Case Note & Summary
The dispute arose from a construction contract for pumping stations and reservoirs at Kanpur between the appellant, Kanpur Nagar Mahapalika (formerly Municipal Board, Kanpur), and the respondent, M/s Narain Das Haribansh. The contract contained an arbitration clause. In 1946, the respondent filed a suit claiming a sum of Rs. 60,802-4-9 as balance due on final bills, interest, refund of security deposit, and interest thereon. The appellant applied under Section 34 of the Arbitration Act, 1940 for stay of the suit, which was granted on August 9, 1952. The respondent’s appeal against the stay was not pressed, and on November 4, 1957, the High Court directed the matter to be referred to arbitration. On May 17, 1958, the court appointed Shri A.K. Roy, Superintending Engineer, as arbitrator. The arbitrator made an award on March 8, 1960, in favour of the respondent for Rs. 42,772-2-9 on the final bill and Rs. 9,705 as refund of security deposit and interest. The appellant applied to set aside the award, alleging misconduct on the ground that the arbitrator did not properly consider that the claim was barred by limitation under Section 326 of the U.P. Act 2 of 1916, which prescribed a six-month limit for suits against municipalities. The trial court (Additional Civil Judge, Kanpur) set aside the award on May 31, 1960, holding that the arbitrator wrongly decided the limitation point. The High Court at Allahabad, on May 3, 1962, reversed the trial court’s decision, reasoning that even if the arbitrator decided against the shorter limitation period, it would not amount to an error of law apparent on the face of the award, as there were conflicting views on the applicable limitation. The appellant then appealed to the Supreme Court. The core legal issue was whether the arbitrator’s award disclosed an error of law on its face for not specifically addressing the limitation question. The appellant argued that the award was bad because the arbitrator should have dealt with the legal contention on limitation and that the error was apparent. The respondent supported the award, maintaining that it contained no erroneous legal proposition. The Supreme Court, relying on the test laid down in Champsey Bhara & Co. v. Jivraj Balloo Spinning and Weaving Co. Ltd., (1923) A.C. 480, as approved in Dr. S. Dutt v. University of Delhi, A.I.R. 1958 S.C. 1050, held that an error of law on the face of the award exists only if one can find in the award or an incorporated document some legal proposition which forms the basis of the award and which is erroneous. In the present case, the award did not set out any legal proposition on limitation or construe Section 326; hence, there was no error apparent. The Court further observed that an arbitrator is not required to separately deal with each issue; it suffices to give an award on the whole case. A mistake of law or fact, if not apparent on the face of the award, does not vitiate it. Consequently, the Supreme Court dismissed the appeal with costs, upholding the arbitrator’s award.
Headnote
A) Arbitration – Award – Error Apparent on Face – Whether Award Discloses Erroneous Legal Proposition – U.P. Municipalities Act, 1916 (U.P. Act 2 of 1916), Section 326; Arbitration Act, 1940 – The appellant challenged the award on the ground that the arbitrator misconducted himself by not properly considering the limitation bar; the Court examined the principle that an error of law on the face of the award exists only if some legal proposition forms the basis of the award and is erroneous. The award here contained no such proposition; it did not construe Section 326 or any legal principle. Held, that as no legal proposition could be identified as the basis of the award, there was no error apparent on its face. (Paras 30-31) B) Arbitration – Award – Duty of Arbitrator on Legal Contentions – Arbitration Act, 1940 – The appellant contended that the arbitrator should have specifically dealt with the question of limitation. The Court clarified that an arbitrator need not give a reasoned award or deal with each issue separately; it is sufficient to render an award on the whole case. A mistake of law or fact, if not appearing on the face of the award, does not vitiate the award. Held, that the award was not invalid for failing to separately address the limitation plea. (Para 31)
Issue of Consideration
Whether the arbitrator's award was liable to be set aside for an error of law apparent on its face due to non-consideration of the limitation bar under Section 326 of the U.P. Act 2 of 1916
Final Decision
The Supreme Court dismissed the appeal, finding that the award did not contain any legal proposition forming its basis; hence there was no error apparent on the face of the award. The Court held that an arbitrator need not deal with each issue separately, and a mistake not apparent on the face of the award does not vitiate it. The award was upheld with costs.
Law Points
- Legal points not extracted
- Error apparent on face of award requires some legal proposition forming basis of award which is erroneous
- Arbitrator need not separately deal with each issue
- Mistake of law or fact not fatal if not apparent on face of award
- Existence of general reference vs. specific reference of law to arbitration distinguished
