Case: Sangamner Bhag Sahakari Karkhana Ltd Vs. Krupp Industries Ltd

(2) The appellant is a co-operative sugar factory manufacturing sugar from sugarcane. On 17-11-1992 an agreement was entered into between the appellant and the respondent for design, manufacture, procurement and supply of machinery and equipments for modernisation with continuous fermentation process based on Encillium Process, developed and patented by Council for Scientific and Industrial Research, New Delhi and National Chemical Laboratory, Pune. Disputes arose between the parties. The agreement dated 17-11-1992 contained an arbitration clause pursuant whereto the disputes were referred for arbitration by two arbitrators, one appointed by each of the parties. By their award dated 20/06/1999, the learned Arbitrators directed an amount of Rs. 151.97 lacs to be paid by the respondent to the appellant in full and final settlement of all claims by and between the parties.  (3) The award was filed in the Court of the Civil Judge, Senior Division, Sangamner. Both the parties preferred objections against the award. After hearing the learned counsel for the parties, by its judgment dated 6-5-2000 the learned Civil Judge directed the award to be remitted back to the learned arbitrators for rendering a fresh award consistently with the directions given by the learned Civil Judge. The appellant preferred a revision laying challenge to the direction of the Court remitting the award while the respondent preferred an appeal submitting that on the view taken by the learned Civil Judge, Senior Division the award itself should have been set aside and there was no occasion for remitting the award to the arbitrators. The learned single Judge of the High Court heard the revision and the appeal together. By the impugned order the learned Judge has dismissed the civil revision and allowed the appeal. As a result the order of the learned Civil Judge, Senior Division remitting the award to the arbitrators has been set aside and the award to the extent of Rs. 107.54 lacs and the interest thereon in the sum of Rs. 28.74 lacs has been set aside. The rest of the award has been made a rule of the Court. Feeling aggrieved by the impugned judgment of the High Court these petitions have been filed by the appellants seeking leave to file appeals by special leave.

Reasoning: (4) We have heard the learned counsel for the parties at length who have apart from making legal submissions carried the Court through the pleadings, the relevant correspondence between the parties, several documents and the proceedings before the arbitrators. However it is not necessary for us to deal with the same in very many details as we have formed an opinion that the impugned judgment of the High Court deserves to be set aside and the order of the learned Civil Judge deserves to be restored(5) A perusal of the judgment of the learned Civil Judge, Senior Division shows the learned Judge having formed an opinion that the award suffered from an error apparent on its face. There was an omission on the part of the learned arbitrators to consider a few relevant documents available on record which in the opinion of the learned Civil Judge if taken into consideration the finding of the arbitrators would not have been what it is. The learned Civil Judge also formed an opinion that there was a violation of the principles of natural justice inasmuch as the parties were not afforded a hearing on the issue on which the learned arbitrators had based their decision. The learned Civil Judge was of the opinion that on totality of the facts and circumstances of the case instead of setting aside the award the same deserved to be remitted to the arbitrators with the request to render the award afresh. The High Court has however, formed an opinion that to the extent to which the award has been set aside by the High Court it was beyond the scope of reference to the arbitration and hence there was no question of the parties being afforded an opportunity of re-arguing the same question before the arbitrators as the arbitrators could not assume jurisdiction over an issue which was not referred to them(10) Clause (c) of sub-section (1) of Section 16 contemplates an award being remitted to the arbitrators or Umpire for reconsideration upon such terms as the Court thinks fit where an objection to the legality of the award is apparent upon the face of it. As held recently by this Court in Ramachandra Reddy and Co. v. State of A.P. and Ors. (2001) 4 SCC 241  the jurisdiction to remit an award by the Court to the arbitrators is a discretionary jurisdiction conferred on the Court and so long as the said discretion has been judicially exercised an Appellate Court would not be justified in interfering with the exercise of discretion unless the discretion is misused. In our opinion no fault can be found with the discretion exercised by the learned Civil Judge, Senior Division. The High Court has erroneously formed an opinion that part of the award was beyond the jurisdiction of the arbitrators