Holding

The award was not liable to be set aside as it was based on a plausible interpretation of the contract and did not involve an error of law apparent on the face of the award.

Summary

BOC India Ltd. entered into a turnkey contract with Bhagwati Oxygen Ltd. for the erection, installation and commissioning of an oxygen plant at a lump‑sum price, subject to variations for imported components. Due to exchange‑rate and customs‑duty changes the price rose, and the parties later disputed a sum of Rs 17,95,710 claimed by the respondent as a refund for indigenous supply. An arbitrator awarded the claim in favour of the respondent and rejected the appellant's counter‑claim. The appellant sought to set aside the award under Section 30 of the Arbitration Act, 1940, alleging error apparent on the face of the award, misconduct and excess of jurisdiction. The Supreme Court examined whether the arbitrator had mis‑interpreted the contract or erred in law, and held that the award was based on a plausible contractual interpretation and did not contain an error of law apparent on its face. Consequently, the Court dismissed the appeal, upholding the arbitrator’s award.

Issues considered

Whether the arbitrator's award can be set aside under Section 30 of the Arbitration Act, 1940 on the ground of error apparent on the face of the award or misconduct.
Whether the award of Rs 17,95,710 to the respondent is contrary to the terms of the lump‑sum contract and the indigenous‑supply clause.
Whether the arbitrator exceeded his jurisdiction by interpreting the lump‑sum price to include the disputed amount.

Legislation cited

Arbitration Act, 1940s. 30, s. 33, s. 8

Subjects

ArbitrationSection 30Error apparent on the face of the awardContract interpretationLump sum priceIndigenous supplyJurisdictionAward setting aside

Judgment

BOC INDIA LTD. A
v.
BHAGWATl OXYGEN LTD.

MARCH 12, 2007

[DR. AR. LAKSHMANAN AND TARUN CHA TIERJEE, JJ.] B

••
, Arbitration Act, 1940-Sections 30, 33 and 8-Works contract-Lump
sum price fvced-Party raising invoices against indigenous supply and
realising excess amount-Claim of refund by other party-Award by· the
arbitrator allowing the claim-Interference with-Held: Arbitrator took a c
plausible view on interpretation of contract-Award was not based upon an
erroneous proposition of law or error of law appeared from the award or
from any document-Award was passed considering the terms of contract,
arbitration clause, materials on record and the statement of claim-Figure
in dispute was only a mark upto which parties agreed to keep in contract
D
for rendering of service-Thus, award calls for no interference.

Appellant and NSKK entered into an agreement to facilitate the
respondent to import components for setting up Oxygen plant. Appellant and
respondent entered into a contract for erection, installation and commission
of the plant. Respondent issued purchase orders in favour of the appellant for E
supply, installation and commissioning of oxygen plant at a lump sum price
of Rs.347.40 lacs. The fixed price was subject to variation of importation of
the contract and exchange rates. Due to variation in exchange rate and
customs duty, the lump sum price of Rs.347.40 lacs was increased to
Rs.4,62,60,543. Appellant submitted its bill inclusive of taxes as per the
- )-
contract. In view of the arbitration clause respondent raised claims after F
payment. Since the appellant did not refund the amount, respondent filed an
application for the appointment of an arbitrator under sections 8 and 33 of
the Arbitration Act, 1940 and submitted its claim before the arbitrator under
12 heads. Appellant also submitted its counter claim. Arbitrator was appointed
and he passed an award in favour of the respondent allowing five claims of the G
~. respondent. However, it rejected the counter claim of the appellant. Appellant
-~

then filed an application for setting aside the award. Appellant raised objection
that the award suffered errors apparent on the face of it; and that the arbitrator
erred in awarding the claim of the respondent for a sum of Rs. 17,95,710/-
915
H
916 SUPREME COURT REPORTS [2007] 3 S.C.R.

A relating to claim no. 9 although the arbitrator held issue no. 4 in favour of
the appellant. High Court rejected the objection filed and upheld the award.
Aggrieved appellant filed an appeal. Division Bench of High Court dismissed
the same. Hence the present appeal.

