RAJENDRA CONSTRUCTION COMPANYversusMAHARASHTRA HOUSING AND AREA DEVELOPMENT AUTHORITY AND ORS.

A                  RAJENDRA CONSTRUCTION COMPANY
                                          v.
          MAHARASHTRA HOUSING AND AREA DEVELOPMENT
                     AUTHORITY AND ORS.


B                                 AUGUST I I, 2005

           [C.K. THAKKER AND P.K. BALASUBRAMANYAN, JJ.]

         Arbitration Act, 1940:

C        Section 17-Arbitration award-No reasons in support of-Validity-
    Neither the arbitration agreement nor the contract provided for recording
    ofreasons by the Arbitrator-Held: High Court could not set aside the award
    on the ground that it was not supported by reasons and was not a speaking
    award-Arbitration and Conciliation Act, 1996, S. 31 (3).
D
         Sections 13 and 29-lnterest-Award of-Power of Arbitrator-
    Arbitrator awarded interest@ 18% per annum on the principal amount from
    the date ofthe suit till the date ofthe award as also from the date ofthe award
    to the date of payment or the date of decrees, "whichever was ear/ier"-
    Validity of-Held: Arbitrator had power to award interest at pre-reference,
E   pendente lite and post-award stages-However, on facts, interest reduced to
    10% per annum being proper, equitable and in the interest ofjustice.

         The appellant was a partnership firm doing business in construction
    work. The appellant completed certain construction work for the
F   respondent. However, the respondent made no payment to the appellant.
    Therefore, the disputes were referred to the sole Arbitrator under Section
    21 of the Arbitration Act, 1940.

          The sole Arbitrator awarded a certain amount and interest@ 18%
    per annum on the principal amount of the award from the date of the
G   suit till the date of the award as also from the date of the award to the
    date of payment or the date of decrees, 'whichever was earlier'. The
    award was made rule of the court under Section 17 of the Act.

         The High Court set aside the award on the ground that the award
H   passed by the sole Arbitrator was not a speaking award. The High Court
                                         582
     RAJENDRA CONST. v. MAHARASHTRA HOUSG. AND AREA DEV. AUTH.           583


further held that the directions to pay interest@ 18% per annum for the         A
post pendente lite period were not supported by any reasons. Henoe, the
appeal.

      On behalf of the appellant, it was contended that the proceedings
were governed by the Arbitration Act, 1940 (old Act) and the Arbitration
and Conciliation Act, 1996 (new Act) had no application; that since it was
                                                                                B
not necessary for the Arbitrator to record reasons under the old Act and
as there was no agreement between the parties nor the contract provided
for recording of reasons by the Arbitrator, he was under no obligation
to make reasoned awards; that the trial court had again considered the
objections raised by the respondent and the awards were made rule of            C
the court; that the trial court also ordered to draw decrees in terms of
the awards; and, therefore, there was no reason for the High Court to
interfere with the awards passed by the sole Arbitrator as also the judgment
and order passed by the trial court.

      On behalf of the respondent, it was contended that it was incumbent       D
on the sole Arbitrator to apply his mind to the rival contentions of the
parties, to consider the issues framed by the trial court and to record
findings on those issues supported by reasons and to make awards; that
even if there \Vas no clause in the contract or agreement providing for
recording of reasons, since the Arbitrator was to decide the question and       E
to adjudicate the matter, he ought to have recorded reasons in support
of his decision; and that recording of reasons in support of the order was
part and parcel of 'natural justice' and, therefore, an unreasoned award
should be treated as null and void and ineffective.

     Allowing the appeal in part, the Court                                     F
     HELD: I. The present awards are not under the Arbitration and
Conciliation Act, 1996 but under the Arbitration Act, 1940. It is, therefore,
obvious that they could not have been set aside by the High Court on the
ground that they were not supported by reasons and were not speaking
awards. [593-F-G!
                                                                                G

     Raipur Development Authority v. Mis. Chokhamal Contractors, [1989]
2 sec 721, followed.

     T.N. Electricity Board v. Bridge Tunnel Construction, [1997] 4 SCC         H
    584                  SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.

