Allen Berry & Co. (P) Ltd. Vs.
Union of India, New Delhi  INSC 1 (5 January 1971)
REDDY, P. JAGANMOHAN
CITATION: 1971 AIR 696 1971 SCR (3) 282 1971
SCC (1) 295
F 1973 SC 683 (10) R 1987 SC2045 (7) R 1988
SC1166 (7) F 1988 SC1791 (10) R 1988 SC2018 (9) RF 1990 SC1340 (8)
Arbitration Act (10 of 1940), s. 30-Setting
aside award---Error apparent on the face of award-What is.
The Director General of Disposals, through
correspondence and sale notes, sold to the appellant-company, United States
surplus was materials consisting of vehicles and other stores. Disputes having
arisen between the parties, both as regards the contents of and the quantity of
the vehicles deliverable under the contracts, they were referred to arbitration
as per cl. 13 of the general conditions of the contract between the parties.
The disputes consisted of claims and counter claims and the umpire after
deducting the amount of one claim allowed to the appellant, held that the
appellant was liable to pay to the respondent Rs.
34,70,226.50 and costs amounting to Rs.
The award was filed in the District Judge's
Court and the appellant applied for having it set aside on various grounds. The
Court held that with respect to certain matters claimed by the respondent the
umpire had no jurisdiction and remitted the award for reconsideration of those
items and also for readjustment of the amount of costs. The High Court
confirmed the judgment of the District Judge.
In appeal to this Court, it was contended
that the award was liable to be set aside, because : (1) the contracts of sale
were misconstrued and the error appeared on the face of the award; (2) several
documents bearing on the scope of the sales were not considered; (3) the umpire
went beyond his jurisdiction when he awarded compensation to the respondent
because the appellant removed certain vehicles; (4) that the umpire acted as a
conciliator deciding matters on conjecture; (5) that the umpire fixed ground
rent payable by the appellants without any evidence; and (6) that the costs
awarded were totally disproportionate.
HELD : (1) When parties choose their own
arbitrator to be the judge in the dispute between them, they cannot, when the
award is good on the face of it, object to the decision either upon the law or
the facts. Therefore, even when an arbitrator commits a mistake either in law
or in fact in determining the matters referred to him. but such mistake does
not appear on the face of the award or in a document appended to or
incorporated in it so as to form part of it, the award will neither be remitted
nor set aside. Whether the contract or a clause of it is incorporated in award
is a question of construction of the award. The test is, did the arbitrator
corn,--' to a finding on the wording of the contract. If be did, he can be said
to have impliedly incorporated the contract or the relevant clause but a mere
general reference to the contract in the award is not to be held as
incorporating it. [288 F-H; 289 A] Union of India v. Bungo Steel Furniture Pvt.
Ltd.  1 S.C.R. 324, followed.
283 Champsey Bhara & Co. v. Jivraj Balloo
Spinning & Weaving Co.Ltd.  A.C. 480, applied.
Kelanton v. Duff Development Co. 
A.%'-. 395 and Giacomo Costa Fu Andrea v. British Italian Trading Co. Ltd.
