{"id":153759,"date":"2001-05-01T00:00:00","date_gmt":"2001-04-30T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/ms-sikkim-subba-associates-vs-state-of-sikkim-on-1-may-2001"},"modified":"2019-02-21T18:53:53","modified_gmt":"2019-02-21T13:23:53","slug":"ms-sikkim-subba-associates-vs-state-of-sikkim-on-1-may-2001","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/ms-sikkim-subba-associates-vs-state-of-sikkim-on-1-may-2001","title":{"rendered":"M\/S Sikkim Subba Associates vs State Of Sikkim on 1 May, 2001"},"content":{"rendered":"
Supreme Court of India<\/div>\n
M\/S Sikkim Subba Associates vs State Of Sikkim on 1 May, 2001<\/div>\n
Author: Raju<\/div>\n
Bench: Cji, R.C. Lahoti, Doraiswamy Raju<\/div>\n
           CASE NO.:\nAppeal (civil) 2789-2790  of  1997\n\n\n\nPETITIONER:\nM\/S SIKKIM SUBBA ASSOCIATES\n\n\tVs.\n\nRESPONDENT:\nSTATE OF SIKKIM\n\nDATE OF JUDGMENT:\t01\/05\/2001\n\nBENCH:\nCJI, R.C. Lahoti & Doraiswamy Raju\n\n\n\n\nJUDGMENT:\n<\/pre>\n
RAJU, J.\n<\/p>\n
L…I…T…….T…….T…….T…….T…….T…….T..J<\/p>\n
    A skeletal reference to the facts, without much emphasis
\non  the\t details  of  merits  of the  case,  would  help  to
\nappreciate  certain  submissions,  at  the  time  of  actual
\nconsideration of the claims projected before us.\n<\/p>\n
    The\t respondent, State of Sikkim, and the appellant, M\/s
\nSikkim Subba Associates (referred throughout as appellants),
\nclaimed\t to  be\t a  firm of  Partnership,  entered  into  an
\nagreement  on 22.1.1991 under which the appellants have been
\nappointed  as  the  organising agents  for  its\t lotteries
\nenumerated  therein subject to the terms and conditions more
\nfully  set out therein regulating the rights and obligations
\nof  the\t parties.   It needs to be kept in view\t that  since
\nrunning\t of  private lotteries would constitute\t a  criminal
\noffence,  some of the States have allowed parties to put  on
\nthe  apparel of the State in return for a stipulated fee  to
\nmobilise  funds,  in  public interest  to  undertake  public
\nworks.\tDisputes and misunderstanding arose which led to the
\ntermination  of\t the agreement resulting in  the  appellants
\nseeking\t recourse  to  litigation by getting  an  Arbitrator
\nappointed  invoking  the  powers  under\t Section  8  of\t the
\nArbitration  Act,  1940\t (hereinafter  referred\t to  as\t the
\n`Act).\n<\/p>\n
    As\tagainst\t the order dated 24.10.1992 of the  District
\nJudge, Gangtok (Sikkim), appointing the sole Arbitrator, the
\nrespondent  challenged\tthe  same before the High  Court  by
\nfiling\tan appeal which came to be dismissed on\t 23.11.1992.
\nThe  matter was pursued further before this Court in SLP (C)
\nNo.26  of 1993 and by an order dated 26.4.1993 the same was,
\nby  the\t agreement  of\tparties, dismissed  subject  to\t the
\nobservation  that the Arbitrator shall give a speaking order
\nand, therefore, there was no need to go into the controversy
\nraised.\t  The  appellants  filed their\tstatement  of  claim
\nbefore\tthe  Arbitrator\t for a sum of  Rs.81,84,679.45\twith
\nfurther\t relief\t for the refund of Rs.76 lacs, said to\thave
\nbeen realised by the State by encashing two bank guarantees,
\nwith  interest\tat  18% p.a.  from 23.9.1992,  the  date  of
\nencashment.   The respondent-State filed its reply  opposing
\nthe  claims  made by the appellants and asserted  a  counter
\nclaim  against the appellants for a sum of  Rs.8,64,81,445\/-
\nwith  future  interest\tand   costs.   Both  parties  marked
\ndocuments  and\tadduced\t oral\tevidence.   Thereupon,\t the
\nArbitrator  made an Award on 8.2.1994 determining the amount
\npayable\t by the State to the appellants at Rs.37,75,00,000\/-
\nand the amount payable by the appellants to the State by way
\nof counter claim at Rs.4,61,35,242\/- and after adjusting the
\namounts\t due  to  the  State   towards\tits  counter  claim,
\ndetermined  the net amount payable to the appellants by\t the
\nState\tat  Rs.33,13,54,758\/-.\t  Proportionate\t costs\twere
\nawarded\t and future interest was also granted at the rate of
\n12% p.a.  on the sum of Rs.33,13,54,758\/-.\n<\/p>\n
    Aggrieved,\tthe State filed an application under Section
\n30 of the Act to set aside the Award.  The District Judge by
\nhis  decision dated 27.10.94 overruled the objections of the
\nState  and  made  the Award the rule of court by  passing  a
\ndecree in terms of the Award.  The State challenged the same
\nbefore\tthe High Court by filing an appeal under Section  39
\nof  the\t Act.  The matter was heard in the High Court  by  a
\nDivision  Bench\t consisting  of the  learned  Chief  Justice
\n(Justice  S.N.\t Bhargava)  and\t Justice R.   Dayal.   In  a
\njudgment  dated\t 29.9.1995 the learned Chief Justice  agreed
\nwith  the  contentions\traised on behalf of  the  State\t and
\nsustained  the challenge made to the Award by setting  aside
\nthe  Award as well as the Judgement of the learned  District
\nJudge,\tthereby\t allowing the appeal with costs.  Dayal,  J.
\nrendered  a  separate dissenting judgment by coming  to\t the
\nultimate  conclusion that the quantum of damages arrived  at
\nby  the\t Arbitrator suffered an illegality apparent  on\t its
\nface  and, therefore, in his view the matter required to  be
\nremitted  for  reconsideration of the matter afresh  to\t the
\nArbitrator.   In  view\tof the above, the Court\t passed\t the
\nfollowing order :-\n<\/p>\n
    There  is  a difference of opinion between\tus.   Chief
\nJustice has come to the conclusion that the appeal should be
\nallowed\t with  costs whereas Justice Dayal has come  to\t the
\nconclusion  that  the  matter may be remitted  back  to\t the
\nArbitrator for determining quantum of damages.\tAs such, the
\nmatter\tmay be placed before the Honble Chief Justice\/Judge
\nas soon as he assumes charge.\n<\/p>\n
\t\t\t     Sd\/-\t\t\t\t\t\t\tSd\/-\n\n    (Ripusudan Dayal)\t\t(S.N.  Bhargava)\n\n    Judge\n\n    Chief Justice\n\n\t\t\t     29\/09\/1995\n\t29\/09\/1995\n\n\n<\/pre>\n
    Thereafter,\t Dayal, J.  ceased to be Judge of the Sikkim
\nHigh  Court and was transferred to the Allahabad High  Court
\nand  in\t his  place  Justice M.\t  Sengupta  assumed  office.
