vil Appeal Nos 1553 to 1556 of 198 1 etc
From the Judgment and Order dated 2031981 of the Kerala High Court in WP Nos 166 177223 and 243 of 1980
TS Krishnamurthy Iyer GL Sanghi MM Abdul Khader MK Ramamurthi G Vishwanatha Iyer Ms Shanta Vasudeavan AS Nambiar KMK Nair EMS Anam VJ Francis OV Radhakrishnan and N Sudhakaran for the appearing parties
The Judgment of the Court was delivered by PATHAK CJ
These appeals by graduate Excise Inspectors are directed against the judgment and order dated 20 March 1981 of the High Court of Kerala holding that the amendment to Special Rule 2 of the Kerala Excise  Prohibition Subor dinate Service Rules is ultra vires
The writ petitions were filed by non graduate Excise Inspectors alleging that the amendment to Special Rule 2 of the aforesaid Rules violates Articles 14 and 16 of the Constitution inasmuch as an invidious discrimination has been made between graduates and non graduates by prescribing a ratio between them in the matter of promotion from the post of Excise Preventive Officer to that of Second Grade Excise Inspectors
As all the cases have proceeded on a common factual basis we shall take up the appeal arising out of OP 3760 of 1978 for the purpose of this judgment
The petitioner in OP 3760 of 1978 joined the post of Excise Guard on 2 April 1960
He was promoted on 12 Janu ary 1966 as Excise Preventive Officer
In the list of Preventive Officers in the 204 Excise Department as on 1 August 1970 he was ranked No 131 while the third respondent was ranked at number 390
The third respondent was promoted earlier although he was junior to the petitioner
This was on the ground that he was a graduate and the petitioner was a non graduate
The peti tioner contended that as graduates and non graduates were both regarded as eligible for promotion to the post of Second Grade Excise Inspectors no differentiation should have been made between them when prescribing a rule of quota for promotion
The writ petition was heard by a learned Single Judge who held that the amendment to Special Rule 2 was violative of Articles 14 and 16 of the Constitution
It may be noted that the original Special Rule 2 of the Special Rules for the Kerala Excise and Prohibition Subordinate Service was amended by GOPNo
7978TD dated 23 June 1978 whereby the ratio 13 between graduate and non gradu ates was introduced into the Special Rules in the matter of promotion from the category of Excise Preventive Officers to that of Second Grade Excise Inspectors
The amendment was deemed to have come into force retrospectively from 9 Sep tember 1974 when the Special Rules were brought in
The learned Single Judge directed the respondents in the case to cause the Departmental Promotion Committee to be convened within two months to prepare a select list in order that promotions on a regular basis could be made
Against the judgment of the learned Single Judge in the different cases appeals were filed before a Division Bench of the High Court
Two contentions were raised on behalf of the appellants who in some of the appeals were the State of Kerala and the Deputy Commissioner of Excise Board of Revenue Trivandrum and in other cases were a number of private respondents in the original petitions and who held the post of Excise Inspector
Two contentions were raised by the appellants before the Division Bench of the High Court
It was contended that the preference shown to graduates by prescribing under the amended special Rule 2 the ratio 13 represents the recogni tion of graduation as a standard of merit and it was urged officers with more merit in the post of Excise Inspectors would promote administrative efficiency
It was also con tended that the amendment to Special Rule 2 is the result of an historical background which justifies preferential treat ment
It was pointed out that as graduates and non graduates had all along been treated differently in the matter of promotion to the post of Excise Inspector the classifica tion brought about by amending Special Rule 2 could not be regarded as unreasonable
205 It will be appropriate to set forth the historical background out of which the present controversy arises
From the year 1935 in the erstwhile State of Travancore prefer ence was given to graduates in the matter of promotion
When the State of Kerala was constituted by the merger of the Travancore and Cochin areas with effect from 1 November 1956 a rule was promulgated in the Excise Department of Kerala prescribing a ratio in the matter of promotion to the post of Excise Inspectors by an order dated 23 August 1957
The Rule regulated appointments to posts of Guards Preven tive Officers and Second Grade Inspectors in the Excise Department
