UNION OF INDIA Vs. ARCTIC INDIA

JUDGEMENT

(1.) These Appeals pertain to the scope of interference of Courts in the Award pursuant to filing of Objections under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act for short). While answering this legal nodus, we must not lose sight of the fact that Parliament had carried out widespread amendments to the law, principally with a view to remedy protracted litigation. Arbitration was conceived as an adjunct to law Court in the process of dispute resolution. Rampant interference in Awards had virtually emasculated this objective, thus necessitating a legal regime. The endeavour of Parliament was to impart finality to arbitral Awards which has been sought to be achieved by circumscribing and curtailing challenges to the Award by confining it to cases where the arbitral verdict manifestly is in conflict with the public policy of India.

(2.) In the nascent stages of arbitration, when it was still to be ubiquitously accepted as an alternative forum for dispute resolution, Courts exercised supervision on these proceedings. Arbitration, as an alternative dispute resolution mechanism, has now developed into a robust institution, capable of effectively and expeditiously deciding disputes, especially because of specialized knowledge of the Arbitral Tribunals. With this metamorphosis, the superintendence of the Courts has expectedly and exponentially waned. Initially, jural interference was allowed wide amplitude by the Supreme Court, leading to a proliferation in the grounds on which Awards could be assailed. Whilst initially Awards were susceptible to being set aside if all questions raised were not discussed in the Award, with the passage of time the fiction that all points had been duly considered and rejected came to be adopted to insulate Awards from jural censure. Similarly, whilst it was earlier accepted that Awards should contain reasons in clear terms, it was subsequently opined that if the trend/chain of thought was discernible, the Award was impregnable to attack. Most significantly, their Lordships have gone to the extent of enunciating that judicial interference is not called for even in those instances where the arbitrator may have committed an The following passage from Union of India vs- error of fact. Rallia Ram, AIR 1963 SC 1685, even though in the context of the repealed Arbitration Act, 1940 (,,Arbitration Act for short), is worthy of reproduction:- An award being a decision of an arbitrator whether a lawyer or a layman chosen by the parties, and entrusted with power to decide a dispute submitted to him is ordinarily not liable to be challenge on the ground that it is erroneous. In order to make arbitration effective and the awards enforceable, machinery is devised for lending the assistance of the ordinary Courts. The Court is also entrusted with power to modify or correct the award on the ground of imperfect form or clerical errors, or decision on questions not referred, which are severable from those referred. The Court has also power to remit the award when it has left some matters referred undetermined, or when the award is indefinite, or where the objection to the legality of the award is apparent on the face of the award. The Court may also set aside an award on the ground of corruption or misconduct of the arbitrator, or that a party has been guilty of fraudulent concealment or wilful deception. But the Court cannot interfere with the award if otherwise proper on the ground that the decision appears to it to be erroneous. 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 reached 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. Acknowledging that the Arbitrator is the final judge of State of Orissa vs- Kalinga facts, the Apex Court in Construction Co. (P) Ltd., 1970 (2) SCC 861 held that the High Court erred in considering the matter as a Court of Appeal by re-evaluating the evidence.

(3.) In Hindustan Iron Co. vs- K. Shashikant & Co., AIR 1987 SC 81, the Court held that the Award of the Arbitrator ought not to be set aside for the reason that, in the opinion of the Court, the Arbitrator reached wrong conclusions or failed to appreciate some facts. That this was a well settled proposition of law was reiterated in the decision of the Apex Court in Coimbatore District Podu Thozillar Sangam -vs- Balasubramania Foundary, AIR 1987 SC 2045. It was opined that it is only an error of law and not a mistake of fact committed by the arbitrator, which is justiciable in the application/objection before the Court. If there is no legal proposition in the Award, which is erroneous and the alleged mistakes are in the nature of errors of fact, the Award is not amenable to corrections of the Court provided the Award is made fairly, after giving adequate opportunity to the parties to articulate their grievances in the manner provided by the arbitration agreement. Similar views were again expressed in Indian Oil Corporation Ltd. vs- Indian Carbon Ltd., (1988) 3 Jawahar Lal Wadhwa vs- Haripada Chakroberty, SCC 36; (1989) 1 SCC 76; Puri Construction Pvt. Ltd. vs- Union of India, (1989) 1 SCC 411; M/s. Sudarsan Trading Co. vs- Government of Kerala, (1989) 2 SCC 30; Food Corporation of India vs- Joginderpal Mohinderpal , AIR 1989 SC 1263 where even a plausible view taken by the Arbitrator was held not to interference. In Municipal Corporation of be open to Court Delhi vs- M/s. Jagan Nath Ashok Kumar, AIR 1987 SC 2316, the Court held that if the reasons appear per se to be not unreasonable and irrational, the Court ought not to reappreciate the evidence. In Hind Builders vs- Union of India, AIR 1990 SC 1340 the Court cautioned that where two views were possible, it could not be predicated that there was an error apparent on the face of the Award. In Bijendra Nath Srivastava vs- Mayank Srivastava, AIR 1994 SC 2562, the view was expressed that the reasonableness of reasons given by the arbitrator was not open to challenge and that the proper approach would be for the Hindustan Court to support the Award. Similarly, in Construction Co. Ltd. vs- Governor of Orissa, AIR 1995 SC 2189, it was repeated that the Court cannot reappreciate the material on the record. In Trustees of the Port of Madras vs- Engineering Constructions Corporation Ltd., (1995) 5 SCC 531, the decision of a Division Bench of the High Court of Madras, which reversed the Award on a question of fact and not a question of law, was set aside by the Supreme Court. After considering its previous decisions, the Apex Court in B.V. Radha Krishna vs- Sponge Iron India Ltd., (1997) 4 SCC 693 again held that the Court could not substitute its own view in of the Arbitrator. In Army Welfare Housing place of that Organisation -vs- Gautam Construction & Fisheries Ltd., (1998) 7 SCC 290, the Court declined to vary an Award for the reason that without reappreciating evidence it would not be possible to fault the quantum awarded towards anticipated expenses. The A&C Act has given statutory expression to the judicial view that Courts' interference in arbitration matters is to be eschewed.