Case: Union Of India Vs. G.S. Atwal &amp; Co

The respondent had entered into an agreement in 1968-69 for excavation of feeder canal from RD.68.00 to RD.97.00. During the course of the execution of the work certain disputes had arisen between the respondent and the appellant. The disputes were referred from time to time to arbitration. This is the 5th arbitration the instalment. Details of previous four arbitrations are as under :2. The dispute as regards hire charges of equipment load by Farakka Barage Project was referred to Goyal Committee for rationalization. On submission of its report and in furtherance thereof the respondent by letter dated August 8, 1984 had claimed for reference to the arbitration thuswhereas M/s. Tarapore & Co. having long back been refunded the excess hire charges recovered earlier, but having became refundable on the basis of said Goyal Committee Report, in our case the excess recovered amount and now refunded to us despite repeated, written as well as oral requests and demands in thissupplied]3. In furtherance thereof, by proceedings dated November 18, 1984, the General Manager, Farakka Barrage Project appointed T. Raja Ram as the sole arbitrator to settle the disputes. After entering into the reference on December 12, 1984, admittedly the respondent laid claim for the refund of hire charges which was disputed by counter-statement by the appellant. Later the respondent laid further claims on March 6, 1985 for Rs.1,68,000/- towards repairs on departmental equipments; Rs.1,38,600/- towards refund of expenses on security watch and ward; Rs.28,12,085.33 towards final bill of the firm; Rs. 95,60,653.10 towards part interest and the amount of claim in addition to the refund of hire charges was Rs.32,45,538.27. The appellant in its statement had objected to unilateral enlargement of the reference. The arbitrator awarded by a non-speaking award dated August 18, 1987, a sum of Rs.35,72,550/- with interest at 15% per annum from July 1, 1976 or the date of the payment of decree whichever was earlier.4. The appellant fixed Misc. Case No.95/87 on April 8, 1988 under Section 30(c) of the Arbitration Act, 1940 [for short, the Act], questioned the award contending that the claim was barred by limitation; the arbitrator had no power to enlarge the scope of the arbitration and he had no power to award interest at higher rate without any claim before it. The Assistant District Judge, Murshidabad by his order dated January 19, 1991 set aside the award upholding these contentions. On appeal, in the impugned order the High Court set aside the order of the civil Court holding that there was no error apparent on the face of the award warranting setting aside of the award. It directed the civil Court to take steps for passing a decree in terms of the award as expeditiously as possible not later than four months. Thus this appeal by special leave.

Court's reasoning:
9. It would thus be seen that appointment of an arbitrator is founded upon the agreement between the parties, Once on his appointment either by consensus or by an order of the court, the parties put forth their claim and participate in the proceedings, the parties acquiesce to the appointment of the arbitrator and the award made thereon binds the parties. The party who has suffered the award is precluded from questioning the power and jurisdiction of the arbitrator to make the award. The reason being that the parties have by contract consented to the forum to adjudicate their dispute and to-give a decision, by a non-speaking or speaking award in terms of the agreement. This principle is inapplicable to the jurisdiction of the arbitrator to unilaterally enlarge his own power to arbitrate any of the disputes. It is seen that by express agreement between the parties, arbitrability of the claim for refund of the hire charges was referred to arbitration and T. Raja Ram came to be appointed as arbitrator and entered upon that reference. But when claim was made, he enlarged the dispute unilaterally without there being any agreement by the appellant. In fact they objected to the enlargement of the Scope of the arbitration. Since arbitrator went on adjudicating the disputes, they were left with no option but to participate in the proceedings as the claims were pressed for and parties submitted to the jurisdiction of the arbitrator. Therefore, it did not amount to acquiescence. The jurisdiction of the arbitrator is founded upon the agreement between the parties. To the extent of the agreement, the parties are bound by the decision of the arbitrator. But the arbitrator cannot enlarge the scope of his arbitration and make in a non speaking award, a lump sum amount of all claims, after enlarging his jurisdiction on non-accepted or objected claims.The arbitrators went out of their way to declare that whatever amount in addition to Rs.3,500/- was found due from respondent No.1 upon the bahikhata account was remitted having regard to his labour and poverty and the whole unspecified amount found due against respondent No.2 was remitted in full in view of his labour and poverty. It was contended that the award was decided outside the authority of the arbitrators. It was held that the arbitrators had clearly misdirected themselves and had exceeded the scope of their authority and the award was, therefore set aside.11. Thereby, the arbitrator had misdirected himself and committed legal misconduct in making the award vitiating the entire award itself. It is difficult to decide as to what extent each of the claims was accepted or rejected. In that view, it is not necessary to go into the second question of the power of the arbitrator to award interest or excess rate of interest.