 2 All E.R. 53, 62. referred to.
2(a) The dispute in the present case being as
to what was sold and as to whether besides the sale-notes, the subsequent
clarifications or. explanations given by various officers of the respondent
formed part of the contract and were binding on the respondent, and both the
questions having been referred to arbitration, the umpires findings on them
would bind the parties unless he laid down any legal proposition such as a
construction which is made the basis of the award and is on the face of the
award erroneous. The award showed that the umpire had considered besides the
sale-notes the oral and documentary evidence led by the parties as also the
contentions urged by counsel. It could not, therefore, be contended that the
several documents were not taken into consideration by the umpire. [291 E-F;
292 EH] (b) The umpire laid down the legal proposition that the clarifications
or assurances given subsequent to the dates of the sale-notes were not binding
on the respondent and could not affect the scope of the sales; but the fact
that he answered a legal point, which he had to decide while deciding the
questions referred to him, did not mean that he incorporated into the award or
made part of it a document or documents, the construction of which was the
basis of the award. If there was an error in such a case it could not be said
to an error apparent on the face of the award entitling the court to consider
the various documents placed before the umpire but not incorporated in the
award so as to form part of it, and then to make a search if they had been
misconstrued by him. [293 B-E] (3) Once it was found that it was competent for
the umpire to decide that the appellant company was not entitled to keep
certain vehicles which it had removed, he must, to do justice between the
parties, order the appellant either to return them or to pay compensation for
them. Since the first course-was not possible because of lapse of time the second
was the only obvious course. Clause 13 of the general conditions provides for
reference to arbitration of all questions or disputes arising, under these
conditions or in connection with this co-tract, and these words are wide and
comprehensive. Therefore, the umpire did not go beyond his jurisdiction in
accepting the respondent's counter claim for compensation. [295 D-E] (4) Merely
because the umpire held that even though the appellant was not entitled to some
vehicles claimed by it, yet the authorities had delivered a substantial number
of them. without going into details, it could not be said that he bad acted
without evidence or that he behaved in the matter as a conciliator, or gave
findings on conjuncture and surmises, especially when the appellant withheld
relevant evidence which was in its possession. [296 E-F] (5) Under the
contracts of the sale. the appellant was bound to pay to the respondent ground
rent and other charges which the respondent in its turn was liable to pay the
owners; and since it was not the appellant's case that the respondent had
claimed a higher amount there was no substance in the contention that the
arbitrator fixed the ground rent without any evidence. [297 A-C] 284 (6)
Considering the huge amounts claimed by the parties, the volume of evidence,
adduced and the number of days occupied in recording that evidence and in
arguing the case, it could not be said that the discretion of the umpire
exercised in the matter of costs was exercised in breach of any legal provision
or unreasonably. [297 C-D]
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 2418 of 1966.
Appeal by special leave from the judgment and
order dated February 19, 1963 of the Punjab High Court, Circuit Bench, at Delhi
in F.A.0. Appeal No. 123-D of 1961.
R. L. Agarwal, K. L. Mehta, S. K. Mehta, P.
N. Chadda. M. G., Gupta and K. R. Nagaraja, for the appellant.
L. M. Singhvi, Badri Dass Sharma and S. P.
Nayar, for the respondent.
The Judgment of the Court has delivered by
Shelat, J. By this appeal, under special leave, the appellantcompany challenges
the correctness of the judgment of the High Court of Punjab, dated February 19,
1963 refusing to set aside an umpire's award, dated March 22, 1958. The award
was in respect of certain disputes between the company and the Union of India
in the matter of disposals of the United States surplus war materials left by
the Government of the U.S.A. at the end of the last World War. These surplus
materials, called the U.S. Surplus Stores, consisted of vehicles and other
stores. It was said that these were sold to the company by the
Director-General, Disposals through correspondence and sale-notes. These
contracts of sale were subject to the General Conditions of Contract (Form Con.
117). Cl. 13 of these General Conditions provided that "In the event of
any question or dispute arising under these conditions or any special
conditions of contract or in connection with this contract-the same shall be
referred to the award of an arbitrator to be nominated by the Director General
and an arbitrator to be nominated by the contractor, or in the case of the said
arbitrators not agreeing then to the award of an Umpire to be appointed by the
arbitrators in writing before proceeding on the reference----.
Upon every and any such reference, the assessment
of the costs incidental to the reference and award respectively shall be in the
discretion of the arbitrators, or in the event of their not agreeing, of the
Umpire appointed by them." 285 Disputes having arisen between the parties
both as regards the contents and the quantity of the vehicles delivered under
the contracts, they were referred, in the first instance, to two arbitrators
nominated by the parties, and ultimately to an umpire. The disputes were
crystallized into nine claims by the appellant company totaling Ks. 6,73,34,500/-,
and several counterclaims by the Government of India. At the end of the
arbitration, the umpire, by his said award, disallowed all the claims made by
the company, except one for which he awarded RS. 6,94,000/and held, in respect
of the counter-claims filed by the Government of India, that the
appellant-company was liable to pay to the Government in all Rs. 36,23,682.50
P. and costs amounting to Rs. 5,40,544/-. In the result, after deducting the
claim allowed to the appellant-company, the company was held liable to pay to
the Government Rs. 34,70,226.50 P.
