Gujarat High Court
District Manager, Food Corporation Of … vs B M Samani on 1 May, 2026
NEUTRAL CITATION
C/FA/7110/1998 CAV JUDGMENT DATED: 01/05/2026
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Reserved On :-
Pronounced On : 01/05/2026
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO. 7110 of 1998
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE J. C. DOSHI
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Approved for Reporting Yes No
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DISTRICT MANAGER, FOOD CORPORATION OF INDIA & ANR.
Versus
B M SAMANI . & ANR.
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Appearance:
MR NIRAD D BUCH(4000) for the Appellants
MR MITUL SHELAT, SR. ADVOCATE with MR PRERAK P OZA(8279) for the
Respondent No.1
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CORAM:HONOURABLE MR. JUSTICE J. C. DOSHI
CAV JUDGMENT
1. The present appeal is preferred under Section 39 of the
Arbitration Act, 1940 (in short “the Act”), calling in question
the legality and validity of the common judgment and order
dated 5.12.1992 passed in CMA No. 69 of 1991 and CMA No.
132 of 1991, whereby CMA No. 132 of 1991 filed by the
appellant – Food Corporation of India was dismissed, and CMA
No. 69 of 1991 filed by the contractor was allowed, directing
the award dated 18.3.1991 passed by the learned Arbitrator
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to be made as rule of the court and registered as a decree
with interest at the rate of 18% per annum from the date of
the award till realisation, along with costs. Thereby, the
application filed under Sections 30 and 33 of the Act was
rejected and the award dated 18.3.1991 was upheld.
2. Brief facts leading to filing of present First Appeal are as
under:-
2.1 The appellant, Food Corporation of India, had awarded
stevedoring, clearing, handling and transport contract to the
respondent contractor M/s B.M. Samani for a period of two
years between 25.8.1980 and 24.8.1982. Disputes having
arisen between the parties, the FCI filed an application under
Section 20 of the Act for appointment of an Arbitrator, being
CMA No. 170 of 1984, which was allowed vide order dated
13.7.1989 by the learned Civil Judge, (SD), Jamnagar. The
learned trial court directed that the Managing Director of the
FCI shall appoint an Arbitrator within four months from the
date of the order, and that the Arbitrator so appointed shall
proceed in accordance with the terms and conditions of the
agreement and resolve the dispute as per clause 20 of the
agreement. Pursuant to the said order, the Managing Director
of the FCI appointed Mr. R.K. Gupta as Arbitrator to resolve
the disputes between the parties.
2.2 Since Mr. R.K. Gupta could not publish the award within
the stipulated time i.e. within two months from the date of the
award, the FCI filed CMA No. 127 of 1990 under Section 20 ofPage 2 of 34
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the Act seeking extension of time for the arbitration
proceedings. Simultaneously, contractor M/s B.M. Samani
preferred CMA No. 111 of 1990 under Sections 5 and 12 of
the Act seeking revocation of the authority of the Arbitrator.
Subsequently, Mr. R.K. Gupta resigned from his position as
Arbitrator, and the FCI thereafter appointed Mr. Shiv
Prakash, Additional Legal Advisor, Ministry of Law, New
Delhi, as Arbitrator for resolution of the dispute. After
conducting the arbitration proceedings and issuing notice
under Section 14(1) of the Act, Arbitrator Mr. Shiv Prakash
published the award of 18.3.1991.
2.3 Thereafter, contractor M/s B.M. Samani filed CMA No.
69 of 1991 directing the FCI to file the original award along
with depositions so as to make the award as rule of the court.
As against the said application, the FCI filed CMA No. 132 of
1991 seeking to set aside the award published by the
Arbitrator. The impugned order records dismissal of the FCI’s
application and allowance of the contractor’s CMA, being
aggrieved by which the FCI has preferred the present first
appeal.
2.4 Before the learned Arbitrator, contractor M/s B.M.
Samani had filed following claims:-
“I. Claim of Rs 44,015.93 towards amount illegally
withheld/deducted from the bills.
II. Claim of Rs 15,78,681.68 towards dispatch money
earned on account of early release of 11 vessels
during the contract period.
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III. Claim for release of Bank Guarantee of Rs
45,000/- furnished as security depositIV. Claim for interest at the rate of 18% on claimed
amount.
V. Claim for legal expenses of Rs 2000/-.”
2.5 Against the aforesaid claims, the FCI had filed following
counter claims:-
“I. Counter Claim No.1 for Rs 64,931.25 as per para 7
of the CCII. Counter Claim No.2 for Rs 1,92,413.86 toward
destination shortagesIII. Counter Claim No.3 for adjustment of Rs.45,000
bank guarantee against the above two claimsIV. Counter Claim No.4 towards interest.”
2.6 The Arbitrator allowed Claim No. 1 of the contractor
pertaining to illegal deduction of Rs.44,015.93; Claim No. 2 to
the extent of granting benefit of dispatch money amounting to
Rs. 13,65,352.52, and Claims No. 3 and 5 were also allowed,
however, interest was disallowed.
2.7 As regards the counter claims of the FCI, Counter Claim
No. 1 was allowed to the extent of Rs. 6,40,931.35, Counter
Claim No. 2 to the extent of Rs. 1,92,413.86, and an
adjustment of Rs. 45000/- was granted in favour of the
claimant against encashment of counter claims No. 1 and 2
and disallowed counter claim No.4 towards interest.
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2.8 It is in aforesaid background that the FCI, being
aggrieved by the allowance of the contractor’s claims by the
Arbitrator, has preferred the present first appeal.
3. Learned Advocate Mr. Nirad Buch appearing for the FCI
and learned Senior Counsel Mr. Mitul Shelat appearing for
the contractor have filed their respective written submissions,
both of which are taken on record.
4. Submissions of learned advocate Mr.Nirad Buch in short
are as under:-
That an Arbitrator or umpire has misconducted himself or
the proceedings;
That an award has been made after the issue of an order
by the Court superseding the arbitration or after
arbitration proceedings have become invalid under
section 35;
That an award has been improperly procured or is
otherwise invalid.
That the learned Arbitrator has transgressed the
jurisdiction and the agreement.
That the learned Arbitrator has committed a material
impropriety and a legal misconduct and grievous favor to
the contractor.
