vil Appeal No 41819 of 1989
From the Judgment and Order dated 2941988 of the Gujarat High Court in FA Nos
848 849 of 1986
VB Patel D Patel TH Pandey and RP Kapur for the Appellant
Soli J Sorabjee Atul Setalwad NJ Mehta P Shah SK Sharma section Sharma and PH Parekh for the Respondents
The Judgment of the Court was delivered by SABYASACHI MUKHARJI J
This is an application for leave to appeal under Article 136 of the Constitution from the judgment and order of the High Court of Gujarat dated 29th April 1988
To appreciate the questions involved herein few facts have to be emphasized
In 1978 the State Government of Gujarat undertook a scheme known as Bhavnagar City Water Supply Scheme 
The 322 Scheme was divided into two parts i Raising Main and ii Gravity Main
Raising Main was divided into two sec tions namely 101 kms
and 74 kms
steel welded pipe line
On or about 1516th December 1978 the State Govern ment issued letter of approval to the bargain between the parties on certain terms
On 12th January 1979 two contracts were awarded to the respondent No 1 for Rs 12939691 and Rs9430435 which provided the dates of completion as February 1979 and the 3rd week of September 1980 respectively
On 29th March 1981 the respondent No 1 filed the Civil Suit No 588 of 1981 in the City Civil Court with regard to measurements recorded by the Deputy Engineer and alleged underpayments
On 4th June 1981 the respondent No 1 gave notice to the State Government and the petitioner Board requesting for reference of the alleged disputes to the arbitrator under clause 30 of the agreement
On or about 8th July 198 1 the respondent No 1 gave notice under Section 8 of the Arbitra tion Act 1940 hereinafter called the Act  calling upon the petitioner to concur in the appointment of one Shri GG Vaidhya
On 21st July 1981 he withdrew the Civil Suit No 588 of 1981
On 6th August 1981 the respondent No 1 filed Civil Miscellaneous Application No 231 of 1981 in the Court of Civil Judge SD Ahmedabad for appointment of the said Shri GG Vaidhya as the sole arbitrator
On 7th November 1981 the petitioner filed reply contesting the arbitrabili ty of the various claims made in the application and inter alia contending that the application was not maintainable
On or about 15th December 1981 the learned Civil Judge appointed Shri GG Vaidhya as the sole arbitrator with a direction that he should first decide as to which disputes fell within the purview of clause 30 of the agreement
On 5th May 1982 Shri Vaidhya gave an interim award holding that the claims at section Nos
10g and 101 only were not arbitrable and further that the other claims were arbitra ble
A petition was filed in High Court which was dismissed and then there was an application to this Court under Arti cle 136 of the Constitution which was disposed of by consent on 30th November 1983
The said order inter alia provided that the parties had agreed to settle the matter amicably and one Shri Mohanbhai D Patel Retired Secretary Public Works Department Gujarat and at that time Sitting Member of the petitioner Board was appointed as the sole arbitrator in place of Shri Vaidhya to decide all disputes between the parties relating to the following works i providing fabricating laying and joint ing 1000 mm dia
10000 M long steel welded pipe line under Bhavnagar 323 Emergency Water Supply Scheme based on She trunji Dam Agreement No 52 1 of 1978 79
ii providing fabricating laying and jointing 1000 mm dia 7400 M long steel welded pipe line under Bhavnagar Emergency Water Supply Scheme based on Shetrunji Dam Agreement No B 22 of 1978 79
 It was further provided that all disputes concerning the said two works in question should be referred to the sole arbitrator and the Board could also be entitled to put counter claims before him
The consent terms also provided the following terms That the arbitration proceedings shall be started de novo meaning thereby that the earlier appointment and proceedings before the Sole Arbitrator Shit GG Vaidhya shall be inoperative and void
That the Board shall have a right to agitate all points both in fact and in law before the Sole Arbitrator as per the terms and condi tions of the contract including the question of arbitrability within the meaning of clause 30 of the contract
Both parties shall have a right to be repre sented by an Advocate andor their representa tives
The expenses of arbitration shall be borne by both the parties as per rules of Govern ment in this behalf
That both parties shall agree to extend time as and when necessary for competition of arbitration proceedings
That a formal agreement for arbitration shall be executed between the parties defining the scope of Arbitration
_ That the provisions of the Indian shall apply to the proceedings before this Sole Arbitrator On 31st March 1984 Shri MD Patel was appointed as the sole arbitrator jointly by the parties and on 2nd April 1984 he accepted his appointment and directed the parties to file their claim statements within 15 days
Thereafter the respondent No 1 filed claim to the tune of Rs49220683 and a counter claim to the extent of 324 Rs268721740
On 22nd August 1984 the parties appeared before the arbitrator after filing of claims and counter claims
On 1st October 1984 the petitioner filed an application before the arbitrator praying that preliminary issues be raised and decided first as to which of the disputes were arbitrable under clause 30 Of the agreement
On 8th July 1985 a lumpsum award was made by the arbitrator and on 19th July 1985 the parties were informed about the signing of the award
On the same day the award filed by the re spondent No1 s Advocate which was dated 871985 was regis tered as Civil Miscellaneous Application No 14485
There after notice was issued on the same day and served on the petitioner also on the same day
The petitioner filed objec tions to the award and the Objection Petition was registered as Civil Miscellaneous Application No 15885