A   121; Kundale & Associates v. Konkan Hotels (P) Ltd., (1999] 3 SCC 533 and
    Build India Construction System v. Union ofIndia, (2002] 5 SCC 433, relied
    on.

        State of Punjab v. Bhag Singh, (2004] 1 SCC 547 and Gora Lal v.
B   Union of India, [2003] 12 sec 459, held inapplicable.

         Breen v. Amalgamated Engineering Union, (1971] 1 All ER 1148 and
    Alexander Machinery (Dedley) Ltd. v. Crabtree, (1974] ICR 120, referred
    to.

C         Ronald Bernstein: Hand Book of Arbitration Practice, referred to.

          2. Therefore, the awards passed by the sole Arbitrator cannot be
    held illegal or unlawful. In making such awards the rule of the court, the
    trial court had not committed any illegality which vitiated the awards and
    the High Court could not have set them aside. (595-E-F]
D
         3. The sole Arbitrator has the power to award interest for the pre-
    reference, pendente lite and post-award stages. Keeping in view the facts
    and circumstances of the present case, it would be proper, equitable and
    in the interest of justice if the rate of interest is reduced to 10 per cent
E   per annum. (596-A-B]

          Bhagwati Oxygen Ltd. v. Hindustan Copper Ltd., AIR (2005) SC 2071,
    relied on.

         Executive Engineer, Dhenkanal Minor Irrigation Division v. N.C.
F   Budhraj, (2001) 2 SCC 721, Secretary, Irrigation Department, Government
    of Orissa v. G.C. Roy, (1992] l SCC 508 and Hindustan Construction Co.
    Ltd v. State of Jammu & Kashmir, (1992) 4 SCC 217, referred to.

         CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 5045-5046
    of 2005.
G
         From the Judgment and Order dated 4.6.2003 of the Bombay High
    Court in F.A. Nos. 528 and 529 of 1996.

        Uday U. Lalit, Atul Karad, Gautam Godara and Ravindra Keshavrao
H   Adsure for the Appellant.
   RAJENDRA CONST. i·. MAHARASHTRA HOUSG. AND AREA DEV. AUTH. [THAKKER, J.]585


     Ramesh P. Bhatt, Sr. Adv., Chirag M. Shroff, M.S. Girish and M.N.           A
Shroff for the Respondents.

     The Judgment of the Court was delivered by

     C.K. THAKKER, J. : Leave granted.
                                                                                 B
     The present appeals are directed against the judgment and order dated
June 4, 2003 passed by the Division Bench of the High Court of Bombay
(Aurangabad Bench) in First Appeal Nos. 528 and 529 of 1996. By the said
judgment, the High Court allowed the appeals filed by the Maharashtra
Housing & Area Development Authority and set aside decrees dated August
25, 1996, passed by the Court of Civil Judge, (Senior Division), Aurangabad
                                                                                 c
in Special Civil Suit Nos. 265 and 266 of 1991.

     The relevant facts leading to these appeals may now be stated in brief;
Appellant Rajendra Construction Company ('RCC' for short) is a partnership
firm doing business in construction work. Maharashtra Housing & Area             D
Development Authority ('MHADA' for short) issued a Tender Notice No.
4/87-88 calling offers from registered contractors for the construction of 444
tenements under the Low Income Group Scheme (L!Gs), near Scot Grini,
Garkheda, Aurangabad and 192 tenements under Middle Income Group
Scheme (MIGs), near Griha Nirman Bhavan, Aurangabad.
                                                                                 E
     In November, 1987, work orders were issued in favour of RCC for an
amount of Rs. 50,38,068 in respect of the first work and for an amount of
Rs. 74,56,972 in respect of the second work. According to the appellant, the
time limit within which the construction was to be completed was eighteen
months for the first scheme and twelve months for the second scheme.             F
However, the execution of construction work was delayed on account of
variation in the existing and agreed items as also certain ex,tra work as per
the instructions of MHADA. Requests were, therefore, made by RCC for
extension of time which was granted and within that extended period, the
work was completed to the satisfaction ofMHADA. MHADA, however, took
no steps to prepare final bill on one pretext or the other and no payment was    G
made to RCC. It was the case of RCC that its claim was not properly worked
out. Still, however, RCC accepted the payment made by MHADA 'under
protest'.

