TRUSTEES OF THE PORT OF MADRASversusENGINEERING CONSTRUCTIONS CORPORATION LIMITED

A                 TRUSTEES OF THE PORT OF MADRAS
                                        v.
      ENGINEERING CONSTRUCTIONS CORPORATION LIMITED

                               AUGUST 14, 1995

B            [S.C. AGRAWAL AND B.P. JEEVAN REDDY, JJ.]

           Arbitration Act, 194(}-Sections 16( 1) C, 30(CrReasoned award-
    Error apparent on the face of the award-Held, means "e1mr of law" and not
    "error offact''-Error must have appeared from the award-Or from document
C   incorporated or appended to it.·

          Contract Act, 1872-Section 46-Explanation-Question of reasonable
    time-Wliere no period is presC1ibed for executing a contract-Held, is a
    question offact and not a question of law.

D       Practice and Procedure-Letters Patent Appeal-Interference in
    Award-On question of fact-Not acceptable.

           The Board of Trustees of Madras Port Trust invited tenders for
    certain work at the port in 1957, for which the Respondent submitted its
    tender specifying the entitlment to certain deviations with regard the
E   period for completion of work and for importing plant and machinary for
    executing the work compensation on account of delay and also that requi-
    site foreign exchange was to be made available by the Board. The Board
    refused to agree to any change iq the draft agreement and an agreemet was
    entered into by the respondent without incorporating the modifications
F   suggested by the Respondent. Since there were delays in importing the
    requisite machinery the contract was completed in the extended period
    asked to respondent and granted by the board. After the completion of
    contract the Respondent raised a dispute claiming additional amount on
    account of delay in supplying the machinery and other heads. The respon-
G   dent invoking the arbitration clause in the agreement, nominated a retired
    Judge as the arbitrator and the Board nominated another retired judge as
    their nominee. Since the arbitrators could not agree among themselves,
    the;y designated an Umpire.

         The Umpire inter alia found that there was no undertaking by the
H   Board to supply to the respondent the imported machinery within a period
                                       672
            TRUSTEES PORT OF MADRAS v. ENGG. CONST. CORPN. LTD.             673

    of six months from the acceptance of the tender, that the Board was not        A
    responsible for the dealy and that the contractor was not entitled to
    payment of any compensation. The umpire further held that in case the

-   respondent was found entitled to any compensation, a sum of Rs. 5 lakhs
    would represent a fair compensation for the delay in the supply of im-
    ported machinery and another one lakh for delay on other grounds.              B
          The appellant filed a petition for making the award as rule of court
    and the respondent filed a petition for setting aside the award on two
    grounds viz., misconduct and error apparent on the face of the award. The
    Single Judge of Madras High Court made the ·award a rule of court, over
    ruling the objections raised by the respondent. On Appeal the Division C
    Bench inter alia held that the claim of the respondent did not arise from
    the contract but only from other correspondence, that Section 46 of the
    Contract Act, 1872, would govern the situation since there was no time
    stipulated in the contract, that the undertaking given by the Board was an
    implied undertaking and the Board was under a bounden duty to have
    supplied the machinery within a reasonable time, and that the failure of D
    the Board to supply the machinery was a breach of implied promise. The
    Division Bench set aside the judgment of the Single Judge and remanded
    the matter to the Umpire for a fresh consideration.

           In the appeals against the judgment of the Divisin Bench of the High    E
    Court, it was contended by the respondent that the dela;r. on the part of
    the Board in importing the machinery has caused loss for which the Board
    was bound to compensate. The Appellants denied that they undertook an
    obligation to import machinery within a particular period, that the period
    of six months was only a rough estimate or an expectation, that the extra
    payment of nine percent of the contract price agreed upon by the Board         F
    and the contractor was not only intended to cover delays caused due to
    suspension of work, failure to supply in time primary material and services
    etc. but also the delays, if any, caused in supplying the imported machinery
    and spares.
                                                                                   G
          Allowing the Appeals, this Court

          HELD : 1. The concept of error aparent on the face of the award is
    an en"Or of law apparent on the face of the award and not an error of fact.
    The error of law can be discovered from the award itself or from a
    document actually incorporated therein. [682-H; 683-A]                         H
    674                  SUPREME COURT REPORTS [1995] SUPP. 2 S.C.R.

