STATE OF RAJASTHANversusR.S. SHARMA & CO.

                      STATE OF RAJASTHAN                                   A
                                    v.
                       R.S. SHARMA & CO.

                          AUGUST 16, 1988

 [SABYASACHI MUKHARJl ANDS. RANGANATHAN, JJ.]                              B

      Arbitration Act, 1940: Sections 14, 17, 30 and 33-Award-
Setting aside of by Court-Error apparent on face of award-Award not
invalid where by process of inference and argument it may be demon-
strated that the arbitrator had committed mistake in arriving at some
conclusion.
                                                                           c
      A dispute over the completion of construction work under a con-
tract led to the litigation between the appellant and the respondent-
company. However, during the pendency of the proceedings in the High
Court, the parties agreed to settle the dispute through arbitration.
                                                                           D
     The Arbitrators gave their award in favour of the respondent-
company on the ground that the appellant had committed breach of
contract and was also guilty of wrongful revocation of the agreement.
The award did not contain any reason as to why and how the
Arbitrators had arrived at the sum awarded.
                                                                           E
      The appellant filed objection to the respondent's application for
making the award Rule of the Court_ on the ground inter alia that (i) no
reasons had been given for the award, (ii) the award being ambiguous
showed non-application of mind, and (iii) the amount of interest
awarded was unjustified. The learned District Judge allowed the objec-
tion and set aside the award on the ground of ambiguity and non-           F
statement of reasons. The High Court, however, allowed the respon-
dent's appeal and also directed payment of interest for the period dur-
ing which the arbitration proceedings were pending.

      Before this Court it was urged that, because the question whether
on the ground of absence of reasons the award is bad per se is pending     G
consideration by a Constitution Bench of this Court, the present case
should await adjudication on this point by. the Constitution Bench.

      Disposing of the appeal, it was,

      HELD: (1) One of the cardinal principles of the administration of    H
                                   441
    442          SUPREME COURT REPORTS                 [1988] Supp. 2 S.C.R.

    justice is to ensure quick disposal of disputes in accordance with law,
A
    justice and equity. Justice between the parties in a particular case
    should not be in suspended animation. [44SB-C, G]

          (2) Interests of justice and administration of justice would not be
    served by keeping at bay final adjudication of the controversy in this
B   case on the plea that the question whether an unreasoned award is bad
    or not, is pending adjudication by a larger Bench. [44SE·Fl

          (3) It is not known whether the decision of this Court would have
    prospective application only in view of the long settled position of law on
    this aspect in this country or not. [44SG]
c         (4) The law as it stands today is clear that unless there is an error
    of law apparent on the face of the award, the award cannot be chal-
    lenged merely on the ground of absence of reasons. This is settled law
    by a long series of decisions. [44SE]

D        (5) An award is.not invalid merely because by a process of infe-
    rence and argument it may be demonstrated that the arbitrator had
    committed some mistake in arriving at some conclusion. [446B]

          (6) It is not open to the Court to speculate, where no reasons are
    given by the arbitrator, as to what impelled the arbitrator.to arrive at
E   his conclusions. [446C]

         Jivarajbhai Ujamshi Sheth v. Chintamanrao Balaji & Ors., [1964]
    S SCR 480, referred to.

          (7) It is an error of law apparent on the face of it and not a
F   mistake of fact which could be the ground for challenging the award. (446F]

          Union of India v. Bungo Steel Furniture P. Ltd., I1967] I SCR
    324 and Allen Berry & Co. P. Ltd. v. Union of India, I 1971 I 3 SCR 282,
    referred to.

G         8. In the present case the arbitrator gave no reasons for the
    award. There is no legal proposition which is the basis of the award. far
    less any legal proposition which is erroneous. And there is no allegation
    of any misconduct in the proceedings. [446E-F]

           (9) The award of interest pendente lite in this case was in violation
H   of the principles enunciated by this Court.· [447B]
       STATE OF RAJASTHAN v. R.S. SHARMA [MUKHARJI,. J.}             443

      Executive Engineer (Irrigation) Balimela v. Abhaduta Jena,
                                                                            A
i 1988] 1sec418. followed.