     RCC then issued notice to MHADA on April 17, 1991 demanding                 H
    586                   SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.

A   additional amount of Rs. 19,01,600 for construction work in the first scheme
    and Rs. 21,08, 100 for the work in the second scheme. MHADA, however,
    refused to make payment. RCC filed two appeals before MHADA Board on
    May 06, 1991 under Clause 30 of the agreement claiming the above amounts
    with interest at the rate of 18 per cent per annum. On June 14, 1991, RCC
    requested the Board to decide its claim. On June 29, 1991, RCC issued notice
B
    to MHADA under Section 173 of Maharashtra Housing & Area Development
    Act, 1976 to settle the claim within a period of sixty days. As the claim was
    not settled, and payment was not made, RCC filed two suits in the Court of
    Civil Judge, (Senior Division); Aurangabad being Special Civil Suit No. 265
    of 1991 for Rs. 19,01,100 with running interest of 18 per cent per annum
c   from the date of the suit till realization of the amount and Special Civil Suit
    No. 266 of 1991 for Rs. 21,08,100 with running interest of 18 per cent per
    annum for the second scheme. The Civil Judge, (Senior Division), Aurangabad
    issued summons to MHADA. MHADA filed written statements in the suits.
    On September 3, 1993, the Court framed issues in Special Civil Suit No. 266
    of 1991 and on October 27, 1993 in Special Civil Suit No. 265of1991. On
D
    January 5, 1995, RCC filed an application (Ex. 38) for appointment of sole
    arbitrator under Section 21 of Arbitration Act, 1940 for settling of the
    disputes/claims in the light of Clause 30 of contract giving the names of five
    officers. A copy was served on defendant MHADA immediately and the
    court passed the order "Call say other side". On March 10, 1995, MHADA
E   filed application (Ex. 45) thereby giving no objection for appointment of sole
    arbitrator but suggested three different names. On April 3, 1995, RCC, vide
    its application (Ex. 47) agreed to the appointment of Mr. S.R. Wadekar as
    sole arbitrator as suggested by MHADA and to refer the dispute to the said
    arbitrator. In pursuance of the above agreement, the learned Civil Judge,
    (Senior Division), Aurangabad passed an order on April 6, 1995 vide ex. 48
F
    and on April 7, 1995 vide Ex. 51. The order Ex. 47 reads as under :

                     ORDER PASSED BELOW EXH. NO. 47

                  "Shri S.R. Wadekar, Ex. Chief Engineer is appointed as Sole
             Arbitrator who shall settle the terms of the agreement along with the
G
             record if any, relevant and necessary. The sole Arbitrator shall also
             collect the record from the Court and shall report and shall write the
             award within 60 days from the date of passing of this order, and
             without any further delay."

H         The Court then stated;
   RAIENDRA CONST. 1·. MAHARASHTRA HOUSG. AND AREA DEV. AUTH. ITHAKKER_, J.)587


               "You are therefore hereby appointed as Sole Arbitrator in the      A
         matter. Accordingly the disputes and claims between the parties are
         referred to you for Arbitration.

               You are required to complete the proceedings as per provisions
         of Arbitration Act, 1940 and file your award in this Court within
         the time fixed by this Court.
                                                                                  B

               You may fix up terms of fees and expenses with the parties
         after entering on this reference. (Rs.2,000 deposited in Court).

         Please notify the parties at the earliest.                               c
         Please acknowledge receipt of this order."