That no clause in the agreement entitles the contractor to
get dispatch money. P. 26 of the Agreement (Clause I,
Part XX-I, Part I).
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That even as per the custom, practice and rules of
business, the contractor was not entitled, for claim of
dispatch money.
That dispatch money stems from Charter Party agreement
between the FCI and the charterer, in which the
Contractor is not a party and thus, cannot validly claim
the dispatch money.
That dispatch money was in fact Rs. 12,99,923.62, but
calculated at Rs. 15,78,681.68.
That the claim was Rs. 15,78,681.68; The learned
Arbitrator awarded Rs. 13,65,352.52 and although the
Contractor did not challenge it, the learned court
increased it to Rs. 15,78,681.68.The learned Arbitrator
refused to award interest to the Contractor, and the court
allowed it without challenge by the contractor.
That the learned Arbitrator passed the award in
ignorance of material evidence and decides the matter
not in accordance with the terms of the contract and has
construed the contract in unreasonable manner.
That it is well-settled that Arbitrator is the creature of
contract executed between the parties and thereby, the
Arbitrator cannot ignore the terms of the contract.
Consistent view is prevailing that if the learned Arbitrator
does not adhere to or disregard the terms of the contract,
it would amount to a jurisdictional error and the Court
can therefore, interfere with the award.
That it was incumbent upon the learned civil court to
examine as to whether the Arbitrator had acted in excess
of his jurisdiction, by disregarding the terms of referencePage 6 of 34
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or the arbitration agreement or the terms of contract,
which would indeed be a jurisdictional error in rendering
the award.
That a deliberate departure or conscious disregard of the
contract would have resulted in not only manifesting the
disregarding of his authority by the Arbitrator or
misconduct on his part, but also tantamount to mala fide
action/patent illegality. The Arbitrator could not have
acted arbitrarily, irrationally, independently or
capriciously of the contract even under the old regime of
Arbitration Act. In a case where the Arbitrator acted
beyond his jurisdiction, interference by the Court in
setting aside the award was permissible.
4.1 Mainly upon above submissions, learned advocate Mr.
Buch seeks to allow this appeal and to quash and set aside the
impugned award.
4.2 In support of his submission, learned advocate Mr. Buch
has relied upon following authorities:-
1. P. C. Snehal Construction Co. Versus Municipal
Corporation of Ahmedabad – First Appeal No. 617 of
2005 (Para 37)
2. S.D.Shinde Tr. Partner Versus Govt. Of Maharashtra
2023 (0) AIR(SC) 4174 (Para 24)
3. Rajasthan State Mines & Minerals Ltd. (1999) 9 SCC
283 [para 25-29 & 31 to 44]
4. National Buildings Construction Corporation Limited
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Versus U.P. State Bridge Corporation Ltd
(FA/2359/2010) – Para 57 to 71.
5. Amratlal B. Tank vs. Surat Municipal Corporation (2012
(2) GLH 15)
6. M/s. Cochin Shipyard Ltd. (2015) 10 SCR 994 (Para 10,
12, 16, 18)
5. Learned senior Counsel Mr. Mitul Shelat assisted by
learned advocate Mr. Prerak Oza for the respondent No.1, as
against the aforesaid submissions, would mainly submit that
scope of review under Section 39 is extremely circumspect
and it does not permit a re-appreciation of evidence or
substitution of the Arbitrator’s findings on merits.
Interference is only for patent misconduct. He would further
submit that in the case on hand, the Arbitrator is appointed
by the Appellant. He would further submit that in the present
case, the appellant has firstly appointed Mr.RK Gupta and
then Mr. Shiv Prakash, Additional Legal Advisor, Ministry of
Law, New Delhi as Arbitrator. He would further submit that
considering the impugned order, whereby the learned
Arbitrator allowed the claim as well as counterclaim leaves no
room for alleging any bias or misconduct on the proceedings.
He would further submit that this impugned award
demonstrates that while passing the award, the learned
Arbitrator has applied his mind. He would further submit
that the learned civil Court while making the award as as rule
of the court confirmed the findings of the learned Arbitrator
which infers that there is no misconduct of the proceedings.
He would further submit that the appellant failed to establish
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any ground, which would warrant interference with the
impugned award.
5.1 In support of his submission, learned Senior Counsel Mr.
Shelat has relied upon following authorities.
1. State of Gujarat, Executive Engineer vs. Nitin
Construction & Co., First Appeal No.692 of 1990
2. BB Yadav through legal heirs and others Vs. Food
Corporation of India and another, 2025 SCC Online Guj
2085
3. Food Corporation of India Vs. Harish Transport
Corporation, 2007 AIJEL Hon’ble Court 219527
5.2 In addition to above arguments, learned senior Counsel
Mr. Shelat would submit that the main dispute between the
parties about passing of dispatched money received by the
FCI under the chartered agreement to the contractor. He
would further submit that the learned Arbitrator recorded the
finding on fact that since the liability of demurrage arising
under the chartered agreement is passed upon the contractor
in converse benefit of receiving of dispatched money for doing
the work earlier than the stipulated time period has to be
passed to the contractor. This is prevailing commercial
practice, which has been rightly observed by the learned
Arbitrator and confirmed by the learned civil Court.
Therefore, he would submit that the reasoning demonstrates
that the Arbitrator’s view was not only plausible but also
aligned with equity and fairness. He would further submit
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that the tone and tenor of the award passed by the learned
Arbitrator, whereby he has allowed the claim and
counterclaim and disallowed the appellant’s claim and
counterclaim, demonstrate that the learned Arbitrator has not
misconducted himself or misconducted the proceedings, as
impugned award suffers from any legal flow. He would
further submit that looking to this aspect, it cannot be said
that the award passed by the learned Arbitrator is contrary
and the decision confirming the same passed by the learned
civil Court is erroneously illegal. He would further submit
that application of mind of the learned Arbitrator would be
seen as he has noted minor discrepancies and miscalculation
in the claim and thereby, he has acted in the best interest of
both the parties. Such award being on fact, full of reasons
and application of mind cannot be said to be non-speaking
award.
5.3 In light of the aforesaid argument, learned senior
Counsel Mr. Shelat would submit that this Court u/s 39 of the
Act should not examine sufficiency of the correctness of the
fact and reasoning nor can it attempt to reconstruct the
reasoning process of the Arbitrator.
