ivil Appeal No 4800 of 1989
From the Judgment and Order dated 2031987 of the Orissa High Court in Misc
Appeal No 453 of 1982
Anil B Divan and Vinoo Bhagat for the Appellant
GL Sanghi and AK Panda for the Respondent
The Judgment of the Court was delivered by V RAMASWAMI J
Special leave granted
In respect of a dispute relating to the work Lankagada Minor Irrigation Project Balance Work in Jagannathaprasad Block which 351 was entrusted to him the appellant contractor invoking clause 23 of the agreement and section 8 of the Arbitration Act requested the Chief Engineer Rural Engineering Organi sation Bhubaneswar Orissa to nominate an arbitrator
It may be mentioned that before making this request for nomina tion of an arbitrator the appellant made a claim on 166
1975 before the Executive Engineer MI Division Berham pur Ganjam claiming to be paid a sum of Rs281745
He had also claimed interest on this at the rate of 18 per cent from the date of receiving of the claim book till payment
The work entrusted to the appellant was to commence on 612
1971 and to be completed within 18 months ie on or before 561973 and the total cost of the work was Rs998970
One Shri DC Panda Superintending Engineer Central Range was nominated as the sole arbitrator to decide the dispute and give the award
This arbitrator having accepted the appoint ment entered on the reference and issued notices to both the parties directing them to file their claims
The appellant filed a claim statement on 54
1977 before the arbitrator
In this claim statement he had made a detailed description of each of the items of the claim and the total of the 15 items claimed came to Rs 387796
To this he added inter est at 18 per cent from the date which according to him each of the claims should have been settled making a total claim of interest to the tune of Rs295894
He thus prayed for an award of Rs683690 and also prayed for further interest on Rs387796 from 64 1977 till date of award and there after until payment at 18 per cent
It may be mentioned that in this statement of claim made before the arbitrator some of the claims made before the Executive Engineer were omit ted some were reduced whereas some new claims were intro duced and some other items of claim were enhanced
The State of Orissa filed a written statement and the arbitration proceedings continued for some time but before the arbitra tor could make the award an application before the Subordi nate Judge Bhubaneswar was filed under sections 82 and 12 of the Arbitration Act
By an order dated 17121979 the learned Subordinate Judge removed the arbitrator and ap pointed one Shri J Pati Chief Construction Engineer Paradip Port as the sole arbitrator to decide the dispute between the parties
However since Shri J Pati expressed his inability to arbitrate by another order dated 1641980 the court appointed Shri Banabasi Patnaik Superintending Engineer Sambalpur as the sole arbitrator in place of Shri J Pati
This arbitrator entered on the reference got all the relevant records from the previous arbitrator continued the hearing on the 9th June and 9th July 1980
On the ground that the appellant has not included some of his claims relating to this work in the claim statement sub mitted to the previous arbitrator he made a supplemental claim for a sum of 352 Rs827857 and prayed that in addition to the claim stated in the original claim statement a sum of Rs827857 be awarded in his favour with interest at 18 per cent per annum on Rs827857 from 1410
1973 till date of payment
The State of Orissa not only disputed the claim made but also objected to the entertainment of an additional claim in their written statement dated August 13 1981
The arbitra tor however decided to entertain the supplemental claim and proceeded with the hearing of the dispute
The supple ment claim consisted of 11 items
As seen from the note papers the arguments on supplemental claims 1 to 6 were heard on two different dates and the hearing was adjourned to 811
On that day arguments in respect of rest of the supplemental claim items were heard and the hearing was closed
On the same day the appellant contractor filed what he termed as one consolidated abstract  of his two claim statements and the abstract showed a total claim of Rs3144437 and he had further prayed in this that the total amount of Rs3144437 may be allowed along with an interest at 18 per cent per annum on the said amount from 911
198 1 till date of payment
The arbitrator made an award on 712
1981 allowing a lump sum of Rs2500156 together with interest at 9 per cent after the expiry of 30 days from the date of making the award till the date of payment or decree whichever is earlier
The award was filed in court for making a decree and the Government filed an application to set aside the award on various grounds
The trial court overruled the objections of the State and the award was made a decree of the court
However learned Judge disallowed the interest from the date of decree till reali sation
On appeal by the State Government the High Court came to the conclusion that award suffers from non applica tion of the mind amounting to legal misconduct
In that view the award was set aside and the matter was remitted back to the Arbitration Tribunal constituted under section 41 A of the Arbitration Act as amended by Orissa Act 3 of 1983
The contractor claimant has filed this appeal against this judgment of the High Court
As is seen from the award though it refers to getting all the relevant record from the ex arbitrator there is no reference to the heating of the parties or consideration of the documents relating to the original claim made on 64 1977
