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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.  9187  of 2015 (@ SLP(C) NO. 34309 OF 2014)

M/s Cochin Shipyard Ltd. ... Appellant

                               Versus

M/s Apeejay Shipping Ltd. ... Respondent

J U D G M E N T

Dipak Misra, J.

 In this Appeal, by special leave, the appellant calls in  

question  the  legal  tenability  of  the  order  passed  by  the  

learned single Judge of the High Court of Kerala in O.P. (C)  

No.  482  of  2013  whereby  he  has  granted  liberty  to  the  

respondent  to  substantiate  its  objection  preferred  under  

Sections 30 and 33 of the Arbitration Act, 1940 (for brevity,  

“the  1940  Act”)  by  adducing  evidence  which  would  be  

considered  within  the  ambit  and  scope  of  the  aforesaid  

provisions.

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2. The  facts  which  are  essential  to  be  stated  for  the  

adjudication  of  this  appeal  are  that  an  agreement  was  

entered into between the parties on 29.11.1980. As per the  

terms  and  conditions  of  the  agreement,  the  appellant,  a  

Government undertaking, had agreed to build and deliver a  

cargo ship  to  the  respondent  for  the  price  of  Rs.  32.527  

crores. Certain differences arose between the parties which  

led to an arbitration proceeding and a former Judge of this  

Court  was  appointed  as  the  arbitrator/sole  umpire  to  

resolve the disputes between the parties.   As facts would  

unveil, the learned arbitrator after holding series of sittings  

passed an award on 15.07.2009.  After the award was sent  

to the civil court, the claimant-appellant moved the Court  

for passing a decree under Section 17 of the 1940 Act in  

terms of the award and the respondent filed O.P. (Arb.) No.  

30 of 2009 under Sections 30 and 33 to set aside the award.  

During the pendency of  the said petition,  the respondent  

almost after expiry of two years filed an application, that is,  

I.A. No. 5625 of  2011 seeking permission to examine the  

learned  arbitrator  and  the  General  Manager  of  the  

respondent  as  witnesses.  The  learned  Additional  

Subordinate Judge,  vide order  dated 23.12.2011,  rejected  

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the  application holding  that  there  was  no  justification to  

examine the arbitrator; that the Court while considering the  

objections under Sections 30 and 33 of the 1940 Act does  

not sit in appeal over the arbitrator’s award; that the Court  

does  not  assess  or  re-appreciate  the  evidence;  that  the  

award passed by the learned arbitrator can only be assailed  

on the grounds as engrafted under Sections 30 and 33 of  

the 1940 Act; and that no reason had been disclosed by the  

respondent, the applicant before the Subordinate Judge, to  

examine the witness No. 2, that is, the General Manager.   

3. The aforesaid rejection of the application constrained  

the respondent to file a Writ Petition before the High Court  

which concurred with the view expressed by the court below  

opining  that  there  was  no  necessity  to  examine  the  

arbitrator as a witness as more than five years had elapsed  

since  the  award  was  passed.  The  High  Court  further  

appreciated  the  reasoning  expressed  by  the  rule  making  

Court and ruled that even if umpire would be examined, no  

fruitful  purpose will  be served and,  accordingly,  gave the  

stamp of approval to the same.  However, the High Court  

granted  liberty  to  the  writ  petitioner  to  produce  other  

available evidence to substantiate its claim and specifically  

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permitted  to  examine  its  employee  as  a  witness  in  the  

proceeding.   The  High  Court  further  observed  that  his  

evidence would be appreciated bearing in mind the scope of  

Sections  30  and  33  of  the  1940  Act  and,  accordingly,  

modified the order passed by the civil court.  Be it noted,  

further  liberty  was  granted  to  summon the  entire  record  

including  the  orders  passed in the  course  of  the  arbitral  

proceeding.  