A        Hodgkinson v. Femie, 140 English Reports 712;Champsey Bhara and
    Company v. Jivraj Ba/loo Spinning and Weaving Co. Ltd., AIR (1923) PC 66;
    Raipur Development Authority v. Chokhmal Contractors, [1989) 3 SCR
    144;Thawardas Pe1Umal v. Union of India, [1955) 2 SCR 48, referred to.

          2. In the case of a reasoned award, the Court can interfere if the
B   award is based upon a proposition of law which is unsound in law. The
    erroneous proposition must be established to have visited the decision.
    The error of law must appear from the award itself or from any document
    or note incorporated in it or appended to it. [684-E]

       S. Harcharan Singh v. Union of India, AiR (1991) SC 945; Hindustan
c Construction Co. Ltd. v. State of J&K, [1992) 4 SCC 217 and Bijendra Nath
    Srivastava v. Mayank Srivastava & Ors., [1994) 6 SCC 117, relied on ..

          3. All that the Umpire has done is to refer extensively to the cor-
    respondence that passed between the parties and the other material placed
D   before him and infer therefrom that the Appellant- Board did never make a
    firm commitment nor did it ever undertake to import and supply the
    machinery within a particular period much less within a period of six
    months. The finding of the Umpire is thus based upon the material placed
    before him by both the parties and was a pure finding of fact.
                                                              [686-G-H; 687-A]
E
          4. The finding of the Division Bench that the delay occurred in supply-
    ing the machinery is unreasonable and the contractor is entitled to com pen- ·
    sation is not acceptable. The theory of duty to supply within a reasonable
    time was not put forward before the umpire and finding of the umpire is
    inconsistent with the theory of obligation to import within a reasonable
F   time. There was no room for importing the theory of reasonable time and
    for punishing the Board for something of which it was not guilty. [687-D-E]

          5. The explanation to Section 46 of the Contract Act of 1872 makes
    it abundantly clar that the question what is a reasonable time is, in each
G   particular case, a question of fact. The question whether the machi~ery
    was imported and supplied to the contractor within a reasonable time or
    not was thus a question of fact. [687-E-F]

          6. The Division Bench was not correct in recording th~ fi~ding of fact
    for the first time, at the stage of Letters Patent Appeal and· on that basis
H   holding that the Board is guilty of not performing its obligation ~thin a
   TRUSTEES PORT OF MADRAS v. ENGG. CONST. CORPN. LTD. [ JEEVAN REDDY, J.) 675


reasonable time. The Division Bench had interfered on a new ground which         A
is factual in nature and which was made out for the first time at the stage
a letters of Patent Appeal for setting aside the award. [687-F-G]

      CIVIL APPELLATE JURISDICTION: Civil Appeal Nos.1175-76
of 1976.
                                                                                 B
     From the Judgment and Decree dated 4.4.75 of the Madras High
Court in O.S. Appeals Nos. 5 & 6 of 1970.

         S. Balakrishnan, S. Prasad and P.V. Yogeswar for the Appellants.

         R.P. Bhatt, Kuldeep S. Parihar and H.S. Parihar for the Respon-         C
dents.

         The Judgment of the Court was delivered by

      B.P. JEEVAN REDDY, J. Th_e facts of this case remind us of what
this Court observed in M/s. Gurn Nanak Foundation v. M/s. Rattan Singh           D
and Sons, (1981] 4 S.C.C. 634 :

           "Interminable, time consuming, complex and expensive court pro-
           cedures impelled jurists to search for an alternative forum, less
           formal, more effective and speedy for resolution of disputes avoid- E
           ing procedural claptrap and this led them to Arbitration Act, 1940
           ('Act' for short). However, the way in which the proceedings under
           the Act are conducted and without an exception challenged in
           courts, has made lawyers laugh and legal philosophers weep.
           Experience shows and law reports bear ample testimony that the
           proceedings under the Act have become highly technical accom- F
           panied by unending prolixity, at every stage providing a legal trap
           to the unwary. Informal forum chosen by the parties for expeditious
           disposal of their disputes has by the decisions of the courts been
           clothed with 'legalese' or unforseeable complexity. This case amply
           demonstrates the same."                                             G
         The facts speak for themselves.

      The Board of Trustees, Madras Port Trust, invited tenders in the
year 1957 for certain works at the port. Clause (4) of the Instructions for
tender stipulated that the tenderer is required to indicate clearly in the       H
    676                   SUPREME COURT REPORTS [1995] SUPP. 2 S.C.R.

