{"id":153251,"date":"1988-08-16T00:00:00","date_gmt":"1988-08-15T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/state-of-rajasthan-vs-r-s-sharma-co-on-16-august-1988"},"modified":"2018-12-22T13:02:07","modified_gmt":"2018-12-22T07:32:07","slug":"state-of-rajasthan-vs-r-s-sharma-co-on-16-august-1988","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/state-of-rajasthan-vs-r-s-sharma-co-on-16-august-1988","title":{"rendered":"State Of Rajasthan vs R.S. Sharma & Co on 16 August, 1988"},"content":{"rendered":"
Supreme Court of India<\/div>\n
State Of Rajasthan vs R.S. Sharma & Co on 16 August, 1988<\/div>\n
Equivalent citations: 1988 SCR, Supl. (2) 441 1988 SCC (4) 353<\/div>\n
Author: S Mukharji<\/div>\n
Bench: Mukharji, Sabyasachi (J)<\/div>\n
           PETITIONER:\nSTATE OF RAJASTHAN\n\n\tVs.\n\nRESPONDENT:\nR.S. SHARMA & CO.\n\nDATE OF JUDGMENT16\/08\/1988\n\nBENCH:\nMUKHARJI, SABYASACHI (J)\nBENCH:\nMUKHARJI, SABYASACHI (J)\nRANGNATHAN, S.\n\nCITATION:\n 1988 SCR  Supl. (2) 441  1988 SCC  (4) 353\n JT 1988 (4)\t18\t  1988 SCALE  (2)644\n\n\nACT:\n    Arbitration\t Act,  1940:  Sections 14, 17,\t30  and\t 33-\nAward- Setting aside of by Court- Error apparent on race  of\naward-\tAward not invalid where by process of inference\t and\nargument  it  may be demonstrated that\tthe  arbitrator\t had\ncommitted mistake in arriving at some conclusion.\n\n\n\nHEADNOTE:\n    A dispute over the completion of construction work under\na  contract led to the litigation between the appellant\t and\nthe respondent-company. However, during the pendency of\t the\nproceedings in the High Court, the parties agreed to  settle\nthe dispute through arbitration.\n    The\t Arbitrators  gave  their award\t in  favour  of\t the\nrespondent-company  on\tthe ground that\t the  appellant\t had\ncommitted breach of contract and was also guilty of wrongful\nrevocation  of the agreement. The award did not contain\t any\nreason as to why and how the Arbitrators had arrived at\t the\nsum awarded.\n    The\t appellant  filed  objection  to  the\trespondent's\napplication  for making the award Rule of the Court  on\t the\nground inter alia that (i) no reasons had been given for the\naward, (ii) the award being ambiguous showed non-application\nof  mind,  and\t(iii) the amount  of  interest\tawarded\t was\nunjustified.   The  learned  District  Judge   allowed\t the\nobjection and set aside the award on the ground of ambiguity\nand  non-statement  of\treasons. The  High  Court,  however,\nallowed the respondent's appeal and also directed payment of\ninterest  for  the  period  during  which  the\t arbitration\nproceedings were pending.\n    Before  this  Court\t it  was  urged\t that,\tbecause\t the\nquestion  whether  on the ground of absence of\treasons\t the\naward\tis  bad\t per  se  is  pending  consideration  by   a\nConstitution  Bench of this Court, the present\tcase  should\nawait adjudication on this point by the Constitution Bench.\n    Disposing of the appeal, it was,\n    HELD:  (1)\tOne  of\t the  cardinal\tprinciples  of\t the\nadministration\tof justice is to ensure\t quick\tdisposal  of\n\t\t\t\t\t\t  PG NO 441\n\t\t\t\t\t\t  PG NO 442\ndisputes in accordance with law, justice and equity. Justice\nbetween\t the parties in a particular case should not  be  in\nsuspended animation. [445B-C, G]\n    (2)\t Interests of justice and administration of  justice\nwould not be served by keeping at bay final adjudication  of\nthe  controversy in this case on the plea that the  question\nwhether\t an  unreasoned\t award is bad  or  not,\t is  pending\nadjudication by a larger Bench. [445E-F]\n    (3)\t It is not known