 SCC 497 referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 840C
842of1989.
From the Judgment and Order dated 5.5.1988 of the Kerala High
Court in M.F.A. Nos. 72/83, 346/83 and 380 of 1983.
K.K. Venugopal, Shiv Pujan Singh and Miss Niranjana for the
Appellant.
G. Vishwanath Iyer and K.R. Narnbiar for the Respondents.
The Judgment of the Court was delivered by
SABY ASA CHI MUKHARJI, J. Leave granted .
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These appeals arise from the, judgment and order of the High
Court of Kerala, dated 5th May, 1~8. The High Court by the
impugned judgment and order in M.F.A; Nos. 72, 346 and 380 of 1983
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allowed the appeals of the respondent-the Govt. of Kerala, against
the judgment and decree dated 25th September, 1982 passed by the
principal Sub-Judge, Trivandrum in· S.P. (Arbitration) Cases Nos.
184, 185 and 186 of 1982 by which the learned Sub-Judge had upheld
the awards by the arbitrator on the ground that it was not open to the
court to sit in appeal over the decision of the arbitrator and the court 0
could not adjudicate upon the justification for the conclusions arrived
at by the arbitrator unless such awards were the result of corruption,
fraud or when there were errors apparent on the face of the award.
The learned Sub-Judge further held that there was no error apparent
on the face of the record and there was no allegation of corruption or
fraud. The High Court reversed the said decision.
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SUPREME COURT REPORTS
[1989] 1 S.C.R.
The questions involved in these appeals are: how should the
court examine an award to find out whether it was a speaking award or
not; and if it be a non-speaking award, how and to what extent the
court could go to determine whether there was any error apparent on
the face of the award to be liable for interference by the court. The
other question that arises in this case is, to what extent can the court
examine the contract in question though not incorporated or referred
to in the award.
It may be noted that on 23rd December, 1976 the agreement
No. 25/SESPC/1976-77 was entered into between the appellant and
the respondent herein for construction of masonary dam across Siruvani river. Certain disputes arose between the appellant and the
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respondent. These disputes were referred to the arbitrator named in
the agreement. The arbitrator passed the awards dated 12th, 16th and
23rd April, 1982, which were filed before the Sub-Judge and the appellant prayed for passing of decree in terms of the awards. The respondents filed petitions seeking to set aside the awards. The learned Judge
D refused to set aside the awards and passed decrees in terms of the
awards. The Trial Court held that there was no merit in the contention
regarding limitation; and that the claims under the award were not
barred by limitation. It was further held by the learned Trial Judge
that the arbitrator had not incorporated in the award any material for
his conclusion nor had he incorporated the terms of contract between
E the parties. Under such circumstances the award could not be set
aside, especially when there was no error apparent on the face and that
there was nothing to show that the arbitrator had mis-conducted the
proceedings or that the award had been improperly procured. So the
objection to the passing of the award was turned down.
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Aggrieved thereby, the respondent filed appeals before the High
Court. The High Court by the impugned judgment dated 5.5.1988 set
aside the awards and the decree of the Trial Court on the ground that
there were errors of law apparent on the face of the awards. It is
contended that the High Court in the circumstances of this case and in
view of the settled principles of law, exceeded its jurisdiction by acting
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in the manner it purported to do. It is, therefore, necessary to refer to
the award to determine how has the arbitrator proceeded and what
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actually .;1e arbitrator has decided. The arbitrator has noted in the first
award that the dispute related to the work of 'Siruvani drinking Water
Supply Project-Construction of an Intak Tower and allied structures'; and observed that an estimate amounting to Rs.17.45 lakhs was
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sanctioned for the work and it was entrusted on contract to the
SUDARSAN TRADING CO. v. GOVT. OF KERALA [MUKHARJI, J.]
671
claimant-appellant herein, on tenders. The value of the work arranged on contract was Rs.14.45 lakhs as per the departmental estimate
which the appellant undertook, as understood by the arbitrator, to
carr;1 out works at a total amount of Rs.19 .15 lakhs as per their tender.