     On the same day, the Court communicated the decision to sole
Arbitrator Mr. Wadekar. Mr. Wadekar sent his acceptance vide letter dated
April 10, 1995. The Arbitrator then conducted the proceedings, called for         D
record of the Civil Court and examined it. He also visited the site of
construction. After going through all the documents, terms and conditions of
tender agreement and other relevant records and after hearing the parties, he
passed awards on August 17, 1995. He considered the claims under different
heads and awarded an amount of Rs. 14,36,708.00 in respect of Scheme No. I
and an amount of Rs.11,80,935.00 in respect of Scheme No.2. The sole              E
Arbitrator also awarded interest at the rate of 18 per cent per annum on the
principal amount of the award from the date of the suit till the date of the
awards as also from the date of the awards to the date of payment or the date
of decrees, 'whichever is earlier'.
                                                                                  F
      The Arbitrator issued notice to both the parties intimating them about
passing of the awards. The Arbitrator also filed awards in the court. On 16th
September, 1995, sealed envelope of award was opened in the court.
MHADA raised objection against the awards under Section 30 of the Act,
vide objections (Ex. 62 and 66) on October 13, 1995. RCC filed its objections
(Ex. 63 and 67) on October 16, 1995 to the applications of MHADA. On              G
the same day, RCC filed applications (Exs. 64 and 68) under Section 17 of
the Act for making awards of the Arbitrator as rule of the court by
pronouncing judgment. By final order dated April 25, 1996, the Civil Judge,
(Senior Division), Aurangabad made Arbitrator's awards as "rule of court".
He also passed an order to draw up decrees accordingly.                           H
       588                  SUPREME COURT REPORTS (2005] SUPP. 2 S.C.R.

·· A         Against the above judgment of the Civil Court, MHADA filed two First
       Appeals. The Division Bench of the High Court, by the judgment impugned
       in the present appeals, allowed those appeals, set aside the order passed by
       the trial court and remitted arbitration proceedings to the sole arbitrator to
       pass fresh awards. According to the High Court, the awards passed by the
  B    sole Arbitrator were not speaking awards and, therefore, could not be said
       to be in accordance with law. The High Court concluded that the awards were
       vitiated under Section 30 of the Act.

             The Court observed :

  c                   "We are, therefore, of the view that the _award of the sole
                arbitrator which has been made rule of the court by the trial court
                is unsustainable on the ground that it suffers from errors apparent
                on the face of the record and the sole arbitrator misdirected the
                proceedings, in as much as, he was required to adjudicate upon the
                issues framed by the trial court and give reasons thereof in respect
  D             of the claims allowed by him. In addition, the directions to pay
                interest at 18% per annum for the post-pendente lite period are not
                supported by any reasons, howsoever short they may be, and
                therefore, the said directions are also unsustainable. We, therefore,
                deem it appropriate to remit the arbitration proceedings to the sole
  E             arbitrator for fresh award and thereupon the trial court would
                examine the same for its decision under Section 21 of the Act.

                      In the result, the appeals are allowed and the decrees passed
                by the trial court in Special Civil Suit Nos. 265 and 266 of 1991
                are hereby quashed and set aside. The arbitration proceedings
  F             initiated pursuant to the order passed by the trial court are restored
                to the sole arbitrator Shri S.R. Wadekar. He shall pass a fresh award
                within a period of60 days from the date of appearance of the parties
                before him. The parties shall appear before the sole arbitrator on
                16.6.2003. No order as to costs."
  G
             The above judgment is challenged by RCC in the present appeals.

             We have heard learned counsel for the parties.

           The learned counsel for RCC submitted that the High Court has
  H    committed an error of law in interfering with the order passed by the trial
    RAJENDRA CONST. r. MAHARASHTRA HOUSG. AND AREA DEV. AUTII. [THAKKER, J.]589


