Andhra Pradesh & Anr Vs. R.V. Rayanim  INSC
8 (15 January 1990)
Sabyasachi (Cj) Mukharji, Sabyasachi (Cj) Punchhi, M.M. Reddy, K. Jayachandra
1990 AIR 626 1990 SCR (1) 54 1990 SCC (1) 433 JT 1990 (1) 57 1990 SCALE (1)47
INFO : R 1992
SC 232 (30)
Act, 1940: Sections 14, 17, 30 and 33--Award-Challenge of--Error apparent on
face of record--Arbitrator exceeded jurisdiction--Only in speaking award Court
can look into reasons.
had entered into an agreement with the petitioner for formation of an earth
dam. Disputes and difference arose between the parties. A reference was made to
the arbitrator wherein the respondent made eleven claims out of which one claim
was later withdrawn. The arbitrator gave a non-speaking award in favour of the
re- spondent amounting to a consolidated sum of Rs.19.39 lakhs.
respondent flied a proceeding before the Court to make the award rule of the
Court. The petitioner preferred an application for setting aside the award
which was dis- missed. The High Court dismissed the appeal and the revision of
this Court it was contended inter alia that the award purported to grant
damages on the basis of escalation of cost and prices, and such escalation was
not a matter within the domain of the bargain between the parties. It was also
contended that the fact that the arbitrator had taken into consideration the
question of escalation would make the award bad because it was not discernible
whether he had awarded any amount on account of excalation.
the special leave petition, this Court,
matters of challenging an award, there are often two distinct and different
grounds. One is an error apparent on the face of the record and the other is
that the arbitrator has exceeded his jurisdiction. In the latter case the Court
can look into the arbitration agreement but under the former It cannot, unless
the agreement was incorporated or recited In the award. [58A-B] M/s Sudarshan
Trading Co. v. Government of Kerala & Anr.,  2 SCC 38, referred to.
Only in a speaking award the court can look into the reasoning of the award. 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
the arbitrator to arrive at his conclusion. [58D]
is not discernible on the face of the record that the arbitrator has exceeded
his jurisdiction in awarding damages on account of escalation. All that the
award states is that he has considered the claim on the basis of escala- tion.
Such a consideration does not make the award, on the race of it, bad on the
ground of error apparent on the face of the record.' [58G-H; 59A-B]
The Arbitrator does not state that he has awarded any amount on that account.
There is neither any error apparent on the face of the record, nor any material
to satisfy that the arbitrator has exceeded his jurisdiction in awarding the
amount as he did. [59B-C]
APPELLATE JURISDICTION: Special Leave Petition (Civil) No. 8094 of 1988.
the Judgment and Order dated 16.3.88 of the Andhra Pradesh High Court in
(A.A.O.) No. 1152/86 & C.R.P. No. 2728 of 1986.
and G. Prabhakar for the Petitioners.
K. Prabhakar and R.N. Kishwani for the Respondent.
Judgment of the Court was delivered by SABYASACHI MUKHARJI, CJ. The respondent
R.V. Rayanim was, at all material times, a Class I contractor who had entered into
an agreement with the Government of Andhra Pradesh for formation of earth dam
in gorge portion from chainage 3360 to 3380-M of Raiwada Reservoir Project near
Devarapalli village, Chodavaram Taluk, Distt. Visakhapatnam, Andhra Pradesh. Disputes and differences arose between the
parties in respect of the aforesaid agreement. A reference was made to the
arbitrator as per the arbitrator clause in the agreement between the parties.
The respondent made eleven claims claiming various amounts, particulars whereof
have been set out by the arbitrator as follows.
"I.Payment for forming cross (Rs. in lakhs) 15.89 bund and refund of the
(subsequently reduced amount recovered. to Rs.14.89 lakhs)
of Seigniorage 2.071 (withdrawn) Charges
and damages 14.00
load for sand 1.075 (subsequently reduced to Rs.0.575 lakhs).
for excavation 1.030 under water for probing diaphram wall
Compensation for loss 1.500 suffered due to partial prevention by the
for loss 2.015 suffered due to non-payment for the work done.
of excess hire 0.730 charges recovered.
Overheads 0,960 X. Costs O. 100 XI.
Interest on II and VIII at 24% from the date of recovery.
Rs.8.30 lakhs at 24% p.a. from 30.11.81 to 12.5. 3982.
