1. These two cases arise out of an award filed by the Arbitrator and involves common questions of law. I, therefore, propose to deal with them by one common judgment. Case No. 1 of 1964 relates to a contract No. DEW-14 of 1957–1958 resulting from a contract which was taken by the applicants for supplying of sleeping platforms to the military department. The contract commenced from 12-11-1957 and under the terms of the contract the applicants had to make the supplies to Srinagar, Baramulla, Pattan, Rampur and Choukibal, and to complete them within the dates specified in the agreement. The supplies, however, were inordinately delayed as a result of which the department claimed compensation of the amount of Rs. 29,921 J- at the rate of 10% as agreed to between the parties under condition No. 14 of the contract. In accordance with the arbitration clause in the agreement, the matter was referred to the arbitration of Shri D.C D.'Souza. The arbitrator has filed his award and has allowed compensation only to the extent of half the amount claimed by the contractor (department?) namely the amount of Rs. 14,960.50. Against this award the applicant has filed his objections and the only point pressed before me is that the arbitrator was not justified in law in allowing any compensation to the department in absence of proof of actual damages. This is the point which is common to both the cases. The respondent has filed counter affidavit making certain allegations and supporting the award in its entirety and further praying that the award be made a rule of the court.

2. The only contention put forward before me in both these cases by Mr. Sharma appearing for the applicants is that the arbitrator has granted compensation by misconstruing the provisions of Section 74 of the Contract Act, though the point was specifically argued before him. The learned counsel for the applicants, therefore, contends that the award is vitiated by an error of law.

3. In support of his contention the learned counsel for the applicants has placed reliance on a decision of the Supreme Court Fateh Chand v. Balkishan Dass, reported in AIR 1963 SC 1405 and particularly to the following observations made by their Lordships in that case:

“The Section undoubtedly says that the aggrieved party is entitled to receive compensation from the party who has broken the contract, whether or not actual damage or loss is proved to have been caused by the breach. Thereby it merely dispenses with proof of “actual loss or damage”; it does not justify the award of compensation when in consequence of the breach no legal injury at all has resulted, because compensation for breach of contract can be awarded to make good loss or damage which naturally arose in the usual course of things, or which the parties knew when they made the contract, to be likely to result from the breach.”

4. Before going into this question, however, I think it necessary to examine the exact scope of rile proceedings before me. It is well settled that a court while considering an award under Section of the Arbitration Act is not sitting in appeal over the award itself. The object of the Arbitration Act is that when parties to a contract decide to get their dispute settled by an arbitrator, the decision of the arbitrator should be considered to be final. In other words, the arbitrator should be given complete freedom to decide the issue rightly or wrongly. If the court sits in appeal over the award by going into questions of fact or of law, as if it were a court of appeal, the entire object of the Arbitration Act would be frustrated. In these circumstances, it has been held in several cases that an award should be set aside not merely because it involves an error of law but when an error of law is apparent on the face of the award. Thus even if the award contains an error of law, it will be valid unless the error of law is apparent on the face of the award.

5. The words “an error apparent on the face of the award” have been the subject matter of several decisions of the Supreme Court which have been cited before me by the learned counsel for the parties. As early as 1955, the Supreme Court in its decision Seth Thawardas Pherumal v. Union Of India, reported in (S) AIR 1955 SC 468 observed as follows:

“An arbitrator is not a conciliator and cannot ignore the law or misapply it in order to do what in thinks it just and reasonable. He is a tribunal selected by the parties to decide their disputes according to law and so is bound to follow and apply the law, and if he does not he can be set right by the court provided his error appears on the face of the award. The single exception to this is when the parties choose specifically to refer a question of law as a separate and? distinct matter.”

6. The Supreme Court in Dr. Dr S. Dutt v. University Of Delhi, reported as AIR 1958 SC 1050, clearly indicated what amounts to “an error apparent on the face of the award.” In this connection, their Lordships of the Supreme Court held as follows:

“In our view, all that is necessary for an award to disclose an error on the face of it is that it must contain, either in itself or in some paper intended to be incorporated in it, some legal proposition which on the face of it and without more, can be said to be erroneous.”

7. This principle was further reiterated in a later decision of the Supreme Court Alopi Prashad and Sons Ltd. v. Union of India reported in AIR 1960 SC 588, their Lordships made the following observations:

“The Award of an arbitrator may be set aside on the ground of an error on the face thereof only when in the award or in any document incorporated with it, as for instance, a note appended by the arbitrators stating the reasons for his decision, there is found some legal proposition which is the basis of the award and which is erroneous.”

