ORDER
R.P. Sethi, J.
1. The petitioner claimant filed Arbitration Application No. 309 of 1985 in this Court praying therein that the respondent-corporation be directed to file the arbitration agreement in the Court and reference of the disputes detailed in para 28 be referred to the arbitration of one person out of the names given in para 27 of the said petition. The petition was resisted by the Hotel Corporation of India Ltd. “hereinafter called the Corporation” on various grounds denying their liability, towards the petitioner. It was further stated, “it was however denied that the petitioners are entitled to the amounts as stated in para 26 of the petition. On the contrary, it is the respondents who suffered heavy losses and damages and which the respondents reserve their right to claim from the petitioners at the appropriate time”. It was however submitted that the respondents had no objection for reference of the disputes between the parties to arbitration in terms of the arbitration clause in the contract. The petitioner-claimant had filed a separate CMP No. 609 of 1985 praying therein that “this Hon’ble Court while referring the claims detailed in para 28 of the petition to arbitra-
tion refer claim No. 7 for Rs. 8,95,839.62 instead of Rs. 3,57,281.54 and also refer the claim for Rs. 89,946/- to arbitration”. This Court vide its order dated 11-4-1986 appointed Shri R.C. Desi, Chartered Engineer, E.E.M.E. FIV, 62, Sunder Nagar, New Delhi as the named arbitrator of the petitioner and Sh. T.k. Saran, Retd. Advisor (Constn), Bereau of Public Enterprises, Ministry of Finance, Government of India at present residing at Flat No. Ill, DDA, SFS, Hauz Khas, New Delhi as the named arbitrator on behalf of the respondents. The disputes between the parties as mentioned in their pleading including those mentioned in CMP No. 609 of 1985 were referred to the above named two Arbitrators directing them to enter upon the reference, adjudicate upon the matters in dispute between the parties and submit their award within the statutory period of four months.
2. The Arbitrators thereafter entered upon the reference on 5-5-1986, passed the award on 12-11-1986. The claimant was held entitled to a sum of Rs. 34,15,383/ – in full and final settlement of their claims except claim No. 9 along with interest at the rate of 15% per annum from 25-1-1984 till the date of payment or decree whichever is earlier. The counter claim of the Corporation was rejected as not having been referred by this Court.
3. After the filing of the award notices were issued to the parties to file objections if any within the statutory period. The Corporation filed the objections to the award on 29-
12-1986 which were appropriately replied by the petitioner-claimant.
4. On the’ basis of the pleadings of the parties the following issues were framed by this Court on 2-4-1988 :–
1. Whether there is any error apparent on the face of the award? OPP
2. Whether the arbitrators’ mis conducted the proceedings? OPP
3. Whether the arbitrators acted beyond the scope of the reference in respect of any of the claims of the respondent-claimant? OPP
4. Whether the arbitrator committed any misconduct in not considering the counterclaim of the petitioner-objector?OPP
5. Whether the arbitrators over-stepped the limit of their jurisdiction by awarding interest beyond the date of the award?OPP
6. Whether the arbitrators committed misconduct by making an award against the terms of the detailed work order contract between the parties?OPP
7. Whether the award of the arbitrators is perverse being without any evidence in support thereof. If so whether the same amounts to misconduct and renders the award liable to be set aside?OPP
8. Whether the arbitrators committed misconduct by entertaining fresh claims on behalf of the claimant?OPP
9. Whether the arbitrators committed misconduct in awarding a lump sum amount to the claimant?OPP
10. Whether the arbitrators have committed any misconduct in awarding various claims to the claimant?OPP
5. The evidence of the parties was closed vide a detailed order passed by this Court on 9-6-1988 read with order dated 8-2-1989.
