Supreme Court of India

M/S Dyna Technologies Pvt.Ltd. vs M/S Crompton Greaves Ltd. on 18 December, 2019

Equivalent citations: AIRONLINE 2019 SC 1928, (2020) 1 ARBILR 1, (2020) 1 CURCC 100, 2020 (1) KCCR SN 22 (SC), (2020) 1 SCALE 121

Author:
N. V. Ramana

Bench:
Ajay Rastogi
,
Mohan M. Shantanagoudar
,
N.V. Ramana

Reportable

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2153 OF 2010

M/S. DYNA TECHNOLOGIES PVT. LTD. …APPELLANT(S)

VERSUS
M/S. CROMPTON GREAVES LTD. …RESPONDENT(S)

JUDGMENT

N. V. RAMANA, J.

1. The question involved herein revolves around the requirement of

reasoned award and the cautionary tale for the parties and

arbitrators to have a clear award, rather than to have an award

which is muddled in form and implied in its content, which

inevitably leads to wastage of time and resources of the parties to

get clarity, and in some cases, frustrate the very reason for going for

an arbitration.

2. This appeal is filed against the final order and judgment dated

27.04.2007, passed by the High Court of Judicature at Madras

Signature Not Verified

Digitally signed by

whereby the High Court partly allowed the appeal filed by the

SATISH KUMAR YADAV

Date: 2019.12.18

13:34:36 IST

Reason:

respondent and set aside the award of Arbitral Tribunal relating to
claim no. 2 for payment of compensation for the losses suffered due

to unproductive use of machineries.

3. Brief facts of the case are that a contract was entered into between

DCM Shriram Aqua Foods Limited (hereinafter referred to as ‘DCM’

in short) and M/s. Crompton Greaves Limited (hereinafter referred

to as “CGL” in short) for an aquaculture unit to be set up by such

Principal, namely, DCM. CGL invited tenders for carrying out

certain works for construction of ponds, channels, drains and

associated works. The appellant M/s Dyna Technologies Pvt. Ltd.

gave its proposal, estimate and quotation for carrying out the work.

Thereafter, the respondent CGL placed a letter of intent dated 25 th

July, 1994, relevant portions of which are as under:

“10. In the event that you are forced to keep your
equipment and manpower idle due to non
availability of work fronts due to reasons
attributable to DCM or due to legal disturbances not
connected with you, you shall be compensated as
follows:

(i) Maximum seven days of stoppage of work
without any compensation.

(ii) CGL reserves the right to advice you to
demobilize partially or fully in lieu of paying
compensation for such delays. Under such
circumstances, you shall be paid such
compensation towards transportation of
equipment to Site at mutually agreed rates.

(iii) Suitable time extension shall be given to
complete the work to compensate the delay
caused due to the stoppage of work.

11. Storage & Security: you will be responsible to
provide necessary stores, office and labour camps
for your staff at site. Only open area for
construction of above will be given to you.

Electricity will be provided at one point on
chargeable basis at actuals. You will be responsible
to tap the same to your required place.

A format work order will be charged subsequently
which will cover other General Terms and
Conditions. Labour rules, Workmen Compensation
etc. which may not be covered by this LOI and the
same shall also be part of this LOI.”

4. The appellant made certain queries and clarifications, and by letter

dated 10th October, 1994, CGL amended the contract as suggested

by the appellant company. Thereafter, CGL issued work order on

15th November, 1994 setting out the terms and conditions of the

work, material portions of which are stated as under:

“2. Termination of contract:

The Company reserves the right to terminate this
work at any stage without payment of compensation
due to any of the following reasons:

a. If the original contract between the client and
the company is terminated/suspended.
b. The company is unable to proceed with the
work due to reasons like non­availability of
work fronts, delay in availability of materials or
delay in receipt of payments from clients etc.
c. If the contractor is not able to carry out work
to the satisfaction of the company’s clients
representatives.

d. If the contractor is unable to ensure adequate
progress as required by the company and their
purchaser.

e. Upon termination of this contract/work order,
all rights and obligation of the parties, shall
cease provided that the termination shall not
relieve the contractor of any of his obligations
which may have accrued upto the date of
termination.

Upon termination of this contract/work order due to
default on the part of the contractor, he /it shall
indemnify the company against all losses incurred
by the company as a result of such termination.”

