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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.76 OF 2009

M/s Anand Brothers P. Ltd. TR. M.D. …Appellant

Versus

Union of India & Ors. …Respondents

J U D G M E N T

T.S. THAKUR, J.

1. A  non-speaking  arbitral  award  in  favour  of  the  

appellant-company was set aside by a learned Single Judge  

of the High Court of Delhi on the ground that the Arbitrator  

had not recorded his “findings” as required under Clause 70  

of  the  General  Conditions  of  Contract.  Relying  upon  the  

decisions of this Court in M/s Daffadar Bhagat Singh and  

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Sons v.  Income-tax officer,  A Ward, Ferozepur (AIR  

1969  SC  340),  Bhanji  Bhadgwandas  v.  The  

Commissioner  of  Income-tax,  Madras  (AIR 1968 SC  

139  and Rajinder  Nath  etc.  v. Commissioner  of  

Income-tax, Delhi (AIR 1979 SC 1933)  the High Court  

held that the expression “finding” appearing in Clause 70 of  

the General Conditions of Contract implies something more  

than the mere recording of a conclusion by the Arbitrator.  

Inasmuch as the Arbitrator had failed to do so, the award  

rendered  by  him  was  unsustainable.  The  High  Court  

accordingly  set  aside  the  award  and remitted  the  matter  

back  to  the  Arbitrator  for  a  fresh  determination  of  the  

disputes between the parties.

2. An  appeal  was  then  preferred  by  the  appellant-

company  before  a  Division  Bench  of  the  High  Court  who  

relying upon the decision of this Court in Gora Lal v. Union  

of India (2003) 12 SCC 459 affirmed the view taken by  

the  learned  Single  Judge.  Dissatisfied,  the  appellant  has  

approached this Court by special leave.

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3. When  the  matter  initially  came  up  before  a  Bench  

comprising  R.V.  Raveendran  and  J.M.  Panchal,  JJ.  on  5th  

January, 2009 the Court noticed a divergence in the decision  

rendered by this Court in Gora Lal’s case (supra) and that  

rendered in Build India Construction System v. Union of   

India  (2002)  5  SCC  433.  The  matter  was,  therefore,  

referred to a larger Bench to resolve the conflict.  That is  

precisely how this appeal has been listed before us.

4. Clause 70 of the General Conditions of Contract to the  

extent  the  same  is  relevant  for  our  purposes,  is  to  the  

following effect:

 “…………The Arbitrator shall  give his award within a   period of six months from the date of his entering on   his reference or within the extended time as the case  may  be  on  all  matters  referred  to  him  and  shall   indicate  his  findings,  along  with  sums  awarded,   separately on each individual item of dispute.”

5. A  plain  reading  of  the  above  would  show  that  the  

Arbitrator  was  required  to  (i)  give  his  award  within  the  

stipulated  period  as  extended  from time to  time.  (ii)  the  

Award  must  be  on  “all  matter  referred  to  him”  (iii)  the  

Award must indicate the findings of the Arbitrator along with  

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sums, if any, awarded (iv) the findings and award of sums if  

any must be separate on each item of dispute. There is no  

gainsaying that Clause 70 makes a clear distinction between  

findings on each individual item of dispute on the one hand  

and the sum, if any, awarded in regard to the same on the  

other. That the Arbitrator had made his award in regard to  

each item of  dispute raised by the appellant  before  it,  is  

evident  from  a  reading  of  the  award.  The  question  is  

whether  the  Arbitrator  had recorded his  findings  on each  

such items. The High Court has, as noted above, answered  

that  question  in  the  negative;  and  set  aside  the  award  

holding  that  the  expression  ‘findings’  must  include  the  

reasons  for  the  ultimate  conclusion  arrived  at  by  the  

Arbitrator. That view was assailed by learned counsel for the  

appellant  who  contended  that  the  expression  ‘findings’  

should not imply the process of reasoning adopted by the  

Arbitrator for recording his conclusions. A finding howsoever  

cryptic  would,  according to the submission of  the learned  

counsel for the appellant, satisfy the requirement of Clause  

70  for  otherwise  the  Clause  would  have  been  differently  

worded so as to  make it  mandatory  for  the Arbitrator  to  

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make what is called a speaking award giving reasons for the  

conclusions arrived at by him.  

