Vanaspati & Allied Industries Vs. Union
of India  Insc 923 (14 September 2007)
Chatterjee & Dalveer Bhandari Dalveer Bhandari, J.
This appeal is directed against the judgment of the Division Bench of the Delhi
High Court dated 17.4.2006 passed in FAO (OS) No. 206/2006.
respondent, Union of India, issued tender dated 29th June, 1989 for purchase of oil. The appellant offered to supply 1600
metric tons of different categories of oil vide quotation dated 15th July,
1989, the details of which are as under:-
MT @ 24,150/- per MT by 31.8.89 (Refined Cotton Seed Oil)
MT @ Rs.21,500/- per MT by 31.8.1989 (Rapeseed Oil)
MT @ Rs.24,550/- per MT by 30.9.1989 (Refined Soyabeen Oil)
MT @ Rs.22,000/- per MT by 30.9.1989 (Rapeseed Oil).
respondent-Union of India accepted the offer given by the
appellant and consequently the respondent issued tender in the form of a letter
dated 22nd August, 1989. The appellant failed to supply the
oil as per the delivery schedule. The time for supply was extended, reserving
the respondents right to levy liquidated damages. All the supplies could
not be delivered. The contract was cancelled and the appellant resorted to
force majeure clause.
dispute was referred to an arbitrator. The sole arbitrator made and published
his award on 20th June,
1995. The appellant
prayed before the arbitrator that in view of the extension of time on various
occasions, the time was not the essence of the contract. The appellant has admitted
various delays including in furnishing security, but stated that the same were
may be pertinent to mention that the objections regarding limitation and
jurisdiction were given up by the appellant before the Division Bench of the
the Division Bench, the appellant sought the benefit of the force majeure
clause because the government had banned the use and process of rapeseed oil by
manufacturers. The Division Bench specifically noted in the impugned judgment
that no other argument was advanced by the learned counsel appearing for the
appellant. Therefore, we requested the learned counsel for the appellant to
confine his submissions only with regard to force majeure clause argued before
the Division Bench of the High Court in this case. On the basis of the
documents referred to the court by the learned counsel for the appellant, it is
clear that the ban was imposed for the use of rapeseed oil for manufacturing Vanaspati
but manufacturing of rapeseed oil was not debarred or restricted. Therefore,
even the plea of force majeure clause taken by the appellant was found to be
totally devoid of any merit.
arbitrator in the instant case gave a non- speaking award, which was made rule
of the court by the order of the learned Single Judge on 21st February, 2006.
appellant preferred FAO (O.S.) No.206/2006, before the Division Bench of the
High Court, which was also dismissed on 17th April, 2006. The appellant has preferred
special leave petition against the said impugned judgment of the Division
Bench. This Court granted leave on 14th May, 2007.
Division Bench, in the impugned judgment, while affirming the judgment of the
learned Single Judge has correctly observed that the ban was on the use of
rapeseed oil for manufacturing Vanaspati but manufacture of rapeseed oil was
not debarred or restricted.
have heard Mr. L. Nageshwar Rao, the learned senior counsel for the appellant,
and Mr. Vikas Singh, the learned Addl. Solicitor General for the respondent,
Union of India. In this case, the award has been made rule of the court by the
learned Single Judge of the High Court and the findings of learned Single Judge
have been affirmed by the Division Bench. The Court in the impugned judgment
held that the force majeure clause could not be attracted in the facts and
circumstances of this case. This was so because the ban covered the use of
rapeseed oil for manufacturing Vanaspati, yet manufacturing rapeseed oil was
not debarred or restricted. We concur with the learned Single Judges
findings, which were affirmed by the Division Bench.
consistent and settled legal position is that the scope of interference is
extremely limited in a non- speaking award. The legal position has been
consistently followed in number of judicial decisions. The findings of some of
those judgments are recapitulated as under.