5.4 In support of his submission, learned senior Counsel Mr.
Shelat has referred to and relied upon the judgment in case of
Atlanta Limited through its Managing Director vs.
Union of India represented by Chief Engineer, Military
Engineering Service, (2022) 3 SCC 739 and in case of
Nitin Construction (supra) and in case of Administrator
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of the Specified Undertaking of the Unit Trust of India
and another Vs. Garware Polyester Ltd., 2005(10) SCC
682.
5.5 With the aforesaid submissions, learned senior Counsel
Mr. Shelat prays to dismiss the petition.
6. Having heard the learned advocates for both parties and
having gone through the facts, circumstances, record and
proceedings of the case, as well as the authorities cited at bar,
this Court proceeds to decide the matter. Before adverting to
the rival submissions of the contesting parties, worthy
reference is taken from the Division Bench judgment of this
Court in the case of Nitin Construction (supra), wherein
the Division Bench analysed the scope of interference in an
arbitral award in the context of the prevailing position of law.
The relevant paragraphs 13, 14, 15, 16 and 17 of the said
judgment are reproduced as under:-
“13. Analysis :-
[As regards the award of an arbitrator under
the Act, the law is well settled that the
Arbitrator’s adjudication is generally considered
binding between the parties for he is a Tribunal
selected by the parties and the power of the
Court to set aside the award is restricted to
cases set out in Sec. 30 of the Act, viz. (a) if the
Arbitrator has misconducted himself or the
proceedings; or (b) when the award has been
made after the issue of an order by the Court
superseding the arbitration or after arbitration
proceedings have become invalid under Sec. 35;
or (c) when the award has been improperlyPage 11 of 34
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produced or is otherwise invalid.]
14. Under clause (c) of Sec. 30, the Court can set
aside the award which suffers from an error on the
face of the award. It is, however, not open to the
Court to speculate, where no reasons are given by
the Arbitrator, as to what impelled the Arbitrator to
arrive at his conclusion. The jurisdiction of the
Arbitrator is limited by the reference and if the
Arbitrator has assumed jurisdiction not possessed by
him, the award to the extent to which it is beyond the
Arbitrator’s jurisdiction, would be invalid and liable
to be set aside. This position of law has been well
settled by the Constitution Bench of the Supreme
Court in Raipur Development Authority V/s.
Chokhamal Contractors and ors., reported in 1989
(2) SCC 721. In Raipur Development Authority
(supra) it has been held that an Arbitrator or umpire
is under no obligation to give reasons in support of
the decision reached by him unless under the
arbitration agreement or the deed of submission he
is required to give such reasons, and if the Arbitrator
or umpire chooses to give reasons in support of his
decision it is open to the Court to set aside the award
if it finds that an error of law has been committed by
the arbitrator or umpire on the face of the record on
going through such reasons, and an award can
neither be remitted nor set aside merely on the
ground that it does not contain reasons in support of
the conclusion or decisions reached in it except
where the arbitral agreement or the deed by
submission requires him to give reasons.
15. The position of law as aforesaid answers one of
the main contentions of the appellant that the
Arbitrator has failed to assign reasons while passing
the award. As a matter of fact, on perusal of the
award we find that the arbitrator in his own way has
assigned reasons and we are convinced by the
reasons assigned by the Arbitrator.
16. The scope and extent of examination by the
Court of an award made by the Arbitrator has been
laid down in various decisions. We may profitably
quote decision of the Supreme Court in the case of
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Guj. Water Supply & Sewerage Board V/s. Unique
Erectors (Gujarat) (P) Ltd., reported in AIR 1989 SC
972, wherein the Bench held in para 9 as under :-
[“It has to be noted that there is a trend in
modern times that reasons should be stated in
the award though the question whether the
reasons are necessary in ordinary arbitration
awards between the parties is pending
adjudication by the Constitution bench of this
Court. Even,however, if it be held that it is
obligatory for the arbitratorto state reasons, it
is not obligatory to give any detailed judgment.
An award of an arbitrator should be read
reasonably as a whole to find out the
implication and the meaning thereof Short
intelligible indications of the grounds should be
discernible to find out the mind of the arbitrator
for his action even if it be enjoined that in all
cases of award by any arbitrator reasons have
to be stated. The reasons should not only be
intelligible but should also deal either expressly
or impliedly with the substantial points that
have been raised. Even in a case where the
arbitrator has to state reasons, the sufficiency
of the reasons depends upon the facts and the
circumstances of the case. The Court, however,
does not sit in appeal over the award and
review the reasons. The Court can set aside the
award only if it is apparent from the award that
there is no evidence to support the conclusion
or if the award is based upon any legal
proposition which is erroneous. See the
observations of this Court in Indian Oil
Corporation Ltd. V/s. Indian Carbon Ltd.[1988]
3 SCC 36.]
[In M.CD. V/s. M/s. JaganNath Ashok Kumar,
reported in (1987) 4 SCC 497, the Supreme
Court observed thus :-]
[“In this case, there was no violation of any
principles of natural justice. It is not a case
where the arbitrator has refused cogent and
material factors to be taken into consideration.
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The award cannot be said to be vitiated by non-
reception of material or non-consideration of
the relevant aspects of the matter.
Appraisement of evidence by the arbitrator is
ordinarily never a matter which the Court
questions and considers. The parties have
selected their own forum and the deciding
forum must be conceded the power of
appraisement of the evidence. In the instant
case, there was no evidence of violation of any
principle of natural justice.]
[The arbitrator in our opinion is the sole judge
of the quality as well as quantity of evidence
and it will not be for this Court to take upon
itself the task of being a judge of the evidence
before the arbitrator. It may be possible that on
the same evidence the Court might have arrived
at a different conclusion than the one arrived at
by the arbitrator but that by itself is no ground
in our view for setting aside the award of an
arbitrator.”]
[The Supreme Court further concluded:-]
[“After all an arbitrator as a judge in the words
of Benjamin N. Cardozo, has to exercise a
discretion informed by tradition, methodized by
analogy, disciplined by system, and
subordinated to “the primordial necessity of
order in the social life”.]