Dismissing the appeal, the Court
B
HELD: 1.1. When the Arbitrator had taken a plausible view on
interpretation of contract, it is not open to the court to set aside the award on
' <
the ground that the Arbitrator had misconducted himself in the proceedings
and therefore, the award was liable to be set aside. !Para 251 1927-GI

c l.2. The Arbitrator came to a conclusion that the figure of
Rs. 17,95,710/-, was included as lump sum contract price as consideration
payable to the respondent for service rendered by them for importation of plants
and components. The Arbitrator in his award also considered that the break-
up and the sum ofRs.17,95,710/-, the appellant had recovered under the bill
issued against indigenous supply and the respondent paid the amount without
D any objection. While the Arbitrator has considered the fact that the appellant
had realised the differential amount of Rs.17,95,710/- from the respondent
against indigenous supply, it cannot be said to mean that the value of
indigenous supply had gone up from Rs.SO lacs to Rs.67,95,710/- as according
to the terms of the contract the value of indigenous supply remained at
E Rs.67,95,710/- and the appellant realised the differential amount of
Rs.17,95,710/- against indigenous supply. Accordingly the Arbitrator was
justified in holding that the said sum of Rs.17,95,710/- was on account of
expenses that might have been incurred by the respondent in executing the
contract. (Paras 21, 22 and 261 (925-C, F, GI

F 1.3. The award of the Arbitrator cannot at all be interfered with as the ....... -
award was not based upon either a proposition of law which is unsound or an
erroneous proposition of law was established to have vitiated the decision. The
Arbitrator had considered all aspects of the matter including the terms of
the contract, arbitration clause, all the materials on record produced by the
parties and the statement of claim of the respondent disputed by the appellant
G and came to a conclusion of fact. According to the Arbitrator, this figure was
. ,___
nothing but a mark up which the parties agreed to keep in the contract for
rendering of service towards importation of plant components. The appellant
had realized this difference amount of Rs. 17 lacs from the respondent against
indigenous supplies. Therefore, it was not the case that the arbitrator had
H
BOC INDIA LTD. 1·. BHAGWATI OXYGEN LTD. [TARUN CHATTER.IEE . .lj 917

misconducted himself in passing the award by ignoring to consider material A
., -,I
documents. It was not the case that the arbitrator had decided erroneously a
question of law referred to him but on consideration of the terms of contract
and statement of claim came to a conclusion that Claim No. 9 of the respondent
should be awarded in its favour. Such being the position, there is no reason to
interfere with the award of the arbitrator which was passed on consideration
of all material pat on record. It is not open to the court to set aside the award
B
on the ground that the Arbitrator had, while continuing with the proceeding,
,.. , acted beyond his jurisdiction and violated the contract while awarding Rs.
17,95,710/- in the form of Award No.9. This cannot be said to be an award,
.)
which is contrary to the contract entered into by the parties.
(Paras 24, 25 and 261 (926-F, H; 927-B, C, DI c
K.P. Pou/ose v. State of Kera/a, [1975) 2 SCC 236; Trustees of the Port
ofMadras v. Engineering Construction Corporation Ltd., AIR (1995) SC 2423
and lndu Engineering and Textile Limited v. Delhi Development Authority,
1200115 sec 691, referred to.
D
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1280 of2007.

From the Final Judgment and Order dated 20.05.2005 of the High Court
of Calcutta in APOT No. 334 of 2002.

Soli J. Sorabjee, Dhruv Mehta, Harshvardhan Jha, Yashraj Deora and E
Mannoj Mehta (for K.L. Mehta & Co.) for the Appellant.

Bhaskar P. Gupta, R.K. Ghosh, A. Dutta and Praveen Kumar for the
Respondent.

The Judgment of the Court was delivered by F
- ;.~
TARUN CHATTERJEE, J. I. Leave granted.

2. This is an appeal from a judgment of a Division Bench of the Calcutta
High Court dismissing an appeal which was filed against the judgment of a
learned Judge refusing to accept the objection filed by the appellant under G
Section 30 read with Section 33 of the Arbitration Act, 1940 (hereinafter
_J~ . referred to as the "Act").

The brief facts of this appeal are as follow:
H
918 SUPREME COURT REPORTS (2007) 3 S.C.R.