A letter forwarding the tender any deviation from the conditions and
   specifications mentioned in the Instructions. Clause (7) provided that until
   a formal agreement was entered into, the tender together with the Board's
   acceptance thereof shall constitute the binding contract between the par-
   ti~s. The respondent submitted its tender on November 11, 1957 along with
B ·a letter specifying certain deviations. The main deviation suggested was that
   the thirty months' period specified for completing the work shall be subject
   to such delays as are due to causes beyond their control. In case of such
   delays, the respondent claimed to be entitled to not only extension of time
   but also to compensation. It further specified that the Board should make
   available to it the requisite foreign exchange for importing the plant and
C machinery required for executing the work. Soon thereafter, it was realised
   by both the parties that foreign exchange would not be released to the
   respondent for purchasing machinery on its own account. The parties then
   agreed that the Board should import the said machinery on its own account
   and should hire it out to the respondent for execution of the said work.
D The respondent's tender was accepted by the Board on October 6, 1958.
   A formal contract was sent by the Board to the respondent for its signature.
   The respondent suggested several modifications and alterations which
   according to it were necessary to truly reflect the consensus arrived at
   between them. The modifications and alterations pertained mainly to the
   supply of imported plant and machinery and the spares. Certain correspon-
E dence passed between the parties but the Board refused to agree to any
   change in the draft agreement. On April 9, 1960 the respondent signed the
   agreement without incorporating the modifications suggested by it.

          There were delays in importing the machinery. As against a period
F   of about six months· envisaged by the parties, it took about twelve months
    for importing the entire machinery. It was hired out to the respondent and
    it completed the work within the extended period, asked by it and granted
    by the Board. The total contract value was Rupees one crore and sixty
    three lakhs. After the work was completed,' the respondent raised a dispute
G   claiming additional amount on account of the delay in supplying the
    machinery and on certain other counts. It claimed a total amount of Rs.
    14,93,654.78p. In terms of the arbitration clause contained in the contract,
    the respondent nominated Sri W.S. Krishnaswamy Naidu, a retired Judge
    of the Madras High Court as its arbitrator. The Board nominated another
    retired Judge of the Madras High Court, Sri Somasundaram, as its
H   nominee. Since the arbitrators could not agree among themselves, they
   1RUSTEESPORTOFMADRAS v. ENGG. CONST. CORPN. LTD. (JEEVAN REDDY,J.) 677


designated Dr. P.V. Rajamanner, retired Chief justice of the Madras High A
Court, as the umpire. The learned umpire heard both the parties, took the
material adduced by them and made a speaking award on October 30,
1965.

       Though the amount claimed by the respondent was under several
heads, the main head - and with which alone we are concerned in these B
appeals - is the delay on the part of the Board in importing the machinery
which according to the respondent has caused loss to it and for which, it
says, the Board is bound to compensate. The Board denies that it under-
took an obligation to import machinery within a particular period. Accord-
ing to them, the period of six months' was only a rough estimate or an C
expectation, as it may be called. They submitted that the extra payment of
nine percent of the contract price agreed upon by the Board and the
contractor was not only intended to cover delays caused due to causes such
as suspension of work, failure to give possession of site, failure to supply
in time primary material and services etc. but also the delays, if any, caused
in supplying the imported machinery and spares. They denied their liability D
to compensate the contractor on any of the grounds claimed by it.

      In view of the statements of claim filed by the parties, the arbitrators
settled as many as fourteen issues. When the matter was referred to the
learned umpire, he adopted the said issues and recorded the following            E
findings:

     (a) Issues 1and2: the offer of the Board to import the equipment
and spares was not by way of gratuitous service to the contractor as
contended by the Board.
                                                                                 F
      (b) Issues 3 and 7: There was no undertaking by the Board to supply
to the respondent the imported machinery within a period of six months
from the date of acceptance of the tender (from October 6, 1958). The
Board was not responsible for the delay in the supply of plant and
machinery.
                                                                                 G
       (c) Issue Nos. 8 and 12: The reservations made by the contractor in
respect of the disputed claims were unilateral but even so the said claims
fall within the ambit of mattters in dispute for arbitration. The contractors
were not precluded from putting forward their claim for compensation on
the ground of delay supply of imported plant and machinery.                      H
    678                   SUPREME COURT REPORTS [1995] SUPP. 2 S.C.R.

A         (d) Issue No. 13 : The matters in dispute under refere~ce fell within
    the socpe of the arbitration clause contained in the agreement between the
    parties.