    Food Corporation of India v. M/s. Surendra Devendra &
Mohendra Transport Co., [1988] l SCC 547, explained.

      CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3054                   B
of i988.

     From the Judgment and Order dated 16.3.1988 of the Rajasthan
High Court in S.B. Civil Miscellaneous Appeal No. 240/1987.

     K. Parasaran, Attorney General, B.L. Saruparia and Badridas
Sharma {or the Appellant.
                                                                            c

     Soli J. Sorabjee, Paras Kulad, Rohinton F. Nariman and Rathin
Das for the Respondent.

      The Judgment of the Court was delivered by                            D

     SABYASACHI MUKHARJI, J. Leave granted. Appeal is dis-
posed of by the judgment herein.

       This appeal challenges the order of the High Court of Rajasthan,
dated 16th March, 1988. The respondent's tender for construction of         E
complete masonry dam (Civil Engineering Works) Mahi Bajaj-
Sagar Project, Banswara, was accepted by the appellant for a sum of
Rs.5,90,30,191 vide letter dated 29.4.1974 and a provisional agree-
ment was entered into between the parties on 23.5.1975. The construc-
tion was commenced by the respondent-company but it did not com-
plete the same and, it is alleged, left the work unfinished in the year     F
 1979, which was of the value of Rs. I, 79,80,054.

      The letter of acceptance was dated 23.5:1915. It is stated that the
respondent did not start the work in spite of written notices and,
ultimately, by a letter dated 24th December, 1979 of the Executive
Engineer (Dam Division), Banswara, the respondent was informed              G
that as it had committed breach of the conditions of the contract, the
same had been terminated and that the State Govt. would complete
the work under the clauses and conditions of the contract. The work
had to be completed departmentally at the cost and risk of the
respondent-company. After some litigation between the parties when
the Civil Revision was pending in the High Court of Rajasthan at            H
    444         SUPREME COURT REPORTS              [1988) Supp. 2 S.C.R.

A Jodhpur, a compromise between the parties was arrived at on 13th
  April, 1982. It was agreed that the dispute would be settled through
  arbitration. By an agreement dated 13th June, 1982 the parties named
  their arbitrators.
         The .arbitrators entered upon the reference on 19th June, 1982.
  On 5th May, 1982, the respondent-company presented its claims under
B
  .JU heads claiming a total sum of Rs.1,90,53,059.28. This amount was
  later on revised to Rs.1,82,20,261.02. The State filed a counter-claim
  for a sum of Rs. l, 70,63,026.37 which was revised to Rs.1,25,706, 17. It
  is stated that the arbitration proceedings were conducted for 52 days
  during which the number of sittings was 25. Various issues were
  framed. Minutes of the proceedings were recorded. The arbitrators
C gave the award on 8.12.1982. It is stated that the award did not contain
  any reason as to why and how they had arrived at the 'figure of
  Rs.75,41,755 in favour of the respondent-company. The award, how-
  ever, mentioned that the State of Rajasthan committed breach of con-
  tract and was also guilty of wrongful revocation of the agreement and
  the actions taken under Clauses 2 and 3 of the conditions of the con-
D tract, were wrongful and unjustified. However, no reasons were indi-
  cated as to how the arbitrators arrived at those findings.
        The respondent filed an application in the Court of the learned
  District Judge for making the award Rule of the Court. The appellant,
  however, filed an objection on the grounds inter alia that no reasons
E had been given by the arbitrators for the award and the amount of
  interest awarded was unjustified. It was further averred that the award
  being ambiguous, showed non-application of mind and the question as
  regards the plant machinery of the respondent-company lying at the
  dam site, were beyond the scope of the arbitrator.