Clause d related to Second Grade Excise In spectors and it provided d Second Grade Excise Inspectors A margin of twentyfive per cent of the vacancies in the cadre of Second Grade Excise Inspectors will be left for being filled up by direct recruitment by the Public Service Commission of graduates 
The remaining seventy five per cent will be filled up by promoting LD Clerks   and Preventive Officers on a 5050 basis observing the ratio
of 31 between graduates and non graduates in either case
 Clause d applied to personnel of the Travancore Cochin area
The officers allotted from Madras were governed by the Madras Rules pending the issue of common rules applicable to both
By reason of this Order 25 per cent of the post of Second Grade Excise Inspectors were to be filled up by direct recruitment 37 12 per cent by promoting Lower Division Clerks and 37 12 per cent by promoting Preventive Officers
Within the promotion quota of Preventive Officers promotion was to be effected between graduates and non graduates in the ratio of 3 1
This rule applied to Travancore and Cochin personnel appointed prior to 1 November 1956
After taking note of the situation in different parts of the State the Government order dated 19th November 1957 prescribed the ratio of 11 between graduates and non graduates on an interim basis
It was mentioned there that the ultimate aim was to do away with the distinction between graduates and non graduates in offices other than the Secretariat the Public Service Commission and the High Court
Subsequently however it was clarified on 8 July 1966 that the Order was intended to apply to ministerial posts only and not to executive posts such as those of Preventive Officers
The question of the applicability of the graduate and non graduate ratio was examined by the High Court in Writ Petitions filed 206 in 1972 and the High Court directed the Government to look into the matter and finalise the provisional promotion of Excise Inspectors accordingly
It was thereafter that Spe cial Rules for the Kerala Excise and Prohibition Subordinate Service dated 9 September 1974 were published
They provide for appointment to the posts of Excise Inspectors by direct recruitment promotion from the category of Excise Preven tive Officers and recruitment by transfer from among Upper Division Clerks employed in the Excise Department
The Rules did not provide for any graduate non graduate ratio in the matter of promotion apparently because the ratio had al ready been provided earlier by the Government order dated 23 August 1957
But meanwhile the High Court held that the Government order dated 23 August 1957 could not be applied to those appointed after the formation of the State of Kerala
To fill up the vacuum in respect of appointments after 1 November 1956 an order dated 4 October 1974 was made applicable retrospectively to all appointments on or after 1 November 1956 till the date of issue of the Special Rules for the Excise Subordinate Service
It adopted the ratio of 31 between graduates and non graduate for promo tion to the post of Second Grade Excise Inspectors for the entire State of Kerala and it specifically provided that this graduate non graduate ratio 31 would apply to the case of persons who had entered the Excise Department on or after 1 November 1956 and that it would operate until the coming into force of the Kerala Excise and Prohibition Subordinate Service Rules
This was however challenged in the High Court and the High Court held that it was not open to the Government to apply the ratio of 31 by an executive order passed in 1974 and made retrospectively from 1 November 1956 inasmuch as an executive order could not be given retrospective effect
There was therefore no provision in law prescribing a graduate non graduate ratio governing appointments made on and from 1 November
As has been stated Special Rules for the Excise Subordinate Service dated 9 September 1974 had been published meanwhile
Spe cial Rule 2 was amended with effect from 9 September 1974 the date of commencement of the Special Rules providing for a ratio of 13 between graduates and non graduates as from 9 September 1974
In consequence
while up to 9 September 1974 there was no valid Rule in force applying a graduate non graduate ratio for promotion there was a rule intro duced in 1978 by amendment to the Special Rules prescribing a ratio from 9 September 1974 onwards
The gap between 1 November 1956 and 9 September 1974 was sought to be filled thereafter by an Order dated 6 March 1981 which provided that the appointment of Excise Inspectors during the period from 1 November 1956 and ending 8 September 1974 from 207 among Clerks and Preventive Officers who have entered serv ice on or after 1 November 1956 would be made in the ratio of 11 between Clerks and Preventive Officers