\nThough\tthe date for hearing of the matter was fixed by\t the
\nsaid  learned Judge, on the said date it was mentioned\tthat
\nSikkim\tSubba  Associates,  the\t appellants,  has  filed  an
\napplication  in CMA No.11\/96 invoking powers under  Sections
\n98  and 151,CPC, opposing the hearing of the appeal in\tview
\nof  Section  98(2).   The  State  also\tfiled  CMA  No.15\/96
\ninvoking  Sections 11, 98 and 151, CPC, questioning the very
\nmaintainability\t of  the application filed by  Sikkim  Subba
\nAssociates.   The  said applications though  initially\twere
\nbefore\tSengupta, J., due to inadvertence came to be  listed
\nbefore\tthe  new Chief Justice (Justice K.M.   Agarwal)\t and
\nwhen  the  learned  Chief Justice asked the  counsel  as  to
\nwhether\t they  wanted the case to be made over to  Sengupta,
\nJ.,  both  sides  wanted the same to be heard by  the  Chief
\nJustice\t himself.  The learned Chief Justice was of the view
\nthat the order of reference made on the judicial side by the
\nDivision  Bench cannot be upset either on the administrative
\nside  or on the judicial side while hearing the appeal as  a
\nthird\tJudge\tpursuant   to\tthe  order   of\t  reference.
\nConsequently,  by  an  order dated 14.8.96  the\t application
\nfiled  by  the appellants came to be dismissed and  the\t one
\nfiled  by  the\tState came to be allowed to  the  extent  of
\nchallenge  made\t to the maintainability of  the\t application
\nfiled  by the appellants.  These appeals came to be filed in
\nthis Court challenging those orders.\n<\/p>\n
    On\t3.3.1997 when SLP (C) Nos.3232-3233 of 1997 came  up
\nfor  hearing,  this  Court (Honble the\tChief  Justice\tand
\nHonble\tMrs.   Justice\tSujata\tV.   Manohar)  passed\tthe
\nfollowing order, after briefly noticing the circumstances in
\nwhich the appeals have been filed :-\n<\/p>\n
    Against the said order of 14.8.96 made by Agarwal Chief
\nJustice,  the  petitioners filed the present  Special  Leave
\nPetitions.  When these petitions were came up for hearing on
\nthe  last occasion a technical objection was raised that the
\nper  Court  order of 29.9.95 had not been challenged by\t the
\npetitioners   and,  therefore,\tthe   petitions\t  were\t not
\nmaintainable.\tTo overcome this technical objection by\t way
\nof abundant caution the petitioners have sought amendment of
\nthe  petition with a view to challenging the said per  Court
\norder  of  29.9.95.  The amendment is opposed on the  ground
\nthat   it   is\tbarred\tby   400  days.\t  However,  in\t the
\naforementioned\tcircumstances, we conclude that there was no
\ndeliberate  delay on the part of the petitioners, but it was
\nonly  because  they  thought that it was  not  necessary  to
\nchallenge  the\torder of 29.9.95 as they had challenged\t the
\nsubsequent  order  of 14.8.96.\tWe, therefore,\tcondone\t the
\ndelay and allow the amendment.\n<\/p>\n
    We\twould  also  like to make it clear that\t we  do\t not
\npropose\t to  go\t into  the merits of the  matter  except  to
\nconsider  whether in the aforesaid factual background was it
\npermissible  to\t the learned Chief Justice to hear and\tpass
\nthe order of 14.8.96.  In other words, was the learned Chief
\nJustice entitled to hear the matter in view of the per Court
\norder  passed  on 29.9.95.  If yes, the question is  whether
\nthe  per Court order of 29.9.95 itself was a correct  order.
\nIf  no,\t what  order this Court should pass in\tthe  matter.
\nThis  is  the limited question which we may be\trequired  to
\nconsider at the initial stage unless we find it necessary to
\nenter into the merits of the matter.\n<\/p>\n
    We\t direct\t the  learned\tcounsel\t appearing  for\t the
\ncontesting  parties to file their brief written\t submissions
\nwithin\ttwo weeks from today.  The matters may thereafter be
\nfixed  for final disposal.  Permitted to mention before\t the
\nlearned Chief Justice.\n<\/p>\n
\tOn 11.4.1997 when the SLPs came up once again before the
\nvery Bench of this Court, it was ordered as follows :-\n<\/p>\n
    In order to avoid multiplicity of the proceedings which
\nmay  be the consequence if this Court first decides only the
\nlegality  of the order dated 14.8.1996 passed by the learned
\nthird Judge in the High Court, we consider it appropriate to
\ntreat  these  special  leave petitions as ones\tagainst\t the
\njudgment  of the High Court even on merits.  Irrespective of
\nthe view taken by this Court on the question of the legality
\nof the order of the learned third Judge, these matters would
\nbe  heard  as appeals even on merits of the case.   This  is
\nclarified  in view of the earlier order dated 3.3.1997 which
\nhad  indicated\tthat this Court did not propose then  to  go
\ninto  the merits of these matters.  Learned counsel for both
\nsides  agree that this would be the more appropriate  course
\nto avoid any further delay in the decision of the matters on
\nmerits\tand it would also avoid multiplicity of\t proceedings
\nbecause\t in either view taken on the question of legality of
\nthe  learned third Judges order, the aggrieved party  would
\nbe required to then challenge the decision on merits.  It is
\nclarified accordingly.\n<\/p>\n
Leave granted.\n<\/p>\n
No stay.\n<\/p>\n
    Shri B.  Sen, learned senior counsel for the appellants,
\nsubmitted  that\t having regard to the fact that\t the  Sikkim
\nHigh  Court,  at  the relevant point of time, had  only\t two
\njudges, inclusive of the Chief Justice, and they have chosen
\nto differ from each other – the learned Chief Justice taking
\nthe  view that the appeal of the State has to be allowed and
\nthe  Award  of\tdamages\t in favour  of\tthe  appellants\t was
\nunwarranted  as\t well as unsustainable in law and the  other
\nlearned\t Judge (R.  Dayal J.,) expressing the view that\t the
\naward  suffered\t from an error of law apparent only  in\t the
\nmanner\tof determination of the quantum of damages and\tthat
\nfor  purposes  of re-determination afresh of the quantum  of
\ndamages\t alone,\t the  matter  has  to  be  remitted  to\t the
\nArbitrator,  the  Award ought to have been  confirmed  under
\nSection\t 98 (2) C.P.C., particularly when rules 149 & 150 of
\nthe  Sikkim  High Court (Practice & Procedure)\tRules,\t1991
\ncame  to  be deleted with effect from 12.3.92, the  date  of
\nenforcement of the original rules.  Reliance has been placed
