Case: Oil &amp; Natural Gas Corpn.Ltd Vs. Western Geco International Ltd

the importance of Judicial approach in judicial and quasi judicial determination lies in the fact so long as the Court, Tribunal or the authority exercising powers that affect the rights or obligations of the parties before them shows fidelity to judicial approach, they cannot act in an arbitrary, capricious or whimsical manner. Judicial approach ensures that the authority acts bonafide and deals with the subject in a fair, reasonable and objective manner and that its decision is not actuated by any extraneous consideration. Judicial approach in that sense acts as a check against flaws and faults that can render the decision of a Court, Tribunal or Authority vulnerable to challenge. In Ridge v. Baldwin [1963 2 All ER 66], the House of Lords was considering the question whether a Watch Committee in exercising its authority under Section 191 of the Municipal Corporations Act, 1882 was required to act judicially. The majority decision was that it had to act judicially and since the order of dismissal was passed without furnishing to the appellant a specific charge, it was a nullity. Dealing with the appellant’s contention that the Watch Committee had to act judicially, Lord Reid relied upon the following observations made by Atkin L.J. in [1924] 1 KB at pp. 206,207: “Wherever any body of persons having legal authority to determine questions affecting the rights of subjects, and having the duty to act judicially, act in excess of their legal authority, they are subject to the controlling jurisdiction of the King’s Bench Division exercised in these writs.” 27. The view taken by Lord Reid was relied upon by a Constitution Bench of this Court in A.C. Companies Ltd vs. P.N. Sharma and Anr. (AIR 1965 SC 1595 ) where Gajendragadkar, C.J. speaking for the Court observed : “In other words, according to Lord Reid’s judgment, the necessity to follow judicial procedure and observe the principles of natural justice, flows from the nature of the decision which the watch committee had been authorised to reach under S.191(4). It would thus be seen that the area where the principles of natural justice have to be followed and judicial approach has to be adopted, has become wider and consequently, the horizon of writ jurisdiction has been extended in a corresponding measure. In dealing with questions as to whether any impugned orders could be revised under A. 226 of our Constitution, the test prescribed by Lord Reid in this judgment may afford considerable assistance.” 28. Equally important and indeed fundamental to the policy of Indian law is the principle that a Court and so also a quasi-judicial authority must, while determining the rights and obligations of parties before it, do so in accordance with the principles of natural justice. Besides the celebrated ‘audi alteram partem’ rule one of the facets of the principles of natural justice is that the Court/authority deciding the matter must apply its mind to the attendant facts and circumstances while taking a view one way or the other. Non-application of mind is a defect that is fatal to any adjudication. Application of mind is best demonstrated by disclosure of the mind and disclosure of mind is best done by recording reasons in support of the decision which the Court or authority is taking. The requirement that an adjudicatory authority must apply its mind is, in that view, so deeply embedded in our jurisprudence that it can be described as a fundamental policy of Indian Law.29. No less important is the principle now recognised as a salutary juristic fundamental in administrative law that a decision which is perverse or so irrational that no reasonable person would have arrived at the same will not be sustained in a Court of law. Perversity or irrationality of decisions is tested on the touchstone of Wednesbury’s principle of reasonableness. Decisions that fall short of the standards of reasonableness are open to challenge in a Court of law often in writ jurisdiction of the Superior courts but no less in statutory processes where ever the same are available.30. It is neither necessary nor proper for us to attempt an exhaustive enumeration of what would constitute the fundamental policy of Indian law nor is it possible to place the expression in the straitjacket of a definition. What is important in the context of the case at hand is that if on facts proved before them the arbitrators fail to draw an inference which ought to have been drawn or if they have drawn an inference which is on the face of it, untenable resulting in miscarriage of justice, the adjudication even when made by an arbitral tribunal that enjoys considerable latitude and play at the joints in making awards will be open to challenge and may be cast away or modified depending upon whether the offending part is or is not severable from the rest.31. Inasmuch as the arbitrators clubbed the entire period between 16th October, 2001 and 21st March, 2002 for purposes of holding the appellant-Corporation responsible for the delay, they committed an error resulting in miscarriage of justice apart from the fact that they failed to appreciate and draw inferences that logically flow from such proved facts. We have, therefore, no hesitation in rejecting the contention urged on behalf of the respondent that the arbitral award should not despite the infirmities pointed out by us be disturbed.32. That brings us to the last submission that deduction on account of taxes not paid should have been allowed by the respondent-arbitral tribunal. The Tribunal has, in our opinion, correctly held that no part of the work was undertaken outside Singapore which was to be executed on a turnkey basis for a price that was pre-determined. The arbitrators have, in our opinion, rightly held that no taxes were payable under the Indian Income tax Act so as to entitle the Corporation to deduct any amount on that account by reason of non-payment of such taxes. The challenge to the award to that extent must fail and is, hereby, rejected.