A 3. BOC Ltd. being the appellant herein and one Nippon Sansa K.K.
11- ,.
(NSKK) entered into an agreement in order to facilitate the respondent to
import components for setting up a 25 tons per day Oxygen plant at Ghatsila,
Bihar (now in the State of Jharkhand). In the month of April/May 1990 the
appellant and the respondent entered into a contract for erection, installation
and commission of the aforesaid plant at Ghatsila, Jharkhand. On 5th June
B 1990 a tripartite meeting between the representatives of the appellant and the
respondent and NSKK were held where the letter of intent was signed and
purchase orders were issued by the respondent in favour of the appellant. . ~

The respondent awarded a turnkey contract on 6th June, 1990 to the appellant l
for manufacture, supply, erection and commission of the said plant. Vide
c letter dated 18th December 1990, the respondent had agreed to pay interest
on margin money and reimburse the same to the appellant. The appellant
thereafter on 31st March 1992 raised final invoices and subsequently on
13th April 1992 the respondent raised claims and sought refund from the
appellant. By a letter dated 9th March 1993 the appellant informed the
respondent indicating therein the interest payable by them to the respondent.
D
Finally, when the prior invoice and letter were not responded to, on 13th
September 1993 the respondent again raised claims and sought refund from
the appellant. When the refund was not made by the appellant, the
respondent made an application under Sections 8 and 33 of the Act for the
appointment of an arbitrator on 24th November 1995 in the High Court at
E Calcutta.

4. In the meantime, on 21st September 1995 the High Court directed the
appellant to release the spares to the respondent on payment of
Rs. 10,19,000/- by them. A lawyer was thereafter appointed as Arbitrator by
consent of the parties and the said arbitrator subsequently was replaced on
F 12th February, 1996 by Late Arbitrator Shri P.K. Roy. On 29th July 2000, Late
~i.. .
Shri Roy had passed his award in favour of the respondent for a sum of Rs.
24,92, 165/- with an interest of 12 per cent on the amount. However, the
counter claim of the appellant was rejected.

G 5. On 30th October, 2000, the appellant filed an application for setting
aside the award passed by the arbitrator under Section 30 of the Act before
the High Court at Calcutta. In the said application, the appellant raised
"\._
objection to the effect that the award in question suffered errors apparent
on the face of it. It was alleged that the arbitrator erred in awarding the claim
of the respondent for a sum of Rs. 17,95, 7I 0/- relating to claim no. 9 although
H the learned arbitrator held issue no. 4 in favour of the appellant. It was also
BOC INDIA LTD. 1·. BHAGWATI OXYGEN LTD. [TAR UN CHATTERJEE, J.l 919

~
-,J alleged that since the appellant had not realised any sum in excess of Rs. 50 A
lacs against indigenous supply, the award of the learned arbitrator to the
... ~:
effect that the respondent was entitled to receive back from the appellant, the
said sum of Rs. 17,95,710/-, was not only erroneous on the face of the award
but also contradictory and inconsistent with the findings of the arbitrator
against issue no. 4. It was further alleged by the appellant under Section 30
of the Act that the learned arbitrator committed error apparent on the face of B
the award and had acted in excess of his jurisdiction by awarding the aforesaid
' ' sum of Rs. 17,95, 710/- in favour of the respondent as the award was contrary
,; to the findings made by the learned arbitrator himself and therefore was liable
to be set aside. We are not dealing with the other objections taken by the
appellant in its objection under Section 30 of the Act as noted herein after. c
A learned Judge of the High Court by a detailed judgment had rejected the
objection filed under Section 30 of the Act and had refused to set aside the
award passed by the arbitrator on the ground that on the materials on record,
the award was not liable to be set aside on such grounds.

6. Feeling aggrieved by the judgment of the learned Single Judge, the D
appellant filed an appeal before the Division Bench of the High Court which
was also dismissed against which the present Special Leave Petition was filed
in respect of which leave has been granted.

7. We have heard Mr. Soli J. Sorabjee, learned senior counsel appearing
for the appellant and Mr. Bhaskar P. Gupta, learned senior counsel appearing E
for the respondent. We have also considered the award passed by the Sole
Arbitrator Late Mr. P.K. Roy and the objection raised against such award
under Section 30 of the Act and also the judgment of the learned Single Judge
as well as the Division Bench of the High Court in detail.
- ;~
F
8. Before we proceed further, as noted herein earlier, we keep it on
record that before the Division Bench of the High Court, the appellant restricted
his grounds for setting aside the award in respect of Claim No.9 of the
statement of claim only and prayed for the same. Before us, Mr. Sorabjee also
restricted his submissions only in respect of Claim No.9 of the statement of
; claim and also prayed for setting aside the award restricted to Claim No.9 only. G
_j-· In view of this stand taken by the appellant, we need not dwell upon other
questions and are concentrating only on the issue raised before us by the
learned senior counsel appearing for the appellant.

