vil Appeal No 840842 of 1989
From the Judgment and Order dated 551988 of the Kerala High Court in MFA Nos
728334683 and 380 of 1983
KK Venugopal Shiv Pujan Singh and Miss Niranjana for the Appellant
G Vishwanath Iyer and KR Nambiar for the Respondents
The Judgment of the Court was delivered by SABYASACHI MUKHARJI J
Leave granted
These appeals arise from the judgment and order of the High Court of Kerala dated 5th May 1988
The High Court by the impugned judgment and order in MFA Nos
72346 and 380 of 1983 allowed the appeals of the respondent the Govt
of Kerala against the judgment and decree dated 25th Sep tember 1982 passed by the principal Sub Judge Trivandrum in SP Arbitration Cases Nos 184 185 and 186 of 1982 by which the learned Sub Judge had upheld the awards by the arbitrator on the ground that it was not open to the court to sit in appeal over the decision of the arbitrator and the court could not adjudicate upon the justification for the conclusions arrived at by the arbitrator unless such awards were the result of corruption fraud or when there were errors apparent on the face of the award
The learned Sub Judge further held that there was no error apparent on the face of the record and there was no allegation of corruption or fraud
The High Court reversed the said decision
670 The questions involved in these appeals are how should the court examine an award to find out whether it was a speaking award or not and if it be a non speaking award how and to what extent the court could go to determine whether there was any error apparent on the face of the award to be liable for interference by the court
The other question that arises in this case is to what extent can the court examine the contract in question though not incorpo rated or referred to in the award
It may be noted that on 23rd December 1976 the agree ment No 25SESPC1976 77 was entered into between the appellant and the respondent herein for construction of masonary dam across Siruvani river
Certain disputes arose between the appellant and the respondent
These disputes were referred to the arbitrator named in the agreement
The arbitrator passed the awards dated 12th 16th and 23rd April 1982 which were filed before the Sub Judge and the appellant prayed for passing of decree in terms of the awards
The respondents filed petitions seeking to set aside the awards
The learned Judge refused to set aside the awards and passed decrees in terms of the awards
The Trial Court held that there was no merit in the contention regard ing limitation and that the claims under the award were not barred by limitation
It was further held by the learned Trial Judge that the arbitrator had not incorporated in the award any material for his conclusion nor had he incorporat ed the terms of contract between the parties
Under such circumstances the award could not be set aside especially when there was no error apparent on the face and that there was nothing to show that the arbitrator had mis conducted the proceedings or that the award had been improperly pro cured
So the objection to the passing of the award was turned down
Aggrieved thereby the respondent filed appeals before the High Court
The High Court by the impugned judgment dated 55
1988 set aside the awards and the decree of the Trial Court on the ground that there were errors of law apparent on the face of the awards
It is contended that the High Court in the circumstances of this case and in view of the settled principles of law exceeded its jurisdiction by acting in the manner it purported to do
It is therefore necessary to refer to the award to determine how has the arbitrator proceeded and what actually the arbitrator has decided
The arbitrator has noted in the first award that the dispute related to the work of Siruvani drinking Water Supply project Construction of an Intak Tower and allied structures  and observed that an estimate amounting to Rs 1745 lakhs was sanctioned for the work and it was entrusted on contract to the 671 claimant appellant herein on tenders
The value of the work arranged on contract was Rs 1445 lakhs as per the departmental estimate which the appellant undertook as understood by the arbitrator to carry out works at a total amount of Rs 1915 lakhs as per their tender
The contract was embodied in agreement No 18SCSPS1977 78 dated 17378 between the claimants on the one side and the re spondent No 2 on behalf of the State of Kerala cited as respondent No 1 on the other in these proceedings
The work had been taken up as part of the scheme for augmenting the drinking water supply to Coimbatore city from the yield of the Siruvani river and due to acute scarcity of water in the city work was taken up on an urgent footing and it was understood by both the parties that time was of utmost importance in the execution of work
The site for the work was handed over to the claimants on 17th December 1977 and the work had to be completed by 1561978
Accordingly to the arbitrator however it was clear that the work could not be completed within the stipulated period due to various reasons for which each party blamed the other
It was noted in the award that according to the respondents after carry ing out the work to the tune of Rs346 lakhs approx against the accepted probably estimate of contract of Rs 1915 lakhs the appellant refused to proceed with the
balance work in spite of specific notices to them and so the respondents were constrained to terminate the contract at the risk and cost of the appellant
Several efforts were made to re arrange the balance works and finally as per the situation obtaining then these works were to be expected to be completed at an excess cost of Rs097 lakhs over the amount that would have been payable to the appellant as per the terms of the original contract
The arbitrator thereaf ter noted that the appellant had raised in respect of the dispute which is the subject matter in the first award specific claims for an amount of Rs 597 lakhs in addition to release of their retention sum of Rs 32139 and the security deposit of Rs38400 payment of final bill for the work done including the above claims interest on amounts awarded and cost of the arbitration proceedings
It seems from the award of the arbitrator that the contention of the respondents had been that as per the terms of the contract they were entitled to realise the excess cost on re arrangement of the balance works estimated at Rs087 lakhs from the claimant and so they proposed to appropriate the retention sum of Rs32139 lying in their hands the Security Deposit of Rs38400 and the sums due to the claimant by way of final bill on other works as well
