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Reportable IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION  CIVIL APPEAL NO.3209  OF 2007

INDIAN RARE EARTHS LTD. .....APPELLANT VERSUS

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

The appellant has preferred this appeal by special leave  against  the  impugned  judgment  and  order  dated 05.08.2005 passed by the High Court in ARBA No.2 of 2002 dismissing the appeal and civil revision filed by the parties  against  the  order  dated  29.04.2002  passed  by the 1st Additional Civil Judge (Senior Division), Cuttack, in Misc. Case No.78 of 2000 dismissing the application filed by the present appellant under section 30 read with section 33 of the Arbitration Act, 1940 (for short the 'Act'), for setting aside the Award passed by the learned Arbitrator  in  Misc.  Case  No.671/93(117/83)  dated 19.12.1996.  

The facts of the case lie in narrow compass.  The  appellant  being  a  government  company,  entered

into  a  works  contract  with  the  respondent-company  for structural steel and cladding work for 4 bulk warehouses. The work was to be completed within 18 months from the

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date of the award of the work order i.e. 14.12.1979. A contract was signed between the parties wherein there was a provision for arbitration in case of dispute that may arise  between  the  parties.  From  perusal  of  general conditions of the contract, we found that there was a clause  to  the  effect  that  any  increase  in  statutory levies such as taxes and duties and statutory increase in steel prices shall be paid by the appellant. Before the work was completed, a dispute arose and ultimately, the same was referred to the Arbitration.  

The  respondent-contractor  made  a  claim  of Rs.97,54,143.78 on different heads which have been noted by the High Court and the same is extracted hereinbelow:

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

1 Escalation  as  per  annexure  and  the  same submitted to M/s Dastur & Co.

Rs.22,13,368.38

2 40% of the overheads as per enclosed statement (Annexure-2)  

Rs.2,00,672.48

3 Encashment of bank guarantee  (Letter at Annexure-3)

Rs.2,50,000.00

4 Loss  due  to  complete  damage  of workshop and store shed made of steel column, trusses with A.C. Sheet-1,200 sq.ft. @ Rs.200/- per sq. ft.  

Rs.2,40,000.00

5 Loss  of  Welding  Machine,  Drilling Machine,  Jigs,  Tools,  Tackles, Electrodes, Store items (As per Annexure-5)

Rs.1,30,000.00

6 Legal expenses for fighting the Rs.   75,000.00 Rs.31,09,040.86

7 Interest  @  18%  from  11.8.82  to  31st December, 1992 (Annx.7)

Rs.58,13,991.42

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8 Loss for extra liability for payment of Income Tax by not availing of the adjustment of loss of Rs.16,62,223.00 upto  previous  eight  years  from  the account year starting from Accounting year  82-83,  i.e.  50%  of  the  above loss of Rs.16,62,223 (Annx.8)

Rs.8,31,111.50

Rs.97,54,143.78

Although  the  respondent  made  a  claim  of Rs.97,54,143.78/-  but  the  Arbitrator  after  hearing  the parties  and  considering  all  objections  raised  by  the appellant,  passed  an  Award  for  Rs.19,55,368/-  with pendente lite interest at the rate of 15% per annum from the date of institution of the suit till the date of the Award. The said Award was challenged by the appellant before the 1st Additional Civil Judge (Senior Division), Cuttack on various grounds by filing an application under section 30 of the Act being Misc. Case No.78 of 2000, for setting aside the said Award. The 1st Additional Civil Judge  (Senior  Division),  Cuttack,  dismissed  the  said application.  Aggrieved  by  the  same,  the  appellant preferred an appeal before the High Court. The High Court after  considering  the  case  of  the  appellant  and  the respondent  and  referring  to  the  claims  made  by  the respondent,  finally  upheld  the  Award  passed  by  the learned Arbitrator.  

Mr. Vinoo Bhagat, learned counsel appearing for the appellant, assailed the said Award and the impugned order passed by the High Court on various grounds  inter alia

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the  jurisdiction  of  the  Arbitrator  in  passing  a non-speaking Award when arbitrability of the disputes was questioned.  Mr.  Bhagat,  learned  counsel,  also  submits that  in  absence  of  any  specific  provision,  the  claim against the escalation of prices ought not to have been awarded.  In  this  connection,  Mr.  Bhagat  relied  upon various decisions of this Court in the case of  T. N. Electricity Board vs. Bridge Tunnel Constructions & Ors.

- (1997) 4 SCC 121; V. G. George vs. Indian Rare Earths Ltd.  &  Anr.  -  (1999)  3  SCC  762;  and  Associated Engineering Co. vs. Government of Andhra Pradesh & Anr. - (1991) 4 SCC 93.  

We have gone through the decisions relied upon by Mr. Bhagat, learned counsel appearing for the appellant. The  ratios  decidendi  in  those  decisions  are  based  on different facts of the cases.  

In the instant case, the only question that arises for our consideration is as to whether the non-speaking Award given by the Arbitrator can be set aside on the grounds asserted by the appellant.  

A five-Judge Constitution Bench of this Court in the case of  Raipur Development Authority etc. etc. vs. M/s Chokhamal  Contractors  etc.  etc.  -  AIR  1990  SC  1426, considered the scope of section 30 of the Arbitration Act, 1940 and held as under :

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

A three-Judge Bench of this Court in another case of S. Harcharan Singh vs. Union of India – (1990) 4 SCC 647, reiterated  its  earlier  view  that  the  arbitrator's adjudication is generally considered binding between the parties for he is a tribunal selected by the parties and the  power  of  the  court  to  set  aside  the  award  is restricted to cases set out in section 30 of the Act.  

As notice above, although the respondent claimed a sum of Rs.97,54,143.78/- but the Arbitrator only awarded a sum of Rs.19,55,368/- (Rupees nineteen lakh fifty five thousand  three  hundred  and  sixty  eight  only)  with pendente lite interest at the rate of 15% per annum from the date of institution of the suit till the date of the

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Award.  Admittedly,  the  Award  is  a  non-speaking  award. Hence, it is not permissible for the court to probe into the mental process of the learned Arbitrator especially when the Arbitrator rejected major portion of the claim made by the respondent.  

In the background of all these facts, we do not find any reason to interfere either with the Award passed by the learned Arbitrator or with the impugned order passed by the High Court. Hence, this appeal is dismissed.  

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

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

NEW DELHI; AUGUST 05, 2015.