The award having been filed by the umpire in
the Court of the, District Judge, Delhi and the Government of India having
thereupon applied for a decree in term of the award, the company applied to the
Court for setting aside the award urging several grounds for so doing. The
District Judge by an elaborate judgment declined to set aside the award. He,
however, held that the award suffered from an error apparent on the face of the
award in respect of the appellant's claim No. 111(a), and further held that the
counter-claims 11, IV, V and VI made by the Government were not covered by the
reference, and consequently, the umpire had no jurisdiction to go into them.
Declining, however, to set aside the award, he remitted it for reconsideration
of the aforesaid items and also for readjustment of the amount of costs in the evert
of enhanced compensation being awarded to the company in respect of its claim
No. 111(a). Dissatisfied with the judgment of the court the company filed an
appeal before the High Court. The Union of India also filed certain cross-objections.
The High Court heard the appeal and the cross-objections together and by its
aforesaid judgment dismissed both the anneal and the cross-objections and
upheld the judgment of the District Judge.
In support of the claim that the award was
liable to be set aside, counsel for the company submitted the following six
propositions for our acceptance :
1. that the contracts of sale entered into by
the company were misconstrued by the umpire and such misconstruction appears on
the face of the award:
2. that the umpire. as also the High Court,
failed to take into consideration several documents while deciding the scope of
3. that in respect of claim No. VI and
counter-claim No. VI of the Government, the umpire acted beyond his
jurisdiction as those question,,; did not fall within the scope of the
4. that the umpire did not act according to
law but acted as a conciliator and based his award on mere conjectures and
5. that his conclusion on ground rent awarded
to the Government was based on no evidence;
6. that the costs awarded to the Government
were altogether disproportionate.
Before we proceed to consider these
propositions, it is necessary to ascertain the scope of, S. 30 of the Arbitration
Act 1940 and the principles underlying that section. The general rule in
matters of arbitration awards is that where parties have agreed upon an
arbitrator, thereby displacing a court of law for a domestic forum, they must
accept the award as final for good or ill. In such cases the discretion of the
court either for remission or for setting aside the award will not be readily
exercised and will be strictly confined to the specific grounds set out in ss.
16 and 30 of the Act. In Hodgkinson vs. Fernie,(1) Williams, J. stated the
principle as follows :"where a cause or matters in difference are referred
to an arbitrator, whether a lawyer or a layman, he is constituted the sole and
final judge of all questions both of law and fact .... 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 arises on the face of the award, or
upon some paper accompanying and forming part of,-the award." This
observation was recently cited with approval in Union of India v. Bungo Steel
Furniture Pvt. Ltd. (2) The principle is that the Court, while examining an
award-, will look at documents accompanying and forming part of the award.
Thus, if an arbitrator were to refer to the pleadings of the parties so as to
incorporate them into the award, the Court can look at them. In some cases,
however, courts extended the principle and set aside the award on a finding
that the contract, though only referred to but not incorporated into the award
as part of it, had been misconstrued and such misconstruction had (1)
(2)  1 S.C.R.324.
287 been the basis of the award. Thus, in
Landauer v. Asser(1) the dispute between buyers and sellers of goods was as to
who was entitled to certain sums paid upon a policy of insurance upon the
goods. This was referred to arbitration and the umpire made his award basing it
on the construction he placed on the contract, namely, that as the parties to
the contract were "by the terms thereof" principals, their interest
and liability in insurance was defined to be the value of the invoice plus 5
per cent. On an application to set aside the award, the Court of Appeal held
that inasmuch as the umpire had referred to the contract and the terms thereof,
it was justified in looking at the contract, and having done so, found that he
had based his decision entirely upon the terms of the contract. It also found
that since the contract, if properly construed, did not justify the decision,
the award was bad on the face of it and was liable to be set aside. A similar
view appears also to have been taken in F.R. Absalom Ltd. v. Great Western
(London) Garden Village Society Ltd . (2 ) where the award set out the relevant
words and cl. 30 of the contract and also the conclusion of law on the meaning
of those words. Lord Russel said that since the award recited the contract and
referred in terms to the provisions of cl. 30, thereby incorporating it into
the award, and then stated the construction which the arbitrator placed upon
that clause, the Court was entitled to look at that clause to ascertain if the
construction placed by the arbitrator was erroneous.
