PETITIONER:
B.V. RADHA KRISHNA
Vs.
RESPONDENT:
SPONGE IRON INDIA LTD.
DATE OF JUDGMENT: 04/03/1997
BENCH:
CJI, K. VENKATASWAMI
ACT
HEADNOTE
JUDGMENT
JUDGMENTK. VENKATASWAMI, J.
Leave granted
Heard learned counsel for the parties. The short question that arises for out consideration is whether the High Court was justified in interfering with the award by reducing the amount for he work done as well as allowing the interest only from the date of the notice demanding the amount.
The appellant contractor undertook the work of transportation of waste and finished products within the plan of the respondent company commencing from 16.4.1982 to 31.3.1983. The agreement in respect of that contract was executed by both the parties on 8.6.1982. As certain disputes arose between the parties in respect of transportation work the appellant issued notices to the respondent calling upon them to settle the bills and claim raised by him. As the respondent failed to settle the bills, the appellant moved the City Civil Court Hyderabad under Section 20 of the Arbitration Act (hereinafter referred to as "the Act") for appointment of the Sole Arbitrator to adjudicate upon the dispute between the parties. Mr. Justice K. Punnayya (retired judge of the High Court of Andhra Pradesh) was appointed as Sole Arbitrator by order dated dated 31.10.1985. The learned Arbitrator by the award dated 1.8.1986, after giving opportunity to both the parties, determined the amount of Rs. 5,29,864.55 as payable by the respondent Company to the appellant. In addition to that the Arbitrator also awarded interest of the rate of 18 per cent per annum on the said amount from 1.4.1983 till the date of award being made the rule of Court.
The appellant moved the City Civil Court, Hyderabad by filling O.S. No.1027 of 1986 for making the award of the Arbitrator as rule of the Court and also prayed for the grant of interest at the rate of 21 per cent per annum from the date of decree till the date of realisation of the amount. The respondent company, on the other hand, filed O.P. No 349/86 challenging the award. The learned judge City Civil Court by a common judgment dated 30.8.1988 decreed the suit filed by the appellant for making the award as rule of the Court by awarding 20% interest from the date of decree till the date of realisation of the amount of dismissed the O.P. filed by the respondent challenging the award.
Aggrieved by the common judgment and order of the City Civil Court, the respondent Company moved the High Court in C.M.A. No. 1277/88 and C.R.P.No. 3695/88 against O.P. No. 349/86 and O.S. No.1027/86 respectively.
The Division Bench the High Court, by a common judgment dated 29.9.1995, partly allowed the appeal as well as the Revision Petition by reducing the amount from 5,29,864.55 to Rs. 1,72,347/- and interest 18% from 14.6.1984 instead of from 1.4.1983. The appellant is aggrieved by the said judgment of the High Court.
Mr. K. Madhava Reddy. learned Senior Counsel appearing for the appellant submitted that the High Court exceeded its jurisdiction in interfering with the well considered award of the arbitrator by examining the matter as a regular appellate court. Learned counsel also invited out attention to the discussion made by the Arbitrator as well as by the High Court regarding the relevant clause in the agreement and in particular to the expression one ’One Kilometre lead’. We find from the Award that the Arbitrator has taken into account the oral evidence of both the parties and also the documentary evidence placed before him to come to the conclusion that the version of the respondent company ’one Kilometre lead’ means ’one Kilometre by one side’ in not correct by way of understanding it.
This finding of the Arbitrator was upset by the High Court by going into the question as if sitting a appeal to render a contrary view. this, according to the learned counsel, is not the jurisdiction of the High Court as this is not an error apparent on the face of the record. He further argued that it is settled law that the Court while exercising power under Section 30 of the Arbitration Act cannot re-appreciate all the materials on the record for the purpose of recording a finding whether in the facts and circumstances of a particular case the award in question could have been made. In support of this contention he placed reliance on Hindustan Construction Company Ltd. Vs. Governor of Orissa and Others (1995) 3 SCC 8.