simultaneous ly observing the ratio 01  3 l was observed between gradu ates non graduates The Rule was deemed to have into force from 1 November 1956
It will thus be evident that in the case of Preventive Officers appointed on or after 1 November 1956 the gradu ate non graduate ratio of 31 was observed between 1 Novem ber 1956 and 8 September 1974 and it became 13 from 9 September 1974 onwards
The plea of the non graduate Preventive Officers that there should be no preference in favour of the graduate officers was accepted as we have seen by the learned Single Judge and upheld in appeal by the Division Bench of the High Court
In these appeals by graduate Excise Inspectors it is contended that there was good and substantial reason for maintaining the ratio between graduate and non graduate Officers and the history of the evolution of the service supported the maintenance of such ratio and that the High Court proceeded erroneously in assuming that the observance of the ratio between graduates and non graduates produced an invidious discrimination violative of articles 14 and 16 of the Constitution
We are referred to Mohammad Shujat Ali  Ors
vs Union of India  Ors etc
  where this Court upheld the differentiation between graduate supervisors and non graduate supervisors for the purpose of promotion as Assistant Engineers
But it is clear that this was on the ground that the two categories of supervisors had been kept distinct and apart under the Cadre Rules from the beginning with different pay scales and different treatment for the purpose of promotion
Reference was also made of State of Jammu  Kashmir vs Triloki Nath Khosa  Ors   but it was held there that having regard to the object of achieving administrative efficiency in the
Engineering Service it was a just qualification to maintain a distinction between Assistant Engineers who were degree holders and those who were merely diploma holders
In SL Sachdev  Anr
vs Union of India  Ors
  again the discrimination between UDCs drawn from Audit Offices and other UDCs in the matter of the eligibility qualification for promotion was justified on the basis that the one enjoyed greater experience and that the distinction based on length of service was directly related to the object of the classification
In Col AS Iyer and Others vs
V Balasubramanyam and Others  upon which reliance 208 has been placed by the Appellants the recruits were from two different sources which had not completely fused into one integrated service but were instead allowed to maintain their separate identity and regard was had to their basic functional character operational capabilities and futuris tic  uses to support the differential treatment between military engineers and civilian engineers
HH Shri Swamiji of Shri Admar Mutt etc
vs The Commissioner Hindu Reli gious  Charitable Endowments Department  Ors  is a case where we find it difficult to see any argument in favour of the appellants for the passage there in to which our attention has been drawn specifically al ludes to the circumstance that the passing of time results in altering a fact situation which has the consequence of wearing out the basis on which the differentiation is found ed
So also in Motor General Traders and Anr
vs State of Andhra Pradesh  Others  it was observed by this Court that an exemption provision initially valid could become discriminatory where with the passage of time the nexus with the object did not survive any longer
We have also heard submissions made by learned counsel for the appellants in Civil Appeals Nos 1554 and 1556 of 1981 and they have elaborated on the points raised by learned counsel in Civil Appeal No 1553 of 1981 with some differences of nuance and emphasis
In essence the conten tion remains the same
It seems to us that the history of the evolution of the Kerala Excise and Prohibition Subordinate Service has shown no uniformity either in approach or in object
The history has varied with the circumstances prevailing before and after the reorganisation of the State on 1 November 1956
Originally when more emphasis was laid on the induction of graduate the ratio of graduate to non graduate officers was maintained at 3 1
But from 9 September 1974 the ratio was changed inversely to 13
More non graduates were now in ducted into the Service
The trend shows if anything that it ran in favour of absorbing more non graduates
The condi tions pertaining to the service and respecting which the constitution of the service varied from time to time showed fluctuations
A consistent or coherent policy in favour of graduates was absent
This is not a case where the cadre of officers was kept in two separate divisions