\nin this regard on the decision of this Court reported in Tej
\nKaur  & another vs Kirpal Singh & Another (1995 (5) SCC 119)
\nand  that  of the Assam High Court in Abdul Latif  vs  Abdul
\nSamad  (AIR<\/a>  1950 Assam 80).  In traversing the said  claim,
\nShri  V.A.   Bobde,  learned senior counsel for\t the  Sikkim
\nState,\tcontended  that the words Court consisting  of\tin
\njuxtaposition  to  the\twords Constituting the\tBench,\tin
\nproviso\t to  sub-Section  (2) of Section 98 will  only\thave
\nrelevance  and\thas  to be construed with reference  to\t the
\nsanctioned  strength alone – which at all relevant points of
\ntime was only three so far as Sikkim High Court is concerned
\nand  whenever  there is a third judge, even on\tthe  vacancy
\nbeing  filled  up on such vacancy arising for any reason  in
\nrespect of any one of the two, the matter should be referred
\nto  and\t heard by the third judge and neither any  exception
\ncould be taken for the same nor could it be claimed that the
\njudgement  under appeal before the High Court should only be
\nconfirmed.  Since retrospective deletion of a statutory rule
\ncould  not have been legitimately made by a notification  by
\nthe  rule-making  authority  in the absence  of\t a  specific
\nstatutory  provision conferring any such power in this case,
\nit  is\tcontended  that\t the   deletion\t could\tbe  only  of
\nprospective  effect and the case before us would be governed
\nby those rules, as if it existed.\n<\/p>\n
    In\tour view, the decision in AIR 1950 Assam 80  (Supra)
\nhas no application to this case where unlike the Assam Case,
\nthe  very  Division Bench, as part of their  judicial  order
\nalso  made  a  consequential order of reference to  a  third
\njudge  and  inasmuch as there was no appeal challenging\t the
\nsame.  We are of the view that rules 149 & 150 of the Sikkim
\nHigh  Court  (Practice\t&   Procedure)\tRules,\t1991,  which
\ngoverned  the situation, were very much in force on the date
\nwhen  the Division Bench exercised their power and the order
\nof reference passed in this case could not therefore be said
\nto be bad in law.  Apart from the axiomatic principle of law
\nthat  a\t subordinate  legislation  in the form\tof  Rule  or
\nNotification could not be made\/unmade retrospectively unless
\nany  power  in that regard has been  specifically  conferred
\nupon  the  Rule-making\tAuthority  ,  a\t mere  retrospective
\ndeletion  could not per se have the effect of nullifying  or
\ndestroying  orders  passed or acts already  performed,\twhen
\nsuch  powers  were available in the absence of any  specific
\nstatutory  provision  enacted  to destroy  all\tsuch  rights
\nalready\t acquired  or obligations and liabilities  incurred.
\nThe  decision  in  1995\t (5) SCC 119 (supra)  will  have  no
\napplication to this case, in view of rules 149 & 150 noticed
\nabove  and  also for the reason that unlike in\tthe  present
\ncase, the case considered therein, concedingly involved only
\na  question of fact over which the dissenting views came  to
\nbe  expressed.\tThat apart, the words Consisting of  shall
\nmean  and  also\t considered to have relevance  only  to\t the
\nsanctioned  strength.\tTherefore, taking into\taccount\t the
\nfact  that for the time being, there were only two Judges in
\nposition  and  that the learned judges, who constituted\t the
\nDivision  Bench,  expressed different views and at the\tsame
\ntime  thought  fit to refer the matter to the opinion  of  a
\nthird  judge, the matter should await till the arrival of  a
\nthird judge.  Not only such a contingency also fructified in
\nthis  case  but the matter also came to be  actually  posted
\nbefore the third judge for hearing.  The amplitude of powers
\nof this Court under Articles 136 and 142 of the Constitution
\nof  India for doing complete justice in any cause or  matter
\nbrought\t before it, cannot also be otherwise disputed.\tAs a
\nmatter\tof  fact, in the teeth of the Orders passed by\tthis
\nCourt  on 11.4.97 to treat the appeals as having been  filed
\neven  on  the merits of the case and be heard as  such,\t and
\nthat  too, on the agreement expressed by the counsel on both
\nsides,\tto be also the appropriate course, in these matters,
\nit  is not permissible for the appellants to take a stand to
\nthe  contrary  to avoid or stall an hearing and disposal  of
\nthese appeals on the merits of the matters involved therein.\n<\/p>\n
    The\t respondent-State,  though  at some point  of  time,
\nseems  to  have\t pressed  into service Article\t299  of\t the
\nConstitution  of  India, to contend that no  valid  contract
\nbetween parties came into existence as envisaged therein and
\nconsequently  neither the Arbitrator could have entered upon
\nreference  nor\tcan  the  State be held\t bound\tby  such  an
\nagreement,  the same was not pursued before us realising the
\nfutility of the same, having regard to the peculiar facts of
\nthis  case.  We are not called upon, in such  circumstances,
\nto  decide this issue and the parties have also proceeded on
\nthe  footing  that  there was a valid and  binding  contract
\nbetween\t the appellants and the State, in this case, without
\nprejudice  to  their contentions in respect of their  rights
\nunder the agreement.\n<\/p>\n
    On\tbehalf\tof the appellants, it has  been\t strenuously
\ncontended  that the Arbitrators award cannot be\t challenged
\nin  proceedings\t under\tSection 30 of the Act, as if  on  an
\nappeal\tand  that  the Award in this case has  been  rightly
\nupheld\tby the District Judge, since it did not disclose any
\nmisconduct  on\tthe  part of the Arbitrator and\t no  other
\nground for any such an interference within the parameters of
\nSection\t  30,\thaving\talso   been  substantiated  by\t the
\nrespondent-State.   It\tis,  therefore, contended  that\t the
\ndecision  of  Chief Justice Bhargava, for the  same  reason,
\ncould  not  be sustained and that the learned Chief  Justice
\ncommitted  an  error in directing the Award, as affirmed  by
\nthe  District Judge, to be set aside for any one or other of
\nthe  reasons  assigned\tby  him.  At the  same\ttime,  while
\nstrongly  defending  the  decision  of\tthe  learned   Chief
\nJustice,  it  was urged for the respondent- State  that\t the
\nnumerous errors apparent ex facie on the Award have been not
\nonly   meticulously  enumerated\t but   found  to  have\tbeen