  court and in setting aside the award made by the sole Arbitrator on the ground     A
  that the awards were not 'speaking' awards. The learned counsel submitted
  that the High Court was wrong in holding that an award passed by the
  Arbitrator must be a reasoned one. According to the counsel, under the
  Arbitration Act, 1940 (hereinafter referred to as 'the old Act'), there was no
  obligation on the Arbitrator to record reasons. He further submitted that          B
  admittedly the proceedings were governed by the old Act and the Arbitration
  and Conciliation Act, 1996, (hereinafter referred to as 'the new Act'), has
  no application and the provisions of the new Act could not be pressed into
  service by MHADA. Since it was not necessary for the Arbitrator to record
  reasons under the old Act and as there was no agreement between the parties
  nor the contract provided for recording of reasons by the Arbitrator, he was       c
  under no obligation to make reasoned awards. Setting aside of award by the
  High Court, therefore, was contrary to law. It was submitted that the
  Arbitrator followed the requisite procedure under the old Act. He conducted
  the proceedings by calling the parties and by affording opportunity of hearing
  to them. He also visited the construction-site. He perused the material            D
  documents, pleadings of the parties, relevant record and having applied his
  mind, passed awards which were in conformity with law. The counsel also
  submitted that the trial court before which the awards were produced to make
  them rule of the court, again considered the objections raised by MHADA.
   It negatived the objections and by detailed judgment, the awards were made
  rule of the court. The Court also ordered to draw decrees in terms of awards.      E
   ln the circumstances, there was no reason for the High Court to interfere with
  the awards passed by the sole Arbitrator as also the judgment and order
. passed by the trial court. The order passed by the High Court, therefore,
  deserves to be quashed and set aside.
                                                                                     F
       The learned counsel for the respondent MHADA, on the other hand,
 supported the order passed by the High Court. He submitted that since there
 was dispute between the parties, RCC had approached Civil Court by filing
 two civil suits. In those suits, written statements were filed by MHADA
 raising several objections against maintainability of the claim and also the
 amount demanded by RCC. On the basis of pleadings of the parties, issues            G
 were framed and thereafter an application was made by RCC to refer the
_matter to sole Arbitrator. In the light of the facts and attending circumstances,
 it was clear that the Arbit•ator was a "substituted forum". It was, therefore,
 incumbent on him to apply his mind to the rival contentions of the parties,
 to consider the issues framed by the trial court and to record findings on those    H
    590                   SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.

A   issues supported by reasons and to make awards. Since the Arbitrator had
    totally overlooked those aspects and the facts and circumstances in which the
    matters were referred to him, the awards suffer from non-application of mind
    and the trial court was wrong in making such awards rule of the court and
    by directing to draw up decrees on the basis of the awards. The High Court
B   was fully justified in setting aside such awards and also the judgment and
    order of the trial court by remitting the matter to the sole Arbitrator to decide
    the same in accordance with law. It was also submitted that even ifthere was
    no clause in the contract or agreement providing for recording of reasons,
    since the Arbitrator was to decide the question and to adjudicate the matter,
    he ought to have recorded reasons in support of such decision, finding and
c   adjudication. The counsel, therefore, submitted that no case for interference
    with the order passed by i:he High Court has been made out and the appeals
    deserve to be dismissed.

          Having given anxious and thoughtful consideration to the rival
D   contentions of the parties, in our opinion, the appeals deserve to be allowed
    partly. The main question, according to us, is as to whether the sole Arbitrator
    was required to record reasons in support of the awards made by him. If that
    was the duty on the part of the Arbitrator, the contention of MHADA must
    be upheld by holding that the order passed by the High Court was in
    accordance with law and no fault can be found against the decision. If, on
E   the other hand, there was no such requirement of law and Arbitrator was not
    bound to record reasons in support of the awards, they could not have been
    set aside 'merely' on the ground of non-recording of reasons and the High
    Court ought not to have interfered with the said awards and set them aside
    reversing the judgment and order passed by the trial court.
F
          The learned counsel for RCC drew our attention to the relevant case
    law on the point. We would refer to only few of them. Raipur Development
    Authority & Others v. Mis. Chokhamal Contractors & Others, [1989] 2 SCC
    721 is indeed the leading decision of this Court on the point. A Constitution
    Bench of this Court was called upon to consider an identical issue which has
G   been raised before us, i.e. whether an award passed under the (old) Act was
    liable to be set aside under Section 30 or to be remitted under Section 16
    of the Act "merely" on the ground that no reasons had been recorded by the
    Arbitrator in support of the award.