[In P. M. Paul V/s. Union of India, reported in
(1989) Supp 1 SCC 368, the Supreme Court
held as under :-]
[“It was submitted that if the contract work was
not completed within the stipulated time which
it appears was not done then the contractor has
got a right to ask for extension of time, and he
could claim difference in price. This is precisely
what he has done and has obtained a portion of
the claim in the award. It was submitted on
behalf of the Union of India that failure to
complete the contract was not the case. Hence,
there was no substance in the objections raised.
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Furthermore, in the objections raised, it must
be within the time provided for the application
under Sec. 30 i.e., 30 days during which the
objection was not specifically taken, we are of
the opinion that there is no substance in this
objection sought to be raised in opposition to
the award. Once it was found that the arbitrator
had jurisdiction to find that there was delay in
execution of the contract due to the conduct of
the respondent, the respondent was liable for
the consequences of the delay, namely, increase
in prices. Therefore, the arbitrator had
jurisdiction to go into this question. He has
gone into that question and has awarded as he
did.”]
[In one of the recent pronouncements of the
Supreme Court in the case of Ravindra Kumar
Gupta and Company v. Union of India, reported
in (2010) 1 SCC 409, the Supreme Court has
considered the law with regard to the scope and
ambit of the jurisdiction of the Courts to
interfere with an arbitration award after taking
note of catena of judgments. The relevant
paragraphs are quoted below :-]
[9. The law with regard to scope and ambit of
the jurisdiction of the Courts to interfere with
an arbitration award has been settled in a
catena of judgments of this Court. We may
make a reference here only to some of the
judgments. In the case of State of Rajasthan
V/s. Puri Construction Company Ltd. 1994 (6)
SCC 485 : (1994 AIR SCW 5061), this Court
observed as follows :-]
[“The arbitrator is the final arbiter for the
dispute between the parties and it is not open
to challenge the award on the ground that the
arbitrator has drawn his own conclusion or has
failed to appreciate the facts. In Sudarsan
Trading Co. V/s. Govt. of Kerala, 1989 Ind law
SC 463 : (AIR 1989 SC 890) it has been held by
this Court that there is a distinction between
disputes as to the jurisdiction of the arbitrator
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and the disputes as to in what way that
jurisdiction should be exercised. There may be
a conflict as to the power of the arbitrator to
grant a particular remedy. One has to
determine the distinction between an error
within the jurisdiction and an error in excess of
the jurisdiction. Court cannot substitute its own
evaluation of the conclusion of law or fact to
come to the conclusion that the arbitrator had
acted contrary to the bargain between the
parties. Whether a particular amount was liable
to be paid is a decision within the competency
of the arbitrator. By purporting to construe the
contract the Court cannot take upon itself the
burden of saying that this was contrary to the
contract and as such beyond jurisdiction. If on a
view taken of a contract, the decision of the
arbitrator on certain amounts awarded is a
possible view though perhaps not the only
correct view, the award cannot be examined by
the Court. Where the reasons have been given
by the arbitrator in making the award the Court
cannot examine the reasonableness of the
reasons. If the parties have selected their awn
forum, the deciding forum must be conceded
the power of appraisement of evidence. The
arbitrator is the sole judge of the quality as well
as the quantity of evidence and it will not be for
the Court to take upon itself the task of being a
judge on the evidence before the arbitrator.]
[In the case of Municipal Corpn. of Delhi v.
Jagan Nath Ashok Kumar, 1987 (4) SCC 497 :
(AIR 1987 SC 2316), it has been held by this
Court that appraisement of evidence by the
arbitrator is ordinarily never a matter which the
Court questions and considers. It may be
possible that on the same evidence the Court
may arrive at a different conclusion than the
one arrived at by the arbitrator but that by
itself is no ground for setting aside the award.
It has also been held in the said decision that it
is difficult to give an exact definition of the
word ‘reasonable’. Reason varies in itsPage 16 of 34
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conclusions according to the idiosyncrasies of
the individual and the time and circumstances
in which thinks. In cases not covered by
Authority, the verdict of a jury or the decision of
a judge sitting as a jury usually determines
what is ‘reasonable’ in each particular case is
The word reasonable has in law prima facie
meaning of reasonable in regard to those
circumstances of which the actor, called on to
act reasonably knows or ought to know. An
arbitrator acting as a judge has to exercise a
discretion informed by tradition, methodized by
analogy disciplined by system and subordinated
to the primordial necessity or order in the social
life. Therefore, where reasons germane and
relevant for the arbitrator to hold in the manner
he did, have been indicated, it cannot be said
that the reasons are unreasonable.”]
[10. In the case of Arosan Enterprises Ltd. v.
Union of India, 1999 (9) SCC 449 : (1999 AIR
SCW 3872), this Court upon analysis of
numerous earlier 35 decisions, held as
follows :-]
[“36. Be it noted that by reasons of a long
catena of cases, it is now a well-settled
principle of law that reappraisal of evidence by
the Court is not permissible and as a matter of
fact exercise of power by the Court to
reappraise the evidence is unknown to
proceedings under Sec. 30 of the Arbitration
Act. In the event of there being no reasons in
the award, question of interference of the Court
would not arise at all. In the event, however,
there are reasons, the interference would still
be, not available within the jurisdiction of the
Court unless of course, there exist a total
perversity in the award or the judgment is
based on a wrong proposition of law. In the
event however two views are possible on a
question of law as well, the Court would not be
justified in interfering with the award.]
[37. The common phraseology “error apparentPage 17 of 34
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on the face of the record” does not itself,
however, mean and imply closer scrutiny of the
merits of documents and materials on record.
The Court as a matter of fact cannot substitute
its evaluation and come to the conclusion that
the arbitrator had acted contrary to the bargain
between the parties. If the view of the,
arbitrator is a possible view the award or the
reasoning contained therein cannot be
examined.”]
[11. This view has been reiterated by this Court
in the case of Oil and Natural Gas Corporation
Ltd. V/s. SAW Pipes Ltd. 2003 AIR SCW 3041 :-]
[“53. In the light of the aforesaid decisions, in
our view, there is much force in the contention
raised by the learned Counsel for the appellant.
However, the learned senior Counsel Mr. Dave
submitted that even if the award passed by the
arbitral Tribunal is erroneous, it is settled law
that when two views are possible with regard to
interpretation of statutory provisions and or
facts, the Court would refuse to interfere with
such award.]
