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Friday, September 19, 2014

Arbitration - clause 70 of General conditions of contract - the term "FINDING" - interpretation - High court set aside the award of arbitrator due non-speaking order - D.B. confirmed the same - Apex court held that The expression ‘finding’ appearing in Clause 70, therefore, needs to be so construed as to promote that object and include within it not only the ultimate conclusion which the Arbitrator arrives at but also the process of reasoning by which he does so. Clause 70 could not, in our opinion, have meant to be only a wooden or lifeless formality of indicating whether the claim is accepted or rejected.and further held thatIn Build India Construction System (supra) this Court noted in no uncertain terms that the validity of the award had not been specifically questioned on the ground of its having been given in breach of any obligation of the Arbitrator to give reasons as spelled out by the arbitration clause The plea regarding the Award being non-speaking was raised for the first time before the Division bench in appeal. This Court in that backdrop held that the Division Bench fell in error in entertaining and upholding such a plea at such a late stage and held that Build India Construction System (supra) as an authority for the proposition that Clause 70 of the General Conditions of the Contract did not oblige the Arbitrator to record reasons. The decision must, therefore, remain confined to the facts of that case only and declared that Gora Lal’s case only holds the filed and dismissed the appeal =CIVIL APPEAL NO.76 OF 2009 M/s Anand Brothers P. Ltd. TR. M.D. …Appellant Versus Union of India & Ors. …Respondents = 2014 - Sept.Month - http://judis.nic.in/supremecourt/filename=41879

Arbitration - clause 70 of General conditions of contract - the term "FINDING" - interpretation - High court set aside the award of arbitrator due non-speaking order - D.B. confirmed the same - Apex court held that The expression ‘finding’ appearing in Clause  70,  therefore,  needs  to  be  so
construed as to promote that object and  include  within  it  not  only  the ultimate conclusion which the Arbitrator arrives at but also the process  of reasoning by which he does so. Clause 70 could not,  in  our  opinion,  have meant to be only a wooden or lifeless formality of  indicating  whether  the claim is accepted or  rejected.and further held that In  Build India Construction System (supra) this Court noted  in  no  uncertain  terms that the validity of the award had not been specifically questioned  on  the ground of its  having  been  given  in  breach  of  any  obligation  of  the Arbitrator to give reasons as spelled out by  the  arbitration  clause
The plea regarding the Award being non-speaking was raised for the first time before the Division bench in  appeal. This Court in that backdrop held that the Division Bench fell  in  error  in entertaining and upholding such a plea at such a  late  stage and held that Build India Construction System (supra) as an authority for the  proposition that Clause 70 of the General Conditions of the Contract did not oblige  the Arbitrator to record reasons. The decision must, therefore, remain  confined to the facts of that case only and declared that Gora  Lal’s  case only holds the filed and dismissed the appeal =

upon  the
decisions of this Court in M/s Daffadar Bhagat Singh and Sons v.  Income-tax
officer, A Ward, Ferozepur (AIR 1969 SC  340),  Bhanji  Bhadgwandas  v.  The
Commissioner of Income-tax, Madras (AIR 1968 SC 139 and Rajinder  Nath  etc.
v. Commissioner of Income-tax, Delhi (AIR 1979 SC 1933)
 the High Court  held
that the  expression  “finding”  appearing  in  Clause  70  of  the  General
Conditions of Contract implies something more than the mere recording  of  a
conclusion by the Arbitrator.
Inasmuch as the Arbitrator had  failed  to  do
so, the award rendered by him was unsustainable.
The High Court  accordingly
set aside the award and remitted the matter back to  the  Arbitrator  for  a
fresh determination of the disputes between the parties. =

An appeal  was  then  preferred  by  the  appellant-company  before  a
Division Bench of the High Court who  relying  upon  the  decision  of  this
Court in Gora Lal v. Union of India (2003) 12  SCC  459  affirmed  the  view
taken  by  the  learned  Single  Judge.  Dissatisfied,  the  appellant   has
approached this Court by special leave =
the  Court  noticed  a
divergence in the decision  rendered  by  this  Court  in  Gora  Lal’s  case
(supra) and that rendered in Build India Construction  System  v.  Union  of
India (2002) 5 SCC 433. The matter was,  therefore,  referred  to  a  larger
Bench to resolve the conflict.=