          (e) Issues No. 9 : The grant of extension of time by the Board was
    only to relieve the contractor from payment of penalty under the contract
B   and to enable it to draw its bills and obtain. payments without audit.
    objections.

          (f) Issues 10, 11 and 14 : The contractor was not entitled to payment
    of any compensation.
c          (The learned umpire did not record any findings on issues 4 to 6).

         The learned umpire further held that in case the respondent was
   found entitled to any compensation, a sum of Rupees five lakhs would
   represent a fair compensation for the delays in the supply of i:rµported plant
D and machinery and that another sum of Rupees one lakh would be the
 _ reasonable compensation for the dealy on other grounds like inclement
   weather, break-down etc.

           O.P.No. 276 of 1965 was filed by the appellant-Board for making the
    award a rule of the court. The respondent-contractor filed O.P.No. 213 of
E   1966 for setting aside the award under Sections 16, 30 and 33 of the
    Arbitration Act. The objections raised by the respondent fell under two
    heads, viz., (i) mis-conduct of the umpire in conducting the proceedings
    and -(ii) error apparent on the face of the award. Both the O.Ps. were
    considered by a learned Single Judge of the Madras High Court, Palanis-
F   wamy, J., who substantially agreed with the reasoning contained in the
    award and made it a rule of the court over-ruling the objections raised by
    the respondent. The respondent carried the matter in Letters Patent
    Appeal to the DiVision Bench of the Hgh Court which allowed the appeaL
    set aside the award and remitted the matter to the learned umpire for fresh
G   consideration of the matter in the light of their judgment. Since the
    judgment of the Division Bench is questioned herein, it is necessary to
    notice first the several findings recorded by the Division Bench :

          (i) the learned umpire was right in holding that the respondent-
    contractor was entitled to and was well within its rights in seeking a
H   decision on their claim for compensation under the disputed heads by
   TRUSTEES PORT OF MADRAS v. ENGG. CONST. CORPN. LTD. (JEEVAN REDDY, J.) 679


reference to arbitration.                                                                   A
       (ii) the learned umpire was equally right in holding that the under-
taking by the appellant-Board to import the machinery and parts was not
a gratuitous one but an undertaking which had the effect of creating certain
rights and obligations.
                                                                                            B
      (iii) the learned umpire was also right in holding that the supply of
imported machinery did not fall within the ambit of 'services' contemplated
by the contract, though it is true the learned umpire did not record a
finding on the question whether the extra payment of nine percent over the
contract price was relatable to the respondent's claim for compensation on                  C
account of the delay in supplying the imported machinery.

      (iv) it is true that the claim of the respondent-contractor did not arise
from the contract but only from other correspondence that passed between
the parties. Even so, "the undertaking by the Board to secure the plant and
equipment from abroad was undoubtedly an obligation in the nature of a D
promise and was an event which had a material bearing on the completion
of the project and the time-factor relating to the contract. So much
depended upon the making available of the plant to the Contq•ctors, as
without such machinery, some of the items of the contract work could never
have been executed by the Contractors. In such circumstances, the under- E
taking given by the Board to import and supply the plant cannot be left
out of reckoning when the rights and obligations of the contracting parties
in terms of the contract arise for determination. Even so, it would be futile
for the Board to contend that its undertaking was not related to any
time-stipulation and its obligation was an unfettered one'. The letter writ-
ten by the Chief Engineer (Exh. 33) did state "that it would fake about six F
months from the date of intimation of order of procurement of...... .
machinery". In view of this letter, the Board cannot now contend that its
undertaking"was an unfettered one and free of all time limit. Even if the
time stipulation of six months is not to be rigidly construed, yet the rule
in Section 46 of the Contract Act would govern the situation and the Board G
must be held obliged to make available the machinery within a reasonable
     Section 46 of the Contract Act reads : "Where by the contract, a promisor is to
     perform his promise without application by the promisee, and no time for perfom1ance
     is specified, the engagement must be perfom1ed within a reasonable time.
     EXPLANATION: The question what is a reasonable time is, in each particular case,
     a question of fact."                                                                   H
    680                  SUPREME COURT REPORTS [1995] SUPP. 2 S.C.R.

A   time. A delay of 12/1/2 months in the supply of the Machinery which, as
    already stated about, has been certified by the Chief Engineer of the Board,
    can never be construed as due compliance with the obligations within a
    reasonable time".