5. After commencement of the work, the respondent CGL on 5 th

January, 1995 instructed the employees of the appellant company

to stop the work.

6. The appellant company claimed compensation for such premature

termination of the contract and ultimately the dispute was referred

to Arbitral Tribunal consisting of three Arbitrators.

7. The appellant­claimant made the following claims:­

(1)Losses due to idle charges.
(2)Losses due to unproductivity of the men and
machineries which could not work due to hindrances.
(3)Loss of profit as the contract got dissolved and
(4)Interest on the above claims and
(5)Costs.

8. The aforementioned claims are listed in the statement of claims

totalling to Rs. 54,21,170.45 initially on 21 st June, 1997 and

revised to Rs. 53,83,980.45 on 5 th July, 1997.

9. The following is a summary of the final claims:­

(1) Idle Charges for machineries and
demobilisation as approved by …Rs. 4,18,551.50
Respondent
(2)Losses due to unproductive use
of machineries …Rs. 45,85,286.00
(3)Loss of profit …Rs. 20,89,925.00
(4)And (5) Interest and Costs … to be assessed

Rs. 70,93,763.33
Deduct Payment already received Rs. 17,09,782.88
_____________________
Balance due Rs. 53,83,980.45
+
Interest and costs

10. It may be relevant to note at this stage that so far as claim no.

1 in reference to the losses due to idle charges is concerned, it was
finally settled amicably by the parties and the balance towards the

interest component also stands paid.

11. So far as claim no. 3 in reference to loss of profit is concerned,

the same was disallowed by the Arbitral Tribunal and it was later

not questioned by the appellant­claimant and that attained finality.

12. The only objection is in reference to claim no. 2, i.e., losses

due to unproductive use of machineries which was accepted by the

Arbitral Tribunal for a sum of Rs. 27,78,125/­ with interest @ 18%

p.a. vide its award dated 30th April, 1998 and Correction to award

dated 5th May, 1998.

13. Aggrieved by the award passed by the Tribunal, an original

petition was filed before the learned Single Judge of the High Court

of Judicature at Madras, questioning the award under
Section 34
of

the Arbitration and Conciliation Act, 1996 (hereinafter “
Arbitration

Act
”), by the respondent. The learned Single Judge, while upholding

the award of the Tribunal, observed as under:

“7. Thus the Arbitrators have given a specific
finding that the amount paid as compensation is
actually the amount expended by the fourth
respondent and therefore the petitioner is liable
to reimburse the loss sustained by the fourth
respondent. Therefore, this contention is also
not acceptable.

…

9. Further, the learned counsel for the petitioner
took this court to various portions of the Award and
tried to convince this Court that the Arbitrators
have not decided the issue fully appreciating the
evidence on record.
In the judgment of the Supreme
Court reported in M/s
Sundarsan Trading Company
v. Government of Kerala
(AIR 1989 Supreme Court

890) it has been clearly held that the power of the
Arbitrator in respect of the interpretation of the
contract in a matter for arbitration, the Arbitrator
can pass the Award by taking a particular view of
the contract and hence, the Court cannot substitute
its own decision. Therefore, this Court cannot
reappraise the evidence and substitutes its views
and set aside the Award. Also in the case of
Tamil
Nadu Civil Supplies Corporation Limited v. Albert
and Company
(2000 (III) CTC 83), this Court has
held that as per
Section 34
of the Act, the Award of
the Arbitrator can be set aside only on the limited
grounds and the Award cannot be interfered with
simply because another view is possible on the
available materials. The arbitrator is a Judge of
choice of parties and this Court cannot set aside
unless it suffers from error apparent on the face of
the record. It cannot be set aside even if the Court
can come to different conclusion on the same facts.

