Case: M/s. Anand Brothers P. Ltd. TR. M.D Vs. Union of India &amp; Others

1. A non-speaking arbitral award in favour of the appellant-company was set aside by a learned Single Judge of the High Court of Delhi on the ground that the Arbitrator had not recorded his findings as required under Clause 70 of the General Conditions of Contract. Relying upon the decisions of this Court in M/s Daffadar Bhagat Singh and Sons v. Income-tax officer, A Ward, Ferozepur (AIR 1969 SC 340 ), Bhanji Bhadgwandas v. The Commissioner of Income-tax, Madras (AIR 1968 SC 139 and Rajinder Nath etc. v. Commissioner of Income-tax, Delhi (AIR 1979 SC 1933 ) the High Court held that the expression finding appearing in Clause 70 of the General Conditions of Contract implies something more than the mere recording of a conclusion by the Arbitrator. Inasmuch as the Arbitrator had failed to do so, the award rendered by him was unsustainable. The High Court accordingly set aside the award and remitted the matter back to the Arbitrator for a fresh determination of the disputes between the parties2. An appeal was then preferred by the appellant-company before a Division Bench of the High Court who relying upon the decision of this Court in Gora Lal v. Union of India (2003) 12 SCC 459 affirmed the view taken by the learned Single Judge. Dissatisfied, the appellant has approached this Court by special leave3. When the matter initially came up before a Bench comprising R.V. Raveendran and J.M. Panchal, JJ. on 5th January, 2009 the Court noticed a divergence in the decision rendered by this Court in Gora Lals case (supra) and that rendered in Build India Construction System v. Union of India (2002) 5 SCC 433 . The matter was, therefore, referred to a larger Bench to resolve the conflict. That is precisely how this appeal has been listed before us.

Court's reasoning:
5. A plain reading of the above would show that the Arbitrator was required to (i) give his award within the stipulated period as extended from time to time. (ii) the Award must be on all matter referred to him(iii) the Award must indicate the findings of the Arbitrator along with sums, if any, awarded (iv) the findings and award of sums if any must be separate on each item of dispute.11. Let us in the above backdrop examine the textual meaning and contextual significance of the expression finding appearing in Clause 70. The expression has not been defined either in the agreement executed between the parties or in any statute for that matter. The expression shall, therefore, have to be given its ordinary literal meaning having regard to the context in which the same is used. A textual interpretation that matches the contextual is known to be the best13. It is evident from the above that English language and law dictionaries and the Law Lexicons give a wide range of meaning to the expression finding. The predominant use of the expression is in relation to determination by a Judge, Jury, Administrative Agency, Arbitrator or a Referee. The determination is described either as a finding, decision or conclusion; upon disputed facts. It is also described as a determination of a fact supported by evidence on the record. It is interchangeably used as a conclusion or decision a term used by the legal profession and by Courts.14. It is trite that a finding can be both; a finding of fact or a finding of law. It may even be a finding on a mixed question of law and fact. In the case of a finding on a legal issue the Arbitrator may on facts that are proved or admitted explore his options and lay bare the process by which he arrives at any such finding. It is only when the conclusion is supported by reasons on which it is based that one can logically describe the process as tantamount to recording a finding. It is immaterial whether the reasons given in support of the conclusion are sound or erroneous. That is because a conclusion supported by reasons would constitute a finding no matter the conclusion or the reasons in support of the same may themselves be erroneous on facts or in law. It may then be an erroneous finding but it would nonetheless be a finding. What is important is that a finding presupposes application of mind. Application of mind is best demonstrated by disclosure of the mind; mind in turn is best disclosed by recording reasons. That is the soul of every adjudicatory process which affects the rights of the parties. This is true also in the case of a finding of fact where too the process of reasoning must be disclosed in order that it is accepted as a finding in the sense the expression is used in Clause 7015. The above exposition matches even the contextual interpretation of Clause 70 which provides a mechanism for adjudication of disputes between the parties and not only requires the Arbitrator to indicate the amount he is awarding in regard to each item of claim but also the findings on each one of such items. The underlying purpose of making such a provision in the arbitration clause governing the parties, obviously was to ensure that the Arbitrator while adjudicating upon the disputes as a Judge chosen by the parties gives reasons for the conclusions that he may arrive at. The expression finding appearing in Clause 70, therefore, needs to be so construed as to promote that object and include within it not only the ultimate conclusion which the Arbitrator arrives at but also the process of reasoning by which he does so. Clause 70 could not, in our opinion, have meant to be only a wooden or lifeless formality of indicating whether the claim is accepted or rejected. Any such statement would have made no qualitative addition to the adjudication of the claim for the arbitrator would award a sum of money but withhold the reasons for the same16. In the case at hand the Arbitrators award was admittedly unsupported by any reason, no matter the Arbitrator had in the column captioned findings made comments like sustained, partly sustained, not sustained. The High Court was, therefore, justified in setting aside the award made by the Arbitrator and remitting the matter to him for making of a fresh award17. That brings us to the decision of this Court in Build India Construction System (supra) which was relied upon to canvass that it stated a proposition contrary to that stated in Gora Lals case (supra). In Build India Construction System (supra) this Court noted in no uncertain terms that the validity of the award had not been specifically questioned on the ground of its having been given in breach of any obligation of the Arbitrator to give reasons as spelled out by the arbitration clause. The judgment of the learned Single Judge did not show, observed this Court, that such a plea was urged before him. The objection petition filed to challenge the award was also found by this Court to be vague and general hence insufficient to give rise to an effective challenge to the award on the ground of it being non-speaking. The plea regarding the Award being non- speaking was raised for the first time before the Division bench in appeal. This Court in that backdrop held that the Division Bench fell in error in entertaining and upholding such a plea at such a late stage18. It is, in the light of the above observations, difficult to read Build India Construction System (supra) as an authority for the proposition that Clause 70 of the General Conditions of the Contract did not oblige the Arbitrator to record reasons. The decision must, therefore, remain confined to the facts of that case only