Case Note & Summary
The dispute arose from the sale of United States surplus war materials, consisting of vehicles and other stores, by the Director General of Disposals to the appellant company through correspondence and sale notes. The contracts were subject to the General Conditions of Contract (Form Con. 117), Clause 13 of which provided for arbitration of any question or dispute arising under or in connection with the contract. Disputes arose between the parties as regards the contents and quantity of vehicles deliverable under the contracts, leading to reference to two arbitrators and ultimately to an umpire. The appellant company raised nine claims totaling Rs. 6,73,34,500, while the Government of India filed several counterclaims. The umpire, by award dated March 22, 1958, disallowed all claims of the company except one for which Rs. 6,94,000 was awarded, and held the company liable to pay Rs. 36,23,682.50 plus costs of Rs. 5,40,544, resulting in a net liability of Rs. 34,70,226.50. The award was filed in the District Judge's Court, Delhi; the Government applied for a decree in terms of the award, and the company applied to set it aside. The District Judge declined to set aside the award but held that the award suffered from an error apparent on the face of the award regarding the appellant's claim No. III(a) and that counter-claims II, IV, V and VI were not covered by the reference, and consequently remitted the award for reconsideration of those items and readjustment of costs. The Punjab High Court, Circuit Bench at Delhi dismissed both the company's appeal and the Union of India's cross-objections, upholding the District Judge's judgment. The appellant company then appealed to the Supreme Court by special leave. The appellant 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 in awarding compensation for removed vehicles; (4) the umpire acted as a conciliator deciding matters on conjecture; (5) the umpire fixed ground rent without any evidence; and (6) the costs awarded were totally disproportionate. The Supreme Court examined the scope of Section 30 of the Arbitration Act, 1940 and the principles governing setting aside of awards. It held that when parties choose their own arbitrator, they must accept the award as final unless the mistake appears on the face of the award or in a document incorporated into it. A mere general reference to the contract in the award does not incorporate it; the test is whether the arbitrator came to a finding on the wording of the contract. The court found that the umpire had considered oral and documentary evidence and his legal proposition that clarifications subsequent to sale-notes were not binding did not amount to incorporation of documents into the award. The court also held that Clause 13 of the General Conditions was wide enough to cover the counter-claims for compensation, and that the umpire did not act as a conciliator or without evidence. The costs awarded were not disproportionate given the magnitude of the claims and evidence. Accordingly, the Supreme Court dismissed the appeal and upheld the High Court's judgment, confirming that the award was not liable to be set aside.
Headnote
A) Arbitration Law - Scope of Judicial Review of Award - Error Apparent on Face of Award - Arbitration Act, 1940, Section 30 - The court examined whether an arbitrator's mistake of law or fact could lead to setting aside an award. Parties who choose their own arbitrator must accept the award as final unless the mistake appears on the face of the award or in a document appended to or incorporated into it. A mere general reference to the contract in the award is not to be held as incorporating it; the test is whether the arbitrator came to a finding on the wording of the contract. Held that the award cannot be set aside for such errors unless the contract is incorporated. (Paras Not mentioned) B) Arbitration Law - Incorporation of Contract into Award - Construction of Award - Arbitration Act, 1940, Section 30 - The umpire considered oral and documentary evidence and laid down the legal proposition that clarifications subsequent to sale-notes were not binding on the respondent; answering a legal point does not mean incorporation of documents into the award. The court cannot look at external documents not incorporated into the award to search for misconstruction. Held that no error apparent on the face of the award existed. (Paras Not mentioned) C) Arbitration Law - Jurisdiction of Umpire - Counter-Claims and Compensation - Arbitration Act, 1940, Section 30 read with Clause 13 of General Conditions of Contract - The umpire awarded compensation for vehicles removed by the appellant. Clause 13 provided for reference to arbitration of all questions or disputes arising under or in connection with the contract, which is wide and comprehensive. Since return of vehicles was not possible due to lapse of time, compensation was the only obvious course. Held that the umpire did not go beyond his jurisdiction. (Paras Not mentioned) D) Arbitration Law - Standards of Evidence - Conciliator vs Arbitrator - Arbitration Act, 1940, Section 30 - The umpire held that though appellant was not entitled to some vehicles, the authorities had delivered a substantial number without going into details. Merely because details were not given could not lead to inference of acting without evidence or as conciliator, especially when appellant withheld relevant evidence. Held that findings were not based on conjectures and surmises. (Paras Not mentioned) E) Arbitration Law - Ground Rent Determination - Evidence - Arbitration Act, 1940, Section 30 - Under the contracts of sale, appellant was bound to pay ground rent and other charges. It was not appellant's case that respondent claimed a higher amount. Held that the contention that arbitrator fixed ground rent without any evidence had no substance. (Paras Not mentioned) F) Arbitration Law - Costs in Arbitration - Discretion of Umpire - Arbitration Act, 1940, Section 30 - Considering the huge amounts claimed, volume of evidence, and number of days occupied, the umpire's discretion in awarding costs was not exercised in breach of any legal provision or unreasonably. Held that costs awarded were not disproportionate. (Paras Not mentioned)
Issue of Consideration
Whether the umpire's award dated March 22, 1958 was liable to be set aside under Section 30 of the Arbitration Act, 1940 on grounds of misconstruction of contracts apparent on face of award, failure to consider relevant documents, excess of jurisdiction regarding certain claims and counter-claims, acting as conciliator on conjectures, awarding ground rent without evidence, and disproportionate costs.
Final Decision
The Supreme Court dismissed the appeal and upheld the High Court's judgment. All contentions raised by the appellant were rejected. The umpire's award was not set aside; no error apparent on the face of the award was found, the umpire acted within jurisdiction, his findings were based on evidence, and costs were not disproportionate.
Law Points
- Parties choosing their own arbitrator must accept award as final unless error apparent on face of award
- court cannot set aside arbitrator's mistake of law or fact unless it appears on face of award or in incorporated document
- mere general reference to contract in award not incorporation
- test is whether arbitrator came to finding on wording of contract
- answering legal point does not mean incorporation of documents
- clause 13 wide enough to cover counter-claims for compensation
- findings based on evidence not to be disturbed
- costs discretion not interfered unless unreasonable