The correctness of the decision in Landauer
v. Asser(1) was challenged before the Privy Council in Chempsey Bhara & Co.
v. Jivraj Balloo Spinning and Weaving Co. Ltd.(2) Lord Dunedin,, however, did
not expressly overrule it but rested content by observing that that decision
was not binding on the Board. But he formulated the principle thus :
.LM15 " An error in law on the face of
the award means, that you can find 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 proposition 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." (1)
(2) K.B. 184.
(2) 1933 A.C. 592.
(3)  A.C.480.
288 The Privy Council upheld the award.
stating that it was impossible to say what was the mistake on the face of the
award which the arbitrators had made as they had not tied themselves down to
any legal principle which was unsound.
The mere fact that the court would have
construed a document differently than the arbitrator would not induce the court
to interfere unless the construction given by the arbitrator is such that it is
against the well-established principles of construction. see Kelanton v. Duff
Development Co.(1) I In an illuminating analysis of a large number of earlier
decisions, including Landauer(2) and F. R. Absalom Ltd.(3) Diplock, L.J., in
Giacomo Costa Fu Andrea v. British Italian Trading Co. Ltd. (4 ) recorded his
conclusion thus "It seems to me, therefore, that, on the cases, there is
none which compels us to hold that a mere reference to the contract in the
award entitles us to look at the contract. It may be that in particular cases a
specific reference to a particular clause of a contract may incorporate the
contract, or that clause of it, in the award. I think that we are driven back
to first principles in this matter, namely, that an award can only be set aside
for error which is on its face. It is true that an award can incorporate
another document so as to entitle one to read that document as part of the
award and, by reading them together, find an error on the face of the award."
The question whether a contract or a clause of it is incorporated in the award
is a question of construction of the award. The test is, does the arbitrator
come to a finding on the wording of the contract. If he does, he can be said to
have impliedly incorporated the contract or a clause in it whichever be the
case. But a mere general reference to the contract in the award is not to be
held as incorporating it. The principle of reading contracts or other documents
into the award is not to be encouraged or extender. (see Babu Ram v. Nanhemal
& The rule thus is that as the parties choose their own arbitrator to be
the judge in the dispute between them, they cannot, when the award is good on
the face of it, object to the decision either upon the law or the facts.
even when an arbitrator commits a mistake
either in law or in fact in determining the matters referred to him, but such
mistake does not appear on the face of the (1)  1923 A.C.395 (2)  2
K.B.184 (3)  A.C. 592. (4) 2 All E.R. 53, 62 (5) C. A. NO. 1 07 of
1966, Decided on 5-12-1968.
289 award or in a document appended to or
incorporated in it so as to form part of it, the award will neither be remitted
nor set aside notwithstanding the mistake.
In the light of the principle above stated,
the first question calling for determination is, is there an error apparent on
the award, in the sense that the umpire misconstrued the contracts of sale
inasmuch as though those contracts were contained 'in sale-notes as well as in
several letters, he considered the sale-notes only as containing the contracts
of sale disregarding the correspondence which had taken place between the
company and the Director-General, Disposals and his officers ? Such a question
would undoubtedly be one of law. But the disputes referred to the umpire
contained disputes both of fact and law. Ordinarily the decision of the umpire,
even though it be on a question of law, would be binding on the parties.
The court would only interfere if the case
falls within the exceptions mentioned by Williams, J. in Hodgkinson v.
Fernie(1) and reaffirmed by Diplock L. J., in
Giacomo Costa Fu Andrea' v. British Italian Trading Co. Ltd.(2).
