Special Leave Petition Civil No 4557 of 1988
From the Judgment and Order dated 21388 of the Bombay High Court in Appeal No 306 of 1988
FS Nariman BD Sharma and RP Kapur for the Petitioner
Soli J Sorabjee Harsh Mittre Harish N Salve Jeel Peres DN Mishra and Mrs AK Verma for the Respondents
The Judgment of the Court was delivered by SABYASACHI MUKHARJI J
This petition under Article 136 of the Constitution challenges the judgment and order of the Division Bench of the High Court of Bombay dated 21st March 1988
The petitioner in this case on 23rd June 1961 had agreed to sell to the predecessor of respondent raw petroleum coke
There was a second agreement on 22nd April 1971
The said agreement was arrived at between the parties whereunder it was provided that in case the respondent failed to lift raw petroleum coke as agreed the petitioner would have right to shift raw petroleum coke at the risk and expense of the respondent
There was a third agreement providing that in case of delay in payment the respondent would pay interest at 4 per cent over the IOC Bank borrowing rate on the value of the stock not uplifted
It appears that on 5th August 1982 the respondent wrote a letter to the petitioner showing inability to pay the arrears of the price against delivery of raw petroleum coke
On 4th October 1982 there was a stock of about 13760 MTS Of saleable raw petroleum coke lying at Gauhati Refinery
The petitioner on 18th October 1982 wrote to the 429 respondent that unless the outstandings as on 1st September 1982 and interest were paid the petitioner would not make further supplies
Thereafter the petitioner filed Suit No 2187 of 1982 for payment and for attachment before judgment
On 21st December 1982 it appears that there was an order of attachment of stocks of raw petroleum coke to the extent of Rs6 crores of the respondent
The order was confirmed after notice
Respondent filed Appeal No 858 of 1983
Thereafter respondent on 20th ostler 1983 filed an application for stay of the suit under section 34 of the hereinafter called the Act 
The petitioner on 11th July 1983 terminated the agreement with effect from 31883
The respondent thereafter filed Suit No 122 of 1983 and applied for an order compelling the petitioner to make supplies
The learned District Judge passed an order on 28th April 1984 for restoration of supplies
On 7th May 1984 in petitioner s appeal viz Civil Appeal No 2476 of 1984 this Court stayed the above order
On 24th May 1984 this Court s order setting aside the order of the learned District Judge dated 28th April 1984 and recorded the compromise terms
Pursuant to the compromise all proceedings were withdrawn by the parties
On 11th December 1984 matter relating to the petitioner s claims in respect of interest on stocks held from 1st October 1982 onwards and expenses of shifting raw petroleum coke from 1st October 1982 upto 31st August 1983 were referred to arbitration of Shri AK Sarkar a former Chief Justice of India
On 21st August 1986 an interim award was passed by the learned arbitrator
Interim award was filed in the High Court of Bombay and the petitioner challenged the said award
The learned single Judge of the High Court dismissed the petition challenging the interim award
The Division Bench of the High Court of Bombay upheld the order of the learned single Judge
Hence this petition under Article 136 of the Constitution
The main contention urged before us was that it was necessary in the present trend of law for the learned arbitrator to have given a reasoned award
The Arbitration Act 1979 in England so enjoins
The arbitrator according to the petitioner has failed to do so
Hence the award was bad and as such the decision of the High Court was wrong and leave should be granted from the said decision and the matter be referred to the Constitution Bench as several cases are pending on this point
The learned single Judge of the High Court in his decision had observed that the award was undoubtedly not an elaborately reasoned award setting out all the reasons which prompted the learned arbitrator to arrive at the conclusion he did reach but it was a speaking 430 award
The learned Judge however held that it was not necessary to examine this aspect since even if it was a speaking order it was not bad in law
It is true that the law as it stands upto date since the decision of Champsey Bhara and Company vs Jivraj Balloo Spinning and Weaving Company Ltd AIR 1923 PC 66 that it was not necessary that all awards should be speaking awards
See in this connection the observations of this Court in Hindustan Steelworks Construction Ltd vs Shri CRajasekhar Rao 3 SC 239
Previously the law both in England and India was that an arbitrator s award might be set aside for error of law appearing on the face of it though the jurisdiction was not lightly to be exercised
Since question of law could always be dealt with by means of a special case this is one matter that could be taken into account when deciding whether the jurisdiction to set aside an award on this ground should be exercised or not
The jurisdiction was one that existed at common law independently of statute
In order to be a ground for setting aside the award an error in law on the face of the award must be such that there could be found in the award or in any document actually incorporated with it some legal proposition which was the basis of the award and which was erroneous
