State Bank Of India vs Ram Das And Others on 12 March, 1998

ORDER

B. Sudershan Reddy, J.

1. These cases arise out of an Award passed on 8-8-1984 by the Umpire in the Arbitration proceedings. CM A No. 1805 of 1994 is filed by the State Bank of India and directed against the judgment in OP No.76/85 on the file of the learned I Additional Judge, City Civil Court, Hyderabad, filed under Sections 30 and 34 of the Arbitration Act, 1940 to set aside the Award dated 8-8-1984. CRP No.5283/94 is directed against the judgment and decree dated 27-4-1993 passed in OP No968/93 making the Award Rule of the Court CRP No.5367/94 is directed against the judgment and decree in OSNo.191/85. The said suit is filed by the Umpire to issue notices to the parties to the arbitration proceedings and for making the Award dated 8-8-1984 passed by the Umpire Rule of the Court. All the matters were disposed of by the learned trial Judge by a common judgment under challenge.

2. For the sake of convenience the parties shall be referred to as the petitioner and respondents, as arrayed in CRP No.5283/94.

3. The first respondent M/s. Ramdas Contractors shall be referred to as the contractor and the petitioner as the State Bank of India (for short ‘SBI’). The contractor raised a dispute in respect of execution of work relating to the construction of Local Head Office building of the SBI at Hyderabad. The parties have entered into an agreement on 6-10-1978 relating to the said contract. The matter was referred to arbitration under clause 36 of the agreement dated 6-10-1978. Two arbitrators viz., M. Sudhakar Reddy and T.K. Mohan Rao, were appointed as arbitrators. The arbitrators could not reach to a unanimous decision in the matter of passing the award. Consequently one Sri M. U. Hattikudur was appointed as Umpire to adjudicate the dispute. The arbitrators made available all the documents filed before them by the parties to the Umpire and the Umpire entered upon the reference on 5-5-1984 and both the parties were required to submit their respective claims. The parties have filed their statement of claims and made available the

correspondence between the parties. The correspondence between the parties, filed by the Contractor/claimant was marked before the Umpire as Ex.C33, 34 and 35 and the counter claim filed in one volume by the SBI during hearing was marked as Ex.R39. Both the parties have agreed before the Umpire to rely upon all the documents produced by them before the joint arbitrators. The documents upon which the reliance was placed by the Claimant/contractor were marked as Exs.C1 to C32; whereas the documents filed and relied upon by the State Bank of India were marked as Exs.R1 to R38. A copy of the agreement is marked as Ex.R4. Copies of all the documents, claims and counter claims were exchanged between the parties. The Umpire having entered appearance had given due notice to the parties, heard the parties on 13th, 14th and 15th of June, 1984. The parties were represented by their respective Legal Advisors.

4. In all, the Contractor/claimant had put forward twenty three claims, to talling to a sum of Rs. 22,98,843.44 and also claimed interest and costs of arbitration proceedings. The SBI not only resisted the claim, but also put forth counter claim of Rs.9,02,306.75. After hearing both the parties, the Umpire made Award dated 8-8-1984.

5. The Umpire filed OS No. 191/85 by engaging an Advocate to issue notices to the Contractor/Claimant, as well as the SBI, who are the parties to the arbitration proceedings and for making the Award dated 8-8-1984 Rule of the Court. Having received the notices, the Contractor/Claimant filed OP No.968/93 for making the Award of the Umpire Rule of the Court; and the SBI filed OP No.76/85 for setting aside the Award made by the Umpire. While proceedings were pending, Sections 14 and 17 of the Arbitration Act, 1940, (for short ‘Act, 19401) were amended by the State Legislature of Andhra Pradesh by the Amendment Act 1 of 1990. Under the amended provisions, the Umpire is required to give reasons. Consequently the learned I Additional Judge, City Civil Court, Hyderabad, passed order in IA No.266/90

remitting the Award to the Umpire for giving reasons. The Award alongwith all the records was returned to the Umpire by the Court for assigning reasons through the Advocate engaged by the Umpire on his behalf. As directed by the Court, the Umpire passed a reasoned Award, on 24-7-1993. It may be noticed that the Umpire had done nothing further except assigning reasons in the award dated 8-8-1984. In the earlier award dated 8-8-1984 the Umpire awarded one lumpsum amount to the Contractor/Claimant without specifying the claim and counter claim. In the impugned Award dated 24-7-1993 the Umpire examined each of the claims of the Contractor/claimant and the counter claims of the SBI. Out of twenty six claims, the Umpire allowed four claims; partly allowed seven claims; and rejected rest of the claims. All the counter claims put forth by the SBI were rejected.

6. The reasoned Award dated 24-7-1993 is impugned in the proceedings before us. The learned senior Counsel, Sri T. Anantha Babu appearing on behalf of SBI submits that the impugned award passed by the Umpire does not contain any reasons whatsoever even after its remission by the Civil Court for giving reasons, no reasons whatsoever are assigned by the Umpire. It is urged by the teamed senior Counsel that the award though styled as a reasoned award does not satisfy the mandatory requirement of law. It is urged that the amended provisions of Act, 1940, by the State of Andhra Pradesh by Amendment Act 1 of 1990 mandates and requires recording of reasons in support of the award. It is the submission of the learned senior Counsel that the arbitrator or the Umpire as the case may be, is under statutory obligation to record reasons for Award and failure to do so would vitiate the entire award. According to the learned senior Counsel, the so-called reasons mentioned in the award, at best, are conclusions and findings. The conclusions and findings cannot be equated to reasons. It is submitted that the award itself should disclose that the material available on record has been taken into consideration. Mere repetition slating ‘that the material has

been taken into consideration’ is not enough. The Arbitrator or the Umpire as the case may be should state as to what is the material that has been taken into consideration to record the conclusions and findings. It is submitted that the requirement of recording reasons is not a mere formality. The Legislature in its wisdom and having regard to the previous experience thought it fit to impose such statutory duty upon the arbitrator to record reasons. The requirement to give reasons is to be strictly construed.

7. Sri P. Innayya Reddy, learned Counsel appearing on behalf of the Contractor/Claimant submits that the impugned award contains detailed reasons. Each and every claim and counter claim is meticulously examined and scrutinised by the Umpire after the award was sent back by the Court for giving reasons. A plain reading of the Award would disclose the application of mind by the Umpire. It is submitted by the learned Counsel that the Court cannot expect the arbitrator or the Umpire, as the case may be to write any judgment like the civil Courts. If such duty is imposed upon the arbitrator the whole purpose of the arbitration itself would get defeated. It is urged that an arbitrator is a tribunal or Judge selected by the parties to resolve the dispute between them and derives support and jurisdiction mostly out of the consent between the parties. It is finally submitted that the impugned award substantially complies with the requirement of law and satisfies the requirement of giving reasons.

8. We have heard the learned Counsel in detail. The short but an important question of law arises for consideration in this case relates to the nature and scope and content of Sections 14 and 17 of the Indian Arbitration Act, 1940, as amended by A. P. Amendment Act 1 of 1990.

9. We will first deal with the question of law that arises for consideration and then proceed to consider as to whether the award passed by the Umpire satisfies the requirement of law relating to recording of reasons.