The learned counsel for the respondent however strenously argued supporting the judgment of the High Court. According to him the High Court has placed a correct interpretation on the clause in the agreement in question by referring to various dictionary and other technical meaning to be given to the word ’lead’ occuring in the clause. He also submitted that the High Court has explained the oral evidence of R.W. 5 and therefore, the view taken by the High Court Should be accepted in preference to the view taken by the Arbitrator.
We are afraid we cannot accept the contention of the learned counsel appearing for the respondent Company. We are of the view of that the learned counsel for the appellant is right in contending that the High Court exceeded its jurisdiction under Section 30 of the Arbitration Act by dealing with the issue as an appellate court. Regarding the issue in question, the Arbitrator has observed as follows :-
"The next point that requires
consideration is whether R.W.- 1’s
contention that one kilometre lead
mentioned in Ex. R-1 means one
kilometre by one side but not to
and fro as contended by the
claimant, is acceptable?
R.W.1 asserts in his evidence
that in all transport contracts it
would be mentioned only as lead
which mean by one side... In fact
R.W. 1’s version that "one
kilometre lead means one Kilometre
by one side" is contradicted by
their own witness R.W.-5, to whom a
part of P.W.-1’s present contract
was given under the work order
Ex.R-8 dated 14.3.1983. R.W -5
deposed that one Kilometre lead
includes to and fro. He further
clarified that though the word
"lead" does not mention the word to
and fro", it is meant or understood
as to and fro. R.W.-5’s evidence
that the lead of 1 k.m. means one
kilometre to and fro. falsifies
R.W.-1’s version in this regard.
P.W.-1’s evidence on this aspect is
that in the case of internal
transport the word ’lead’ only is
mentioned and it would mean to and
fro. If the lead is only one side,
the tender notice would
specifically mention as "one side".
In support of his contention he
relied upon Ex.C-2 the Tender
Notice issued by the Singarani
Collaries Co. Ltd. Bellampally,
dated 5.11.1985 published in the
Indian Express. Hyderabad edition
dated 19.11.1985. Under Ex. C-2
Sealed Tenders are invited from
reputed transport contractors for
transport of coal is self dumping
lorried at the following place :
"One Way distance Approx. quantity
in K.M.’s(Approx.) in tonnes
by/month
SRP 2A to 9,000
RAP-I CSP
It is therefore, clear that
Ex.C-2 which relates to transport
contract specifically mentions as
"one way distance", Ex. C-2
clarifies that as the lead is for
one side, it is mentioned
specifically as "one way distance".
R.W.-1 was confronted with
Ex.C-2 in the Cross-examination and
he admitted that Ex. C-2 relates to
the transport contract.
R.W.-1, of course, says that
Ex.C-2 relates to that Company
(Singarani Collories). It is true
that Ex. C-2 relates to Singarani
Colleries, but it is also
Government Company. All the
Government companies have to follow
the same rules pertaining to the
transport contracts. Even R.W.-1
stated in his evidence that in all
the transport contracts it would be
mentioned as lead only and would
not be mentioned as one way lead.
But Ex. C-2 proves that the view
expressed by R.W.-1 is not correct.
Since R.W.-5 who is the
witness of the respondent-company
and who transported and dumped
22,000 M.Ts. of material from out
of P.W. 1’s contract, unequivocally
stated that one kilometre lead
mentioned in tender notice is meant
and understood as one kilometre
lead to and fro and since Ex. C-2
also specifically mentions as one
side lead P.W.-1’s version is
accepted and R.W.-1’s version
cannot be accepted.
From may above discussion, I
hold that the claimant transported
10.195.80 M.Ts. of material within
one kilometre lead to and fro. as
contended by the claimant but not
the entire material of 47,463.29
M.Ts. as contended by the
respondent Company."
As against the above discussion and conclusion of the Arbitrator, The high Court on the same issue observed as follow :-
"....(T)he learned Arbitrator did
not discuss the meaning of the term
’lead’ used in ordinary or
engineering parlance. He relied on
two factors, namely, the tender
notice of another Company (Ex.C-2)
and the so-called admission of R.W.
-5 which we shall refer to later.