[54. It is true that if the arbitral Tribunal has
committed mere error of fact law in reaching its
conclusion on the disputed question submitted
to it for adjudication then the Court would have
no jurisdiction to interfere with the award. But,
this would depend upon reference made to the
arbitrator : (a) if there is a general reference for
deciding the contractual dispute between the
parties and if the award is based on erroneous
legal proposition, the Court could interfere; (b)
It is also settled law that in a case of reasoned
award, the Court can set aside the same if it is,
on the face of it, erroneous on the provision of
law or its application; (c) If a specific question
of law is submitted to the arbitrator, erroneous
decision in point of law does not make the
award bad, so as to permit of its being set
aside, unless the Court is satisfied that the
arbitrator had proceeded illegally.”]Page 18 of 34
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[12. In the M/s. Kwality Manufacturing
Corporation V/s. Central Warehousing
Corporation it was held :-]
[“10. At the outset, it should be noted that the
scope of interference by Courts in regard to
arbitral awards is limited. A Court considering
an application under Sec. 30 or 33 of the Act,
does not sit in appeal over the findings and
decision of the arbitrator. Nor can it re-assess
or re-appreciate evidence or examine the
sufficiency or otherwise of the evidence. The
award of the arbitrator is final and the only
grounds on which it can be challenged are
those mentioned in Secs. 30 and 33 of the Act.
Therefore, on the contentions urged, the only
question that arose for consideration before the
High Court was, whether there was any error
apparent on the face of the award and whether
the arbitrator misconducted himself or the
proceedings.”]
[13. Again it is reiterated in the judgment of
Madhya Pradesh Housing Board v. Progressive
Writers and Publishers (2009) 5 SCC 678 :
(2009 AIR SCW 2484) as follows :-]
[“28. The finding arrived at by the arbitrator in
this regard is not even challenged by the Board
in the proceedings initiated by it under Sec. 30
of the Act. It is fairly well settled and needs no
restatement that the award of the arbitrator is
ordinarily final and the Courts hearing
applications under Sec. 30 of the Act do not
exercise any appellate jurisdiction. Reappraisal
of evidence by the Court is impermissible.”]
[14. In this case, the Supreme Court notice the
earlier judgment in the case of Ispat
Engineering and Foundry Works, B.S. City,
Bokaro V/s. Steel Authority of India, B.S. City,
Bokaro [(2001) 6 SCC 3471 : (2007 AIR SCW
2723) wherein it was held as follows :-]
[“4. Needless to record that there exists a long
catena of cases through which the law seems toPage 19 of 34
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be rather well settled that the reappraisal of
evidence by the Court is not permissible. This
Court in one of its latest decisions [Arosan
Enterprises Ltd. V/s. Union of India (1999) 9
SCC 449 : (W99 AIR SCW 3872)] upon
consideration of decisions in Champsey Bhara
and Co. v. Jivraj Balloo Spg. and Wvg. Co. Ltd.
[AIR 1923 PC 66], Union of India v.. Bungo
Steel Furniture (P) Ltd. [(1967) 1 SCR 324] :
(AIR 1967 SC 1032) N.Chellappan V/s. Secy.,
Kerala SEB [(1975) 1 SCC 289] : (AIR 1975 SC
230), Sudarshan Trading Co. V/s. Govt.of Kerala
[(1989) 2 SCC 38], State of Rajasthan v. Puri
Construction Co.Ltd. [(1994) 6 SCC 485] :
(1994 AIR SCW 5061) as also in Olympus
Superstructures (P) Ltd. V/s. Meena Vijay
Khetan [(1999) 5 SCC 651]: (1999 AIR SCW
1831) has stated that reappraisal of evidence by
the Court is not permissible and as a matter of
fact, exercise of power to reappraise the
evidence is unknown to a proceeding under
Sec. 30 of the Arbitration Act, 1940 . This Court
in Arosan Enterprises. categorically stated that
in the event of there being no reason in the
award, question of interference of the Court
would not arise at all. In the event, however,
there are reasons, interference would still be
not available unless of course, there exist a
total perversity in the award or the judgment is
based on a wrong proposition of law. This Court
went on to record that in the event, however,
two views are possible on a question of law, the
Court would not be justified in interfering with
the award of the arbitrator if the view taken
recourse to is a possible view. The observations
of Lord Dunedin in Champsey Bhara stand
accepted and adopted by this Court in Bungo
Steel Furniture to the effect that the Court had
no jurisdiction to investigate into the merits of
the case or to examine the documentary and
oral evidence in the record for the purposes of
finding out whether or not the arbitrator has
committed an error of law. The Court as aPage 20 of 34
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matter of fact, cannot substitute its own
evaluation and come to the conclusion that the
arbitrator had acted contrary to the bargain
between the parties.”]
17. From the various decisions referred to above, it
could safely be stated that :-
[(a) In the award, the arbitrator is not required
to give reasons in detail.]
[(b) The award can be set aside only on the
ground of error of law on the face of it, i.e. to
say, if the award is based upon any legal
proposition which is erroneous.]
[(c) The Civil Court has no jurisdiction to sit in
appeal over the award and review the reasons
assigned by the arbitrator and the award
cannot be set aside merely because by process
of inference and arguments it could be
demonstrated that the arbitrator has committed
some mistake in arriving at his conclusion.]
[(d) The award cannot be interfered with even
in the case where on an interpretation of any
contract or documents, two views are plausible
and the arbitrator accepts one view while the
other view is more appealing to the Court.]
[(e) The award can be set aside by the Civil
Court if the arbitrator has misconducted
himself or the arbitrator has acted contrary to
or gone beyond the terms of the reference.]”
7. In the case of Atlanta Limited (supra), the Hon’ble
Apex Court held that once an Arbitrator has interpreted the
clauses of a contract by taking a possible view and has gone
to great lengths to analyze several reasons offered by the
appellant-claimant to justify its plea for extension of time to
execute the contract, the High Court, exercising jurisdiction
under Section 39 of the Act, ought not to have sat over thePage 21 of 34
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said decision as an appellate court seeking to substitute its
own view for that of the Arbitrator. The relevant paragraphs
are 19 to 22 of the said judgment, which read as under:-
“19. It is also a well-settled principle of law that
challenge cannot be laid to the Award only on the
ground that the Arbitrator has drawn his own
conclusion or failed to appreciate the relevant facts.