8. The same principle was again reiterated by another decision of the Supreme Court, Union Of India v. A.L Rallia Ram, reported in AIR 1963 SC 1685, where their Lordships made the following observations:

“The award of the arbitrator is ordinarily final and conclusive, unless a contrary intention, is disclosed by the agreement. The award is the decision of a domestic tribunal chosen by the parties and the civil courts which are entrusted, with the power to facilitate arbitration and to effectuate the awards, cannot exercise appellate powers over the decision. Wrong or right the decision is binding if it be readied fairly after giving adequate opportunity to the parties to place their grievances in the manner provided by the arbitration agreement. But it is now firmly established that an award is bad on the ground of error of law on the face of it, when in the award itself or in a document actually incorporated in it, there is found some legal proposition which is the basis of the award and which is erroneous. An error in law on the face of the award means: ‘you can find in the award or a document actually incorporated thereto, as for instance, a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which is the basis of the award and which you can then say is erroneous. It does not mean that if in a narrative at ‘reference is made to a contention of one party, that opens the door to setting first what that contention is, and then going to the contract on which) the parties’ rights depend to see if that contention is sound.”

9. It is needless to refer to earlier decisions of the other High Courts which have taken the same view. Analysing the decisions of the Supreme Court the proposition that emerges is that an error of law would be apparent on the face of the award only where the arbitrator has given certain reasons which reasons are either opposed to any statutory requirements or which are legally erroneous. In other words, the question of an error apparent on the face of the award would occur only where the award amounts to a speaking order. Where, however, no reasons are given by the arbitrator and the point of law argued is not apparent from any material which has been made the basis of the award by the arbitrator, it cannot be said that such an error of law is an error of law which is apparent on the face of the award. In the instant case, the contractors had, no doubt, in their objections before the arbitrator mentioned that the respondents were not entitled to claim compensation without leading any evidence to show that they had sustained actual damage. This was only an argument put forth by the contractors before the arbitrator and this argument has not been incorporated either in the award or in any note appended to the award by the arbitrator. In these circumstances, I cannot see how the present award in both the cases contains an error of law apparent on the face of the award. Reliance was, however, placed by the learned counsel for the applicants on Dhulipudi Namayya… v. The Union Of India…. reported in AIR 1958 Andh Pra 533 where a Division Bench of the Andhra Pradesh held that Page: 31the court was wrong in awarding damages for breach of contract only by way of compensation claimed by one of the parties to the contract under the terms and stipulation of the contract. In that case, it appears their Lordships held that the claim of compensation amounted to penalty and could not have been awarded by the court in absence of evidence to show that the claimant had suffered actual loss on account of delayed supplies. In the first place, this case is not applicable to the facts of the present case, because here we are dealing with an award filed by the arbitrator, whereas in, that case the matter came up before the court in a regular appeal from a decree of a Sub Judge. As indicated above, the principles of deciding the validity of an award under Section 30 of the Arbitration Act are quite different from the principles where an appellate court is called upon to examine the validity of an order passed by a subordinate court. Moreover, in the instant case, the arbitrator has, in fact, reduced the amount claimed by the respondents to one half and he has, therefore, granted what he considered to be reasonable compensation for the delayed supplies made by the applicants. Where the arbitrator, therefore, has granted what he considered reasonable compensation according to the terms of the parties, it cannot be said to involve an error of law much less an error of law apparent on the face of the award. It is not for the court to interfere with the discretion exercised by the arbitrator.

10. Coming now to the decision of the Supreme Court reported in AIR 1963 SC 1405 their Lordships have pointed out that a court could grant a relief by granting a reasonable compensation where the court is of the opinion that the compensation claimed amounts to a punishment or is one which acts in terrorem. At the same time, their Lordships observed that Section 74 undoubtedly gives an aggrieved party a right to reasonable compensation from the court for a breach of contract. It is not disputed that the applicants in both the contracts had committed a, serious breach of the contract. In fact, counter-affidavit filed by the respondents would clearly show that the contractors made grossly inadequate supplies and that too far beyond the period fixed. Having regard therefore, to these circumstances, it cannot be said that the arbitrator was not justified in granting even one half of the total compensation claimed by the respondents. At any rate, it is not necessary for me to go into this question at length because in my opinion, there is no error of law apparent on the face of the award in the present case. The mere fact that the arbitrator has ignored certain legal principles in awarding compensation to the applicants will not be sufficient to attract the jurisdiction of this court to interfere under Section 30 unless it is shown that from the reasons given by or the notes appended to by the arbitrator in his award these principles have been misconstrued. This, however, is not the position before me, in these two cases.

11. No other point was pressed before me. For these reasons, therefore, the objections raised by the applicants are overruled and the awards given by the arbitrator in both these cases are made a rule of the court. Let a decree follow in terms of the award in both the cases. In the circumstances, there will be no order as to costs.

IH/R.G.D

12. Order accordingly.