High Court
Case Details
Arb.A. 9/2013 BEFORE HON’BLE MR. JUSTICE I. A. ANSARI HON’BLE MR. JUSTICE P. K. MUSAHARY
Legal Reasoning
This is an appeal, made under Section 37 of the Arbitration and Concilia tion Act, 1996 (in short, ’the Act’). The appellant herein has put to challenge the order, dated 04.12.2012, passed by the learned District Judge, Dibrugarh, in Misc. (Arb.) Case No. 12/2011, whereby the learned District Judge, Dibrugarh, h as dismissed the application, made by the present appellant, under Section 34 of the Act, impugning therein the validity of the arbitral award, dated 10.08.2011 We notice that one of the grounds, specifically taken by the present app , passed, by the Sole Arbitrator, Lt. Col. Uday, R.S. 2. ellant, in his application made under Section 34 of the Act, was as under: (cid:28)vii) For that the impugned order of the sole arbitrator is devoid of any reason s thereby violating the provisions of section 31 of Arbitration and Conciliation Act which makes it mandatory upon which the award is passed, and any award pass ed devoid of any reason the same is liable to be set aside. (cid:29) 3. The learned District Judge, by its order, dated 04.12.2012, took note of the above ground by observing in its order, dated 04.12.2012, thus, (cid:28)Further co ntention of the learned counsel for the petitioner was that the arbitrator viola ted the provision of Section 31 and 33 of the Arbitration and Conciliation Act a nd also did not take into account the various letters and petitions issued by th e petitioners. That the impugned award was in direct conflict with law and publi c policy and that the arbitrator played fraud upon legal rights of the petitione r. While passing the impugned award, and therefore, contended by the learned cou nsel, that the impugned award cannot be allowed to stand and liable to be set as ide (cid:29). Considering the above contention of the present appellant, the learned D 4. istrict Judge observed to the effect that Section 34 of the Act is not attracted to the facts of the present case. In other words, what the learned District Jud ge contended was that omission to assign any reason for the award, though a viol ation of the provisions of Sections 31 of the Act, such a violation of the provi sions, embodied in Section 31 of the Act, would not be a legal ground for interf erence under Section 34 of the Act. For the conclusion, amongst others, so reach ed, the learned District Judge has rejected the application made by the present appellant. Aggrieved by the decision rendered on its application made under Sect ion 34 of the Act, the present appeal has been preferred by the appellant under Section 37 of the Act. 5. rs. R. Bora, learned Central Government counsel, appearing for the respondent. 6. While considering the present appeal, it needs to be noted that unlike t he Indian Arbitration Act, 1940, whereunder reason was not statutorily required to be assigned by an arbitrator in respect of an award delivered by him. However , Section 31 (3) of the Act, now, requires reasons to be assigned for an arbitra l award. (See Mcdermott International Inc. vs. Burn Standard Co. Ltd., reported in (2006) 11 SCC 181).
Legal Reasoning
Heard Mr. A. Biswas, learned counsel, appearing for the appellant, and M 7. It is Section 31 of the Act, which lays down the form and contents of th e arbitral award. Sub-Section (3) of Section 31 of the Act, being relevant, is r e-produced below: (cid:28)(1) An arbitral award shall be made in writing and shall be signed by the membe rs of the arbitral tribunal. (2) For the purposes of sub-section (1), in arbitral proceedings with more than one arbitrator, the signatures of the majority of all the members of the arbitra l tribunal shall be sufficient so long as the reason for any omitted signature i s stated. (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 in an arbitral award on agreed terms under section 30. (cid:29) (Emphasis is added) 8. From a bare reading of the provisions of Sub-Section (3) of Section 31, it becomes abundantly clear that every arbitral award shall assign reasons upon which the award is based. This obligation to assign reason(s), for an award rend ered, can be dispensed with in only two cases, namely, if (a) the parties have a greed that no reasons are to be given, or (b) the award in an arbitral award on agreed terms under Section 30. (cid:29) We have gone through the award, which was impugned by the appellant in i 9. ts application made under Section 34, and we notice that the learned Sole Arbitr ator did not, in fact, assign any reason whatsoever for allowing the counter cla im of the respondent, while the disallowing the claim of the present appellant. In fact, it is not in dispute before us that the impugned award, dated 1 10. 0.08.2011, does not assign reasons for disallowing the claim of the present appe llant and/or for allowing the counter-claim of the respondent. 11. Situated thus, there can be no escape from the conclusion that the arbit ral award, which stands impugned in this appeal and which also stood impugned in the application made by the appellant under Section 34 of the Act, assigned no reason whatsoever for allowing various claims of the respondent herein and there by violated the mandate of Sub-Section (3) of Section 31 of the Act. 12. 1 of the Act can be a ground for setting aside an award given under Section 34. 