It was a single cadre and they were all equal members of it
There is no evidence that graduate Preventive Officers enjoyed higher pay than non graduate Preventive Officers
The High Court has noted that the nature of the duties of Preventive Offi cers whether graduate or non graduate was identical and both were put to field work
Non graduate Preventive 209 Officers were regarded as competent as graduate Preventive Officers
There is no evidence of any special responsibility being vested in graduate Preventive Officers
Once they were promoted as Excise Inspectors there was no distinction between graduate and non graduate Excise Inspectors
In our opinion the learned Single Judge as well as the Division Bench are right in holding that the prescription of a ratio dividing the quota of promotion between graduate Preventive Officers and non graduate Preventive Officers is invalid on the ground that it violates articles 14 and 16 of the Constitution
The other contention raised before the High Court namely that the ratio 13 between graduates and non gradu ates is supportable on the ground that the recognition of graduation is recognition of merit and that more merit in the post of Excise Inspectors would be conducive to better administrative efficiency is shortly disposed of
Ordinari ly it is for the Government to decide upon the considera tions which in its judgment should underlie a policy to be formulated by it
But if the considerations are such as prove to be of no relevance to the object of the measure framed by the Government it is always open to the Court to strike down the differentiation as being violative of articles 14 and 16 of the Constitution
In the present case we have already commented on the circumstance that the conditions of employment and the incidents of service recognise no dis tinction between graduate and non graduate Officers and that for all material purposes they are effectively treated as equivalent
Accordingly this contention must also be rejected
In the result the appeals fail and are dismissed but there is no order as to costs
RSS Appeals failed


Summary:
The common question arising in the instant cases which was referred to this larger Bench is whether an award passed under the provisions of the is liable either to be remitted under section 161c of the Act or liable to be set aside under section 30c thereof merely on the ground that no reasons have been given by the arbitrator or umpire as the case may be in support of the award
It was urged that i subsequent to 1976 there has been a qualitative change in the law of arbitration and that it has become necessary to insist upon the arbitrator or the umpire to give reasons in support of the award passed by him unless the parties to the dispute have agreed that no rea sons need be given by the arbitrator or umpire for his decision ii since under section 161c of the Act the legality of an award can be questioned in Court on the basis of an error apparent on the face of an award the only way of ensuring that an award is in accordance with law is by insisting upon the arbitrator or umpire to give reasons for the award and iii an arbitrator or an umpire discharges a judicial function while functioning as an arbitrator or an umpire under the Act and therefore is under an obligation to observe rules of natural justice while discharging his duties iv that the concept of natural justice had under gone a great deal of change in recent years and the re quirement of giving 145 reasons for a decision should be treated as a new rule of natural justice
While answering the question in the negative and remit ting the cases to the Division Bench for disposal in accord ance with law this Court HELD 1 The arbitrator or umpire is under no obliga tion 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
161C D 2 The arbitrator or umpire shall have to give reasons also where the court has directed in any order such as the one made under section 20 or section 21 or section 34 of the Act that reasons should be given or where the statute which governs an arbitration requires him to do so
161D E 1 University of New South Wales vs Max Cooper  Sons Pty Ltd 35 Australian Law Reports p 219 2 Hodgkinson vs Fernie  Anr
  English Reports p 712 3 Champsey Bhara  Company vs Jivraj Balloo Spinning and Weaving Company Ltd AIR 1923 Privy Council 66 4 Seth Thawardas Pherumal vs The Union of India 5 Jivarajbhai Ujamshi Sheth  Ors
vs Chintamanrao Balaji  Ors  6 Bungo Steel Furniture Pvt Ltd vs Union of India   7 State of Rajasthan vs Ms RS Sharma  Co   referred to
3 The people in India as in other parts of the world such as England USA and Australia have become accustomed to the system of settlement of disputes by private arbitra tion and have accepted awards made against them as binding even though no reasons have been given in support of the awards for a long time