The contract was embodied in agreement No. 18/SC/SPS/1977-78
dated 17.3. 78 between the claimants on !he one side and the respon-
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dent No. 2 on behalf of the State of Kera!~ cited as respondent No. 1
on the other, in these proceedings. The work had been taken up as
part of the scheme for augmenting the drinking water supply to Coimbatore city from the yield of the Siruvani river and due to acute scarily
of water in the city, work was taken up on an urgent footing and it was
understood by both the parties that time was of utmost importance in
the execution of work. The site for the work was handed over to the
claimants on 17th December, 1977 and the work had to be completed
~ )..
by 15.6.1978. Accordingly to the arbitrator, however, it was clear that
the work could not be completed within the stipulated period due to
various reasons for which each party blamed the other. It was noted in
the award that according to the respondents, after carrying out the
work to the tune of Rs.3.46 lakhs (approx.) against the accepted probably estimate of contract of Rs.19.15 lakhs, the appellant refused to
proceed with the balance work in spite of specific notices to them and
so the respondents were constrained to terminate the contract at the
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risk and cost of the appellant. Several efforts were made to re-arrange
the balance works and finally as per the situation obtaining then these
works were to be expected to be completed at an excess cost of Rs.O .97
lakhs over the amount that would have been payable to the appellant
as per the terms of the original contract. The arbitrator, thereafter,
noted that the appellant had raised in respect of the dispute which is
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\ the subject-matter in the first award, specific claims for an amount of
\fRs.5.97 lakhs in addition to release of their retention sum of Rs.32, 139
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and the security deposit of Rs.38,400 payment of final bill for the work
done including the above claims, interest on amounts awarded and
cost of the arbitration proceedings.
It seems from the award of the arbitrator that the contention of
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the respondents had been that as per the terms of the contract, they
were entitled to realise the excess cost on re-arrangement of the
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-ic '* balance works estimated at Rs.0.87 lakhs from the claimant and so
they proposed to appropriate the retention sum of Rs.32, 139 lying in
their hands, the Security Deposit of Rs.38,400 and the sums due to the
claimant by way of final bill on other works as well. It was noted by the
arbitrator that there was a prayer by the appellant for inspection of the
site and the same was inspected on 9.12.80. It was conterided on behalf
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SUPREME COURT REPORTS
[1989] 1 S.C.R.
A of the claimant that the site of work was situated on the Western Ghats
far away from human habitation in dense forest infected with wild
animals at an elevation of about 600 M and subject to heavy precipitation of upto 400 ems. annually and that access to the site was only from
Coimbatore side in Tamil Nadu. Several obstacles for access to the site
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were highlighted before the arbitrator. Another important point on
which considerable stress was laid was the compensation for losses
occasioned to them on account of the unsatisfactory law and order
situation coupled with labour unrest, stoppages and threats and even
physical violence on the agents of the appellant. It was further highlighted that the termination of the contract at their risk despite the
frustration and impossibility of performance was :.Clearly illegal and
unjustified. In the premises compensation was demanded for loss of
equipments. The arbitrator noted that the main point of defence of the
respondent was that the time for the completion of the work forming
part of the time-bound programme was six months from the date of
handing over the site. As the site was handed over on 16.12.77, the
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date of completion should have been 15.6.1978. Of the difficulties
arising out of the location of the site of the W\Jrk, it was emphasised by
the respondent that the conditions under which the contract had to ,be
performed were within the knowledge of the parties, and there could
not be any ground for claiming any addition than those contemplated
in the contract. It was definitely further stated that the additional
haulage was due to the alternate route via Thachampara which was
opened on 15.2.1977 and that any claim on this account subsequent to
the above date was unjustified. Furthermore, that materials like sand,
cement and steel were all issued in time and there could hardly be any
justification regarding delays on these account. Regarding interruptions in power supply the respondents' case was that .such interruptions (.
were not unexpected at a site to which the power lines passed through-\-.
virgin reserve area, and at any rate the claimants were not assured by ,
the respondents of uninterrupted power and there was hardly any
items of machinery belonging to. the appellant which had remained idle
for want of power.
It was further stated that the various extra items of works includ1
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ing the work on the quarries had been adequately paid for by them and
no further payments were due to the appellant; that there was no
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serious deterioration of the law and order situation; and that the losses
were due to the conduct of the claimant and the materials left over by
the claimant at the end of the second working seasons that had been
taken over by them, duly accounted for and the credit thereof given in
H the final bill. It was further reiterated by the respondent that the work
•
SUDARSAN TRADING CO. v. GOVT. OF KERALA IMUKHARJI, J.]