What is important is to find
out whether the world ’lead’ means
the distance covered from the point
of origin to the point of
destination only, or the return
empty trip form the destination to
the point of origin should also be
taken into consideration. If a
distance of say, 4 Kms was to be
covered by way of ’lead’ whether it
would mean that a distance of only
2 Km from the point of origin to
the point of destination would be
taken into account or whether the
return trip of 2 Km also would be
included within the meaning of the
word ’lead’. We have no doubt in
our mind that, that is not the
meaning which could be attributed
to the word ’lead’. ’Lead’ means
and for all practical purposes it
is only the one way distance to be
covered from the point of origin to
the point of destination unless
otherwise specified."
"The concise Oxford
Dictionary. 1990 Edition, spells
out different contexts. As far as
the present context is concerned
the meanings of the word ’lead’ is
stated to be as follows
"Bring to a certain position
or destination"
In Oxford Universal Dictionary
(Illustrated) the meaning of the
word ’lead’ under the sub-head
’Engineering is given as follows"
"The distance to which ballet,coal,
soil etc. is to be conveyed to its
estination."
This meaning attributed to the
word ’lead’ in the Oxford
Dictionary makes it abundantly
clear that only one way distance
from the point of origin to the
point of destination is to be taken
into account.
The High Court further observed :
"We are also of the view that
tit admits of one and only meaning
and the Arbitrator, on a
consideration of irrelevant factor,
namely, tender notice of Singarani
Colleries and going by a non-
existent admission of R.W.-5
understood the word ’lead’ in a
sense contrary to its plain
meaning. Without any factual or
legal basis and, therefore, there
is an error of law apparent on the
face of the award. The construction
of a material portion of document
is a question of law, but not
merely one of fact. There is no
basis at all for the Arbitrator’s
conclusion and the legal error is
therefore apparent.
The disposal of the matter by the High Court in the manner shown aboye does not come within the ambit of section 30 of the Arbitration Act. This Court, time and again, has pointed out the scope and ambit of section 30 of the Act. In State of Rajasthan vs Puri Construction Co. Ltd. and Another (1994) 6 SCC 485 after referring to decisions of this Court as well as English cases. The Court observed as follows:
"On the scope and ambit of the
power of interference by the court
with an award made by an arbitrator
in a valid reference to
arbitration, various decisions
have been made from time to time by
Law Courts of India including this
court and also by the Privy Council
and the English Courts. Both the
parties have referred to such
decisions in support of their
respective contentions. The factual
contentions of the respective
parties are proposed to be
scrutinised and then the facts are
proposed to be tested within the
conspectus of judicial decisions
governing the issues involved.
This Court again observed in paras 26-28 as follows :-
"The arbitrator is the final
arbiter fr the disputes between the
parties and it is not open to
challenge the award on the ground
that the arbitrator has drawn his
own conclusion or has failed to
appreciate the facts. In Sudarsan
Trading Co. Vs. Govt. of Kerala it
has been held by this Court that
there is a distinction between
disputed as to the jurisdiction of
the arbitrator and the disputes as
to in what way that jurisdiction
should be exercised. There may be
conflict as to the power of the
arbitrator to grant a particular
remedy. One has to determine the
distinction between an error within
the jurisdiction and an error in
excess of the jurisdiction. Court
cannot substitute its own
evaluation of the conclusion of law
or fact to come to the conclusion
that the arbitrator had acted
contrary to the bargain between the
parties. (exphasis supplied) Where
a particular amount was liable to
be paid is a decision within the
competency of the arbitrator. By
purporting to construe the contract
the court cannot take upon itself
the burden of saying that this was
contrary to the only correct view,
the award cannot be examined by the
court. Where the reasons have been
given by the arbitrator in making
the award the court cannot examine
the reasonableness of the own
forum, the deciding forum must be
conceded the power of appraisement
of evidence. The arbitrator is the
sole judge of the quality as well
as the quantity of evidence and it
will not be for the court to take
upon itself the takes of being a
judge on the evidence before the
arbitrator.
