Case: Indian Oil Corporation Vs. Indian Carbon Ltd

This petition under Article 136 of the Constitution challenges the judgment and order of the Division Bench of the High Court of Bombay dated March 21, 1988. The petitioner in this case on June 23, 1961, had agreed to sell to the predecessor of respondent raw petroleum coke. There was a second agreement on April 22, 1971. The said agreement was arrived at between the parties whereunder it was provided that in case the respondent failed to lift raw petroleum coke as agreed, the petitioner would have right to shift raw petroleum coke at the risk and expense of the respondent. There was a third agreement providing that in case of delay in payment, the respondent would pay interest at 4 per cent over the IOC bank borrowing rate, on the value of the stock not uplifted. It appears that on August 5, 1982, the respondent wrote a letter to the petitioner showing inability to pay the arrears of the price against delivery of raw petroleum coke. On October 4, 1982 there was a stock of about 13, 760 MTS of salable raw petroleum coke lying at Gauhati Refinery. The petition on October 18, 1982 wrote to the respondent that unless the outstanding as on September 1, 1982 and interest were paid, the petitioner would not make father supplies. Thereafter the petitioner filed Suit No. 2187 of 1982 for payment and for attachment before judgment. On December 21, 1982, it appears that there was an order of attachment of stocks of raw petroleum coke to the extent of Rs. 6 crores of the respondent. The order was confirmed after notice. Respondent filed Appeal No. 858 of 1983. Thereafter respondent on October 20, 1983 filed an application for stay of the suit under Section 34 of the Arbitration Act, 1940 (hereinafter called the Act). The petitioner on July 11, 1983 terminated the agreement with effect from August 31, 1983. The respondent thereafter filed Suit No. 122 of 1983 and applied for an order compelling the petitioner to make supplies. The learned District Judge passed an order on April 28, 1984 for restoration of supplies. On May 7, 1984 in petitioners appeal viz., Civil Appeal No. 2476 of 1984, this Court stated the above order. On May 24, 1984 this Courts order set aside the order of the learned District judge dated April 28, 1984 and recorded the compromise terms. Pursuant to the compromise, all proceedings were withdrawn by the parties. On December 11, 1984 matter relating to the petitioners claims in respect of interest on stocks held from October 1, 1982 onwards and expenses of shifting raw petroleum coke from October 1, 1982 up to August 31, 1983, were referred to arbitration of Shri A. K. Sarkar, a former Chief Justice of India. On August 21, 1986 an interim award was passed by the learned arbitrator. Interim award was filed in the High court of Bombay and the petitioner challenged the said award. The learned Single Judge of the High Court dismissed the petition challenging the interim award. The Division Bench of the High Court of Bombay upheld the order of the learned Single Judge. Hence this petition under Article 136 of the Constitution

Court's reasoning:
9. In a case of this nature, issues are simple, points are fresh and facts are clear, the reasons given by the arbitrator, in our opinion, meet the requirements of a reasoned award. It is apparent that the arbitrator has not acted irrelevantly or unreasonably. Arbitration procedure should be quick and that quickness of the decision can always be ensured by insisting that short intelligible indications of the grounds should be available to find out the mind of the arbitrator for his action. This was possible in the instant case. In the instant case the arbitrator has spoke his mind, and he is clear as to how he acted and why he acted in thatThe purpose of Section 12 of the English Tribunal and Inquiries Act which required the statutory tribunal to furnish a statement of the reasons if requested to do so before it gave its decision was to enable a person whose property or whose interests were affected to know if the decision was against him what the reasons were. Justice R. S. Bachawat in his Law of Arbitration, First Edition 1983, pages 320 and 321 states that the provision was read as meaning that proper and adequate reasons must be given. The reasons that are set out must be reasons which will not only be intelligible but also deal with the substantial points that have been raised. When the arbitration clause required the arbitrator to give a reasoned award and the arbitrator does give his reasons in the award, the sufficiency of the reasons depend upon the facts of the particular case. He is not bound to give detailed reasons. The court does not sit in appeal over the award and review the reasons. The court can set aside the award only if it is apparent from the award that there is not evidence to support the conclusions or if the award is based upon any legal proposition which isJudged in that light, the award in question was unassailable in the instantIn the aforesaid view of the matter, we are of the opinion that the High Court was right in the view it took.