4. At  the  very  outset,  we  are  obliged  to  state  that  the  

respondent has not challenged the order passed by the High  

Court and, therefore, as far as examination of the umpire is  

concerned, it stands foreclosed.  As far as liberty to examine  

the witness to substantiate the claim for the rule making  

Court is concerned, it is contended by Mr. Ranjit  Kumar,  

learned  Solicitor  General  for  the  appellant,  that  the  

respondent has been allowed to examine the employee as a  

witness to prove the misconduct of the learned arbitrator in  

conducting of the arbitral proceedings as the grounds had  

been raised pertaining to grant of adequate opportunity to  

the respondent and the recording of  minutes. In essence,  

the  stand  of  the  respondent  was  that  there  had  been  

violation  of  the  principles  of  the  natural  justice  by  the  

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learned arbitrator.   It is urged by the learned senior counsel  

for the appellant that it is totally unwarranted to examine  

witnesses  for  the  purpose  of  substantiating  the  claims  

before  the  Court  which  has  the  authority  to  accept  the  

objection under Sections 30 and 33 of the 1940 Act or to  

pass a decree in terms of the award.  In essence, the attack  

on the order by Mr. Ranjit Kumar is that the witness No. 2,  

General  Manager,  could  not  have  been  permitted  by  the  

High Court  to be examined as a witness in the Court  to  

prove any kind of legal misconduct, for the same has to be  

demonstrated from the records of the arbitral proceedings  

as  well  as  the  evidence  adduced  before  the  learned  

arbitrator.  It is further contended that the witness sought  

to  be  examined  had  already  been  examined  before  the  

learned arbitrator and his evidence can be read by the trial  

court  to  discern  and  decide  if  there  is  any  perversity  of  

approach by the arbitrator.   Learned Solicitor General,  to  

bolster  his  submissions,  has  placed  reliance  on  Arosan  

Enterprises Ltd.  v.  Union of India and Another1, Inder  

Sain Mittal  v.  Housing Board, Haryana and Others2,  

1 (1999) 9 SCC 449 2 (2002) 3 SCC 175

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State of U.P.  v. Allied Constructions3,  State Bank of  

India v. Ram Das and Another4, D.D. Sharma v. Union  

of India5, Hari Om Maheshwari v. Vinitkumar Parikh6,  

Bhagawati Oxygen Ltd.  v. Hindustan Copper Ltd.7  and  

Oil  and  Natural  Gas  Corporation  v.  Wig  Brothers   

Builders and Engineers Private Limited8.

5. Resisting  the  aforesaid  submissions,  Mr.  Vivek  

Tankha, learned senior counsel for the respondent, would  

contend  that  adducing  of  oral  evidence  in  a  proceedings  

under Sections 30 and 33 of the 1940 Act is not prohibited  

and  in  the  obtaining  factual  matrix  the  High  Court  has  

correctly exercised its discretion by granting the liberty to  

the respondent and, therefore,  the order cannot be found  

fault  with.  It  is  urged by  him that  to  establish  the  legal  

misconduct on the part of the learned arbitrator as asserted  

by the respondent, it is necessary to examine the General  

Manager  so  that  he  can  throw  light  on  the  proceedings  

before the learned arbitrator and, in fact, that is the only  

way it can be proven.  It is further propounded by him that  

3 (2003) 7 SCC 396 4 (2003) 12 SCC 474 5 (2004) 5 SCC 325 6 (2005) 1 SCC 379 7 (2005) 6 SCC 462 8 (2010) 13 SCC 377

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this  Court  in  Fiza Developers  and Inter-Trade Private  

Limited v.  AMCI  (India)  Private  Limited and Another9  

while  dealing  with  Section  34  of  the  Arbitration  and  

Conciliation  Act,  1996  (for  brevity,  “the  1996  Act”)  has  

clearly held that evidence can be adduced.  Learned senior  

counsel has drawn inspiration from the authorities in K.P.  

Poulose  v.  State  of  Kerala  and  Another10,  Union  of  

India  v.  Jain  Associates  and  Another11 and  Food  

Corporation  of  India  v.  Chandu  Construction  and  

Another12.  