9. As noted, we may reiterate that the respondent placed Purchase
H
920 SUPREME COURT REPORTS [2007] 3 S.C.R.

A Order (P.O.) dated 6th of June, 1990 to the appellant for supply, installation ..
and commissioning of oxygen plant at a lump sum price of Rs.347.40 lacs. This
fixed price was, however, subject to variation only in respect of imported
components of supply on account of exchange rate variation and customs
duty variation. This would be evident from clause 1.1 of the P.O. as quoted
B herein after. It is not in dispute that the job was completed in June/July, 1992.

I0. Due to variation in exchange rate and also in customs duty, the lump
sum price ofRs.347.40 lacs increased to Rs.4,62,60,543. The appellant submitted ,•
its bill inclusive of taxes as per the contract and the break up which is as
follows:
c "A. Annexure I

Invoice No. 3224 Rs. 4,62,60,543/-

8. Invoice dated 31.3 .1992 Rs. 5,91,625/-

D C. Taxes paid as per contract

(as mentioned in Invoice

No. 3225 and 3227) Rs. 6,25,984/-

E
Total Rs. 4,74,78,152/-"

F 11. As stated herein earlier, in view of the arbitration clause accepted
by the parties, the respondent had raised a dispute after payment and the
matter was referred to arbitration. The respondent submitted its claim before
the arbitrator under 12 heads for a total amount of Rs.1,79,76,716/-. The
appellant also submitted its counter claim. The sole arbitrator Late Shri
P.K.Roy passed an award on 29th of July, 2000, as noted herein earlier and
G allowed the claim of the respondent in respect of the following items:
"A. Claim No. I: Interest
on margin money Rs.1,80,000/-

B. Claim No.3: Bank charges
H
BOC INDIA LTD. 1·. BHAGWATI OXYGEN LTD. [TARUN CHATTER.IEE, .I.] 921

-; and interest Rs.3, 10,932/- A
c. Claim No.7: Refund
on REP Licence Rs. 35,0001-

D. Claim No.8 : Foreign Technician
fees, Air fare, hotel expenses Rs. I, 70,523/- B
E. Claim No.9 Indigenous Supply Rs.17,95,7101-
~·

,;

.Rs.24,92, 1651-"
c
12. As noted herein earlier, the arbitrator, however, dismissed all other
claims of the respondent and also the counter claim of the appellant.

13. Mr. Sorabjee contended that since the award in question was contrary
to the findings of the learned arbitrator himself, the learned arbitrator in D
passing the award had misconducted himself and accordingly the award was
arbitrary and liable to be set aside in respect of claim No.9 of the respondent.

14. Mr. Sorabjee had drawn our attention to the purchase order, which
contained price for manufacture and supply of plant and equipment comprising E
both imported and indigenous components for installation, erection and
commissioning thereof. He had also drawn our attention to the fact that a
lump sum of Rs.379.49 lacs was fixed as a price for doing the job. The 'basis
of price' is mentioned in Clause 1.1. of the contract which, is as follows:-

"Basis of price includes - F
I.I.I The value of the imported components will be 128.66 million YEN
CIF Calcutta.
1.1.2 Customs duty @ 80% of CIF value based on 'Project Import".
1.1.3 Stevedoring, port handling, customs clearance, inland G
transportation and transit insurance from port to site @ 5% of CIF
J· Value.
1.1.4 Exchange rate has been taken at I 00 yen Rs.10.9.
1.1.5 The price includes excise duty towards supply wherever applicable
H
922 SUPREME COURT REPORTS [2007] 3 S.C.R.

A as on date, but does not include sales tax, entry tax, income tax
on foreign technicians and other Govt. impositions, if any, which
will be paid extra, as applicable.
1.1.6 Any variation in I. I to 1.1.5 except 1.1.3 indicated above will be
adjusted.
B 1.1.7 The premium of Rs.5 lakhs towards purchase of REP Licences is
the maximum amount payable by us. Any decrease below Rs. 5
lakhs will ·be passed on to us. . ..
1.1.8 The above price is also subject to 'General Conditions of sale and
installation of Pla9t and Equipment'. In the event of any conflict
c between the clauses, one mentioned herein shall prevail. Where
General Conditions are not applicable, have been marked
accordingly and initiated by competent authority."