673
was not completed within the period agreed and, therefore, the respondent issued notice to resume the work and on the failure of the
claimant to re-start the work, there was no other alternative except to
terminate the contract as the work itself was part of a time-bound
programme; and they had to make alternate arrangements and that
would have cost Rs.0.87 lakhs additionally which was sought to be
recovered from the appellant appropriating the retention money and
security deposit. It was, therefore, claimed that the claims of the
appellant should be rejected.
Considering all these contentions and noting the several respective claims, the arbitrator awarded as follows:
"Claims Nos. (1), (2) (a & b) and (3) These claims are
declined.
Claim No. 4 The Respondents shall pay the Claimants a
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sum of Rupees Ninety Six Thousand only (Rs.96,000) in
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satisfaction of this claim including the various Sub Claims
under the same.
Claims No. 5(a), (b) & (c)-The Respondents shall pay an
amount of Rs. five thousand only (Rs.5,000) to the Claimants in satisfaction of this claim.
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Claims Nos. (6), (7), (8) and (9)-These four Claims are
declined.
Claim No. (10)-The retention moneys recovered from the
Claimants in regard to this work shall be refunded to them
by the Respondents. Claim No. 11-The f.oo. for the
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workShall be paid to Claimant for the sums awarded under
Claims (4) and (5) Supra resulting in a net payment of
Rupees one Lakh and One thousand only (Rs.1,01,000).
€!aim No. 12-The Respondents shall refund the security
deposit held by the Claimants for this work subject to the G
rules regarding tax clearance.
Claim No. 13-The Claim for interest.is declined.
Ciaim No. 14-The parties shall suffer their respective
costs in these proceedings."
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SUPREME COURT REPORTS
[1989] 1 S.C.R.
Regarding the counter-claims it was held that the order of the
2nd respondent terminating tne contract in favour of the appellant was
valid and as such, the respondents were free to arrange for the balance
work in the manner they thought fit. The counter claim for costs of the
respondents was also held by the arbitrator to be covered by other
claims. The award was passed on 12th April, 1982.
There was another award dated 16th April, 1982 which was with
regard to the dispute that arose for controlling the work of "Siruvani
Drinking Water Supply Project-Constructing a Masonry dam across
Siruvani·River Block Nos. I, II and III from Ch. 13 to 60 up to level + .
883.00 metres and Block No. III from ch. 60 to 82 upto level + 870
metres". In respect of the aforesaid, an estimate amounting to Rs.71.5
lakhs had been sanctioned for the work and it was entrusted on contract to the appellant. It appears that the value of the work airanged
on contract was Rs.67 ,72, 760 as per departmental estimate which the
appellant undertook to carry out at a total amount of Rs.76,55,300 as
per their tender. The contract was embodied in the aforesaid agreement of 23rd December, 1976. The arbitrator recited the original claim
and noted that the work could not be completed during the scheduled
time and the respective contentions of the parties were, more or less,
identical with the one made in the previous case.
There was inspection of documents and the parties were heard in
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person, it was noted. Aft1>r noting the respective contentions the
arbitrator awarded as follows;
"Claim No. (l)(A)-The Claim for additional payment on
account of aslar work is declined.
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Claim No, (l)(B)-The Respondents shall pay the Claim- t''i---
ants an additional amount of Rupees One Lakh only
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(Rs. l,00,000) in satisfaction of this claim over and above
the amounts already paid by them in the various part bills.
Claim No. (l)(c)-This claim for compensation on account
of loss in hire charges and shortage of rubble is declined.
Claim No. 2-The Respondents shall pay the Claimants a
sum of Rupees three lakhs and thirty six thousand only
(Rs.3,36,000) in satisfaction of this claim.
Claim Nos. 3 & 4-These two claims are declined.
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SUDARSAN TRADING CO. v. GOVT. OF KERALA [MUKHARJI, l.J
675
Claim No. 5---, The Respondents shall pay the Claimants an
increase of forty ( 40) per cent in the agreed rates for agreed
items and rates derived from the agreement for the extra
items for all work paid for after CC2 and part, such increase being worked out on the cost of the work excluding
the value of the materials supplied by the Respondents.
Claim No. 6-The Claimant shall be entitled to a payment
of Rupees twenty five thousand only (Rs.25,000) in satisfaction of this claim and the Respondent shall pay it
accordingly.
