Holding

The arbitrators were not bound by a joint mandate to give reasons, the lack of reasons does not amount to legal misconduct, and the Bombay High Court had jurisdiction, so the award stands.

Summary

The Food Corporation of India entered into a charter‑party with Great Eastern Shipping for bulk cargo transport and later disputed demurrage and overtime charges. The contract required joint arbitration, each party appointing an arbitrator; the appellant’s arbitrator was instructed in writing to give reasons for his award, a copy of the letter being sent to the respondent’s arbitrator. The arbitrators issued a non‑speaking award, ordering the appellant to pay a lump‑sum amount, and the award was filed in the Bombay High Court. The appellant challenged the award on the grounds of lack of jurisdiction of the Bombay court and the arbitrators’ failure to give reasons, alleging misconduct and irregularity. The Supreme Court held that no mandate was given by both parties to require reasons, that a non‑reasoned award is not per se misconduct, and that the High Court had jurisdiction to entertain the filing. Consequently, the appeals were dismissed and the award upheld.

Issues considered

Whether both parties mandated the arbitrators to give reasons for their award.
Whether the failure to provide reasons constitutes misconduct sufficient to set aside the award.
Whether the Bombay High Court had jurisdiction to entertain the filing of the award.

Legislation cited

Arbitration Act, 1940s. 14, s. 2, s. 30, s. 33

Subjects

arbitrationcharter partydemurrageawardreasoned awardjurisdictionmisconductnatural justicejoint arbitration

Judgment

"f
A FOOD CORPORATION OF INDIA & ANR.
v.
GREAT EASTERN SHIPPING CO. LTD.

MARCH 28, 1988
B
[SABYASACHI MUKHARJI ANDS. RANGANATHAN, JJ.] )(

Arbitration Act, 1940: Sections 2, 14, 30 and 33-Charter Party
agreement-Arbitrators--Men of commerce-Letter written by one
party to its Arbitrator to record reasons for award-Copy to arbitrator
appointed by other party-Whether amounts to mandate from both )!.--'
c parties to both arbitrators--Arbitrators award lump sum amount- ~
Whether legal misconduct. '
A Charter Party agreement was entered into betwe.en the appel-
lant-Food Corporation of India, and the respondent-Shipping Com-
pany for transportation of bulk cargo from Australia to India. After the
D
cargo was delivered, the respondent Company raised disputes regard·
ing certain items and claimed demurrage and overtime charges. As per
the agreement, .the disputes were referred to joint arbitration by two
Arbitrators, one each appointed by each of the parties. The appellant
appointed its Arbitrator with a specific condition that he should give )..-
reasons for his award, and sent a copy of this letter to the arbitrator
E
appointed by the respondent. The award was made and duly signed by
the two Arbitrators at Calcutta and Bombay respectively. The award,
which was a non-speaking one rood did not contain reasons for the
award but directed the appellant Corporation to pay a lump sum
amount to the respondent Company, was filed in the High Court of
F
Bombay.

The High Court rejected the objection petition filed by the appel·
lants for setting aside the award.

In the appeals, by special leave, it was contended that the High
*
Court of Bombay had no jurisdiction to entertain the filing of the award
G
since no cause of action arose in Bombay and that the Arb.itrators had
not complied with the mandate given to them to state the reasons and,
)-.._
therefore, th~ award was liablr to he set aside for reasons of miscon-
duct, irregularity and lack of competence.

Dismissing the appeals, by special leave,
H

l 366
F.C.I. v. GREAT EASTERN SHIPPING [MUKHARJI, J.[ 367

HELD: There was no mandate given by both the parties to the
A
arbitration agreement to both the arbitrators to state reasons, The
arbitrators could not act on the mandate of one of the parties, [368G I

Unreasoned award is bad, Though the recent trend is that there
should be a reasoned award, and that would be in consonance with the
principles of natural justice, in a case where two men of commerce B
entered into arbitration in respect of money claim under the Charter
Party Agreement and the award has awarded a lump sum amount, the
reasons are not far too seek, It is really an accounting of the rivai claims
of the parties, [368H, 369A-BI

--f Therefore, on the facts of the case, there is no legal misconduct as C
'ii such in not giving reasons, [369B-CI
r
There is a specific finding by the Single Judge of the High Court
that the agreement was signed at Bombay which was affirmed by the
Division Bench. Hence the High Court bad the jurisdiction to entertain
the filing of the award. [368E-FJ D

CIVIL APPELLATE JURISDK'TION: Civil Appeal Nos. 150().
Olof1988.