6. I have heard the learned counsel for the parties and have perused the record.
Issues 1 to 4
7. All these issues are inter-connected and the decision of one would determine the fate of all the issues:
The term misconduct occurring in Section 30 of the Arbitration Act has not been defined and it is difficult to give an exhaustive definition to what amounts the misconduct on the part, of the Arbitrator. The expression is wide in import covering within its ambit the acts of bribery and corruption as also a mere mistake regarding the scope of the authority conferred by the agreement of reference. It is not only the case where moral turpitude of the arbitrator has been made out which alone falls within this category but even the cases where no moral turpitude is alleged or proved
against the arbitrator yet the facts disclose a technical or legal misconduct in relation to the arbitrator’s conduct or the proceedings making out a ground for setting aside the award under Clause (a) of Section 30 of the Arb. Act. The term has to be interpreted in a wider sense including the legal misconduct which means some palpably erroneous though honest decision particularly when it causes miscarriage of justice. The plea of misconduct has to be specifically raised and proved on facts by leading evidence or on the basis of the record. In K.P. Poulose v. State of Kerala, AIR 1975 SC 1259, the Supreme Court while dealing with the scope of Section 30(a) held:
“Under Section 30(a) of the Arbitration Act an award can be set aside when an Arbitrator has misconducted himself or the proceedings. Misconduct under Section 30(a) has not a connotation of moral lapse. It comprises legal misconduct which is complete if the Arbitrator on the face of the award arrives at an inconsistent conclusion even on his own finding or arrives at a decision by ignoring very material documents which throw abundant light on the controversy to help a just and fair decision. It is in this sense that the Arbitrator has misconducted the proceedings in this case.”
If the award is passed contrary to the directions in the order of the reference which cannot be termed as “inadvertent error or accidental slip but are deliberate and conscious”, the award would be liable to be set aside on the ground of legal misconduct attributable to the Arbitrators. While making a reference under Section 20 of the Arb. Act, the Court is not under an obligation to specify the matter in difference between the parties and it would be sufficient if reference is made to the disputes of the parties raised in their pleadings which would be required to be adjudicated upon by the Arbitrators. The Arbitrator is under a legal obligation to deal with all the claims and if the award leaves any of the matters referred to the arbitration undetermined, the award would be liable to be set aside. When the parties agree to refer the matter to arbitration, there is an ample consent for submission of all the matters to
the arbitrator. If any one of the matters
referred to the arbitrator is not decided that
would vitiate the whole award making it liable
to be set aside.
8. The learned counsel for the Corporation has vehemently argued that the arbitrators are guilty of legal misconduct because they declined to decide the counter claims of the Corporation referred to them by this Court vide the order of reference mentioned hereinabove. It is submitted that the omission to determine the counter claim by the Arbitrator was intentional and contrary to the directions of this Court. Mr. V.K. Gupta the learned counsel appearing for the petitioner-claimant has however submitted that the award cannot be set aside on the ground argued by the learned counsel for the Corporation because no counter claim was referred by the Court to the Arbitrators as there did not exist any disputes so far as the claim of the Corporation was concerned. Attention of this Court has been drawn to the agreement executed between the parties prescribing the mode for preferring a dispute.
9. The relevant arbitration clause in the agreement executed between the parties under the heading “Settlement of Disputes” provides:
“All disputes and differences of any kind whatever arising out of or in connection with the contract or the carrying out of the works (whether during the progress of the works or after their completion, and whether before or after the determination, abandonment or breach of the contract) shall be referred to and settled by the Architect who shall state his decision in writing. Such decision may be in the form of a final certificate or otherwise. The decisions of the Architect with respect to any or all the following matters shall be final and without appeal”.
It is further provided:
“But if either the owner or the Contractor be dissatisfied with the decision of the Architect on any matter, question or dispute of any kind except the matters listed above, then and in any such case, either party (the
owner or the Contractor) may within twenty eight days, after receiving notice to such decisions, give a written note to other party through the Architect requiring that such matters which are in dispute or difference of which such written notice has been given and no other shall be and is hereby referred to the arbitration and final decision of a single Arbitrator being a person who is a professional Engineer/Chartered Architect/Chartered Surveyor (Building and Quantities/ Land Surveying) to be agreed upon and appointed by both the parties or in the case of disagreement as to the appointment of a single Arbitrator to the arbitration of two Arbitrators both being persons who are professional Engineers/Chartered Architects/ Chartered Surveyors (Building and Quantities/ Land Surveying), one to be appointed by each party, which Arbitrators shall, before taking upon themselves the burden of reference appoint an Umpire, who must also be a Professional Engineer/Chartered Architect/Chartered Surveyor as described earlier. The Arbitrator, the Arbitrators or the Umpire shall have power to open up, review and revise any certificate, opinion, decision, requisition or notice pertaining to the matters, referred to them, and to determine the same by his/their award. Upon every or any such references the cost of and incidental to the reference and award repectively shall be at the discretion of the Arbitrator or Arbitrators or Umpire who may determine the amount thereof, or direct the same to be taxed as between Attorney and Client or as between party and party, and shall direct by whom and to whom and in what manner the same shall be borne and paid. This submission shall be deemed to be submission to Arbitration Act, 1940 or any statutory notifications thereof. The award of the Arbitrator or Arbitrators or the Umpire shall be final and binding on the parties. The owner and the Contractor hereby also agree that Arbitration under this clause shall be a condition precedent to any right of action under the Contract”.