Claim No. 7(a)(b) & (c)-The Claimants shall be entitled
to a consolidated payment of Rupees fifty thousand only
(Rs.50,000) from the Respondents in satisfaction of these
claims and the same shall be paid accordingly in addition to
the payments already made. The Claimants on receipt of
such payment shall have no lien whatsoever on the sheds,
goods of whatever description and materials lying at the
site of the work and said to belong to them. Claims 8, 9, 10,
11 & 12-These five claims are declined.
Claim No. 13-The retention amounts from the bills of the
Claimants lying in the hands of the Respondents shall be
released to them.
Claim No. 14-An amount of Rupees two lakhs only
(Rs.2,00,000 shall be paid to the claimants in settlement of
the final claims on the work in addition to the specific items
referred to in th~ other claims as per this award.
Claim No. 15-The Security offered by the Claimants for
this work ·shall be released to them sμbject to the rules
regarding tax clearance,
Claim No. 16-The claim for interest is declined.
Claim No. 17-The parties shall suffer their respective
costs in these proceedings."
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Regarding the counter claims, it was reiterated by the arbitrator
that the respondents were entitled to arrange for the balance work in
any manner they deemed fit on the termination of the contract by H
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676
SUPREME COURT REPORTS
I 1989) 1 S.C.R.
them. But the appellant should not be responsible for any loss that
might be sustained for this re-arrangement. The counter claim for
costs of the respondents was also dealt with.
There was a third award dated 23.4.1982 which was in respect of
the sum due to Blocks Nos. 7, 8 & 11. In respect thereof an estimate of
Rs.69. 7 lakhs had been sanctioned for the work and it was entrusted to
the appellant. The value of the work arranged on that contract was
Rs.63.68 lakhs as per the departmental estimate which the claimants
undertook to carry but at a total amount of Rs. 71. 96 lakhs as per their
tender. After reiterating that time was of the essence of the contract,
the difficulties that arose in carrying out the contract and the respective contentions, which were identical with those in respect of the first
two .contracts were discussed. In respect of interruptions in power
supply the case of the respondent was that such interruptions were not
unexpected at a site through which the power lines passed through
virgin reserve forest and tii~t the claimants had not been assured by
the respondents of uninterrupted power and in any case there was
hardly any item of machinery belonging to the claimant which could
have reinained idle for want of power. In respect of the medical facilities it was submitted by the reSpondents that according to the terms
of the contract it was the primarylduty of the appellant to provide for
medical assistance to their work force. After setting out the rival contentions the arbitrator awarded as follows:
"Claim No. (l)(A)-The claim for additional payment on
account of ashlar work is declined.
Claim No. (l)(B): The respondents shall pay the claimants
an additional amount of rupees seventy five thousand onl)
(Rs.75,000) in satisfaction of this claim over and above the
amounts already paid by them in the various part bills.
Claim No. (l)(C): The claim for compensation on account
of loss of hire charges and shortage of rubble is declined.
Claim No. 2: The respondents shall pay the claimants a
sum of Rupees three lakhs and seventy five thousand only
(Rs.3,75,000) in satisfaction of this claim.
Claim Nos. 3 & 4: These two claims are declined.
Claim No. 5: The respondents shall pay the claimants an
_'}..
·'
SUDARSAN TRADING CO. v. GOVT. OF KERALA (MUKHARJI, J.J
677
increase of Forty ( 40) per cent in the agreed rates for
agreed items and rate derived from the agreement for extra
items for all work paid for after CC 2 and part, such increase being worked out on the cost of the work excluding
the value of materials supplied by the respondents.
Claim No. 6: the claimants shall be entitled to a payment
of rupees twenty five thousand only (Rs.25,000) in satisfaction of this claim and the respondents shall pay it
accordingly.
Claim No. 7(a)(bj & (c): The claimants shall be entitled to
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a consolidated payment of rupees fifty thousand only C
(Rs.50,000) from the respondents in satisfaction of these
claims and the same shall be paid accordingly in addition to
the payments already made. The claimants on receipt _of
such payment shall have no lien whatsoever on the sheds,
goods of whatever description and materials lying at site of
the work and said to belong to them.
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Claims Nos. 8, 9, 10, 11 & 12: These five claims are
declined.
Claim No. 13: The retention amounts from the bills of the
claimant lying in the hands of the respondents shall be
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released to them.