M/s Sudarsan Trading Co. v. Govt. of Kerala & Another (1989) 2 SCC 38 in para
29 at page 53, Sabyasachi Mukharji, J. speaking for the Court observed that the
court in a non-speaking award cannot probe into the reasoning of the award. The
Court further observed that only in a speaking award the court may look into
the reasoning of the award, and it is not open to the court to probe the mental
process of the arbitrator and speculate, where no reasons are given by the
arbitrator as to what impelled him to arrive at his conclusion. Furthermore,
the reasonableness of the arbitrators reasons cannot be challenged. The
arbitrators appraisement of the evidence is never a matter for the court
This Court in State of A.P. v. R.V. Rayanim (1990) 1 SCC 433 in
para 6 at page 437, dealt with a non- speaking award. The court observed that
it is not open to the court to probe the mental process of the arbitrator where
he has not provided the reasoning for his decision.
This Court, in Bijendra Nath Srivastava v. Mayank Srivastava & Others
(1994) 6 SCC 117 in para 20 at page 133 and para 31 at page 138, observed that
the arbitrator is under no obligation to give reasons in support of the
decision reached by him, unless the arbitration agreement or deed of settlement
arbitrator or umpire chooses to give reasons in support of his decision, then
it would be open to the court to set aside the award upon finding an error of
reasonableness of the reasons given by the arbitrator cannot, however, be
challenged. It is not open to the court to look for the reasons and proceed to
examine whether they were right or erroneous. The arbitrator is the sole judge
of the quality as well as the quantity of the evidence. 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.
New India Civil Erectors (P) Ltd. v. Oil
& Natural Gas Corporation (1997) 11 SCC 75 in para 7 at page 78, the Court
observed while dealing with a non- speaking award that the attempt of the court
should always be to support the award within the letter of law.
Rajasthan State Mines & Minerals Ltd. v. Eastern Engineering Enterprises
& Another (1999) 9 SCC 283 in para 44 at page 309, the Court observed that
in a non-speaking award the jurisdiction of the court is limited. 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 his conclusion. It is also not
possible to admit to probe the mental process by which the arbitrator has
reached his conclusion where it is not disclosed by the terms of the award.
Similar view has been taken in the following cases, namely, State of Bihar
& Others v. Hanuman Mal Jain (1997) 11 SCC 40, P.V. Subha Naidu &
Others v. Govt. of A.P. & Others (1998) 9 SCC 407, Star Construction and
Transport Co. & Others v. India Cements Ltd. (2001) 3 SCC 351 and D.D.
Sharma v. Union of India (2004) 5 SCC 325.
The decided cases of this Court demonstrate that this Court has consistently
taken the view that scope of interference in a non-speaking award is extremely
limited. The Court cannot probe into the mental process of the arbitrator. The
court should endeavour to support a non-speaking arbitration award provided it
adhered to the parties agreement and was not invalidated due to
Russell on Arbitration 19th Edition at Pages 110-111 described the entire
genesis of arbitration as under:- An arbitrator is neither more or less
than a private judge of a private court (called an arbitral tribunal) who gives
a private judgment (called an award). He is a judge in that a dispute is
submitted to him; he is not a mere investigator but a person before whom
material is placed by the parties, being either or both of evidence and
submissions; he gives a decision in accordance with his duty to hold the scales
fairly between the disputants in accordance with some recognized system of law
and rules of natural justice. He is private in so far as
is chosen and paid by the disputants
does not sit in public
acts in accordance with privately chosen procedure so far as that is not
repugnant to public policy
far as the law allows he is set up to the exclusion of the State Courts
authority and powers are only whatsoever he is given by the disputants
effectiveness of his powers derives wholly from the private law of contract and
accordingly the nature and exercise of those powers must not be contrary to the
proper law of the contract or the public policy of England bearing in mind that the paramount
public policy is that freedom of contract is not lightly to be inferred
Whatever has been mentioned by Russell in this paragraph is equally true for Indian
Arbitration is a mechanism or a method of resolution of disputes that unlike
court takes place in private, pursuant to agreement between the parties. The
parties agree to be bound by the decision rendered by a chosen arbitrator after
giving hearing. The endeavour of the court should be to honour and support the
award as far as possible.
have perused the award and the judgment of the learned Single Judge by which
the award has been made the rule of the Court and the impugned judgment of the
Division Bench of the High Court. In our considered view, no interference is
called for. The appeal being devoid of any merit is accordingly dismissed. In
the facts and circumstances of the case, we direct the parties to bear their