10. The Stale Legislature of Andhra Pradesh by Amendment Act 1 of 1990, amended Sections 14 and 17 of the Arbitration Act, 1940. The following proviso is added to Section 14(1) :

“Provided that the arbitrators or Umpire shall give reasons for any award made under this section and no award shall be valid unless the reasons therefor are given as aforesaid.”

The following proviso was added to Section 17 :

“Provided that where an award pending in the Court at the commencement of the Arbitration (Andhra Pradesh Amendment) Act, 1990, or an award filed in the Court, thereafter does not contain reasons therefor as required by the proviso to subsection (1) of Section 14 the Court shall not proceed to pronounce the judgment according to the Award, but shall remit the award to the Arbitrators…..”

It would be appropriate to refer the Statement of Objects and Reasons explaining the purpose of amendment which is to the following effect :

“The provisions of Arbitration Act, 1940, are not specific that the Award shall give reasons. In the absence of a reasoned award, the parties effected by it remain unaware of how the Arbitrators reached their decision. The process is also susceptible of Courts abuse and afford little or no legal remedy to the parties. The present trend of law in United Kingdom and other countries is towards passing a reasoned award. Accordingly the Government considered the desirability to amend the provisions of the Arbitration Act, 1940 to enjoin upon the Arbitrators to adduce reasons in the award passed by them.”

(Act 1 of 1990 received President’s assent on 13-2-1990 and came into force on 19-2-1990).

Reading of newly added provisos to Sections 14 and 17 in the Act, 1940, in the

background of Statement of Objects and
Reasons would make it clear that giving of
reasons for any award is a mandatory
requirement. The arbitrator is under
statutory obligation to give reasons for any
award. The award shall contain reasons.

The proviso to Section 17 as amended,
mandates that the Court shall not proceed
to pronounce the judgment according to the
award, which does not contain the reasons.

Proviso to Section 14, as amended declares
that no award shall be valid unless reasons
therefor are given. The legislative intention is
clear and unambiguous. There is not much
of dispute before us about the arbitrator’s
umpire’s mandatory statutory duty to give
reasons for any award.

11. What is reason : Reason is nothing but intellectual faculty by which conclusions are drawn from premises; reaching conclusion by connected thought.

(i) A faculty of the mind by which it distinguishes truth from falsehood, good from evil, and. which enables the possessor to deduce inference from facts or from propositions. (Black’s Law Dictionary Fifth Edition)

(ii) Recording of reasons require coherent and logical thinking and drawing inference from conclusions by systematic analysis from facts known.

12. Reasons are the link between material on which certain conclusions are based and the actual conclusions. They disclose how the mind is applied and the subject matter for decision. They should reveal the rational nexus between the facts considered and the conclusions reached. (See Union of India v. Mohan LalKapoor, ). The reasons should demonstrate that there is logical and legal basis for their ultimate conclusions. The reasons provide means whereby a party is appraised of why a decision has been made.

13. The Apex Court in Woolcombers of India Ltd., , observed that :

“The giving of reasons in support of their conclusions by judicial and quasi-judicial authorities when exercising initial jurisdiction is essential for various reasons. First, it is calculated to prevent unconscious, unfairness or arbitrariness in reaching the conclusions. The very search for reasons will put the authorities on the alert and minimise the chances of unconscious infilteration of personal bias or unfairness in the conclusion The authority will adduce reasons which will be regarded as fair and legitimate by a reasonable man and will discard irrelevant or extraneous considerations. Second, it is a well-known principle that justice should not only be done but should also appear to be done. Unreasoned conclusions may be just, but they may not appear to be just to those who read them. Reasoned conclusions, on the other hand, will have also the appearance of justice.”

14. It is held by the Apex Court in S.N. Mukherjee v. Union of India, , that requirements of recording reasons would (i) guarantee consideration by the authorities, (ii) introduce quality in the decisions; and (iii) minimise chances of arbitrariness in decision making.

15. It is true in M/s. Raipur Development Authority v. M/s. Chokhamal Contractors, AIR 1990 SC 1426 = (1989) 2 SCC 721, a constitution Bench of the Apex Court considered the question whether it is obligatory for an arbitrator under the Act of 1940 to give reasons for the Award. It was specifically urged that the requirement of giving reasons for the decision is a part of the rules of natural justice which are also applicable to the Award of Arbitrator and reliance was placed on the decisions in Bhagat Raja’s case, AIR 1976 SC 1606 and Siemens Engineering case, . The Apex Court observed that:

“It is no doubt true that in the decision pertaining to Administrative Law, this Court in some cases has observed that the giving of reasons in an administrative decision is

a rule of natural justice by an extension of the prevailing rules. It would be in the interest of the world of commerce that, the said rule is confined to the area of Administrative Law. But at the same time it has to be borne in mind that what applies generally to settlement of disputes by authorities governed by public law need not be extended to all cases arising under private law such as those arising under the law of arbitration which is intended for settlement of private disputes.”

16. This aspect of the matter is, emphasised by the learned Counsel for the respondent in support of his submission that a distinction should be made in the matter of applying the requirement to record reasons to the cases arising under private law in comparison to the cases arising under public law. At once we may point out that in Chokhamal’s case (supra). The Apex Court was considering the provisions of the Indian Arbitration Act, 1940, as then stood, whereunder there was no requirement to record reasons in support of the award. It is under those circumstances, the Apex Court held that an Award passed under the Arbitration Act is not liable to be remitted or set aside merely on the ground that no reasons have been given in its support, except where the arbitration agreement or the deed of submissions or an order made by the Court such as one under Section 20 or 21 or 34 of the Act or the Statute governing the Arbitration requires that Arbitrator or Umpire should give reasons in the Award. The Apex Court observed that setting aside the Award on the sole ground that the Arbitrator has not given reasons would virtually amount to introducing an amendment to the Act by judicial verdict, when it has not been the law for nearly seven/eight decades. The Apex Court also noted the various reasons given by the Indian Law Commission for not recommending to the Government to introduce an amendment in the Act requiring arbitrators to give reasons for their awards. The Apex Court felt that it is the matter of legislative

policy which should be left to the decision of the Parliament. In the same decision, however, the Apex Court observed that when reasons are given in support of the Awards, the same can be questioned on various grounds known to law. Having declared the law, the Apex Court made a pertinent observation and highlighted the requirement on the part of the Government or their instrumentalities to enter into arbitration agreement with express stipulation to have reasoned and speaking award. It is observed that the Government and their instrumentalities should as a matter of policy and public interest – compulsion of law – ensure that wherever they enter into agreements for resolution of disputes by resort to private arbitrations, the requirement of speaking award is expressly stipulated and ensured.

17. Presumably the Andhra Pradesh Legislature is aware of the development of law and its march and about the desirability of the requirement of reasoned awards and had accordingly suitably amended Sections 14 and 17 of Act 1940. In fact, it may be noticed that 1996 Act (The Arbitration and Conciliation Act, 1996, enacted by the Parliament) mandates recording of reasons in the Award, unless there is an agreement between the parties not to have reasons.

18. The Apex Court in T.N. Electricity Board v. Bridge Tunnel Constructions, , observed that :

“Parliament has expressed the Legislative judgment that the award shall state reasons upon which it is based unless the parties have agreed otherwise or the award is covered on agreed terms under Section 30 of the new Act. Thus, the law on the award, as governed by the new Act, is the other way about the pre-existing laws; it mandates that the award should state the reasons upon which it is based. In other words, unless (a) the parties have agreed that no reasons are to be given or (b) the award is an arbitral award on agreed terms under Section 30 of the new

Act, the award should state the reasons in support of determination of the liability/ non-liability. Thereby, Legislature has not accepted the ratio of the constitution Bench in Chokhamal Contractors case (supra) that the award, being in the private law field, need not be a speaking award even where the award relates to the contract of private parties or between person and the Government or public sector undertakings. The principle is the same, namely the award is governed by Section 31(3).