They have attached more importance to the element of finality of the awards than their legali ty
178D 4 Courts should be slow in taking decisions which will have the effect of shaking rights and titles which have been rounded through a long time upon the conviction that a particular interpretation of law is the legal and proper one and is one which will not be departed from
179C D Brownsea Havel Properties vs Pooje Corporation  referred to
146 5 Even after the passing of the English Arbitration Act 1979 unless a court requires the arbitrator to give reasons for the award an award is not liable to be set aside merely on the ground that no reasons have been given in support of it
180A B 6 The foundation of any arbitration proceeding is the existence of an arbitration agreement between the persons who are parties to the dispute
It is not as if people are without any remedy at all in cases where they find that it is in their interest to require the arbitrator to give reasons for the award
In cases where reasons are required it is open to the parties to the dispute to introduce a term either in the arbitration agreement or in the deed of sub mission requiring the arbitrators to give reasons in support of the award
But there may be many transactions in which parties to the dispute may not relish the disclosure of the reasons for the award
151 E Firm Madanlal Roshanlal Mahajan vs Hukumchand Mills Ltd lndore   N Chelapan vs Secretary Kerala State Electricity Board  Anr   referred to
7 The two well recognised principles of natural jus tice are i that a Judge or an arbitrator who is entrusted with the duty to decide a dispute should be disinterested and unbiased nemo judex in cause sua and ii that the parties to dispute should be given adequate notice and opportunity to be heard by the authority audi alteram partem
Giving reasons in support of a decision was not considered to be a rule of natural justice either under the law of arbitration or under administrative law
171C 10 Payyavula Vengamma vs Payyavule Kasanna  Ors   11 Harvey vs Shelton 1844 7 Bear
455 at p 462 12 Haigh vs Haigh
  13 Som Datt Datta vs Union of India  Ors   14 Bhagat Payyavula vs The Union of India  Ors   15 Siemens Engineering  Manu facturing Co of India Ltd vs Union of India  Anr 1976 Supp
SCR 489 16 Associated Cement Companies Ltd vs
PN Sharma  Anr   16 AK Kraipak ferred to
8 A distinction has to be made between statutory arbitrations and private arbitrations
What applies general ly to settlement of disputes by authorities governed by public law need not be extended to a11 cases arising under private law such as those arising under the law of 147 arbitration which is intended for settlement of private disputes
178A B Rohtas Industries Ltd  Anr
vs Rohtas Industries Staff Union  Ors   referred to
9 It is no doubt true that in the decisions pertaining to Administrative Law this Court in cases has observed that the giving of reasons in an administrative decisions is a rule of natural justice by an extension of the prevailing rule
It would be in the interest of the world of commerce that the said rule is confined to the area of Administrative Law
179D E 10 The trappings of a body which discharges judicial functions and 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 is not supposed to exert the State s sovereign judicial power
180F G 11 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 and private inter est if not as a compulsion of law ensure that wherever they enter into agreements for resolution of disputes by resort to private arbitration the requirement of speaking awards is expressly stipulated and ensured
It is for Governments and their instrumentalities to ensure in future this re quirement as a matter of policy in the larger public inter est
Any lapse in that behalf might lend itself to or per haps justify the legitimate criticism that Government failed to provide against possible prejudice to public interest
181B D 12 A decision on the question involves a question of legislative policy which should be left to the decision of Parliament
It is significant that although nearly a decade ago the Indian Law Commission submitted its report on the law of arbitration specifically mentioning therein that there was no necessity to amend the law of arbitration requiring the arbitrator to give reasons Parliament has not chosen to take any step in the direction of the amendment of the law of arbitration
178H 179G H 13 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 it may not be 148 appropriate to take the view that all awards which do not contain reasons should either be remitted or set aside