H         After considering the relevant provisions of law, legal position in
   RAJENDRA CONST. 1·. MAHARASHTRA HOUSG. AND AREA DEV. AUTH. [THAKKER, J.]591


England, An1erica and Australia and after referring to leading decisions on        A
the point, this Court held that an award passed under the (old) Act was not
liable to be set aside or remitted only on the ground that no reasons had been
recorded in support of such award. The Court also referred to the Hand Book
of Arbitration Practice by Ronald Bernstein wherein it was stated' "The
absence of reasons does not invalidate an award. In many arbitrations the          B
parties want a speedy decision from a tribunal whose standing and integrity
they respect, and they are content to have an answer Yes or No; or a figure
of X. Such an award is wholly effective; indeed, in that it cannot be appealed
as being wrong in law it may be said to be more effective than a reasoned
award."
                                                           (emphasis supplied)     C

     The Court then proceeded to state;

              "It is now well settled th•! an award can neither be remitted
         nor set aside merely on the ground that it does not contain reasons       D
         in support of the conclusion or decisions reached in it except where
         the arbitration agreement or the deed of submission requires him to
         give reasons. The arbitrator or umpire is under no obligation to give
         reasons in support of the decision reached by him unless under the
         arbitration agreement or in the deed of submission he is required to
         give such reasons and if the arbitrator or umpire chooses to give         E
         reasons in support of his decision it is open to the court to set aside
         the award if it finds that an error of law has been committed by the
         arbitrator or umpire on the face of the record on going through such
         reasons. The arbitrator or umpire shall have to give reasons also
         where the court has directed in any order such as the one r.iade under    F
         Section 20 or Section 21 or Section 34 of the Act that reasons should
         be given or where the statute which governs an arbitration requires
         him to do so."

      In the opinion of this Court, it could not be disputed that in India, it
has been 'firmly established' that it was not obligatory on the Arbitrator or      G
Umpire to record reasons in support of the award when "neither any
arbitration agreement nor any deed of submission" required reasons to be
recorded. Jn that case also, it was urged, as has been done in the instant case,
that if no reasons are disclosed by the Arbitrator, it would not be possible
for the court to find out whether the award passed is in accordance with law.      H
    592                   SUPREME COURT REPORTS [2005) SUPP. 2 S.C.R.

A   The Court, however, negatived the contention observing that if the parties
    wanted reasons to be recorded in support of the award to be passed by
    Arbitrator or Umpire it was open to them to make a provision in the
    agreement/contract itself to that effect. Bnt in the absence of any stipulation
    in the contract, the court could not say that Arbitrator was duty bound to
B   record reasons and if reasons are not recorded in support of the award, the
    award was vulnerable and liable to be set aside or should be remitted to the
    Arbitrator. According to this court, such an order would amount to virtually
    introducing by judicial verdict an amendment to the Act. No doubt, if the
    reasons are recorded by the Arbitrator or Umpire in support of the award,
    they can be considered by the court and if those reasons disclose an error
c   apparent on the face of the record, the award can be set aside by a competent
    court of law. But in the absence of such requirement under the agreement
    itself, the party could not insist for reasons in support of the award nor a court
    of law can interfere with non speaking award.


D         It was, however, urged that recording of reasons in support of the order
    is part and parcel of'naturaljustice' and on that count also, unreasoned award
    should be treated as null and void and ineffective. We are unable to uphold
    the argument. A similar contention was raised in Chokhamal and negatived
    by this Court observing that the said doctrine applies to Administrative Law
    field. In the decisions pertaining to Administrative Law, this Court has always
E   insisted for recording of reasons in support of the order or decision. The Court
    observed that it would apply to "public law" field and not to "private law"
    field like Arbitration agreement.

