JUDGMENT
V.S. Aggarwal. J.
1. In pursuance of the arbitrator having filed the
award and the proceedings notices had been issued to
the parties. Objections have been preferred by the
objector (Auto General Engineering co.) which are
being contested.
2. The relevant facts are that on 29th September,
1983 an agreement was entered into between the
parties. The objector entered into an agreement for
sale with the applicant (Priya Holdings Pvt. Ltd.)
for sale of the total recoveries of the ship CAPT
COASTAS E. Material terms of the agreement were:-
“That the material terms and conditions of
the Agreement are set out hereinafter :-
(i) Liability to pay customs duty was that of
the objector;
(ii) The objector was to give irrevocable
authority to a sister concern of the
petitioner, namely, M/s Hindustan Ship
Breakers (hereinafter referred to as
‘Hindustan’), enabling it to take deliveries
of the scrap of ship breaking;
(iii) The liability of payment of sales-tax
and other levies and charges, if nay, on the
scrap of the ship was exclusively of the
petitioner;
(iv) The consideration for selling the entire
scrap and any other material whatsoever of
the ship was Rs. 62,00,000/-. of which
Rs. 6,00,000/- was paid on signing of the
Agreement, Rs. 46,00,000/- (Rupees Forty six
lacs only) was payable on the starting of the
dismantling work; and the balance sum of
Rs. 10,00,000/- was payable within 90 days
from the start of dismantling work. For the
said sum of Rs. 10,00,000/- the petitioner was
to establish an unconditional irremovable and
without Recourse Internal Letter of
Credit/Letter of Guarantee to the benefit of
the objector through a Schedule Bank.”
3. Shri B K Gupta had signed the agreement on
behalf of the applicant because Hindustan was sister
concern of the applicant. In pursuance of the
agreement the following considerations had been paid:
(i) Rs. 6,00,000/- by cheque dated 29.9.1983
drawn on Corporation Bank;
(ii) Rs. 45,00,000/- by Demand Draft dated
7.11.1983 drawn on Corporation Bank;
(iii) Rs. 10,77,500/- by Cheque dated
7.11.1983 drawn Corporation Bank.
4. The case of the complainant was that
respondent had prepared a number of invoices for sale
of the recoveries of the ship. It was necessary to
prepare such invoices because the sale of the
recoveries was subject to payment of sales tax in the
State of Gujarat. The rate of the sales tax depending on
the type of scrap sold. One of the invoices dated
29th December, 1983 was with respect to the crane in
question. It was described as one number mobile crane
powered by internal combustion engine. The price of
the crane was appearing from the invoice to be
Rs. 9,70,720/-. The sales tax was 7% “C” Tax was 3%
and surcharge 1% bringing the total to Rs. 10,77,500/-.
The claimant is alleged to have paid the said amount
vide cheque of 7th November, 1983. The claimants
assertions was that it did not get the possession of
the crane because it was detained by the custom
authorities. The respondent had declared the value of
the crane to be only Rs. 50,000/-. The crane was
stated to have still not been cleared. The applicant
claimed Rs. 10,77,500/- as the price of the crane with
interest.
5. As is apparent from the award, claim and the
pleadings the respondents plea was that single
indivisible consideration for sale of Rs. 62 lakhs,
pricing of parts of recoveries separately was
commercially not feasible and physically impossible.
Only one invoice was issued which was the one annexed
in the counter statement. All other invoices in the
statement of claim of he claimant were alleged to be
false. It was pleaded that payment of sales tax is
the germane in the context of the dispute. Regarding
the sum of Rs. 10,77,500/- purported to have been paid
by cheque respondents assertion was that on payment of
Rs. 6 lakh on 29th September, 1983 and further sum of
Rs. 45 lakhs on 7th November, 1983 there was a balance
of Rs. 11 lakhs. The claimant offered to pay the
balance amount of Rs. 11 lakhs much prior to the
stipulated dated provided a discount of Rs. 22,500/- was
given. It was accepted and therefore the payment of
Rs. 10,77,500/- was made.
6. The learned arbitrator had gone into the
material on the record and concluded that claimant is
entitled to recover from the objector a sum of
Rs. 10,77,500/-. Keeping in view the decision of the
Supreme Court in the case of Executive Engineer
Irrigation v. Abaaduta Jena 1987(2) SCALE 675 ***
the interest as such had not been awarded.