Interest at 24% on the award amount except II and VIII from the date of
arbitrator gave a non-speaking award dated 27th July, 1985 in favour of the respondent,
amounting to Rs.19.39 lakhs, wherein he stated as follows:
II has been withdrawn by the petitioner himself on the ground it was
subsequently refunded by the respondents.
balance claims (I and III to X) according to my assessment, I award a
consolidated amount of Rs.19.39 lakhs to the extent of the claims judged
admissible. The respond- ents shall pay Rs.Nineteen lakhs and thirty nine
thousand to the petitioner." It is, therefore, apparent the claim No. II
as mentioned above, 57 had been withdrawn. On the balance claims I and III the
arbitrator had awarded a consolidated amount of Rs.19.39 lakhs 'to the extent
of the claims judged admissible'. The respondent filed a proceeding before the
Court to make the award rule of the Court. The petitioner preferred an appli- cation
for setting aside the award. By a common judgment dated 21st April, 1985, the
Second Additional Judge, City Civil Court, Hyderabad, dismissed the petition of
the peti- tioner for setting aside the award and allowed the judgment in terms
of the award. The petitioner preferred an appeal and a civil review petition
before the High Court of Hydera- bad. By a judgment dated 16th March, 1988 the
division bench of the High Court dismissed the appeal and the revision of the
petitioner. It held that the non-speaking award of the arbitrator was not
liable to be set aside by the Court.
petitioner has preferred this special leave petition challenging the said
decision of the High Court. The main contention which was sought to be urged on
this case was that the award was a nonspeaking award and, as such, was bad. On
this ground, on or about 9th December, 1988 this Court directed that the matter
should be taken up along with civil appeal No. 5645 and 5645A of 1986 pending
before a larger bench. At that time, the question was pending consid- eration
by the Constitution Bench of this Court. This Court further directed on 9th
December, 1988 that the entire amount of award, if not deposited in the trial
court, should be deposited in the trial court within two months from that date,
and upon the deposit being made the respondent will be at liberty to withdraw
50% of the amount which has not been withdrawn on furnishing security to the
satisfaction of the trial court. It was further recorded that 50% had already
hereinbefore, the main contention sought to be urged was that the award being a
non-speaking award, was bad in law. In view of the decision of this Court in Raipur
Development Authority etc. v. M/s Chokhamal Contractors etc., Jmt. Today 2 SC
285, this contention is no longer sustainable. It was then contended that the
award has pur- ported to grant damages on the basis of escalation of cost and
prices; and such escalation was not a matter within the doman of the bargain
between the parties and having taken that factor into consideration the award
was bad. We have set out the relevant portion of the award. From reading the
award, as set out hereinbefore, it is clear that the arbi- trator has
considered the claim made on the basis of 'esca- lation and damages' but he has
awarded a total sum of Rs.19.39 lakhs insofar as he finds admissible in respect
of the claims which the arbitrator has adjudged. It speaks no further. In such
a situation it is 58 not possible to contend that there was any exercise of
jurisdiction by the arbitrator beyond his competence. It is well-settled that
in matter of challenging the award, there are often two distinct and different
grounds. One is an error apparent on the face of the record and the other is
that the arbitrator has exceeded his jurisdiction. In the latter's case the
Court can look into the arbitration agree- ment but under the former it cannot,
unless the agreement was incorporated or recited in the award. An award may be
remitted or set aside on the ground that the arbitrator, in making it, had
exceeded his jurisdiction and evidence of matters not appearing on the face of
it, will be admitted in order to establish whether the jurisdiction had been
exceed- ed or not, because the nature of the dispute is something which has to
be determined outside the award--whatever might be said about it in the award
or by the arbitrator. See the observations of this Court in M/s Sudarshan
Trading Co. v. Government of Kerala & Anr.,  2 SCC 38.
in a speaking award the court can look into the reasoning of the award. 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
the arbitrator to arrive at his conclusion.
instant case the arbitrator has not awarded any amount on account of escalation
of costs and expenses. At last the arbitrator has not expressly awarded any
amount on the ground of such escalation and if so, what amount, is not apparent
on the face of the record. In these circumstances, in our opinion, on the basis
of well-settled principles of law such an award, especially in view of the fact
that excluding item No. III the remaining items would also be well over
Rs.19.33 lakhs, it is not discernible on the face of the record that arbitrator
has exceeded his jurisdiction in awarding damages on account of escalation of
charges and expenses which were beyond the arbitration ambit. The fact that the
arbitrator has considered the claim made by the respondent on account of
escalation, does not make per se the award to be bad.
Sitaramiah, learned counsel appearing for the appellant contended that the fact
that the arbitrator has taken into consideration the question of escalation
would make the award bad because it is not discernible whether he has awarded
any amount on account of escalation. We are of the opinion that this argument
is not open. In case of an error apparent on the face of the record, it has to
be established that an item or an amount which the arbitrator had no
jurisdiction to 59 take into consideration, has been awarded or granted. That
is not apparent on the face of the award in this case. All that the award
states is that he has considered the claim on the basis of escalation. Such a
consideration does not make the award on the face of it, bad on the ground of
error apparent on the face of the record. Indeed, the arbitrator, when a claim
is made, has to take that into consideration either for acceptance or rejection
of the claim made. The award states that he has taken the claim made, into consid-
eration. The award does not state that he has awarded any amount on that
account. There is neither any error apparent on the face of the record, nor any
material to satisfy that the arbitrator has exceeded his jurisdiction in
awarding the amount as he did.
that view of the matter the special leave petition has no merit made must,
therefore, fail, and is accordingly dismissed. The petitioners were allowed to
withdraw the awarded sum on furnishing security but in view of the deci- sion
now rendered, they will be entitled to take back the security. We order
accordingly. The application is dismissed with aforesaid directions.