\nsubstantiated  succinctly, by adverting to the materials  in
\nsupport thereof for justifying Courts interference.  It was
\nalso  submitted\t for the respondents that Dayal\t J.,  having
\nfound  the  Award  to  suffer from  serious  infirmities  in
\nawarding  damages,  erred in directing a remand to the\tvery
\nArbitrator  for consideration afresh, to re-determinate\t the
\ndamages\t  and  instead\tthere  should\thave  been  only   a
\nsupersession  of  the  arbitration  agreement  itself  under
\nSection 19 read with Section 16 (c) of the Act.\t The learned
\nsenior\tcounsel\t on  either side invited  our  attention  to
\nvoluminous  case  law  on the scope and ambit of  powers  of
\nCourts\texercising jurisdiction under Section 30 as well  as
\nSection\t 39 of the Act for interference with the award of an
\nArbitrator, which, on a closer scrutiny, would disclose that
\nthe  observations  in  each of such cases came to  be  made,
\ninvariably  and\t ultimately in the context of  the  peculiar
\nfacts  and circumstances of the cases dealt with therein and
\nhaving\tregard\tto  the\t particular  class  or\tcategory  of
\nmistakes  or  nature  of errors found highlighted  in  those
\ncases.\t  It   is  appropriate,\t   before   undertaking\t  an
\nadjudication  on  the  merits of the claims of\tparties,  to
\nadvert\tto  the salient and overall  peripheral\t parameters,
\nrepeatedly re- emphasised by this Court, in justification of
\ninterference  with  an Award of the Arbitrator by  different
\nCourts\tat various levels exercising powers under the Act as
\nwell as by this Court, without unnecessarily multiplying the
\nnumber\tof  authorities\t by making reference  to  only\tsome
\nrelevant out of the same, for our purpose.\n<\/p>\n
    Relying  upon  the ratio in Champsey Bhara & Company  vs
\nJivraj\tBalloo\tSpinning & Weaving Company Ltd.\t  (AIR\t1923
\nP.C.   66)  this Court in M\/s Alopi Parshad & Sons Ltd.\t  vs
\nUnion of India (AIR<\/a> 1960 SC 588) observed that the award may
\nbe  set aside on the ground of an error on the face thereof,
\nwhen  in the award or in any document incorporated with\t it,
\nas  for\t instance,  a  note appended  by  the  Arbitrator(s)
\nstating\t the  reasons  for the decision\t wherein  the  legal
\npropositions  which are the basis of the award are found  to
\nbe   erroneous.\t  A  specific\tquestion  submitted  to\t the
\nArbitrator  for his decision, even if found answered wrongly
\ninvolving  an  erroneous decision in point of law also,\t was
\nconsidered  not\t to make the award bad on its face so as  to
\ncall  for interference.\t While emphasising the position that
\nmisconduct  in\tSection 30 (a) of the Act comprises  legal
\nmisconduct, this Court held it to be complete in itself when
\nthe  Arbitrator was found to have, on the face of the award,
\narrived at a decision by ignoring very material and relevant
\ndocuments  which throw abundant light on the controversy  to
\nhelp  a just and fair decision or arrived at an inconsistent
\nconclusion  on\this  own finding (K.P Poulose  vs  State  of
\nKerala\t&  Anr.<\/a>\t  –  AIR  1975\tSC  1259).   In\t M\/s  Chahal
\nEngineering   and   Construction   Company   vs\t  Irrigation
\nDeptartment.,  Punjab, Sirsa,<\/a> (1993 (4) SCC 186), this Court
\nheld  that the words is otherwise invalid in clause (c) of
\nSection 30 of the Act would include an error apparent on the
\nface  of  the record.  In Trustees of the Port of Madras  vs
\nEngineering  Constructions  Corporation Ltd.,<\/a> (1995 (5)\t SCC\n<\/p>\n
531)  after adverting to the ratio of the Constitution Bench
\nof this Court in Raipur Development Authority & Ors.  vs M\/s
\nChokhamal  Contractors\t&  others<\/a> (1989 (2) SCC\t 721),\tthis
\nCourt  held that the error apparent on the face of the award
\ncontemplated by Section 16 (1) (c) and Section 30 (c) of the
\nAct  is an error of law apparent on the face of the  award
\nand  not  an  error of fact and that the  Arbitrator  cannot
\nignore\tthe law or misapply it in order to do what he thinks
\nis  just and reasonable.  In The President, Union of India &
\nAnother\t vs Kalinga Construction Co.  (P) Ltd.\t(AIR<\/a> 1971 SC
\n1646),\tit  was held that the Court, in a proceeding to\t set
\naside  the  award cannot exercise jurisdiction, as if on  an
\nappeal\tby  re-\t examining and\tre-appraising  the  evidence
\nconsidered  by the Arbitrator and come to the decision\tthat
\nthe Arbitrator was wrong (See also AIR 1989 SC 268;  1989 SC
\n777 and 1989 SC 890).\n<\/p>\n
    In\tUnion of India vs M\/s Jain Associates & Another\t (JT<\/a>
\n1994 (3) SC 303), this Court held as follows:\n<\/p>\n
    7.\tIn K.P.\t Poulose vs State of Kerala & Anr.<\/a>  [(1975)
\nSupp.\tSCR  214)],  this Court held that  misconduct  under
\nSection\t 30(a) does not connote a moral lapse.\tIt comprises
\nof  legal misconduct which is complete if the arbitrator, on
\nthe face of the award, arrives at an inconsistent conclusion
\neven  on  his  own finding, by ignoring\t material  documents
\nwhich would throw abundant light on the controversy and help
\nin  arriving  at  a just and fair decision.  It is  in\tthis
\nsense  that the arbitrator has misconducted the\t proceedings
\nin  the\t case.\t In that case the omission to  consider\t the
\nmaterial  documents  to resolve the controversy was held  to
\nsuffer from manifest error apparent ex facie.  The award was
\naccordingly  quashed.\tIn Dandasi Sahu vs State  of  Orissa<\/a>
\n(1990 (1) SCC 214), this Court held that the arbitrator need
\nnot  give any reasons.\tThe award could be impeached only in
\nlimited circumstances as provided under Section 16 and 30 of
\nthe  Act.   If the award is disproportionately\thigh  having
\nregard\tto  the original claim made and the totality of\t the
\ncircumstances\tit  would  certainly  be   a  case  of\t non
\napplication  of mind amounting to legal misconduct and it is
\nnot possible to set aside only invalid party while retaining
\nthe valid part.\t In other words the doctrine of severability
\nwas  held  inapplicable\t in  such   a  situation.   It\t is,
\ntherefore,  clear that the word misconduct in Section  30(a)
\ndoes  not  necessarily comprehend or include  misconduct  of
\nfraudulent  or\timproper  conduct or moral  lapse  but\tdoes
\ncomprehend   and  include  actions  on\t the  part  of\t the