 Clause 70 of the General Conditions of  Contract  to  the  extent  the
same is relevant for our purposes, is to the following effect:


“…………The Arbitrator shall give his award within a period of six months  from
the date of his entering on his reference or within  the  extended  time  as
the case may be on all matters  referred  to  him  and  shall  indicate  his
findings, along with sums awarded, separately on  each  individual  item  of
dispute.”
=
There is  no  gainsaying  that  Clause  70
makes a clear distinction  between  findings  on  each  individual  item  of
dispute on the one hand and the sum, if any, awarded in regard to  the  same
on the other.
That the Arbitrator had made his award in regard to each  item
of dispute raised by the appellant before it, is evident from a  reading  of
the award.
The question is whether the Arbitrator had recorded his  findings
on each such items.
The High  Court  has,  as  noted  above,  answered  that
question in  the  negative;  and  set  aside  the  award  holding  that  the
expression ‘findings’ must include the reasons for the  ultimate  conclusion
arrived at by the Arbitrator. =

 The
expression ‘finding’ appearing in Clause  70,  therefore,  needs  to  be  so
construed as to promote that object and  include  within  it  not  only  the
ultimate conclusion which the Arbitrator arrives at but also the process  of
reasoning by which he does so. Clause 70 could not,  in  our  opinion,  have
meant to be only a wooden or lifeless formality of  indicating  whether  the
claim is accepted or  rejected. 
 We are  in
respectful agreement with the view taken by this Court in  Gora  Lal’s  case
(supra) when it said:

“The point for determination in this case is:
whether the  arbitrator  ought
to have given reasons in support  of  his  findings,  along  with  the  sums
awarded, on each item of dispute.
To decide this point, we  have  to  go  by
the text and the context of clause 70 of the  arbitration  agreement  quoted
above.
Under the said clause, the arbitrator was required to  identify  each
individual item of dispute and give his findings thereon along with the  sum
awarded. In this context, one has to  read  the  word  “findings”  with  the
expression “on each item of dispute” and if so read it  is  clear  that  the
word “finding” denotes “reasons” in support of the said conclusion  on  each
item of dispute.
The word “finding” has been defined in “Words and  Phrases,
Permanent Edn., 17, West Publishing Co.” to mean “an ascertainment of  facts
and the result of investigations”. Applying the above test to clause 70,  we
are of the view that the arbitrator was required to give reasons in  support
of his findings on the items of dispute along  with  the  sums  awarded.
We
make it clear that this order is confined to the facts of this case and  our
interpretation is confined to clause 70  of  the  arbitration  agreement  in
this case.”=
 In the case at hand the Arbitrator’s award was admittedly  unsupported
by any reason,  no  matter  the  Arbitrator  had  in  the  column  captioned
‘findings’  made  comments  like  ‘sustained’,  ‘partly   sustained’,   ‘not
sustained’. The High Court was, therefore, justified in  setting  aside  the
award made by the Arbitrator and remitting the matter to him for  making  of
a fresh award. =
 In  Build
India Construction System (supra) this Court noted  in  no  uncertain  terms
that the validity of the award had not been specifically questioned  on  the
ground of its  having  been  given  in  breach  of  any  obligation  of  the
Arbitrator to give reasons as spelled out by  the  arbitration  clause
The plea regarding the Award being non-
speaking was raised for the first time before the Division bench in  appeal.
This Court in that backdrop held that the Division Bench fell  in  error  in
entertaining and upholding such a plea at such a  late  stage.   This  Court
said:

“11. There are several other factors which  preclude  the  respondents  from
urging such a  plea.  The  reference  to  arbitrator  does  not  suggest  an
obligation having been cast on  the  arbitrator  to  give  reasons  for  the
award. Such a plea, as has been urged in this Court, was not  taken  by  the
respondents before the arbitrator. Even  in  the  objections  filed  in  the
Court, the validity of the award has not  been  specifically  questioned  on
the ground of its having been given in  breach  of  any  obligation  of  the
arbitrator to give reasons as spelled out by  the  arbitration  clause.  The
judgment of the learned Single Judge does not show such a plea  having  been
urged before him. In the objection petition, there is a  vague  and  general
plea raised that rejecting the claims forming the subject-matter  of  cross-
objection and allowing the claim of  the  appellant  without  assigning  any
reason was bad.  Such  an  omnibus  and  general  plea  cannot  be  read  as
submitting that  the  amendment  dated  4-9-1986  applied  to  the  contract
between the parties and that in view of the amended arbitration  clause  the
unreasoned award was bad. It appears that the plea was for  the  first  time
raised at the appellate stage before the Division Bench of the  High  Court.
Unwittingly the Division Bench fell into the error of  entertaining  such  a
plea and disposing of the appeal by upholding the same though the  plea  was
not even available to the respondents to be raised at that stage.”