The learned counsel for the petitioner has not
pointed out any such ground. It cannot also be said
that the Award is perverse or has error apparent on
the face of the record. Therefore, the Award passed
by the Arbitrator is not illegal or invalid and cannot
be set aside. Therefore, the petition is dismissed.”
(emphasis supplied)

14. Aggrieved by the aforesaid decision of the learned Single

Judge, the respondent appealed before the Division Bench in O.S.A

No. 234 of 2001. As aforementioned, the High Court vide impugned

order partly allowed the appeal and set aside the award of the

Tribunal relating to claim no. 2. The High Court was of the opinion

that the award does not contain sufficient reasons and the

statements contained in paragraph 3.1 (a) to 3.1 (g) of the award

does not provide any reasons, discussions or conclusion. The High

Court has observed in the following manner:

“18. It is of course true that an Arbitrator cannot be
expected to write a detailed judgment as in a law
Court. However, the present Act contemplates that
the award of the Arbitrator should be supported by
reason. The decision relied upon by the counsel for
the respondent, rendered on the basis of the

Arbitration Act, 1940
, cannot be pressed into
service keeping in view the specific provision
contained in the Act. Moreover, even assuming that
the ratio of
the said decision
is applicable, we
cannot cull out any underlying reason in the award
for directing payment of compensation. The basis
for the right of the claimant and the basis of the
liability of the present appellant have not been
indicated anywhere within four corners of the award
and in spite of the best efforts it is not possible to
discover even any latent reason in the award.

19. It was also contended that the discussion in
para 3.1(g) of the award contains the basis and
reason given by the Tribunal.

We have carefully gone through such
paragraph as well as the preceding and subsequent
paragraphs. In our considered opinion, the
statements recited in para 3.1 including para 3.1(g)
are only substance of the submissions/claim made
by the claimant and para 3.1(g) cannot be
construed as a conclusion or even the reasoning
given by the Tribunal.”

15. Having come to a conclusion that the arbitral award was

deficient due to the lack of reasoning, the High Court proceeded

further to note that the option of
Section 34 (4)
of the Arbitration

Act was not necessary as the compensation could not have been

claimed considering the fact that the work order has provision

barring claim no. 2, in the following manner:

“20. Learned counsel for the respondent has relied
upon
Section 34(4)
of the Arbitration Act and has
submitted that in case if this Court finds that the
Arbitral Tribunal has not given reason, even though
it is so required under
Section 31(3)
by invoking
jurisdiction under
Section 31(4)
, this Court can give
opportunity to the Arbitral Tribunal to resume the
arbitral proceedings or to take action as in the
opinion of the Arbitral Tribunal would eliminate the
grounds for setting aside the arbitral award.

21. We do not think that the present case is a fit
case where the Arbitral Tribunal can be called upon
to give reasons in support of its conclusion. This is
because, in our considered opinion, the terms of the
contract clearly exclude the possibility of payment
of any compensation on account of premature
termination of the contract as envisaged in para C.
2(a).”

16. Thereafter, the High Court proceeded further to note that the

arbitral proceeding was beyond the competence of the Tribunal by

considering the conditions under the work order.

17. Learned counsel for the appellant submits that the Arbitral

Tribunal comprising of three Arbitrators has looked into the entire

material available on record and recorded a finding in reference to

claim no. 2 (losses suffered due to unproductive use of machineries)

based on the case set up by the parties taking note of
Section 73
of

the Indian Contract Act, 1872 (hereinafter “
Contract Act
”) and

relying on the evidence including appraisal of the log books

approved by the respondent and held that actual losses/expenses

were incurred by the appellant. In the given circumstances it was

not open for the High Court in appeal to reappraise and substitute
its own view in contravention of the clause of the agreement

pursuant to which the arbitral dispute was raised and a finding

came to be recorded in acceptance of the claim with regard to the

losses suffered by the appellant due to unproductive use of

machineries and the interference made by the High Court is beyond

the scope of
Section 37
of the Arbitration Act.

18. Learned counsel further submits that the Division Bench of

the High Court did not hold that the evidence relied upon by the

Arbitral Tribunal, i.e., the log books were not proper or were lacking

quality. As a matter of fact, there was no challenge to the same in

the appeal filed by the respondent under
Section 37
of the

Arbitration Act and only the liability was questioned. The learned

counsel further submitted that the only submission of the learned

counsel for the respondent before the Arbitral Tribunal and also

before the learned Single Judge of the High Court was that there

was no provision under the contract granting compensation for loss

incurred for unproductive use of machinery and that the Arbitral

Tribunal has exceeded its jurisdiction. This issue was examined by

the Tribunal and confirmed by the Single Judge of the High Court,
after examining the objections raised by the respondent under

Section 34
of the Arbitration Act. The learned counsel for the

appellant contented that interference at the appellate stage is

beyond the scope of
Section 37
of the Arbitration Act and in the

given circumstances, claim no. 2 which has been set aside by the

Division Bench of the High Court under the impugned judgment

deserves to be interfered by this Court.