It was noted by the arbitrator that there was a prayer by the appellant for inspection of the site and the same was in spected on 91280
It was contended on behalf 672 of the claimant that the site of work was situated on the Western Ghats far away from human habitation in dense forest infected with wild animals at an elevation of about 600 M and subject to heavy precipitation of upto 400 cms
annually and that access to the site was only from Coimbatore side in Tamil Nadu
Several obstacles for access to the site were highlighted before the arbitrator
Another important point on which considerable stress was laid was the compensation for losses occasioned to them on account of the unsatisfac tory law and order situation coupled with labour unrest stoppages and threats and even physical violence on the agents of the appellant
It was further highlighted that the termination of the contract at their risk despite the frus tration and impossibility of performance was clearly illegal and unjustified
In the premises compensation was demanded for loss of equipments
The arbitrator noted that the main point of defence of the respondent was that the time for the completion of the work forming part of the time bound pro gramme was six months from the date of handing over the site
As the site was handed over on 161277 the date of completion should have been 1561978
Of the difficulties arising out of the location of the site of the work it was emphasised by the respondent that the conditions under which the contract had to be performed were within the knowledge of the parties and there could not be any ground for claim ing any addition than those contemplated in the contract
It was definitely further stated that the additional haulage was due to the alternate route via Thachampara which was opened on 1521977 and that any claim on this account subsequent to the above date was unjustified
Furthermore that materials like sand cement and steel were all issued in time and there could hardly be any justification regard ing delays on these account
Regarding interruptions in power supply the respondents  case was that such interrup tions were not unexpected at a site to which the power lines passed through virgin reserve area and at any rate the claimants were not assured by the respondents of uninter rupted power and there was hardly any items of machinery belonging to the appellant which had remained idle for want of power
It was further stated that the various extra items of works including the work on the quarries had been adequately paid for by them and no further payments were due to the appellant that there was no serious deterioration of the law and order situation and that the losses were due to the conduct of the claimant and the materials left over by the claimant at the end of the second working seasons that had been taken over by them duly accounted for and the credit thereof given in the final bill
It was further reiterated by the respondent that the work 673 was not completed within the period agreed and therefore the respondent issued notice to resume the work and on the failure of the claimant to re start the work there was no other alternative except to terminate the contract as the work itself was part of a time bound programme and they had to make alternate arrangements and that would have cost Rs087 lakhs additionally which was sought to be recovered from the appellant appropriating the retention money and security deposit
It was therefore claimed that the claims of the appellant should be rejected
Considering all these contentions and noting the several respective claims the arbitrator awarded as follows Claims Nos
1 2 a  b and 3 These claims are declined
Claim No 4 The Respondents shall pay the Claimants a sum of Rupees Ninety Six Thousand only Rs96000 in satisfaction of this claim including the various Sub Claims under the same
Claims No 5a b  c The Respondents shall pay an amount of Rs five thousand only Rs5000 to the Claimants in satisfaction of this claim
Claims Nos
6 7 8 and 9 These four Claims are declined
Claim No 10 The retention moneys recovered from the Claimants in regard to this work shall be refunded to them by the Respondents
Claim No 11 The foo
for the work shall be paid to Claimant for the sums awarded under Claims 4 and 5 Supra resulting in a net payment of Rupees one Lakh and One thousand only Rs 101000
Claim No 12 The Respondents shall refund the security deposit held by the Claimants for this work subject to the rules regarding tax clearance
Claim No 13 The Claim for interest is de clined
Claim No 14 The parties shall suffer their respective costs in these proceedings
 674 Regarding the counter claims it was held that the order of the 2nd respondent terminating the contract in favour of the appellant was valid and as such the respondents were free to arrange for the balance work in the manner they thought fit
The counter claim for costs of the respondents was also held by the arbitrator to be covered by other claims
The award was passed on 12th April 1982
There was another award dated 16th April 1982 which was with regard to the dispute that arose for controlling the work of Siruvani Drinking Water Supply Project Construct ing a Masonry dam across Siruvani River Block Nos
I II and III from Ch
13 to 60 up to level  88300 metres and Block No III from ch 60 to 82 upto level  870 metres
In respect of the aforesaid an estimate amounting to Rs715 lakhs had been sanctioned for the work and it was entrusted on contract to the appellant
It appears that the value of the work arranged on contract was Rs6772760 as per de partmental estimate which the appellant undertook to carry out at a total amount of Rs7655300 as per their tender
The contract was embodied in the aforesaid agreement of 23rd December 1976
The arbitrator recited the original claim and noted that the work could not be completed during the scheduled time and the respective contentions of the parties were more or less identical with the one made in the previous case
There was inspection of documents and the parties were heard in person it was noted
After noting the respective contentions the arbitrator awarded as follows Claim No 1A The Claim for additional payment on account of aslar work is declined
Claim No 1B The Respondents shall pay the Claimants an additional amount of Rupees One Lakh only Rs 100000 in satisfaction of this claim over and above the amounts al ready paid by them in the various part bills