Nor can the Court substitute its own view on the
conclusion of law or facts as against those drawn by
the Arbitrator, as if it is sitting in appeal. This aspect
has been highlighted in State of Rajasthan v. Puri
Construction Co. Ltd. And Another, (1994) 6 SCC 485
where it has been observed thus:
“26. The arbitrator is the final arbiter for the
dispute between the parties and it is not open to
challenge the award on the ground that the
arbitrator has drawn his own conclusion or has
failed to appreciate the facts. In Sudarsan
Trading Co. v. State of Kerala [Sudarsan Trading
Co. v. State of Kerala, (1989) 2 SCC 38] it has
been held by this Court that there is a distinction
between disputes as to the jurisdiction of the
arbitrator and the disputes as to in what way
that jurisdiction should be exercised. There may
be a conflict as to the power of the arbitrator to
grant a particular remedy. One has to determine
the distinction between an error within the
jurisdiction and an error in excess of the
jurisdiction. Court cannot substitute its own
evaluation of the conclusion of law or fact to
come to the conclusion that the arbitrator had
acted contrary to the bargain between the
parties. Whether a particular amount was liable
to be paid is a decision within the competency of
the arbitrator. By purporting to construe the
contract the court cannot take upon itself the
burden of saying that this was contrary to the
contract and as such beyond jurisdiction. If on a
view taken of a contract, the decision of the
arbitrator on certain amounts awarded is aPage 22 of 34
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possible view though perhaps not the only
correct view, the award cannot be examined by
the court. Where the reasons have been given by
the arbitrator in making the award the court
cannot examine the reasonableness of the
reasons. If the parties have selected their own
forum, the deciding forum must be conceded the
power of appraisement of evidence. The
arbitrator is the sole judge of the quality as well
as the quantity of evidence and it will not be for
the court to take upon itself the task of being a
Judge on the evidence before the arbitrator.”
[emphasis added]
20. As long as the Arbitrator has taken a possible
view, which may be a plausible view, simply because a
different view from that taken in the Award, is
possible based on the same evidence, would also not
be a ground to interfere in the Award. In Arosan
Enterprises Ltd. v. Union of India and Another, (1999)
9 SCC 449 this Court has held as follows:
“36. Be it noted that by reason of a long catena
of cases, it is now a well-settled principle of law
that reappraisal of evidence by the court is not
permissible and as a matter of fact exercise of
power by the court to reappraise the evidence is
unknown to proceedings under Section 30 of the
Arbitration Act. In the event of there being no
reasons in the award, question of interference of
the court would not arise at all. In the event,
however, there are reasons, the interference
would still be not available within the
jurisdiction of the court unless of course, there
exist a total perversity in the award or the
judgment is based on a wrong proposition of law.
In the event however two views are possible on a
question of law as well, the court would not be
justified in interfering with the award.”
(Also refer Municipal Corporation of Delhi v. Jagan
Nath Ashok Kumar and Another, (1987) 4 SCC 497)
21. In Rajasthan State Mines & Minerals Ltd. (supra),
relied on by the respondent – Union of India, on a
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conspectus of the case law relating to an Award made
under the Arbitration Act, 1940 and the scope of
interference by courts in such an arbitral Award, the
legal position was summarized by the court in the
following words :
“44. From the resume of the aforesaid decisions,
it can be stated that:
(a) it is not open to the court to speculate, where
no reasons are given by the arbitrator, as to
what impelled arbitrator to arrive at his
conclusion.
(b) It is not open to the court to admit to probe
the mental process by which the arbitrator has
reached his conclusion where it is not disclosed
by the terms of the Award.
(c) If the arbitrator has committed a mere error
of fact or law in reaching his conclusion on the
disputed question submitted for his adjudication
then the Court cannot interfere.
(d) If no specific question of law is referred, the
decision of the arbitrator on that question is not
final, however much it may be within his
jurisdiction and indeed essential for him to
decide the question incidentally. In a case where
specific question of law touching upon the
jurisdiction of the arbitrator was referred for the
decision of the arbitrator by the parties, then the
finding of the arbitrator on the said question
between the parties may be binding.
(e) In a case of non-speaking Award, the
jurisdiction of the court is limited. The Award
can be set aside if the arbitrator acts beyond his
jurisdiction.
(f) To find out whether the arbitrator has
travelled beyond his jurisdiction, it would be
necessary to consider the agreement between
the parties containing the arbitration clause. The
arbitrator acting beyond his jurisdiction is a
different ground from the error apparent on the
face of the Award.
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(g) In order to determine whether arbitrator has
acted in excess of his jurisdiction what has to be
seen is whether the claimant could raise a
particular claim before the arbitrator. If there is
a specific term in the contract or the law which
does not permit or give the arbitrator the power
to decide the dispute raised by the claimant or
there is a specific bar in the contract to the
raising of the particular claim then the Award
passed by the arbitrator in respect thereof would
be in excess of jurisdiction.
(h) The Award made by the Arbitrator
disregarding the terms of the reference or the
arbitration agreement or the terms of the
contract would be a jurisdictional error which
requires ultimately to be decided by the Court.
He cannot Award an amount which is ruled out
or prohibited by the terms of the agreement.
Because of specific bar stipulated by the parties
in the agreement, that claim could not be raised.
Even if it is raised and referred to arbitration
because of wider arbitration clause such claim
amount cannot be awarded as agreement is
binding between the parties and the arbitrator
has to adjudicate as per the agreement…..
(i) The arbitrator could not act arbitrarily,
irrationally, capriciously or independently of the
contract. A deliberate departure or conscious
disregard of the contract not only manifests the
disregard of his authority or misconduct on his
part but it may tantamount to mala fide action.
(j) The arbitrator is not a conciliator and cannot
ignore the law or misapply it in order to do what
he thinks just and reasonable; the arbitrator is a
tribunal selected by the parties to decide the
disputes according to law.”