19. Learned counsel also submits that
Section 73
of the Contract

Act confers a right which is for public interest/benefit and

contractual clause, if any, which takes away such a right

unilaterally of a party is violative of
Section 23
of the Contract Act.

The law which is made for an individual’s benefit can be waived by

only by such individual, however, where law is for public interest or

has policy element, then such rights cannot be waived by an

individual person inasmuch as such rights are a matter of public

policy/public interest.

20. Learned counsel further submits that a contractual provision

which is in contravention of a specific statutory provision, if

allowed to be implemented, the same will result in frustration of a
right conferred by law or if the contractual clause is immoral or

opposed to public policy, in such cases the contractual clause is

invalid and void ab initio and cannot be enforced to disentitle

appellant in claiming the actual loss which has been suffered by it

and established before the Arbitral Tribunal and which the

respondent is under an obligation to reimburse. In the given

circumstances, claim no. 2 which has been set aside by the High

Court needs interference by this Court. The learned counsel in

support has placed reliance on the judgment of this Court in K.N.

Sathyapalan (Dead) by Lrs. v. State of Kerala, (2007) 13 SCC

43.

21. Per contra, learned counsel for the respondent, while

supporting the findings recorded by the High Court in the

impugned judgment, submits that the claim which has been

disallowed by the High Court in the impugned judgment is basically

a claim for payment of compensation or damages on account of

premature termination of contract and neither the Arbitral Tribunal

nor the learned Single Judge of the High Court has

considered/examined the terms of the contract in appreciating the
right of the claimant to claim compensation of damages and the

corresponding liability of the respondent to pay/settle the claim.

According to him, as per the terms of contract, no such

compensation was payable.

22. Learned counsel further submits that it is well settled that the

Arbitral Tribunal cannot travel beyond the terms of contract to

award compensation. As a matter of fact, in the present case, the

terms of contract expressly prohibit that no compensation is

payable if the contract is terminated on account of termination of

the project. In the face of such express prohibition, the Arbitral

Tribunal has exceeded its jurisdiction and committed a manifest

error in directing the payment of compensation even without

disclosing the basis of arriving at such a conclusion.

23. Learned counsel for the respondent submits that
Section 34(2)

(a)(iv) of the
Arbitration Act
clearly envisages that such an award

can be set aside if the award deals with a dispute not contemplated

by or not falling within the terms of the submission to arbitration.

When there is a specific exclusion/prohibition in the contract, it

was not open for the Tribunal to travel beyond the terms of contract
in passing an award which has been taken note of by the Division

Bench of the High Court in the impugned judgment and has been

rightly set aside, supported by cogent reasons. The learned counsel

further submitted that what has been observed by the Division

Bench of the High Court in the impugned judgment is based on

settled principles of law and needs no interference.

24. We have heard learned counsel for the parties and with their

assistance perused the material available on record.

25. Before we devolve into the contractual issues, we need to

observe certain pointers on the jurisdiction of the court under

Section 34
of the Arbitration Act.
Section 34
as it stood before the

Amendment Act of 2015, was as follows­

“34 Application for setting aside arbitral award. —
(1) Recourse to a Court against an arbitral award
may be made only by an application for setting aside
such award in accordance with sub­section (2) and
sub­section (3).

(2) An arbitral award may be set aside by the Court
only if—

(a) the party making the application furnishes proof
that—

(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the
law to which the parties have subjected it or, failing
any indication thereon, under the law for the time
being in force; or

(iii) the party making the application was not given
proper notice of the appointment of an arbitrator or
of the arbitral proceedings or was otherwise unable to
present his case; or

(iv) the arbitral award deals with a dispute not
contemplated by or not falling within the terms of the
submission to arbitration, or it contains decisions on
matters beyond the scope of the submission to
arbitration:

Provided that, if the decisions on matters submitted
to arbitration can be separated from those not so
submitted, only that part of the arbitral award which
contains decisions on matters not submitted to
arbitration may be set aside; or

(v) the composition of the arbitral tribunal or the
arbitral procedure was not in accordance with the
agreement of the parties, unless such agreement was
in conflict with a provision of this Part from which
the parties cannot derogate, or, failing such
agreement, was not in accordance with this Part; or

(b) the Court finds that—

(i) the subject­matter of the dispute is not capable
of settlement by arbitration under the law for the
time being in force, or

(ii) the arbitral award is in conflict with the public
policy of India.