18.   It is, in the light of  the  above  observations,  difficult  to  read
Build India Construction System (supra) as an authority for the  proposition
that Clause 70 of the General Conditions of the Contract did not oblige  the
Arbitrator to record reasons. The decision must, therefore, remain  confined
to the facts of that case only.=

In the result this appeal fails and is hereby dismissed. We,  however,
make it clear that consequent upon the orders passed by the High  Court  the
Arbitrator shall conclude the proceedings in terms of the provisions of  the
Arbitration Act of 1940 expeditiously. We further  make  it  clear  that  in
case the Arbitrator already nominated is for any reason unable  to  take  up
the assignment the respondents shall within six weeks from today  appoint  a
substitute Arbitrator who shall then enter upon the reference  and  conclude
the     proceedings     as     early     as     possible.     No      costs.

2014 - Sept.Month - http://judis.nic.in/supremecourt/filename=41879

                                                                  REPORTABLE

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION
                         CIVIL APPEAL NO.76 OF 2009


M/s Anand Brothers P. Ltd.
TR. M.D.                                           …Appellant

Versus

Union of India & Ors.                        …Respondents




                               J U D G M E N T

T.S. THAKUR, J.

1.    A non-speaking arbitral award in favour of the  appellant-company  was
set aside by a learned Single Judge of  the  High  Court  of  Delhi  on  the
ground that the Arbitrator had  not  recorded  his  “findings”  as  required
under Clause 70 of the General Conditions  of  Contract.  Relying  upon  the
decisions of this Court in M/s Daffadar Bhagat Singh and Sons v.  Income-tax
officer, A Ward, Ferozepur (AIR 1969 SC  340),  Bhanji  Bhadgwandas  v.  The
Commissioner of Income-tax, Madras (AIR 1968 SC 139 and Rajinder  Nath  etc.
v. Commissioner of Income-tax, Delhi (AIR 1979 SC 1933) the High Court  held
that the  expression  “finding”  appearing  in  Clause  70  of  the  General
Conditions of Contract implies something more than the mere recording  of  a
conclusion by the Arbitrator. Inasmuch as the Arbitrator had  failed  to  do
so, the award rendered by him was unsustainable. The High Court  accordingly
set aside the award and remitted the matter back to  the  Arbitrator  for  a
fresh determination of the disputes between the parties.



2.    An appeal  was  then  preferred  by  the  appellant-company  before  a
Division Bench of the High Court who  relying  upon  the  decision  of  this
Court in Gora Lal v. Union of India (2003) 12  SCC  459  affirmed  the  view
taken  by  the  learned  Single  Judge.  Dissatisfied,  the  appellant   has
approached this Court by special leave.



3.    When the matter initially came  up  before  a  Bench  comprising  R.V.
Raveendran and J.M. Panchal, JJ. on 5th January, 2009 the  Court  noticed  a
divergence in the decision  rendered  by  this  Court  in  Gora  Lal’s  case
(supra) and that rendered in Build India Construction  System  v.  Union  of
India (2002) 5 SCC 433. The matter was,  therefore,  referred  to  a  larger
Bench to resolve the conflict. That is precisely how this  appeal  has  been
listed before us.



4.    Clause 70 of the General Conditions of  Contract  to  the  extent  the
same is relevant for our purposes, is to the following effect:


“…………The Arbitrator shall give his award within a period of six months  from
the date of his entering on his reference or within  the  extended  time  as
the case may be on all matters  referred  to  him  and  shall  indicate  his
findings, along with sums awarded, separately on  each  individual  item  of
dispute.”



