ORDER
Vijay Daga, J.
1. The petition is directed against the award dated 17-8-1996 passed by the Sole Arbitrator awarding the claim in favour of the Commander Works Engineer (Naval Works), Dr. Homi Bhaba Road, Colaba, Mumbai 400 005 on behalf of Union of India.
2. In order to appreciate the grievance of the petitioners against the said award, few relevant introductory facts need to be noticed at the outset.
3. The petitioners, pursuant to the tender invitation had submitted their tender bid for the works for providing the furniture for Office, Library, Lecture hall-cum-auditorium for Building No. 3-6 at Karanja. The bid submitted by the petitioners came to be accepted. In pursuance thereof the work order came to be issued in November 1988 and formal contract came to be executed between the parties in due course.
4. The petitioners have stated that after getting the work order, they mobilised their resources for the work and commenced the execution thereof promptly and diligently. However, the execution work was delayed mainly due to various acts of omission and commission of the respondents themselves such as non-payment of petitioners dues for prolonged period of time and other acts on the part of the petitioners, which effectively prevented the petitioners from completing the work within the stipulated period. The contract had to be consequently executed beyond the stipulated date of completion. Finally, by and under letter No. 8792-K/56/E-8, dated 15-11-1990, the contract came to be terminated. The respondents claimed to have resorted to the execution of the balance work at the risk and costs of the petitioners.
5. The respondents after getting the balance work done called upon the petitioners vide their letter dated 8-5-1992 to pay to the respondents an amount of Rs. 2,08,565.00 by way of compensation for delay and excess expenditure incurred by the respondents for getting the balance work executed from another agency, the details of which are as under :
(a)
Excess expenditure incurred by the Govt. to get the incomplete items of work completed through other agency in terms of condition 28 of General Condition of Contract.
Rs. 1,49,050.00
(b)
Compensation for the delay as per the Condition 24 of ( IAFW-1815-1.)
Rs. 59,515.00
Total amount to be recovered
Rs. 2,08,565.00
The details extracted hereinabove specifically includes a specific claim of Rs. 1,49,050/- being the excess expenditure incurred by the respondents to get the incomplete items of work completed through other agency in terms of the General Conditions of contract.
6. The failure on the part of the petitioners to accept the above demand and certain dispute having arisen between the parties, the respondent by
their letter dated 25th July 1995 appointed one Shri. R.G. Khadtare, as sole arbitrator to adjudicate upon the disputes raised by the respondent’s the list of which was annexed to the said respondents letter dated 25th July 1995.
The details of which are listed hereinbelow.
CLAIMS OF UNION OF INDIA
Sl. No.
Claim
Brief description of Amount in rupees
(1)
10% compensation on contract amount.
Rs.59,515.00
(2)
Additional expenditure incurred on
account of concluding risk and cost contract.
Rs.1,75,575.00
(3)
Recovery towards defects in workmanship observed during the site
Rs.500.00
(4)
Recovery against non/return of classified documents.
Rs.300.00 (5) Cost of Arbitration Rs.20,000.00 Total : Rs.2,55,890.00 (6) Amount of work done as per final Bill Rs.2,27,525.00 RARs Paid. Rs.2,00,200.00 Difference paid Rs.27,325.00(-) Rs. 2,38,565.00
The learned Sole Arbitrator entered upon the reference and conducted the arbitration proceedings which finally terminated with passing of the award dated 17-8-1996 wherein the sole arbitrator has allowed all the claims raised by the respondents in toto save and except the claim for cost of the arbitration.
7. The arbitrator has allowed the claim No. 2 of the respondents wherein respondents had enhanced their claim from Rs. 1,49,050/- (as claimed by them earlier) to Rs. 1,75,575/- before Arbitrator.
8. The aforesaid award is a subject matter of attack in this petition on the sole ground that as per the arbitration clause in the contract, it was mandatory on the part of the Arbitrator to give his findings, meaning thereby, it should have been a reasoned and speaking award.
9. The learned Counsel appearing for the petitioners contended that the word ‘finding’ covers material questions which arise in a particular case for necessary decision or for passing the final order or for giving final decision in the case. According to him, the ‘decision’ does not merely mean ‘conclusion’. It embraces within its fold the reasons for arriving at the conclusion. Therefore, in the submission of the petitioners, ‘decision’ must be accompanied by reasons upon which it is based.
10. In order to appreciate the above contentions of the petitioners, it is
necessary to examine the relevant arbitration clause, which runs as under:
“The Arbitrator shall give his award within a period of six months from the
date of entering upon the reference or within the extended time as the
case may be, on all matters referred to him and shall indicate his findings along with the sum awarded, separately on each individual items
of dispute”.
11. In order to decide the controversy before me, it is necessary to find out what does the expression ‘finding’ used in arbitration clause mean ? ‘finding’ has not been defined in the Arbitration Act, 1940. Order XIV, Rule 7 of the Civil Procedure Code (“Code” for short) reads as under :
“Where the Court is satisfied after making such enquiry as deems proper —
(a) —–
(b) —–
(c) —–
it shall proceed to record and try the issue and state its findings or decision
thereon in the same manner, as if the issue had been framed by the
Court; and shall upon the finding or decision on such issue, pronounce
judgment according to the terms of the agreement; and upon the judgment so pronounced, decree shall follow”.