F        The learned District Judge by his judgment and order dated 11th
  August, 1987 allowed the objection and set aside the award on the
  ground of ambiguity and non-application of mind. The award also
  suffered from the vice of non-statement of reasons, according to the
  learned District Judge. According to him, the award was not in accor-
  dance with law. He further held that the plant & machinery lying at the
G dam site was beyond the reference made to the arbitrators. He was of
  the opinion that the interest amount was ambiguous and thus liable to
  be set aside. There was an appeal to the High Court. The High Court
  allowed the appeal and passed a decree for Rs.75,41,755 being the
  amount of all claims and directed that the State should pay interest@
  'i'/c p.a. on the said amount for the period from 1.8.1983 to 8.12.1985,
H being· the period during which the arbitration proceedings were pend-
        STATE OF ~ASTHAN v. R.S. SHARMA IMUKHARJJ, J.]               445

ing. This decision of the High Court is under challenge in this appeal.
                                                                             .A
      It was contended before us that the question whether on the
ground of absence of reasons, the award is bad per se, is pending
consideration by a Constitution Bench of this Court in C.A. No. 3137-
39/85, 3145/85-Jaipur Development Authority v. Firm Chhokhamal
Contractor etc. It was, hence, urgeri that this should await adjudication    B
on this point by the Constitution Bench. We are unable to accept this
contention. In our opinion pendency of this question should not post-
pone all decisions by this Court. One of the cardinal principles of the
administration of justice is to ensure quick disposal of disputes in
accordance with law, justice and equity. In the instant·case the pro-
ceedings have long procrasticated. Indeed, the learned Judge of the
High Court, after narrating the incidents from 1975 to 1985, concluded
                                                                             c
his judgment in March 1988 by observing that that was the end of the
journey. He was wrong. That was only the end of a chapter in the
journey and the appellant wants to begin another chapter in the
journey on the plea that the award is not a reasoned one. The bargain-
ing between the parties was entered into in 1974-75 and the award was        D
made on 8th December, 1985 i.e. a decade after the beginning of the
transaction.
      The law as it stands today is clear that unless there is an error of
law apparent on the face of the award, the award cannot be challenged
merely on the ground of absence of reasons. This is settled law by .a
long series of decisions. Interests of justice and administration of
                                                                              E
justice would not be served by keeping at bay final adjupication of the
controversy in this case on the plea that the question whether an un-
reasoned award is bad or not, is pending adjudication by a larger
Bench. There have been a large number of sittings before the
arbitrators. Parties have been heard. There was no misc.onduct in the
                                                                              F
proceedings. There has been no violation of the principles of natural
justice. In such a situation it would be inappropriate to postpone the
                                                    a
decision pending adjudication of this question by larger Bench of ,this
Court. We do not know how long it would take to decide that ques-
tion, and whether ultimately this Court would decide that unreasoned
awards per se are bad or whether the decision would have prospective
                                                                              G
application only in view of the long settled position of law <;>n this
aspect in this country or not. Justice, between the parties in a parti-
cular case, should not be in suspended animation. Law as it stands
today, as observed in Jivarajbhai Ujamshi Sheth & Ors. v. Chin-
tamanrao Balaji & Ors., [1964] 5 SCR 480 is that an award made by an
arbitrator is conclusive as a judgment between the parties and th.e
                                                                             H
Court is entitled to set aside an award only if the arbitrator has miscon-
      446         SUPREME COURT REPORTS               l1988l Supp. 2 S.C.R.

A dfuctedhhimself in the proceedings or when the award has been made
  a ter t e issue of an order by the Court supe·rsedirig the arbitration or
  if the arbitration proceedings have become invalid under Sec. 35 of the
  Arbitration Act or where an award has been improperly procured or is
  otherwise invalid under Sec. 30 of the Act. An award may be set aside
  by the Court on the ground of error on the face of the award, but an
B award is not invalid merely because by ·a process of inference and
  argument it may be demonstrated that the arbitrator had committed
  some mistake in arriving at some conclusion. In that decision Shah, J.
  and-Sarkar, J. as the learned Chief Justices then were, were of the view
  that it was not open to the Court to speculate, where no reasons are
  given by the arbitrator, as to what impelled the arbitrator to arrive at
  his conclusions. They held the award not severable. Hidayatullah, J. as
  the learned Chief Justice then was, observed that if the parties set
  limits to action by the arbitrator, then the arbitrator had to follow the
  limits set for him and the Court can find his auxiliary jurisdiction.
  Instant case before us is also not a severable award.