Reply to the objections was filed by the respondent No 1
On 17th June 1986 however the learned Civil Judge directed that decree be passed in terms of the award
Two appeals were filed by the petitioner
On the 29th April 1988 the High Court by a judgment dismissed the petition challenging the award and upheld the award
Aggrieved thereby the petitioner has moved this Court as mentioned hereinbefore
Various grounds were urged in support of this applica tion
It was contended firstly that there was an error apparent on the face of the award and that the award was bad
It was submitted that the arbitrator had committed an error of law in not deciding or disclosing his mind about the arbitrability of claims or counter claims more so when the Board s application for deciding the same was pending before the arbitrator
Before the learned Trial Judge the Board had submitted an application to the arbitrator seeking to raise a preliminary issue regarding arbitrability of the claims
As noted by the learned Trial Judge it appears that the third meeting specifically mentioned that the claims were placed before the arbitrator and their contentions about the arbitrability were considered
So these issues were gone into and it appears that the parties had agreed and proceeded on the basis that the claims may be examined and it was not necessary to decide preissue of arbitrability and it was agreed that aH the claims be decided claimwise
So it cannot be said that the arbitrator had acted arbi trarily in discussing all the questions raised before him without first deciding the question of arbitrability or non arbitrability of an issue as such
The Court in its judgment has discussed the conduct of the parties
It appears that the Court found that the par ties themselves had 325 agreed that the arbitrator should decide claimwise and on merit
The Court so found and in or opinion rightly
The arbitrator so proceeded
There was no error committed by the arbitrator in so conducting himself
It was secondly contended that out of the numerous claims before the arbi trator some of which according to the petitioner were ex facie not arbitrable and some were withdrawn including the claims for interest of Rs5461073 and compound interest of Rs8226039
and in the award no basis or indication was given as to which claim was rejected and further of the amount which was awarded as claim and what amount towards element of interest
It was thirdly contended that there was an error apparent on the face of the award inasmuch as the basis on which interest has been awarded has not been disclosed and whether the interest has been awarded from the date of the institution of the proceedings
It was fourth ly contended that granting of interest pendente lite was contrary to the decision of this Court
It was lastly contended that non speaking award had resulted in great prejudice inasmuch as against the claim of Rs 1 lakh Rs57 lakhs have been awarded
The scope and extent of examination by the Court of the award made by an arbitrator has been laid down in various decisions
It has to be noted that there is a trend in modern times that reasons should be stated in the award though the question whether the reasons are necessary in ordinary arbitration awards between the parties is pending adjudication by the Constitution bench of this Court
Even however if it be held that it is obligatory for the arbi trator to state reasons it is not obligatory to give any detailed judgment
An award of an arbitrator should be read reasonably as a whole to find out the implication and the meaning thereof
Short intelligible indications of the grounds should be discernible to find out the mind of the arbitrator for his action even if it be enjoined that in all cases of award by any arbitrator reasons have to be stated
The reasons should not only be intelligible but should also deal either expressly or impliedly with the substantial points that have been raised
Even in a case where the arbitrator has to state reasons the sufficiency of the reasons depends upon the facts and the circumstances of the case
The Court however 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 conclusion or if the award is based upon any legal proposition which is erroneous
See the observations of this Court in Indian Oil Corporation Ltd vs Indian Carbon Ltd  326 In the instant case the arbitrator by virtue of the terms mentioned in the order of this Court had to decide which of the disputes were arbitrable and which were not
It is true that the arbitrator has not specifically stated in the award that he had to decide the question of arbitrabili ty
The arbitrator has rested by stating that he had heard the parties on the point of arbitrability of the claim and the counter claim
He has further stated that after con sidering all the above aspects  and the question of arbi trability or non arbitrability  he had made the award on certain aspects
Reading the award along with the preamble it appears clear that the arbitrator had decided the arbi trability and the amount he has awarded was on the points which were arbitrable
The contention that the arbitrator had not decided the question of arbitrability as a prelimi nary issue cannot also be sustained
A reference to the arbitrator s proceedings which were discussed in detail by the High Court in the judgment under appeal reveal that the procedure adopted by the arbitrator ie that he will finally decide the matters indicated that the parties had agreed to and the arbitrator had proceeded with the consent of the parties in deciding the issues before him and in not deciding the question of arbitrability as a separate dis tinct and preliminary issue
The arbitrator has made his award beating all the aspects including the question of arbitrability in mind
It was contended before us that the arbitrator has made a non speaking award
It was obliged to make a speaking award it was submitted by terms of the order of this Court