Explanation. —Without prejudice to the generality of
sub­clause (ii) it is hereby declared, for the avoidance
of any doubt, that an award is in conflict with the
public policy of India if the making of the award was
induced or affected by fraud or corruption or was in
violation of section 75 or section 81.

(3) An application for setting aside may not be
made after three months have elapsed from the date
on which the party making that application had
received the arbitral award or, if a request had been
made under
section 33
, from the date on which that
request had been disposed of by the arbitral tribunal:

Provided that if the Court is satisfied that the
applicant was prevented by sufficient cause from
making the application within the said period of three
months it may entertain the application within a
further period of thirty days, but not thereafter.

(4) On receipt of an application under sub­section (1),
the Court may, where it is appropriate and it is so
requested by a party, adjourn the proceedings for a
period of time determined by it in order to give the
arbitral tribunal an opportunity to resume the
arbitral proceedings or to take such other action as
in the opinion of arbitral tribunal will eliminate the
grounds for setting aside the arbitral award.

26. There is no dispute that
Section 34
of the Arbitration Act

limits a challenge to an award only on the grounds provided therein

or as interpreted by various Courts. We need to be cognizant of the

fact that arbitral awards should not be interfered with in a casual

and cavalier manner, unless the Court comes to a conclusion that

the perversity of the award goes to the root of the matter without
there being a possibility of alternative interpretation which may

sustain the arbitral award.
Section 34
is different in its approach

and cannot be equated with a normal appellate jurisdiction. The

mandate under
Section 34
is to respect the finality of the arbitral

award and the party autonomy to get their dispute adjudicated by

an alternative forum as provided under the law. If the Courts were

to interfere with the arbitral award in the usual course on factual

aspects, then the commercial wisdom behind opting for alternate

dispute resolution would stand frustrated.

27. Moreover, umpteen number of judgments of this Court have

categorically held that the Courts should not interfere with an

award merely because an alternative view on facts and

interpretation of contract exists. The Courts need to be cautious

and should defer to the view taken by the Arbitral Tribunal even if

the reasoning provided in the award is implied unless such award

portrays perversity unpardonable under
Section 34
of the

Arbitration Act.

28. Having established the basic jurisprudence behind
Section 34

of the Arbitration Act, we must focus on the analysis of the case.
The primary contention of the learned counsel appearing on behalf

of the appellant is that the award by the learned Tribunal was

perverse for want of reasons. The necessity of providing reasons has

been provided under
Section 31
of the Arbitration Act, which reads

as under:

“31. Form and contents of arbitral award.­
…
(3) The arbitral award shall state the reasons
upon which it is based, unless—

(a) the parties have agreed that no reasons are to be
given, or

(b) the award is an arbitral award on agreed terms
under
section 30
.”
(emphasis supplied)

Under the UNCITRAL Model Law the aforesaid provision is provided

as under:

“(2) The award shall state the reasons upon which it
is based, unless the parties have agreed that no
reasons are to be given or the award is an award on
agreed terms under article 30.”

29. Similar to the position under the Model Law, India also adopts

a default rule to provide for reasons unless the parties agree
otherwise. As with most countries like England, America and Model

Law, Indian law recognizes enforcement of the reasonless award if it

has been so agreed between the parties.

30. There is no gainsaying that arbitration proceedings are not per

se comparable to judicial proceedings before the Court. A party

under Indian Arbitration Law can opt for an arbitration before any

person, even those who do not have prior legal experience as well.

In this regard, we need to understand that the intention of the

legislature to provide for a default rule, should be given rational

meaning in light of commercial wisdom inherent in the choice of

arbitration.