\narbitrator,  which on the face of the award, are opposed  to
\nall   rational\tand  reasonable\t  principles  resulting\t  in
\nexcessive  award or unjust result or the like  circumstances
\nwhich  tend  to\t show  non application of the  mind  to\t the
\nmaterial  facts placed before the arbitrator or umpire.\t  In
\ntruth  it  points to fact that the arbitrator or umpire\t had
\nnot  applied  his mind and not adjudicated upon the  matter,
\nalthough  the  award  professes\t to  determine\tthem.\tSuch
\nsituation  would  amount to misconduct.\t In other words,  if
\nthe  arbitrator\t or umpire is found to have not applied\t his
\nmind  to the matters in controversy and yet, has adjudicated
\nupon those matters in law, there can be no adjudication made
\non them.  The arbitrator\/umpire may not be guilty of any act
\nwhich  can possibly be construed as indicative or partiality
\nor  unfairness.\t  Misconduct is often used, in\ta  technical
\nsense  denoting\t irregularity  and not guilt  of  any  moral
\nturpitude,  that is, in the sense of non-application of\t the
\nmind  to  the  relevant\t aspects  of  the  dispute  in\t its
\nadjudication.\tIn K.V.\t George vs Secretary to\t Government,
\nWater  & Power Department, Trivandrum & Anr.  [(1989) 4\t SCC
\n595],  this  Court  held that the arbitrator  had  committed
\nmisconduct  in\tthe proceedings by making an  award  without
\nadjudicating  the counter claim made by the respondent.\t  In
\nIndian\tOil  Corporation Ltd.  vs Amritsar Gas\tService\t and
\nOrs.<\/a>   [(1991)\t1  SCC\t533 & 544], the\t counter  claim\t was
\nrejected on the ground of delay and non consideration of the
\nclaim,\tit was held, constituted an error on the face of the
\naward.\n<\/p>\n
    It\tis also, by now, well settled that an Arbitrator  is
\nnot  a\tconciliator and his duty is to decide  the  disputes
\nsubmitted  to  him  according  to the legal  rights  of\t the
\nparties\t and not according to what he may consider it to  be
\nfair  and  reasonable.\tArbitrator was held not entitled  to
\nignore\t the  law  or  misapply\t it  and  cannot  also\t act
\narbitrarily,  irrationally, capriciously or independently of
\nthe  contract (See 1999 (9) SCC 283 :  Rajasthan State Mines
\nand  Minerals  Ltd.   vs Eastern Engineering  Enterprises  &
\nAnr.).\tIf the<\/a>re are two equally possible or plausible views
\nor  interpretations, it was considered to be legitimate\t for
\nthe  Arbitrator to accept one or the other of the  available
\ninterpretations.   It  would be difficult for the Courts  to
\neither exhaustively define the word misconduct or likewise
\nenumerate  the\tline  of cases in which\t alone\tinterference
\neither\tcould  or could not be made.  Courts of Law  have  a
\nduty and obligation in order to maintain purity of standards
\nand  preserve  full faith and credit as well as\t to  inspire
\nconfidence   in\t alternate  dispute   redressal\t method\t  of
\nArbitration, when on the face of the Award it is shown to be
\nbased upon a proposition of law which is unsound or findings
\nrecorded  which are absurd or so unreasonable and irrational
\nthat  no  reasonable or right thinking person  or  authority
\ncould have reasonably come to such a conclusion on the basis
\nof  the materials on record or the governing position of law
\nto  interfere.\t So far as the case before us is  concerned,
\nthe  reference\tto the Arbitrator is found to be  a  general
\nreference  to  adjudicate upon the disputes relating to\t the
\nalleged\t termination of the agreement by the State and not a
\nspecific   reference   on  any\t particular   question\t and
\nconsequently,  if  it  is  shown   or  substantiated  to  be
\nerroneous on the face of it, the award must be set aside.\n<\/p>\n
    The\t Award under challenge, in our view, stands vitiated
\non account of several serious errors of law, apparent on the
\nface of it and such infirmities go to substantiate the claim
\nof  the State that not only the Arbitrator acted arbitrarily
\nand  irrationally on a perverse understanding or  misreading
\nof  the materials but also found to have misdirected himself
\non  the vital issues before him so as to render the award to
\nbe  one\t in  utter  disregard of  law  and  the\t precedents.
\nAlthough  the  award  purports to determine  the  claims  of
\nparties,  a  careful  scrutiny of the same  discloses  total
\nnon-application\t of  mind to the actual, relevant and  vital
\naspects\t and issues in their proper perspective.  Had  there
\nbeen  such a prudent and judicious approach, the  Arbitrator
\ncould  not  have awarded any damage whatsoever and,  at\t any
\nrate,  such  a\tfabulous  and\tastronomical  sum  on\tmere
\nconjectures  and  pure\thypothetical  exercises,  absolutely
\ndivorced  from rationality and realities, inevitably  making
\nlaw,  equity  and justice, in the process, a casualty.\t The
\nArbitrator  has acknowledged when recording a finding on the
\nbasis of indisputable facts that except for the first set of
\ndraws  in  respect of eight lotteries in groups A &  B,\t the
\nprize  money  obliged to be deposited seven days before\t the
\ndraw  (since  the winners have to be paid only out  of\tsuch
\ndeposits,  after draw) as well as the agency fee running  to
\ncrores\twas  not  deposited\/remitted  in  time\tconstraining
\nthereby\t the  State  to mobilise funds to  distribute  prize
\nmoney  from State funds in order to preserve and protect the
\nfair  name and reputation of the State, the lotteries  being
\nrun as that of and for and on behalf of the State.  Even, as
\nlate  as  8.2.94  when\tthe  award came\t to  be\t passed\t the
\nappellants  were  in  arrears, due to non-deposit  of  prize
\nmoney  within the stipulated time, a sum of Rs.1,37,47,026\/-
\nbesides\t non-remittance\t of agency fee of  Rs.3,72,87,884\/-.
\nDespite\t this, the Arbitrator tried to find an alibi for the
\ndefaulter appellants in the fact that the State, in spite of
\nwarnings  and  threats, did not actually stop  either  those
\ndraws  or  the\tfurther\t subsequent draws  and\tallowed\t the
\nlotteries  to go on without any break.\tFrom the above,\t the
\nArbitrator  as\twell as the learned District Judge chose  to
\ninfer  that the respondent-State had condoned or waived\t the
\nlapses\tand  defaults completely overlooking the vital\tfact
\nthat  the  Arbitrator  is  not dealing with  any  claim\t for