5.    A plain reading of the  above  would  show  that  the  Arbitrator  was
required to (i) give his award within  the  stipulated  period  as  extended
from time to time. (ii) the Award must be on “all matter  referred  to  him”
(iii) the Award must indicate the findings  of  the  Arbitrator  along  with
sums, if any, awarded (iv) the findings and award of sums  if  any  must  be
separate on each item of dispute. There is  no  gainsaying  that  Clause  70
makes a clear distinction  between  findings  on  each  individual  item  of
dispute on the one hand and the sum, if any, awarded in regard to  the  same
on the other. That the Arbitrator had made his award in regard to each  item
of dispute raised by the appellant before it, is evident from a  reading  of
the award. The question is whether the Arbitrator had recorded his  findings
on each such items. The High  Court  has,  as  noted  above,  answered  that
question in  the  negative;  and  set  aside  the  award  holding  that  the
expression ‘findings’ must include the reasons for the  ultimate  conclusion
arrived at by the Arbitrator. That view was assailed by learned counsel  for
the appellant who contended that the expression ‘findings’ should not  imply
the process of  reasoning  adopted  by  the  Arbitrator  for  recording  his
conclusions. A finding howsoever cryptic would, according to the  submission
of the learned counsel for the appellant, satisfy the requirement of  Clause
70 for otherwise the Clause would have been  differently  worded  so  as  to
make it mandatory for the Arbitrator to  make  what  is  called  a  speaking
award giving reasons for the conclusions arrived at by him.



6.    On behalf of the respondent it was  per  contra  argued  by  Mr.  P.S.
Patwalia and Mr. J.S. Attri, learned senior counsel that  the  question  was
no longer res-integra having been  addressed  in  Gora  Lal’s  case  (supra)
where this Court held that the expression “finding on each  individual  item
of dispute” clearly meant that reason in support of the findings  must  also
be recorded by the Arbitrator. It was contended  that  a  finding  which  is
unsupported by any reason is no finding in the eye of law.



7.    Before we  examine  whether  the  expression  ‘finding’  appearing  in
Clause 70 would include reasons in support of the conclusion  drawn  by  the
arbitrator, we consider it appropriate to refer to  the  Constitution  Bench
decision of this Court in Raipur  Development  Authority  v.  M/s  Chokhamal
Contractors etc (1989) 2 SCC 721 where this Court was examining  whether  an
award without giving reasons can be remitted or set aside by  the  Court  in
the absence of any  stipulation  in  the  arbitral  agreement  obliging  the
arbitrator to record his reasons. Answering the question  in  the  negative,
this Court held that a non-speaking award cannot  be  set  aside  except  in
cases where the parties stipulate that the arbitrator shall furnish  reasons
for his award. This Court held :


“33…… When the parties to the dispute insist upon reasons being  given,  the
arbitrator is, as already observed earlier, under an obligation[pic]to  give
reasons. But there may be many arbitrations in which parties to the  dispute
may not relish the  disclosure  of  the  reasons  for  the  awards.  In  the
circumstances and particularly having regard to the  various  reasons  given
by the Indian Law Commission for  not  recommending  to  the  Government  to
introduce an amendment in the Act requiring the arbitrators to give  reasons
for their awards we feel that it may not be appropriate  to  take  the  view
that all awards which do not contain reasons should either  be  remitted  or
set aside…..”


[

8.    Having said that,  this  Court  declared  that  Government  and  their
instrumentalities should - as a matter of policy and public  interest  -  if
not as a compulsion  of  law,  ensure  that  whenever  they  enter  into  an
agreement for resolution of disputes by way  of  private  arbitrations,  the
requirement of speaking awards is  expressly  stipulated  and  ensured.  Any
laxity in that behalf might lend itself and perhaps justify  the  legitimate
criticism that government failed to provide against  possible  prejudice  to
public interest.  The following passage is in this regard apposite:

“There is, however, one  aspect  of  non-speaking  awards  in  non-statutory
arbitrations to which Government and governmental  authorities  are  parties
that compel attention. The trappings of a  body  which  discharges  judicial
functions and  is  required  to  act  in  accordance  with  law  with  their
concomitant obligations for reasoned  decisions,  are  not  attracted  to  a
private adjudication of the nature of arbitration as the latter, as we  have
noticed earlier, is not supposed to exert  the  State’s  sovereign  judicial
power. But arbitral awards in [pic]disputes  to  which  the  State  and  its
instrumentalities are parties affect public interest and the matter  of  the
manner in which Government and its instrumentalities  allow  their  interest
to be affected by such arbitral adjudications involve  larger  questions  of
policy and public interest.  Government  and  its  instrumentalities  cannot
simply allow large financial interests of  the  State  to  be  prejudicially
affected by non-reviewable — except  in  the  limited  way  allowed  by  the
statute — non-speaking arbitral awards. Indeed, this branch  of  the  system
of dispute resolution has, of late, acquired a certain degree  of  notoriety
by the manner in which in many cases the financial interests  of  Government
have come to suffer by awards which have raised eyebrows  by  doubts  as  to
their rectitude and propriety. It will not be  justifiable  for  Governments
or their instrumentalities to enter into  arbitration  agreements  which  do
not expressly stipulate the  rendering  of  reasoned  and  speaking  awards.
Governments and their instrumentalities should, as a matter  of  policy  and
public interest — if not as a compulsion of law — ensure that wherever  they
enter into agreements for  resolution  of  disputes  by  resort  to  private
arbitrations, the requirement of speaking  awards  is  expressly  stipulated
and ensured. It is for Governments and their instrumentalities to ensure  in
future this  requirement  as  a  matter  of  policy  in  the  larger  public
interest. Any lapse  in  that  behalf  might  lend  itself  to  and  perhaps
justify, the legitimate criticism that Government failed to provide  against
possible prejudice to public interest.”




9.    Reference may also be made to The Arbitration  and  Conciliation  Act,
1996 which has repealed the Arbitration Act  of  1940  and  which  seeks  to
achieve the twin objectives  of  obliging  the  Arbitral  Tribunal  to  give
reasons for its arbitral award and reducing the supervisory role  of  Courts
in arbitration proceedings. Section  31(3)  of  the  said  Act  obliges  the
arbitral tribunal to state the reasons upon which it  is  based  unless  the
parties have agreed that no reasons be given or the arbitral award is  based
on consent of the parties.  There is, therefore, a  paradigm  shift  in  the
legal position under the new Act which prescribes a uniform requirement  for
the arbitrators to give reasons  except  in  the  two  situations  mentioned
above.  The  change  in  the  legal  approach  towards  arbitration  as   an
Alternative Dispute Resolution Mechanism is perceptible both  in  regard  to
the requirement of giving reasons and  the  scope  of  interference  by  the
Court with arbitral  awards.  While  in  regard  to  requirement  of  giving
reasons the law has brought in dimensions not found under the old  Act,  the
scope of interference appears to be shrinking in its  amplitude,  no  matter
judicial pronouncements  at  time  appear  to  be  heading  towards  a  more
expansive approach, that may appear to some  to  be  opening  up  areas  for
judicial review on newer grounds falling under the caption  “Public  Policy”
appearing in Section 34 of the Act.  We are referring to these  developments
for it is one of the well known canons of  interpretation  of  statues  that
when an earlier enactment is truly ambiguous in that it is equally  open  to
diverse meanings, the later enactment may in certain circumstances serve  as
the parliamentary exposition of the former. (See: Ram  Kishan  Ram  Nath  v.
Janpad Sabha AIR 1962 SC 1073  and  Ghanshyam  Dass  v.  Dominion  of  India
(1984) 3 SCC 46 at 58).

10.   In Jogendra Nath v. Commissioner of Income Tax AIR 1969 SC 1089,  this
Court held that subsequent legislation on the same  subject  may  be  looked
into with a view to giving  a  proper  exposition  of  a  provision  of  the
earlier Act.  Borrowing the principle from the above  pronouncements  it  is
reasonable to hold that the obligation cast upon the arbitrator in terms  of
Clause 70 in the case at hand ought to be understood in  the  light  of  not
only the exposition of law by this Court in  Chokhamal’s  case  (supra)  but
also in the light of the statutory prescription that now mandates  recording
of reasons by the  Arbitrator.   The  judicial  climate  in  which  arbitral
awards are being made and viewed also  lends  itself  to  an  interpretation
that would make it obligatory  for  the  Arbitrator  to  record  reasons  in
support of the findings recorded by him.