Claim No 1c This claim for compensation on account of loss in hire charges and short age of rubble is declined
Claim No 2 The Respondents shall pay the Claimants a sum of Rupees three lakhs and thirty six thousand only Rs336000 in satisfaction of this claim
Claim Nos 3  4 These two claims are de clined
675 Claim No 5 The Respondents shall pay the Claimants an increase of forty 40 per cent in the agreed rates for agreed items and rates derived from the agreement for the extra items for all work paid for after CC2 and part such increase being worked out on the cost of the work excluding the value of the materials supplied by the Respondents
Claim No 6 The Claimant shall be entitled to a payment of Rupees twenty five thousand only Rs25000 in satisfaction of this claim and the Respondent shall pay it accordingly
Claim No 7ab  c The Claimants shall be entitled to a consolidated payment of Rupees fifty thousand only Rs50000 from the Respondents in satisfaction of these claims and the same shall be paid accordingly in addition to the payments already made
The Claimants on receipt of such payment shall have no lien whatsoever on the sheds goods of whatever description and materials lying at the site of the work and said to belong to them
Claims 8 9 10 11  12 These five claims are declined
Claim No 13 The retention amounts from the bills of the Claimants lying in the hands of the Respondents shall be released to them
Claim No 14 An amount of Rupees two lakhs only Rs200000 shall be paid to the claim ants in settlement of the final claims on the work in addition to the specific items re ferred to in the other claims as per this award
Claim No 15 The Security offered by the Claimants for this work shall be released to them subject to the rules regarding tax clear ance
Claim No 16 The claim for interest is de clined
Claim No 17 The parties shall suffer their respective costs in these proceedings
 Regarding the counter claims it was reiterated by the arbitrator that the respondents were entitled to arrange for the balance work in any manner they deemed fit on the termi nation of the contract by 676 them
But the appellant should not be responsible for any loss that might be sustained for this re arrangement
The counter claim for costs of the respondents was also dealt with
There was a third award dated 2341982 which was in respect of the sum due to Blocks Nos7 8  11
In respect thereof an estimate of Rs697 lakhs had been sanctioned for the work and it was entrusted to the appellant
The value of the work arranged on that contract was Rs6368 lakhs as per the departmental estimate which the claimants undertook to carry but at a total amount of Rs7196 lakhs as per their tender
After reiterating that time was of the essence of the contract the difficulties that arose in carrying out the contract and the respective contentions which were identical with those in respect of the first two contracts were discussed
In respect of interruptions in power supply the case of the respondent was that such interruptions were not unexpected at a site through which the power lines passed through virgin reserve forest and that the claimants had not been assured by the respondents of uninterrupted power and in any case there was hardly any item of machinery belonging to the claimant which could have remained idle for want of power
In respect of the medical facilities it was submitted by the respondents that according to the terms of the contract it was the primary duty of the appellant to provide for medical assistance to their work force
After setting out the rival contentions the arbitrator awarded as follows Claim No 1A The claim for additional payment on account of aslar work is declined
Claim No 1B The respondents shall pay the claimants an additional amount of rupees seventy five thousand only Rs75000 in satisfaction of this claim over and above the amounts already paid by them in the various part bills
Claim No 1C The claim for compensation on account of loss of hire charges and short age of rubble is declined
Claim No 2 The respondents shall pay the claimants a sum of Rupees three lakhs and seventy five thousand only Rs375000 in satisfaction of this claim
Claim Nos 3  4 These two claims are de clined
Claim No 5 The respondents shall pay the claimants an 677 increase of Forty 40 per cent in the agreed rates for agreed items and rate derived from the agreement for extra items for all work paid for after CC 2 and part such increase being worked out on the cost of the work excluding the value of materials supplied by the respondents
Claim No 6 the claimants shall be entitled to a payment of rupees twenty five thousand only Rs25000 in satisfaction of this claim and the respondents shall pay it accordingly
Claim No 7ab  c The claimants shall be entitled to a consolidated payment of rupees fifty thousand only Rs50000 from the respondents in satisfaction of these claims and the same shall be paid accordingly in addition to the payments already made
The claimants on receipt of such payment shall have no lien whatsoever on the sheds goods of whatever description and materials lying at site of the work and said to belong to them
Claims Nos 8 9 10 11  12 These five claims are declined
Claim No 13 The retention amounts from the bills of the claimant lying in the hands of the respondents shall be released to them
Claim No 14 An amount of rupees fifty thou sand only Rs50000 shall be paid to the claimants in settlement of the final claims on the work in addition to the specified items as per this award
Claim No 15 The security offered by the claimants for the work shall be released to them subject to the rules regarding tax clear ance
Claim No 16 The claim for interest is de clined
Claim No 17 The parties shall suffer their respective costs in these proceedings
 About the counter claims it was also stated that the claimants would not be responsible to carry out the balance work which the 678 respondents might arrange in any manner they thought fit on termination of the contract but it should not be at the risk of the claimants
Upon these awards an application was made before the Court of the Principle Sub Judge Trivandrum for passing decrees  in terms of the award
Objections were also filed
The learned Judge by his judgment and order dated 25th September 1982 dealt with the objections
He rejected the contention that the claims were barred
He further held that it was not necessary for the arbitrator to give reasons for his award and that there was no provision under the law which required that the arbitrator should furnish reasons for the award