          (v) "on an analysis of the situation, we are of the opinion that the
B   undertaking given by the Board to import the plant and equipment and
    make them available to the contractors was in the nature of an implied
    undertaking and though, in the very nature of things, the Board could not
    have supplied the machinery within a precise and accurate time limit, yet
    the Board was under a bounden duty to have supplied the machinery within
c   a reasonable time. When the Board failed to supply the machinery within
    a reasonable time, the Contractors were left with no other alternative but
    to complete the work and then call upon the Board to compensate them
    for the loss occasioned by it."

          (vi) the respondent-contractor was in error in contending that the
D failure of the Board to supply the machinery within the prescribed time
    was a breach of an express provision of the terms of contract between the
    parties. It is really a breach of an implied promise - which is indeed the
    stand taken by the counsel for the respondent-contractor before them
    (Division Bench). On the basis of implied contract theory, the stand of the
    respondent "is unassailable and the Board has necessarily to face the
E   situation which developed on account of its inability to supply the
    machinery in time and the resultant loss to the contractors".

          On the basis of the above findings, the judgment of the learned Single
    Judge was set aside and the matter was remitted to the learned umpire for
F   a fresh consideration in the light of the said judgment.

         The finding recorded by the Division Bench clearly disclose that they
  set aside the award made by the learned umpire not on the ground of
  mis-conduct on the part of the learned umpire but on the ground that the
  learned umpire did not correctly appreciate the nature of the obligation
G undertaken by the Board in the matter of importing and supplying the
  machinery to the respondent for completing the work. The Division Bench
  recognised that there was no firm commitment by the Board to import
  and supply the machinery within six months from the date of acceptance
  of the tender or from the date of intimation of order for procurement of
H the_ said machinery, as the case may be, yet it found, applying the principle
   1RUSTEES PORT OF MADRAS v. ENGG. CONST. CORPN. LTD. (JEEVAN REDDY. J.) 681


of Section 46* of the Contract Act that the said obligation had to be A
performed within a reasonable time. It opined that since the machinery was
not supplied within, what in its opinion was, the reasonable time, the
contractor is entitled to compensation for the loss suffered by it. The Bench
opined. that inasmuch the respondent was obliged to maintain his staff and
other paraphernalia for some extra period on account of the said delay in
                                                                              B
supplying the machinery, he must have incurred extra expense, for which
he must be reimbursed by the appellant.

      We called upon the learned counsel for the respondent to tell us on
which recognised 'ground did the Division Bench set aside the award. This
was for the reason that the Division Bench did not itself specify the ground    C
on which it was setting aside the award. The answer of the learned counsel
was, "error apparent on the face of the award". This necessitates an
examination on the parameters of the said ground particularly in the
context of a reasoned award.

      In the decision, frequently referred to in the later decision both in     D
England and in this country, Hodqkinson v. Femie, 140 English Reports
712, Williams, J ., observed :

        "I am entirely of the same opinion. The law has for many years
        been settled, and remains so at this day, that, where a cause or
        matters in difference are referred to an arbitrator, whether a
                                                                               E
        lawyer or a layman, he is constituted the sole and final judge of all
        a questions both of law and of fact. Many cases have fully estab-
        lished that position, where awards have been attempted to be set
        aside on the ground of the admission of an in competent witness
        or the rejection of a competent one. The court has invariably met F
        those applications by saying, 'you have constituted your own
        tribunal; you are bound by its decision.' The only exceptions to
        that rule, are cases where the award is the result of corruption or
        fraud, and one other, which, though it is to be regretted, is now, I
        think, firmly established, viz., where the question of law necessarily G
        arises on the face of the award; or upon some paper accompanying
        and forming part of the award. Though the propriety of this latter
        may well be doubted, I think it may be considered (l.S established."

       This decision was followed by the Privy Council in yet another
oft-cited decision, Champsey Bhara and Company v. Jivraj Ba/loo Spinning        H
    682                   SUPREME COURT REPORTS [1995] SUPP. 2 S.C.R.