Clause 4 of the contract contains Terms of Payment. Indigenous supply
is included in clause 4.4 which reads as following-
D
"Supply Portion Rs.SO lacs.

10% advance against order.

I0% advance within 3 months.
E
80% advance against proforma
invoice before dispatch.

4.5 For Erection and Rs.15 Jakhs.

F commissioning - I0% advance against order

10% advance on opening of site

70% pro rata on monthly basis.

I 0% on completion of erection
G and commissioning."

15. Jn the statement of claim, as made by the respondent, the value of
projected imported components worked out to Rs.264.44 lacs in the order
shown below :-
H
BOC INDIA LTD. r. BllAGWATI OXYGEN LTD. [TA RUN CllATTER.IEE. J.] 923
"(i) CIF value of JY 128.66 million Rs.1,40,23,940/- A
(ii) Handling charges @ 5% of CIF- Rs. 7,01,198/-

(iii) Import Duty @ 80% (based on
Project Import) Rs. I, 12.I 9, 152/-
B
(iv) REP Licence premium Rs. 5,00,000/-

.f
Total Rs.2,64,44,290/-"
c
16. In the said statement of claim the total value of the order worked
out as imported components (Rs.264.44 lacs) plus indigenous components
(~s.50 lacs) plus erection and commissioning (Rs.15 lacs) comes to Rs.329.44
lacs. But the value was kept at Rs.347.40 lacs, i.e., a cushion money of Rs.18 D
lacs approximately was provided for securing the forward cover for foreign
exchange and other variations.

17. In paragraph 21 of the said statement of claim, the respondent stated
that under the aforesaid order, the appellant was required to supply indigenous
components plants and machinery as set out in Clause 2.1.2 to 2.3.4 of the E
order for a sum of Rs.50 lacs. The appellant further stated that the indigenous
supply was not subjected to variation as per the order. The appellant contrary
to and in breach of the said order raised invoices for a sum of
Rs.67,95,710/- against indigenous supply and realized an excess amount of
Rs.17,95, 710/- from the respondent. Therefore, the respondent claimed refund
ofRs.17,95,710/- from the appellant. F
18. According to Mr. Sorabjee, the learned Arbitrator had misconducted
himself in passing the award under Section 30(l)(a) of the Act and thus the
award was liable to be set aside so far as Claim No.9 (Award No.9) of the
Arbitrator is concerned. According to Mr. Sorabjee, the award in respect of G
Award No.9 is contrary to the findings of the learned Arbitrator and liable to
be set aside as it amounted to judicial misconduct. As noted herein earlier,
purchase order dated 5th June, 1990 provided for a lump sum price of
Rs.347.40 lacs subject to variation of importation of the contract and exchange
rates. He further submitted that since price was a lump sum amount no
H
924 SUPREME COURT REPORTS 12007] 3 S.C.R.

A specific price could be allotted to a particular item. He contended that the
value of Rs.50 lacs and Rs.15 lacs mentioned against indigenous .supply
under Clause 4.4 of the P.O. and against erection and commissioning mentioned
in Clause 4.5 of the P.O. was not appearing as a component of price but
appearing as "terms of payment" (4.0 of P.O.). Accordingly, Mr. Sorabjee
sought to contend that the Arbitrator had gone beyond his jurisdiction in
B awarding Rs.50 lacs and Rs.15 lacs, mentioned against indigenous supply and
against erection and commissioning, as the same was not appearing as
'component of price'. Therefore, he had misconducted himself in awarding the
amount in respect of Av.ard No.9 (Claim No. 9 of the Statement Of Claim). In
support of this contention, Mr. Sorabjee relied on a decision of this Court in
C K.P. Poulose v. State of Kera/a, [1975] 2 SCC 236. Mr. Sorabjee particularly
relied on para 6 of the judgment and submitted that the Arbitrator was guilty
of legal misconduct as he had gone beyond his jurisdiction to pass an award
on Claim No.9.