11.   Let  us  in  the  above  backdrop  examine  the  textual  meaning  and
contextual significance of the expression ‘finding’ appearing in Clause  70.
The expression has  not  been  defined  either  in  the  agreement  executed
between the parties or in  any  statute  for  that  matter.  The  expression
shall, therefore, have to be  given  its  ordinary  literal  meaning  having
regard to the context in which the same is used.  A  textual  interpretation
that matches the contextual is known to be the best. The principle  is  well
settled but the decision of this Court in Reserve Bank of India v.  Peerless
General Finance and Investment Co. Ltd.  And  Ors.  (1987)  1  SCC  424  has
sounded a timely reminder of the same when it said:



 “Interpretation must depend on the text  and  the  context.  They  are  the
bases of interpretation.  One may well say  if  the  text  is  the  texture,
context is what  gives  the  colour.   Neither  can  be  ignored.  Both  are
important.   That  interpretation  is   best   which   makes   the   textual
interpretation match the contextual.  A statute is best interpreted when  we
know why it was enacted.  With this knowledge, the  statute  must  be  read,
first as a whole and then section by section, clause by  clause,  phrase  by
phrase and word by word.  If a statute is looked at, in the context  of  its
enactment, with the glasses of the statute-maker, provided by such  context,
its scheme, the sections, clauses, phrases and words  may  take  colour  and
appear different than when the statute is  looked  at  without  the  glasses
provided by the context. With these glasses we must look at  the  Act  as  a
whole and discover what each section, each  clause,  each  phrase  and  each
word is meant and designed to say as to fit into the scheme  of  the  entire
Act.  No part of a statute and no word of a  statute  can  be  construed  in
isolation. Statutes have to be construed so that every word has a place  and
everything is in its place.  It is by looking at the definition as  a  whole
in the setting of the entire Act and  by  reference  to  what  preceded  the
enactment and the reasons for it that the  court  construed  the  expression
‘Prize Chit’ in Srinivasa (1980) 4 SCC 507 and we find no reason  to  depart
from the court’s construction.”





12.   Keeping the above in view, we may turn to the Oxford Dictionary  which
gives the following meaning to the word ‘finding’:

“the conclusion reached by judicial or other inquiry”.

Black’s Law Dictionary defines ‘find’ and ‘finding of fact’ thus:

“find - to determine a fact in dispute by verdict or decision.

and,

finding of fact: A determination by a judge, jury, or administrative  agency
of a fact supported by the evidence in the record, usually presented at  the
trial or hearing.”



      Webster Comprehensive Dictionary defines the expression  ‘finding’  as
under:

“the act of finding; that which is found; discovery; 2.  Law   A  conclusion
arrived at before an official or a court. 3 Support; expense.”



P. Ramanathan  Aiyar’s  Law  Lexicon  (Second  Ed.)  assigns  the  following
meaning to the term “finding”:

“The decision of a judge, arbitrator, jury, or referee.”





It further explains the term thus:

“A term used by the profession and by the courts as meaning the decision  of
a trial court upon disputed facts.”



13.    It  is  evident  from  the  above  that  English  language  and   law
dictionaries and the Law Lexicons give  a  wide  range  of  meaning  to  the
expression ‘finding’.  The predominant use of the expression is in  relation
to determination by a Judge, Jury, Administrative Agency,  Arbitrator  or  a
Referee. The determination is described either as  a  finding,  decision  or
conclusion; upon disputed facts.  It is also described  as  a  determination
of a fact supported by evidence on the record. It  is  interchangeably  used
as a conclusion or decision a term used  by  the  legal  profession  and  by
Courts. The term “conclusion” is in turn defined by Black’s  Law  Dictionary
as under:

“The final part of  a  speech  or  writing  (such  as  jury  argument  or  a
pleading);

a judgment arrived at by reasoning;

an inferential statement;

the closing, settling, or final  arranging  of  a  treaty,  contract,  deal,
etc.”





14.   It is trite that a finding can  be  both;  a  finding  of  fact  or  a
finding of law.  It may even be a finding on a mixed  question  of  law  and
fact.  In the case of a finding on a  legal  issue  the  Arbitrator  may  on
facts that are proved or admitted explore  his  options  and  lay  bare  the
process by which he arrives at any  such  finding.   It  is  only  when  the
conclusion is supported by reasons  on  which  it  is  based  that  one  can
logically describe the process as tantamount to recording a finding.  It  is
immaterial whether the reasons given in support of the conclusion are  sound
or erroneous. That is  because  a  conclusion  supported  by  reasons  would
constitute a “finding” no matter the conclusion or the  reasons  in  support
of the same may themselves be erroneous on facts or in law.  It may then  be
an erroneous finding but  it  would  nonetheless  be  a  finding.   What  is
important is that a finding presupposes application of mind. Application  of
mind is best demonstrated by disclosure of the mind; mind in  turn  is  best
disclosed by recording reasons. That  is  the  soul  of  every  adjudicatory
process which affects the rights of the parties.  This is true also  in  the
case of a finding of fact  where  too  the  process  of  reasoning  must  be
disclosed in order that it is  accepted  as  a  finding  in  the  sense  the
expression is used in Clause 70.