6. We have already indicated hereinbefore that the rule  

making  Court  had  declined  the  prayer  to  examine  the  

learned arbitrator as well as the General Manager.  The said  

order was the subject matter of assail in the Writ Petition  

under Article 227 of the Constitution.  We have noted the  

submissions of the learned senior counsel for the appellant  

that the application preferred under Section 151 of the Code  

of Civil Procedure read with Order XVI Rule 1 of the Code of  

Civil Procedure was filed for substantiating the plea of legal  

misconduct alleged in the application.  The learned senior  

9 (2009) 17 SCC 796 10 (1975) 2 SCC 236 11 (1994) 4 SCC 665 12 (2007) 4 SCC 697

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counsel has drawn our attention to the various paragraphs  

of the petition and the relevant clauses to highlight the right  

to  call  for  the  learned  arbitrator  as  a  witness  has  been  

foreclosed.  The purpose to examine the General Manager,  

serial No. 2 in the list, is to substantiate its stand/claim as  

has been observed by the High Court.  Therefore, the thrust  

of the matter is whether on the basis of the allegations of  

legal  misconduct  the  High  Court  should  have  allowed  

examination of the witness.

7. To appreciate the controversy in proper perspective, it  

is pertinent to refer to Sections 30 and 33 of the 1940 Act.  

They read as under:-

“Section 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;

(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 invalid under section 35;

(c) that an award has been improperly procured  or is otherwise invalid.

Section 33. Arbitration agreement or award to  be contested by application.–  Any party to an  arbitration  agreement  or  any  person  claiming  

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under him desiring to challenge the existence or  validity of an arbitration agreement or an award  or to have the effect of  either determined shall  apply to the Court and the Court shall decide the  question on affidavits:

Provided that where the Court deems it just and  expedient,  it  may  set  down the  application  for  hearing on other evidence also, and it may pass  such orders for  discovery and particulars as it  may do in a suit.”

8. In the present case, the issue that has travelled to this  

Court  does not  even remotely  relate  to  Section 33 of  the  

1940 Act.   It centres around Section 30 of the 1940 Act.  

Though certain grounds have been provided under Section  

30, we only require to deal with the ambit and sweep of legal  

misconduct on the part of the learned arbitrator inasmuch  

as  there  are  allegations  as  regards  non-consideration  of  

relevant documents, ascription of reasons of passing of the  

award which do not flow from the material on record and  

further  the  conduct  of  the  arbitrator  during  the  arbitral  

proceedingsin recording of the minutes.  The assail does not  

pertain to personal misconduct or moral misconduct of the  

learned arbitrator.   

9. In  this  regard,  reference  to  a  three-Judge  Bench  

decision  in  Firm  Madanlal  Roshanlal  Mahajan  v.  

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Hukumchand Mills Ltd., Indore13 would be apposite.  In  

the said case, issue arose with regard to misconduct.  It was  

contended before this Court that the learned arbitrator was  

guilty of misconduct as he had amended an issue behind  

the back of the appellant. Repelling the said submission, the  

Court opined :-

“Counsel  then submitted  that  by  amending  an  issue behind the back  of  the  appellant,  the  arbitrator  was  guilty  of  misconduct.  This  contention  has  no  force.  The   arbitrator  had  raised  two issues.  The second issue referred  to  the respondent's claim in respect of 46-1/2 bales  a claim for loss in respect of the bales.  At the  time of the writing of  the award, the arbitrator  corrected this issue so as to show that  the  claim  was  for  the  price  of  the   bales.  By  this  amendment, the appellant suffered no prejudice.  The  parties  well  knew  that  the  respondent  claimed the price  of  46-1/2 bales  and  fought  the case before the arbitrator  on that footing.”

10. In the said authority, the Court referred to the decision  

in  Champsey  Bhara  &  Company  v.  Jivraj  Balloo  

Spinning  and Weaving  Company Ltd.14 wherein  it  has  

been laid down :-

"An  error  in law on the face  of   the  award  means,  in their Lordship's view,  that you can  find  in the  award or  a  document  actually  incorporated  thereto,  as  for  instance  a  note  

13 AIR 1967 SC 1030 14 AIR 1923 PC 66

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appended by the arbitrator  stating the reasons  for  his  judgment,  some legal  proposition which  is  the  basis  of  the  award  and  which  you can  then say is erroneous."  