There were in all three separate sales to the
appellant company,, which according to the respondents were incorporated in
sale notes Nos. 160,. 161 and 197. Before the sale-note 160 was issued on July
11, 1946, it is a fact that the company had written a letter dated July 10,
1946 which was also endorsed by two officers of the Director General,
Disposals. The letter contained three clauses, the first of which stated that
"M/s. Allen Berry will buy the Moran Vehicles Depot 'as is where is for
The two other clauses provided the manner and
time of payment of the sale price. But the letter commenced. with the following
"Pending detailed record of terms
tomorrow the following are the broad heads of agreement, which will form
the-basis of sale of surplus vehicles." The next day, i.e., July 11, 1946,
the Department issued sale note 160, which in clear terms stated that what was
purchased were "all vehicles and trailers lying in Moran Depot",
which meant that the vehicles sold were only those that were actually lying in
that depot on July 11, 1946, and not those outside it or those borne on the
records of that depot, as contended by the company. It, however, appears from
the judgment of the Trial Court (para 206) that on receipt of sale-note 160,
the company wrote a letter on July 11, 1946 in which it contended that "We
have purchased the entire vehicle depot of Moran".
(1)  3 C.B. (N.S. 189,202. 57) (2)
 2 All ER-53, 68.
7SupCI/71 290 It appears that in view of this
difference of opinion, a meeting ,of representatives of the parties, was held
on July 23, 1946, the minutes of which, as recorded by the Assam Controller,
U.S.A.S.S., read as follows:
(2) (a) The vehicles and trailers sold to
Messrs. Allen Berry and Co. Ltd., are deemed to, include all vehicles which
were or should have been held in Moran Depot on the 10th July, also those which
have 'been issued on a Memorandum Receipt as follows :(i) To the Americans,
left behind by them in various camps and depots and not yet turned in by us.
(ii) Vehicles issued on Memorandum Receipt to
military units assisting the U.S.A.S.S.
(iii) Any surplus vehicles originally
allotted to U.S.A.S.S. Units-for operational purposes and now no longer
required by them." On September 17, 1946, a secraphone message was sent
from New Delhi to Calcutta which stated "We have sold U.S. Army surplus
vehicles presumed to be borne on Moran list, that is those actually in Moran
Vehicle Depot or those that were intended to be moved to that depot, which was
meant to be parking depot for surplus U.S. vehicles in Assam area." On September
26 1946, the Director-General,'Disposals, wrote to the company that "The
vehicles sold to you in Assam are those U.S. Army surplus. vehicles actually in
Moran Vehicle Depot or those that were intended to be moved to Moran Vehicle
Depot. Any mobile engineering equipment, such as mobile cranes, tracked
tractors are, excluded from the sale to you." On December 10, 1946, the
Controller issued a release order in respect of
1. All vehicles and trailers lying in Moran
Depot on 10th July 1946 including all United States Army Surplus Stores,
excluding land and buildings lying within Moran Depot and transferred to the
Government of India from the Government of the United States.
2. Vehicles in operational use in Calcutta
and Assam as and when no longer required by the U.S.A.S.S. Organisation."
291 The question raised by counsel is that the umpire failed to consider all
these documents while considering the scope and content of the contract of sale
and relied on only sale-note No. 160, dated July 11, 1946, that the contract
was not contained in the said note 160 alone, and that therefore, he
misconstrued the contract, and that that misconstruction, which is a point of
law, is apparent on the face of the award, as it was made the very basis of the
The first three issues raised by the umpire
were (1) whether the appellant was entitled to prove that any vehicles, stores
etc. other than those mentioned in the sale-notes were sold to it;
(2) whether the Government was bound by the
clarifications, representation, explanations or assurances made or given by any
officer or officers of the Department regarding the subject matter of the
contracts of sale except those necessarily implicit in the sale-notes;
and (3) whether the Government sold any
vehicles except those lying in Moran Depot on July 11, 1946, or those intended
to be moved thereto.
The dispute between the parties, thus,
clearly was that whereas the company claimed that the, sale was of all vehicles
borne on the records of Moran Depot, irrespective of whether they were actually
lying there on July 11., 1946 or not, the Government claimed that the company
was entitled to those actually lying in the Depot. According to the
respondents, the contract of sale was to be found in the sale-note, and
therefore, any subsequent explanations or assurances given by any officer or
officers of the Department could not vary or alter the terms of the contract.
These explanations and assurances were given, only to remove the
misunderstanding of the company over the question of the scope and extent of
the sale made to it.