We cannot sustain this submission because it is not obligatory as yet for the arbitrator to give reasons in his decision
The arbitrator however has in this case indicated his mind
It appears to us that the point that the non speaking award is per se bad was not agitated before the High Court
We come to that conclusion from the perusal of the judgment under appeal though howev er this point has not been taken in the appellant s appeal
It is one thing to say that an award is unintelligible and is another to say that the award was bad because it was a non speaking award
The point taken was that the award was unintelligible and not that it was non speaking
But there was nothing unintelligible about the award
We were invited to refer the matter to the Constitution Bench and await the disposal of this point by the Constitu tion Bench
The contract in this case was entered into in 1978
The proceedings for initiation of arbitration started in 1981
The matter had come up to this Court before which resulted in the order dated 30th November 1983
Pursuant thereto the award has been made and no grounds specifically were urged though they were taken in the appeal in the High 327 Court in the arguments before the High Court about the award being bad because it is non speaking
In those circum stances it will not be in consonance with justice for us to refer the matter to the Constitution Bench or to await the disposal of the point by the Constitution Bench
It was further submitted before us that the award was unreasonable and that the arbitrator had awarded a large amount to money but the original claim was not so large and as such the award was disproportionate
This contention as it is it appears from the judgment of the High Court was not urged and canvassed before the High Court
The claim and the counter claim together in its totality in our opinion does not make the award amount disproportionate
Reasonableness as such of an award unless the award is per se preposterous or absurd is not a matter for the court to consider
Ap praisement of evidence by the arbitrator is ordinarily not a matter for the court
It is difficult to give an exact definition of the word reasonable 
Reason varies in its conclusions according to the idiosyncrasy of the individual and the times and the circumstances in which he thinks
The word reasonable  has in law prima facie meaning of reasona ble in regard to those circumstances of which the actor called upon to act reasonably knows or ought to know
See the observations on this point in Municipal Corporation of Delhi vs Ms Jagan Nath Ashok Kumar  Anr  Judged by the aforesaid yardstick the award cannot be condemned as unreasonable
There is however one infirmity in the award which is apparent on the face of the award which in the interest of justice as the law now stands declared by this Court we should correct viz the question of interest pendente lite
The right to get interest without the intervention of the Court and the powers of the court to grant interest on judgment have been examined by this Court in Executive Engineer Irrigation Balimela and Ors
vs Abhaduta Jena  Ors 1988 1 SCC 418 which observations were also followed by this Court in State of Orissa  Ors
vs Construction India 1987 Supp
SCC 709
In accordance with the princi ples stated therein and the facts in this case it appears that the principal amount awarded is Rs5765273
This is confirmed
In this case 2nd April 1984 is the date of the reference to arbitration on 22nd August 1984 the arbitra tor entered upon the reference
8th July 1985 is the date of the award and 19th July 1985 is the date of the publi cation of the award
The interest awarded in the instant case covers three periods i 6th August 1981 to 21st August 1984 prior to the commencement of the arbitration proceedings ii 22nd August 1984 to 19th July 328 1985 pendente lite and iii 19th July 1985 to 17th June 1986 date of award to date of decree
Having regard to the position in law emerging from the decision of this Court in Executive Engineer Irrigation Balimela  Ors
supra and section 29 of the and section 34 of the Code of Civil Procedure we would modify the grant of interest in this case
The arbi trator has directed interest to be paid at 17 per annum from 681981 upto the date of decree viz 1761986
Since in this case the reference to arbitration was made after the commencement of the  the arbitrator under section 31a of the said Act was entitled to award inter est from 681981 till 2181984 in view of this Court s decision in Abhaduta Jena s case supra
In the light of the same decision he could not have awarded interest for the period from 2281984 till the date of the publication of the award viz 197
So far as interest for the period from the date of the award 1971985 till the date of the decree is concerned the question was not specifical ly considered in Abhaduta Jena s case supra but special leave had been refused against the order in so far as it allowed interest for this period
We think interest should be allowed for this period on the principle that this Court can once proceedings under sections 15 to 17 are initiated grant interest pending the litigation before it ie from the date of the award to the date of the decree
It may be doubtful whether this can be done in cases arising before the in view of the restricted scope of section 29 of the 
But there can be no doubt about the court s power to grant this interest in cases governed by the as section 31a which was applied by Abhaduta Jena to arbitrators will equally apply to enable this Court to do this in these proceedings
In this connection it is necessary to consider whether the date of commencement of the arbitration proceedings should be taken as the date of the reference or the date on which the arbitrator entered upon the reference as the date of the calculation of interest
In this case the proceed ings commenced on 2nd April 1984 and the arbitrator entered upon the reference on 22nd August 1984
