TMI Blog2019 (12) TMI 842X X X X Extracts X X X X X X X X Extracts X X X X ..... fere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated. There is no gainsaying that arbitration proceedings are not per se comparable to judicial proceedings before the Court. A party under Indian Arbitration Law can opt for an arbitration before any person, even those who do not have prior legal experience as well. In this regard, we need to understand that the intention of the legislature to provide for a default rule, should be given rational meaning in light of commercial wisdom inherent in the choice of arbitration - The mandate under Section 31(3) of the Arbitration Act is to have reasoning which is intelligible and adequate and, which can in appropriate cases be even implied by the Courts from a fair reading of the award and documents referred to thereunder, if the need be. The aforesaid provision does not require an elaborate judgment to be passed by the arbitrators having regards to the speedy resolution of dispute. In case of absence of reasoning the utility has been provided under of Section 34(4) of the Arbitration Act to cure such defects. When there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 27.04.2007, passed by the High Court of Judicature at Madras whereby the High Court partly allowed the appeal filed by the respondent and set aside the award of Arbitral Tribunal relating to claim no. 2 for payment of compensation for the losses suffered due to unproductive use of machineries. 3. Brief facts of the case are that a contract was entered into between DCM Shriram Aqua Foods Limited (hereinafter referred to as DCM in short) and M/s. Crompton Greaves Limited (hereinafter referred to as CGL in short) for an aquaculture unit to be set up by such Principal, namely, DCM. CGL invited tenders for carrying out certain works for construction of ponds, channels, drains and associated works. The appellant M/s Dyna Technologies Pvt. Ltd. gave its proposal, estimate and quotation for carrying out the work. Thereafter, the respondent CGL placed a letter of intent dated 25th July, 1994, relevant portions of which are as under: 10. In the event that you are forced to keep your equipment and manpower idle due to non availability of work fronts due to reasons attributable to DCM or due to legal disturbances not connected with you, you shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of any of his obligations which may have accrued upto the date of termination. Upon termination of this contract/work order due to default on the part of the contractor, he /it shall indemnify the company against all losses incurred by the company as a result of such termination. 5. After commencement of the work, the respondent CGL on 5th January, 1995 instructed the employees of the appellant company to stop the work. 6. The appellant company claimed compensation for such premature termination of the contract and ultimately the dispute was referred to Arbitral Tribunal consisting of three Arbitrators. 7. The appellant-claimant made the following claims: (1) Losses due to idle charges. (2) Losses due to unproductivity of the men and machineries which could not work due to hindrances. (3) Loss of profit as the contract got dissolved and (4) Interest on the above claims and (5) Costs. 8. The aforementioned claims are listed in the statement of claims totalling to ₹ 54,21,170.45 initially on 21st June, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent. Therefore, this contention is also not acceptable. 9. Further, the learned counsel for the petitioner took this court to various portions of the Award and tried to convince this Court that the Arbitrators have not decided the issue fully appreciating the evidence on record. In the judgment of the Supreme Court reported in M/s Sundarsan Trading Company v. Government of Kerala (AIR 1989 Supreme Court 890) it has been clearly held that the power of the Arbitrator in respect of the interpretation of the contract in a matter for arbitration, the Arbitrator can pass the Award by taking a particular view of the contract and hence, the Court cannot substitute its own decision. Therefore, this Court cannot reappraise the evidence and substitutes its views and set aside the Award. Also in the case of Tamil Nadu Civil Supplies Corporation Limited v. Albert and Company (2000 (III) CTC 83), this Court has held that as per Section 34 of the Act, the Award of the Arbitrator can be set aside only on the limited grounds and the Award cannot be interfered with simply because another view is possible on the available materials. The arbitrator is a Judge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he claimant and para 3.1(g) cannot be construed as a conclusion or even the reasoning given by the Tribunal. 15. Having come to a conclusion that the arbitral award was deficient due to the lack of reasoning, the High Court proceeded further to note that the option of Section 34 (4) of the Arbitration Act was not necessary as the compensation could not have been claimed considering the fact that the work order has provision barring claim no. 2, in the following manner: 20. Learned counsel for the respondent has relied upon Section 34(4) of the Arbitration Act and has submitted that in case if this Court finds that the Arbitral Tribunal has not given reason, even though it is so required under Section 31(3) by invoking jurisdiction under Section 31(4), this Court can give opportunity to the Arbitral Tribunal to resume the arbitral proceedings or to take action as in the opinion of the Arbitral Tribunal would eliminate the grounds for setting aside the arbitral award. 21. We do not think that the present case is a fit case where the Arbitral Tribunal can be called upon to give reasons in support of its conclusion. This is because, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. The learned counsel for the appellant contented that interference at the appellate stage is beyond the scope of Section 37 of the Arbitration Act and in the given circumstances, claim no. 2 which has been set aside by the Division Bench of the High Court under the impugned judgment deserves to be interfered by this Court. 