Claim No. 14: An amount of rupees fifty thou.sand only
(Rs.50,000) shall be paid to the claimants in settlement of
the final claims on the work in addition to the specified
items as per this award.
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Claim No. 15: The security offered by the claimants for the
work shall be released to them subject to the rules regarding tax clearance.
Claim No. 16: The claim for interest is declined.
Claim No. 17: The parties shall suffer their respective costs
in these proceedings."
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About the counter claims it was also stated that the claimants
would not be responsible to carry out the balance work which the H
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678
SUPREME COURT REPORTS
[1989] 1 S.C.R.
respondents might arrange in any manner they thought fit on termination of the contract, but it should not be at the risk of the claimants.
Upon these awards, an application was made before the Court of
the Principle Sub-Judge, Trivandrum, for passing decrees·in terms of
the award. Objections were also filed. The learned Judge by his judgment and order dated 25th September, 1982 dealt with the objections.
He rejected the contention that the claims were barred. He further
held that it was not necessary for the arbitrator to give reasons for his
award; and that there was no provision under the law which required
that the arbitrator should furnish reasons for the award. It was submitted before him that the arbitrator ought to have given separate
findings for the issues under claim No. 4 as the issues raised were
entirely independent of each other. It was submitted that under subclaim (a) in claim No. 4 the appellant had claimed loss on account of
the pressure tactics adopted by the labourers. Under sub-claim (b) the
appellant had claimed compensation for the ~xtra works done. In the
statement of defence filed by the respondents it was more or less
conceded that the claim for extra works would lie, and stated that the
actuals should be accounted and paid along with the final bill. The
learned judge noted that the arbitrator could only give a lump sum
award with respect to various claims and that he need not quantify the
sum awarded under each claim separately. It was contended before the
learned Sub-Judge that in respect of claim No. 5, there was no
evidence to support the claim. Under that claim the app~llailt had
detailed the value of tools, plants and materials etc. that were left by
him at the site. In the defence statement itself the respondent admitted
that some materials belon5ing to the appellant were taken possession
\·
of by them and the value thereof would be paid in the final bill.
Tthherehfore, accordingdto the lea
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was held that there was no jurisdiction to investigate into the merits of
the case and to examine the documentary and oral evidence for the
purpose of finding out whether or not the arbitrator had committed an
error of law or fact. The learned judge reiterated that the arbitrator
had not incorporated in the award any materials for his conclusion nor
did he incorporate the terms of the contract between the parties.
Under such circumstances the award could not be set aside especially
when there was no error apparent on the face of it; and there was
nothing to show that the arbitrator had misconducted the proceedings
or that the award had been improperly procured. So the objection was
repelled. In the premises the judgment in terms of the award was
passed. In respect of the three awards, three different judgments were
SUDARSAN TRADING CO. v. GOVT. OF KERALA (MUKHARJI, J.J
679
~' delivered incorporating more or less the same reasons.
Being aggrieved thereby the respondent preferred appeals
before the High Court. The Division Bench of the High Court by the
judgment under appeal in F.M.A. Nos. 72, 346 and 380 of 1983 disposed of the appeals.
Being aggrieved thereby, the appellant is before this Court. In
the judgment under appeal, the Division Bench of the High Court has
set out the claims and noted the rival contentions and·referred to the
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.. various clauses and the conditions of the contract, though the contract
itself was made no part of the award. The Division Bench referred to
the decision of the learned Sub-Judge. Before the Division Bench, the C
main contention which succeeded was that there were errors apparent
:t-· on the face of award, and further that the arbitrator had misconducted
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himself and travelled beyond the terms of the contract. On behalf of
the appellant, however, it was contended that the award was a nonspeaking award and, hence, it was not open for the court to go into the
correctness of the reasons of the award. The High Court referred to D
the several decisions of this Court and other relevant decisions ofihe
Kerala High Court. In order, however, to appreciate .the contentions,
it is necessary to refer in detail to the judgment under appeal. The
.. ;/.:
High Court referred to the various clauses of the contract which were
produced before the High Court. The submissions were made on
behalf of the respondents that the claims allowed were beyond and E
contrary to the agreement between the parties. The High Court noted
that the arbitrator had allowed claims Nos. l(b), 2, 5, 7(a), 7(b), 7(c),
13; 14 2 15 and had passed an award for payment of an amount .of
Rs.31.15 lakhs to the claimant towards his claim under the several
. l~eads mentioned therein. The High Court noted the judgment of the
·-y. reamed Sub-Judge. It was heldby the learned Sub· Judge that the court F
·could set aside an award only when it was the result of corruption,
fraud or there were errors apparent ~n the face of the award. According to the learned Sub-Judge there was no error-apparent on the face
of the award and there was no allegation of fraud. Thereafter, the
different points on which the learned Sub-Judge rested his decision,
were noted by the High Court. It was contended before the High
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Court on behalf of the respondents that there were errors apparent on
:Jr the face of the award, and that the arbitrator had misconducted him·
self and travelled beyond the terms of the contract.
