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Judgment Summary: S.N. Kapoor, J. — Objections under Section 30 of the Arbitration Act (s. no. 1756/94 & I.A. 4635/85)

Factual and Procedural Background

An area of approximately 2,743 square yards belonging to Northern Railway, New Delhi was leased by the petitioner to respondent No. 1 under an agreement dated 9 May 1969. Disputes arose between the parties and the respondent filed a petition under Section 20 of the Arbitration Act. By order dated 24 April 1981 in Suit No. 363-A/1977 the dispute was referred to Shri K.C. Tandon, who gave a speaking award on 24 September 1984. A petition was moved under Section 14 of the Arbitration Act and the award was filed.

The objectors (respondents) filed objections under Section 30 by I.A. 4635/85, asserting that the arbitrator misconducted the proceedings: the award was non-speaking and lacked reasons despite voluminous evidence; the arbitrator failed to consider the basic lease document showing the land was to be used as open land; and the award was beyond the scope of the reference (specifically on the issue of eviction).

Legal Issues Presented

  1. Whether an award that does not state reasons (a non-speaking award) can be set aside where the arbitration agreement does not require a reasoned award.
  2. Whether the arbitrator's alleged failure to advert to or explain consideration of evidence (including the lease document) constitutes misconduct sufficient to set aside the award.
  3. Whether the award is beyond the scope of the reference, specifically whether the question of eviction was referred to the arbitrator.

Arguments of the Parties

Objector's Arguments

  • The arbitrator misconducted the proceedings by giving a non-speaking award despite voluminous evidence; therefore the award is liable to be set aside.
  • The arbitrator committed error by not referring to or examining the basic lease document which indicated the land was to be used as open land.
  • The award went beyond the scope of the reference — in particular, the question of eviction was not referred to the arbitrator and therefore could not form part of the award.
  • It was contended that no amount of rent could be fixed in the absence of evidence regarding the rate of rent.

Other Parties' Arguments

The opinion does not contain a detailed account of the other parties' legal arguments beyond the procedural posture (petition under Section 20 and reference) and the concessions recorded (for example, a concession by Mr. Sandeep Sethi that the respondent did not lead evidence about the rate of rent).

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Bhilwara Synthetics Ltd. v. Delhi Hindustani Mercantile Association, AIR 1982 Delhi 155 Suggests that an award by an arbitrator without reasons may be bad in law and criticises non-speaking awards. The court noted the decision and the criticism of non-speaking awards but declined to follow it in view of later Supreme Court authorities.
Food Corporation of India v. Jagdish Chandra Saha, (1989) 2 SCC 347; AIR 1994 SC 219 Holds that no objection can be taken to an award merely because no reasons have been stated when the arbitration clause does not require reasons. The court followed this principle, observing that there was no arbitration agreement here requiring a reasoned award; therefore the lack of reasons did not vitiate the award.
Bijendra Nath Srivastava v. Mayank Srivastava, JT 1994 (5) SC 195 Supports the proposition that an award will not be set aside merely because the arbitrator has not specifically referred to the evidence led by the parties. The court relied on this authority to hold that failure to refer to specific evidence does not automatically invalidate the award.
MCD v. Jagan Nath Ashok Kumar, (1987) 4 SCC 497; AIR 1987 SC 2316 Affirms that the arbitrator is the sole judge of the quality and quantity of evidence and that the court will not substitute its own judgment merely because it might have reached a different conclusion. The court applied this principle to conclude that the arbitrator's conclusions on rent and related factual matters were not for the court to re-appraise absent an error apparent on the face of the award.

Court's Reasoning and Analysis

On the complaint that the award was non-speaking, the court considered the conflict in authority and preferred later Supreme Court authority (Food Corporation of India v. Jagdish Chandra Saha). The court emphasized the controlling principle that, where the arbitration clause does not require a reasoned award, the absence of reasons alone is not a ground to set aside the award. It was noted that in this case no arbitration agreement required the arbitrator to give reasons.