It was submitted before him that the arbitra tor ought to have given separate findings for the issues under claim No 4 as the issues raised were entirely inde pendent of each other
It was submitted that under sub claim a in claim No 4 the appellant had claimed loss on account of the pressure tactics adopted by the labourers
Under sub claim b the appellant had claimed compensation for the extra works done
In the statement of defence filed by the respondents it was more or less conceded that the claim for extra works would lie and stated that the actuals should be accounted and paid along with the final bill
The learned judge noted that the arbitrator could only give a lump sum award with respect to various claims and that he need not quantify the sum awarded under each claim separately
It was contended before the learned Sub Judge that in respect of claim No 5 there was no evidence to support the claim
Under that claim the appellant had detailed the value of tools plants and materials etc
that were left by him at the site
In the defence statement itself the respondent admitted that some materials belonging to the appellant were taken possession of by them and the value thereof would be paid in the final bill
Therefore according to the learned judge it was not correct to say that there was no evidence at all for allowing claim No 5
Furtherit was held that there was no jurisdiction to investigate into the merits of the case and to examine the documentary and oral evidence for the purpose of finding out whether or not the arbitrator had committed an error of law or fact
The learned judge reiterated that the arbitrator had not incorporated in the award any materials for his conclusion nor did he incorpo rate the terms of the contract between the parties
Under such circumstances the award could not be set aside espe cially when there was no error apparent on the face of it and there was nothing to show that the arbitrator had mis conducted the proceedings or that the award had been improp erly procured
So the objection was repelled
In the prem ises the judgment in terms of the award was passed
In respect of the three awards three different judgments were 679 delivered incorporating more or less the same reasons
Being aggrieved thereby the respondent preferred appeals before the High Court
The Division Bench of the High Court by the judgment under appeal in FMA Nos 72 346 and 380 of 1983 disposed of the appeals
Being aggrieved thereby the appellant is before this Court
In the judgment under appeal the Division Bench of the High Court has set out the claims and noted the rival contentions and referred to the various clauses and the conditions of the contract though the contract itself was made no part of the award
The Division Bench referred to the decision of the learned Sub Judge
Before the Division Bench the main contention which succeeded was that there were errors apparent on the face of award and further that the arbitrator had misconducted himself and travelled beyond the terms of the contract
On behalf of the appellant however it was contended that the award was a nonspeaking award and hence it was not open for the court to go into the correctness of the reasons of the award
The High Court referred to the several decisions of this Court and other relevant decisions of the Kerala High Court
In order however to appreciate the contentions it is necessary to refer in detail to the judgment under appeal
The High Court referred to the various clauses of the contract which were produced before the High Court
The submissions were made on behalf of the respondents that the claims allowed were beyond and contrary to the agreement between the parties
The High Court noted that the arbitrator had allowed claims Nos 1b 2 5 7a 7b 7c 13 14 2 15 and had passed an award for payment of an amount of Rs3115 lakhs to the claimant towards his claim under the several heads mentioned therein
The High Court noted the judgment of the learned Sub Judge
It was held by the learned Sub Judge that the court could set aside an award only when it was the result of corruption fraud or there were errors apparent on the face of the award
According to the learned Sub Judge there was no error apparent on the face  of the award and there was no allegation of fraud
Thereafter the different points on which the learned Sub Judge rested his decision were noted by the High Court
It was contended before the High Court on behalf of the respondents that there were errors apparent on the face of the award and that the arbitrator had misconducted himself and travelled beyond the terms of the contract
The first contention urged on behalf of the respondents however was that the award was a non speaking award and there 680 fore it was not open to the court to go into the correct ness or reasonableness of the award
The High Court held that when the arbitrator was constituted the sole and final judge of all questions both of law and of facts normally his decision should stand final and it was only when there was any error apparent on the face of the award either because a question of law arose on the face of the award or upon some paper accompanying or forming part of the award it could be interfered with
Thereafter the High Court in para 8 of its judgment observed that in the light of several decisions it could say that there were any errors apparent on the face of the award and that the arbitrator had mis conducted himself and had travelled beyond his power
The High Court referred to the decision of the Division Bench of the Kerala High Court in State of Kerala vs Poulose The High Court thereafter observed that it was not open to the arbitrator or the umpire to arrogate tO himself jurisdiction and answer a question not referred to him
In this connection reference was made by the High Court to several decisions namely Attorney General for Manitoba vs Kelly and Ors  Upper Ganges Valley Electricity Supply Co Ltd vs UP Electricity Board   Ms Alopy Parshad  Sons Ltd vs The Union of India and Jivarajbhai Ujamshi Sheth  Ors
vs Chintamanrao Balaji  Ors 1964 5 SCR480
Regarding claim No 1b it was the contention of the respondent that the award was over and above the amounts already paid under various part bills
It was argued before the High Court that the Department had measured and paid for all quantities of earth work and ruble work and the same had been entered in the measurement book and accepted by the contractor
Hence the award of additional amount was unwar ranted