6. On behalf of the respondent it was per contra argued  

by  Mr.  P.S.  Patwalia  and  Mr.  J.S.  Attri,  learned  senior  

counsel that the question was no longer  res-integra having  

been addressed in Gora Lal’s case (supra) where this Court  

held that the expression “finding on each individual item of  

dispute” clearly meant that reason in support of the findings  

must also be recorded by the Arbitrator. It was contended  

that  a  finding  which  is  unsupported  by  any  reason  is  no  

finding in the eye of law.  

7. Before  we  examine  whether  the  expression  ‘finding’  

appearing in Clause 70 would include reasons in support of  

the  conclusion  drawn  by  the  arbitrator,  we  consider  it  

appropriate  to  refer  to  the Constitution Bench decision  of  

this  Court  in  Raipur  Development  Authority  v.  M/s  

Chokhamal  Contractors etc (1989) 2 SCC 721 where  

this Court was examining whether an award without giving  

reasons can be remitted or set aside by the Court in the  

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absence of any stipulation in the arbitral agreement obliging  

the arbitrator to record his reasons. Answering the question  

in the negative, this Court held that a non-speaking award  

cannot  be  set  aside  except  in  cases  where  the  parties  

stipulate  that  the  arbitrator  shall  furnish  reasons  for  his  

award. This Court held :

“33…… When the parties to the dispute insist upon  reasons  being  given,  the  arbitrator  is,  as  already   observed earlier, under an obligationto give reasons.  But there may be many arbitrations in which parties   to the dispute may not relish the disclosure of the   reasons  for  the  awards.  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 we feel that it may not   be appropriate to take the view that all awards which  do not contain reasons should either be remitted or   set aside…..”

[

8. Having said that, this Court declared that Government  

and their instrumentalities should - as a matter of policy and  

public interest - if not as a compulsion of law, ensure that  

whenever  they  enter  into  an  agreement  for  resolution  of  

disputes by way of private arbitrations, the requirement of  

speaking awards is  expressly  stipulated and ensured.  Any  

laxity in that behalf might lend itself and perhaps justify the  

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legitimate criticism that government failed to provide against  

possible prejudice to public interest.  The following passage  

is in this regard apposite:

“There  is,  however,  one  aspect  of  non-speaking   awards  in  non-statutory  arbitrations  to  which  Government  and  governmental  authorities  are   parties  that  compel  attention.  The  trappings  of  a   body  which  discharges  judicial  functions  and  is   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,  as  we  have  noticed   earlier,  is  not  supposed  to  exert  the  State’s   sovereign  judicial  power.  But  arbitral  awards  in   disputes to which the State and its instrumentalities   are parties affect public interest and the matter of   the  manner  in  which  Government  and  its   instrumentalities  allow their  interest  to be affected  by  such  arbitral  adjudications  involve  larger   questions of policy and public interest. Government   and its  instrumentalities  cannot  simply  allow large  financial  interests  of  the  State  to  be  prejudicially   affected by non-reviewable — except in the limited   way allowed by the statute — non-speaking arbitral   awards. Indeed, this branch of the system of dispute   resolution has, of late, acquired a certain degree of   notoriety by the manner in which in many cases the   financial  interests  of  Government  have  come  to  suffer  by  awards  which  have  raised  eyebrows  by  doubts as to their rectitude and propriety. It will not   be  justifiable  for  Governments  or  their   instrumentalities  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  interest  — if  not as a   compulsion  of  law  —  ensure  that  wherever  they  enter into agreements for resolution of disputes by  resort  to  private  arbitrations,  the  requirement  of   speaking awards is expressly stipulated and ensured.   It is for Governments and their instrumentalities to   ensure  in  future  this  requirement  as  a  matter  of   

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policy in the larger public interest. Any lapse in that   behalf might lend itself to and perhaps justify, the   legitimate  criticism  that  Government  failed  to   provide against possible prejudice to public interest.”