19. This submission of Mr. Sorabjee was contested by Mr. Bhaskar P.
D Gupta, learned Senior Counsel, appearing on behalf of the respondent. Mr.
Gupta contended that considering the terms of the contract, it cannot be said
that the Arbitrator had acted beyond his jurisdiction in passing the award in
respect of Claim No.9. So far as the decision of this Court, relied on by Mr.
Sorabjee, is concerned, Mr. Gupta submitted that this decision cannot be
E applied in the facts and circumstances of the present cas'e. In that decision,
according to Mr.Gupta documents produced before the Arbitrator were contrary
to the award passed. In this connection, Mr. Gupta had also drawn our
attention to the fact that the arbitrator in that case had ignored two very
material documents resulting in miscarriage of justice. If we read para 6 of this
decision carefully we will find that the princi pie which was laid down in the
F decision was that an award could be set aside on the ground that the
arbitrator had misconducted himself when it was found that the arbitrator on ·-\ ·
the face of the record arrived at an inconsistent decision even on his own
finding or arrived at a decision by ignoring very material documents which
throw abundant light on the controversy to help in arriving at a just and fair
decision. Keeping this principle in mind, this court held that the arbitrator had
G misconducted the proceedings in that case. ·
'l
20. This is not the position in the present. case. For deciding this
question, it would be necessary for us to look into the P.O. Clause 4.0
contains "terms of payment". Clause 4.4 of the P.O. contains the indigenous
H
BOC INDIA LTD.>. BHAGWATI OXYGEN LTD. [TARUN CHATTERJEE, J.] 925
supplies which clearly indicates Rs.50 lacs would be the advance at the rate A
of I0% against the date of order within 30 days and I 0% advance within three
months and 80% advance against proforma invoice before dispatch. Clause
4.5 of the terms of payment provi.des for erection and commissioning which
indicates Rs.15 lacs in respect of which 10% advance against order, I 0%
advance on opening of site, 70% on pro rata on monthly basis, I0% on B
completion of erection and commissioning. The Arbitrator had taken into
consideration the claim of the respondent on indigenous supplies. He had
also taken into consideration the total value of the contract which was
Rs.34 7.40 lacs.

21. A bare perusal of the award of the Arbitrator would show that he C
had considered the figure of 17,95,710/- which is included in the lump sum
contract price as consideration payable to the respondent for services rendered
by it towards importation of plants components. From the award it will also
be evident that in respect of the claim of Rs.17,95,710/- against indigenous
supply attention was drawn to the works given in para 10 [a], 10 [b] and 10 D
[c] of the statement of claim. Ifwe assign individual value to the individual
jobs, the total works out to Rs.3,29,44,290/- leaving a balance of Rs.17,95, 710/
-.

22. The learneC: Arbitrator in his award also considered that the break-
up was an admitted position which would appear from para IO[ c] of the E
Statement of Claim and the sum of Rs.17,95,710/-, the appellant had recovered
under the bill issued against indigenous supply and the respondent paid the
amount without any objection. While the Arbitrator has considered the fact
that the appellant had realised the differential amount of Rs.17,95,710/- from
the respondent against indigenous supply, it cannot be -said to mean that the F
value of indigenous supply had gone up from Rs.50 lacs to Rs.67,95,710/- as
according to the terms of the contract the value of indigenous supply remained
at Rs.67,95,710/- and the appellant realised the differential amount of
Rs.17,95, 710/- against indigenous supply. Accordingly the Arbitrator was
justified in holding that the said sum of Rs.17,95, 710/- was on account of
expenses that might have been incurred by the respondent in executing the G
contract.
)•
23. In the case of Trustees of the Port of Madras v. Engineering
Construction Corporation Ltd., AIR (1995) SC 2423, while this Court dealing
with a situation when an award can be set aside under Section 30 of the H
Arbitration Act
926 SUPREME COURT REPORTS [2007] 3 S.C.R.