It was also argued that as per clause 10 of Form No 83 Notice inviting tender which formed part of the agree ment every tenderer was expected to inspect the site of the proposed work and quarries and satisfy himself about the quality and availability of materials
It was also notified in the same clause that the Govt
would not after accept ance of the contract rate pay any extra charges for lead or any other reason in case the contractor was found later on to have mis judged the materials available
It was also notified that the Department would not be liable for any claim raised later on the plea of non access to the site
R2 was a copy of extract of Clause 10 of Form No 83
It was argued that the award of Rs75000 under claim 1b was beyond the powers of the arbitrator
The High Court held that the award on this aspect was beyond the provisions of the agreement and therefore there were errors apparent on the face of the award
681 Similarly in respect of the claim for Rs375000 under claim No 2 it was contended on behalf of the respondents that this was beyond the powers of the arbitrator and as such there were errors apparent on the face of the award
It was argued by him that clause No 2 of the general speci fication and special conditions of the contract clearly notified to the tenderers the site of the dam
It was also contended by the Govt
Pleader that the period during which the contractor had conveyed sand through Madukkarai the claimant had been actually paid additional conveyance charges
Hence after construing clause 10 of Form No 83 namely notice inviting tender the High Court held that it was necessary for the contractor to have inspected the site before tender
Therefore in awarding the amount as the arbitrator did on this head there was error apparent on its face and such award was liable to be set aside
The High Court did so accordingly
With regard to claim No 5 it was contended that the claim was beyond the powers of the arbitrator and reference was made to clause 66111 of the General Specification and Special Conditions which stated that the Department was not responsible for supply of uninterrupted electric supply so any damage on that basis was also unwarranted
The finding on this issue found in the award was set aside
Similarly in connection with claim No 6 there was a claim for Rs24000 towards expenses for providing a perma nent doctor
It was held to be contrary to Clause 7 of IV of the contract dealing with camp facilities medical aid etc
which according to the high Court indicated that the contractor himself was responsible for providing medical facilities to the contract labourers and that the respond ents were not bound to pay any additional medical expenses
The claim on this construction and view of the contract was held to be not sustainable
The arbitrator had awarded Rs50000 by way of damages for sheds and other materials left by the contractor at the site under claim No 7
It was held by the High Court that it was the duty of the contractor to remove the sheds and materials brought by him and therefore the award allowing such claim was definitely against the provision of the contract
On this head it was held that the award by the arbitrator was contrary to the provision of the agreement and as such bad
Regarding claim No 14 for an additional amount of Rs50000 it 682 was held that it was unsustainable and due to the misconduct of the arbitrator that it was awarded
It was further ob served that it was beyond the power of the arbitrator as it was against the provisions of the contract
While dealing with that part of the award which exoner ated the contractor from the risk after holding that the termination of the contract by the respondent was valid it was held that the same was opposed to the provisions of the agreement
The direction to release the amount and release of security deposit without taking into account the liabili ty to account for the loss on re arrangement of work amount ed to errors apparent on its face
In the aforesaid light the High Court held that the award under claims Nos 1b 2 5 6  7 and also the award of an additional sum of Rs50000 under claim No 14 over and above the claim al lowed was against the terms of the contract and therefore liable to be set aside
Similarly in MFA No 34682 the High Court went into the details of the claims and on the construction of the contract came to the conclusion that the termination of the contract was legal and that the exoneration of the contractor from the risk and losses was opposed to that finding
In the aforesaid light the High Court set aside several claims as mentioned in the judgment on the award
On similar or more or less identical grounds several items of MFA No 38083 were set aside
One of the claims under claim No 4 was the award of Rs96000
The High Court found that it was under clause 205 of the General Specification and Special Conditions of the contract which stated that the Department would not be liable to pay any damages or compensation for hold up caused by intervention of the court labour strike or any other extraneous forces and therefore and award under claim No 4 on the ground of labour unrest and extra work suffered from being erroneous and was liable to be set aside
The clause of the contract covered only situations of labour strike and not labour unrest
It was submitted before us that the High Court had exceeded its jurisdiction in acting in the manner it did on these aforesaid aspects
The first question therefore that arises for consideration in this case is whether the award in question was a speaking award or not
In our opinion the award was not a speaking award
An award can also be set aside if the arbitrator had misconducted himself or the proceedings or had proceeded beyond his jurisdiction
These are separate and district 683 grounds for challenging an award
Where there are errors apparent on the face of the award it can only be set aside if in the award there is any proposition of law which is apparent on the face of the award namely in the award itself or any document incorporated in the award
The Judi cial Committee in Champsey Bhara  Co vs Jivraj Balloo Spinning  Weaving Co Ltd L 1922 IA 324 has discussed this problem
It was held that an award of arbitration can be set aside on the ground of error of law apparent on the face of the award only when in the award or in a document incorporated with it as for instance a note appended by the arbitrator stating the reasons for his decision there is found some legal proposition which is the basis of the award and which is erroneous