The first contention urged on behalf of the respondents,
however, was that the award was a non-speaking award and, thereH
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680
SUPREME COURT REPORTS
[1989] 1 S.C.R.
fore, it was not open to the court to go into the correctness or reason-
).-
ableness of the award. The High Court held that when the arbitrator
was constituted the sole and final judge of all questions both of law and
of facts, normally his decision should stand final and it was only when
there was any error apparent on the face of the award either because a
question of law arose on the face of the award or upon some paper
accompanying or forming part of the award, it could be interfered ·1'.-
with. Thereafter, the High Court in para 8 of its judgment observed
that in the light of several decisions it could say that there were any
errors apparent on the face of the award, and that the arbitrator had
misconducted himself and had travelled beyond his power. The High.-~
Court referred to the decision of the Division Bench of the Kerala
High Court in State of Kera/av. Poulose, [1987] 1KLT781. The High
Court, thereafter, observed that it was not open to the arbitrator or
·the umpire to arrogate fo himself jurisdiction and answer a question -f
not referred to him. In this connection, reference was made by the
High Court to several decisions, namely, Attorney General for
Manitoba v. Kelly and Ors., [1922] 1 AC 268; Upper Ganges Valley
Electricity Supply Co. Ltd. v. U.P. Electricity Board, [1973] 3 SCR
107; Mis Alopy Parshad & Sons, Ltd. v. The Union of India, [1951] 2
SCR 793 and Jivarajbhai Ujamshi Sheth & Ors. v. Chintamanrao Balaji
&Ors., [1964]5SCR480.
Regarding claim No. l(b) it was the contention of the respondent
that the award was over and above the amounts already paid under
various part bills. It was argued before the High Court that the
Department had measured and paid for all quantities of earth work
and ruble work and the same had been entered in the measurement.
book and accepted by the contractor. Hence, the award of additional
amount was unwarranted. It was also argued that as per clause 10 of (
Form No. 83 (Notice inviting tender) which formed part of the agree--t'T
ment, every tenderer was expected to inspect the site of the proposed
work and quarries, and satisfy himself about the quality and availability of materials. It was also notified in the same clause that the Govt.
would not, after acceptance of the contract rate, pay any extra charges
for lead or any other reason in case the contractor was found later on to
have mis-judged the materials available. It was also notified that the
Department would not be liable for any claim raised later on the plea
of non-access to the site. Ext. R2 was a copy of extract of Clause 10 of *
Form No. 83. It was argued that the award of Rs.75,000 under claim
l(b) was beyond the powers of the arbitrator. The High Court held
that the award on this asepct was beyond the provisions of the agreement, and therefore there were errors apparent on the face of the
award.
SUDARSAN TRADING CO. v. GOVT. OF KERALA [MUKHARJI, J.]
681
--{
Similarly, in respect of the claim for Rs.3,75,000 under claim
A
No. 2, it was contended on behalf of the respondents that this was
beyond the powers of the arbitrator and, as such, there were errors
apparent on the face of the award. It was argued by him that clause
No. 2 of the general specification and special conditioris of the contract
clearly notified to the tenderers the site of the dam. It was also
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contended by the Govt. Pleader that the period during which the
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contractor had conveyed sand through Madukkarai, the claimant had
been actually paid additional conveyance charges. Hence, after construing clause 10 of Form No. 83, namely, notice inviting tender, the
. -. High Court held that it was necessary for the contractor to have
inspected _the site before t_ender. Th. erefore, in awarding, the ~mount
as the arbitrator did on this head, there was error apparent on 1ts face
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and such award was liable to be set aside. The High Court did so
* accordingly.
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With regard to claim No. 5, it was contended that the claim was
beyond the powers of the arbitrator and reference.