*THE HONOURABLE SRI JUSTICE L.NARASIMHA REDDY + C.M.A.No.2590 of 2001 and C.R.P.No.3586 of 2002 %12.08.2010 #Sree Rajesh Indistries. ..Appellant. Vs. $.Shri K.K.Verma and others. ..Respondents. !Counsel for the appellant : Sri M.R.S. Srinivas. ^Counsel for the Respondents : Sri Gouri Shankar Sanghi <Gist : >Head Note: ?Cases Referred: [1] 1995 (3) ALT 120 (D.B.) 2 AIR 1971 SUPREME COURT 696 3 AIR 1976 M.P. 126 4 AIR 1987 DELHI 148 THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY C.M.A.No.2590 of 2001 and C.R.P.No.3586 of 2002 COMMON JUDGMENT: The Miscellaneous Appeal under Section 39 of the Arbitration Act, 1940 (for short ‘the Act’) and the revision under Section 115 of C.P.C., are between the same parties and arose out of the arbitration proceedings between them. Hence, they are disposed of through a common judgment. The appellant is an Electrical Contractor and undertakes the works of State Electricity Board and other establishments. It was entrusted with the contract of supply of material and erection of 132/25 KV Traction Sub-Stations at Kondapally, Bonakalu, Dornakal and Neekonda stations of South Central Railway, in the year 1983. The value of the contract was Rs.56,99,932/-. The appellant executed the substantial part of the contract. However, disputes arose between the appellant and the Chief Project Manager, Railway Electrification, the 3rd respondent. As provided for under the agreement, for the works, the matter was referred to respondents 1 and 2 for arbitration. Accordingly, they entered appearance and took up the proceedings. The appellant, on the one hand, and the 3rd respondent, on the other hand, made claims against each other. Through an elaborate award, dated 27.12.1990, the Arbitrators held that the appellant is entitled to be paid a sum of Rs.12,63,044/-, whereas the 3rd respondent is entitled to recover a sum of Rs.8,93,102/-, under various heads. The result was that the appellant was held to be entitled for a sum of Rs.3,69,942/-. The 3rd respondent filed O.S.No.44 of 1991, in the Court of III Additional Senior Civil Judge, Viayawada, under Sections 14 and 20 of the Arbitration Act, with a prayer to make the award as the Rule of the Court. The appellant, on the other hand, filed O.P.No.205 of 1991 in the same Court, under Sections 30 and 33 of the Act, with a prayer to set aside the award. Through a common judgment, dated 17.01.2000, the trial Court dismissed O.P.No.205 of 1991 and decreed O.S.No.44 of 1991. Hence the appeal and revision. Sri M.R.S.Srinivas, learned counsel for the appellant, submits that the award is devoid of any reasons and it cannot be sustained in law. For this submission, he places reliance upon the amendment caused to the Act through A.P. Act 1 of 1990, effecting amendment to Sections 14 and 17 of the Act. He submits that though semblance of reasons are present in the award, they do not withstand the scrutiny. Learned counsel contends that the Arbitrators misconducted themselves in deviating from the terms of contract between the appellant and the 3rd respondent and recorded findings absolutely without any basis. He places reliance upon several decided cases. Sri Gouri Shankar Sanghi, learned counsel for the 3rd respondent, on the other hand, submits that the appeal and revision are not maintainable, inasmuch as the decree passed by the trial Court in the suit was executed at the instance of the appellant himself and the E.P. was closed by recording full satisfaction. According to the learned counsel, nothing remains to be decided at this stage. He further submits that the Arbitrators have assigned adequate and cogent reasons and the award accords with the amended provisions of Sections 14 and 17 of the Act. Learned counsel contends that once the award accords with the basic principles of law, the same cannot be assailed on merits, even if a second view is possible on facts. He submits that the award does not suffer from any legal, or factual infirmity. He places reliance upon a judgment of the Division Bench of this Court in M/s. Hemadri Cements Private Limited, Hyderabad v. M/s. Walchandnagar Industried Limited, Pune[1]. The O.P. and the suit were clubbed and the following common points were framed: 1. “Whether the award dated 27.12.1990 can be made as a rule of Court after making certain modifications and corrections as prayed for by the Railways? 2. Whether the award dated 27.12.1990 is liable to be set aside as prayed for by the contractor?” On behalf of the appellant, PWs.1 and 2 were examined and he filed Ex.A.1 – award passed by the Arbitrators. On behalf of the respondents, DW.1 was examined, and Exs.B.1 to B.5 were filed. The O.P. was dismissed and the suit was decreed. The result is that the award was made as the rule of the Court with certain corrections, namely, the amount awarded by the Arbitrators at Rs.4,29,941/-, was reduced to Rs.3,69,942/-. The first point urged by the learned counsel for the appellant is that the award cannot be sustained in law, in view of the amendment caused through Act 1 of 1990. The award was passed after the amendment caused to Act 1 of 1990 came into force. Through the