31. A five­Judge Constitution Bench of this Court in the case of

Raipur Development Authority v. Chokhamal Contractors
, AIR

1990 SC 1426, considered the scope of
Section 30
of the Arbitration

Act, 1940 and held as under:
“It is now well settled that an award can neither be
remitted nor set aside merely on the ground that it
does not contain reasons in support of the
conclusion or decisions reached in it except where
the arbitration agreement or the deed of submission
requires him to give reasons. The arbitrator or
umpire is under no obligation to give reasons in
support of the decision reached by him unless
under the arbitration agreement or in the deed of
submission he is required to give such reasons and
if the arbitrator or umpire chooses to give reasons in
support of his decision it is open to the Court to set
aside the award if it finds that an error of law has
been committed by the arbitrator or umpire on the
face of the record on going through such reasons.
The arbitrator or umpire shall have to give reasons
also where the court has directed in any order such
as the one made Under
Section 20
or
Section 21
or

Section 34
of the Act that reasons should be given
or where the statute which governs an arbitration
requires him to do so.”

32. A three­Judge Bench of this Court in another case of
S.

Harcharan Singh v. Union of India
, (1990) 4 SCC 647, reiterated

its earlier view that the arbitrator's adjudication is generally

considered binding between the parties for he is a Tribunal selected

by the parties and the power of the Court to set aside the award is

restricted to cases set out in
Section 30
of the Arbitration Act, 1940.
33. However, the ratio of
Chokhamal
case (supra) has not found

favour of the Legislature, and accordingly
Section 31(3)
has been

enacted in the
Arbitration Act
.

This Court in
Som Datt Builders

Ltd. v. State of Kerala
, (2009) 4 ARB LR 13 SC, a Division Bench

of this Court has indicated that passing of a reasoned award is not

an empty formulation under the
Arbitration Act
.

34. It may be relevant to note Russell on Arbitration, 23rd edn.

(2007), wherein he notes that:

“If the Court can deduce from the award and the
materials before it, which may include extracts from
evidence and the transcript of hearing, the thrust of
the tribunal’s reasoning then no irregularity will be
found….Equally, the court should bear in mind
that when considering awards produced by non­
lawyer arbitrators, the court should look at the
substance of such findings, rather than their
form, and that one should approch a reading of
the award in a fair, and not in an unduly literal
way.”
(emphasis supplied)

35. The mandate under
Section 31(3)
of the Arbitration Act is to

have reasoning which is intelligible and adequate and, which can in
appropriate cases be even implied by the Courts from a fair reading

of the award and documents referred to thereunder, if the need be.

The aforesaid provision does not require an elaborate judgment to

be passed by the arbitrators having regards to the speedy resolution

of dispute.

36. When we consider the requirement of a reasoned order three

characteristics of a reasoned order can be fathomed. They are:

proper, intelligible and adequate. If the reasoning in the order are

improper, they reveal a flaw in the decision­making process. If the

challenge to an award is based on impropriety or perversity in the

reasoning, then it can be challenged strictly on the grounds

provided under
Section 34
of the Arbitration Act. If the challenge to

an award is based on the ground that the same is unintelligible, the

same would be equivalent of providing no reasons at all. Coming to

the last aspect concerning the challenge on adequacy of reasons,

the Court while exercising jurisdiction under
Section 34
has to

adjudicate the validity of such an award based on the degree of

particularity of reasoning required having regard to the nature of
issues falling for consideration. The degree of particularity cannot

be stated in a precise manner as the same would depend on the

complexity of the issue. Even if the Court comes to a conclusion

that there were gaps in the reasoning for the conclusions reached

by the Tribunal, the Court needs to have regard to the documents

submitted by the parties and the contentions raised before the

Tribunal so that awards with inadequate reasons are not set aside

in casual and cavalier manner. On the other hand, ordinarily

unintelligible awards are to be set aside, subject to party autonomy

to do away with the reasoned award. Therefore, the courts are

required to be careful while distinguishing between inadequacy of

reasons in an award and unintelligible awards.

37. At this juncture it must be noted that the legislative intention

of providing
Section 34 (4)
in the
Arbitration Act
was to make the

award enforceable, after giving an opportunity to the Tribunal to

undo the curable defects. This provision cannot be brushed aside

and the High Court could not have proceeded further to determine

the issue on merits.
38. In case of absence of reasoning the utility has been provided

under of
Section 34(4)
of the Arbitration Act to cure such defects.