I])         In Firm Madan/a/ Roshanlal Mahajan v. Hukumchand Mills
      Ltd., Indore, [1967] 1 SCR 105 Bachawat, J. speaking for the Court
      observed that an arbitrator could give a lump sum award. He was not
      bound to give a separate award for each claim. His award on both fact
      and law is final. There is no appeal from his verdict. The Court cannot
      review his award and correct any mistake in his adjudication, unless an
      objection to the legality of the_ award is apparent on the face of it.

            In the present case the arbitrator gave no reasons for the award.
      There is no legal proposition which is the basis of the award, far less
      any legal proposition which is erroneous. Also there is no allegation of
      any misconduct in the proceedings. It is an error of law apparent on
      the face of it and not mistake of fact which could be the ground for
      challenging the award. See in this connection the observations in
      Union of India v. Bungo Steel Furniture P. Ltd., [1967] 1 SCR 324.
      Also see the observations of this Court in Allen Berry & Co. (P) Ltd.
      v. Union of India, New Delhi, [1971] 3 SCR 282. Hence, the High
      Court was right in the instant case.
G
            There is, however, one infirmity in the award as sanctioned by
      the High Court, that is to say, the grant of interest pendente lite. The
      arbitrators have observed as follows:
                 "By adjustment of interest held to be due to the Respon-
H                dents with that held to be due to the Claimants on their
                 items of claims which were not in the nature of claim for
         STATE OF RAJASTHAN v. R.S. SHARMA [MUKHARJI, J.]             447

            damages for breach, we hold that the Respondents do pay         A
            Rs.17,92,957 (Rupees seventeen lacs ninetytwo thousand
            nine hundred fiftyseven only) as interest, to the Claimants
            upto the date of the AWARD. Claimants further do pay to
            the Respondents Rs .Nil."

       This was awarding interest pendente lite. This is in violation of B
the principles enunciated by this Court in Executive Engineer (Irriga-
tion), Ba/imela & Ors. v. Abhaduta Jena & Ors., (1988] 1 SCC 418.
Our attention was drawn by Shri Soli J. Sorabjee, counsel for the
 respondent, to the decision of this Court in Food Corpn. of India v.
M/s. Surendra, Devendra & Mohendra Transport Co., (1988] 1 SCC
54 7 where at pages 555-556 of the report, the Court referred to certain
decisions cited by Chinnappa Reddy, J. in Executive Engineer (Irriga-
                                                                          c
tion), (supra) in which he had expressed the view that those were cases
in which the references to arbitration were made by the Court or in
Court proceedings of the disputes in the suit. In that context it was
held in those cases that the arbitrator had power to grant interest. It
was contended before us that this was a similar case. There was a D
Court proceeding in this case regarding the appointment of the ar-
 bitrator and, as such, on the same analogy it should be treated that the
arbitrator had power to grant interest. We are unable to accept this.
      What Mr Justice 0. Chinnappa Reddy meant to say by the latter
judgment in Executive Engineer (Irrigation), case referred to in Food
                                                                            E
Corpqration of India, (supra) was where the disputes regarding the
merit of the case were pending in the Court and such disputes instead
of being decided by the Court· adjudication had been referred to an
arbitrator by the Court, in such cases the arbitrators deciding in the
place of the Court, would have the same powers to grant interest
pendente lite as the Courts have under Section 34 of the Civil Proce-
                                                                            F
dure Code. Instant case is not such a proceeding.

      In that view of the matter this part of the award, which was
affirmed by the High Court of granting of interest, must be deleted.
We.do so accordingly.
                                                                            G
     Shri K. Parasaran, learned Attorney General, assures us that the
amount awarded as modified, would be paid within 8 weeks from
today.

      The appeal is thus disposed of without any order as to costs.
                                                                            H
R.S.S.                                              Appeal disposed of.