22. In a recent ruling in NTPC (supra), decided by a
three Judge Bench of this Court, drawing strength
from the decision in Kwality Manufacturing
Corporation (supra), it has been held thus:
“13. From the above pronouncements, and from
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a catena of other judgments of this Court, it is
clear that for the objector/appellant in order to
succeed in their challenge against an arbitral
award, they must show that the award of the
arbitrator suffered from perversity or an error of
law or that the arbitrator has otherwise
misconducted himself. Merely showing that
there is another reasonable interpretation or
possible view on the basis of the material on the
record is insufficient to allow for the
interference by the Court [See State of U.P. v.
Allied Constructions, (2003) 7 SCC 396;
Ravindra Kumar Gupta and Company v. Union of
India, (2010) 1 SCC 409; Oswal Woollen Mills
Limited v. Oswal Agro Mills Limited, (2018) 16
SCC 219].”
[emphasis added]”
8. Keeping in mind the aforesaid parameters, this Court
proceeds to examine the plea advanced by the learned
Advocate for the appellant. Learned Advocate Mr. Buch
mainly argued that, in the absence of terms and conditions of
passing the dispatch money earned by the FCI to the
contractor in the contract executed between the parties with
regard to the stevedoring, clearing, handling and transport
contract, the learned Arbitrator committed a serious error in
awarding dispatch money in favour of the contractor. He had
further submitted that if the learned Arbitrator recorded
findings beyond the terms and conditions of the contract, the
award would be rendered as nullity. He had further submitted
that the learned Arbitrator, in his findings, categorically held
that there are no terms and conditions executed between the
parties entitling the contractor to have benefit of dispatch
money, yet, by taking recourse to the prevailing commercialPage 26 of 34
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practice, the learned Arbitrator proceeded to award dispatch
money to the contractor.
9. Explaining the term “dispatch money,” learned Advocate
Mr. Buch argued that the contract with the contractor is
subsequent to a charter party agreement executed between
the owner of the ship/vessel and the appellant, the Food
Corporation of India (FCI). If the ship/vessel is alighted and
offloaded within the stipulated time period stated in the
charter agreement, the owner of the vessel would pay
dispatch money to the appellant FCI, as these terms and
conditions remained confined to the agreement between the
owner of the vessel and the appellant FCI. He contended that,
in the absence of contractual terms and conditions between
the contractor and the FCI entitling the contractor to dispatch
money, the contractor would not be legally entitled to claim
dispatch money even if the contractor had completed his work
before the time limit, which in turn enabled the FCI to earn
dispatch money under the charter party agreement.
10. In regard to aforesaid submissions of learned Advocate
Mr. Buch, let refer the order passed in CMA No. 170 of 1984.
Early offloading of the ship/vessel would permit owner to
depart from the port, because of which, owner of ship/vessel
will save port staying charge. To trace root of dispute, by the
order in CMA No.170 of 1984, the learned Civil Court, in
exercise of jurisdiction under Section 20 of the Act, directed
the FCI to appoint an Arbitrator. That order has not been
challenged. In an unnumbered paragraph at the bottomPage 27 of 34
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portion of paragraph 4 of the said order, the learned Civil
Court, while directing appointment of an Arbitrator to resolve
the dispute between the FCI and the contractor, referred to
the tender agreement and held that, though it does not speak
about dispatch money earned by the claimant or as to who
would get the benefit earned out of such dispatch money, if
the defendant is liable for the demurrage for delayed
execution of contract, they have an equal right to demand
dispatch money earned by the other side due to efficiency on
the part of the defendant. Treating this as a dispute between
the parties, the learned Civil Court took the cue from the
terms and conditions of the contract between the FCI and the
contractor and held that the dispute is covered under the
purview of the arbitration clause, and consequently ordered
appointment of an Arbitrator. At the cost of repetition, it has
to be observed that these findings have not been challenged,
but rather accepted and as per order, Arbitrator was
appointed.
11. Looking to the history of the arbitration proceedings as
stated hereinabove, this Court does not venture further into
re-appreciating the same. The real dispute between the
parties pertains to Claim No. 2, as prepared by the contractor
and decided by the learned Arbitrator. Claim No. 2 and the
award thereon reads as under:-
“Claim No. 2)
The claimants claim a sum of Rs. 15,78,681/68 on
account of despatch money earned in early release ofPage 28 of 34
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11 Vessels arrived at Beli/Rozi Court during the
contract period from 25.8.80 to 2418.82.
Award No. 2)
The claim is allowed to the extent of Rs. 13,65,352/52
for the following reasons:-
It is admitted position that the subject contract does
not speak asito who will get the benefit earned out of
despatch money. The Admittedly quantum of Rs.
15,78,681/68 earned as despatch money against the
subject contract is also not disputed as the 11 Vessels
were discharged in a shorter time than the number of
lay-days provided to the claimants contractor. As per
the settled commercial practice, if the Charterer
discharges the Vessels in a shorter time than is
allowed to him by the lay-days, he may be entitled to
despatch money. In the instant case the claimants
contract was responsible for Stevedoring, Clearance,
Handling and Transport of stores and if the despatch
money is earned by his efficient efforts by discharing
the Vessels in a shorter time than is allowed to him
by the lay-days, the benefit of said despatch money
earned shall go to the claimants, particularly for the
reason that the claimants contractor was liable for
any demurrage or warfage charges that may occur
for payment by the Corporation to Railways, Court or
any other party on account of the delay on their part
in leading or unloading etc. beyond the free time
allowed to them for the work under the terms of the
contract. The claim is allowed to the extent of Rs.
13,65,352/52 against the claim of Rs. 15,78,681/68
for the reason that the respondents F.C.I. shall also
be entitled to recover the balance amount of Rs.
2,13,329/16 against their counter claims as
mentioned below after adjusting the withheld amount
of Rs. 44,015/95 as already stated in award against
Claim No. 1) above.”
12. It is the aforesaid finding that bothered the FCI. The first
contention of learned Advocate Mr. Buch, that the reference,
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which was made beyond the terms and conditions of the
agreement, fails to sustain on the ground that the order
passed by the learned Civil Court in CMA No. 170 of 1984
directing appointment of an Arbitrator has not been
challenged at any point of time; rather, it has been accepted
by the FCI and without hesitation, participated in the arbitral
proceedings by raising counter claims. FCI having obtained an
adverse order from the learned Arbitrator, confirmed by the
learned Civil Court, the FCI cannot now contend that the
terms and conditions of the agreement did not permit the
learned Civil Court to appoint an Arbitrator.