said amendment, Sections 14 and 17 of the Act were amended to the effect that the Arbitrators shall assign reasons in support of their conclusions, and any award bereft of reasons, is unenforceable in law. In case the award - Ex.A1 did not contain any reasons, it would have been unenforceable and the matter was required to be remanded to the Arbitrators. However, a perusal of the award discloses that, detailed, extensive and cogent reasons were assigned. The award runs into nine typed pages. Not only the contentions of the parties were taken into account, but also they were discussed by referring to the facts and figures meticulously. The relevant provisions of the agreement were also referred to. The documents relied upon by the parties were considered in detail. Therefore, the contention of the appellant, based upon Act 1 of 1990, cannot be sustained. Another ground urged by the appellant is that the Arbitrators have travelled beyond the scope of reference and the terms of contract and that the same amounts to misconduct. Reliance is placed on fairly large number of precedents. It is difficult to accept the contention of the appellant. An Arbitrator chosen by the parties stands on a substantially different footing compared to a Court of law or an adjudicator of any other description. An Arbitrator is chosen by the parties, reposing confidence in him, and agreeing to bind themselves for whatever he suggests. He is chosen more for his acquaintance with the subject matter in dispute, than his legal acumen. Till the Act came to be amended, an Arbitrator was not even required to assign reasons, in support of his conclusions. Even after the amendment of Sections 14 and 17 of the Act, the reasons assigned by an Arbitrator are not amenable to judicial scrutiny, as in the case of a judgment rendered or order passed by a subordinate Court. Another reason why an Arbitrator is permitted such a latitude is that he is not required to decide the matter according to law. The soundness of reasons can be tested only to know whether they accord with the provision of law, which the Arbitrator has chosen to apply to the facts of the case. Once an Arbitrator is relieved from the requirement of adhering to strict procedure and principles of law, the reasons assigned by him in support of his conclusions, cannot be subjected litmus test, as in the case of judgments rendered by the Courts of law. This is not to suggest that an Arbitrator can totally ignore the provisions of law and decide the matter according to his ipsi dixit. Whether he furnishes reasons or not, in case the conclusions arrived at by him are found to be contrary to any specific provision of law, that govern the issue and the parties are not free to contract it out, it cannot be sustained. Therefore, as long as an aggrieved party is not able to point out that a particular aspect of the award is opposed to specific provision of law, he cannot find fault with it, even if the reasoning of the Arbitrator is not sound. If an award of Arbitrator is to be tested, by the Courts as though it is a judgment rendered by a Subordinate Court, the very purpose of creating institution of Arbitrator would be defeated. On the other hand, the length of litigation would virtually be doubled. In M/s.Allen Berry and Company Private Limited v. the Union of India[2], the Supreme Court observed as under: “The rule thus is that as the parties choose their own arbitrator to be the Judge in the dispute between them, they cannot, when the award is good on the face of it, object to the decision either upon the law or the facts. Therefore, even when an arbitrator commits a mistake either in law or in fact in determining the matters referred to him, but such mistake does not appear on the face of the award or in a document appended to or incorporated in it so as to form part of it, the award will neither be remitted nor set aside notwithstanding the mistake.” The appellants placed reliance upon the judgment of the M.P. High Court in M/s. Umraosingh and Company, Lucknow v. the State of Madhya Pradesh[3]. On broad principle, this case, in a way, negatives the contention of the appellant, than supporting him. It was held that, even if an Arbitrator does not assign reasons, the award cannot be found fault with. On facts, one claim, which was rejected by the Arbitrator, was allowed. The learned Single Judge of Delhi High Court in M/s.Bombay Ammonia Private Limited v. Union of India[4], noticed internal contradictions between two observations made by the Arbitrator on two different issues and held that they are not reconcilable. That was treated as misconduct in the proceedings. No such contradiction is pointed out in the instant case. This Court does not find any reason to interfere with the order passed and judgment rendered by the trial Court, in the O.P. and suit, respectively. The appeal and the revision are accordingly dismissed. There shall be no order as to costs. ______________________ L.NARASIMHA REDDY, J Dated:12.08.2010 L.R. copy to be marked. GJ [1] 1995 (3) ALT 120 (D.B.) [2] AIR 1971 SUPREME COURT 696 [3] AIR 1976 M.P. 126 [4] AIR 1987 DELHI 148