A   and Weaving Co. Ltd. A.LR. (1923) P.C. 66. The Privy Council observed:

            "An error in law on the face of the award means, in their Lordship's
            view, that you can fi:id in the award or a document actually
            incorporated thereto, as for instance a note appended by the
            arbitrator stating the reasons for his judgment, some legal proposi-
B           tion which is the basis of the award and which you can then say is
            erroneous. It does not mean that if in a narrative a reference is
            made to a contention of one party, that opens the door to seeing
            first what that contention is, and then going to the contract on
            which the parties' rights depend to see if that contention is sound.
c           Here it is impossible to say, from what is shown on the face of the
            award, what mistake the arbitrators made. The only way that the
            learned judged have arrived at finding what the mistake was is by
            saying: inasmuch as the arbitrators awarded so-and-so, and inas-
            much as the letter shows that the buyer rejected the cotton, the
            arbitrators can only have arrived at that result by totally
D           misinterpreting Rule 52'. But they were entitled to give their own
            interpretation to rule 52 or any other article, and the award will
            stand unless, on the face of it, they have tied themselves down to
            some special legal proposition which then, when examined, ap-
            pears to be unsound."
E
          Both the above decisions were cited with approval by the Constitu-
    tion Bench of this Court in Raipur Developme_nt Authority v. Chokhamal
    Contractors, [1989] 3 S.C.R. 144. The Constitution Bench clarified that "the
    ground arising out of an error of law apparent on the face of the award
F   prima facie appears to all either under Section 16(1) (c) of the Act, which
    empowers the Court to remit the award to the arbitrator where an objec-
    tion to the legality of the award which is apparent upon the face of it is ·
    successfully taken, or under Section 30( c) of the Act which empowers the
    Court to set aside an award if it is 'otherwise invalid'." Certain earlier
    decisions of this Court supporting the said view were then referred to by
G   the Constitution Bench, which it is unnecessary for us to re-produce.

          The above decisions make it clear that the error apparent on the face
    of the award contemplated by Section 16(1)(c) as well as Section 30(c) of
    the Arbitration Act is an error of law apparent on the face of the award
H   and not an error of fact. It is equally clear that an error of law on the face


                                                                                     I
   TRUSIBES PORT OF MADRAS v. ENGG. CONST. CORPN. LTD. (JEEVAN REDDY, J.) 683


of the award means an error of law which can be discovered from the A
award itself or from a document actually incorporated therein. A note of
clarification may be appended viz., where the parties choose to refer a
question of law as a separate and distinct matter, then the Court cannot
interfere with the award even if the award lays down a wrong proposition
of law or decides the question of law referred to it an erroneous fashion. B
Otherwise, the well settled position is that an arbitrator "cannot ignore the
law or mis-apply it in order to do what he thinks is just and reasonable".
See Thawards Pernmal v. Union of India, [1955] 2 S.C.R. 48.

      We may now refer to a few decision to point out how the said
concept of error of law apparent on the face of the award has been C
understood in the case of a reasoned award. In other words, we have to
examine whether an erroneous interpretation placed by the arbitrator upon
the relevant terms/clauses of the contract can be treated as an error of law
apparent on the face of the award. In Raipur Development Authority, the
Constitution Bench opined that an award cannot be set aside in India on
the ground that it does not contain reasons therefor. But, at the same time, D
it observed, "of course, where reasons are given in support of the awards
and those reasons disclose any error apparent on the face of the record
people have not refrained from questioning such awards before the courts".
The said principle was reiterated by a Three-Judge Bench of which of one
us (S.C. Agrawal, J.) was a member, in S. Harcharan Singh v. Union of E
India, A.LR. (1991) S.C. 945. Referring to Raipur Development Authority,
the Bench observed :

        "It has been held that an arbitrator or umpire is under no obligation
        to give reasons in support of the decision reached by him unless
        under the arbitration agreement or the deed of submission he is         F
        required to give such reasons and if the arbitrator or umpire
        chooses to give 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 ......"                            G
        The Court further observed :