In Municipal Corporation India
vs. Jagan Nath Ashok Kumar, it has
been held by this Court that
appraisement of evidence by the
arbitrator is ordinarily never a
matter which the court questions
and considers. It may be possible
that on the same evidence the court
may arrive at a different
conclusion that the one arrived at
by the arbitrator but that by
itself is not ground for setting
aside the award. It has also been
held in the said decision that it
is difficult to give and exact
definition of the ward
’reasonable’. Reason varies in its
conclusions according to the
idiosyncrasies of the individual
and the time and circumstances in
which he thinks. In cases not
covered by authority the verdict
of jury or the decision of a judge
sitting as a jury usually
determines what is ’reasonable’ in
each particular case. The word
reasonable has in law prima facie
meaning of reasonable in regard to
those circumstances of which the
actor, called on to act reasonably
knows or ought to know. An
arbitrator acting as a judge has to
exercise a discretion informed by
tradition, methodized by analogy,
disciplined by system and
subordinated to the primordial
necessity of order in the social
life. There fore, where reasons
germane and relevant for the
arbitrator to hold in the manner he
did, have been indicated, it cannot
be said that the reasons are
unreasonable.
In this case, claims before
the arbitrators arise from the
contract between the parties. It is
well settled that if a question of
law is referred to arbitrator and
the arbitrator comes to a
conclusion, it is not open to
challenge the award on the ground
that an alternative view of law is
possible. In this connection,
reference may be made to the
decisions of this Court in Alopi
Parshad and Sons Ltd. vs. Union of
India and Kapoor Nilokheri coop.
Dairy Farm Society. In Indian Oil
Corpn. Ltd. vs. Indian Carbon Ltd.,
this Court has held that the court
does notsit in appeal over the
award and review the reasons. The
Court can set aside the award only
it is apparent from the award that
there is no evidence to support the
conclusions or if the award is
based upon any legal proposition
which is erroneous."
In Hindustan Construction Co. Ltd. vs. Governor of Orissa and other (1995) 3 SCC 8 this Court observed on the scope of interference by the court as follows:-
"It is well known that the Court
while considering the question
whether the award should be set
aside does not examine the question
as and appellate court. While
exercising the said power. The
court cannot reappreciate all the
materials on the record for the
purpose of recording a finding
whether in the facts and
circumstances of a particular case
the award in question could have
been made. Such award can be set
aside on any of the grounds
specified in Section 30 of the Act.
Bearing in mind, the principles laid down by this Court in the above aid cases. If we took into disposal of the matter by the High Court, it would be evident that the High Court has substituted its own view in place of the Arbitrator’s view as if its was dealing with an appeal. That is exactly what is forbidden by the decisions of this Court therefore, we have no hesitation to set aside the judgment of the High Court on this issue.
Learned counsel for the appellant also submitted that the High Court went wrong in awarding interest only from 14.6.1984 on the ground that the notice demanding the amount was issued on that date only an therefore, the appellant was not entitled to any interest prior to that date. According to the learned counsel. Section 3(1)(b) or the interest Act 1978 in unequivocal terms specifies that interest would be available from the date mentioned in the demand notice and notice and without noticing that provision that High Court has wrongly given interest from the date of the notice.
On the question of interest we think the learned counsel for the appellant is right in placing reliance on Section 3(1)(b) of the Interest act. The appellant Company had issued notice on 14.6.1984 demanding payment of the specified amount and interest on the specified amount at the rate of 21% per annum from 1.4.1983 till payment. Section 3(1)(b) of the Interest Act. 1978 reads as follow :-
"3. Power of court to allow
interest. - (1) In any proceedings
for the recovery of any debt or
damages or in any proceeding in
which a claim for interest in
respect of any debt or damages
already paid is made, the Court
may, if it thinks fit, allow
interest to the person entitled to
the debt or damages or to the
person making such claim, as the
case may be, at a rate on exceeding
the current rate of interest, for
the whole or part of the following
period, that is to say,----
(a) .........
(b) If the proceedings do not
relate to any such debt, then, from
date mentioned in this regard in a
written notice given by the person
entitled or the person making the
claim to the person liable that
interest will be claimed, to the
date of institution of the
proceedings :"
In view of this, the learned counsel appearing for the respondent company could not support the order of the High Court in awarding interest from the date of notice, namely, 14.6.1984 and not from the date mentioned in the notice viz. 1.4.1983.
In the result, we set aside the judgment of the High Court had restore the Award of the Arbitrator. therefore will be no order to costs.