Be it noted, the proposition laid down in  Champsey  

Bhara & Company (supra) has also been followed in Firm  

Madanlal Roshanlal Mahajan (supra).

11. In K.P. Poulose (supra) while dealing with the concept  

of misconduct, a  three-Judge Bench  was dealing with the  

speaking award where the reasons had been ascribed by the  

learned arbitrator.  A contention was raised that the learned  

arbitrator was guilty of legal misconduct in conducting the  

proceedings,  for  two  very  material  documents  were  

absolutely ignored by the arbitrator resulting in miscarriage  

of justice.  The Court referred to the said two documents  

and took note of the finding recorded by the arbitrator in the  

award  but  made  an  observation  which  was  inconsistent  

with his conclusion that the contractor had no right to extra  

payment for the particular work.  In that context, the Court  

proceeded to observe as follows:-

“We now come to the award. Although the arbi- trator has held that “jetting, however, is not an  authorised extra covered by the agreement”, he  has  made  the  following  significant  observation  which  is  inconsistent  with  his  conclusion  that  

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the contractor has no right for extra payment for  the jetting:

“The Chief Engineer has rejected the claims  of the contractor on grounds of non-inclusion  of this (jetting) in the agreement which was  executed subsequent to the direction issued  by the department to adopt jetting. The Chief  Engineer’s  decision  totally  ignores  the  next  sentence in that letter  ‘Meanwhile you may  execute the agreement’. By this sentence the  issue of extra payment for jetting is left open  even after the execution of the agreement.”

If the above is the conclusion of the arbitrator,  rejection of the claim on the ground that “jetting,  however,  is not an authorised extra covered by  the agreement” cannot be anything but rationally  inconsistent. The award, therefore, suffers from a  manifest error apparent ex facie.”

12. After  so  stating,  the  three-Judge  Bench  opined  that  

under Section 30(a) of the 1940 Act an award can be set  

aside when an arbitrator has misconducted himself or the  

proceedings and misconduct under Section 30(a) has not a  

connotation  of  moral  lapse.   It  further  observed  that  it  

comprises  legal  misconduct  which  is  complete  if  the  

arbitrator on the face of the award arises at an inconsistent  

conclusion even on his own finding or arrives at a decision  

by  ignoring  the  very  material  documents  which  throw  

abundant light on the controversy to help a just and fair  

decision.  On that backdrop, the Court opined that there  

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was a legal misconduct.

13. In Jain Associates  (supra), the Court referred to the  

authority  in  K.P.  Poulose (supra)  and  Dandasi  Sahu v.  

State of Orissa15 and observed thus:-

“...  The arbitrator/umpire  may not  be guilty  of  any act which can possibly be construed as in- dicative of partiality or unfairness. Misconduct is  often used, in a technical sense denoting irregu- larity and not guilt of any moral turpitude, that  is, in the sense of non-application of the mind to  the relevant aspects of the dispute in its adjudi- cation. In K.V. George v. Secretary to Government,   Water & Power Department, Trivandrum, (1989) 4   SCC 595, this Court held that the arbitrator had  committed  misconduct  in  the  proceedings  by  making  an  award  without  adjudicating  the  counter-claim made by the respondent...”

 14. In this regard we may usefully refer to the authority in  

Paradip Port Trust and Others v. Unique Builders16.  In  

the said case, a contention was raised that the award was  

passed in violation of principle of natural justice inasmuch  

as, certain documents were received without notice to the  

Port Trust.  Such a contention was raised before the High  

Court and the said stand was abandoned after perusal of  

the order sheet of the arbitrator which showed that at each  

stage adequate opportunity was given to both the parties.  

