1988 (8) TMI 412 - SC - Companies Law

Whether on the ground of absence of reasons the award is bad per se is pending consideration by a Constitution Bench? Held that - In the present case the arbitrator gave no reasons for the award. There is no legal proposition which is the basis of the award far less any legal proposition which is erroneous. Also there is no allegation of any misconduct in the proceedings. It is an error of law apparent on the face of it and not mistake of fact which could be the ground for challenging the award. In that view of the matter this part of the award which was affirmed by the High Court of granting of interest must be deleted.

Summary

Issues:
- Challenge to High Court order regarding arbitration award
- Validity of arbitration award
- Granting of interest pendente lite

Analysis:
The Supreme Court judgment pertains to a challenge against a High Court order regarding an arbitration award. The respondent's tender for a construction project was accepted, but the work was left incomplete, leading to arbitration. The arbitrators issued an award in favor of the respondent, which was challenged by the appellant on grounds of ambiguity, lack of reasons, and unjustified interest. The District Judge set aside the award, citing ambiguity and non-application of mind. However, the High Court reversed this decision, upholding the award amount and granting interest. The Supreme Court emphasized the finality of arbitral awards unless there is misconduct or a legal error. The Court clarified that an award cannot be challenged solely for lack of reasons, and delay in justice delivery is discouraged. The Court highlighted the principles governing the setting aside of arbitral awards and the limited grounds for such actions.

The Supreme Court reiterated that an arbitrator's award is final and can only be challenged on specific legal grounds. In this case, the lack of reasons in the award did not render it invalid, as long as there was no misconduct or legal error apparent on the face of the award. The Court referenced previous judgments to support this principle, emphasizing that an arbitrator's decision is conclusive between parties. The Court rejected the argument that lack of reasons alone could invalidate an award, emphasizing the need for legal errors or misconduct for such challenges to be successful.

Regarding the granting of interest pendente lite in the award, the Supreme Court found an infirmity. The arbitrators awarded interest, contrary to established principles, which was affirmed by the High Court. However, the Court clarified that the arbitrator did not have the authority to grant interest in this case, as it did not fall under the specific circumstances where such power is permissible. Consequently, the Court ordered the deletion of the interest component from the award. The Court highlighted the specific circumstances under which arbitrators can grant interest, emphasizing that the current case did not meet those criteria.

In conclusion, the Supreme Court disposed of the appeal, upholding the arbitration award with the exception of the interest component. The Court emphasized the finality of arbitral awards, the limited grounds for challenging them, and the need for adherence to established legal principles in arbitration proceedings.