Similarly, Order XX, Rule 5 of the Code reads :—
“In suits in which issues have been framed, the Court shall state its findings
or decision, with the reasons therefor, upon each separate issue un-
less the finding upon any one or more of the issues is sufficient for the
decision of the suit.”
12. In the aforesaid orders, the ‘finding’ is, therefore a decision on an issue framed
in a suit. The scope of meaning of expression ‘finding’ is considered by a Division
Bench of the Allahabad High Court in Pt. Hazarimal v. Income Tax Officer, Kanpur,
. There, the learned Judges pointed out :
“The word ‘finding’ interpreted in the sense indicated by us above, will only cover material questions which arise in a particular case for decision by the authority hearing the case or the appeal which, being necessary for passing the final order or given the final decision in the appeal, has been the subject of controversy between the interested parties or on which the parties concerned have been given a hearing.
We agree with this contention of finding”.
The same aforesaid view has been approved by the Supreme Court in Shivalingam Chettiar v. Commissioner of Income Tax, Madras, . The said judgment has been followed by the Apex Court in CIT, Andhra Pradesh v. M/s. Vadde Pullaiah & Co., .
13. Having set out the law, let us examine whether the impugned award contains findings. The impugned award if perused, would reveal that the Arbitrator, after setting out different heads of the claims, has allowed the claims of the respondents in the following words :—
“I award and direct that M/s Graphic Interiors shall pay the award amount to the claimant within ninety days from the date of the award failing which M/s Graphic Interiors shall pay simple interest to the claimant at the rate of 12% per annum on the amount of award from the date of publication of award till payment or decree of the Award by the Competent Court, whichever is earlier.”
The aforesaid impugned award of the Arbitrator is completely silent so far as finding on each items are concerned. The necessity of recording findings postulates a decision. The decision does not merely mean ‘conclusion’. The word ‘finding’ when used in a commercial contract it is to be understood in its popular rather than technical or legal sense. According to the dictionary meaning, ‘finding’ means a decision means a material decision upon a question of fact reached as a result of proper examination or investigation by an authority entrusted with the job.
14. In the light of what is stated hereinabove, if the impugned award is examined, the same is a non-speaking award, in contravention of the provisions of the Arbitrator Clause between the parties. The Arbitrator has not given reasons in support of the claim which he has awarded. The Arbitrator has extracted a brief description of the claims without recording any reasons while allowing the various claims. It is needless to mention that the arbitration clause specifically provides and makes it obligatory on the part of the Arbitrator to indicate his findings along with the sums awarded separately on each individual item of dispute. It was, therefore, mandatory on the part of the Arbitrator to indicate his findings i.e. decision based on reasons. The purpose of arbitration clause extracted above appears to be that the award should be explanatory and should not keep the parties or the Court guessing for reason. Reasons provide a vital link between the conclusion and the evidence to safeguard against arbitrariness, passion, prejudice, and humour. Reasons are manifestation of the mind of the Arbitrator. It gives liberty to the parties and also to the Court to see whether or not the Arbitrator proceeded on the relevant material. The obligation to record reasons and findings i.e. reasoned findings acts as deterrent against possible arbitrary action by the arbitrator invested with power to adjudicate. In other words, it is calculated to prevent unconsciousness, unfairness or arbitrariness in reaching conclusions. The contract requiring findings to be given by the Arbitrator in support of an award is, like complying with the basic principles of natural justice. This requirement ought to have been followed by the Arbitrator in its true letter and spirit when the same was specifically provided in the contract. The practice of recording decision by the Arbitrator without reasons in support, inspite of arbitration agreement pointedly providing for the same, must be severely deprecated. The breach of this mandate must result in quashing and setting aside the award under challenge.
14A. The impugned award referred to hereinabove, is completely non-speaking award and clearly in contravention of the express mandate of the agreement between the parties. The petitioners are, therefore, right in their submission that the Arbitrator has misconducted in proceeding inasmuch as by failing to give reasons and speaking award, the Arbitrator has committed clear misconduct. The Arbitrator should not act arbitrarily, irrationally, capriciously or independently of the contract.
15. In view of the aforesaid position of law and the facts stated above, it is apparent that the award of the Sole Arbitrator is against the contract between the parties. Thus, for the reasons and findings recorded hereinabove,
the impugned award is set aside and it is remitted to the Arbitrator for fresh consideration in accordance with law.
16. In the light of the observations made hereinabove, the Arbitrator is directed to hear the parties afresh and give his reasoned award recording finding in support of each claim within a period of three months from the date of communication of this order. Since I am remanding the case for fresh consideration after hearing the parties in the light of the observations made by me, I clarify that I have not expressed any opinion regarding the merits of the case and anything said by me hereinabove shall not be construed expressly or impliedly as an opinion on the merits of the case.
According, the impugned award is set aside and the arbitration proceeding is remanded, leaving the parties to bear their own costs.
Petition allowed.