15 (1990) 1 SCC 214 16 (2001) 2 SCC 680

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Thereafter  the  court  referred  to  the  principles  stated  in  

Jivarajbhai  Ujamshi  Sheth  v.  Chintamanrao  Balaji17,  

Puri Construction Pvt. Ltd. v. Union of India18, State of  

Orissa v. M/s Lall Brothers19, Gujarat Water Supply and  

Sewerage  Board  v.  Unique  Erectors  (Gujarat)  (P)  Ltd.   

and  Another20,  Rajasthan  State  Mines  and  Minerals  

Ltd. v. Eastern Engineering Enterprises and Another21  

and opined thus:-

“… It is not a case where the arbitrator has acted  arbitrarily,  irrationally,  capriciously  or  independently of the contract.  It is difficult for us  to take a view that there has been a deliberate  departure or conscious disregard of the contract  to   say   that   the  arbitrator  misconducted  himself...”

15. In the case of Ispat Engineering & Foundry Works,  

B.S. City, Bokaro v. Steel Authority of India Ltd., B.S.   

City,  Bokaro22,  it  has  been held  that  reappraisal  of  evi-

dence by the court is not permissible and as a matter of  

fact,  exercise  of  power  to  reappraise  the  evidence  is  un-

known to a proceeding under Section 30 of the Arbitration  

Act. The court as a matter of fact cannot substitute its own  

17 (1964) 5 SCR 480 18 (1989) 1 SCC 411 19 (1988) 4 SCC 153 20 (1989) 1 SCC 532 21 (1999) 9 SCC 283 22 (2001) 6 SCC 347

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evaluation and come to the conclusion that the arbitrator  

had acted contrary to the bargain between the parties.

16. At this juncture, we may refer to some other authori-

ties as regards the scope of Section 30 of the 1940 Act.  In  

Allied Constructions  (supra), a three-Judge Bench after  

referring  to  earlier  judgments  has  opined  that  an  award  

passed by an arbitrator can be set aside only if one or other  

condition contained in Sections 30 and 33 of the 1940 Act is  

satisfied.  The Court further opined that the term provided  

for setting aside an award under Section 30 is restrictive in  

its operation and unless one or other condition contained in  

Section 30 is satisfied, an award cannot be set aside, for the  

arbitrator is a Judge chosen by the parties and his decision  

is final.  It has been further observed that even in a case  

where the award contains reasons, the interference there-

with would still  be not available within the jurisdiction of  

the court unless, of course, the reasons are totally perverse  

or the judgment is based on a wrong proposition of law and  

further an error apparent on the face of the record would  

not imply closer scrutiny of  the merits of documents and  

materials on record.  

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17. In  Hari Om Maheshwari (supra), the Court after re-

ferring to the decisions in Arosan Enterprises Ltd. (supra)  

and Allied Constructions (supra) opined thus:-

“From the above it is seen that the jurisdiction of  the court entertaining a petition or application for  setting aside an award under Section 30 of the  Act is extremely limited to the grounds mentioned  therein and we do not think that grant or refusal  of an adjournment by an arbitrator comes within  the parameters of Section 30 of the Act...”  

18. In  Wig Brothers (supra) while dealing with the chal-

lenge under Sections 30 and 33 of the 1940 Act, the Court  

opined  that  a  court  while  considering  a  challenge  to  an  

award under Sections 30 and 33 of the 1940 Act, does not  

sit as an appellate court and it cannot reappreciate the ma-

terial on record.  The Court further proceeded to state that  

an award is not open to challenge on the ground that the ar-

bitrator had reached a wrong conclusion or had failed to ap-

preciate some facts, but if there is an error apparent on the  

face of the award or if there is misconduct on the part of the  

arbitrator or  legal  misconduct in conducting the proceed-

ings or in making the award, the court will interfere with the  

award.   In the said case reference was made to Rajasthan  

State Mines and Minerals Ltd. (supra) and certain pas-

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sages were quoted.   We think it  seemly to reproduce the  

said paragraphs:-

“22.  …  The  rates  agreed  were  firm,  fixed  and  binding irrespective of any fall or rise in the cost  of  the work covered by the contract  or  for  any  other  reason  or  any  ground  whatsoever.  It  is  specifically agreed that the contractor will not be  entitled or justified in raising any claim or dis- pute because of increase in cost of expenses on  any  ground  whatsoever.  By  ignoring  the  said  terms, the arbitrator has travelled beyond his ju- risdiction  as  his  existence  depends  upon  the  agreement and his function is to act within the  limits of the said agreement. This deliberate de- parture from the  contract  amounts  not  only  to  manifest disregard of the authority or misconduct  on his part but it may tantamount to mala fide  action.

