Holding

The Supreme Court held that only the court can extend the time for an arbitral award, that such extension may be exercised even after the award is made, and that the award was not a speaking award, so it could not be set aside except for a clear error of law on its face.

Summary

Hindustan Steelworks Construction Ltd entered into a contract with C. Rajasekhar Rao for certain works. Disputes arose and, after the appointed arbitrators could not agree, the Supreme Court directed the appointment of party‑appointed arbitrators and, in case of disagreement, an umpire (Justice Jaganmohan Reddy). The umpire rendered an award on 15 July 1985, which the petitioner sought to enforce, while the respondent challenged the award on three grounds: that it was a speaking award subject to judicial scrutiny, that the umpire acted beyond the two‑month time limit under Section 28 of the Arbitration Act, 1940, and that the award contained an error of law. The Court held that arbitration proceedings must not be unduly prolonged and that only the court has the power to extend the time for making an award, even after the award is rendered, and that such extension may be justified where the parties consent. It further held that the award was not a speaking award; therefore, the court could not probe the umpire’s reasoning, and an award can be set aside only for an error of law apparent on its face. Consequently, the Court confirmed the award and dismissed the respondent’s objections.

Issues considered

The court's power to extend the time for rendering an arbitral award under the Arbitration Act, 1940, including after the award is made.
Whether parties can themselves extend the time for award issuance under the Act.
Whether the umpire's award constitutes a "speaking award" that permits judicial examination of its reasoning.
Whether an arbitral award can be set aside for an error of law on its face.
Whether the umpire acted beyond the statutory two‑month period, rendering the award invalid.

Legislation cited

Arbitration Act, 1940s. 28, s. 3, s. 30, s. 33

Subjects

ArbitrationAwardTime limitSpeaking awardExtension of timeArbitration Act 1940Set asideError of lawUmpire

Judgment

HINDUSTAN STEEL WORKS CONSTRUCTION LTD. A
v.
C. RAJASEKHAR RAO

JULY 27, 1987

[SABYASACHI MUKHARJI AND G.L. OZA, JJ.) B

Arbitration Act, 1940: Sections 3, 28 and 33-Arbitration pro-
ceedings-Not to be unduly prolonged-Whether Court has power to
extend time for giving award after award is made-Award-When can
be set aside-Reasons not given by arbitrator-Whether court entitled to
speculate and probe mental process by which arbitrator reached C
conclusion.

There was an Agreement between the respondent-contractor and
the appellant-construction company in respect of certain works. Differ-
ences and disputes arose and there were proceedings before the
arbitrators named In the Agreement. As the arbitrators could not agree D
,- and there were differences, this Court by an Order dated 16th June,
1983 directed that the arbitrators appointed by each of the parties be
appointed arbitrators and if there was disagreement between the
arbitrators, the matter was to be referred to the Umpire. In pursuance
of the said directions the parties appeared before the arbitrators who
referred the matter to the Umpire and the Umpire after consideration E
~ made an award dated 15th July, 1985.

The petitioner-construction company made a petition to this
Court for a decree in terms of the award, which was opposed by the
respondent-contractor contending that (a) the Umpire had made a
speaking award and that the validity or otherwise of the said award was F
justifiable in a Court of law, (b) that the Umpire had no jurisdiction to
proceed with the arbitration on or about 18th December, 1984 as the
period of two months from the date of his entering upon the reference
had expired and consequently the award was beyond time, and (c) that
the award contained error of law on the face of the award and there
~ were inconsistent findings. G

The Court while confirming the award,

HELD: 1.1 The policy of law is that arbitration proceedings
should not be unduly prolonged. The arbitrator, therefore, has to give
the award within the time prescribed, or such extended time as the H
653
65>1 SUPREME COURT REPORTS (1987) 3 S.C.R.