7. Objections as such have been filed alleging
that the applicant at all time knew that the dispute
raised by the custom authorities was that crane was
not required for operation of the ship as per
conditions laid down in various Import Trade Control
Regulations and Circulars. The applicant knew that
there was no question of mis declaration of the true
value of the ship. It was further alleged that the
applicant did not produce Shri Vijay Prakash Garg who
was the Assistant Branch Manager of the objector. He
was not produced and adverse inferences could well
have been drawn. Even Shri B K Gupta of Hindustan was
not examined. It is reiterated in the form of
objections that it was a single indivisible contract
and consideration was Rs. 62 lakhs. Ship CAPT COSTAS
E given, the arbitrator is alleged to have ignored the
material evidence i.e. the letter of the applicant
dated 8th June, 1984 being the notice issued to the
objector claiming Rs. 16,99,500/- which clearly stated
in great details particulars of the disputes between
the parties. From the said document it is patent that
the claim of the applicant/claimants could not
succeed. Furthermore it is asserted that the
arbitrator was in error in concluding that the
objector could have raised the objections regarding
the invoice being forged in the High Court. It has
been pointed that the said invoice in controversy has
not been produced and that the arbitrator was totally
in error in concluding that Rs. 10,77,500/- was due.
In the reply filed the contentions of the objector
have been controverter.
8. The short question as already referred to
above is as to whether the award is liable to be set
aside in terms that the findings of the arbitrator are
erroneous. The principle of law in this regard are
not much in controversy. Reference can well be made
to some of the precedents on the subject. A Division
Bench of this court had considered this question in
the case of Delhi Development Authority v.
Alkaram, New Delhi AIR 1982 Delhi 364. It was
reiterated that the arbitrator is the final Judge of
fact. The court is bound by the findings of fact and
cannot review the same unless they are totally not
supported by evidence or there was no evidence in
support of the findings. It is not open to the court
to examine the adequacy of evidence which led the
arbitrator to record his findings. The error must be
apparent on the face of the record.
9. In the case of Associated Engineering Co.
v. Govt. of Andhra Pradesh Supreme
Court was also concerned with the question as to what
would be an error apparent on the face of the record.
10. The Supreme Court in this regard after
scanning through various precedents on the subject
also held that :
“If the arbitrator commits an error in the
construction of the contract, that is an
error within his jurisdiction. But if he
wanders outside the contract and deals with
matters not allotted to him, he commits a
jurisdictional error. Such error going to
his jurisdiction can be established by
looking into material outside the award.
Extrinsic evidence is admissible in such
cases because the dispute is not something
which arises under or in relation to the
contract or dependent on the construction of
the contract or to be determined within the
award. The dispute as to jurisdiction is a
matter which is outside the award or outside
whatever may be said about it in the award.
The ambiguity of the award can, in such
cases, be resolved by admitting extrinsic
evidence. The rationale of this rule is that
the nature of the dispute is something which
has to be determined outside and independent
of what appears in the award. Such
jurisdictional error needs to be proved by
evidence extrinsic to the award.”
11. Yet in another decision rendered in the case
of Steel Authority of India Ltd. v. J C Budharaja.
Government and Mining Contractor .
The same principle of law was reiterated and was held:
“Further, the Arbitration Act does not give
any power to the arbitrator to act
arbitrarily or capriciously. His existence
depends upon the agreement and his function
is to act within the limits of the said
agreement. In continental Construction Col
Ltd. v. State of MP this court considered
the clauses of the contract which stipulated
that the contractor had to compete charges
at the rates stipulated in the contract
Despite this, the arbitrator partly allowed
the contractor’s claim. That was set aside
by the court and the appeal filed against
that was dismissed by this court by holding
that it was jot open to the contractor to
claim extra costs towards raise in prices of
material and labour and that the arbitrator
misconducted himself in not deciding the
specific objection regarding the legality of
the extra claim. In that case the court
referred to the various decisions and
succinctly observed: (SCC p. 88, para 5)
“If no specific question of law is referred,
the decision of the arbitrator on that
question is not final however much it may be
within his jurisdiction and indeed essential
for him to decide the question incidentally.
The arbitrator is not a conciliator and
cannot ignore the law or misapply it in order
to do what he thinks is just and reasonable.
The arbitrator is a tribunal selected by the
parties to decided their disputes according to
laws and so is bound to flow and apply the
law, and if he does not he can be set right
by the court provided his error appears on
the face of the award.”
12. Similar was the findings recorded by the
Supreme Court in the case of Arosan Enterprises Ltd.
v. Union of India and Anr. wherein
in paragraphs 36 and 37 the principle of law as to
when the court would be justified in interfering the
award was re-stated:
36. Be if noted that by reason of a long
catena of cases, it is now a well settled
principle of law that reappraisal of evidence
by the Court is not permissible and as a
matter of fact exercise of power by the Court
to reappraise the evidence is unknown to a
proceeding under Section 30 of the
Arbitration Act. In the event of there being
no reasons in the award, question of
interference of the Court would not arise at
all. In the event, however, there are
reasons, the interference would still be not
available within the jurisdiction of the
Court unless of course, there exist a total
perversity in the award or the judgment is
based on a wrong proposition of law: In the
event however two views are possible on a
question of law as well, the Court would not
be justified in interfering with the award.