A held as under:
.
"The above decisions make it clear that the error apparent on the face
of the award contemplated by Section 16(1)(c) as well as Section 30(c)
of the Arbitration Act is an error of law apparent on the face of th1~
award and not an error of fact. It is equally clear that an error of law
B on the face of the award means an error of law which can be discovered
from the award itself or from a document actually incorporated therein.
A note of clarification may be appended viz., where the parties choose
to refer a question of law as a separate and distinct matter, then th(: ' .
Court cannot interfere with the award even if the award lays down a1
c wrong proposition of law or decides the question of law referred to
it in an erroneous fashion. Otherwise, the well settled position is that
an arbitrator "cannot ignore the law or mis-apply it in order to do what
he thinks is just and reasonable." (See Thawardas Perumal v. Union
ofIndia (1955] SCR 48: (AIR 1955 SC 468)."
D 24. In paragraph 20 of the said decision this Court also held that the
proposition that emerges is that in the case of a reasoned award, the Court
can interfere if the award is based upon a proposition of law which is
unsound in law and that the erroneous proposition of law must be established 1·
to have vitiated the decision. It has also been held in that decision that the
E error of law must appear from the award itself or from any document or note
incorporated in it or appended to it. This Court also held that it was not
permissible to travel and consider materials not incorporated or appended to
the award. So far as the facts of the present case are concerned, we do not
think that the award of the Arbitrator can at all be interfered with as the award
F . was not based upon either a proposition of law which is unsound or an
erroneous proposition of law was established to have vitiated the decision.
As noted herein earlier, the Arbitrator had considered all aspects of the matter
including the terms of the contract and all the materials on record and the
statement of claim and has come to a conclusion of fact. Such being the
position, we cannot but hold that the award was not based upon a propositiqn
G of law which is unsound or an error of law must have appeared from the award
itself or from any document or note incorporated in the award or appended
to it.
• -1,

25. That apart, according to the Arbitrator, this figure was nothing but
H

.. '
BOC INDIA LTD.,.. BHAGWATI OXYGEN LTD. (TA RUN CHATTERJEE. J.] 927

a mark up wh.ich the parties agreed to keep in the contract for rendering of A
service towards importation of plant components from Japanese supplies. The
appellant had realized this difference amount of Rs. 17 lacs from the respondent
against indigenous supplies. Therefore, it was not the case that the arbitrator
had misconducted himself in passing the award by ignoring to consider
material documents, which had thrown light on the controversy raised by the
B
parties. As noted herein earlier, the arbitrator had looked into the terms of the
contract, arbitration clause and the statement of claim of the respondent
~
disputed by the appellant. It was not the case that the arbitrator had decided
.....
erroneously a question of law referred to him but on consideration of the
terms of contract and statement of claim came to a conclusion that Claim No.
9 of the respondent should be awarded in its favour. Such being the position, c
we do not find any reason to interfere with the award of the arbitrator which
was passed on consideration of all material put on record.

26. In this view of the matter, it is not open to the court to set aside
the award on the ground that the learned Arbitrator had, while continuing
D
with the proceeding, acted beyond his jurisdiction and violated the contract
while awarding Rs. 17,95,710/- in the form of Award No.9. In our view, this
-)
cannot be said to have an award, which is contrary to the contract entered
into by the parties. It is also not the case where the learned Arbitrator had
failed to consider material documents produced by the parties for arriving at
a right decision. On the other hand as noted herein earlier, we are of the E
considered view that the Learned Arbitrator had duly considered the statement
of claim and the terms and conditions of the contract and the material documents
produced by the parties, which were available on record, and came to a
conclusion rightly in favour of the respondent. The Learned Arbitrator also
came to a conclusion that the aforesaid figure of Rs. 17,95,710/-, was included F
- ,J.. as lump sum contract price as consideration payable to the respondent for
service rendered by them for importation of plants and components. In any
view of the matter, when the Arbitrator had taken a plausible view on
interpretation of contract, it is not open to the court to set aside the award
on the ground that the Arbitrator had misconducted himself in the proceedings
and therefore, the award was liable to be set aside.
G
J· 27. In !ndu Engineering and Textile Limited v. Delhi Development
Authority, [2001] 5 SCC 691 this court laid down a principal when the cou.rt.
cou Id set aside an award in the exercise of its powers under Section 30 o( the ·'""""
Act. This court in the said decision held that when a plausible view had been H
928 SUPREME COURT REPORTS [2007) 3 S.C.R.

A taken by the arbitrator and unless the award of the arbitrator was vitiated by
a manifest error on the face of the award or was wholly improbable or
perverse, it was not open to the court to interfere with the award within the
statutory interpretation set out in Section JO of the Act.

28. That apart, the amount of Rs.17,95,710/- was recovered by the
B appellant under the bill issued against indigenous supplies and amount were
paid without any objection by the respondent. Such being the position we
are unable to agree with Mr. Sorabjee that the award was liable to be set-aside
on the aforesaid ground.
. .
C 29. We, therefore, do not find any merit in this appeal. The appeal is
dismissed without any order as to costs.

N.J. Appeal dismissed.

..

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