whether the decision of this  Court\nwould have prospective application only in view of the\tlong\nsettled\t position of law on this aspect in this\t country  or\nnot. [445G]\n    (4)\t The  law as it stands today is\t clear\tthat  unless\nthere is an error of law apparent on the face of the  award,\nthe  award  cannot  be challenged merely on  the  ground  of\nabsence of reasons. This is settled law by a long series  of\ndecisions. [445E]\n    (5) An award is not invalid merely because by a  process\nof  inference and argument it may be demonstrated  that\t the\narbitrator  had committed some mistake in arriving  at\tsome\nconclusion. [446B]\n    (6)\t It is not open to the Court to speculate, where  no\nreasons are given by the arbitrator, as to what impelled the\narbitrator to arrive at his conclusions. [446C]\n    Jivarajbhai Ujamshi Sheth v. Chintamanrao Balaji & Ors.,<\/a>\n[1964] 5 SCR 480, referred to.\n    (7) It is an error of law apparent on the face of it and\nnot  a\tmistake\t of  fact which\t could\tbe  the\t ground\t for\nchallenging the award. [446F]\n    Union of India v. Bungo Steel Furniture P. Ltd.,<\/a>  [1967]\n1  SCR 324 and Allen Berry & Co. P. Ltd. v. Union of  India,<\/a>\n[1971] 3 SCR 282, referred to.\n    8.\tIn the present case the arbitrator gave\t no  reasons\nfor  the award. There is no legal proposition which  is\t the\nbasis of the award, far less any legal proposition which  is\nerroneous.  And there is no allegation of any misconduct  in\nthe proceedings. [446E-F]\n    (9) The award of interest pendente lite in this case was\nin  violation  of the principles enunciated by\tthis  Court.\n[447B]\n\t\t\t\t\t\t  PG NO 443\n    Executive  Engineer\t (Irrigation) Balimela\tv.  Abhaduta\nJena,<\/a> [1988] 1 SCC 418, followed.\n    Food  Corporation of India v. M\/s. Surendra\t Devendra  &\nMohendra Transport Co.,<\/a> [1988] 1 SCC 57, explained.\n\n\n\nJUDGMENT:\n<\/pre>\n
    CIVIL  APPELLATE JURISDICTION: Civil Appeal No. 3054  of
\n1988.\n<\/p>\n
    From  the  Judgment\t and Order dated  16.3.1988  of\t the
\nRajasthan High Court in S.B. Civil Miscellaneous Appeal\t No.
\n240\/1987.\n<\/p>\n
    K.\tParasaran,  Attorney  General,\tB.L.  Saruparia\t and
\nBadridas Sharma for the Appellant.\n<\/p>\n
     Soli J. Sorabjee, Paras Kulad, Rohinton F. Nariman\t and
\nRathin Das for the Respondent.\n<\/p>\n
    The Judgment of the Court was delivered by
\n    SABYASACHI\t MUKHARJI,  J.\tLeave  granted.\t Appeal\t  is
\ndisposed of by the judgment herein.\n<\/p>\n
    This  appeal challenges the order of the High  Court  of
\nRajasthan,  dated 16th March, 1988. The respondent’s  tender
\nfor construction of complete  masonry dam (Civil Engineering
\nWorks)\tMahi Bajaj-Sagar Project, Banswara, was accepted  by
\nthe appellant for a sum of Rs.5,90,30,791 vide letter  dated
\n29.4.1974  and\ta  provisional agreement  was  entered\tinto
\nbetween\t the  parties  on 23.5.1975.  The  construction\t was
\ncommenced by the respondent-company but it did not  complete
\nthe same and, it is alleged, left the work unfinished in the
\nyear 1979, which was of the value of Rs. 1,79,80,054.
\n    The\t letter\t of acceptance was dated  23.5.1975.  It  is
\nstated\tthat the respondent did not start the work in  spite
\nof  written notices and, ultimately, by a letter dated\t24th
\nDecember,  l979\t of the Executive Engineer  (Dam  Division),
\nBanswara,  the\trespondent  was\t informed  that\t as  it\t had
\ncommitted breach of the conditions of the contract, the same
\nhad been terminated and that the State Govt. would  complete
\nthe  work under the clauses and conditions of the  contract.