23. It is settled law that the arbitrator is the crea- ture  of  the  contract  between  the  parties  and  hence if he ignores the specific terms of the con- tract, it would be a question of jurisdictional er- ror which could be corrected by the court and for  that limited purpose agreement is required to be  considered. …”

19. We have referred to series of  decisions to appreciate  

the concept of  misconduct and how a party is entitled to  

make it the fulcrum of assail in his objection under Sections  

30 and 33 of the 1940 Act.  Misconduct, as has been laid  

down, does not always have a moral connotation. To elabo-

rate,  it  may  not  have  any  connection  with  the  

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individual/personal conduct of the arbitrator. The said con-

duct would be in sphere of moral misconduct.  As far as le-

gal  misconduct  is  concerned,  as  the  authorities  would  

demonstrate, the same must be manifest or palpable from  

the proceedings before the arbitrator. To elaborate, a person  

urging  the  ground of  legal  misconduct  has  to  satisfy  the  

court from the records of the arbitral proceedings that there  

has been a legal misconduct on the part of the arbitrator as  

a consequence of which the award gets vitiated.  The ques-

tion of adducing any kind of oral evidence to substantiate  

the plea or stand or stance does not arise.   It  has to be  

shown from the proceedings carried on before the arbitrator  

and the evidence adduced before the arbitrator.  Evidence  

cannot be adduced in court to substantiate the challenge on  

the score of legal misconduct.  We are not entering upon  

any discussion pertaining to moral  misconduct as that is  

not  the  issue in  the  case  at  hand.  The decision in  Fiza  

Developers and Inter-Trade Private Limited (supra)  has  

been rendered by this Court while interpreting Section 34 of  

the 1996 Act.  The context being different, we are not in-

clined to apply the principles enumerated therein to the ob-

jection filed under Sections 30 and 33 of the 1940 Act, for  

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the  simon pure  reason that  the  authorities  are  plenty  to  

make it limpid that the issue of legal misconduct on the part  

of the arbitrator should be manifestly discernable from the  

record.   

20. In the instant case, the High Court has granted liberty  

to the respondent herein to examine its General Manager to  

substantiate its claim and further opining that the said evi-

dence should be considered within the parameters of Sec-

tions 30 and 33 of the 1940 Act.  The learned senior coun-

sels for the parties have pressed their argument relating to  

legal misconduct. Both the learned senior counsels for the  

parties have construed the order that the said liberty has  

been granted to establish the misconduct and precisely that  

is the subject matter of challenge before us.  Therefore, we  

have clearly  opined that  to substantiate  a stance of  legal  

misconduct on the part of the arbitrator, examination of any  

witness in court is impermissible.  It is because it must be  

palpable from the proceedings and the learned single Judge  

has already directed that the proceedings before the arbitra-

tor to be requisitioned by the civil court.  Least to say, it will  

be open for the respondent to establish the ground of legal  

misconduct from the arbitral proceedings.  We may hasten  

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to add that we have not said anything as regards legal mis-

conduct pertaining to the present case, although we have  

referred to certain authorities as regards the legal miscon-

duct.  

21.  In view of  the aforesaid premises,  the appeal  is  al-

lowed in part as far as it grants permission/liberty to the re-

spondent to examine any witness in court.  The learned Civil  

Judge would requisition the records from the learned arbi-

trator, if not already done, and the respondent would be at  

liberty to advance its arguments for pressing the factum of  

misconduct from the said records.  There shall be no order  

as to costs.   

.............................J. [Dipak Misra]

..........................., J. [Prafulla C. Pant]

New Delhi November 06, 2015

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