In that case the appellants had sold cotton to the respondents by a contract which contained a submission to arbitration of disputes as to quality and a further clause submitting to arbitration all other disputes arising out of the contract
Cotton was delivered but the respondents objected to its quality and upon arbitration an allowance was awarded the respondents thereupon rejected the cotton
The appellants claimed damages for the rejec tion and upon that dispute being referred to arbitration under the further clause were awarded damages
The award recited that the contract the date and subject of which were stated was subject to the rules of the Bombay Cotton Trade Association which were not further referred to and that the respondents had rejected on the grounds contained in a letter of a certain date
That letter stated merely that as the arbitrators had made an allowance of a certain amount the respondents rejected the cotton
The High Court set aside the award holding that it was bad on its face in that under one of the rules of the Association the respond ents were entitled to reject without liability
It was held by the Judicial Committee that the award could not be set aside the terms of the contract were not so incorporated with the award as to entitle the Court to refer to them as showing either that the award was wrong in law or that under them the contract and therefore the jurisdiction of the arbitrators were terminated
This decision and the ratio on this proposition of law has always been accepted by the courts of this country and is well settled
The next question on this aspect which requires consid eration is that only in a speaking award the court can look into the reasoning of the award
It is not open to the court to probe the mental process of the arbitrator and speculate where no reasons are given by the arbitrator as to what impelled the arbitrator to arrive at his conclusion
See the observations of this Court in Hindustan Steel Works Con struction Ltd vs C Rajasekhar Rao 1987 4 SCC 93
In the in 684 stant case the arbitrator has merely set out the claims and given the history of the claims and then awarded certain amount
He has not spoken his mind indicating why he was done what he has done he has narrated only now he came to make the award
In absence of any reasons for making the award it is not open to the court to interfere with the award
Furthermore in any event reasonableness of the reasons given by the arbitrator cannot be challenged
Appraisement of evidence by the arbitrator is never a matter which the court questions and considers
If the parties have selected their own forum the deciding forum must be conced ed the power of appraisement of the evidence
The arbitrator is the sole judge of the quality as well as the quantity of evidence and it will not be for the court to take upon itself the task of being a judge on the evidence before the arbitrator
See the observations of this Court in Municipal Corpn
of Delhi vs Ms Jagan Nath Ashok Kumar  Anr
  The same principle has been stated in Ms Alopi Parshad  Sons Ltd vs The Union of India supra
There this Court held that the award was liable to be set aside because of an error apparent on the face of the award
An arbitra tion award might be set aside on the ground of an error on the face of it when the reasons given for the decision either in the award or in any document incorporated with it are based upon a legal proposition which is erroneous
But where a specific question is referred the award is not liable to be set aside on the ground of an error on the face of the award even if the answer to the question involves an erroneous decision on a point of law
But an award which ignores express terms of the contract is bad
Similarly in Jivarajbhai Ujamshi Sheth  Ors
vs Chintamanrao Balaji  Ors
supra this Court reiterated that an award by an arbitrator is conclusive as a judgment between the parties and the court is entitled to set aside an award if the arbitrator has misconducted himself in the proceeding or when the award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under section 35 of the or where an award has been improperly pro cured or is otherwise invalid under section 30 of the Act
An award may be set aside on the ground of error on the face of the award but an award is not invalid merely because by a process of inference and argument it may be demonstrated that the arbitrator has committed some mistake in arriving at his conclusion
The Court however went into the ques tion whether the arbitrator had included depreciation and appreciation of certain assets in the value of the goodwill which he was incompetent to include by virtue of the limits placed upon his authority by the deed of 685 reference
The Court found that was not a case in which the arbitrator had committed an error of fact or law in reaching his conclusions on the disputed questions submitted for adjudication
It was a case of assumption of jurisdiction not possessed by him and that rendered the award to the extent to which it was beyond the arbitrators  jurisdiction invalid
This was reiterated by Justice Hidayatullah that if the parties set limits to action by the arbitrator then the arbitrator had to follow the limits set for him and the court can find that he exceeded his jurisdiction on proof of such excess
In that case the arbitrator in working out net profits for 4 years took into account depreciation of immov able property
For this reason he must be held to have exceeded his jurisdiction and it is not a question of his having merely interpreted the partnership agreement for himself as to which the Civil Court could have had no say unless there was an error of law on the face of the award
Therefore it appears to us that there are two different and distinct grounds involved in many of the cases
One is the error apparent on the face of the award and the other is that the arbitrator exceeded his jurisdiction
In the latter case the courts can look into the arbitration agreement but in the former it can not unless the agreement was incorpo rated or recited in the award
In Upper Ganges Valley Elec tricity Supply Co Ltd vs UP Electricity Board supra the respondent had taken over the appellant s undertakings but as the parties were at variance on the true market value to be paid to the appellant the matter was referred to arbitration
As the arbitrators were unable to agree on the question whether the appellant was entitled to compensation for the service lines  which were laid with the help of contributions made by consumers they referred the question to the umpire