19. Whatever may have been the law on the subject, the law as it stands today is that an award not containing reasons is no award in the eye of law. Recording of reasons in the award is mandatory requirement. No award shall be valid unless it contains reasons. The Court is precluded from enforcing such awards.

The Courts jurisdiction and power to interfere with the reasoned award and
parameters thereof

20. The next question that would immediately arise for consideration is as to under what circumstances the Court can interfere with the reasoned award passed by the arbitrator/umpire and the nature of interference. When the Court can set aside a reasoned award or remit the same for reconsideration by the arbitrator/ umpire.

21. It is well settled that the Arbitrator’s award is generally considered to be binding the parties since the Arbitrator is a Tribunal selected by the parties. It also equally well settled that the Court while considering the validity of the award does not sit as an appellate Court. It cannot reappreciate or re-assess the evidence and material on record for substituting its own views for that of the Arbitrator. The power of the Court to set aside the award is circumscribed and an award can be set aside by the Court only on the grounds set out under Section 30 of the Act of 1940 viz., (a) where the arbitrator has

misconducted himself or the proceedings; (b) where the award has been made after issue of an order by the Court superseding the arbitrator or after the arbitration proceedings have become invalid under Section 35; and (c) where the award has been improperly procured or other wise invalid.

22. The law is well settled that the Court can set aside the award under clause (c) of Section 30, if it suffers from an error on the face of the award. Even before the Amendment Act the award could be set aside on the ground of error on the face of if when the reasons given by the decision, either in the award or in any document incorporating with it or based upon a legal proposition which is erroneous.

23. It is true that the Court cannot probe the mental process of the Arbitrator and speculate, where no reasons are given by the Arbitrator, as to what impelled the Arbitrator to arrive at his conclusion. But where the Arbitrator is required to give reasons in support of his decision, it would be open to the Court to set aside the award if it finds that an error of law has been committed by the Arbitrator or Umpire on the basis of recording of such reasons. The reasonableness of the reasons given by the Arbitrator cannot, however, be challenged. The Arbitrator is the sole Judge of the quality, as well as quantity of the evidence. It is true that there is no obligation on the part of the Arbitrator/Umpire to give any detailed judgment. But intelligible indication of the grounds should be available to find out the mind of the Arbitrator for his action. Reasons should not only be intelligible but also deal with the substantial points. (See Indian Oil Corporation Ltd. v. Indian Carbon Ltd, ; Bijendra Nath Srivastava v. Mayank Srivastava, ; and B. V, Radhakrishna v. Sponge Iron India Ltd., ).

24. In State of Rajasthan v. Puri Constructions Ltd., , the Apex Court observed that where the reasons have been given by the Arbitrator in making

the award, the Court cannot examine the reasonableness of the reasons. The Arbitrator is the sole Judge of the quality, as well as the quantity of the evidence and it will not be open for the Court to take upon itself the task of being a Judge on the evidence before the Arbitrator. But in the same decision, it is observed that “An Arbitrator acting as a Judge has to exercise a discretion informed by tradition, methodised by analogy, disciplined by system and subordinated to the primordial necessity of order in the social life.”

25. The Apex Court, however, noticed the need to have a fresh look on the ambit of challenge to an award by the Arbitrator so that the award does not get undesirable immunity. In recent times, error in law and fact in passing an award has not been given the wide immunity are enjoyed earlier, by expanding the import and implication of “legal misconduct” of an arbitrator so that the award by the arbitrator does not perpetuate gross miscarriage of justice and the same is not reduced to mockery of fair decision of the lis between the parties to the arbitration. Precisely, for the aforesaid reasons, erroneous application of law constituting the very basis of the award and improper and incorrect finds of fact, which without closer and intrinsic scrutiny, demonstrable on the face of the material on record-have been held, very rightly, as legal misconduct rendering the award as invalid (see Puri Construction case, (supra))

26. An analysis of the judicial decisions on the subject would make it clear that the Court can set aside the award under clause (c) of Section 30, if the award suffers from error on the face of the award. The award might be set aside on the ground of error on the face of it when the reasons given in the award are based upon a legal proposition which is erroneous.

27. Award also can be set aside if there is no evidence in support of the conclusions or if the award is based upon a legal proposition which is erroneous. Improper and

incorrect finding of fact if are demonstrable on the face of the record is also a ground for setting aside the award.

28. We are clear that an award which is not supported by reasons is an invalid award and the Court can set aside such an award in exercise of’ its power and jurisdiction under clause (c) of Section 30 of the Act of 1940.

29. But the next question would be what is the error on the face of the award ? It means an ‘improper and incorrect finding of fact which is demonstrable on the face of the material on record’. It is true that the reasonableness of the reasons given by the arbitrator cannot, however, be challenged. The Arbitrator or Umpire as the case may be is the sole Judge of quality, as well as the quantity of the evidence.

30. But can it be said that giving of reasons is a mere formality ? Does it mean that the Court should accept any and every observation of the Arbitrator as the reason given by the arbitrator or Umpire, as the case may be? The requirement of giving reasons for any award is a legislative mandate as provided in the proviso to Section 14 of the Act. In our considered opinion any and every observation in the Award by the arbitrator cannot be construed as the reason for Award. The arbitrator’s ipsi dixit assertion cannot be equated to that of reason. If the requirement of giving reasons means anything compelling the arbitrator to articulate the basis of finding showing a rational connection between the facts found and the conclusions reached. Vague and general observations cannot be concluded to that of reasons in the Award.

31. Mere statement to the effect that “the records are perused, various documents are taken into consideration by the parties ….. and I accordingly award”, does not satisfy the requirement of giving reasons, particularly where there is an obligation imposed by the Statute to give reasons. In our considered opinion in view of the change in law, the arbitrator is required to give proper, adequate reasons dealing with the issues raised before him.

32. The Queens’ Bench Division in Re Poyser and Mills Arbitration, 1963 (1) All. ER 612, while interpreting Section 12(3) of Tribunals and Inquiries Act, 1958, providing ‘Any statement of the reasons for such a decision as mentioned in….. shall be taken
to form part of the decision and accordingly to be incorporated in the record,” held “that proper and adequate reasons must be given.” A dispute between the landlord and the tenant under Agricultural Holdings Act, 1945, was referred to arbitration and arbitrator made his award without any reasons. The tenant requested the arbitrator to state reasons pursuant to Section 12(1) of Tribunals and Inquiries Act and the reasons given by the arbitrator, and Section 12(3) of the Act provides ….. reasons for such a decision
….. shall be taken to form part of the
decision and accordingly to be incorporated in the record. Construing the said provision it is held’ ‘Now, the Parliament having provided that reasons shall be given, in my view that must clearly be read as meaning improper, adequate, reasons must be given; the reasons that are set out, whether they are right or wrong, must be reasons which not only will be intelligible, but also can reasonably be said to deal with the substantial points that have been raised, and in my view it is right to consider that statutory provision as being a provision as to the form which the arbitration award shall take. If the initial form of the award before the giving of the reasons had in any way failed to comply with the statutory provisions as to form, then it would have been a ground for saying that the award was bad on the face of it, and, now that Parliament has required that reasons shall be incorporated. We think that if those reasons do not fairly comply with the form which Parliament intended that they should have, then that is an error on the face of the award, and equally if the reasons are given in a separate letter. In my view, having regard to para (iii) of the letter of July 30,1962, this award, including the reasons so stated, does not, by virtue of Section 12ofthe Act of 1958, comply with the proper form and therefore there is an error on the face of the award; that is, in my

view an error of law on the face of the award, properly so described, rather than technical misconduct No one here suggests actual misconduct on the part of the arbitrator, but it may well be that what has gone wrong here is something which is capable properly of being described both as misconduct and as error of law on the face of the award. If so, in my view, the fact that it is the latter brings it within the jurisdiction of this Court.