          The Court stated:
F
                   "It is no doubt true that in the decisions pertaining to
              Administrative Law, this Court in some cases has observed that the
             giving of reasons in an administrative decision is rule of natural
             justice by an extension of the prevailing rule. It would be in the
             interest of the world of commerce that the said rule is confined to
G            the area of Administrative Law. We do not appreciate the contention,
             urged on behalf of the parties who contend that it should be made
             obligatory on the part of the arbitrator to give reasons for the award,
             that there is no justification to leave the small area covered by the
             law of arbitration out of the general rule that the decision of every
H            judicial and quasi-judicial body should be supported by reasons. But
       RAJENDRA CONST. I'. MAHARASHTRA HOUSG. AND AREA DEV. AUTH. (THAKKER, J.)593


             at the same time it has to be borne in mind that what applies            A
             generally to settlement ofdisputes by authorities governed by public
             law need not be extended to all cases arising under private law such
             as those arising under the law of arbitration which is intended for
             settlement of private disputes. "
                                                            (emphasis supplied)       B
          This Court noted that a consistent view has been taken by all courts that
    an award was not liable to be set aside merely because reasons were not given
    except where the arbitration agreement or the deed of submission or an order
    made by the court under Sections 20, 21 or 34 of the Act or the statute
    governing the arbitration required the Arbitrator or Umpire to give reasons       C
    for the award.

           In our opinion, the ratio in Chokhamal applies to the case on hand. The
    la'l' laid down in that case has been reiterated by this Court in many cases.
    (See T.N Electricity Boardv. Bridge Tunnel Construction & Others, [1997)          D
    4 SCC 121, Kundale & Associates v. Konkan Hotels (P) Ltd., [ 1999] 3 SCC
    533, Build India Construction System v. Union of India, [2002] 5 SCC 433).

          In T.N Electricity Board, this Court considered the old Act as well as
    new Act and particularly sub-section (3) of Section 31 of the new Act which


-   provides for recording of reasons by Arbitrator in support of the award unless
    (a) the parties have agreed that no reasons are to be given, or (b) the award
    is an arbitral award on agreed terms under Section 30. The Court noted that
    Parliament had expressed the legislative judgment that the award must state
                                                                                      E


    reasons upon which it is passed unless the parties have agreed otherwise or
    the award is on agreed terms.                                                     F
           The present awards are not under the new Act but under the old Act.
    It is, therefore, obvious that they could not have been set aside by the High
    Court on the ground that they were not supported by reasons and were not
    speaking awards.
                                                                                      G
          The learned counsel for the respondent invited our attention to a
    decision of this Court in State of Punjab v. Bhag Singh, [2004) I SCC 547
    and contended that this Court has held that reasons must be recorded in
    support of the order. That was a case wherein the High Court dismissed an
    appeal against an order of acquittal without recording reasons. The State         H
                                                                                       i-


    594                   SUPREME COURT REPORTS [2005] SUPP. 2 S.C.R.

A   approached this Court. Reversing the order passed by the High Court, this
    Court held that in an appeal against acquittal recorded by the Sessions Court,
    the High Court must record reasons as the High Court was obliged to
    undertake the exercise by application of mind and coming to the conclusion
    that an order of acquittal recorded by the trial court was or was not in
B   accordance with iaw. The ratio laid down in Bhag Singh, in our opinion, does
    not apply to the facts of the present case.

          The counsel relied upon the observations of Lord Denning, M.R. in
    Breen v. Amalagamated Engineering Union, [ 1971] I All ER 1148. There
    His Lordship observed; "The giving of reasons is one of the fundamentals
C   of good administration". Reference was also made to Alexander Machinery
    (Dedley) Ltd v. Crabtree, 1974 ICR 120, wherein it was indicated that failure
    to give reasons amounts to denial of justice. Reasons are live links between
    the mind of the decision maker to the controversy in question and the decision
    or conclusion arrived at by him. Reasons substitute subjectivity by objectivity.
    The emphasis on recording reasons is that if the decision reveals the
D
    inscrutable face of the sphinx, it can by its silence render it virtually
    impossible for the courts to perform their appellate function or exercise the
    power of judicial review in adjudging the validity of the decision.