The umpire framed an issue and gave a finding that the appellant was not entitled to claim from the re spondent the value of the position of the service lines which were laid at the cost of the consumers for the sole reason that they were laid at the cost of the consumers
The appellant filed an application under section 30 of the challenging the validity of the award on the question
The lower court and the High Court held against the appellant
Allowing the appeal it was held by this Court that the appellant s application for setting aside the award could succeed only if there was any error of law on the face of the award
There it was found that the umpire had made a speaking award and there was no question of the construction of any document incorporated in or appended to the award
If it was transparent from the award that a legal proposition which forms its basis is erroneous the award is liable to be set aside
An award may be remitted or set aside on the ground that the 686 arbitrator in making it had exceeded his jurisdiction and evidence of matters not appearing on the face of it will be admitted in order to establish whether the jurisdiction had been exceeded or not because the nature of the dispute is something which has to be determined outside award whatever might be said about it in the award or by the arbitrator
See in this connection the observations of Russell on The Law of Arbitration 20th Edn 427
Also see the observations of Christopher Brown Ltd vs Genossenschaft Oesterreichisch er etc at p 10 and Dalmia Dairy Industries Ltd vs National Bank of Pakistan It has to be reiterated that an arbitrator acting beyond his jurisdiction is a different ground from the error apparent on the face of the award
In Halsbury s Laws of England 4th Edn
2 para 622 one of the misconducts enumerated is the decision by the arbitrator on a matter which is not included in the agreement or reference
But in such a case one has to determine the distinction between an error within the jurisdiction and an error in excess of the jurisdiction
See the observations in Anisminic Ltd vs Foreign Compensa tion Commission  and Regina vs Noseda Field Knight  Fitzpatrick But in the instant case the court had examined the different claims not to find out whether these claims were within the disputes referable to the arbitrator but to find out whether in arriving at the decision the arbitrator had acted correctly or incorrectly
This in our opinion the court had no jurisdiction to do namely substitution of its own evalua tion of the conclusion of law or fact to come to the conclu sion that the arbitrator had acted contrary to the bargain between the parties
Whether a particular amount was liable to be paid or damages liable to be sustained was a decision within the competency of the arbitrator in this case
By purporting to construe the contract the court could not take upon itself the burden of saying that this was contrary to the contract and as such beyond jurisdiction
It has to be determined that there is a distinction between disputes as to the jurisdiction of the arbitrator and the disputes as to in what way that jurisdiction should be exercised
There may be a conflict as to the power of the arbitrator to grant a particular remedy
See Commercial Arbitration by Sir NJ Mustil and Stewart C Boyd page 84
The High Court in the judgment under appeal referred to the decision of the Division Bench of the Kerala High Court in State of Kerala vs Poulose supra
Our attention was also drawn to the said decision by the counsel for the respondents that if an arbitrator or the umpire travels beyond his jurisdiction and arrogates jurisdiction that does not vest in him that would be a ground to impeach the award
If 687 an arbitrator even in a non speaking award decides contrary to the basic features of the contract that would vitiate the award it was held
It may be mentioned that in so far as the decision given that it was possible for the court to construe the terms of the contract to come to a conclusion whether an award made by the arbitrator was possible to be made or not in our opinion this is not a correct proposi tion in law and the several decisions relied by the learned Judge in support of that proposition do not support this proposition
Once there is no dispute as to the contract what is the interpretation of that contract is a matter for the arbitrator and on which court cannot substitute its own decision
Reference was also made to the decision in State of Kerala vs Raveendranathan Insofar as the court held therein that an arbitrator deciding a dispute under the contract is bound by the contract the court is right
The court cannot however substitute the decision of the arbitrator as to what was meant by the contract once that dispute is conceded to the arbitrator
In so far and to the extent the aforesaid decision of the Kerala High Court decided to the contrary the same is not the correct law
The Kerala High Court in certain decisions relied on certain authorities of England
In a decision of the House of Lords in FR Absalom Ltd vs Great Western London Garden Village Society Ltd it was held that the arbitrator had erred in his construction of clause 30 of the contract
But as the judgment of Lord Warrington at page 600 of the report made it quite clear that the arbitrator had recited the terms of clause 32 of the contract in the award and thereafter on the construction of that clause the court decided that the arbitrator had misconstrued the effect thereof
That was a case where dispute was not within the contract
In Heyman  Anr
vs Darwins Ltd the controversy was entirely different
Similarly in Attorney General for Manitoba vs Kelly  Ors supra upon which the High Court in the judgment under appeal referred was again in a different context
There in an action in Manitoba against building contractors to recover sums im properly paid to them under a contract and for damages a judgment by consent was entered whereby it was provided inter alia that the plaintiff should recover among other sums all loss to the plaintiff by reason of defective workmanship and materials and that these should be set off against the sums recovered by the plaintiff the fair value of the work done and materials provided at fair contractor s prices
The judgment however provided further that the sums to be debited and 688 credited were to be determined by two appraisers and that any matter upon which they differed was to be referred to a named umpire whose decision thereon was to be final and that the Manitoba should not apply
The defendants moved to set aside or vary an award