33. I do not want it to be brought for a moment that I am saying that any minor or trivial error, or failure to give reasons in relation to every particular point that has been raised at the hearing, would be sufficient to invoke the jurisdiction of this Court. Far from it, there must be something wrong and inadequate in reasons that are given in order to enable the jurisdiction of this Court to be invoked. In the present case para (iii) has sufficient substance, and accordingly I hold that there is an error of law on the face of the award, that motion succeeds and that the award must be set aside.”

34. It is thus clear that a mere statement of conclusions without stating the salient reasons would not meet the requirement of law of giving reasons. In Iveagh (Earl) v. Min. of Housing, 1963 (3) All. ER 817, the Court of appeal while considering the same Section 12 of the Tribunals and Inquiries Act, which mandates giving of reasons as in re Poyser and Mills’ Arbitration case (supra), observed : “Section 12(1) of the Tribunals and Inquiries Act, 1958,says that the minister must give his reasons, and that his reasons are to form part of the record. The whole purpose of that enactment is to enable the parties and the Courts to see what matters he has taken into consideration and what view he has reached on the points of fact and law which arise. If he does not deal with the points that arise, he fails in his duty, and the Court can order him to make good the omission I regret, therefore, that the minister did not state expressly, what his view was on this point of construction, and did not find expressly the facts in relation to that point”

35. In Hamburg Middle East Line v. Virtue Shipping, 1981 (2) All. ER 887, while considering Section 1(5) of the Arbitration Act, 1979, which confers jurisdiction upon the Court to order an arbitrator to set out the reasons for his award observed :

‘ ‘However, there is now a parallel, though more limited, jurisdiction under Section 1(5) of the 1979 Act under which the Court may order an arbitrator to state the reasons for his award in sufficient detail to enable the Court, should an appeal be brought under Section 1 of 1979 Act, to consider any question of law arising out of the award. Further more, in my judgment the expression ‘reason’ in this sub-section cannot be limited to ‘reasoning’, but must include the relevant facts on which the arbitrator’s conclusion is based. Of course, a reasoned award need not take any particular form; though a typical form of reasoned award which now comes before the Court is one in which the arbitrator, having set the general scene and identified the dispute between the parties, then sets out the parlies respective contentions, makes any further finding of. fact which may be desirable for the purpose of considering those contentions, and then sets out his contentions and reasons for reaching that conclusion. In such an award, facts found by the arbitrator appear to me to form an inseparable part of the total reasons for his award. ”

36. Section 1(5) of the Arbitration Act, 1979, is some what similar and analogous to proviso to Section 14 of the Indian Arbitration Act, as amended by the A.P. Amendment Act 1 of 1990. In this decision it is held in categorical terms that the expression ‘reasons’ cannot be limited to reasoning but must include the relevant facts on which the arbitrator’s conclusion is there.

37. In R. v. Immigration Appeal Tribunal, 1983 (2) All. ER 420, the Court of Appeal quashed the decision of the Immigration Appeal Tribunal on the ground

that the reasons given by the appeal Tribunal were unsatisfactory. It is observed “the important matter which must be borne in mind by the Tribunal…. that it must be apparent from what they state by way of reasons. First of all they have to consider the point which is at issue between the parlies ami they should-indicate the evidence on which they have come to their conclusions.

38. Failure to indicate evidence on which the arbitrator has reached the conclusion would amount to an error apparent on the face of the award. It is true sufficiency of evidence upon which conclusions are based may not be a factor to be taken into consideration by the Court in the arbitration proceedings; but, the sufficiency of reasons is a factor to be taken into consideration in deciding as to whether the arbitrator has made any error of law in reaching this finding of fact.

39. It is true that the arbitrator-Umpire is not expected to recite at great length communications exchanged or submissions made by the parties. But the arbitrator/ Umpire is duty bound to explain what its findings are and how the conclusions are reached.

40. When giving a reasoned award the Tribunal need only set out what, on its view of the evidence, did or did not happen, and explain succinctly why, in the light of what happened, the tribunal has reached its decision and what that decision is. It should set out the facts and general reasoning so as to enable the parties to understand them and why particular points are decisive. (See Russel on Arbitration, 21 st Edition).

41. We may notice the development of law in England. Under Section 74 of the Arbitration Act, 1996, the Court is conferred with jurisdiction and power to order the Tribunal to set reasons for its award in sufficient details to enable the Court of appeal to consider the challenge to or the appeal against the award.

42. In Crake v. Supplementary Benefits Commission, 1982 (1) All. ER 498, while construing Section 12 of the Tribunals and Inquiries Act, 1971, whereunder a duty is, imposed on the Tribunal to give reasons in support of its decision, Woolf J., observed that:

“There is an obligation on the Tribunal to give reasons; and those must be reasons which are sufficient to indicate to the person who is in receipt of its decision why the Tribunal came to the decision which it did ? It has got to be borne in mind, particularly with tribunals of this sort, that they cannot be expected to give long and precise accounts of their reasoning; but a short and concise statement in clear language should normally be possible which fairly indicates to the recipient why his appeal was allowed or dismissed.”

After elaborate survey of the law on the subject, it is further observed : “However, it has to be applied in the light of the ten years which have elapsed since that case was decided. Over that period of ten years the approach of the Courts with regard to ‘their giving of reasons has been much more definite than they were at that time and Courts are now much more ready to infer that because of inadequate reasons there has been an error of law, than perhaps they were prepared to at the time that Mounrview case was decided.”

43. Analysis of judicial precedents would lead to an irresistible conclusion that the arbitrator/Umpire is duty bound and under statutory obligation to give reasons for the award and failure to give adequate and sufficient reasons would constitute an error or law on the face of the award requiring the Court’s intervention

44. We have highlighted the statutory requirement of giving adequate and sufficient reasons in the award by the arbitrator/Umpire. However, the proceedings before the arbitrator/Umpire do not partake the character

of Court proceedings. Judicialisation of arbitration proceedings is not permissible. We are aware of the settled legal position that the arbitrator/Umpire is selected as a Judge by the parties and the award can be set aside or remitted on limited ground provided by the Arbitration Act, itself. But the development of law is so clear that no award enjoys any undesirable immunity particularly where the State and its instrumentalities are parties to the arbitration proceedings.