13. It is an uncontroverted fact that 11 vessels were
discharged in a shorter time period than the number of lay
days provided to the contractor, having been stevedored and
offloaded before the date stipulated by the FCI. Adopting the
practice prevailing in commercial transactions, the learned
Arbitrator held that if the stevedore discharged a vessel
within a shorter time period than the lay days allowed to him,
the charterer would, under the charter party agreement
between the owner of the vessel and the charterer, be entitled
to dispatch money. In the present case, the charterer, i.e., the
FCI, earned the dispatch money. The contract was in respect
of stevedoring, clearing, handling and transport of stores, and
the contractor was responsible for the performance thereof.
14. If the charterer, i.e., the FCI, was required to adhere to
the time limit for completion of stevedoring, clearing,
handling and transport in order to earn dispatch money, the
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corollary follows that the contractor who actually performed
the said work would equally be entitled to earn dispatch
money if he completed the work within the time limit
stipulated by the charterer. In other words, if the contractor
completed the work of stevedoring, clearing, handling and
transport of the stores within the time limit specified by the
charterer, the contractor would be entitled to receive dispatch
money to the extent that the charterer received dispatch
money. This is just, fair and equitable.
15. The charter party agreement between the owner of the
vessel and the FCI, more particularly Clauses 35,37 and 42,
contemplates earning of dispatch money. If discharge of the
vessel is completed before the stipulated time, and liability to
pay demurrage if the discharge of the vessel is not completed
within the lay days. The agreement between the contractor
and the FCI does not speak to the payment of dispatch money,
as has consistently been held by the competent Civil Court
and the learned Arbitrator. It is evident that while the FCI
retained the benefit of earning dispatch money arising under
the charter party agreement, it cast the liability of demurrage
upon the contractor. Clause 49 of the agreement between the
FCI and the contractor expressly provides that, in case the
contractor fails to complete the work within the lay days
provided by the FCI, the contractor would be liable to pay
demurrage and other consequential costs. This is unfair
practice and rules against equity. FCI cannot observe double
standard The FCI on one hand, retains clause to earn benefit
of dispatch money, which could only be achieved by the
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contractor by offloading ship/vessel before lay days, on the
other hand, cannot pass liability of demurrage which could be
occurred due to non-observance of offloading within the lay
days. The FCI thus, either can retain both; benefit of earning
of dispatch money and risk of demurrage or can pass both to
the contractor. As far as passing of the benefit of earning
dispatch money is concerned, the FCI, by executing contract,
can retain same share.
16. The FCI cannot be permitted to blow hot and cold. If the
FCI earned dispatch money on account of the early discharge
of the vessel, it is obligated to pass the same or part thereof to
the contractor. As observed hereinabove, the FCI, instead of
providing for payment of dispatch money to the contractor,
retained it for itself by not incorporating any clause in the
agreement in that regard, while simultaneously incorporating
a liability clause, i.e., a demurrage clause, upon the contractor
in case the vessel was not discharged within the lay days. The
learned Arbitrator rightly recorded the unfairness on the part
of the FCI and passed the award in favour of the contractor.
The said award was thereafter subjected to scrutiny before
the learned Civil Court, which did not find any compelling
reason to set aside the impugned award and has accordingly
made the award a decree of the court. This Court, exercising
jurisdiction under Section 39 of the Act, does not find any
reason to interfere with the impugned order.
17. In the case of Parasa Raja Manikyala Rao And Anr vs
State Of A.P reported in AIR 2004 SC 132, the Hon’ble
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Supreme Court has observed and held as under:
“…Each case, more particularly a criminal case
depends on its own facts and a close similarity
between one case and another is not enough to
warrant like treatment because a significant detail
may alter the entire aspect. In deciding such cases,
one should avoid the temptation to decide cases (as
said by Cordozo) by matching the colour of one case
against the colour of another. To decide therefore on
which side of the line a case falls, the broad
resemblance to another case is not at all decisive.”
17.1 In expose of aforesaid law on binding precedent, the
authorities relied on by the learned advocate for the appellant
would not be of any assistance to the case of the appellant, as
they are on different facts.
18. Before parting with this judgment, worthy assistance
may be drawn from the judgment of the Hon’ble Apex Court in
the case of Himachal Pradesh State Electricity Board
Versus R.J.Shah And Company , reported in (1999) 4
SCC 214, wherein the Hon’ble Apex Court, in paragraph 26,
laid down the relevant position of law, which is adopted and
applied in the present case.
“26. The decision in Associated Engineering Co. case
relied upon by Sh. Maninder Singh does not in any
way persuade us to take a view different than the
view arrived at by the High court. At page 103
Thommen, J. speaking for the court observed as
follows:
“The arbitrator cannot act arbitrarily,
irrationally, capriciously or independently of
the contract. His sole function is to arbitrate
in terms of the contract. He has no powerPage 33 of 34
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NEUTRAL CITATIONC/FA/7110/1998 CAV JUDGMENT DATED: 01/05/2026
undefined
apart from what the parties have given him
under the contract. If he has travelled outside
the bounds of the contract, he has acted
without jurisdiction. But if he has remained
inside the parameters of the contract and has
construed the provisions on the contract, his
award cannot be interfered with unless he has
given reasons for the award disclosing an
error apparent on the face of it.”
Applying the ratio of the present case it is not
possible to say that the arbitrator in the
present case travelled outside the bounds of
the contract. Correspondence exchanged
between the parties prior to the making of the
reference shows that the arbitrators were
called upon to construe the contract in order
to determine whether the contractor was
entitled to claim revision of rates and if so
what should be the revised rates. The
construction placed on contract by the
contract by the contractor cannot be said to
an implausible one. Even if the arbitrators
construed the terms of the contract
incorrectly it cannot be said that the award
was in excess of their jurisdiction. Their
jurisdiction clearly was to construe the terms
of the contract and their decision thereon is
final and binding on the parties.”
19. For the foregoing reasons, present First Appeal fails and
stands dismissed. Notice discharged. Interim relief, if any,
stands vacated forthwith.
20. Registry is directed to return back the R & P, if any, to
the concerned Court forthwith.
(J. C. DOSHI,J)
SHEKHAR P. BARVE
Page 34 of 34
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