19. Learned counsel also submits that Section 73 of the Contract Act confers a right which is for public interest/benefit and contractual clause, if any, which takes away such a right unilaterally of a party is violative of Section 23 of the Contract Act. The law which is made for an individual s benefit can be waived by only by such individual, however, where law is for public interest or has policy element, then such rights cannot be waived by an individual person inasmuch as such rights are a matter of public policy/public interest. 20. Learned counsel further submits that a contractual provision which is in contravention of a specific statutory provision, if allowed to be implemented, the same will result in frustration of a right conferred by law or if the contractual clause is immoral or opposed to public policy, in such c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y set aside, supported by cogent reasons. The learned counsel further submitted that what has been observed by the Division Bench of the High Court in the impugned judgment is based on settled principles of law and needs no interference. 24. We have heard learned counsel for the parties and with their assistance perused the material available on record. 25. Before we devolve into the contractual issues, we need to observe certain pointers on the jurisdiction of the court under Section 34 of the Arbitration Act. Section 34 as it stood before the Amendment Act of 2015, was as follows 34 Application for setting aside arbitral award. - (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with subsection (2) and subsection (3). (2) An arbitral award may be set aside by the Court only if- (a) the party making the application furnishes proof that- (i) a party was under some incapacity, or (ii) the arbitration agreement is not valid under the law to which the parties have subje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award. 26. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various Courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the Court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the Courts were to interfere with the arbitral award in the usual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en rational meaning in light of commercial wisdom inherent in the choice of arbitration. 31. A fiveJudge Constitution Bench of this Court in the case of Raipur Development Authority v. Chokhamal Contractors, AIR 1990 SC 1426, considered the scope of Section 30 of the Arbitration Act, 1940 and held as under: It is now well settled that an award can neither be remitted nor set aside merely on the ground that it does not contain reasons in support of the conclusion or decisions reached in it except where the arbitration agreement or the deed of submission requires him to give reasons. The arbitrator or umpire is under no obligation to give reasons in support of the decision reached by him unless under the arbitration agreement or in the deed of submission he is required to give such reasons and if the arbitrator or umpire chooses to give reasons in support of his decision it is open to the Court to set aside the award if it finds that an error of law has been committed by the arbitrator or umpire on the face of the record on going through such reasons. The arbitrator or umpire shall have to give reasons also where the court has directed in any order s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... priety or perversity in the reasoning, then it can be challenged strictly on the grounds provided under Section 34 of the Arbitration Act. If the challenge to an award is based on the ground that the same is unintelligible, the same would be equivalent of providing no reasons at all. Coming to the last aspect concerning the challenge on adequacy of reasons, the Court while exercising jurisdiction under Section 34 has to adjudicate the validity of such an award based on the degree of particularity of reasoning required having regard to the nature of issues falling for consideration. The degree of particularity cannot be stated in a precise manner as the same would depend on the complexity of the issue. Even if the Court comes to a conclusion that there were gaps in the reasoning for the conclusions reached by the Tribunal, the Court needs to have regard to the documents submitted by the parties and the contentions raised before the Tribunal so that awards with inadequate reasons are not set aside in casual and cavalier manner. On the other hand, ordinarily unintelligible awards are to be set aside, subject to party autonomy to do away with the reasoned award. Therefore, the courts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the award with narration of facts with references to the annexures wherever it relied upon by it. The Tribunal abruptly concluded at the end of the factual narration, without providing any reasons, in the following manner: (3) Claim for unproductive usage of machineries . (g) All the above facts clearly establish that the machineries deployed by the Claimant had to do unproductive work by shifting from one place to another to suit the availability of work.The contract contemplates only payment for actual turnover of earthwork and for this they had received amount totaling to ₹ 1709782.88. The Claimant claims that the hire charges paid to the machineries, men and engineers should be reimbursed to him. He has given the actual expenses in his claim statement. (emphasis supplied) 41. Interestingly, the factual narration is coupled with the claimant s argument, which is bundled together. A close reading of the same is required to separate the same wherein the Arbitral Tribunal has mixed the arguments with the premise it intended to rely upon for the claimant s claim. Further, it has reduced t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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