15.   The above exposition matches even  the  contextual  interpretation  of
Clause 70 which provides a mechanism for adjudication  of  disputes  between
the parties and not only requires the Arbitrator to indicate the  amount  he
is awarding in regard to each item of claim but also the “findings  on  each
one of such items”. The underlying purpose of making  such  a  provision  in
the arbitration clause governing the parties, obviously was to  ensure  that
the Arbitrator while adjudicating upon the disputes as  a  Judge  chosen  by
the parties gives reasons for the conclusions that he  may  arrive  at.  The
expression ‘finding’ appearing in Clause  70,  therefore,  needs  to  be  so
construed as to promote that object and  include  within  it  not  only  the
ultimate conclusion which the Arbitrator arrives at but also the process  of
reasoning by which he does so. Clause 70 could not,  in  our  opinion,  have
meant to be only a wooden or lifeless formality of  indicating  whether  the
claim is accepted or  rejected.  Any  such  statement  would  have  made  no
qualitative addition to the adjudication of the  claim  for  the  arbitrator
would award a sum of money but withhold the reasons for the same. We are  in
respectful agreement with the view taken by this Court in  Gora  Lal’s  case
(supra) when it said:

“The point for determination in this case is: whether the  arbitrator  ought
to have given reasons in support  of  his  findings,  along  with  the  sums
awarded, on each item of dispute. To decide this point, we  have  to  go  by
the text and the context of clause 70 of the  arbitration  agreement  quoted
above. Under the said clause, the arbitrator was required to  identify  each
individual item of dispute and give his findings thereon along with the  sum
awarded. In this context, one has to  read  the  word  “findings”  with  the
expression “on each item of dispute” and if so read it  is  clear  that  the
word “finding” denotes “reasons” in support of the said conclusion  on  each
item of dispute. The word “finding” has been defined in “Words and  Phrases,
Permanent Edn., 17, West Publishing Co.” to mean “an ascertainment of  facts
and the result of investigations”. Applying the above test to clause 70,  we
are of the view that the arbitrator was required to give reasons in  support
of his findings on the items of dispute along  with  the  sums  awarded.  We
make it clear that this order is confined to the facts of this case and  our
interpretation is confined to clause 70  of  the  arbitration  agreement  in
this case.”


16.   In the case at hand the Arbitrator’s award was admittedly  unsupported
by any reason,  no  matter  the  Arbitrator  had  in  the  column  captioned
‘findings’  made  comments  like  ‘sustained’,  ‘partly   sustained’,   ‘not
sustained’. The High Court was, therefore, justified in  setting  aside  the
award made by the Arbitrator and remitting the matter to him for  making  of
a fresh award.

17.   That  brings  us  to  the  decision  of  this  Court  in  Build  India
Construction System (supra) which was relied upon to canvass that it  stated
a proposition contrary to that stated in Gora Lal’s case (supra).  In  Build
India Construction System (supra) this Court noted  in  no  uncertain  terms
that the validity of the award had not been specifically questioned  on  the
ground of its  having  been  given  in  breach  of  any  obligation  of  the
Arbitrator to give reasons as spelled out by  the  arbitration  clause.  The
judgment of the learned Single Judge did  not  show,  observed  this  Court,
that such a plea was urged before  him.  The  objection  petition  filed  to
challenge the award was also found by this Court to  be  vague  and  general
hence insufficient to give rise to an effective challenge to  the  award  on
the ground of it being non-speaking. The plea regarding the Award being non-
speaking was raised for the first time before the Division bench in  appeal.
This Court in that backdrop held that the Division Bench fell  in  error  in
entertaining and upholding such a plea at such a  late  stage.   This  Court
said:

“11. There are several other factors which  preclude  the  respondents  from
urging such a  plea.  The  reference  to  arbitrator  does  not  suggest  an
obligation having been cast on  the  arbitrator  to  give  reasons  for  the
award. Such a plea, as has been urged in this Court, was not  taken  by  the
respondents before the arbitrator. Even  in  the  objections  filed  in  the
Court, the validity of the award has not  been  specifically  questioned  on
the ground of its having been given in  breach  of  any  obligation  of  the
arbitrator to give reasons as spelled out by  the  arbitration  clause.  The
judgment of the learned Single Judge does not show such a plea  having  been
urged before him. In the objection petition, there is a  vague  and  general
plea raised that rejecting the claims forming the subject-matter  of  cross-
objection and allowing the claim of  the  appellant  without  assigning  any
reason was bad.  Such  an  omnibus  and  general  plea  cannot  be  read  as
submitting that  the  amendment  dated  4-9-1986  applied  to  the  contract
between the parties and that in view of the amended arbitration  clause  the
unreasoned award was bad. It appears that the plea was for  the  first  time
raised at the appellate stage before the Division Bench of the  High  Court.
Unwittingly the Division Bench fell into the error of  entertaining  such  a
plea and disposing of the appeal by upholding the same though the  plea  was
not even available to the respondents to be raised at that stage.”


18.   It is, in the light of  the  above  observations,  difficult  to  read
Build India Construction System (supra) as an authority for the  proposition
that Clause 70 of the General Conditions of the Contract did not oblige  the
Arbitrator to record reasons. The decision must, therefore, remain  confined
to the facts of that case only.

19.   It was next contended by learned counsel for the  appellant  that  the
High Court has directed the Arbitrator to make an  award  in  terms  of  the
Arbitration and Conciliation Act,  1996.  Since,  however,  the  arbitration
proceedings had been conducted under  the  old  Act  any  remission  to  the
Arbitrator could  only  be  under  the  provisions  of  the  said  Act.  Mr.
Patwalia,  learned  Additional  Solicitor  General,  did  not  dispute  that
position. He submitted  that  this  Court  could  make  it  clear  that  the
Arbitrator would  conduct  the  proceedings  under  the  provisions  of  the
Arbitration Act, 1940.



20.   It was lastly argued by learned counsel for the appellant  that  since
the proceedings have remained stayed for a considerable period,  this  Court
could direct the Arbitrator  to  dispose  of  the  same  expeditiously.  Our
attention was, in this connection, drawn to a letter dated 2nd  March,  2009
whereby the respondents have appointed Shri Dharma  Sheel,  Supdt.  Engineer
(Personnel and Legal) Headquarter as a Sole Arbitrator  to  adjudicate  upon
the dispute between the parties as Col. Dalip  Banerjee,  earlier  appointed
had expressed his inability to continue nor was Col.  S.N.  Kuda,  initially
appointed, ready to go on with proceedings. It was urged  that  if  for  any
reason Shri Banerjee, the newly appointed Arbitrator is also unable to  take
up the assignment, the respondents could  be  directed  to  appoint  another
Arbitrator within a time  frame  with  a  direction  to  the  Arbitrator  so
appointed to conclude the proceedings  as  early  as  possible.  We  see  no
reason to decline the  limited  prayer  made  by  learned  counsel  for  the
appellant especially when Mr. Patwalia submitted that in case Shri  Banerjee
was also unable to enter upon  reference  for  any  reason  the  respondents
shall, within such time, as may be fixed  by  this  Court  nominate  another
Arbitrator.



21.   In the result this appeal fails and is hereby dismissed. We,  however,
make it clear that consequent upon the orders passed by the High  Court  the
Arbitrator shall conclude the proceedings in terms of the provisions of  the
Arbitration Act of 1940 expeditiously. We further  make  it  clear  that  in
case the Arbitrator already nominated is for any reason unable  to  take  up
the assignment the respondents shall within six weeks from today  appoint  a
substitute Arbitrator who shall then enter upon the reference  and  conclude
the     proceedings     as     early     as     possible.     No      costs.




                                                    …......………………………….…..…J.
                                  (T.S. THAKUR)





                                                      .…………………………..……………..J.
                                  (C. NAGAPPAN)



                                                      ..…………………………..…………….J.
(ADARSH KUMAR GOEL)

New Delhi
September 4, 2014

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