10. This Court while making a reference to the Arbitrators in its order of reference dated 11-4-1986 found. The petitioner has referred in para 28 of the petition its claims
regarding the matters enumerated therein. Respondent has filed objections controverting the claims of the’ petitioner-firm. The Corporation in their objections had categorically stated,” on the contrary, it is respondents who have suffered heavy losses and damages and which the respondents reserve their right to claim from the petitioners at the appropriate time”. It was further stated, “that the respondents had no objection for reference of disputes between the parties to arbitration in terms of the arbitration clause in the contract”. The arbitrators vide the communication dated 26-4-1986 addressed to both the parties directed that the first arbitration meeting will be held on 5-5-1986 in the office of Sh. R.G. Desai to discuss the preliminaries about the arbitration. On 5-5-1986 the Arbitrators directed that all documents, letters, statement etc., to be filed by the claimant and the objector shall be sent simultaneously to the two Arbitrators. It is alleged that in para 2 of the said order the claimant was directed to file its statement of claims and/or disputes within 15 days from the receipt thereof along with the copies of the documents, if any relating to the subject matter of the case. Respondent was also directed to file its counter statement on facts and counter claim if any within a period of 15 days, from the date of receipt of the statement of claims from the claimant. The issuance of the letters by the Arbitrators on 26-4-1986 and 5-5-1986 had not been denied by the claimant. The Corporation through their Advocates M/s. Bhasin and Co. submitted to the Arbitrators reply to the statement of claim/counter claim and documents marked as EXP: 1 to 36. The respondent-Corporation preferred a counter claim of Rs. 118.45 lacs. The petitioner-claimant vide their letter dated 30-7-1986 addressed to the Arbitrators submitted replication to the counter statement of facts/counter claim of the respondents in detail. Regarding counter claims of the Corporation it was submitted that the same were baseless and raised by way of an afterthought. It was submitted that this Court had referred to the Arbitrators only the claims of the petitioner-claimant and not of the Corporation. The claimant submitted
written, arguments regarding the maintainability of the counter claims, of the Corporation 22-10-1986 reiterating that the counter claims had not been referred to the Arbitrators. Relying upon the judgment of’ the Supreme Court reported in AIR 1977 SC 2014, it was submitted that when an agreement is filed in the Court and order of reference is made under Section 20(4) of the Arb. Act then the claim as a result of the order of reference is limited to a particular relief and the Arbitrator cannot enlarge the scope of the reference and entertain fresh claims without the further order of reference from the Court. The record of the Arbitrators show that on 5-5-1986 the claimant and the respondents were directed that all documents, letters, statement etc., be filed simultaneously. Vide para 3 of the said letter it was directed:
“The respondent is directed to file its counter statement of facts and counter claims, if any, within a period of “fifteen days” from the date of receipt of statement of claims from the claimant. The respondent is directed to simultaneously forward a copy of its counter statement of facts and counter claims, if any, to the claimant.”