With respect to appreciation of evidence, the court explained that absent a contractual requirement to produce a reasoned award, the arbitrator need not state reasons. The arbitrator is the sole judge of the facts and law in the dispute and the court will not reappraise the evidence or substitute its own conclusion unless the award contains an error apparent on its face. The court rejected the submission that no rent could be fixed without specific evidence: it recorded a concession that the respondent did not lead evidence on the rate of rent but held that the arbitrator could nevertheless consider all aspects (including whether or not constructions existed) and, by virtue of experience and specialization, arrive at a just conclusion.

On the contention that the award was beyond the scope of the reference (specifically eviction), the court examined the terms of the reference and reproduced the disputes that had been referred to the arbitrator. Those referred matters included: (1) the dispute as to the period of the lease beginning 1 January 1963; (2) dispute as to the quantum of rent for the agreed period up to the end of 20 years; (3) dispute as to rate of rent (petitioner said not more than Rs. 30,611.80 per year); and (4) the question whether the petitioner could be evicted during the 20-year period. The court concluded that the eviction question had been part of the matters referred and therefore the arbitrator was entitled to decide on eviction.

The court also observed factual behavior relevant to estoppel: when the Union of India took steps under the Public Premises Act the petitioner sought arbitration; after expiry of the 20-year period the petitioner contested referral on the eviction point, which the court regarded as inconsistent conduct amounting to estoppel from raising that plea.

Holding and Implications

Objections under Section 30 were dismissed and the award was made rule of the Court.

Consequential directions and immediate effects ordered by the court (as stated in the opinion):

  • The respondent (objector) is directed to deliver possession to the claimants (Union of India, Railways).
  • The respondent must pay interest at the rate of 18% per annum from the date of the award until realisation, after adjusting amounts already paid or deposited under the award.
  • Parties are to bear their own costs.
  • A decree sheet is to be prepared accordingly.

The opinion does not purport to announce any new legal precedent; it applies and relies on existing authorities to resolve the objections and enforce the award.

    Union Of India v. Oriental Building & Furnishing Co. Ltd.

    S.N Kapoor, J.— By this judgment I propose to dispose of s. no. 1756/94 & i.a 4635/85, objections under section 30 of the arbitration act filed by objector/respondents.

    2.1 Facts in brief are as under:

    2.2 An area of 2,743 sq. yards approximately of Northern Railway, New Delhi was leased out by the petitioner to respondent No. 1 vide agreement dated 9th May, 1969. Subsequently the disputes arose between the parties. The respondent filed a petition under Section 20 of the Arbitration Act. The dispute was referred accordingly vide order dated 24.4.1981 in Suit No. 363-A/1977 to Shri K.C Tandon. Shri K.C Tandon gave a speaking award on 24.9.1984 The petition was moved under Section 14 of the Arbitration Act. Award has been filed.

    2.3 The respondent filed objections under Section 30 vide I.A 4635/85 inter alia on the ground that the Arbitrator misconducted the proceedings. The Arbitrator ought to have given a reasoned award in view of the fact that the matter involved was heavy and voluminous evidence had been recorded. The Arbitrator misconducted as well as committed error in not looking at the basic document of lease which gave the open land to use as open land. The award is said to be beyond the reference.

    3.1 I have heard the parties Counsel. In so far as the question of non-speaking award is concerned, the contention of the learned Counsel for the objector Mr. Sandeep Sethi, is that award being non-speaking is liable to be set aside. He relies upon Bhilwara Synthetics Ltd. v. Delhi Hindustani Mercantile Association, AIR 1982 Delhi 155. In that case a Single Judge of this Court observed as under:

    “…In English Law, an award by an Arbitrator without reasons, even without adequate reasons, would be bad in law but not so in India. In international arbitration, the convention recognises the obligation to give reasons. While the rule that the arbitrator need give no reason for the award may have had its importance at one time, there is little doubt that the power to make a non-speaking award must have given undue protection to considerable incompetence, arbitrariness and even dishonesty in the arbitral process…”

    3.2 But with due deference to the learned Single Judge, I find it difficult to follow the judgment in view of the subsequent judgments of the Supreme Court and specially the following observations made in Food Corporation of India v. Jagdish Chandra Saha, (1989) 2 SCC 347 : AIR 1994 SC 219:

    “…no objection could be taken to an award merely on the ground that no reasons have been stated therefor when the arbitration clause did not contain any requirement to that effect.”