9. Reference  may also  be  made to  The Arbitration  and  

Conciliation Act, 1996 which has repealed the Arbitration Act  

of 1940 and which seeks to achieve the twin objectives of  

obliging the Arbitral Tribunal to give reasons for its arbitral  

award  and  reducing  the  supervisory  role  of  Courts  in  

arbitration proceedings. Section 31(3) of the said Act obliges  

the arbitral  tribunal  to state the reasons upon which it  is  

based unless the parties  have agreed that no reasons be  

given  or  the  arbitral  award  is  based  on  consent  of  the  

parties.  There is, therefore, a paradigm shift in the legal  

position  under  the  new  Act  which  prescribes  a  uniform  

requirement for the arbitrators to give reasons except in the  

two situations  mentioned  above.  The change  in  the  legal  

approach  towards  arbitration  as  an  Alternative  Dispute  

Resolution Mechanism is perceptible both in regard to the  

requirement of giving reasons and the scope of interference  

by  the  Court  with  arbitral  awards.  While  in  regard  to  

requirement  of  giving  reasons  the  law  has  brought  in  

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dimensions  not  found  under  the  old  Act,  the  scope  of  

interference  appears  to  be  shrinking  in  its  amplitude,  no  

matter  judicial  pronouncements  at  time  appear  to  be  

heading  towards  a  more  expansive  approach,  that  may  

appear to some to be opening up areas for judicial review on  

newer  grounds  falling  under  the  caption  “Public  Policy”  

appearing  in  Section  34 of  the Act.   We are referring  to  

these developments for it is one of the well known canons of  

interpretation of statues that when an earlier enactment is  

truly  ambiguous  in  that  it  is  equally  open  to  diverse  

meanings, the later enactment may in certain circumstances  

serve as the parliamentary exposition of the former. (See:  

Ram Kishan Ram Nath v. Janpad Sabha AIR 1962 SC   

1073  and  Ghanshyam  Dass  v.  Dominion  of  India  

(1984) 3 SCC 46 at 58).   

10. In Jogendra Nath v. Commissioner of Income Tax  

AIR  1969  SC  1089, this  Court  held  that  subsequent  

legislation on the same subject may be looked into with a  

view  to  giving  a  proper  exposition  of  a  provision  of  the  

earlier  Act.   Borrowing  the  principle  from  the  above  

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pronouncements it is reasonable to hold that the obligation  

cast upon the arbitrator in terms of Clause 70 in the case at  

hand ought to be understood in the light  of  not only the  

exposition of law by this Court in Chokhamal’s case (supra)  

but also in the light of the statutory prescription that now  

mandates  recording  of  reasons  by  the  Arbitrator.   The  

judicial climate in which arbitral awards are being made and  

viewed also lends itself to an interpretation that would make  

it obligatory for the Arbitrator to record reasons in support  

of the findings recorded by him.

11. Let  us  in  the  above  backdrop  examine  the  textual  

meaning  and  contextual  significance  of  the  expression  

‘finding’ appearing  in  Clause  70.  The  expression  has  not  

been defined either in the agreement executed between the  

parties  or  in  any  statute  for  that  matter.  The  expression  

shall, therefore, have to be given its ordinary literal meaning  

having regard to the context in which the same is used.  A  

textual interpretation that matches the contextual is known  

to be the best. The principle is well settled but the decision  

of  this  Court  in  Reserve  Bank  of  India  v.  Peerless  

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General  Finance  and  Investment  Co.  Ltd.  And  Ors.   

(1987) 1 SCC 424  has sounded a timely reminder of the  

same when it said:

