Case Note & Summary
The dispute arose from certain contracts between the Union of India and Bungo Steel Furniture Pvt. Ltd., which were referred to arbitration. The arbitrator made an award, and the Union of India sought to set it aside on two grounds: first, that the arbitrator committed an error in deducting a specific amount, relying on affidavits and statements made before the arbitrator; second, that the arbitrator had no jurisdiction to grant future interest from the date of the award until the date of decree. The Supreme Court examined these contentions under the law of arbitration. On the first ground, the Court held that an award may be set aside for an error of law apparent on its face only when the error appears in the award itself or in a document incorporated with it, and the error must be a legal proposition that forms the basis of the award. The Court emphasized that it has no jurisdiction to review the merits of the case or re-examine oral and documentary evidence to determine whether the arbitrator made a mistake. The appellant’s attempt to rely on affidavits and statements to establish the error was rejected. On the second ground, the Court ruled that the arbitrator had jurisdiction to grant interest for the period from the date of the award to the decree because all questions, including interest, were referred to the arbitrator. It is an implied term of the reference that the arbitrator will decide according to existing law, which includes the power to award interest. Consequently, the Supreme Court dismissed the appeal and upheld the arbitration award.
Headnote
A) Arbitration - Error of Law on Face of Award - Setting Aside Award - Arbitration Act, 1940 - The award can be set aside on ground of error of law on the face of the award only when in the award or attached document there is an erroneous legal proposition forming the basis of the award. The court has no jurisdiction to investigate merits by examining evidence. Held that the court cannot examine documentary and oral evidence to find if arbitrator committed error of law. (Paras 327 A-B) B) Arbitration - Interest - Arbitrator's Jurisdiction to Grant Future Interest - Code of Civil Procedure, 1908, Section 34 - All questions including interest were referred to arbitrator. Implied term that arbitrator decides according to law, thus has jurisdiction to grant interest from date of award to decree. Held that arbitrator can award future interest. (Paras 327 D-E)
Issue of Consideration
Whether the arbitrator committed an error of law apparent on the face of the award by deducting an amount; whether the arbitrator had jurisdiction to grant future interest from the date of award till the passing of the decree
Final Decision
Appeal dismissed. The award cannot be set aside as no error of law apparent on face of award, and arbitrator had jurisdiction to grant future interest.
Law Points
- error of law on face of award
- no jurisdiction to examine evidence
- arbitrator's power to award future interest
- implied term of reference to decide according to law