\nThe work had to be completed departmentally at the cost\t and
\nrisk  of  the  respondent-company.  After  some\t  litigation
\nbetween\t the parties when the Civil Revision was pending  in
\nthe High Court of Rajasthan at Jodhpur, a compromise between
\n\t\t\t\t\t\t  PG NO 444
\nthe  parties was arrived at on the 13th April, 1982. It\t was
\nagreed\t that\tthe  dispute  would   be   settled   through
\narbitration.  By  an  agreement dated 13th  June,  1982\t the
\nparties named their arbitrators.\n<\/p>\n
    The arbitrators entered upon the reference on 19th June,
\n1982. On 5th May, 1982, the respondent-company presented its
\nclaims\t under\t40  heads  claiming  a\ttotal  sum  of\t Rs.
\n1,90,53,059.28.\t This  amount was later on  revised  to\t Rs.
\n1,82,20,261.02. The State filed a counter-claim for a sum of
\nRs. 1,70,63,026.37 which was revised to Rs. 1,25,706,17.  It
\nis  stated that the arbitration proceedings  were  conducted
\nfor  52\t days during which the number of  sittings  was\t 25.
\nVarious issues were framed. Minutes of the proceedings\twere
\nrecorded. The arbitrators gave the award on 8.12.1982. It is
\nstated\tthat the award did not contain any reason as to\t why
\nand  how they had arrived at the figure of Rs. 75,41,755  in
\nfavour\tof  the\t respondent-company.  The  award,   however,
\nmentioned  that the State of Rajasthan committed  breach  of
\ncontract  and was also guilty of wrongful revocation of\t the
\nagreement and the actions taken under Clauses 2 and 3 of the
\nconditions  of the Contract, were wrongful and\tunjustified.
\nHowever. no reasons were indicated as to how the arbitrators
\narrived at those findings.\n<\/p>\n
    The respondent filed an application in the Court of\t the
\nlearned\t District  Judge for making the award  Rule  of\t the
\nCourt.\tThe  appellant, however, filed an objection  on\t the
\ngrounds\t inter\talia that no reasons had been given  by\t the
\narbitrators for the award and the amount of interest awarded
\nwas unjustified. It was further averred that the award being
\nambiguous,  showed non-application of mind and the  question
\nas  regards  the plant machinery of  the  respondent-company
\nlying  at  the\tdam  site, were\t beyond\t the  scope  of\t the
\narbitrator.\n<\/p>\n
    The\t learned  District Judge by his judgment  and  order
\ndated 11th August, 1987 allowed the objection and set  aside
\nthe award on the ground of ambiguity and non-application  of
\nmind. The award also suffered from the vice of non-statement
\nof  reasons,  according\t to  the  learned  District   Judge.
\nAccording to him, the award was not in accordance with\tlaw.
\nHe further held that the plant & machinery lying at the\t dam
\nsite  was beyond the reference made to the  arbitrators.  He
\nwas  of the opinion that the interest amount  was  ambiguous
\nand thus liable to be set aside. THere was an appeal to\t the
\nHigh  Court. The High Court allowed the appeal and passed  a
\ndecree for Rs. 75,41,755 being the amount of all claims\t and
\ndirected that the State should pay interest @ 5% p.a. on the
\nsaid amount for the period from 1.8.1983 to 8.12.1985, being
\nthe  period  during which the arbitration  proceedings\twere
\n\t\t\t\t\t\t  PG NO 445
\npending. This decision of the High Court is under  challenge
\nin this appeal.\n<\/p>\n
    It was contended before us that the question whether  on
\nthe  ground of absence of reasons, the award is bad per\t se,
\nis  pending  consideration by a Constitution Bench  of\tthis
\nCourt  in C.A. No. 3137-39\/85, 3145\/85-\t Jaipur\t Development
\nAuthority v. Firm Chhokhamal Contractor etc. It was,  hence,
\nurged  that this should await adjudication on this point  by
\nthe  Constitution  Bench.  We  are  unable  to\taccept\tthis
\ncontention. In our opinion pendency of this question  should
\nnot  postpone  all  decisions  by this\tCourt.\tOne  of\t the
\ncardinal  principles of the administration of justice is  to
\nensure\tquick disposal of disputes in accordance  with\tlaw,
\njustice and equity. In the instant case the proceedings have
\nlong  procrasticated. Indeed, the learned Judge of the\tHigh
\nCourt,\tafter  narrating the incidents from  1975  to  1985,
\nconcluded his judgment in March 1988 by observing that\tthat
\nwas the end of the journey. He was wrong. That was only\t the
\nend  of a chapter in the journey and the appellant wants  to
\nbegin  another chapter in the journey on the plea  that\t the
\naward  is  not a reasoned one. The  bargaining\tbetween\t the
\nparties\t was entered into in 1974-75 and the award was\tmade
\non  8th December, 1985 i.e. a decade after the beginning  of
\nthe transaction.\n<\/p>\n
    The law as it stands today is clear that unless there is
\nan error of law apparent on the face of the award, the award
\ncannot\tbe  challenged merely on the ground  of\t absence  of
\nreasons. This is settled law by a long series of  decisions.