“Interpretation must  depend on the text  and the   context. They are the bases of interpretation.  One   may well  say if  the text is  the texture,  context is   what gives the colour.  Neither can be ignored. Both   are  important.   That  interpretation  is  best  which  makes  the  textual  interpretation  match  the  contextual.  A statute is best interpreted when we  know why it was enacted.  With this knowledge, the   statute  must  be  read,  first  as  a  whole  and  then   section  by  section,  clause  by  clause,  phrase  by  phrase and word by word.  If a statute is looked at,   in the context of its enactment, with the glasses of   the  statute-maker,  provided  by  such  context,  its   scheme,  the  sections,  clauses,  phrases  and  words   may take colour and appear different than when the   statute is looked at without the glasses provided by  the context. With these glasses we must look at the   Act as a whole and discover what each section, each   clause,  each  phrase  and  each  word  is  meant  and  designed  to  say  as  to  fit  into  the  scheme of  the   entire Act.  No part of a statute and no word of a   statute can be construed in isolation. Statutes have   to be construed so that every word has a place and  everything is  in its  place.   It  is  by looking at  the   definition as a whole in the setting of the entire Act   and by reference to what preceded the enactment   and the reasons for it that the court construed the  expression ‘Prize Chit’ in Srinivasa (1980) 4 SCC 507   and we find no reason to  depart  from the court’s   construction.”

12. Keeping the above in view, we may turn to the Oxford  

Dictionary which gives the following meaning to the word  

‘finding’:

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“the conclusion reached by judicial or other inquiry”.

Black’s Law Dictionary defines ‘find’ and ‘finding of  

fact’ thus:

“find - to determine a fact in dispute by verdict or   decision.

and,

finding of fact: A determination by a judge, jury, or   administrative agency of  a fact supported by the  evidence in the record, usually presented at the  trial or hearing.”

Webster  Comprehensive  Dictionary defines  the  

expression ‘finding’ as under:   

“the act of finding; that which is found; discovery; 2.   Law  A conclusion arrived at before an official or a   court. 3 Support; expense.”

P. Ramanathan Aiyar’s Law Lexicon (Second Ed.)  

assigns the following meaning to the term “finding”:

“The decision of a judge, arbitrator, jury, or referee.”

It further explains the term thus:

“A term used by the profession and by the courts as   meaning the decision of a trial court upon disputed   facts.”

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13. It is evident from the above that English language and  

law dictionaries and the Law Lexicons give a wide range of  

meaning to the expression ‘finding’.  The predominant use of  

the expression is in relation to determination by a Judge,  

Jury,  Administrative  Agency,  Arbitrator  or  a  Referee.  The  

determination is  described either as a finding, decision or  

conclusion; upon disputed facts.  It is also described as a  

determination of a fact supported by evidence on the record.  

It is interchangeably used as a conclusion or decision a term  

used  by  the  legal  profession  and  by  Courts.  The  term  

“conclusion” is in turn defined by  Black’s Law Dictionary  

as under:

“The final part of a speech or writing (such as jury   argument or a pleading);

a judgment arrived at by reasoning;

an inferential statement;

the closing,  settling,  or  final  arranging of  a treaty,   contract, deal, etc.”

14. It is trite that a finding can be both; a finding of fact or  

a  finding  of  law.   It  may even  be  a  finding  on  a  mixed  

question of law and fact.  In the case of a finding on a legal  

issue  the  Arbitrator  may  on  facts  that  are  proved  or  

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admitted explore  his options and lay bare the process by  

which he arrives at any such finding.  It is only when the  

conclusion is supported by reasons on which it is based that  

one  can  logically  describe  the  process  as  tantamount  to  

recording  a  finding.  It  is  immaterial  whether  the  reasons  

given in support of the conclusion are sound or erroneous.  

That is  because a conclusion supported by reasons would  

constitute  a  “finding”  no  matter  the  conclusion  or  the  

reasons  in  support  of  the  same  may  themselves  be  

erroneous on facts or in law.  It may then be an erroneous  

finding  but  it  would  nonetheless  be  a  finding.   What  is  

important is that a finding presupposes application of mind.  

Application of mind is best demonstrated by disclosure of the  

mind; mind in turn is best disclosed by recording reasons.  

That is the soul of every adjudicatory process which affects  

the rights of the parties.  This is true also in the case of a  

finding of fact where too the process of reasoning must be  

disclosed  in  order  that  it  is  accepted  as  a  finding  in  the  

sense the expression is used in Clause 70.  