The minutes of the proceedings of the Arbitrators dated 4-6-1986 shows that they received a communication No. 12413 dated 23-5-1986 from the D.R. of this Court informing them, “this case was taken up by the Hon’ble Court on 22-5-1986 and the Hon’ble Court has directed that the Arbitrator be informed that they can proceed with the case.” In view of this direction from the High Court of J. & K., the proceedings in the matter are being continued uninterrupted, Therefore the respondent is directed to file the counter statement of facts with documents given in schedule of the communication dated 5-5-1986. As the counter claim was not filed within the time specified the Arbitrators vide their order dated 11-6-1986 informed the respondent-petitioner that, “In the interest of justice and in view of the request dated 10-6-1986, we give the respondents a further time up to 26-6-1986, to file the same, failing which the matter will be proceeded into, without the counter statement of facts and documents of
the respondent”. Again on 26-6-1986 the respondents were directed to file their counter statements before 9-7-1986. The time was again extended by the Arbitrators vide their order dated 8-7-1986. On 22-7-1986 the claimants were given time to file rejoinder to the counter statement of the respondents on or before 31-7-1986. The Arbitrators thereafter conducted the proceedings on 18-8-1986, 19-8-1986, 20-8-1986, 22-8-1986, 23-8-1986, 6-9-1986, 15-9-1986, 22-9-86, 27-9-1986,3-10-1986, 6-10-1986, 22-10-1986 and 23-10-86. Thereafter the award was published after requesting the parties to get the time extended for the said purpose up to 15-11-1986.
11. A perusal of the proceedings of the arbitrators would show that they never intimated the respondent-Corporation regarding the alleged non-reference of the counter claims to them. Acting upon the direction of the Court and properly understanding its import the arbitrators directed the parties to file their claims and counter claims and thereafter at no point of time felt it necessary to point out to the Corporation that their counter claims in fact had not been referred to them. If the Arbitrators had any doubt they could have sought clarification from this Court as they did at a time when the objection was raised by the Corporation regarding the maintainability of the proceedings in view of the pendency of the review petition. From the proceedings of the Arbitrators dated 4-6-1986 it appears an objection was taken by the Corporation that Arbitrators should not proceed with the proceedings until the disposal of the Review Petition and application for stay, stated to have been filed in this Court on 5-5-1986. The arbitrators in that event had directed, “we made clear that in view of the application of the respondent we would refer the matter to the High Court of J. & K. and seek the direction from the Court as we have been appointed by the High Court of J. & K., with the direction to enter upon the reference, adjudicate upon the disputes between the parties and submits the award within the statutory period of four months.” Upon their request they were informed by this Court through the Dy. Registrar vide his communication No. 12413 dated 23-5-1986 that
the Arbitrators were at liberty to proceed with the case notwithstanding the pendency of the Review Petition and the stay application. From the record of the Arbitrators it is evident that the reference of the disputes in the form of counter claims by the Corporation were never doubted by them. Otherwise also stand taken by the arbitrators appears to be hyper technical depriving the adjudication of the disputes raised by the Corporation in the proceedings regarding which reference was made to them and they were seized of the matter. Insisting one of the parties to proceed separately for adjudication of his disputes notwithstanding the reference made by the High Court regarding the subject matter would result in the failure of justice and may at appropriate time result in conflicting judgments, awards and decrees. If the award of the arbitrator is allowed to stand the Corporation may be in a position to either separately initiate arbitration proceedings or proceed in a competent Civil Court of jurisdiction and in that event the possibility of conflicting judgments and decrees cannot be ruled out. The Arbitrators instead of shirking from their responsibility of adjudicating the disputes between the parties should have adjudicated upon all the claims and counter claims of the parties specifically referred to them or in case they felt any doubt should have sought directions from this Court or direct the concerned party to approach the Court for appropriate directions. As the arbitrators have declined to adjudicate the counter claims of the respondent-Corporation, they are held to be guilty of legal misconduct rendering the award liable to be set aside. Issues 1 to 4 are, therefore, decided in favour of the corporation and against the petitioner-claimant.
Issues No. 5.
12. The arbitrators besides awarding an amount of Rs.34,15,383/- to the claimant have also held them entitled to the interest at the rate of 15% per annum from 25-1-1984 till the date of the payment of the decree whichever is earlier. The arbitrators had no jurisdiction to direct the payment of interest pendentelite in view of the judgment of the
Supreme Court reported in AIR 1988 SC 1520. This issue is accordingly held in favour of respondents-Corporation and against the petitioner-claimant.