It was held that under the words all loss there was jurisdiction to award to the plaintiff not only sums actually expended but also a sum estimated as being necessary to make good the defects and that extrinsic evidence was not admissible to show that the sum allowed to the defendants as set off had been reduced in respect of defective work for which they had also been debited
Further it was held that the award being within the jurisdiction conferred by the submission and there being no error apparent on its face it could not be questioned either on the facts or on the law
In the instant case the High Court seems to have fallen into an error of deciding the question on interpretation of the contract
In the aforesaid view of the matter we are of the opinion that the High Court was in error
It may be stated that if on a view taken of a contract the decision of the arbitrator on certain amounts awarded is a possible view though perhaps not the only correct view the award cannot be examined by the court in the manner done by the High Court in the instant case
In light of the above the High Court in our opinion had no jurisdiction to examine the different items awarded clause by clause by the arbitrator and to hold that under the contract these were not sustainable in the facts found by the arbitrator
These appeals are therefore allowed
The judgment and order of the High Court are set aside and the orders of the learned Sub Judge are restored
In the facts and the circum stances of the case however the parties will bear their own costs
PSS Appeals al lowed


Summary:
Clause 2 of Regulation 20 of the Service Regulations of the Punjab National Bank lays down that no officer shall resign from the service of the bank otherwise than on the expiry of three months from the service on the bank of a notice in writing of such resignation
The proviso thereto empowers the competent authority to reduce the period of three months or remit the requirement of notice
The respondent a permanent officer of the bank made an application on 21st January 1986 purporting to resign from the service with effect from 30th June 1986
He however received a letter from the bank on 7th February 1986 in forming him that his resignation letter had been accepted by the competent authority with immediate effect by waiving the condition of notice
He thereupon filed a writ petition in the High Court challenging the validity of the purported acceptance of his resignation with effect from 7th February 1986 and for a direction to consider him as in service up to 30th June 1986
Thereafter on 15th April 1986 he wrote another letter to the Bank purporting to withdraw the resignation letter dated 21st January 1986
The High Court held that the petitioner s resignation letter would have become effective only on the 30th June 1986 that under the Regulations there was no jurisdiction whatever in the competent authority to determine his service earlier than that and that until the resignation became effective on 30th June 1986 he had a right to withdraw the same
Consequently it quashed the order dated 7th February 1986 and declared that the petitioner continued to be in service with the bank
613 In this appeal by special leave it was contended for the appellant that Regulation 202 provided for a notice to the employer only in order to protect the employer s interests that its requirements could therefore be waived by the employer if it so desired unilaterally that under the proviso to clause 2 it was competent for the bank to waive any notice at all and to accept the resignation with immedi ate effect or with effect from such other date as the bank may consider appropriate
Dismissing the appeal HELD 1
Until the resignation becomes effective on the terms of the letter read with Service Regulation 20 of the Punjab National Bank it is open to the employee on general principles to withdraw his letter of resignation
619C Raj Kumar vs Union of India  Union of India vs Gopal Chandra Misra  and Balram Gupta vs Union of India  2
Clause 2 of Regulation 20 makes it incumbent on an officer of the bank before resigning to serve a notice in writing of such proposed resignation
The clause also makes it clear that the resignation will not be effective other wise than on the expiry of three months from the service of such notice
616H 617A 3
What the proviso to clause 2 contemplates is that in a case where the employee desires that his resignation should be effective even before the expiry of the period of three months or without notice being given by him the bank may consider such a request and waive the period or require ment of notice if it considers it fit to do so
It does not empower the bank to thrust a resignation on an employee with effect from a date different from the one on which he can make his resignation effective under the terms of the resig nation
In the instant case the employee had not requested the bank to reduce the period of notice or to waive the requirement of notice
617F 618G 4
There are two ways of interpreting clause 2
One is that the resignation of an employee from service being a voluntary act on his part he is entitled to choose the date with effect from which his resignation would be effective and give a notice to the bank accordingly
The only restric tion is that the proposed date should not be less than three months from the date on which the notice is given
In the instant case the letter dated 21st January 1986 sent by the employee purporting to 614 resign with effect from 30th June 1986 fully complied with the terms of this clause and so the resignation would have become effective only on that date
The other interpretation is that when an employee gives a notice or resignation it becomes effective on the expiry of three months from the date thereof
On this interpretation the respondent s resig nation would have taken effect on or about 21st April 1986 even though he had mentioned a later date
In either view of the matter the respondent s resignation did not become effective till 21st April 1986 or 30th June 1986
The bank could not have accepted that resignation on any earlier date
The letter dated 7th February 1986 was therefore without jurisdiction
617A B 618A B G H The respondent had thus continued to be in service till the 21st April 1986 or 30th June 1986
But by that time he had exercised his right to withdraw the resignation
Since the withdrawal letter was written before the resigna tion became effective the resignation stood withdrawn with the result that the respondent continued to be in the serv ice of the bank
619A B Delhi Electric Supply Undertaking vs Tara Chand  distinguished