Supreme Court Upholds Appellant in Arbitration Act Dispute — Consent Order and Acquiescence Confer Jurisdiction on Sole Arbitrator. Umpire's Award Upheld as Sole Arbitrator Had Jurisdiction Under Rule 4 of First Schedule to Arbitration Act, 1940 and Error of Law Not Apparent on Face of Award.

Arbitration dispute arising from a construction contract for a dam, involving a challenge to an arbitration award under the Arbitration Act, 1940.

The respondent Kerala State Electricity Board sought to set aside the umpire's award under Sections 16, 30 and 33 of the Arbitration Act, 1940, while the appellant contractor prayed for a decree in terms of the award.

Disputes arose between the contractor and the Board about non-execution of the work; five points were referred to arbitration; the umpire made an award in favour of the contractor for nearly Rs. 30 lakhs; the Board challenged the award on grounds of lack of jurisdiction and error apparent on the face of the record.

The trial court dismissed the Board's application to set aside the award and passed a decree in terms of the award. On appeal, the High Court held that the umpire as sole arbitrator had no jurisdiction and that the Board had insufficient opportunity to substantiate objections, thereby setting aside the award. The Supreme Court allowed the appeal and restored the trial court's decree.

Whether the umpire as sole arbitrator had jurisdiction to enter upon the reference and pass the award when the order revoking the arbitrators' authority and appointing the sole arbitrator was passed by consent of the parties Whether Rule 4 of the First Schedule to the Arbitration Act, 1940 authorised the umpire to enter upon the reference in case arbitrators failed to make an award within the specified time Whether the umpire's award allowing time-barred claims amounts to error apparent on the face of the record warranting setting aside under Sections 16, 30 and 33 of the Arbitration Act, 1940 Whether the High Court was justified in exercising suo motu revisional jurisdiction under Section 115 of the Code of Civil Procedure, 1908 to set aside the trial court order Whether the respondent had sufficient opportunity to substantiate its objections to the award

Appellant: The order in O.P. 11 of 1972 was by consent of parties; the consent given by counsel on both sides amounted to a fresh arbitration agreement, and therefore the umpire had jurisdiction. Appellant: The respondent Board participated in the proceedings before the umpire without protest, thereby estopped from challenging the umpire's authority by acquiescence and waiver. Appellant: After 18-12-1971 the arbitrators became functus officio, and Rule 4 of Schedule I to the Arbitration Act authorised the umpire to enter upon the reference; the court order merely carried out Rule 4. Appellant: The award was not reasoned, and the arbitrator was not bound to give reasons; the court cannot investigate into the merits or evidence to find error; the claims were not time-barred and the security deposit and retention amounts fell within the scope of reference. Respondent: The order revoking the arbitrators' authority was wholly outside the scope of Sections 5 and 11 of the Arbitration Act, 1940; the umpire's purported jurisdiction must be traced only to that invalid order. Respondent: The appellant's advocate had expressly given up all contentions of fact including the contention that the order was a consent order; the Board did not acquiesce in the proceedings and was not estopped. Respondent: No sufficient opportunity was given to the respondent to substantiate its objections to the award.

An umpire who enters upon the reference pursuant to a consent order and with participation of the parties without demur has jurisdiction to make an award; Rule 4 of the First Schedule to the Arbitration Act, 1940 independently authorises the umpire to enter upon the reference when arbitrators fail to make an award within the specified time. A sole arbitrator is not bound to give a reasoned award, and a mistake of law or fact is no ground for setting aside; an award can be set aside only when an erroneous legal proposition is stated in the award or in a document incorporated into it and forms the basis of the award.

Since the order was passed by the consent of the parties the Umpire had the jurisdiction. Even apart from the consent of the parties rule 4 in the First Schedule to the Arbitration Act authorities the Umpire to enter upon the reference in case arbitrators fail to make award within the time specified. The respondent is precluded from challenging the jurisdiction of the Umpire by acquiescence. It is only when a proposition of law is stated in the award and it is the basis of that award that is erroneous, can the award be set aside or remitted on the grounds of error of law apparent on the face of the record.

Disputes arose between the contractor and the Kerala State Electricity Board over non-execution of dam construction work; five points were referred to two arbitrators who appointed an umpire. The arbitrators failed to make an award within the original or extended time limits, the last extension expiring on 18 December 1971. The contractor filed O.P. 11 of 1972 to revoke the arbitrators' authority and direct the umpire to enter upon the reference, and also prayed to appoint the umpire as sole arbitrator. By order dated 22 June 1972, the trial court revoked the arbitrators' authority, directed the umpire to enter upon the reference, and appointed the umpire as sole arbitrator by consent of parties. Both parties participated in the arbitration without demur. The umpire made an award in favour of the contractor for nearly Rs. 30 lakhs. The Board filed an application under Sections 16, 30 and 33 of the Arbitration Act, 1940 to set aside the award, while the contractor sought a decree in terms of the award. The trial court dismissed the Board's application and passed a decree in terms of the award. On appeal by the Board, the High Court held that the umpire as sole arbitrator had no jurisdiction and that the Board had insufficient opportunity to substantiate objections, thereby setting aside the award. The contractor appealed by special leave to the Supreme Court, which allowed the appeal and restored the trial court's decree.

• Arbitration Act, 1940: Sections 5, 11, 12, 16, 30, 33; First Schedule Rule 4
• Indian Contract Act, 1872: Section 25
• Code of Civil Procedure, 1908 (CPC): Section 115