Issues Nos. 6 to 10.
13. of my finding on issues 1 to 5 by which the award filed by the Arbitrators has been set aside on the technical grounds of judicial misconduct, there is no necessity of deciding these issues.
Relief:
14. After setting aside the award of the Arbitrators in its entirity for legal misconduct it has to be seen whether the disputes should be referred back to the same Arbitrators or a new Arbitrator be appointed in the case. In the instant case the arbitrators while deciding the claim of the petitioner-claimant have in fact rejected the counter claim of the respondents without adjudication under law. The arbitrators have expressed their mind regarding the merits of the counter claim of the respondents. The position of law is that justice should not only be done but it must manifestly appear to be so done. It would not be proper to refer the case back to the same arbitrators resulting a pre-conceived apprehension in the mind of the respondent-Corporation that they would not get justice at the hands of the same arbitrators. Law does not warrant and equity does not approve the reference of the disputes again to the same arbitrators. The disputes cannot be remitted to the same arbitrators even under Section 16 of the Act. As the award has been set aside under Section 30/33 of the Arb. Act on the ground of proved legal misconduct, there is no scope for remitting the same to the same arbitrators. It was held in Chairman the Orissa State Electricity Board v. Jayashree Chemicals Ltd., AIR 1980 Ori 20 that where the arbitrator has, though not factually but legally misconducted the proceedings which disentitles him to arbitrate on the matter second time after the award made by him is set aside in its entirety, the matter cannot be referred back to the same arbitrator. Law does not warrant it, equity does not approve it and good-con-
science does not support it. In such a case there is no question of remittance under Section 16(l)(c) of the Arb. Act to the same Arbitrator. The same view was taken by Delhi High Court in Union of India v. K. D. Bhatia, AIR 1977 Delhi 82 and Union of India v. Manipur Builders Association, AIR 1977 Gau 5.
15. Under the Arbitration Clause both the parties are entitled to appoint one arbitrator of their choice as was done by them in the instant case. Both the arbitrators appointed by the parties have been held guilty of misconduct within the meaning of Section 30 read with S. 33 of the Arb. Act. No useful purpose would be served by again directing the parties to appoint new arbitrators for reference of disputes already raised. Otherwise also once the parties have exercised their right, and the award passed by such arbitrators has been set aside, this Court has the power to appoint a new arbitrator for adjudication of the disputes existing between the parties. From the record it appears that the arbitrators appointed by the parties in their proceedings dated 26-4-1986 had declared and agreed without any difference to nominate Mr. Swami Dial, Chief Engineer CPWD (Rtd.) of S-298, Panchsheela Park, New Delhi as Umpire in the case who was requested to give his consent for the proposal. Sh. Swami Dial, on the same day gave his consent and stated that he was agreeable to take the burden of acting as Umpire as per Arbitration Act. I have therefore, come to the conclusion that the said Swami Dial is a person in which both the parties have reposed the confidence and can be appointed as sole arbitrator for settlement of the disputes raised by the parties.
16. Accordingly the award filed by the arbitrators namely S/Sh. R.G. Desai and D. K. Saran dated 12-11-1986 is hereby set aside and the aforesaid arbitrators removed holding them dis entitled to adjudicate the disputes between the parties. All the disputes raised by the parties including the claims of the petitioner and the counter claims of the respondent already submitted are referred to the sole Arbitration of Sh. Swami Dial, Chief Engineer, CPWD (Rtd.) of Section 298, Panchsheela Par, New Delhi. The newly appointed
arbitrator shall enter upon the reference and submit his award within the statutory period of four months unless extended by the Court. It would be appreciated that the new arbitrator gives the award item wise of the claims and counter claims preferred by the parties and the reasons for the same if he deems proper. The learned counsel for the parties have been directed to appear or cause the appearance of their clients before Sh. Swami Dial, above said, newly appointed arbitrator on 9-12-1989. The record of the arbitrators whose award has been set aside and who have been removed from being arbitrators shall be transmitted to the newly appointed arbitrator by the registry at the expense of the parties. Arbitration fee is tentatively fixed at Rs. 20.000/- to be shared by the parties equally.