The umpire set out part of the sale-notes 160
and 197 in the award and then observed "the language used in these sale
letters is to my mind perfectly clear, explicit and unambiguous and excludes
the possibility of any vehicles, trailers or stores lying on the dates in
question outside the locations specified in the sale letters having been
included in the two sales. The contention that they in fact include all
vehicular stores in Assam in one case and in Bengal area in the other has been
made in all seriousness and a good deal 292 of evidence both oral and
documentary has been produced in support of or against such contention. The
point has also been argued at great length by learned counsel for the parties.
I have given the whole matter my most serious and earnest consideration and my
view is that apart from the language of the two saledeeds' being against such a
contention, the evidence too considered as a whole does not support it.
Accordingly, I hold that the stores sold to the claimants in the case of Assam
were those actually located in Moran Depot on July 10,1946 and in the case of
Bengal those actually located in Jodhpur and other depots specified in the sale
letter on July 31, 1946." He next held :
"The alleged clarifications or
representations made or explanations or assurances given by any officer or
officers of the Disposals Department either verbally or in writing have been
very carefully examined by me and I am of opinion that neither are they,
considered as whole, capable of the interpretation sought to be put upon them
by the claimants nor are the respondents bound by them. They are not in
accordance with law and do not amount to legal contracts binding the
respondents." These passages clearly show that the umpire had considered,
besides the sale-notes, the oral and documentary evidence led by the parties as
also the contentions urged on and as regards them by counsel for the company.
It is impossible, therefore, to uphold the contention that the various documents,
i.e., the letter of the company dated July 10, 1946, 'the subsequent
correspondence, minutes of the meetings which took place after the sale note
160 was issued etc. were not taken into consideration by the umpire while
coming to his conclusion as to what actually was sold to the company.
The dispute, amongst other disputes, referred
to the umpire and crystallized by him in the form of issues on the pleadings of
the parties involved, as already stated, the question first as to what was
sold, and secondly, arising out of that, the question whether besides the said
sale notes 160 and 197, the subsequent clarifications or explanations were
binding on the Government. These were, no doubt, questions partly of fact and
partly of law. But questions both of fact and law were referred to the umpire
and prima facie his findings on them would bind the parties unless, as
explained earlier, the umpire has laid down any legal proposition, such as a
construction which is made the basis of the award and is on the face of the
award an error.
293 The point is, is this such a case ? True
it is that this is not ,a case where a question of law is specifically referred
to. It is clearly a case falling in the category of cases, like Kalanton v. Du#
Development Co. Ltd. (1) wherein deciding the questions referred to him the
umpire has to decide a point of law. In doing so, the umpire no doubt, laid
down the legal proposition that the clarifications or assurances given
subsequent to the dates of the said sale notes by an officer or officers of the
department were not binding on the respondents nor could they affect the scope
of the sales. That answer the umpire, was entitled to give.
But the fact that he answered a legal point
does not mean that he has incorporated into the award or made part of the award
a document or documents, the construction of which, right or wrong, is the
basis of the award. The error, if any, in such a case cannot be said to be an
error apparent on the face of the award entitling the court to consider the
various documents placed in evidence before the umpire but not incorporated in
the award so as to form part of it and then to make a search if they have been
misconstrued by him.
This, in our understanding, is the correct
principle emerging from the decisions which counsel placed before us.
In any event, this is not a case where the
umpire, in the words of Lord Dunedin, "tied himself down to a legal
proposition" which on the face of the award was unsound.
The award ,makes it clear in so many words
that he took into. Account the entire evidence, including the documents relied
on by counsel and then only came to the conclusion that it did not assist the
company in its contention as to the scope of the sales. Contentions 1 and 2
raised by Mr. Agarwal, therefore, cannot be upheld.
Contention No. 3 relates to 547 vehicles
said' to have been sold to the company under sale:-note 197, dated August 2,/6,
1946. There is no dispute that out of these vehicles the company removed 291
vehicles alleging that the delivery of the balance of 256 vehicles was
withheld. The company made a claim being claim No. VI for the price of these
256 undelivered vehicles. The respondents contention was that the sale to the
company was confined only to the U.S.A.