45. On this aspect we conclude with a classic statement of law by Lord Donaldson in King v. Thomas Me. Kenna Ltd., 1991 (1)All. ER 653 :

“That the great distinguishing feature between litigation and arbitration is that parties voluntarily submit to the latter system of disputes resolution, save when it is imposed by Statute, and as part of that choice can stipulate who shall be the Judges and the procedures to be adopted. As a consequence, it is not unreasonable, although the matter can be more politely expressed, to require them to accept those Judges and those procedures ‘warts and all’. On the other hand, arbitration is not entirely a private matter, because the state stands in the background as the ultimate enforcer of the resulting award, either by means of Section 26 of the 1950 Act or as a result of an action on the award. In exercising a discretion under Section 22, the Court must never lose sight of this fundamental distinction or of the ultimate involvement of the State.”

We are aware that parties opt for resolution of dispute through arbitration preferring a ‘finality’ to ‘legality’, in Lord Diplock’s terminology.

46. In the light of the aforesaid legal position, we would now examine as to whether the award passed by the arbitrator/Umpire satisfy the requirement of law of giving reasons. Whether each claim in respect of which the award is passed by the Umpire-arbitrator contains reasons in accordance with

law. It may be noticed at the outset that the claimant filed documents and the same were marked as Exs.C1 to C32 before the joint arbitrators and like wise the documents filed by SBI were marked as Exs.R1 to R38. The contract or agreement is marked as Ex.R4. Though the documents were marked as such before the joint arbitrators, the parties have agreed to refer them as documents in the same series before the Umpire. The statement of claims and correspondence before the parties were marked during the hearing before the parties were marked during the hearing before the Umpire as Exs.C33, 34 and 35 and the counter claim in one volume is marked as Ex.R39. We have referred to those aspects only to highlight that the parties have produced voluminous documentary evidence during the arbitration proceedings. There cannot be any dispute whatsoever that any award either accepting or rejecting the claim and counter claim should be based upon the evidence and material available on record. The question now would arise for consideration is as to whether the Umpire had referred to all the documentary evidence in reaching to the conclusion and if not what is the effect ?

47. It is true in the preamble of the award it is observed by the Umpire that he had ‘carefully considered the pleadings of the parties in respect of their claim and counter claim and the volumnious documentary evidence adduced, arguments advanced and authorities cited and relied upon by both the parties.

Claim No. I:

Claim No. 1 is purported to be based upon Ex.C32 and final bill submitted by the contractor for the work done, but for which the payment was not received by him The contractor claimed an amount of Rs. 94,531.70 and subsequently revised the same to Rs.94,024.67 as per Ex.C33. The claim is purportedly based upon the revised certificate No.32 dated 22-11-1983 issued by the architect. According to the State Bank of India it is minus certificate. But it is observed

by the Umpire that admittedly as per the certificate No.32 dated 22-11-1983 of the architect, an amount of Rs.79,161.25 is due for the work executed after taking into account the admissible recoveries. However, the Umpire observed that an amount of Rs. 14,235.49 has been added towards rolling margin which is not justified according to him. The Umpire accordingly ordered for payment of an amount of Rs.64,926.00 to the claimant. It is observed by the Umpire that final bill along with its enclosures and certificates given by the architects, various documents pertaining to the final bill and its certification were also produced and they were referred to and argued by both the parties.

48. The award does not disclose as to what are the documents that were taken into consideration by the Umpire. The Umpire merely observes that various documents pertaining to the final bill and its certification were and referred to and argued by both the parties. The documents filed on behalf of the parties are exhibited. The award does not disclose as to what are the documents taken into consideration by the Umpire, in particular, the exhibited documents in recording the conclusion. There is no doubt whatsoever that the Umpire had recorded conclusion. But the conclusion is not based upon appreciation of any evidence. It is true that whether the evidence on record is sufficient or adequate is for the Umpire to decide. But, in our considered opinion the Umpire is under statutory obligation to disclose as to what evidence is taken into consideration by him in reaching the conclusion. The link between the conclusions and the consideration of evidence is undoubtedly missing. Failure to do so would amount to not giving any reasons.

49. It is urged by the learned Counsel for the claimant, Sri P. Innayya Reddy that the material available on record is sufficient to reach such conclusion by the Umpire. The learned Counsel made an attempt to refer to the documents, including the final certificate stated to have been issued by the Architects. We have already indicated that we are not

exercising any jurisdiction akin to that of an appellate Court in considering the validity of the award. We cannot go into the merits of the case and reappreciate the evidence and substitute our own opinion for that of the ‘ Umpire. The award on the face of it does not disclose that the Umpire had taken into consideration any documentary evidence available on record in awarding amounts under claim No. 1. It is urged by the learned Counsel for the claimants that the preamble of the award would indicate that the Umpire had taken the entire documentary evidence into consideration and, therefore, it should be presumed that the relevant documents rath regard to claim No.1 were taken into consideration by the Umpire. We find it difficult to accept the submission. Vague, indefinite and ipsi dixit assertions would not amount to giving reasons. The minimum requirement of law is that the award itself should disclose as to what are the documents taken into consideration and which is the document upon which reliance is placed by the Umpire in reaching the conclusion. Nothing more is required. Even that elementary requirement is not satisfied in the case.

Claim No. 3:

Claim No.3 relates to extra cost claimed by the claimants for the additional thickness of plaster. An amount of Rs.1,43,993.22 is claimed by the contractor under this head. It is concluded by the Umpire stating that the claimants are entitled to be paid for the additional thickness of plaster required to be executed over the brick work. It is observed by the Umpire that ‘from the documents on record, I hold that the claim of the claimants is partly justified for an amount of Rs.86,074.00’. The claim was accordingly partly allowed. What are the documents which would support such conclusion readied by the Umpire ? It is the specific case of SBI that no permission as such was granted by the Architects for doing any extra work and the contractor could not have done any extra work without prior written permission of the architects.

50. The note relating plaster at page 22 of the agreement is sought to be relied upon by the SBI in support of its submission that the plaster shall be of sufficient thickness to fill up all irregularities in surface masanory and to provide finished surface. Nothing is indicated in the award relating to this claim No.3 as to on what basis the amount is arrived at by the Umpire. It is true the Umpire observed that ‘claimants have claimed difference in rate of Rs.4.50 per M2 for the plaster quantity of 20.0742.94 M2 and difference in rate of Rs.5.01 per M2 for 10,389.22 M2. Having observed the same, the Umpire concluded that the claimants are entitled for a sum of Rs. 86,074.00 under the head, perhaps this would have met the requirement of law prior to amendment of Sections 14 and 17 of the Arbitration Act. We do not find any reason whatsoever given by the Umpire, let alone adequate and sufficient reasons, in support of the conclusion. What is the material that has been taken into consideration, is not indicated by the Umpire. The submission made by the learned Counsel for the claimant that the conclusion of the Umpire obviously is based on the documents filed by SBI, evidencing the working details at page 85 of the record, is not acceptable to us. We cannot imagine and surmise that the Umpire may have reached such conclusion on the basis of some documentary evidence available on record. It would amount to evaluation of the decision of the Umpire on merits by reappreciating the evidence on record. It would be sufficient if the Umpire disclose as to what are the documents that were taken into consideration for arriving at such a conclusion. It is nobody’s case that no documents are available on record to take any view in the matter. If no documents are available in support of the claim, it could have been perhaps open for the Umpire to rely upon the oral evidence and record the conclusions supported by reasons. We cannot uphold mere conclusions without giving reasons in support of the conclusions.