        ''While considering the claim of the appellant the arbitrator was
        required to consider the terms of the contract and to construe the
        same. It was, therefore, permissible for the arbitrator to consider H
    684                   SUPREME COURT REPORTS [1995) SUPP. 2 S.C.R.                   ...
A           whether Cl. 12 of the contract enables the Engineer-in-charge to
            require the appellant to execute additional work without any limit
            or a reasonable limit should be placed on the quantity of the
            additional work, which the appellant may be required to execute
            at the rate stipulated for the main work under the contract... ........ .
            The Arbitrator was entitled to do so (awarding additional amount
B           to the contractor) on the construction placed by him on Cl. 12 of
            the contract and, therefore, it cannot be said that in awarding the
            sum of Rs. 52,800 for the additional work the Arbitrator has
            exceeded his jurisdiction and the award is vitiated by an error of
            jurisdiction.11
c
           This was so observed in the context of the principle that 11the juris-
    diction of the arbitrator is limited by the reference and if the arbitrator has
    assumed jurisdiction not possessed by him, the award to the extent to which
    it is beyond the arbitrator's jurisdiction would be invalid and liable to be
    set aside11
D
          In Hindustan Construction Co. Ltd. v. State of Jammu and Kash"}ir,
    [1992) 4 S.C.C. 217, a three Judge Bench comprising one of us (B.P. Jeevan
    Reddy, J.) dealing with a non-speaking award observed thus: 11 even if, in
    facts the arbitrators had interpreted the relevant clauses of the contract in
E   making their award on the impugned items and even if the interpretation
    is erroneous, the Court cannot touch the award as it is within the jurisdic-
    tion of the arbitrator to interpret the contract. Whether the interpretation
    is right or wrong, the parties will be bound; only if they set out their line
    of interpretation in the award and that is found erroneous can the Court
    interfere11 • The above principle, of course, is subject to the proposition
F   aforestated, viz., that the Arbitrator being a creature of the contract must
    operate within the four corners of the contract and cannot travel beyond
    it either by mis-interpreting the terms of the contract or otherwise.

          In Bijendera Nath Srivastava v. Mayak Srivastava and Ors., [1994) 6
G S.C.C. 117, it was held by us:
            "If the arbitrator or umpire choose to give reasons in support of
            his decision it would be open to the court to set aside the award           ·-
            if it fmds that aii error of law has been committed by the arbitrator
            or umpire on the basis of the recording of such reasons. The
H           reasonableness of the reasons given by the · arbitrator cannot,
   TRUsTEES PORT OF MADRAS v. ENGG. CONST. CORPN. LTD. (JEEVAN REDDY, J.) 685


        however, be challenged. The arbitrator is the sole judge of the A
        quality as well as the quantity of the evidence and it will not be
        for the court to take upon itself the task of being a judge of the
        evidence before the arbitrator. The court should approach an
        award with a desire to support it, if that is reasonably possible,
        rather than to destroy it by calling it illegal. See Champsey Blzara B
        and Co. v. Jivraj Ba/loo Spq. and Wvg. Co. Ltd., AIR (1923) PC
        66; Jivrajbhai Ujamshi Sheth v. Chintamanrao Balaji, [1964) 5 SCR
        480; Sudarshan Trading Co. v. Govt. of Kerala, [1989) 2 SCC 38;
        Raipur Development Authority v. Chokhamal Contractors, [1989) 2
        SCC 721 and Santa Sita Devi v. Dhirendra Nath Sen, [1964) 3 SCR
        410."                                                                   c
       Reference may also be made to the observations in Champsey Bhara,
quoted hereinabove, holding that the arbitrators were entitled to place
their own interpretation upon Rule 52 or any other article (of the Bombay
Cotton Trade Association Limited) and that the award would still stand          D
unless on the face of it, they have tied themselves down to some legal
proposition which when examined appears to be unsound.

      The proposition that emerges from the above decisions is this : in the
case of a reasoned award, the Court and interfere if the award is based
upon a proposition of law which is unsound in law. The erroneous proposi- E
tion of law must be established to have vitated the decision. The error of
law must appear from the award itself or from any document or note
incorporated in it or appended to it. It is not permissible to travel beyond
and consider material not incorporated ~ or appended to the award. Now
let us examine the award concerned herein from the above point of view p
and see whether it suffers from any error of law apparent on the face of
the award. We have gone through the award of the learned umpire - a man
of great learning and eminence, Dr. P.V. Rajamannar - very carefully. All
that the learned umpire has done is to refer extensively to the correspon-
dence that passed between the parties and the other materials placed
before him and infer therefrom that the appellant-Board did never make G
a firm commitment not did it ever undertake to import and supply the
machinery within a particular period much less within a period of six
months. The learned umpire remarked :

        "There is no mention of this period of six months in the relevant H
    686                  SUPREME COURT REPORTS {1995] SUPP. 2 S.C.R.