\nInterests of justice and administration of justice would not
\nbe  served  by\tkeeping at bay\tfinal  adjudication  of\t the
\ncontroversy  in\t this  case on the plea\t that  the  question
\nwhether\t an  unreasoned\t award is bad  or  not,\t is  pending
\nadjudication  by  a larger Bench. There have  been  a  large
\nnumber of sittings before the arbitrators. Parties have been
\nheard. There was no misconduct in the proceedings. There has
\nbeen  no violation of the principles of natural justice.  In
\nsuch  a situation it would be inappropriate to postpone\t the
\ndecision  pending adjudication of this question by a  larger
\nBench  of this Court. We do not know how long it would\ttake
\nto  decide that question, and whether ultimately this  court
\nwould  decide  that  unreasoned awards per  se\tare  bad  or
\nwhether the decision would have prospective application only
\nin  view of the long settled position of law on this  aspect
\nin  this country or not. Justice, between the parties  in  a
\nparticular  case, should not be in suspended animation.\t Law
\nas it stands today, as observed in Jivarajbhai Ujamshi Sheth
\n&  Ors. v. Chintamanrao Balaji & Ors.,<\/a> [1964] 5 SCR  480  is
\nthat award made by an arbitrator is conclusive as a judgment
\nbetween\t the parties and the Court is entitled to set  aside
\nan award only if the arbitrator has misconducted himself  in
\n\t\t\t\t\t\t  PG NO 446
\nthe  proceedings or when the award has been made  after\t the
\nissue  of an order by the Court superseding the\t arbitration
\nor if the arbitration proceedings have become invalid  under
\nSec.  35 of the Arbitration Act or where an award  has\tbeen
\nimproperly procured or is otherwise invalid under Sec. 30 of
\nthe  Act.  An  award may be set aside by the  Court  on\t the
\nground\tof error on the face of the award, but an  award  is
\nnot  invalid  merely because by a process of  inference\t and
\nargument  it  may be demonstrated that\tthe  arbitrator\t had
\ncommitted  some mistake in arriving at some  conclusion.  In
\nthat  decision Shah, J. and Sarkar, J. as the learned  Chief
\nJustices then were, were of the view that it was not open to
\nthe  Court to speculate, where no reasons are given  by\t the
\narbitrator, as to what impelled the arbitrator to arrive  at
\nhis  conclusions.  They\t held  the  award   not\t  severable.
\nHidayatullah,  J.  as the learned Chief\t Justice  then\twas,
\nobserved  that\tif the parties set limits to action  by\t the
\narbitrator, then the arbitrator had to follow the limits set
\nfor  him and the Court can find his auxiliary  jurisdiction.
\nInstant case before us is also not a severable award.
\n    In\tFirm Madanlal Roshanlal Mahajan v. Hukumchand  Mills
\nLtd., Indore<\/a> [1967] 1 SCR 105 Bachawat, J. speaking for\t the
\nCourt  observed\t that an arbitrator could give\ta  lump\t sum
\naward.\tHe was not bound to give a separate award  for\teach
\nclaim.\tHis  award  on both fact and law is final. There  is
\nno  appeal  from his verdict. The Court\t cannot\t review\t his
\naward  and correct any mistake in his  adjudication,  unless
\nan objection to the legality of the award is apparent on the
\nface of it.\n<\/p>\n
    In\tthe present case the arbitrator gave no reasons\t for
\nthe award. There is no legal proposition which is the  basis
\nof  the\t award,\t far less any  legal  proposition  which  is
\nerroneous. Also there is  no allegation of any misconduct in
\nthe proceedings. It is an error of law\tapparent on the face
\nof it and not mistake of fact which could be the ground\t for
\nchallenging   the   award.  See\t in  this   connection\t the
\nobservations  in Union of India v. Bungo Steel Furniture  P.