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15. The  above  exposition  matches  even  the  contextual  

interpretation of Clause 70 which provides a mechanism for  

adjudication of disputes between the parties and not only  

requires the Arbitrator to indicate the amount he is awarding  

in regard to each item of  claim but also the “findings on  

each one of such items”. The underlying purpose of making  

such  a  provision  in  the  arbitration  clause  governing  the  

parties,  obviously  was to ensure that  the Arbitrator  while  

adjudicating upon the disputes as a Judge chosen by the  

parties gives reasons for the conclusions that he may arrive  

at.  The  expression  ‘finding’  appearing  in  Clause  70,  

therefore,  needs  to  be  so  construed  as  to  promote  that  

object and include within it not only the ultimate conclusion  

which  the  Arbitrator  arrives  at  but  also  the  process  of  

reasoning by which he does so. Clause 70 could not, in our  

opinion,  have  meant  to  be  only  a  wooden  or  lifeless  

formality  of  indicating  whether  the  claim  is  accepted  or  

rejected.  Any  such  statement  would  have  made  no  

qualitative addition to the adjudication of the claim for the  

arbitrator  would award a sum of  money but withhold the  

reasons for the same. We are in respectful agreement with  

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the view taken by this  Court  in  Gora Lal’s  case  (supra)  

when it said:

“The point for determination in this case is: whether   the arbitrator ought to have given reasons in support   of  his  findings,  along  with  the  sums awarded,  on   each item of dispute. To decide this point, we have  to go by the text and the context of clause 70 of the   arbitration agreement quoted above. Under the said   clause, the arbitrator was required to identify each  individual  item  of  dispute  and  give  his  findings   thereon  along  with  the  sum  awarded.  In  this   context, one has to read the word “findings” with the   expression “on each item of dispute” and if so read it   is clear that the word “finding” denotes “reasons” in   support  of  the  said  conclusion  on  each  item  of   dispute.  The  word  “finding”  has  been  defined  in   “Words  and  Phrases,  Permanent  Edn.,  17,  West  Publishing Co.” to mean “an ascertainment of facts   and the result of investigations”. Applying the above   test  to  clause  70,  we  are  of  the  view  that  the   arbitrator was required to give reasons in support of   his findings on the items of dispute along with the   sums awarded. We make it clear that this order is   confined  to  the  facts  of  this  case  and  our  interpretation  is  confined  to  clause  70  of  the   arbitration agreement in this case.”

16. In  the  case  at  hand  the  Arbitrator’s  award  was  

admittedly  unsupported  by  any  reason,  no  matter  the  

Arbitrator  had  in  the  column  captioned  ‘findings’  made  

comments like ‘sustained’, ‘partly sustained’, ‘not sustained’.  

The High Court was, therefore, justified in setting aside the  

award made by the Arbitrator and remitting the matter to  

him for making of a fresh award.

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17. That brings us to the decision of this Court in  Build  

India Construction System (supra) which was relied upon  

to  canvass  that  it  stated  a  proposition  contrary  to  that  

stated  in  Gora  Lal’s  case  (supra).  In  Build  India  

Construction  System (supra)  this  Court  noted  in  no  

uncertain terms that the validity of the award had not been  

specifically  questioned  on  the  ground  of  its  having  been  

given in breach of any obligation of the Arbitrator to give  

reasons  as  spelled  out  by  the  arbitration  clause.  The  

judgment  of  the  learned  Single  Judge  did  not  show,  

observed this Court, that such a plea was urged before him.  

The objection petition filed to challenge the award was also  

found  by  this  Court  to  be  vague  and  general  hence  

insufficient to give rise to an effective challenge to the award  

on the ground of it being non-speaking. The plea regarding  

the Award being non-speaking was raised for the first time  

before  the  Division  bench  in  appeal.  This  Court  in  that  

backdrop  held  that  the  Division  Bench  fell  in  error  in  

entertaining and upholding such a plea at such a late stage.  