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

Explanation:
1[ds]19. The above period of 4 months and 22 days between 1st November, 2001 and 22nd March, 2002, in our opinion, comprises four separate intervals. The first of these four intervals is the period between 1st November, 2001 and 26th November, 2001 which period was taken by the appellant-Corporation to take a final decision whether or not an application should be made to the U.S authorities for the issue of a licence. The second interval comprises time taken by the respondent-claimant to make an application between 27th November, 2001 and 7th January, 2002, both days inclusive. The application for grant of a license was filed by the respondent only on 8th January, 2002. The third interval comprises time taken by the U.S Authorities between 8th January, 2002 and 7th March, 2002 to formally decline the issue of a license for sale of US made hydrophones to India. The fourth interval comprises time taken by the respondent-claimant to convey the decision of the U.S Authorities between 8th March, 2002 and 21st March, 2002. It is common ground that while the U.S Authorities had rejected the request for grant of a license on 8th March, 2002, the said rejection was conveyed to the appellant-corporation only on 22nd March, 2002.20. From the findings of the fact recorded by the arbitrators with which we see no reason to interfere or disagree, it is evident, that the appellant-corporation was solely responsible for the delay in taking a decision in the matter between 24th October, 2001 and 26th November, 2001. The arbitrators have found and, in our opinion, rightly so that the respondent-claimant had by its letter dated 24th October, 2001 clearly informed the appellant that there was no use pursuing the matter with the U.S. Authorities any further. Even particulars regarding Canadian hydrophones were supplied to the appellant in terms of a letter dated 25th October, 2001. The arbitrators have held that delay in taking a decision whether or not any formal application should be made and a formal rejection obtained by the respondent was attributable only to the appellant- Corporation. There is, in our opinion, no legal flaw, infirmity or perversity in that finding which we hereby affirm. Deduction made by the appellant-Corporation for the First interval that comprises period between 1st November, 2001 and 25th November, 2001, both days inclusive, cannot, therefore, be sustained and the arbitral award to that extent cannot be faulted.21. That brings us to the second interval comprising period between 26th November, 2001-the date when the appellant-Corporation issued instructions for making of a formal application for the grant of a license and 8th January, 2002-when such an application was actually made by the respondent-company. This period reckoned from 27th November, 2001 to 7th January, 2002 works out to 42 (Forty two) days which must be attributed to the respondent- claimant, who could and indeed ought to have acted diligently and with reasonable despatch in the matter instead of taking the same easy, and if we may say so somewhat reluctantly. We cannot help saying with utmost respect at our command for the eminence and erudition of the distinguished jurists comprising the Arbitral Tribunal that the tribunal failed to appreciate this aspect hence fell in a palpable error leading to miscarriage of justice. The test adopted by the Tribunal for holding the appellant-Corporation responsible for delay ought to have been applied to the respondent as well for its failure to take action in the right earnest instead of sitting over the matter leading to detention of the vessel for a period more than what was absolutely necessary.22. The period between 8th January, 2002 and 8th March, 2002 comprising the third interval during which the U.S. authorities decided the application for the grant of a license has been rightly counted against the appellant-Corporation as it was at the instance of the Corporation that a formal application was made. The time spent by the U.S. authorities for disposal of the request could not in the facts and circumstances be attributed to or counted against the respondent-claimant who had advised the appellant against any such move. The arbitral Tribunal, therefore rightly held that deduction for this period was not justified.23. That leaves us with the fourth and the last interval comprising the period between 8th March, 2002 and 22nd March, 2002 when the rejection of the application was conveyed to the appellant-Corporation. There is, in our opinion, no valid reason why this period should not be counted against the respondent, who could and indeed should have conveyed the rejection to the appellant-Corporation forthwith, instead of taking nearly two weeks to do so. To sum up; the period of 4 months and 22 days which the arbitrators have attributed to the appellant-Corporation shall have to be reduced by 42 days comprising the first interval and 14 days comprising the fourth making a total of 56 days. Resultantly, deduction made by the appellant- Corporation for 56 days referred to above deserve to be affirmed, and the award made by the arbitrators modified to that extent. It follows that the amount awarded to the respondent-Company shall on a proportionate basis, stand reduced.It is true that none of the grounds enumerated under Section 34(2)(a) were set up before the High Court to assail the arbitral award. What was all the same urged before the High Court and so also before us was that the award made by the arbitrators was in conflict with thea ground recognised under Section 34(2)(b)(ii) (supra). The expressionfell for interpretation before this Court in ONGC Ltd. v. Saw Pipes Ltd. (2003) 5 SCC 705  and was, after a comprehensive review of the case law on the subject, explained in para 31 of the decision in the followingTherefore, in our view, the phraseused in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the termin Renusagar case10 it is required to be held that the award could be set aside if it is patently illegal. The result would be — award could be set aside if it is contrary to:(a) fundamental policy of Indian law; or(b) the interest of India; or(c) justice or morality, or[pic](d) in addition, if it is patently illegal.Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy.Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged void.What then would constitute the ‘Fundamental policy of Indianis the question. The decision in Saw Pipes Ltd. (supra) does not elaborate that aspect. Even so, the expression must, in our opinion, include all such fundamental principles as providing a basis for administration of justice and enforcement of law in this country. Without meaning to exhaustively enumerate the purport of the expressionPolicy of Indianwe may refer to three distinct and fundamental juristic principles that must necessarily be understood as a part and parcel of the FundamentalPolicy of Indianlaw. The first and foremost is the principle that in every determination whether by a Court or other authority that affects the rights of a citizen or leads to any civil consequences, the Court or authority concerned is bound to adopt what is in legal parlance called a ‘judicialin the matter. The duty to adopt a judicial approach arises from the very nature of the power exercised by the Court or the authority does not have to be separately or additionally enjoined upon the fora concerned. What must be remembered is that the importance of Judicial approach in judicial and quasi judicial determination lies in the fact so long as the Court, Tribunal or the authority exercising powers that affect the rights or obligations of the parties before them shows fidelity to judicial approach, they cannot act in an arbitrary, capricious or whimsical manner. Judicial approach ensures that the authority acts bonafide and deals with the subject in a fair, reasonable and objective manner and that its decision is not actuated by any extraneous consideration. Judicial approach in that sense acts as a check against flaws and faults that can render the decision of a Court, Tribunal or Authority vulnerable to challenge. In Ridge v. Baldwin [1963 2 All ER 66], the House of Lords was considering the question whether a Watch Committee in exercising its authority under Section 191 of the Municipal Corporations Act, 1882 was required to act judicially. The majority decision was that it had to act judicially and since the order of dismissal was passed without furnishing to the appellant a specific charge, it was a nullity. Dealing with thecontention that the Watch Committee had to act judicially, Lord Reid relied upon the following observations made by Atkin L.J. in [1924] 1 KB at pp.any body of persons having legal authority to determine questions affecting the rights of subjects, and having the duty to act judicially, act in excess of their legal authority, they are subject to the controlling jurisdiction of theBench Division exercised in these writs.The view taken by Lord Reid was relied upon by a Constitution Bench of this Court in A.C. Companies Ltd vs. P.N. Sharma and Anr. (AIR 1965 SC 1595 ) where Gajendragadkar, C.J. speaking for the Court observedother words, according to Lordjudgment, the necessity to follow judicial procedure and observe the principles of natural justice, flows from the nature of the decision which the watch committee had been authorised to reach under S.191(4). It would thus be seen that the area where the principles of natural justice have to be followed and judicial approach has to be adopted, has become wider and consequently, the horizon of writ jurisdiction has been extended in a corresponding measure. In dealing with questions as to whether any impugned orders could be revised under A. 226 of our Constitution, the test prescribed by Lord Reid in this judgment may afford considerable assistance.Equally important and indeed fundamental to the policy of Indian law is the principle that a Court and so also a quasi-judicial authority must, while determining the rights and obligations of parties before it, do so in accordance with the principles of natural justice. Besides the celebrated ‘audi alteramrule one of the facets of the principles of natural justice is that the Court/authority deciding the matter must apply its mind to the attendant facts and circumstances while taking a view one way or the other. Non-application of mind is a defect that is fatal to any adjudication. Application of mind is best demonstrated by disclosure of the mind and disclosure of mind is best done by recording reasons in support of the decision which the Court or authority is taking. The requirement that an adjudicatory authority must apply its mind is, in that view, so deeply embedded in our jurisprudence that it can be described as a fundamental policy of Indian Law.29. No less important is the principle now recognised as a salutary juristic fundamental in administrative law that a decision which is perverse or so irrational that no reasonable person would have arrived at the same will not be sustained in a Court of law. Perversity or irrationality of decisions is tested on the touchstone ofprinciple of reasonableness. Decisions that fall short of the standards of reasonableness are open to challenge in a Court of law often in writ jurisdiction of the Superior courts but no less in statutory processes where ever the same are available.30. It is neither necessary nor proper for us to attempt an exhaustive enumeration of what would constitute the fundamental policy of Indian law nor is it possible to place the expression in the straitjacket of a definition. What is important in the context of the case at hand is that if on facts proved before them the arbitrators fail to draw an inference which ought to have been drawn or if they have drawn an inference which is on the face of it, untenable resulting in miscarriage of justice, the adjudication even when made by an arbitral tribunal that enjoys considerable latitude and play at the joints in making awards will be open to challenge and may be cast away or modified depending upon whether the offending part is or is not severable from the rest.31. Inasmuch as the arbitrators clubbed the entire period between 16th October, 2001 and 21st March, 2002 for purposes of holding the appellant-Corporation responsible for the delay, they committed an error resulting in miscarriage of justice apart from the fact that they failed to appreciate and draw inferences that logically flow from such proved facts. We have, therefore, no hesitation in rejecting the contention urged on behalf of the respondent that the arbitral award should not despite the infirmities pointed out by us be disturbed.32. That brings us to the last submission that deduction on account of taxes not paid should have been allowed by the respondent-arbitral tribunal. The Tribunal has, in our opinion, correctly held that no part of the work was undertaken outside Singapore which was to be executed on a turnkey basis for a price that was pre-determined. The arbitrators have, in our opinion, rightly held that no taxes were payable under the Indian Income tax Act so as to entitle the Corporation to deduct any amount on that account by reason of non-payment of such taxes. The challenge to the award to that extent must fail and is, hereby, rejected.