See Halsbury s Laws of England 4th edition
paragraph 623 page 334
The law has undergone a sea change in England
It is obligatory in England now after the Arbitration Act 979 that the award should give reasons
In the instant case
the arbitrator has set out the history in the interim award
The arbitrator has stated that the agreement dated 22nd April
1970 provided that ICL will uplift all available coke produced at the Gauhati Refinery by which name also the Noonmati Refinery was called
the said upliftment being so regulated that the quantity uplifted every week was equivalent to the production of coke at the refinery in the previous week and that whereas it was thereby further provided that the upliftment by ICL shall also be as regulated that the accumulated quantity of coke in the refinery coke yard does not fall below 2500 tons and does not exceed 4500 tons
The other history of the matter it was recited that the order dated 24th May 1984 was passed by consent of the parties by this Court that the claim of the Indian oil Corporation for interest on stocks said to have been held in the Gauhati Refinery from 1st October 1982 onwards and its claim for expenses of shifting the coke from 1st October 1982 upto 3 1st August 1983 would be referred to the arbitration of a retired Judge of the Supreme Court mutually acceptable to the parties
Two preliminary issues the arbitrator framed were namely 1 Is the 431 claimant entitled to charge any interest on unlifted stock of raw petroleum coke in view of its letter dated October 18 1982 and 2 Is the claimant entitled to any shifting charges in view of its letter dated 18th October 1982 The gist of the letter dated 18th October 1982 is set out in the arbitration agreement
The arbitrator in his award pro to observe as follows And whereas it is not in dispute between the parties that since the said letter of 18th October 1982 IOC had not delivered or offered to deliver any raw petroleum coke for ICL Now therefore having heard counsel for the parties and perused the documents and statements filed by them the despatch and receipt of none of which is disputed and having considered thereafter I adjudge hold and award as follows The letter dated 18th October 1982 is no bar to Indian oil Corporation s claim for shifting charges and interest in respect of the period from 1st October 1982 to 17th October 1982
Because of the said letter which has been admittedly acted upon by the Indian oil Corporation Ltd which had not delivered any coke to Indian Carbon Ltd Or made any offer to do so the Indian oil Corporation Ltd is not entitled to the interest claimed in respect of the period from 18th October 1982 onwards nor to shifting charges in respect of any shifting done on or after 18th October 1982
 The aforesaid grounds are the reasons of the arbitrator for making the award
The award is that the Indian oil Corporation is not entitled to any interest nor any shifting charges
The reasons for the said conclusion are the aforesaid three factors mentioned by the arbitrator
How the arbitrator has drawn inference is apparent from the reasons
It is to be noted that this Court has been insisting on the arbitrators to give some indications to indicate how the mind of the arbitrator acts
This Court in the case of Siemens Engineering and Manufacturing Company of India Ltd vs Union of India was concerned with the decision of the Collector of Customs
This Court observed that where an authority makes an order 432 in exercise of a quasi judicial function it must record its reasons in support of the order it makes
This Court observed further that every quasi judicial order must be supported by reasons
In Rohtas Industries Ltd and Another vs Rohtas Industries Staff Union and others  where this Court was concerned with an award under section 10A of the 
This Court observed that there was a need for a speaking order where considerable numbers are affected in their substantial rights
It was further reiterated that in such a situation a speaking order may well be a facet of natural justice or fair procedure
In Dewan Singh vs Champat Singh   this Court reiterated that it was an implied term of the arbitration agreement that the arbitrators must decide the dispute in accordance with the ordinary law and they cannot decide disputes on the basis of their personal knowledge
The proceedings it was held before the arbitrators were quasi judicial proceedings and they must be conducted in accordance with the principles of natural justice
It was therefore obligatory to give reasons
As mentioned hereinbefore there has been since then trend that reasons should be stated in the award and the question whether the reasons are necessary in ordinary arbitration agreement between the parties has been referred to the Constituion Bench
In this case however we are in agreement with the High Court of Bombay that reasons were stated in the award
We have set out hereinbefore the three grounds namely 1 The letter dated 18th October 1982 is no bar to Indian oil Corporation s claim for shifting charges and interest in respect of the period from 1st October 1982 to 17th October 1982
2 The inference drawn from the contents of the letter and 3 Because of the said letter which has admittedly been acted upon by the Indian oil Corporation Ltd and which had not delivered any coke to the Indian Carbon Ltd Or made any offer to do so