This Court said:  

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“11. There are several other factors which preclude  the  respondents  from  urging  such  a  plea.  The   reference  to  arbitrator  does  not  suggest  an  obligation having been cast on the arbitrator to give   reasons  for  the  award.  Such a  plea,  as  has  been   urged  in  this  Court,  was  not  taken  by  the   respondents  before  the  arbitrator.  Even  in  the  objections  filed  in  the  Court,  the  validity  of  the   award has not been specifically  questioned on the   ground of  its  having been given in  breach of  any  obligation of the arbitrator to give reasons as spelled   out by the arbitration clause. The judgment of the   learned  Single  Judge  does  not  show  such  a  plea   having  been  urged  before  him.  In  the  objection   petition,  there  is  a  vague and general  plea raised   that rejecting the claims forming the subject-matter   of  cross-objection  and  allowing  the  claim  of  the  appellant  without  assigning  any  reason  was  bad.   Such an omnibus and general plea cannot be read as   submitting  that  the  amendment  dated  4-9-1986  applied to the contract between the parties and that  in  view  of  the  amended  arbitration  clause  the   unreasoned award was bad. It appears that the plea   was for the first time raised at the appellate stage  before  the  Division  Bench  of  the  High  Court.   Unwittingly the Division Bench fell into the error of   entertaining such a plea and disposing of the appeal   by upholding the same though the plea was not even   available  to  the  respondents  to  be  raised  at  that   stage.”

18. It is, in the light of the above observations, difficult to  

read  Build  India  Construction  System (supra)  as  an  

authority for the proposition that Clause 70 of the General  

Conditions of the Contract did not oblige the Arbitrator to  

record  reasons.  The  decision  must,  therefore,  remain  

confined to the facts of that case only.  

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19. It  was  next  contended  by  learned  counsel  for  the  

appellant that the High Court has directed the Arbitrator to  

make an award in terms of the Arbitration and Conciliation  

Act, 1996. Since, however, the arbitration proceedings had  

been  conducted  under  the  old  Act  any  remission  to  the  

Arbitrator could only be under the provisions of the said Act.  

Mr.  Patwalia,  learned  Additional  Solicitor  General,  did  not  

dispute  that  position.  He  submitted  that  this  Court  could  

make  it  clear  that  the  Arbitrator  would  conduct  the  

proceedings  under  the  provisions  of  the  Arbitration  Act,  

1940.  

20. It  was  lastly  argued  by  learned  counsel  for  the  

appellant that since the proceedings have remained stayed  

for  a  considerable  period,  this  Court  could  direct  the  

Arbitrator  to  dispose  of  the  same  expeditiously.  Our  

attention was, in this connection, drawn to a letter dated 2nd  

March, 2009 whereby the respondents have appointed Shri  

Dharma  Sheel,  Supdt.  Engineer  (Personnel  and  Legal)  

Headquarter  as  a  Sole  Arbitrator  to  adjudicate  upon  the  

dispute between the parties as Col. Dalip Banerjee, earlier  

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appointed had expressed his inability to continue nor was  

Col.  S.N.  Kuda,  initially  appointed,  ready  to  go  on  with  

proceedings.  It  was  urged  that  if  for  any  reason  Shri  

Banerjee, the newly appointed Arbitrator is also unable to  

take up the assignment, the respondents could be directed  

to  appoint  another  Arbitrator  within  a  time  frame with  a  

direction  to  the  Arbitrator  so  appointed  to  conclude  the  

proceedings  as  early  as  possible.  We  see  no  reason  to  

decline the limited prayer made by learned counsel for the  

appellant  especially  when  Mr.  Patwalia  submitted  that  in  

case Shri Banerjee was also unable to enter upon reference  

for any reason the respondents shall, within such time, as  

may be fixed by this Court nominate another Arbitrator.   

21. In the result this appeal fails and is hereby dismissed.  

We, however, make it clear that consequent upon the orders  

passed by the High Court the Arbitrator shall conclude the  

proceedings in terms of the provisions of the Arbitration Act  

of 1940 expeditiously. We further make it clear that in case  

the Arbitrator already nominated is for any reason unable to  

take  up  the  assignment  the  respondents  shall  within  six  

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weeks from today appoint a substitute Arbitrator who shall  

then enter upon the reference and conclude the proceedings  

as early as possible. No costs.  

…......………………………….…..…J.     (T.S. THAKUR)

     .…………………………..……………..J.      (C. NAGAPPAN)

..…………………………..…………….J. (ADARSH KUMAR GOEL)

New Delhi September 4, 2014

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