In the order sheet it has been mentioned that both parties had agreed that they had nothing more to add except what had been already given in their respective claim and counter statement and what had been recorded in the deposi tions already made before the previous arbitrator
The reference to depositions already made is incorrect as it is admitted by both the parties that no deposition was at all recorded before the previous arbitrator nor 353 there is any record of the previous arbitrator showing such oral evidence was recorded by him
Neither of the parties adduced any oral evidence before the new arbitrator
Though the arbitrator is not bound to disclose as to what interpre tation he has made and what inference he has derived from the documentary evidence he is bound to refer in the award that he had considered all the documents placed before him no matter whether he relies on them or discards them from consideration
The arbitrator in his award ex facie does not mention that he has referred to or considered the documents placed before him in respect of the original claim
The order sheet mentions about the hearing on different dates relating to the supplemental claim statement which was filed before him
It is this argument in respect of the supplemen tal claim that has been mentioned in the award
The other point to be noted
is that the original claim together with the supplemental claim do not make total claim of Rs3144437
It is seen from the records that the arbi trator directed the claimant to submit a consolidated claim abstract which was submitted by him on 811
1981 the date on which the hearing by the arbitrator was concluded
There is clearly some discrepancy while consolidating both the claims
In addition to the total of both the claims some other amounts may be by way of extra interest or otherwise have been included but the arbitrator seem to have not applied his mind
Then again in the award it is stated that the total amount claimed by the claimantappellant inclusive of damages compensation and interest is Rs3144437
Even the abstract  filed before the arbitrator does not show any claim of damages or compensation
As may be seen from the facts set out above before the appellant demanded the appointment of an arbitrator he had made a claim before the Executive Engineer for a sum of Rs281745
This is an iternised claim
This claim was made in the claim book kept by the Executive Engineer
It may be that this claim did not cover the entire amount due
We may point out that in the letter demanding the appointment of an arbitrator he had stated that during the execution of the work he had executed many extra items of work as per direc tions of the Department and also incurred heavy expenditure which were not covered in the agreement and that he had submitted most of my claims in the claim book on 1661965 but these have not yet been decided
It may also be men tioned that in this letter itself he has stated that he has completed the work in all respects on 1491973 and that though the final bill which should have been prepared within one month of the completion of the work has not yet been paid to him
The claim made before the arbitrator originally as already stated was Rs683690 of which a sum 354 of Rs387796 represented the value of the work not paid and the remaining represented interest claimed
The total agreed value of the work entrusted to the appellant was Rs998970
In the counter affidavit filed by the State of Orissa in the special leave petition it is stated that a total of Rs2311887 had been paid to the appellantcontrac tor by 2011
1976 which was with reference to the original work entrusted and the extra work done by the appellant
Arejoinder was filed by the appellant to this counter affi davit but the fact of payment of Rs23 11887 is admitted
The supplemental claim itself was filed on 1071980 and that amounted to Rs827857 over and above Rs683690 which he had claimed originally before the arbitrator
Then again the abstract  filed by him on 8111981 showed a figure of Rs3144437 as the claim
We have already pointed out that the total of the claim made on 54
1976 and the supplemental claim made on 107
1980 itself will not make anyway that figure of Rs3144437 and therefore some more claims have been included
The foregoing facts do show that the award suffers from non application of the mind by the arbitrator
This Court in State of Orissa vs Dandasi Sahu  to which one of us Sabyasachi Mukharji J was a party while noting that the amount award is quite high or that a large amount has been awarded does not by itself vitiate the award as such observed that one has to judge whether the amount of the award was so disproportionately high to make it per se bad on the facts and circumstances of a particular case
In this connection we have to keep in mind that we are concerned with a situation where the arbi trator need not give any reason and that even if he commits a mistake either in law or in fact in determining the matter referred to him where such mistake does not appear on the face of the award the same could not be assailed
The arbitrator in the case of a reference to him in pursuance of an arbitration agreement between the parties being a person chosen by parties is constituted as the sole and final judge of all the questions and the parties bind them selves as a rule to accept the award as final and conclu sive
The award could be interfered with only in limited circumstances as provided under sections 16 and 30 of the Arbitration Act