Claim No.4:

Claim No.4 relates to payment of extra charges for cutting (grinding) and polishing

marble mosaic flooring work. The claimants claimed a sum of Rs. 1,60,716.74 under this head. It is the case of the claimants that the preamble in the bill of quantities does not include the element of cutting (grinding) and polishing of marble mosaic tiles in flooring and skirting; whereas it is the specific case of the SBI that it was not at all necessary to include in the description of items and details of all the activities connected with the execution of the item. The SBI relied upon the trade practice. Description of the work at page 15 of the Annexure under the heading ‘pavior’ is given in Item No.(V) under the heading pavior. The relevant item of work in the contract reads :

“Covering with marble mosaic tiles and * approved quality in gray colour of approved shades in floor. Items 1 to 8,9 to 16. Marble mosaic tiles of approved quality of gray colour of approved shade in skirting to wells.”

51. This was the controversy before the Umpire. After referring to the contentions of the parties, the Umpire concludes that the claimants are entitled for certain extra charges for the elements not covered in the description of items. Accordingly, the Umpire awarded an amount of Rs.26,315.00.

52. We do not find any reason whatsoever as to how the Umpire had concluded that the claimants are entitled for such amounts. Though respective contentions are referred to by the Umpire no reason is recorded either accepting or rejecting any of the submissions of the parties. No documents were referred by the Umpire in coming to the said conclusion and the Umpire has not even adverted to any correspondence exchanged between the parties.

Claim No. 6:

This claim relates to the alleged excess recovery of cost of the cement. According to the SBI this claim comes under excepted matter falling within the purview of clause (34) read with clause 4 of conditions of contract. Reliance is placed upon by the SBI on Ex.R3 (Ex. A39, Annexure 26).

53. The claimants claimed an amount of Rs.66,707.90 under this head. It is the specific claim of the SBI that F.O.R. price stated in the tender does not include the sales tax. The Umpire observed that various documents were referred to by the parlies, including the price list of cement, price of indicies, statement of cement received and consumed etc. What are the relevant documents perused by the Umpire in arriving at the conclusion is not indicated in the award. What are those reasons that made him to accept any of the documents filed by the parties is also not indicated. The Umpire merely records the conclusions and allows the claim in its totality without assigning any reasons.

54. The learned senior Counsel appearing for the SBI placed reliance upon the decision in M/s, Prabartak Commercial Project v. Chief Administrator, Dandakaranya Project, and Yelluru Mohan Reddy v. Rashtnya Ispath Nigam Ltd, Visakhapatnam, in support of his submission that this particular claim fall within the excepted matter and the claimants are not entitled for any amount whatsoever. The Umpire even did not refer to the contentions of the parties. It is not for us to express any opinion whether it falls within the excepted matter. The award on the face of it, does not disclose any reason for accepting the claim of the claimant.

Claim No.8 :

This claim relates to escalation. The contractor claimed an amount of Rs-3,67,096.00 towards balance payment due for escalation. It is the specific case of the SBI that ex gratia payment was made on the distinct and clear understanding that no further payment need be made towards escalation. The claimant is stated to have given an undertaking in Ex.R3 (A39, Annexure 16) to this effect.

55. It is also urged that even otherwise, where the contract specifically provides for a particular type of escalation, no general plea can be entertained. It is their case that the contractor had accepted the ex gratia

increase in rates of tax and extension of time till 30-5-1981. The acceptance of ex gratia amounts to “accord and satisfaction” and no claim thereafter survives. Reliance is placed on the decision in Lala Kapurchand. Godha v. Mir Nawab Himayatalikhan Azamjah, .

56. Such a formidable objection is not even dealt with by the Umpire. It is observed by the Umpire that the amount of ex gratia considered by the respondents in 32nd bill does not completely cover the escalation payable to the claimant. The claimants are, therefore, entitled for this sum of Rs.3,67.096.00 towards balance of escalation under the claim. The conclusion is purported to be based on the correspondence relating ty the said claim and the agreement provisions. What is that correspondence between the parties which would have bearing on the claim, is not disclosed. The Umpire does not deal with the objection as to whether the contractor is entitled for any amount under this head, in view of the undertaking given by the contractor in Ex.R3 (Ex. A39, Annexure 16). The conclusion reached is not supported by any reason.

Claim No. 14 :

Claim No.14 relates to the earth work executed by the claimant for which no amount has been paid. The claimant claimed a sum of Rs.2,318.76; but, subsequently revised to Rs,25,963.33. The Umpire awarded a sum ofRs.2,318.76 under the claim. The Umpire merely observed that after going through all the documents filed before him, ‘I hold that the claims have not been fully paid for the earth work executed by him and accordingly allowed a sum of Rs.2,318.00’. The verdict suffers from the same infirmity of not giving reasons as in the case of other claims which we have already considered. The Umpire merely concludes and awards the sum without assigning any reasons as to why the amount is being awarded.

Claim No. 15:

Under this claim, the claimant claimed an amount of Rs.6,058.36 for providing PCC

blocks to fix hold-fasts which item is not covered under the agreement. It is observed by the Umpire ‘after going through the documents I hold that providing PCC blocks for holding the hold-fast is not covered under the agreement items’.

57. The “learned senior Counsel appearing for the SBI refers to clause 9.21 and CPWD specifications (Annexure 29) Ex.A39 (R3) and submits that they provide that the hold fasts shall be fixed in cement concrete blocks of specified size. Like the previous claim, the Umpire disposed of the present claim also without assigning any reasons. The Umpire once again says that the documents produced by both the parties were considered. What are the documents perused by the Umpire and what do they reveal is left to guess work. It is true as contended by the learned Counsel for the claimant that this Court cannot go into the question by reappreciating the evidence available on record to decide as to whether the Umpire had given a proper finding or not. We would have been satisfied if the Umpire had given reason in support of the conclusions indicating as to what documents were taken into consideration in reaching the conclusioa

Claim No. 16:

Under this claim the contractor claimed an amount of Rs. 16,175.15 for the extra work carried out by the contractor towards water bound Macadam work. The claim is for the use of extra metal, extra moram and consequent additional rolling charges. The SBI raised specific objection stating that prior consent from the architect before using extra quantities were not obtained and, therefore, the contractor is not entitled for any extra amount. The Umpire observed that extra metal, moram, additional rolling involves extra amount and, therefore, the claimant is entitled for extra payment of the same. It is once again ipsi dixit assertion by the Umpire in awarding a sum of Rs.11,480.00. According to the learned senior Counsel appearing for the SBI, this is also excepted item falling under

clause 35 of the contract and, therefore, the issue is not arbitrable. We do not propose to express any opinion on this question inasmuch as, the Umpire had merely awarded a quantified sum without giving any reasons. The Umpire had not adverted to the question whether the dispute is arbitrable. The learned Counsel for the SBI once again placed reliance upon Yeluru Mohan Redtty’s case (supra). This aspect of the matter ought to have been taken into consideration by the Umpire by giving reasons.