From the Judgment and Order dated 26.10.1987 of the Bombay
High Court in Appeal No. 1207and 1206 of 1987. E

Y.P. Rao for the Appellants.

H.N. Salve, Hardeep Singh and Raian Karanjawala for the
Respondent.

The Judgement of the Court was delivered by

SABYASACHI MUKHARJI, J. Special leave granted and the
appeals are disposed of by the judgment herein.

These two appeals are directed against the judgment and order G
of the Division Bench of the High Court of Bombay confirming the
decision of the learned single Judge dismissing the application for
setting aside the award. It appears that there was a Charter Party
Agreement entered into between the parties in .December, 1981 signed
by the representative of the President of India .and the respondent
Shipping Company for transportation of bulk cargo from Australia to H
368 SUPREME COURT REPORTS [19881 3 S.C.R.

India. Thereafter in February, 1982 the agreement was sent to the
-f
A
President's representative at New Delhi for signing the same. The said
cargo was delivered at the port of Tuticorin and not at Calcutta. The
respondent company raised disputes regarding several items and
claimed an amount of Rs.9,06,854.86 as demurrage and Rs.7881.43
against over time charges. As per the said agreement, the disputes
B were referable to arbitration by joint arbitration of two Arbitrators one
each to be appointed by each of the parties. The appellant appointed
one Shri J.L. Puri as its arbitrator with a specific condition that he shall
give reasons for the award. The respondent company appointed one
Shri P.S. Gokhale as its arbitrator. Thereafter the award was made

c
and the same was signed by Shri Gokhale at Bombay on 11th June,
1986 and Shri J.L. Puri at Calcutta on 18th of June, 1986. ..__
1--
The award did not speak. As such there is no reason apparent \
from the award. The award, however, directed the appellant Corpora-
tion to pay lumpsum amount of Rs.6,22,589 to the respondent com-
pany. The award was filed in the High Court of Bombay. Notice of
D such filing was received by the appellant Corporation at Delhi. The
appellants filed objection petition before the High Court of Bombay
for setting aside the award. It was contended that the High Court of
Bombay had no jurisdiction to entertain the filing of the award since
no cause of action arose at Bombay. The appellants contended that the
award was liable to be set aside for reasons of misconduct, irregularity
E and lack of competence.

In both the appeals similar claims have been made. It appears,
however, that there is a specific finding made by the learned single
Judge that the agreement was signed at Bombay which was affirmed by
the Division Bench. We find no material to impeach this finding. It
F was next contended as it has been contended before the Division ,l
ltl
,y_
Bench that there was a mandate given to the arbitrators to state
reasons for the award but it was not complied with. It is true that the
/°~'
appellants had written a letter to their arbitrator stating that he should
record reasons for the award. Copies of this letter were also sent to the
arbitrator appointed by the respondents. There was, therefore, no
G mandate given by both parties to the arbitration agreement to both
arbitrators to state reasons. The arbitrators could not act on the man-
.)....._
date of one of the parties. This contention of the appellants cannot be
accepied. It was next contended that the arbitrators should have given
reasons. Unreasoned award is bad. It is true that the recent trend is to
have reasoned awrds. Indeed a matter is pending in this Court on this
H aspect. The appointed arbitrators were men of commerce and they
F.C.J. v. GREAT EASTERN SHIPPING [MUKHARJI, J.] 369

arrived at a consensual figure. Though the recent trend is that the A
award should be a reasoned award iuid that would be in consonance
with the principles of natural jusice, in a case of this nature where two
men of commerce in respect of money claim under Charter Party
Agreement entered into arbitration and the award has awarded a
lumpsum amount, it appears to us, that the reasons are not far to seek.
B
It is really an accounting of the rival claims of the parties.

In that view of the matter and in the facts of this case, we find
that there is no legal misconduct as such in not giving reasons. In the
premises, the High Court was right in dismissing the objections. Both
the appeals are disposed of accordingly. There will be no order as to
costs.

N.P.V. Appeals dismissed.