\ndamages from the respondent-State against the appellants who
\ndefaulted  in respect of such defaults but on the other hand
\na  claim  from the defaulter appellants itself\tfor  damages
\nagainst\t the State for not willing to put up any longer with
\na  recurrent  and recalcitrant defaulter.   The\t Arbitrator,
\ngrossly\t omitted  to  give  due\t  weight  to  such  defaults
\ncommitted  by the appellants and further misdirected himself
\nin not drawing the legal inferences necessarily flowing from
\nthem.\tEven if it is assumed for purposes of  consideration
\nthat  the  State  had  waived  past  lapses,  it  cannot  be
\ncompelled  to  condone the persistent and continuous  wrongs
\nand  defaults  and  continue to perform their  part  of\t the
\ncontract  to  their  disadvantage  and\tdetriment  and\talso
\nfurther\t penalise  them with damages for not doing so,\twhen
\neven  dictates of common sense, reason and ordinary prudence
\nwould  commend for rejecting the claim of the appellants  as
\nnothing\t but a gamble and vexatious.  The Arbitrator, who is
\nobliged to apply law and adjudicate claims according to law,
\nis  found  to  have  thrown  to winds  all  such  basic\t and
\nfundamental  principles and chosen to award an\tastronomical
\nsum  as damages without any basis or concrete proof of\tsuch
\ndamages, as required in law.\n<\/p>\n
    Though   the  entire  award\t  bristles   with   numerous
\ninfirmities  and  errors of very serious nature\t undermining
\nthe  very  credibility and objectivity of the  reasoning  as
\nwell  as  the  ultimate\t conclusions   arrived\tat  by\t the
\nArbitrator, it would suffice to point out a few of them with
\nnecessary  and\trelevant  materials  on\t record\t in  support
\nthereof\t to  warrant  and justify the interference  of\tthis
\nCourt  with  the award allowing damages of such\t a  fabulous
\nsum,  as  a windfall in favour of the appellants, more as  a
\npremium for their own defaults and breaches :-\n<\/p>\n
    a)\tThe  conclusions  in the award are  found  seriously
\nvitiated  on account of gross misreading of the materials on
\nrecord\tas  well  as  due to conspicuous  omission  to\tdraw
\nnecessary and lawful inferences, inevitably flowing from the
\nindisputable  materials as well as findings recorded by\t the
\nArbitrator  himself.   Conclusions directly contrary to\t the
\nindisputable  facts placed on record are shown to have\tbeen
\ndrawn  on the question of alleged waiver throwing over board
\nthe  well-settled  norms  and criteria to be  satisfied\t and
\nproved\tbefore the plea of waiver, can ever be\tcountenanced
\nleave  alone,  the  basic and fundamental principle  that  a
\nviolator  of  reciprocal promises cannot be crowned  with  a
\nprize  for  his defaults.  Chief Justice Bhargava has  taken
\ngreat  pains to enumerate them.\t Neither the Arbitrator, nor
\nthe  District Judge or even the learned Judge who has chosen
\nto  differ from the view of the Chief Justice appear to have
\napplied\t their\tmind  judiciously  or  judicially  to  these
\naspects\t before\t countenancing the claim of damages made  by
\nthe  appellants.  Even a cursory reading of the contents  of
\nEx.   R-14,  R- 16 to R-19, R-21, R-22 to R-25 and  R-26  to
\nR-34  as well as R-80 would belie the claims based upon\t the
\nplea  of condonation or waiver forever so as to entitle\t the
\nappellants   to\t  still\t insist\t  upon\tthe   State   alone,
\nnotwithstanding\t its  own continuing wrongs, to perform\t its
\npart  of  the  obligations under the contract  or  to  claim
\ndamages from the respondent for not doing so.  To illustrate
\nR-25  dated 7.8.91 written to the appellants may be usefully
\nextracted :-\n<\/p>\n
    I  have  been  repeatedly  reminding  you  for  sending
\nGovernment  dues of Agency fees and prize money but it seems
\nthat  you  are\tnot bothering to care for it.\tSince  three
\nmonths\thave passed you have not yet paid any instalments of
\nAgency\tfees.  As regards prize money you have paid only for
\nthe   five  draws  and\tremaining   ten\t draws\t are   still
\noutstanding.   Now Govt.  has taken a very serious view\t for
\nthe  lapses  on\t your part.  I am,  therefore,\tdirected  to
\ninform\tyou  that if we do not receive Agency fees  together
\nwith  18%  interest and prize money by the end of  the\tnext
\nweek, we shall be constrained to stop all your lottery draws
\nwithout any further notice which may please note:\n<\/p>\n
    This  may be treated as our final reminder and we  shall
\nnot be held responsible if any thing goes wrong against you.\n<\/p>\n
\tR-39 dated 12.2.92 also reads as follows :\n<\/p>\n
In continuation of our Telegram dated
\n8.2.92, a detailed statement of Agency fee due
\nupto 31st January, 1992 is enclosed herewith:-\n<\/p>\n
1st. lot of eight lotteries –<\/p>\n
\nAgency Fee -\t\t1,09,36,924\nInterest -\t\t\t   10,64,272\n\n2nd. lot of eight lotteries -\nAgency fee -\t\t1,15,09,517\nInterest\t-\t\t     5,25,534\n\n3rd. lot of eight lotteries -\nAgency fee -\t\t    48,46,154\nInterest -\t\t\t      1,15,324\n__________\nTotal Rs. :-\t\t2,89,97,725\n\n(Rupees two crores eighty nine lakhs\n<\/pre>\n
ninety seven thousand seven hundred twenty
\nfive only).\n<\/p>\n
Please clear the dues before 25th of Feb
\n92 positively so that money could be credited
\nin time in the Govt. A\/c.\n<\/p>\n
Besides this, draw expenses of
\nRs.6,00,000\/- in respect of 3rd. lot of eight
\nlotteries may be sent expeditiously and prize
\nmoney in respect of all the 24 lotteries should
\nbe cleared immediately so that all the pending
\nclaims could be settled early in order to keep
\nthe prestige of the Sikkim State Lotteries.\n<\/p>\n
    R-45  dated\t 31.3.92 addressed to the  appellants  reads
\nthus :\n<\/p>\n
Please refer to our various letters and
\ntelegrams requesting you to settle the dues as
\nmentioned below :-\n<\/p>\n
(1)  Telegram No.452\/Fin.\/Lott. Dated 28.10.91
\n(2)  Telegram No.572\/Fin\/Lott. Dated 19\/11\/91
\n(3)  Letter No.484\/Fin\/Lott. Dated 27\/11\/91
\n(4)  Letter No.902\/Fin\/Lott. Dated 17\/1\/92
\n(5)  Telegram No.1062\/Fin\/Lott. Dated 8\/2\/92
\n(6)  Letter No.1066\/Fin\/Lott. Dated 12\/2\/91<\/p>\n
As per your requests we have given sufficient
\ntime to settle the dues but because of your failure we
\nhave been compelled to stop printings of Tickets
\nfrom 16\/4\/1992 onwards to avoid further liabilities.