Claim No. 20:

Under this claim, the contractor claimed an amount of Rs.1,02,988.00 towards compensation for the extra cost due to alleged frequent changes in specifications and drawings made by’ the SBI and that too at late stages. The Umpire awarded an amount of Rs.52,200.00. The Umpire disposed of the claim awarding the said amount on the ground that it is an admitted fact that there were changes in specifications and drawings from time to time during the progress of work resulting in claimants having incurred additional expenses. It is observed that the claimants are entitled to be compensated for the extra expenses incurred by them as a consequence. The Umpire observed that from ‘the particulars filed and based on the respective contentions’ I hold that the claim is partly justified. It is submitted that the finding is based on no evidence. There were five items of works under this particular head of different kinds and the Umpire was not even conscious of this fact. Once again it is urged by the learned Counsel that this issue is covered by condition 13 of the General Conditions of contract which is excepted matter, and contemplated under clause 35 of the general conditions. It is submitted that the issue is not arbitrable. It is submitted that the findings are based on assumptions and presumptions. Reliance is placed on a Division Bench decision of this Court in Central Ware Housing Corporation Construction Cell v. P..Devendra Raju, .

58. We have already discussed about the requirement of law of giving reasons. It

is observed by the Division Bench that “the decision taken or statement made by the Arbitrator on the claim, which he has allowed cannot be said to be reasons”. We may make it clear that we are not scrutinising the reasonableness or otherwise of the reasons given by the Umpire, but are simply endeavouring to find out whether the decision given to the reference made by the Arbitrator amounts to reason. The arbitrator simply decides the matter by referring to the claims and gives some decision on each claim without reflecting the material considered by him, then it cannot be said that the award is a reasoned award…..”

59. It is further held that the reasons given by the arbitrator shall not only be intelligible, but also shall deal with the substantial points. It is also held that the Court has ample power to scrutinise whether the award of the arbitrator is supported by reasons or not. The ratio of the decision applies in all its force to the facts of the case on hand.

60. We have also not made any attempt whatsoever to ascertain the reasonableness of the reasons; but we have limited our scrutiny to find out as to whether the award contains any reasons and as to whether the Umpire had given reasons in respect of each claim. Applying the said test we have no other option except to hold that the Umpire had not given any reason whatsoever, even in respect of claim No.20. The Umpire as usually disposed of the controversy without referring to the contentions and the material available on record. It is the specific case of the SBI that the delay in work was on account of the inability of the contractor to set up proper infrastructure and work force and defective work carried out. The relief is based upon Annexure (i) (A39) and letters dated 6-8-1982; 18-8-1982 and 19-9-1982. None of these letters which are admittedly filed before the arbitrators have been taken into consideration by the Umpire. We do not propose to speculate as to what would have been the decision of the Umpire had he taken the said documents into consideration. We

have already indicated that it is not within the jurisdiction of this Court to record a finding about the admissibility or otherwise of the claims. It would amount to exercising appellate jurisdiction, which is not permissible in law. Therefore, we are not in a position to appreciate the award of Umpire partly allowing the claim and awarding a sum of Rs.52,200.00.

Claim No. 21 :

This is a claim for compensation by the contractor under the provisions of Section 76 of the Contract Act on the ground of alleged breach of contract by the SBI. The breach, according to the contractor, had resulted in delay in execution of the work and due to non-supply of drawings in time, non-fixation of other agencies and also due to the delays in decision making process by the SBI. An amount of Rs. 6,98,590.00 was claimed; but, subsequently amended to Rs.6,98.000.00. The date of commencement of work was 6-8-1978 and the time stipulated in the contract for completing the work was twenty four months. The work could not be completed within the ‘time on account of the delays and hindrances caused in the matter from time to time by the SBI and their architects, is the submission of the contractor. The work was prolonged beyond that date and there was a delay of twenty months in completing the work beyond the original period.

61. The Umpire disposed of the claim by awarding the amount of Rs.6,5I,283.00 by observing ‘from the voluminous correspondence produced before me by the parties and the arguments advanced by the parties in respect of this claim, I hold that the delay in completion of the work was the responsibility of the respondent/SBI.’ The Umpire held that the drawings were not issued in time and some were issued as late as in November, 1981 and several changes in designs, drawings and items of work were made by the architect and that too at late stages and several delays occurred on account of the Architects in-Decision. Additional work, deviations were ordered by the

architects and several of them at late stages. The delay was also caused to the work by various other agencies engaged in the said building by the architects. There were various other delays and hindrances caused to the work by the architects.

62. The Umpire accordingly held that there was breach of contract on the part of the SBI and, therefore, the contractor is entitled for compensation towards expenses incurred which they had suffered as a consequence. The Umpire observed that ‘considering the details and particulars produced before me, the contractor is entitled for a sum of Rs.6,51,283.00’. It is required to be noticed that the Umpire does not even decide as to whether the compensation is being awarded towards the extra expenses incurred by the contractor on account of breach of contract by the employer or towards losses which they had suffered as a consequence. A reading of the award does not show that any material whatsoever available on record has been taken into consideration by the Umpire. All the observations are in the nature of clear findings that the employer had committed breach of contract. Specific reliance is placed upon clause 28 of the agreement of the SBI. It inter alia provides that the contractor shall have no claim other than extension of time for the delay in completion of the work due to such hindrances and nothing else and that the contractor shall suspend the works whenever called upon to do so in writing by the architects and shall be allowed reasonable extension of time for completion of the work due to such suspension of work and nothing else.

63. It is submitted that this clause precludes the present claim. The Umpire does not even refer to this clause. But, merely concludes that the employer has committed breach of contract. It is further urged that the claim falls under condition 13 of General Conditions of contract and the claim based thereon is not arbitrable. It is an excepted matter and not arbitrable.

64. It is also urged that the claim is unacceptable because of the claimant’s undertaking in his letter dated 28-10-1980 (Annexure 16, Ex.39 (R3). The award of the Umpire does not disclose consideration of any of these aspects of the matter. It is difficult to discern as to on what basis the Umpire has reached the conclusion. It is true that the Umpire need not refer to each and every argument and write an award like that of a judgment of civil Court. But the contentions which have a direct bearing on the central issue are required to be taken note of by the Umpire. The evidence on record either for allowing or disallowing the claim is required to be referred, if the conclusions are passed after referring to the documents which are already exhibited and available on record may amount to giving reasons as in the process of referring to the document, the Umpire would indicate as to what are the documents upon which reliance is placed for reaching the conclusions. No such minimum exercise has been undertaken by the Umpire.

Claim No.22
Under this head the claimant claimed an amount of Rs.3,05,122.00 which was amended to Rs.3,13,378.10. The Umpire passed award allowing the claim to an extent of Rs.2,51,000.00. This amount is claimed towards escalation in prices in the work done for the prolonged period of contract beyond the original contract period, till its actual completion. The Umpire held that the delay was for the reasons attributable to the employer and their architects and reliance was placed upon the reasons given by him under claim No.21. The claim is disposed of by observing that all the details and the documents produced and arguments advanced were taken into consideration in the light of various provisions in the contract What are the documents taken into consideration and what are the details that were taken note of by the Umpire is not evidenced from the Award. The award under this claim also suffers from the same incurable defect of not giving any reason whatsoever in support of the award.