For these reasons the arbitrator held that the Indian oil Corporation Ltd is not entitled to interest claimed in respect of the period from 18th October 1982 onwards nor to shifting charges from 18th October 1982
These are the reasons for giving the award
No error of law was pointed out in those reasons
Indeed no proposition of law was stated in the aforesaid reasons which could be objected to as an error of law
There was however no error of fact
It was a possible view to take
It could not be urged that it was an impossible view to take
The arbitrator has made his mind known on the basis of which he has acted that in our opinion is sufficient to meet the requirements even if it be reasons should be stated in the award
It is one thing to say that 433 reasons should be stated and another thing to state that a detailed judgment to be given in support of an award
Even if it be held that it is obligatory to state the reasons it is not obligatory to give a detailed judgment
This question was considered by the Court of Appeal in England in Bremer Handelsgesellschaft vs Westzucker 1981 2 Lloyd s Law Reports 130
There Lord Donaldson speaking for the court at pages 132 and 133 of the report observed as follows It is of the greatest importance that trade arbitrators working under the 1979 Act should realize that their whole approach should now be different
At the end of the hearing they will be in a position to give a decision and the reasons for that decision
They should do so at the earliest possible moment
The parties will have made their submissions as to what actually happened and what is the result in terms of their respective rights and liabilities
All this will be fresh in the arbitrators  minds and there will be no need for further written submission by the parties
No particular form of award is required
Certainly no one wants a formal Special Case
All that is necessary is that the arbitrators should set out what on their view of the evidence did or did not happen and should explain succinctly why in the light of what happened they have reached their decision and what that decision is
This is all that is meant by a reasoned award
For example it may be convenient to begin by explaining briefly how the arbitration came about X sold to Y 200 tons of soyabean meal on the terms of GAFTA Contract 100 at US
Z per ton cif
Bremen
X claimed damages for non delivery and we were appointed arbitrators
The award could then briefly tell the factual story as the arbitrators saw it
Much would be common ground and would need no elaboration
But when the award comes to matters in controversy it would be helpful if the arbitrators not only gave their view of what occurred but also made it clear that they have considered any alternative version and have rejected it eg The shippers claimed that they shipped 100 tons at the end of June
We are not satisified that this is so or as the case may be
We are satisfied that this was not the case
The arbitrators should end with their conclusion as to the resulting rights and liabilities of the parties
There is nothing about 434 this which is remotely technical difficult or time consuming
It is sometimes said that this involves arbitrators in delivering judgments and that this is something which requires legal skills
This is something of a half truth
Much of the art of giving a judgment lies in telling a story logically coherently and accurately
This is something which requires skill but it is not a legal skill and it is not necessarily advanced by legal training
It is certainly a judicial skill but arbitrators for this purpose are Judges and will have no difficulty in acquiring it
Where a 1979 Act award differs from a judgment is in the fact that the arbitrators will not be expected to analyse the law and the authorities
It will be quite sufficient that they should explain how they reached their conclusion eg We regarded the conduct of the buyers as we have described it as constituting a repudiation of their obligations under the contract and the subsequent conduct of the sellers also as described as amounting to an acceptance of that repudiatory conduct putting an end to the contract
It can be left to others to argue that this is wrong in law and to a professional Judge if leave to appeal is given to analyse the authorities
This is not to say that where arbitrators are content to set out their reasoning on questions of law in the same way as Judges this will be unwelcome to the Courts
Far from it
The point which I am seeking to make is that a reasoned award in accordance with the 1979 Act is wholly different from an award in the form of a special case
It is not technical it is not difficult to draw and above all it is something which can and should be produced promptly and quickly at the conclusion of the hearing
That is the time when it is easiest to produce an award with all the issues in mind
 See the observations in Russel on Arbitration 20th Edn page 291 Reasons for the Award and the decision referred to therein
 In a case of this nature issues are simple points are fresh and facts are clear the reasons given by the arbitrator in our opinion meet the requirements of a reasoned award
It is apparent that the arbitrator has not acted irrelevantly or unreasonably
Arbitration procedure should be quick and that quickness of the decision can always be ensured by insisting that short intelligible indications of the grounds 435 should be available to find out the mind of the arbitrator for his action