In this situation we have to test the award with circumspection
Even with all this limitations on the power of Court and probably because of these limitations we have to hold that if the amount awarded was disproportion ately high having regard to the original claim made and the totality of the circumstances it would certainly be a case where the arbitrator could be said to have not applied his mind amounting to legal misconduct
It may be seen that in this case in the 355 original claim made before the arbitrator the value of the work not paid was stated as Rs387796 The supplemental claim made before the arbitrator amounted to Rs827857
Thus the total value of the work not paid according to the appellant was Rs 12 15653
As against this claim the arbitrator has awarded a lump sum of Rs2500156
It is true that the appellant has asked for payment of interest and including interest his claim was Rs3144437
In a recent judgment of this Court in State of Orissa vs Niranjan Swain 1989 4 SCC 269 it has been held that where a refer ence to arbitration was made prior to the commencement of the which Act came into force on August 19 198l the arbitrator is not empowered to grant interest for the period upto the date of submission of the claim or the period during which the dispute was pending before the arbitrator
It was further held that where the award granted a lump sum amount it shall deem to have included the inter est also if interest had been claimed before the arbitrator and the inclusion of such interest rendered that part of award invalid
If we exclude the interest portion then there could be no doubt that award of Rs2500156 suffers from the vice of giving disproportionately high amount
The learned counsel for the appellant however contend ed that the invalid part relating to the grant of interest may be set aside and the award may be accepted so far as the claim for the value of the work done applying the formula adopted in State of Orissa vs Niranjan Swain supra
The learned Judges who decided the case after holding that inclusion of the interest rendered the award invalid pro ceeded to separate the invalid part from the rest stating that the total amount awarded is principal plus interest the rate of interest and the period for which the interest was claimed before known the principal could be determined easily and on that basis the principal amount and the interest out of the total amount awarded was divided and the award was sustained relating to the principal
We are unable to apply this principle in this case as the State had dis puted major part of the claim in their counter statements before the arbitrator and we have held that the award suf fers not merely on the ground that it included interest but also on the ground of non application of the mind
We are also of the view that there was nothing wrong in the approach of the High Court and that this is not a fit case for interference under Article 136 of the Constitution
We accordingly dismiss the appeal with costs
PSS Appeal dismissed


Summary:
The appellant is a partnership firm carrying on business of manufacturing and selling carpets in the State of Rajas than
It owns three factories
When the Regional Provident Fund Commissioner took steps to direct the appellant firm to comply with the provisions of the  the appellant con tested the applicability of the Act on the ground that it was not manufacturing textiles included in Schedule I of the Act
The Regional Provident Fund Commissioner held that the business of manufacturing carpets carried on by the appel lant included textiles and that the Act was applicable to the appellant
Aggrieved by the said order the appellant approached the Central Government under section 19A of the Act which upheld the order of the Regional Provident Fund Commission er
Thereafter the appellant moved the High COurt under Article 226 of the Constitution
The writ petition was dismissed
The appellant preferred an appeal to the Division Bench of the High Court and that appeal was also dismissed
This appeal by special leave is against the order of the Division Bench
Dismissing the appeal this Court HELD 11 The activity of manufacturing carpets is generally understood as the weaving of carpets and the man who is engaged in such activity is popularly known as a carpet weaver 
Weaving means to form a fabric by interlac ing yarn on a loom
It also means the method or pattern of weaving or the structure of a woven fabric 420B C 418 12 Though there may be knotting of the yarn the fabric which is ultimately produced does not cease to be a textile fabric
The fact that the Handicrafts Board has issued certificate under the Import Trade Control Policy Handbook of Rules that carpet is a product of handicrafts does not in any way improve the matter
Even then the carpets do not cease to be textiles
That certificate is not enough since it is very clear that the activity of making carpet though it involves knotting in substance amounts to weaving and the carpet is a fabric which is woven
Thus it comes within the meaning of the expression textiles as explained in clause d to the Explanation of Schedule I to the Act
420D F 13 The non inclusion of knotting in the explanation to Schedule defining textiles  is therefore immaterial
42ID Porrits Spencer Asia Ltd vs State of Haryana   relied on
The Regional Provident Fund Commissioner the Govern ment of India and the High Court were right in holding that the establishment of the appellant came within the scope of the Act and the appellant was liable to comply with the requirements of the Act in all respects
421D