    3.3 It is not alleged in this case that there was any arbitration agreement to the effect that the Arbitrator should give any reasoned award.

    4. In so far as the appreciation of evidence is concerned in the absence of any specific requirement to give reasoned and speaking award, the Arbitrator may not give any reason. Being a Sole Judge of the facts and law involved in the case before him, his decision is not bound for review by the Court unless the objection taken by the learned Counsel of the award is apparent on the face of the award. The submission of the learned Counsel for the appellant that no amount of rent could be fixed in the absence of any evidence, I feel, is totally misconceived. Mr. Sandeep Sethi very fairly conceded that the respondent did not lead any evidence about the rate of rent of the land in question. In arriving at the rate of rent, it cannot be accepted that he had not considered all the aspects of the matter including the question of existence of the construction or lack of construction on the land. It may further be mentioned that the Arbitrator on account of the prolonged experience and specialisation could consider the evidence led by the parties to arrive at just conclusion so far as the rate of rent is concerned. The award cannot be set aside merely on the ground that the Arbitrator has not specifically referred to any evidence led by either of the parties (See Bijendra Nath Srivastava v. Mayank Srivastava, JT 1994 (5) SC 195). Even otherwise, once parties have selected their Forum, then the deciding Forum must be given the power of appraisement of the evidence. The Arbitrator is the Sole Judge of the quality as well as the quantity of the evidence and Court will not substitute its own judgment even if it arrived at a different conclusion (See MCD v. Jagan Nath Ashok Kumar, (1987) 4 SCC 497 : AIR 1987 SC 2316). Consequently, I feel that there is virtually no substance in the submission of the learned Counsel for the appellant in this regard.

    5. In so far as the question of award being beyond the scope of the reference, is concerned, the learned Counsel for the Objector submits that the question of eviction was not referred to the Arbitrator. There is no dispute parties that following disputes were specifically mentioned in the judgment whereunder the matter was ordered to be referred Arbitrator:

    1. Dispute relating to the period of the lease beginning from 1st January, 1963.

    2. Dispute relating to the quantum of rent for the agreed period up to the end of 20 years.

    3. Dispute relating to rate of rent, according to the petitioner, the rate is not more than Rs. 30,611.80 per year.

    4. The question whether the petitioner can be evicted during the period of 20 years.

    6. It was further mentioned that all the aforesaid matters arise from the agreement and had to be decided by an interpretation thereof. It appears that the question of period of lease beginning from 1st January, 1963 as well as whether the petitioner could be evicted during the period of 20 years were all the questions involved, and referred to the Arbitrator. This aspect was specifically considered while making the reference and it is now final. Now, since the award came after expiry of period of 20 years, the arbitrator was absolutely justified in holding that M/s. Oriental Building & Furnishing Co. Limited became liable to the evicted from the disputed premises w.e.f 31st December, 1982 when the period of lease finally expired, the Objector was supposed to hand over the peaceful vacant possession to the claimants, Union of India (Railways).

    7. It is also apparent that when the Union of India proceeded to take steps under the Public Premises Act, the petitioner rushed to the Court to seek arbitration but now after the expiry of the period of 20 years and availing the entire period, they say that the matter was not referred. Consequently, it is apparent that the objectors are blowing hot and cold at different stages to suit the exigencies of time. I feel, therefore, that it is not permissible, and objectors are estopped from raising such a plea.

    8. Since no other point has been argued, I feel that there is virtually no substance in the objections. The objections are accordingly dismissed. The award is made rule of the Court and the respondent will deliver possession and pay the interest at the rate of 18% per annum from the date of the award till realisation after adjusting the amount which had already been paid/deposited in terms of the award.

    9. Parties are left to bear their own costs.

    10. Decree sheet be prepared accordingly.

    Award made rule of the court.
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    Comments

    Union Of India v. Oriental Building & Furnishing Co. Ltd.
    (Oct 12, 1998)