\nFurther you have also failed to give assurance or
\nproper response to our various letters.\t In view of
\nyour failure to settle the huge amount of dues your
\nrequest to continue Seven Weekly Lotteries from
\n16\/4\/92 onward has not been considered by the
\nGovernment.\n<\/p>\n
The dues based on draws upto 15\/4\/92 works
\nout as under :-\n<\/p>\n
1.  Agency Fees –\tRs.3,72,87,824\/-\n<\/p>\n
2.  Interest –\t\tRs.   28,80,621\/-\n<\/p>\n
    Total\t\tRs.4,01,68,505\/-\n<\/p>\n
Besides above you have also failed to deposit
\nthe prize money from time to time as a result of
\nwhich we have not been able to settle the claim.\n<\/p>\n
I am therefore directed to give you this notice
\nto settle the entire dues before 15th April, 1992 failing
\nwhich Government will be compelled to take action
\nand also invoke the guarantees.\n<\/p>\n
    Waiver  involves a conscious, voluntary and\t intentional
\nrelinquishment\tor  abandonment of a known,  existing  legal
\nright,\tadvantage, benefit, claim or privilege, which except
\nfor  such  a  waiver,  the party would\thave  enjoyed.\t The
\nagreement  between  parties  in this case is such  that\t its
\nfulfilment depends upon the mutual performance of reciprocal
\npromises  constituting the consideration for one another and
\nthe  reciprocity  envisaged and engrafted is such  that\t one
\nparty who fails to perform his own reciprocal promise cannot
\nassert\ta claim for performance of the other party and go to
\nthe  extent of claiming even damages for non-performance  by
\nthe  other  party.  He who seeks equity must do\t equity\t and
\nwhen  the  condonation or acceptance of belated\t performance
\nwas  conditional upon the future good conduct and  adherence
\nto  the\t promises  of the defaulter,  the  so-called  waiver
\ncannot be considered to be forever and complete in itself so
\nas  to\tdeprive\t the State, in this case, of  its  power  to
\nlegitimately repudiate and refuse to perform its part on the
\nadmitted  fact that the default of the appellants  continued
\ntill  even the passing of the Award in this case.  So far as
\nthe  defaults  and  consequent entitlement or right  of\t the
\nState to have had the lotteries either foreclosed or stopped
\nfurther,  the State in order to safeguard its own stakes and
\nreputation  has\t continued the operation of  lotteries\teven
\nundergoing  the\t miseries  arising  out\t of  the  persistent
\ndefaults  of the appellants.  The same cannot be availed  of
\nby  the appellants or used as a ground by the Arbitrator  to
\nclaim  any immunity permanently for being pardoned, condoned
\nand  waived  of\t their subsequent recurring  and  persistent
\ndefaults  so  as to deny or denude forever the power of\t the
\nState  as  other party to the contract to put an end to\t the
\nagreement  and thereby relieve themselves of the misfortunes
\nthey  were  made to suffer due to such defaults.   Once\t the
\nappellants  failed  to\tdeposit the prize money\t in  advance
\nwithin the stipulated time, the time being essence since the
\nprizes\tannounced after the draw have to be paid from out of
\nonly  the  prize money deposited, the State was well  within
\nits rights to repudiate not only due to continuing wrongs or
\ndefaults  but  taking  into  account the  past\tconduct\t and
\nviolations  also despite the fact that those draws have been
\ncompleted by declaration or disbursement of prize amounts by
\nthe  State from out of its own funds.  The conclusion to the
\ncontrary that the State has committed breach of the contract
\nis nothing but sheer perversity and contradiction in terms.\n<\/p>\n
    b)\tThe  mere reference to the documents or material  on
\nrecord,\t or  a cryptic observation that all those  materials
\nhave been considered is no substitute by itself for proof of
\nsuch  positive\tconsideration,\twhich  should  otherwise  be
\napparent  from\tonly the manner of  consideration  disclosed
\nfrom the award and reasonableness of the conclusions arrived
\nat  by\tthe Arbitrator.\t That the contents of Ex.  R-52\t and
\nR-43  have  been patently misread is obvious from  the\tfact
\nthat  the  Arbitrator has merely chosen to fall back on\t the
\nword  postpone totally ignoring the following words there
\nwill  be no draw of these weekly lotteries w.e.f.  16.4.1992
\nand  onwards, taking together with the further fact that no
\nre-scheduled date on which they propose to hold the draw for
\nthe   so-called\t postponed  lotteries\thave   been   given.
\nLikewise,  Ex.C-3  another  vital  document  has  also\tbeen
\nmisconstrued  by  ignoring the vital and  relevant  portions
\ncontained  therein.   Similar instances in respect of  other
\nrelevant  documents also are rampant, as could be seen\tfrom
\nthe award, appropriately pointed out by the Chief Justice in
\nhis judgment.\n<\/p>\n
    c)\tThe  manner  in which the Arbitrator has  chosen  to
\narrive\tat  the\t quantum  of damages alleged  to  have\tbeen
\nsustained by the appellants not only demonstrates perversity
\nof  approach,  but per se proves flagrant violation  of\t the
\nprinciples  of law governing the very award of damages.\t The
\nprinciples  enshrined  in  Section 54  in  adjudicating\t the
\nquestion  of  breach  and  Section 73 of  the  Contract\t Act
\nincorporating  the  principles for the determination of\t the
\ndamages,  are  found  to have been observed  more  in  their
\nbreach.\t Despite the fact that M.K.  Subba, who had been all
\nalong  corresponding  and dealing with the matter  directly,
\nhas  without  any  justification whatsoever, not  only\tbeen
\nwithheld  from the witness box but despite the oral evidence
\nof  RW-1, facts which could only be denied or proved by M.K.
\nSubba  have  been  taken  for  granted.\t  No  one  from\t the
\nappellants side who could speak for as to what is the usual
\ncourse\tof things in lotteries was examined and no  material
\nabout  similar\tlotteries making consistent profit at  7.51%
\nthroughout all years regardless even of stoppage of lots and
\nabsence\t of  sale  of  all the tickets\tand  other  relevant
\nfactors\t highlighted  in the course of cross examination  of
\nCW-1  and  CW-2\t were  produced to prove  the  profit  range
\nclaimed.    Merely   relying  upon   CW-1,   the   Chartered
\nAccountant,  who,  admittedly,\twas unaware  of\t the  actual
\nfunctioning  of the business and who had not looked into  or
\nshown  any accounts, records or was in the knowledge of\t the
\nstate  of  affairs of the lottery business in question,\t the
\nArbitrator  appears  to have relied upon  some\thypothetical
\ncalculations  worked out on mere surmises and conjectures as
\nthough\tit  constituted substantive evidence even  in  utter
\ndisregard of the specific admissions contained in the letter
\nof  the\t appellants marked as R-46, against the very  claims
\nnow put forward on behalf of the appellants.  The Award also
\nsuffers from obvious and patent errors of law in calculating
\ndamages\t on the footing that all the lotteries continued for
\ntheir full term, ignoring the real facts.\n<\/p>\n
d) Clause 2 of the Agreement reads as follows:-\n<\/p>\n
    2.\t Except\t on  the  detection   of  the  default\t or
\nfraudulent conduct in lotteries or of any act of malfeasance
\nor  misfeasance\t on the part of the Organising\tAgents,\t the
\nGovernment  shall  not\trescind or  modify  this  agreement.
\nProvided  that\tthe  Organising\t Agents shall  be  given  an
\nopportunity  of\t being heard in person before  any  decision
\nregarding rescission or modification is taken.\n<\/p>\n
    Even a cursory reading of the clause would show that the
\nArbitrator  has\t adopted a narrow, pedantic  and  perfidious
\nconstruction  of  the clause not only doing violence to\t the
\nlanguage but defeating the very object of introducing such a
\nclause\treducing  it to a mere dead letter by  holding\tthat
\napparent,  obvious and admitted defaults of the nature\twill
\nnot  fall within the said clause, but instead only  defaults
\nwhich  are  and\t could\tbe  found  out\tor  unearthed  after
\ndetection  alone  would\t answer\t  the  situation   envisaged
\ntherein.  By such construction, the Arbitrator has chosen to
\ndeny  the powers of the State to put an end to the  contract
\non  account  of\t the defaults of the  appellants,  which  as
\nobserved by the Arbitrator himself could have under general
\nlaw  of\t the  contract provided grounds for  the  respondent
\n(meaning  thereby  the\tState) to terminate  the  contract.
\nThis misconstruction and misdirection alone is sufficient to
\nscrap the Award of the Arbitrator.\n<\/p>\n
    e)\tThe Award of an Arbitrator cannot be opposed to\t law
\nand what is not permissible in law cannot be granted or even
\napproved  by Courts merely because it was an Arbitrator\t who
\ngranted\t it.   Section 54 of the Contract Act is a  complete
\nanswer\tto  the claim at the instance of the appellants\t for
\neither\tperformance of the contract or for asserting a claim
\nfor  compensation\/damages  for the  alleged  non-performance
\narising\t out  of repudiation by the State.   The  Arbitrator
\ncould  not  have been oblivious of the fact that it was\t the
\ndefaults,   violations\tand  breaches\tcommitted   by\t the
\nappellants that necessitated the termination of the contract
\nby  the\t State,\t left with no other option for it,  in\tlaw.