Surplus Stores, that these vehicles did not
fall within that category, but were Reverse Land Lease vehicles belonging to
the Government of India under an agreement between the U.S.A. and India. On
these allegations the respondents laid counter-claim No. VI claiming the price
of the 291 vehicles admittedly removed by the company when they were lying in
Jodhpur Depot, Calcutta.
The umpire found that the expression
"Reverse Land Lease" related to the reciprocal aid articles referred
to in the said agreement. A reciprocal aid article, according to that
agreement, (1)  A.C. 395.
294 meant an article transferred by the India
Government to the U.S. Government under reciprocal aid under para 4-C of that
agreement'. The U.S.A. Government was deemed to have acquired as on September
2, 1945 full title over such articles except that such reciprocal aid articles
incorporated into installations in India were deemed to have been returned to
India Government from the date when the U.S.A. forces relinquished possession
of such installations.
From the inventories produced before him, the
umpire held that these 547 vehicles were incorporated into installations in
India, and therefore, ownership in them vested in India Government on and after
the U.S.A. forces relinquished possession of those installations. They could
not, therefore, be regarded ,is U.S. Surplus Stores which alone were and could
be the subject-matter of sale-note 197.
Consequently, the company was not entitled to
remove the said 291 vehicles which it did, much less could the company claim
compensation for 256 vehicles which it alleged were not delivered to it. In the
result, the umpire allowed the Government's counter-claim No. VI, which was for
the price of 291 vehicles unauthorisedly removed by the company from Jodhpur
The argument in connection with this part of
the award was, firstly, that the findings of the umpire were vitiated as there
was total lack of evidence on which they could be based, and secondly that in
any event, the umpire had no jurisdiction to award compensation to the
Government in respect of counterclaim No. VI. The first part of the argument
need not detain us as the finding that these vehicles formed part of reciprocal
aid articles, the ownership in which vested in the Government of India and were
therefore not U.S.A.S.S. was based on the agreement between the two Governments
and the inventories produced before the umpire from which he could hold that
they belonged to the Government of India from the date when the installations
in which they were incorporated were relinquished by the U.S. forces, and that
therefore, they could not form the subject-matter of sale-note 197 which
related only to the U.S. Surplus St-ores.
The second part of the argument, however,
requires consideration. The question is whether the arbitration clause
included. a dispute relating to compensation in respect of the said 291
vehicles unauthorisedly removed by the company.
Cl. 13 of the General Conditions of Contract,
quoted earlier, provide for reference to arbitration of all questions or
disputes "arising under these conditions" or "in connection with
Dr. Singhvi referred us to cl. 10 of these
Conditions also but it is clear that it can in no sense apply to the dispute
relating to, compensation. But the words "arising under these
conditions"' 295 and "in connection. with this contract" are
undoubtedly wide and comprehensive. it is, nonetheless, a question whether the
dispute as to compensation on the ground of unauthorised appropriation of these
vehicles by the company falls within cl. 13. In Vidya SagarJoshi v. Surinder
Nath Gautam(1) the words "expenditure, in connection with election"
used in s. 77 of the Representation of the People Act, 1951 were construed to
mean "having to do, with". An arbitration clause wherein the words
"in relation to or in connection with the contract" were construed
not to contemplate a dispute raised by a contractor that he could avoid the contract
on the ground that it was obtained by a fradulent misrepresentation. (see Monro
v. Bognor Urban District Council(2). But a claim for damages on the ground of
negligence on. the part of the defendant in re-moving the plaintiff's furniture
against a clause for due diligence in removing it was held to fall, within the
arbitration clause. Woolf v. Collis Remo val Service (3) Counsel conceded that
a dispute as to the interpretation of sale-note 197 would fall under the
arbitration clause.. If that is so, it must follow that the umpire was
competent to decide whether the said 547 vehicles fell within the purview of
the sale-note or not. If in determining that question he came to the conclusion
that they did not, the obvious conclusion would be that the company was not
entitled to take away 291 vehicles admittedly removed by it from the Depot. If the
company did that, would the question as to the return or of compensation in
lieu of such vehicles, to which it was not entitled under the sale, be a
question which arises out of or in connection with the contract ? Counsel went
as far as to say that the umpire in deciding the company's claim No. VI and the
Government's counterclaim No. VI could decide that the company was not entitled
to those vehicles, but could not take the next step either to direct the return
of them or payment of compensation in lieu of those vehicles. In our view, such
an argument cannot be accepted. The reason is that once it is found that he was
competent to decide the dispute as to whether the said 547 vehicles were not
the subject-matter of the sale and 291 of them were removed unauthorisedly, he
must, to do justice between the parties in respect of disputes referred to him,
order the company either to return them or to pay compensation for them. Since
the first course was not possible after all these years, the second was the
only and the obvious course. The dispute raised by the respondents that 291
vehicles were not included in the sale was: co-extensive with and connected
with the dispute that the company (1) A.I.R. 1969 S.C. 288.