          As already observed by us, all these principles apply to Administrative
E   Law and in the public law field. They would not get attracted in the field
    of private Jaw. The court, in such matters, does not exercise appellate
    jurisdiction and cannot substitute its decision for the decision of the
    Arbitrator. Those principles, therefore, have no place when one is considering
    the legality of an award made by an Arbitrator with the consent of parties,
    which is otherwise legal and valid.
F
         The learned counsel also placed reliance on a decision of this Court in
    Gora Lal v. Union ofIndia, [2003] 12 SCC 459. The Court in that case held
    that when the'Arbitrator was to give his findings, it was obligatory on him
    to record reasons. In Gora Mal, the relevant clause of arbitration was as
G   under;

                  "The arbitrator shall be deemed to have entered on the
             reference on the date he issues notice to both the parties, asking them
             to submit to him their statement of case and pleadings in defence.

H                 The arbitrator may, from time to time, with the consent of the
   RAJENDRA CONST. v. MAHARASHTRA HOUSG. AND AREA DEV. AUTH. (THAKKER, J.)595


         parties, enlarge the time up to but not exceeding one year from the        A
         date of his entering on the reference, for making and publishing the
         award.

               The arbitrator shall give his award within a period of six
         months from the date of his entering on the reference or within the        B
         extended time as the case may be on all matters referred to him and
         shall indicate his findings, along with the sums awarded, separately
         on each individual item of the dispute."

      Observing that the word 'findings' denotes 'reasons' in support of the
conclusion 'on each item of dispute', the Court held that the Arbitrator was        C
required to record reasons in support of his findings. The Court, however,
added; "We make it clear that this order is confined to the facts of this case
and our interpretation is confined to clause 70 of the arbitration agreement
in this case". Gora Lal thus was decided in the fact-situation before the Court
and the relevant clause in the agreement and the ratio of that case connot make     D
the awards in the present case illegal or unlawful in absence of a similar
clause.

      For the foregoing reasons, the awards passed by the sole Arbitrator
cannot be held illegal or unlawful. In making such awards the rule of the
court, the Court of Civil Judge, (Senior Division), Aurangabad had not              E
committed any illegality which vitiated the awards and the High Court could
not have set aside them.

      The question then remains as to interest. The appellant had claimed
interest in the suits. The Arbitrator awarded interest at the rate of J8 per cent   F
per annum on the principal amount from the date of the suits to the date of
awards and also from the date of the awards to the date of payment or up
to the date of decrees, 'whichever is earlier'. This Court has dealt with the
power of Arbitrator to award interest for (i) pre-reference period [Executive
Engineer, Dhenkanal Minor Irrigation Division & Others v. N.C. Budhraj
(Deceased) by LRs & Others, [2001] 2 sec 721]; (ii) pendente lite                   G
[Secretary, Irrigation Department, Government of Orissa & Others v. G. C.
Roy, (1992) I SCC 508]; and (iii) post-award period [Hindustan Construction
Co. Ltd. v. State of Jammu & Kashmir, [1992] 4 SCC 217. In Bhagwati
Oxygen Ltd. v. Hindustan Copper Ltd., AIR (2005) SC 2071 : JT (2005) 4
SC 73, one of us (C.K. Thakker, J.) had an occasion to consider the relevant        H
    596                   SUPREME COURT REPORTS (2005] SUPP. 2 S.C.R.

A   decisions on the power of Arbitrator to award interest at all the three stages.
    It was held that the arbitrator had power to award interest. Keeping in view
    the facts and circumstances of the present case that the contract was entered
    into in 1987, the work was completed in 1990 after extension granted by
    MHADA and the Arbitrator passed awards in 1995, it would be proper,
B   equitable and in the interest of justice if we reduce the rate of interest to 10
    per cent per annum.

          For the foregoing reasons, in our opinion, the order passed by the High
    Court deserves to be interfered with by partly allowing the appeals. We,
    therefore, allow the appeals in part confirming the awards made by the
c   Arbitrator. We, however, direct the respondent MHADA to pay interest at
    the rate of l 0 per cent per annum instead of 18 per cent per annum as awarded
    by the Arbitrator. The other directions in the awards are hereby confirmed.
    The appeals are allowed to the extent indicated above. There shall be no order
    as to costs.
D
    v.s.s.                                                 Appeal partly allowed.




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