\nEven  a\t cursory  reading of the Award in the light  of\t the
\nmaterials  on record, as rightly pointed out in the judgment
\nof  Chief Justice Bhargava, with particular reference to the
\nindisputable   facts   disclosed  on   the  basis   of\t the
\ncorrespondence\tbetween\t parties  would\t  disclose  that  no
\nreasonable   or\t prudent  person   could  have\tever  either
\nreasonably,  fairly  or justly arrived at such\tfindings  as
\nhave  been  recorded by the Arbitrator in this case  by\t any
\nknown  or proclaimed process of consideration and  judicious
\nreasoning.  The errors which could be noticed in the form of
\nobvious and conspicuous mistake of facts vital and essential
\naspects\t  and  misapplication  of  law\t are  found  to\t  so
\nextensively  and  deeply  pervade  the\tentire\tadjudicatory
\nprocess\t undertaken  by\t the  Arbitrator  as  to  render  it
\nimpossible to save the Award except at the expense rendering
\nthe   ends  of\tjustice,  a   casualty.\t  It  would  be\t  no
\nexaggeration or meaning any disrespect to place on record as
\nto  how\t appropriately\tthe following observations  of\tLord
\nHalsbury, L.C.\tin Andrews Vs.\tMitchell (1904-7 All E R 599
\nat  600 E) fits in with the manner of disposal given by\t the
\nArbitrator :\n<\/p>\n
    I should be anxious myself, as I have no doubt that all
\nyour  Lordships\t would\tbe, to give every  effect  to  their
\ndecisions.   On\t the other hand, there are  some  principles
\nwhich it is impossible to disregard, and, after giving every
\ncredit\tto the desire on the part of this arbitration  court
\nto  do justice, I think it manifest that they proceeded\t far
\ntoo  hastily in this case;  and without imputing to them any
\nprejudice  or any desire to do wrong, I think that the\tmode
\nin  which the whole question was raised and was disposed of,
\nwas  so\t slipshod  and\tirregular  that\t it  might  lead  to
\ninjustice.\n<\/p>\n
    Consequently,  we  have no hesitation to set  aside\t the
\nAward  of the Arbitrator, as affirmed by the District Judge,
\ninsofar\t as  it\t purports to award damages to  the  tune  of
\nRs.37,75,00,000\/-  in  favour of the appellants,  as  wholly
\nuncalled for and illegal.\n<\/p>\n
    On behalf of the State of Sikkim, a strong plea has been
\nmade  in pursuit of its counter-claim by contending that  it
\nis always permissible for this Court to set aside the bad or
\nvitiating  part of the Award and retain and affirm the valid
\nportion,  alone and, therefore, the Award to that extent may
\nbe  allowed  to stand and the same be made a rule of  Court.
\nNo  doubt this Court in M.  Chelamayya Vs.  M.\tVenkataraman
\n(AIR  1972 SC 1121);  Upper Ganges Valley Electricity Supply
\nCo.   Ltd.   Vs.  U.P.\tElectiricty Board (1973(3) SCR\t107)
\nand  Union  of\tIndia Vs.  M\/s Jain Associates &  Anr.\t (JT
\n1994(3)\t SC 303) has held so.  The Arbitrator has allowed  a
\nsum  of\t Rs.5,39,15,531\/- in favour of the State  and  after
\nadjusting  against  the same, the sum admittedly due to\t the
\nappellants,    the   counter-claim   to\t   the\t  tune\t  of
\nRs.4,61,35,242\/-  was  awarded to them.\t The  various  facts
\nadverted  to supra would go to show that though the  initial
\ndefault\t   was\t committed   by\t   the\t  appellants,\t the
\nrespondent-State  was also not adhering strictly to the time
\nschedule  and other stipulations contained in the agreement.
\nThe  lotteries agreed to be run through the appellants\thave
\nsince  been  closed,  once  and for  all.   Due\t to  certain
\nsupervening  difficulties  said to have been encountered  by
\nthe  appellants, their business adventure did not proceed on
\nthe  expected lines and it is not also the case of the State
\nthat  the appellants have made any undue profit or  enriched
\nthemselves  at\tthe  expense  of   the\tState.\t We   cannot
\ncompletely  ignore the fact that the initial preparations to
\nfloat  and  publicise  the scheme of lotteries\tin  question
\ninvolving considerable expenditure did not bring to them the
\nexpected returns, on account of the premature termination of
\nthe Agency agreement and the encashment and appropriation of
\nthe  bank guarantees.  The appellants could not have  reaped
\nthe  full benefit of those business ventures.  There seem to
\nbe  no\tproper rendition of accounts at the proper time\t and
\nthe  finalisation came only at a much later stage.   Keeping
\nin  view  all  these  practicalities and  realities  of\t the
\nsituation,  we\tare  convinced, on the\tpeculiar  facts\t and
\ncircumstances  of  this\t case,\tthat  equities\thave  to  be
\nproperly worked out between parties to ensure that no one is
\nallowed\t to  have their pound of flesh unjustly against\t the
\nother.\t Since\tthis  Court  has   chosen  to  take  up\t for
\nconsideration  the  merits of the claims of  the  respective
\nparties\t in these appeals filed by the appellants, in  order
\nto do substantial justice between parties in exercise of its
\npowers\tunder  Article 142 of the Constitution of India,  we
\nconsider  it not only appropriate but just and necessary  as
\nwell,  on an overall consideration of the matter, to  reject
\nthe counter-claim made by the State.\n<\/p>\n
    The\t challenge  to\tthe orders of the High\tCourt  dated
\n11.8.96\t fails\tand shall stand rejected.  Consequently,  we
\nset  aside  the Award of the Arbitrator, as affirmed by\t the
\nlearned\t District  Judge.   The judgment of the\t High  Court
\nrendered  on  29.9.1995 shall stand  modified,\taccordingly.
\nThe  appeals  shall stand finally disposed of on  the  above
\nterms.\tThe parties will bear their respective costs.
\nL…I…T…….T…….T…….T…….T…….T…….T..J<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India M\/S Sikkim Subba Associates vs State Of Sikkim on 1 May, 2001 Author: Raju Bench: Cji, R.C. Lahoti, Doraiswamy Raju CASE NO.: Appeal (civil) 2789-2790 of 1997 PETITIONER: M\/S SIKKIM SUBBA ASSOCIATES Vs. RESPONDENT: STATE OF SIKKIM DATE OF JUDGMENT: 01\/05\/2001 BENCH: CJI, R.C. Lahoti & Doraiswamy Raju JUDGMENT: RAJU, 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-153759","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nM\/S Sikkim Subba Associates vs State Of Sikkim on 1 May, 2001 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/ms-sikkim-subba-associates-vs-state-of-sikkim-on-1-may-2001\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"M\/S Sikkim Subba Associates vs State Of Sikkim on 1 May, 2001 - 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