A court concerned may in its discretion extend, and the Court alone had
been given the power to extend the time for giving the award. [656E)

1.2 The Court has got power lo extend time even after the award
has been given or after the expiry of the period prescribed for the
award. But the court has to exercise its discretion in a judicial manner.
B This power could be exercised even by the appellate court. [656F]

1.3 The arbitrator gets the jurisdiction to enlarge the time for
making the award only in a case where after entering on the arbitra·
tion, the parties to the arbitration agreement consent to such enlarge-
ment of time. [657B]
c In the instant case, in view of the policy of law that the arbitration
proceedings should not be unduly prolonged and in view of the fact that
the parties have been taking willing part in the proceedings before the
arbitrator without a demur and had all along been willing to extend
time, this will be a fit case for the extension of time, and the time for
D giving the award is accordingly extended and the award will be deemed ....._
to have been given in time. [656F·G) '

2.1 An award might be set aside by the court on the ground of
error on the face of the award, but an award is not invalid merely
because by a process of inference and argument, it might be demons-
E trated that the arbitrator had committed some mistake in arriving at his
conclusion. (6570) ~

Jivarajbhai Ujamshi Sheth and others v. Chintamanrao Balaji and
others, (1964) 5 S.C.R. 480, followed. .y

F 2.2 Only in a speaking award the Court could took into the
reasoning of the award. It is not open to the Court to speculate, where
no reasons are given by the arbitrator, as to what impelled him to arrive
at his conclusion. It is also not open to the Court to attempt to probe the
mental process by which the arbitrator had reached his conclusion
where it u not disclosed by the terms of his award. [6570, H, 658A)
G r
The instant case is not one of a speaking award. The Umpire had
not spoken his mind indicating why he has done, what he has done, he
has narrated only how he came to make the award. No reasons have
been given for the purpose of making the award. There is no legal
proposition in the award which is unsustainable or lm11roper. The
H challenge to the award cannot, therefore, be accepted. [659G-Hl
HINDUSTAN STEEL WORKS v. C.R. RAO [MUKHARJJ, J.) 655

State of Punjab v. Sri Hardyal, (1985] 3 S.C.R. 649; H.K. Wattal A
v. V.N. Pandya, (1974] 1 S.C.R. 259 and Chempsay Bhara and Com-
pany v. Jivraj Balloo Spinning and Weaving Company Ltd., L.R. 50
I.A. 324, referred to.

CIVIL APPELLATE JURISDICTION: Civil Misc. Petition No.
'" 28356 of 1986. B

IN

- CIVIL APPEAL No, 5579 of 1983.

From the Judgment and Order dated 22.4.1983 of the Andhra C
Pradesh High Court in Civil Rev. Peta. No. 2626 of 1982.

Dr. Shanker Ghose and P .P. Singh for the Appellant.

S. Markandeya and C. Markandeya for the Respondent.
D
The Judgment of the Court was delivered by

SABYASACIU MUKHARJI, J. This is an application filed by
the Hindustan Steelworks Construction Company Limited for filing
the award of the Umpire appointed by this Court, Shri Justice
Jaganmohan Reddy, retired Judge of this Court and for passing a E
decree in terms of the said award. It appears that there was an agree-
ment between Shri Rajasekhar Rao, the contractor and the Hindus-
tan Steelworks Construction Limited, petitioner, in respect of certain
-,· works. Differences and disputes arose, and there were proceedings
before the arbitrator named in the Agreement and there were certain
proceedings, the detail of which is not necessary to refer. As the F
arbitrators could no.t agree, there were differences. This Court by an
order dated 16th of June, 1983 directed that arbitrators appointed by
each of the parties be appointed arbitrator to adjudicate upon the
dispute between the parties. It was stipulated therein that in the said
order of this Court dated 16th of June, 1983, it would be no longer
~pen to the party to question the validity of the appointment of the G
arbitrators. In the event of any disagreement between the two
arbitrators, Shri Jaganmohan Reddy, a former Judge of this Court was
directed to act as the Umpire. Further consequential directions were
also given. Thereafter the parties appeared before the arbitrators and
referred the matter to the umpire, The Umpire after consideration bas
made the award dated 15th of July, 1985 which has been filed in this H·
I
656 SUPREME COURT REPORTS [1987) 3 S.C.R.

