Case: M/S Sumitomo Heavy Industries Ltd Vs. Oil &amp; Natural Gas Company

the arbitrator is based on a possible view of the matter, the court is not expected to interfere with the award. The High Court has erred in so interfering. 36. Can the findings and the award in the present case be described as perverse? This Court has already laid down as to which finding would be called perverse. It is a finding which is not only against the weight of evidence but altogether against the evidence. This Court has held in Triveni Rubber & Plastics v. CCE AIR 1994 SC 1341 that a perverse finding is one which is based on no evidence or one that no reasonable person would have arrived at. Unless it is found that some relevant evidence has not been considered or that certain inadmissible material has been taken into consideration the finding cannot be said to be perverse. The legal position in this behalf has been recently reiterated in Arulvelu and Anr. v. State Represented by the Public Prosecutor and Anr. (2009) 10 SCC 206. In the present case, the findings and award of the umpire are rendered after considering the material on record and giving due weightage to all the terms of the contract. Calling the same to be perverse is highly unfair to the umpire. The umpire has considered the fact situation and placed a construction on the clauses of the agreement which according to him was the correct one. One may at the highest say that one would have preferred another construction of Clause 17.3 but that cannot make the award in any way perverse. Nor can one substitute ones own view in such a situation, in place of the one taken by the umpire, which would amount to sitting in appeal. As held by this Court in Kwality Manufacturing Corporation v. Central Warehousing Corporation reported in (2009) 5 SCC 142 the court while considering challenge to arbitral award does not sit in appeal over the findings and decision of the arbitrator, which is what the High Court has practically done in this matter. The umpire is legitimately entitled to take the view which he holds to be the correct one after considering the material before him and after interpreting the provisions of the agreement. If he does so, the decision of the umpire has to be accepted as final and binding. 37. It is an obligation of the parties to a contract that they must perform their respective promises, and if a party does not so perform, the arbitrator or the umpire has to give the necessary direction if sought. In that process, they have to give a meaningful interpretation to all the relevant clauses of the contract to make them effective and not redundant. The intention of the parties in providing a clause like Clause 17.3 could not be ignored. It had to be given a due weightage. This is what the umpire has done and has given the direction to the respondent to compensate the appellant for the amount of the necessary and reasonable extra cost caused by change in law. We have no hesitation in holding that the award of the umpire is a well reasoned award and one within his jurisdiction, and which gives a meaningful interpretation to all the clauses of the contract including Clause 17.3. In the circumstances in our view the High Court has clearly erred in interfering with the award rendered by the umpire. 38. There is one more submission which has to be referred to. It was canvassed on behalf of the appellant in the High Court and before us also that the award rendered by the umpire was one on a question of law and on that ground also the Court was not expected to interfere with the award. Mr. Dave took us through the notice of intention to appoint the arbitrator, the request for arbitration, the summary of issues submitted by the appellant and the draft issues submitted by the respondent. He then contended that appellants claim essentially depended on the interpretation of the clauses of contract which plea was specifically raised through these draft issues and this stood on the same footing, as a reference of an issue of law for arbitration. Amongst others, the judgment in Kapoor Nilokheri Co-op Diary Farm Society Ltd. v. Union of India and Ors. in (1973) 1 SCC 708 was relied upon in support of this proposition. As against that, Mr. Tankha submitted that in paragraph 23 of Tarapore & Co. v. Cochin Shipyard Ltd. AIR 1984 SC 1072 the judgment in Kapoor Nilokheri has been read as one in the facts of that case. He further relied upon the judgment in Rajasthan State Mines & Minerals Ltd. v. Eastern Engineering Enterprises and Anr. JT 1999 (7) SC 379 to submit that the award of the arbitrator on a question of law is immune from a challenge in a Court only when it is rendered on a specific question of law referred to him and that the same was not the situation in the present matter. The Division Bench has accepted this submission of the respondent and held that in the present case there was no specific question of law referred to the arbitrators or the umpire. It held that what was referred for arbitration was the determination of the claim of the appellant against the respondent, and that an incidental question involving interpretation cannot be said to be a specific question of law. 39. However, we are not required to go into that issue since we are otherwise holding that the award was not only a plausible one but a well-reasoned award. In the circumstance the interference by the High Court was not called for. In that view of the matter we allow this appeal and set aside the judgment of the learned single Judge, as well as that of the Division Bench. The award made by the Umpire is upheld and there shall be a decree in terms of the award.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]34. In the present matter the Division Bench has observed, that the umpire exceeded his jurisdiction in awarding Appellants claim under17.3 of the agreement and that he has failed to apply his mind to the pleadings, documents and the evidence as well as particular clause of the contract to declare that the award was perverse. In fact as seen above, the umpire has entertained appellants claim only after giving a meaningful interpretation to17.3 after considering all the material on record as well as the context. Respondent had contended in their arbitration petition before the High Court that it was not permissible to refer to thenegotiations and the documents arising therein. What the umpire has however done is to look into the context with a view to understand the text. As we have noted above the umpire has looked into the evidence before him including that of the respondents officer as to how MII had participated in the bid clarification meetings. He considered the submission of the appellant as to how thewas also tax protected, which was their main plea. It is true that if there is an error apparent on the face of the award or where the umpire had exceeded his jurisdiction or travelled beyond the reference, the court can interfere. However in view of what is noted above it is not possible to say that the award suffers from any of the above defects so as to call for. The view canvassed on behalf of the respondent was that17.3 ought to be read narrowly like an indemnity clause or given a literal interpretation as in the case of an insurance policy. The umpire on the other hand has observed that this clause is couched in wide terms and it was commercially understandable and sensible, since it was designed to cover a wide and potentially unforeseeable spectrum viz. the likely impact of a possible change in Indian law in future. In the circumstances the approach adopted by the umpire being a plausible interpretation, is not open to interfere. The Division bench was clearly in error when it observed that the view of the umpire on17.3 is by no stretch of imagination a plausible or a possible view. Perhaps, it can be said to be a situation where two views are possible, out of which the umpire has legitimately taken one. As recently reiterated by this Court in Steel Authority of India LimitedGupta Brothers Steel Tubes Limited reported in (2009) 10 SCC 63  if the conclusion of the arbitrator is based on a possible view of the matter, the court is not expected to interfere with the award. The High Court has erred in so interfering.In the present case, the findings and award of the umpire are rendered after considering the material on record and giving due weightage to all the terms of the contract. Calling the same to be perverse is highly unfair to the umpire.The umpire has considered the fact situation and placed a construction on the clauses of the agreement which according to him was the correct one. One may at the highest say that one would have preferred another construction of17.3 but that cannot make the award in any way perverse. Nor can one substitute ones own view in such a situation, in place of the one taken by the umpire, which would amount to sitting in appeal. As held by this Court in Kwality Manufacturing CorporationCentral Warehousing Corporation reported in (2009) 5 SCCthe court while considering challenge to arbitral award does not sit in appeal over the findings and decision of the arbitrator, which is what the High Court has practically done in this matter. The umpire is legitimately entitled to take the view which he holds to be the correct one after considering the material before him and after interpreting the provisions of the agreement. If he does so, the decision of the umpire has to be accepted as final and binding.However, we are not required to go into that issue since we are otherwise holding that the award was not only a plausible one but aaward. In the circumstance the interference by the High Court was not called for. In that view of the matter we allow this appeal and set aside the judgment of the learned single Judge, as well as that of the Division Bench. The award made by the Umpire is upheld and there shall be a decree in terms of the award.