37. The common phraseology “error apparent
on the face of the record” does not itself,
however, mean and imply closer scrutiny of
the merits of the documents and materials on
record. The court as a matter of fact,
cannot substitute its evaluation and come to
the conclusion that the arbitrator had acted
contrary to the bargain between the parties.
If the view of the arbitrator is possible
view the award or the reasoning contained
therein cannot be examined. ….
13. More recently the Supreme Court in the case
of Sikkim Subba Associates v. State of Sikkim also held that if there are two views
possible or plausible views then it is legitimate that
the arbitrator to accept one or the other and also for
the court not to interfere. The Supreme Court held:
“If there are two equally possible or
plausible views or interpretations, it was
considered to be legitimate for the
arbitrator to accept one or the other of the
available interpretations. It would be
difficult for the courts to either
exhaustively define the word “misconduct” or
likewise enumerate the line of cases in which
alone interference either could or could not
be made. Courts of law have a duty and
obligation in order to maintain purity of
standards and preserve full faith and credit
as well as to inspire confidence in alternate
dispute redressal method of arbitration, when
on the face of the award it is shown to be
based upon a proposition of law which is
unsound or findings recorded which are absurd
or so unreasonable and irrational that no
reasonable or right-thinking person or
authority could have reasonably come to such
a conclusion on the basis of the materials on
record or the governing position of law to
interfere. So far as the case before us is
concerned, the reference to the arbitrator is
found to be a general reference to adjudicate
upon the disputes relating to the alleged
termination of the agreement by the State and
not a specific reference on any particular
question and consequently, if it is shown or
substantiated to be erroneous on the face of
it, the award must be set aside.’
14. The principle therefore can conveniently be
stated to be that regarding findings of fact the
arbitrator is the final authority. The court will not
re-appraise the evidence or come to a different
conclusion. If the order is without jurisdiction or
it travels beyond the contract on basis of which the
arbitrator has been appointed in that case only the
court would be justified in interference. If there
are erroneous decision not based on any evidence or no
reasonable person can come to such a finding the court
can indeed interfere and it can well be stated in that
event to be a legal misconduct.
15. In the present case the arbitrator has looked
into the evidence and the reasons that prompted the
arbitrator to give the award in question were that the
price of the crane as appearing from the invoice
annexed to the statement of claim was Rs. 9,77,500/-
besides sales tax and C tax. The arbitrator found
that the objector had not dispute this sum. It was
further found that invoice of 29th December, 1993 was
a genuine document and that the affidavit that was
filed on behalf of the objector in this court in OMP
106/84 and is 6129/84 there was no allegation that the
said invoice was fabricated or a forged document. The
arbitrator found that now the same could not be
assailed. The arbitrator had further recorded that
the applicant had raised a loan on hypothecation of
the crane expecting that it would be delivered shortly
and therefore the invoice was a genuine document and
lastly that objector had received on 7th November,
1983 Rs. 10,77,500/- as the price of the crane.
16. According to the learned counsel, Shri Garg
was an employee of the objector was to be produced as
a witness but the applicant later on did not produce
him before the arbitrator and he went on to urge that
forgery has been committed in connivance with the said
Shri Garg. When a person intends to examine a witness
and does not examine him there can be many reasons.
Necessarily it does not imply that adverse inference
should be drawn against him. Shri Garg was an
employee of the objector though it is being stated
that he was instrumental in forging the invoice in
question but no action was taken against Shri Garg by
the objector. When no action as such is being taken
against such a person indeed the obvious is clear that
such a contention cannot be accepted.
17. In that event it had been urged that objector
was allotted ship CAPT COSTAS E by Metal Scrap Trading
Corporation. The ship was not even within the shores
of India and because of the said fact the objector had
no physical means to verify the exact contents of the
ship. He further contended that the petitioner had
not produced before the High Court invoice in question
and therefore question of disputing the same to be a
forged one did not arise. The learned counsel further
had a grievance that the arbitrator was in error in
recording that Rs. 10,775 lakhs were paid by the
petitioner towards the value of the crane. So far as
these contentions are concerned indeed the evidence is
not to be re-appraised. Except for the argument that
the invoice has not been produced before this court
and therefore the question of objecting to the
validity of the same other pleas required re-appraisal
of evidence. As already pointed out above the
re-appraisal of evidence will not be permissible
because in the present case as had been noticed above
from the resume of facts the arbitrator has considered
the evidence and recorded a finding. Even if two
views are possible this court will not interfere.
There was invoices that were more than one and the
position as set up by the arbitrator therefore could
hardly be described to be erroneous. There was not
evidence led by the objector that the invoices in
question on basis of which the amount was held to be
due were forged. The invoices ran into series.
Keeping in view the same the findings are obvious that
this court will not interfere in findings of the
arbitrator.
18. For these reasons the objections are
dismissed. The award is made a rule of the court and
decree in terms of the award is passed. The applicant
would be entitled to interest on the principle amount
from the date of the award till the final payment is
made.