\nLtd.,<\/a>  [1967] 1 SCR 324. Also see the observations  of\tthis
\nCourt in Allen Berry &\tCo. (P) Ltd. v. Union of India,\t New
\nDelhi,<\/a> [l971] 3 SCR 282. Hence, the High Court was right  in
\nthe instant case.\n<\/p>\n
    There  is,\thowever,  one  infirmity  in  the  award  as
\nsanctioned  by the High Court, that is to say, the grant  of
\ninterest  pendente  lite. The arbitrators have\tobserved  as
\nfollows :\n<\/p>\n
    “By\t adjustment  of\t interest  held to  be\tdue  to\t the
\nRespondents  with  that held to be due to the  Claimants  on
\ntheir items of claims which were not in the nature of  claim
\n\t\t\t\t\t\t  PG NO 447
\nfor damages for breach, we hold that the Respondents do\t pay
\nRs. 17,92,957 (Rupees seventeen lacs ninetytwo thousand nine
\nhundred fiftyseven only) as interest, to the Claimants\tupto
\nthe  date  of  the AWARD. Claimants further do\tpay  to\t the
\nRespondents Rs. Nill.”\n<\/p>\n
    This  was  awarding interest pendente lite. This  is  in
\nviolation  of  the principles enunciated by  this  Court  in
\nExecutive Engineer (Irrigation), Balimela & Ors. v. Abhaduta
\nJena  & Ors.,<\/a> [1988] 1 SCC 418. Our attention was  drawn  by
\nShri  Soli J. Sorabjee, counsel for the respondent,  to\t the
\ndecision  of  this  Court in Food Corpn. of  India  v.\tM\/s.
\nSurendra,  Devendra & Mohendra Transport Co.,<\/a> [1988]  1\t SCC
\n547 where at pages 555-556 of the report, the Court referred
\nto   certain  decisions\t cited by  Chinnappa  Reddy,  J.  in
\nExecutive  Engineer  (Irrigation), (supra) in which  he\t had
\nexpressed  the\tview  that those were  cases  in  which\t the
\nreferences to arbitration were made by the Court or in Court
\nproceedings of the disputes in the suit. In that context  it
\nwas  held  in those cases that the arbitrator had  power  to
\ngrant  interest. It was contended before us that this was  a
\nsimilar\t case.\tThere was a Court proceeding  in  this\tcase
\nregarding the appointment of the arbitrator and, as such, on
\nthe  same analogy it should be treated\tthat the  arbitrator
\nhad power to grant interest. We are unable to accept this.
\n    What  Mr justice O. Chinnappa Reddy meant to say by\t the
\nlatter\tjudgment  in Executive Engineer\t (Irrigation),\tcase
\nreferred to in Food Corporation of India, (supra) was  where
\nthe disputes regarding the merit of the case were pending in
\nthe Court and such disputes instead of being decided by\t the
\nCourt adjudication had been referred to an arbitrator by the
\nCourt,\tin such cases the arbitrators deciding in the  place
\nof  the Court, would have the same powers to grant  interest
\npendente  lite\tas the Courts have under Section 34  of\t the
\nCivil Procedure Code. Instant case is not such a proceeding.
\n    In that view of the matter this part of the award, which
\nwas affirmed by the High Court of granting of interest, must
\nbe deleted. We do so accordingly.\n<\/p>\n
    Shri K. Parasaran, learned Attorney General, assures  us
\nthat the amount awarded as modified, would be paid within  8
\nweeks from today.\n<\/p>\n
    The\t appeal is thus disposed of without any order as  to
\ncosts.\n<\/p>\n
R.S.S.\t\t\t\t\tAppeal disposed of.\n\n\n\n<\/pre>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India State Of Rajasthan vs R.S. Sharma & Co on 16 August, 1988 Equivalent citations: 1988 SCR, Supl. (2) 441 1988 SCC (4) 353 Author: S Mukharji Bench: Mukharji, Sabyasachi (J) PETITIONER: STATE OF RAJASTHAN Vs. RESPONDENT: R.S. SHARMA & CO. DATE OF JUDGMENT16\/08\/1988 BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-153251","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nState Of Rajasthan vs R.S. 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