Case Note & Summary
This case involved a dispute arising from a building contract between the appellant, the Union of India, and the respondent, a contractor, concerning the construction of quarters at Kanpur. The contract contained an arbitration clause, and disputes were referred to an arbitrator. The arbitrator made an award directing the Union of India to pay a total sum of Rs. 1,07,631/5 to the respondent, comprising an admitted amount of Rs. 22,292/5, a sum of Rs. 6,000 for security deposit, and a sum of Rs. 79,339 representing the arbitrator’s determination of additional dues. The respondent applied to the trial court for modification and remission of the award, but the Second Civil Judge, Kanpur, dismissed the objections and pronounced judgment according to the award. On appeal by the Union of India under Section 39 of the Arbitration Act, 1940, the High Court of Allahabad set aside the award as vague and uncertain, holding that the arbitrator had not clearly distinguished the basis for the separate items and had not made separate awards for the twenty-nine disputed claims and counter-claims. The Union of India appealed to the Supreme Court. The Supreme Court examined whether the award suffered from patent ambiguity. The Court observed that the award on its face professed to be of and concerning all matters referred, and there was no evidence that it was unintelligible to the parties. Leaning in favour of certainty, the Court held that the first and third items were clear: the first represented the admitted sum and the third the additional sum found by the arbitrator. It was emphasized that an arbitrator is not bound to give an award on each point; he can make a lump sum award on the whole case, and an award combining an admitted sum and a lump sum for remaining claims is valid. Moreover, it must be presumed that the arbitrator took all claims and counter-claims into account. Regarding the second item of Rs. 6,000 for security deposit, the Court noted that this had been returned and was not in dispute, rendering that part of the award a mistake. However, the Court held that this portion was separable and could be struck out, and that the Union of India had suffered no injury from it, as it was to the respondent’s advantage. The Supreme Court therefore allowed the appeal, set aside the High Court’s order, and restored the award and decree of the trial court, reaffirming that the award was a final and certain determination of all disputes.
Headnote
A) Arbitration - Certainty of Award - Court leans towards construction that award is certain; prima facie good, burden on party challenging to show uncertainty - Arbitration Act, 1940 - The High Court set aside the award as vague and uncertain, but the Supreme Court held that on the face of it the award professed to be of all matters referred, and there was no evidence it was unintelligible to parties. Held, the award was a final and certain determination of all disputes. (Paras 590 G, 590 H) B) Arbitration - Arbitrator's Duty to Give Award on Each Point - An arbitrator is not bound to give an award on each point; he can make a lump sum award on the whole case unless the submission requires separate awards - Arbitration Act, 1940 - The arbitrator awarded a total sum made up of three items, including an admitted sum and a lump sum for remaining claims. Held, the arbitrator lawfully combined the admitted amount and a lump sum, and it must be presumed he considered all claims and counter claims. (Paras 591 C, D) C) Arbitration - Severability of Part of Award Based on Mistake - If part of the award is based on a mistake and is clearly separable, that part may be struck out without affecting the rest; a party cannot challenge an award if they suffered no injury from the error - Arbitration Act, 1940 - The award included Rs. 6,000 for security deposit which had been returned and was not in dispute; this part was a mistake. Held, that part was severable and could be struck out, and since it was to the advantage of the respondent, the appellant suffered no injury. (Para 591 F) D) Arbitration - Finality of Award - A lump sum award in favour of a party professing to be of all matters referred raises a presumption that the arbitrator considered all claims and counter-claims - Arbitration Act, 1940 - The arbitrator's award of Rs. 1,07,631/5 recited being of and concerning all matters referred. Held, it must be presumed all claims and counter-claims were considered, making the award final and certain. (Paras 591 C, D)
Issue of Consideration
Whether the arbitration award was vague and uncertain and thus liable to be set aside under the Arbitration Act, 1940.
Final Decision
The Supreme Court allowed the appeal, set aside the High Court order, and restored the award and decree of the trial court, holding that the award was a final and certain determination of all disputes, and that the part of the award relating to Rs. 6,000 security deposit, being a mistake and separable, could be struck out.
Law Points
- Legal points not extracted
- Arbitrator is not bound to give an award on each point
- Court leans towards the construction that the award is certain
- An arbitrator may award one sum generally in respect of all money claims unless submission requires separate awards
- Arbitrator can make an award of a sum admitted to be due and a lump sum in respect of the remaining claim
- Part of award based on mistake may be struck out if separable
- Award cannot be set aside at instance of party who suffered no injury