(2)  (3) K.B.167.
296 was bound to return them if it was found
that they were not covered by the sale. On this reasoning it is not possible to
say that the umpire went beyond his jurisdiction either in rejecting the
company's claim No. VI or in accepting the corresponding counter-claim No. VI
of the respondents.
Contention 4 relates to 600 vehicles which
had been taken out of Moran Depot for operational purposes, but which the
company claimed were part of the sale under sale-note 160.
The umpire held (I that those vehicles having
been taken out of the Depot for operational purposes did not fall within the
sale, and (2) in the alternative, that the evidence disclosed that a
substantial number of vehicles in operational use were delivered to the company
even though strictly speaking it was not entitled to them as they were not
lying in the, Depot on. July 10, 1946. The umpire further held that if some of
them per chance were not handed over, the respondents had sufficiently
compensated the company by handing over several non-operational vehicles from
outside the depot to which the company-was not entitled. Counsel argued that
this part of the award was vague and without any evidence to support it, and
therefore, the umpire behaved in this respect more like a conciliator than as
Having held that sale-note 160 covered only
those vehicles which were actually lying in Moran Depot on July 10, 1946, it
was not incumbent on the umpire to decide the number of operational vehicles
outside the depot. Consequently, if he was satisfied that even though the
company was not entitled to the said 600 vehicles claimed by it, yet the
authorities had delivered a substantial number of them, and for any deficiency,
had also delivered non-operational vehicles, there would be no purpose in going
into the details of vehicles delivered to the company. Even though, as the
judgment of the Trial Court discloses (para 223), there was evidence, both oral
and documentary, that the company had collected a number of vehicles lying at
places outside the Depot, and the vehicles so collected were recorded by the
company, yet the company had withheld the production of those records. In view
of these facts it is impossible to say that the umpire had acted without
evidence, or that he behaved in the manner of a conciliator, or gave findings
on conjectures and surmises.
Our interference was invited next on the
question of ground rent on the ground that the amount of such rent was fixed by
the umpire without any evidence. There is hardly any substance in this
contention. The sites, on which the various depots were situated, were
requisitioned by the Government under the 297 Defence of India Rules. The
Government had a statutory obligation, therefore, to pay to the owners of those
sites compensation as provided by those Rules. Under the contracts of sale the
company was, bound to pay to the Government ground rent and other charges which
the Government in its turn was liable to pay. It is, therefore, not correct to
say that the umpire could award only that amount which the Government had
actually paid and that the umpire should, therefore, have taken an account from
the Government. It was never the case of the company that the Government had
claimed ground rent higher than the compensation it was liable to pay.
The last objection was that the amount of
costs awarded by the umpire to the respondents was disproportionate. It appears
from the award-that the umpire fixed the amount of costs after considering the
statements of expenses incurred by the parties for the hearing before him
tendered by the respective counsel for the parties. Considering the huge
amounts claimed by the parties, the volume of evidence, both oral and
documentary, adduced by them, the number of days occupied in recording that
evidence and in arguing the case, we are not prepared to say that the
discretion which the umpire. exercised in the matter of costs was exercised in
breach of any legal provision or unreasonably which can justify the Court's
In our view, none of the six contentions
urged by counsel can be upheld. The result is that the appeal fails and is
dismissed with costs.
V.P.S. Appeal dismissed.