Court and the petitioner seeks a decree in terms of the award. The
A
respondent-contractor, Shri Rajasekhar Rao objects to the award be-
ing made a rule of the Court. He states in his objections that the
umpire had made a speaking award, therefore according to his counsel
the validity or otherwise of the said award was justifiable in a court of
law.
B
He, however, firstly contends that the award was m3de beyond
time. He further contends that the umpire had no jurisdiction to pro- Y '
ceed with the arbitration on or about 18th of December, 1984 as the

-
period of two months from the date of his entering upon the reference
viz, October 20, 1984 had expired on December 18, 1984. According
C to the said objections, the umpire became functus-officio. It was con-
tended that the power to extend the period of passing the award was •
vested in the court alone under section 28 of the Arbitration Act and it Y
was not permissible for the parties to extend the time. We are unable
to accept this position. Mr. Markendeya drew our attention to certain
observations of this Court in the case of State of Punjab v. Sri Hardyal,
D [ 1985] 3 S. C.R. 649. He relied on the observations of the Court at ~
page 656 and emphasised that law precludes parties from extending
time after the matter had been referred to the arbitrator, it would be
contradiction in terms to hold that the same result could be brought
about by the conduct of the parties. These observations, in our opi-
nion, are out of the context. The policy of law is that the arbitration
E proceedings should not be unduly prolonged. Th6 arbitrator therefore
has to give the award within the time prescribed or such extended time 4--
as the court concerned may in its discretion extend and the court alone
has been given the power to extend time for giving the award. The
court has got the power to extend time even after the award has been 'y
given or after the expiry of the period prescribed for the award. But
F the court has to exercise its discretion in a judicial manner. In that case
this Court found that the High Court was justified in taking the view
that it did. This power, however, could be exercised even by the appel-
late court. In view of the policy of law that the arbitration proceedings
should not be unduly prolonged and in view of the fact that the parties
have been taking willing part in the proceedings before the arbitrato~
G without a demur and had all along been willing to extend time, this wilP.-
be a fit case, in our opinion, for the extension of time. We accordingly
extend the time for giving the award and the award will be deemed to
have been given in time. In this case, it appears that under section 28
and in the light of section 3 of the First Schedule the parties are
allowed to extend the time. In this connection reference may be made
H to H.K. Wattal v. V.N. Pandya, (1974] 1 S.C.R. 259, where this Court
HINDUSTAN STEEL WORKS v. C.R. RAO (MUKHARJ!, J.] 657

reiterated that sub-section (2) of section 28 indicated one exception to A
the above rule that the arbitrator could not enlarge the time, and that
was when the parties agreed to such an enlargement. It is clear this
Court reiterated that the arbitrator gets the jurisdiction to enlarge the
time for making the award only in a case where after entering on the
arbitration the parties to the arbitration agreement consent to such
enlargement of time. In this case precisely it happened. Furthermore B
the parties have proceeded before the umpire on that basis which is
just and proper and furthermore the time should be extended as was
done in the case of State of Punjab v. Sri Hardyal, (supra). In the
aforesaid view of the matter we are unable to accept the submission on
behalf of Shri Markendeya that the award of the umpire was beyond
time. c
It was next contended that the award contained error of law on
the face of the award and there were inconsistent findings. It has to be
borne in mind that it was only in a speaking award that the court could
look into the reasoning of the award. In the case of Jivarajbhai
< Ujamshi Sheth and others v. Chintamanrao Balaji and others, [1964] 5 D
S.C.R. 480, this Court observed that an award n\ight be set aside by
the court on the ground of error on the face of the award, but an award
was not invalid merely because by a process of inference and argument
it might be demonstrated that the arbitrator had committed some mis·
take in arriving at his conclusion. The law on this point is well-settled.
The Judicial Committee in Chempsey Bhara and Company v. Jivraj E
-f. Balloo Spinning and Weaving Company Ltd. L.R. 50 I.A. 324 clarified
that an error of law on the face of the award means, that one could find
in the award or a document actually incorporated thereto, as for
'f instance a note appended by the "arbitrator stating the reasons for his
judgment, some legal proposition which is the basis of the award and
which one could then say was erroneous. It did not mean that if in F
narrating a reference was made to a contention of one party, that
opened the door to seeing first what that contention was, and then
going to the contract on which the parties' rights depended to see if
that contention was sound". It has been further reiterated by this
Court in the aforesaid decision relying on Chempsey Bhara and Com-
-( pany's case (supra), that in dealing with an application to set aside an G
award the court had not to consider whether the view of the arbitrator
on the evidence was justified. The arbitrator's adjudication was gener-
ally considered binding between the parties, for he was the tribunal
selected by the parties and the power of the Court to set aside the
award was restricted to cases set out in section 30 of the Arbitration
Act. It is not open to the court to speculate, where no reasons are H

.. lT .
658 SUPREME COURT REPORTS [1987] 3 S.C.R.