A           minutes of the meetings of the tender Committee; but it is fairly
            clear that this period was mentioned during the discussions. The
            Board's case which we find set out in some of their letters is that
            the period of six months was only an approximate time within
            which they expected the plant and machinery might be available.
            But the Board would not and did not undertake definitely to supply
B           the plant and machinery not later than six months fi:om 6-10-1958,
            the date of the order to commence work. There is no oral evidence
            relating to this matter and there is no sufficient material in the
            correspondence to warrant the conclusion that there was a term
            of the contract which bound the Port Trust to deliver to the
c           Contractors the plant and machinery within six months. Even at
            the time when the two alternative proposals were placed before
            the Contractors, it was impressed on them that the proposals for
            the Board itself to import the plant and machinery would involved
            delay. Obviously, it was not for the Board to be certain of the extent
            of the delay. The Board might have though that it would not take
D
            longer than six months for the arrival of the equipment. I am unable
            to find any default or remissness on the part of the Board in taking
            steps to get the equipment. It was as much to their interest as to
            the Contractor's that the plant should be available as early as
            possible. Otherwise, the completion of the work would be delayed.
E           There is no suggestion of any malafide act or negligence on the
            part of the Board in the procurement of the equipment. It should
            also be mentioned that the Contractors themselves took some time
            before they could give detailed specifications. taking all the cir-
            cumstances into consideration, I hold that there has been no
            breach of any term of the contract committed by the Board because
F
            of the late arrival of the plant and machinery."

          The finding of the learned umpire is thus based upon the material
    placed before him by both the parties and was a pure finding of fact. Now,
    the Division Bench does not say that the correspondence that passed
G   between the parties or that the materials placed before the arbitrator and
    referred to in the award establishes that the Board undertook a firm
    commitment to supply the machinery within six months from the date of
    acceptance of the tender (October 6, 1958) - assuming that it could say so.
    (We are, of course, of the firm opinion that it was not open to the Division
H   Bench to re-appraise the evidence/material before the learned umpire and
   TRUSTEES PORT OF MADRAS v. ENGG. CONST. CORPN. LTD. [JEEVAN REDDY, J.) 687


come to a different finding of fact.) What the Division Bench says is that A
even though there was no such firm commitment, "the Board was under a
bounden duty to have supplied the machinery within a reasonable time"
applying the principle of Section 46 of the Contract Act. The Bench finds
that the delay that has occurred in supplying the machinery is unreasonable
and on that basis holds that the contractor is entitled to compensation. B
With great respect, we are unable to agree with this approach. Apart from
the fact that this theory of duty to supply within a reasonable time was not
put forward before the learned umpire - it is neither referred to by the
learned umpire, nor does it constitute the basis of his award - the finding
recorded by the learned umpire viz., that the period of six months was only C
a rough estimate, an expectation, within which the Board thought it could
import the machinery) is inconsistent with the theory of obligation to
import within a reasonable time. The learned umpire has also found that
the contractors themselves took some time before they could give detailed
specifications of the machinery and parts required for carrying out the
work. The Bench did not also find - it was not even suggested by anyone D
- that the Board was guilty of any deliberate delay or of any negligence or
that it was remiss in taking steps required for importing and/or supplying
the machinery. The matter did not lay in its hands. In such a situation, there
was no room for importing the theory of reasonable time and for punishing
the Board for something of which it was not guilty. Secondly, the explana- E
tion to Section 46 makes it abundantly clear that "the question what is a
reasonable time is, in each particular case, a question of fact". The question
whether the machinery was imported and supplied to the contractor within
a reasonable time or not was thus a question of fact and not a question of
law. No such contention was raised before the learned umpire nor did he
                                                                                F
record a finding on the said aspect. It was not open to the Division Bench
to record the said finding of fact, for the first time, at the stage of letters
patent appeal and hold on that basis that the Board is guilty of not
performing its obligation within a reasonable time. In short, this is not a
case where the Division Bench has interfered on the ground that the award
suffers from an error of law apparent on the face of award. This is a case G
where a new ground - and that too factual in nature - was made out for
the first time at the letter patent appeal stage for setting aside the award.
Indeed, a reading of the judgment of the Division Bench shows that the
Bench approached the matter as if it was sitting in first appeal over the
award. The judgment does not even indicate on which recognised ground H
    688                    SUPREME COURT REPORTS [1995] SUPP. 2 S.C.R.

A is it setting aside the award. It does not say either that the award is vitiated
    by an error of law apparent on the face of it nor does it say that the learned
    umpire was guilty of any misconduct in conducting the proceedings or
    otherwise. We are of the firm opinion that this could not have been done.

           For the above reasons, the appeals are allowed, the impugned judg-
B   ment of the Division Bench is set aside and the judgment of the learned
    Single Judge is restored. The respondent shall pay the costs of the appel-
    lant throughout.

    V.M.                                                        Appeals allowed.