When there is complete perversity in the reasoning then only it can

be challenged under the provisions of
Section 34
of the Arbitration

Act. The power vested under
Section 34 (4)
of the Arbitration Act to

cure defects can be utilized in cases where the arbitral award does

not provide any reasoning or if the award has some gap in the

reasoning or otherwise and that can be cured so as to avoid a

challenge based on the aforesaid curable defects under
Section 34

of the Arbitration Act. However, in this case such remand to the

Tribunal would not be beneficial as this case has taken more than

25 years for its adjudication. It is in this state of affairs that we

lament that the purpose of arbitration as an effective and

expeditious forum itself stands effaced.

39. It may be noted that when the High Court concluded that

there was no reasoned award, then the award ceased to exist and

the Court was functus officio under
Section 34
of the Arbitration Act

for hearing the challenge to the award under the provisions of

Section 34
and come to a conclusion that the arbitration award was
not in terms of the agreement. In such case, the High Court ought

to have considered remanding the matter to the Tribunal in the

usual course. However, the High Court analyzed the case on merits,

but, for different reasons and we need not go into the validity of

High Court’s interference.

40. Coming back to the award, we need to see whether the award

of the Arbitral Tribunal can be sustained in the instant case.

Although the Arbitral Tribunal has dealt with the claims separately

under different sub­headings, the award is confusing and has

jumbled the contentions, facts and reasoning, without appropriate

distinction. The Tribunal rendered the award with narration of facts

with references to the annexures wherever it relied upon by it. The

Tribunal abruptly concluded at the end of the factual narration,

without providing any reasons, in the following manner:

“(3) Claim for unproductive usage of machineries
….

(g) All the above facts clearly establish that the
machineries deployed by the Claimant had to do
unproductive work by shifting from one place to
another to suit the availability of work.The
contract contemplates only payment for actual
turnover of earthwork and for this they had
received amount totaling to Rs. 1709782.88. The
Claimant claims that the hire charges paid to the
machineries, men and engineers should be
reimbursed to him. He has given the actual
expenses in his claim statement.

(emphasis supplied)

41. Interestingly, the factual narration is coupled with the

claimant’s argument, which is bundled together. A close reading of

the same is required to separate the same wherein the Arbitral

Tribunal has mixed the arguments with the premise it intended to

rely upon for the claimant’s claim. Further, it has reduced the

reasons for respondent’s defense. In spite of our independent

application of mind based on the documents relied upon, but

cannot sustain the award in its existing form as there is a

requirement of legal reasoning to supplement such conclusion. In

this context, the complexity of the subject matter stops us from

supplementing such legal reasoning and we cannot sustain the

aforesaid award as being reasoned.

42. It may be beneficial to reduce the concluding paragraph of the

award, which reads as under:

“3.4. The above arguments and various authorities
quoted by them have been studied by the Tribunal
and we are convinced that the compensation is
payable on the hire charges and expenses incurred
by the claimant based on the claims made by him in
June 95 and now submitted by the claimant in his
revised claim petition on 05.07.1997. We are
convinced that the machineries have been
actually mobilized from the letter R­3, R­8 and
R­10 issued by DCM reporting on the number of
machineries deployed by Claimant. The
Claimants have produced the log books and bills for
the various machineries and modified their claims.
The tribunal had perused the log books and idle
wages approved in C­7 by Respondent and the
claims made in R­17.”
(emphasis supplied)

43. From the facts, we can only state that from a perusal of the

award, in the facts and circumstances of the case, it has been

rendered without reasons. However, the muddled and confused

form of the award has invited the High Court to state that the

arbitrator has merely restated the contentions of both parties. From

a perusal of the award, the inadequate reasoning and basing the

award on the approval of the respondent herein cannot be stated to

be appropriate considering the complexity of the issue involved

herein, and accordingly the award is unintelligible and cannot be

sustained.
44. In any case, the litigation has been protracted for more than

25 years, without any end for the parties. In totality of the matter,

we consider it appropriate to direct the respondents to pay a sum of

Rs. 30,00,000/­ (Rupees Thirty Lakhs only) to the appellant in full

and final settlement against claim No. 2 within a period of 8 weeks,

failing which the appellant will be entitled to interest at 12% per

annum until payment, for providing quietus to the litigation.

45. In view of the conclusions reached, the appeal is disposed of to

the extent indicated herein. There shall be no orders as to the costs.

..............................................J.
(N.V. RAMANA)

..............................................J.
(MOHAN M. SHANTANAGOUDAR)

..............................................J.
(AJAY RASTOGI)

NEW DELHI;

DECEMBER 18, 2019.
30