A given by the arbitrator, as to what impelled the arbitrator to arrive at
his conclusion. It is not open to the Court to attempt to probe the
,,
mental process by which the arbitrator had reached his conclusion
where it is not disclosed by the terms of his award. In this case this is
not a speaking award. The learned Umpire has not spoken his mind
indicating why he has done, what he has done, he has narrated only
B
how he came to make the award.

Counsel drew our attention to page 26 of the award where diffe.
rent items have been set out and referred to page 30 of the award
where the arbitrator noted as under:
~
c "The Respondent demurs to this and its officers have
denied having received them in their affidavits and in their
oral testimony. No officer of the Post Office from which y
the letter was sent by Registered Post or of the Post Office
through which delivery of that Registered letter was effec·
D
ted to the addressee has been summoned to establish that
these letters did not emanate from their Post Offices or that
the Post Office seals affixed on the "Certificates of Posting"
and "Postal Acknowledgements" were not of those Post
,.
Offices which delivered them to HSCL or that they were
forged or fraudulent, nor was anything produced to show
that these were not posted or registered from the Post
E
Offices from which they emanated".

Counsel further drew our attention to the statement at page 33 of .+
the award about the losses. Mr. Markandeya contended that these
were the reasons given by the learned umpire, We are unable to y·
accept, What the learned umpire did in the aforesaid paragraphs was
F
to narrate the facts and state the history and state of pleadings. The
umpire in the operative part of the award observed as under:

"WHEREAS I perused and considered the entire
record with great care including the record of affidavits, the
oral evidence tendered before me, the statement of claim
G dated 12.10. 1983; the counter-statements dated 27 /31-10- ~
1983 and the Rejoinder of the claimant and considered the
documents filed in support of the case of the respective
parties as also the written and oral submissions made
before me by counsel for the parties in support of their
respective cases of the parties for which they have
H
HINDUSTAN STEEL WORKS v. C.R. RAO [MUKHARJI, J.] 659

appeared; and having duly considered the dispute in its A
varied aspects placed before me by the parties and in the
light of the entire material in the case as above narrated.

I, P. JAGANMOHAN REDDY, the Umpire,
nominated by the Supreme Court of India as aforesaid, and B
having jurisdiction to adjudicate the dispute between the
parties in the claims and counter-claims relating to Work
Orders Nos. 3, 4, 5, 6 and 8 concerning the Glass Factory
and Works Orders Nos. 9 and 10 concerning Lamp Factory
and the contention of the claimant and the respondent in
respect of the said Claims and counter claims.
c
(1) I DO HEREBY MAKE MY AWARD, order
and direct that the Respondent do pay to the claimant a
sum of Rs,31,740-30p. (Rupees thirtyone thousand seven
hundred and forty and thirty paise) only in full satisfaction
of its liability for the claim made by the Claimant-Contra- D
ctor against the Respondent with interest at the rate of six
per cent per annum from the date of Award.

(2) I further award and direct that the counter-claims
made by the respondent do stand dismissed.
E
+ (3) I further award and direct that the parties do bear
their respective costs incidental to these proceedings.

I (4) I further direct that the amounts paid by the
parties towards the hearing fees etc., from time to time in
respect of the several hearings of these arbitration proceed- F
ings and the amount in deposit be appropriated and has/
have accordingly been appropriated towards the remunera-
tion of the Umpire".

_, Therefore, in his award as a whole no reasons have been given G
for the purpose of making the award. In other words, it is not a speak-
ing award at all. The Award did not speak as to why the umpire has
awarded as he did. It does not speak the mind of the umpire. It men-
tions the events leading to the making of the award. In the award,
there is no legal proposition which is unsustainable or improper. In
that view of the matter the challenge to the award cannot be accepted. H

...
660 SUPREME COURT REPORTS [ 1987] 3 S.C.R.

A In the premises, the objections are rejected. There will be decree
in terms of the award of the Umpire, Shri P. Jaganmohan Reddy.
There will be interest on the judgment at 9% until realisation. The
applicant will have the costs of this application.

N.P.V. Award Confirmed.
B