13. A close reading of Section 34 shows that an arbitral award can be set as ide if the award is, amongst others, in conflict with the public policy of India . What is, however, the meaning and scope of the public policy of India has been The question, now, is: Whether violation of Sub-Section (3) of Section 3 a subject of controversy. 14. In the case at hand, the limited question, which we have to address, is whether omission to assign reasons for an arbitral award, as required to be assi gned in terms of Sub-Section (3) of Section 31 of the Act, can be described as a n arbitral award, which is in conflict with the public policy of India. 15. Referring to the case of Som Datt Builders Limited reported in (2009) 10 SCC 259, Mr. Biswas, learned counsel for the appellant, has pointed out that th e omission to assign reasons in arbitral award is bad in law inasmuch as the sta tutory provisions, embodied in Sub-Section (3) of Section 31, shall, if not adhe red to, render the award as an award, which is in conflict with, or in violation of, the law contained in that behalf. 16. We find considerable force in the above submission of Mr. Biswas, learne d counsel for the appellant, and the reliance placed by him, on the case of Som Datt Builders Limited (supra), is, to our mind, not entirely misplaced inasmuch as Som Datt Builders Limited (supra) clearly lays down, at para 20, that Sub-Sec tion (3) of Section 31 mandates that 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 under Section 31. The relevant observations, made by the Supreme Court at para 20, 21 and 22 of Som Datt’s case (supra), read as under: (cid:28) 20. Section 31(3) mandates that the arbitral award shall state the reasons upo n which it is based, unless-(a) the parties have agreed that no reasons are to b e given, or (b) the award is an arbitral award under Section 30. That the presen t case is not covered by clauses (a) and (b) is not in dispute. In the circumsta nces, it was obligatory for the Arbitral Tribunal to state reasons in support of its award in respect of Claims 1 and 4-B. By legislative mandate, it is now ess ential for the Arbitral Tribunal to give reasons in support of the award. It is pertinent to notice here that the 1996 Act is based on UNCITRAL Model Law which has a provision of stating the reasons upon which the award is based. 21. In Union of India v. Mohan Lal Capoor this Court said: (SCC p. 854, para 28) (cid:28)28. & Reasons are the links between the materials on which certain conclusions are based and the actual conclusions. (cid:29) 22. In Woolcombers of India Ltd. v. Workers’ Union this Court stated: (SCC pp. 3 20-21, para 5) (cid:28)5. ... The giving of reasons in support of their conclusions by judicial and qu asijudicial authorities when exercising initial jurisdiction is essential for va rious reasons. First, it is calculated to prevent unconscious unfairness or arbi trariness in reaching the conclusions. The very search for reasons will put the authority on the alert and minimise the chances of unconscious infiltration of p ersonal bias or unfairness in the conclusion. The authority will adduce reasons which will be regarded as fair and legitimate by a reasonable man and will disca rd irrelevant or extraneous considerations. (cid:29) (Emphasis is added) 17. In Som Datt Builders Limited (supra), the Supreme Court further observes , at para 25, that the requirement of reasons, in support of the award under Sec tion 31(3), is not an empty formality. It guarantees fair and legitimate conside ration of the controversy by the Arbitral Tribunal. The relevant observations, a ppearing at para 25, in Som Datt’s case (supra), read as under: (cid:28)25. The requirement of reasons in support of the award under Section 31(3) is n ot an empty formality. It guarantees fair and legitimate consideration of the co ntroversy by the Arbitral Tribunal. It is true that the Arbitral Tribunal is not expected to write a judgment like a court nor is it expected to give elaborate and detailed reasons in support of its finding(s) but mere noticing the submissi ons of the parties or reference to documents is no substitute for reasons which the Arbitral Tribunal is obliged to give. Howsoever brief these may be, reasons must be indicated in the award as that would reflect the thought process leading to a particular conclusion. To satisfy the requirement of Section 31(3), the re asons must be stated by the Arbitral Tribunal upon which the award is based; wan t of reasons would make such award legally flawed. (cid:29) (Emphasis is added) 18. In the case at hand, since the impugned award suffers from violation of the statutory obligation, imposed on every arbitrator, while giving an award, we are clearly of the view that the impugned award cannot survive inasmuch as the same not only ignores, but also violates the statutory provision embodied in Sub -Section (3) of Section 31 of the Act and such an award must be treated as an aw ard, which is in conflict with the public policy of India. Considering, therefore, the matter in its entirety and in the interest o 19. f justice, the impugned order, dated 04.12.2012, passed, by the learned District Judge, on the application made under Section 34 of the Act, as well as the impu gned arbitral award, dated 10.08.2011, are hereby set aside and the proceeding i s remanded to the Sole Arbitrator for rendering a decision, in accordance with l aw, keeping in view the requirement of law as regards assigning of reasons for t he award, which may be rendered in the present case. 20. 21.
Decision
With the above observations and directions, this appeal stands allowed. No order as to costs.