This was possible in the instant case
In the instant case the arbitrator has spoken his mind and he is clear as to how he acted and why he acted in that manner
The purpose of section 12 of the English Tribunal and Inquiries Act which required the statutory tribunal to furnish a statement of the reasons if requested to do so before it gave its decision was to enable a person whose property or whose interests were affected to know if the decision was against him what the reasons were
Justice RS Bachawat in his Law of Arbitration First Edition 1983 pages 320 and 321 states that the provision was read as meaning that proper and adequate reasons must be given
The reasons that are set out must be reasons which will not only be intelligible but also deal with the substantial points that have been raised
When the arbitration clause required the arbitrator to give a reasoned award and the arbitrator does give his reasons in the award the sufficiency of the reasons depend upon the facts of the particular case
He is not bound to give detailed reasons
The Court does not sit in appeal over the award and review the reasons
The Court can set aside the award only if it is apparent from the award that there is no evidence to support the conclusions or if the award is based upon any legal proposition which is erroneous
Judges in that light the award in question was unassailable in the instant case
In the aforesaid view of the matter we are of the opinion that the High Court was right in the view it took
The special leave petition fails and is accordingly dismissed
GN Petition dismissed


Summary:
 The respondents manufactured goods which were assessable under Item 68 of the Central Excise Tariff
The respondents filed price lists for the sale of the goods through their distributors one of them being Ms TI  M Sales Ltd quoting their price to the distributors as assessable value
Subsequently the respondents required that the price charged by them from buyers at the factory gate should be accepted as the assessable value and not the price to the distributors
The Assistant Collector found that the distributors were related persons as per section 4 of the and the price at which the distributors sold the goods should therefore be the assessable value
On appeal by the appellant revenue the Appellate Collector held that these could not be held to be the related persons
The Revenue had found that there was an agreement existing between the respondents and their distributors according to which they were the company s distributors for the sale of their goods
Major portion of the sales were effected through Ms TI  M Sales Ltd who were the main distributors of Ms Tube Investments of India Ltd and its subsidiary companies and rest of the sales through the other two distributors
Ms Tube Investment of India was the holding company of Ms TI Millers Ltd The agreement between the assessee and the TI Revenue had further found that there was a territorial earmarking for the operation of the distributors who also undertook advertisements and helped the sub dealers for maintaining show rooms in dealer s premises
The distributors did not deal with competitor s goods
The Revenue had also noted that the assessee granted mark up to the distributors to cover their establishment expenses travelling expenses advertisements and 356 sundry expenses
In view of this the revenue filed a review petition but the Appellate Tribunal rejected the review petition and upheld the finding of the Appellate Collector
Hence these appeals under section 351b of the Act
The question was whether the distributors were related persons of the respondents and secondly whether the expenses incurred for maintaining the show room advertisements etc
should also be added to the assessable value
Dismissing the appeals this Court  HELD To find out whether the distributors were related persons of the manufacturers it is necessary to find out whether the buyer is holding company or subsidiary company or relative of the manufacturer
From the explanation of the relationship furnished in this case such is not the position
It appears that the link between the respondents TI Miller Ltd Company and TI  M Sales Ltd is that the latter are the main distributors of Ms Tube Investments of India Ltd which is the holding company of the respondents
This relationship does not satisfy the criteria for establishing the related persons concept
These were limited companies at the material time and it will be difficult to say that a limited company has any interest direct or indirect in the business carried on by one of its shareholders
362A C The mark up in the price was allowed in connection with the requirement to display the maximum sale price
The sales pattern shows also sales to other than distributors and it is not restricted only to the appointed distributors of TI India Limited
In the background of the facts mentioned hereinbefore and in the light of the decisions of this Court in Bombay Tyre International and Atic Industries cases we are of the opinion that the Tribunal was right and there is no cause for interference with the order of the Tribunal
362C E Union of India and others vs Atic Industries Limited  and Union of India and Others etc
vs Bombay Tyre International Ltd etc
 1984 1 SCR 347 referred to