Having regard to the facts and the circumstances of the case it is neces sary in our opinion to take 22nd August 1984 as the date
It is also necessary to consider whether the date of award should be taken as the date of its making or its publica tion
The award was made on 8th July 1985 and it was pub lished on 19th July 1985 and therefore the latter date would be taken as the date of the award
329 We would however delete the interest awarded by the arbitrator for the period from 2281984 till the date of the award and confine the interest on the principal sum of Rs5765273 to interest at 9 per cent from 681981 till 2181984 which has been worked out at Rs2982443
However in exercise of our powers under section 3 of the and section 29 of the  we direct that the above principal sum or the unpaid part thereof should carry interest at the same rate from the date of the award 1971985 till the date of actual pay ment
The appeals are disposed of in the above terms
NVK Appeals disposed of


Summary:
Sub section 1 of section 245C of the Income Tax Act 1961 entitles an assessee at any stage of the case to make an application to the Settlement Commission to have his case settled
Sub section 1 of section 245D requires the Set tlement Commission as and when such an application is made to call for a report from the Commissioner of Income Tax
The first proviso thereto interdicts rejection of the appli cation under that sub section unless an opportunity has been given to the applicant of being heard
The second proviso thereto provides that no application shall be proceeded with under that sub section if the Commissioner objects to the same on the ground that concealment of particulars of income on the part of the applicant or perpetration of fraud by him for evading any tax has been established or is likely to be established
Sub section IA inserted in section 245D by the Finance Act 1979 empowered the Settlement Commission to overrule the objections of the Commissioner
The appellant made a composite application under section 245C of the Act for settlement of his assessments for the assessment years 1948 49 to 1975 76
The Commissioner ob jected to the proposals under sec 336 tion 245D1 for settlement for the years 1948 49 to 1959 60 but agreed to the settlement for the later years
The Commission accordingly made an order an 24th August 1977 rejecting the application for settlement for the years 1948 49 to 1959 60
The appellant thereupon applied to the Commission to recall its order since the same had been made without furnishing him any opportunity of hearing
That application was pending
When sub section IA was inserted to section 245D the appellant applied to the Commission to permit him to contest the objections of the Commissioner contending that these should be dealt with in accordance with the amended provisions of section 245DIA
On 7th August 1987 the Settlement Commission accepted the first part of the contentions holding that the applicant was entitled to a re hearing since its order of 24th August 1977 had been made in violation of the principles of natural justice and also express provision of section 245D1 provi so but rejected the second part of the submission on the view that the application for settlement would have to be disposed of in accordance with law which prevailed on 24th August 1977
It further held that since the Commissioner had objected only to some of the years under settlement the entire application would have to be rejected
Allowing the appeal by Special Leave HELD 1
It is necessary as a concomitant of the fulfil ment of natural justice that an applicant before the Settle ment Commission should be heard before his application under Section 245C of the Act is rejected
The order made by the Commission on 24th August 1977 in the instant case in violation of the principles of natural justice was there fore of no value
If that is so then the application made for settlement was still pending before the Commission when the amendment made by the Finance Act of 1979 came into effect and the said amendment being procedural it would govern the pending proceedings and the Commission would have the power to overrule the objections of the Commissioner
342E 341E G H Income Tax Central Calcutta vs BN Bhattachargee  Anr 1979 Vol  MS Gill
vs Chief Election Commissioner   Maneka Gandhi vs Union of India 1978 1 SCC 248 State of Orissa vs Dr Miss Binapani Dei  Ors   Ridge vs Baldwin   Anisminic Ltd vs Foreign Compensation Commission  and Administrative Law by HWR Wade5th Edn
310 311 referred to
21 The appellant had a right to be heard on the objections of the 337 Commissioner
But no clear opportunity was given to him to make submissions in the sense to demonstrate that the Com missioner was not justified in making the objections and that the Commission should not accept or accede to the objections
He should therefore be heard on the said objections
342D E
22 Though for the relevant orders for the years for which the Commissioner had objected the concealment had been upheld in the appeal before the appropriate authorities but in spite of this it may be possible for the appellant to demonstrate or to submit that in disclosure of concealed income for a spread over period settlement of the entire period should be allowed and not bifurcated in the manner sought to be suggested for the Commissioner s objections
This objection the appellant should have opportunity to make
342F G 3
In exercise of its power of judicial review of the decision of the Settlement Commission under Article 136 of the Constitution the Court is concerned with the legality of procedure followed and not with the validity of the order
342G Chief Constable of the North Wales Police vs Evans  referred to
The order dated 7th August 1987 is set aside and the matter is remanded hack to the Settlement Commission to hear and dispose of the settlement petition in accordance with law
343A