65. It is urged that there is a special clause providing for escalation which does not comprehend a claim like the present one.’ The contractor is not entitled to increase in rates on account of the alleged increase in prices. Increase is specifically provided in the contract at sub-clause (ii) of clause 2 of Form of Tender read with clauses 13, 13-A and 17. That apart the matter has been concluded by compromise between the parties on 28-10-1980. It is, however, urged by the learned Counsel for the contractor that the claim is neither excepted nor barred by any of the provisions of the contract or by the alleged compromise dated 28-10-1980. We cannot decide the controversy. But the award on the face of it does not disclose consideration of any of these aspects by the Umpire. The Umpire merely observed that the amount of claim No.21 do not cover the ultimate escalation in prices in the prolonged period of contract. If the Umpire had adverted to these contentions and had reached the same conclusions, by giving reasons, we would not have interfered in the matter. Even on the available material on record, the Umpire could not reach the appropriate decision by giving reasons in support thereof. It is difficult to uphold the award under this claim.

Claim No. 24 :

This claim is for interest on the amount that may be awarded in favour of the claimant out of the total amounts claimed under claim Nos.1 to 23. It is a consequential claim. Since we have reached a conclusion that the award of the Umpire under various claims awarding amount to the contractor suffers from incurable infirmity of not giving reasons, no further discussion as such under this claim is necessary. We need not consider the decisions upon which reliance is placed by both the parties on this aspect. However, we reject the plea of the SBI that the claim shall not be referred to arbitration and the reference was invalid.

66. In fact, it is urged by the learned Counsel for the contractor that the claim Nos.20, 21 and 22 would go together. It is

urged that there is no duplication of claims and general .damages can be awarded under both, common law and equity. In support of his contention, the learned Counsel places reliance on Managing Director, Nagarjuna Co-op. Sugars Ltd v. T.K. Mohan Rao, . We are not deciding the matter on merits. We do not propose to express any opinion whatsoever on the said contention. We are of the clear opinion that the Umpire had not given any reasons in the award. No reasons whatsoever as such are also stated in support of awarding amounts under various claims. Whether the evidence available on record is sufficient or adequate to pass an award may be within the jurisdiction of the Umpire. It is for this Umpire to arrive at the conclusions based upon the evidence on record by giving reasons therefor. This Court, in our considered view, can definitely go into the question of adequacy and sufficiency of the reasons, wherever there is statutory requirement of giving reasons by the Umpire.

67. the observations of the Apex Court in Gujarat WS & 57 v. Unique Erectors (Gujarat) Ltd., , are apt to
be recalled :

“….., The reasons should not only be intelligible but should also deal either expressly or impliedly dealt with the substantial points that have been raised. Even in case where the arbitrator has to state reasons, the sufficiency of the reasons depends upon the facts and circumstances of the case,”

It is thus clear that the Court is not precluded from going into the sufficiency and adequacy of reasons. Whether the reasons are sufficient or adequate in a given case depend upon the facts of the each case.

68. For all the aforesaid reasons, we hold that the award is vitiated by error apparent on the face of the award and the same is required to be set aside. It is an invalid award inasmuch as it is not supported by any reasons.

69. However, we make it clear that we have not expressed any opinion whatsoever on the question as to whether the contractor is entitled for any amounts under various claims. We have not adjudicated the dispute on merits. We have not expressed any opinion whatsoever about the contentions raised with regard to the matters falling under the category of excepted matters. We have also not expressed any opinion about the arbitrability of certain claims. We are of the opinion that the Umpire had committed an error, but within his jurisdiction It is not a case of lack of jurisdiction in the Umpire to decide the matter.

70. Obviously, the trial Court has not adverted to any of the questions that arise for consideration, but merely confirmed the award. The trial Court disposed of the matter by observing that the Court is not a fact finding authority and cannot go into the facts and controversies between the parties. Since we have reached the conclusion that the award is not supported by any reason, the judgment of the trial Court under appeal and revision has become unsustainable. The judgment under appeal and revision is, accordingly, set aside.

71. But the matter does not end there. It is urged by the learned senior Counsel appearing for SBI, that the matter cannot be remitted to the Umpire for giving reasons. The award made under Section 14(1) of the Act without giving reasons is an invalid award and as such an invalid award is required to be set aside by the Court in exercise of its jurisdiction under Section 30(c) of the Act of 1940. Since the statute itself prescribes the invalidity, the Court has no option, but to set aside the award, if the reasons are not given. In case where the arbitration agreement contains such requirement, to state reasons, the matter could be remitted for setting out reasons under Section 17 of the Act, but such an opinion is not available to the Court in this case, because the statute itself declares that the award without reasons is invalid. We express our inability to accept the submission. We cannot make the party to suffer on

account of an error committed by the Umpire. The parties are admittedly entitled to resolve their dispute. The award may not be valid in law, but the parlies cannot be made to suffer on account of the illegality committed by the Umpire/arbitrator. The reference to arbitrator/ Umpire does not become invalid. The agreement to get the dispute resolved through alternative dispute resolution forum (Arbitration) does not come to an end on account of errors committed by the Umpire-Arbitrator.

72. The Apex Court in T.N. Electricity Board case, (supra), while making distinction between the error apparent on the face of the award and jurisdictional error observed :

‘ ‘It would thus be seen that the arbitrator, while deciding the admitted dispute, subject-matter of adjudication, may decide the dispute in reference to the agreement That would be within his jurisdiction. In such jurisdictional issue, even if an error is committed that may not be an error apparent on the face of the record because the arbitrator, the chosen forum, may commit an error in exercising his jurisdiction. However, if he, by a speaking award, decides it on a wrong proposition of law, it will be an error apparent on the face of record and liable to correction If the arbitrator decides a dispute which is beyond the scope of his reference or beyond the subject-matter of the reference or he makes the award disregarding the terms of reference or the arbitration agreement or terms of the contract, it would be a jurisdictional error beyond the scope of reference; he cannot clothe himself to decide conclusively that dispute as it is an error of jurisdiction which requires to be ultimately decided by the Court.”

It is further held :

“Once finding is recorded that the Umpire/ arbitrator has committed error oi jurisdiction, as stated earlier, two courses are open, viz., either to remit the award to the Umpire for reconsideration or to set aside the award in toto.”

73. Here is a case where the award is vitiated for the simple reason of not giving reasons in the award. It is not a case where the award is vitiated on account of lack of jurisdiction on the Umpire to pass the award. The amended proviso to Section 17(1) says that the award filed into the Court which does not contain reasons shall have to be remitted to the arbitrator or the Umpire for giving reasons thereof, as required by proviso to sub-section (1) of Section 14 of the Act of 1940. Therefore, it is not possible to accept the submission made by the learned senior Counsel appearing for the SBI to set aside the award in toto.

74. Yet another aspect of the matter. We are really surprised to notice that the Umpire in this case has chosen not only to file the award into the Court through a Counsel appointed by himself, but also filed OS No.191/85 to make the award rule of the Court. It is difficult to appreciate as to why the Umpire has chosen to adopt such a course. Such actions on the part of the arbitrators or Umpire would convey wrong signals. It is needless to reiterate that arbitrator/Umpire is chosen by the parties to resolve their dispute and is required to act as an independent tribunal. The Umpire ought not to have filed the suit for making the award rule of the Court No Umpire/arbitrator is under any duty or obligation to defend their own award. It is for the parties to the dispute to avail the remedies available to them in law. We disapprove the method adopted by the Umpire. We need say nothing further on this aspect.

75. Accordingly the award is remitted to the Umpire for giving reasons in the light of the observations made in this judgment. The Umpire shall give reasons within thirty days from the date of receipt of a copy of this order.

76. The civil miscellaneous appeal and the civil revision petitions are accordingly allowed. No costs.