Holding

A lump‑sum arbitration award is within the scope of a broad arbitration clause, need not be separately reasoned for each claim, and can be set aside only on the limited grounds specified in Sections 30 and 33 of the Arbitration Act, 1940.

Summary

Paradip Port Trust entered into a scrap‑sale agreement with Unique Builders that contained an arbitration clause. Disputes were referred to an arbitrator who awarded a lump‑sum of Rs 8,51,315 with interest, without giving reasons and based solely on documentary evidence. The Sub‑Judge set aside the award under Sections 30 and 33 of the Arbitration Act, 1940; the High Court reversed that decision, making the award a rule of court but denying pendente‑lite interest. The Trust appealed, arguing the award was beyond the scope of the arbitration agreement, violated natural‑justice principles and was arbitrary; the Company appealed on the interest issue. The Supreme Court held that a lump‑sum award is within the scope of a wide‑ranging arbitration clause, that an arbitrator is not required to give separate awards for each claim, and that the award was not arbitrary nor violative of natural justice. The Court affirmed that an award can be set aside only on the limited grounds in Sections 30 and 33, and it awarded future interest of 12% per annum while upholding the High Court’s denial of pendente‑lite interest.

Issues considered

The award was beyond the scope of the arbitration agreement because it was a lump‑sum award covering multiple claims.
Whether the arbitrator’s award, being non‑reasoned and based only on documents, violated principles of natural justice or was arbitrary.
Whether the award could be set aside under the Arbitration Act, 1940, Sections 30 and 33.
The entitlement to pendente‑lite interest and the appropriate rate of future interest.

Legislation cited

Arbitration Act, 1940s. 30, s. 33

Subjects

ArbitrationLump‑sum awardScope of arbitration clauseNatural justiceInterest pendente liteFuture interestArbitration Act 1940Section 30Section 33Award set‑aside

Judgment

A PARADIP PORT TRUST AND ORS. ETC.
v.
UNIQUE BUILDERS ETC.

JANUARY 30, 200 I

B [S. RAJENDRA BABU AND SHIVARAJ V. PATIL. JJ.]

Arbitration:

Arbitration Act, 1940--Sections 30, 33-Claims-Award of-Arbitrator
C awarding a lump sum award and not separate award for each claim-·
Contention that award was beyond the scope of arbitration agreement as ii
could not be made in respect of certain claims-Tenability of-Held, it is not
possible to say uhether the Arbitrator awarded any amount under the claims
alleged to be olllside the scope of arbitration clause when the award was
D made in lump sum-There is nothing to show that the award passed by the
Arbitrator was beyond the scope of either the arbitration clause or the terms
of the contract or it was iiz excess or opposed to the terms of reference-
Arbitrator not bound to give a separate award for each claim-lump sum
award, held, not bad per se. .'/I'

E Arbitration Award-Amenability to Court's jurisdiction--Scope a/-
Held, the arbitrator's award is final both on facts as well as law and can be
set aside only in situations specified in Sections 30 and 33 of the Arbitration
Act.

Interest-Future interest--Grant of-Held, just and appropriate in the
F facts and circumstances of the case.

Administrative law:

Principles of Natural Justice-Compliance of-Parties not leading any
oral evidence and re~ving only on the correopondence between them-Held,
G contents of award clearly indicating that fair and sufficient opportunity was
given to parties by !he Arbitrator-·No violation of Principles of Natural
Justice.

Appellant-Trust entered into an agreement with respondent-Company
for sale of scrap. Certain disputes arose between the parties which were
H 668
1

P/\RADll' PORTTRlJSTv. lJNIQUE BUILDERS 669
referred to an arbitrator pursuant to the arbitration clause contain.ed in the A
- -.i-- said agreement. B, an advocate, was appointed as Arbitrator. He entered into
reference and after conducting the proceedings passed an award to the effect
that the Company was entitled to receive a sum of Rs. 8,51,315 together with
interest@ 18 per cent per annum from the Trust. The parties did not lead
any oral evidence before the Arbitrator and relied only on the correspondence B
between them. The award passed by the Arbitrator did not contain any reasons
and was a non-speaking one. The Court of Subordinate Judge, on receipt of
the award, issued notices to the parties. The Trust filed objections challenging
the award on various grounds which were upheld and award was set aside.
Aggrieved, the Company filed a Miscellaneous Appeal before the High Court.
The High Court allowed the appeal and made the award a rule of the court C
subject to the modification as to the award of interest as indicated in the
order. Hence the appeal by the Trust. The other appeal has been preferred by
_..,,,- the Company challenging the aforesaid order to the extent it was denied
interest.

On behalf of the appellant-Trust, it was contended that the award had D
been passed in violation of principles of natural justice inasmuch as cer~ain
documents were received without notice to the Trust, after the closing of the
proceedings before the Arbitrator and thereafter the award was passed; that
/
. ,.-- the award passed by the Arbitrator was beyond the scope of the arbitration
agreement, as it could not be made in respect of certain claims; that although
recording of reasons in the award could not be insisted and on that account
E
itself, award could not be vitiated, yet no award could be passed arbitrarily.

On behalf of the respondent-Company, it was contended that there was
no justification for the High Court to deny pendente lite and future interest.

Dismissing the appeal filed by the trust and partly allowing the appeal F
filed by the Company in regard to the payment of interest, the Court

HELD : I. The claims made in the statement by the Company are clearly
covered by the arbitration clause in the agreement and they fall within the
scope of arbitration clause. The contention that some of the claims were G
outside the terms of agreement, cannot be upheld. It is an award made in
lump sum. It is not possible to read the mental process of the Arbitrator as to
how he came to the conclusion in passing the award for lump sum amount.
further the award passed by the Arbitrator cannot be set aside assuming
that another view is possible. Thus, it can111;1t be held that the award passed by
the Arbitrator was beyond the scope of either the arbitration clause or the H
670 SUl'RUvl I. COURT REPORTS [200111 S.C.R.

A terms of the contract or it was in excess or opposed to the terms of reference.
It is not possible to take a view that the award passed by the Arbitrator was
arbitrary or unsustainable. It is not shown as to how the award was made by
the Arbitrator disregarding the terms of the reference or the arbitration
agreement or the terms of the contract. It is not a case where the arbitrator
B has acted arbitrarily, irrationally, capriciously or independently of the
contract. It is difficult to take a view that there has been a deliberate departure
or conscious disregard of the contract to say that the arbitrator misconducted
himself. 1674-C-F; 676-C-DI

State ofOrissa and 01hers v. Ml\·. Lall Bro1hers, 1198811 SCC 153 and
C Firm Madan/a/ Roshanlal Mahuian v. Hukumchand Mills Ltd, AIR 119671
SC I 030, referred to.

2. The High Court having denied the interest on the ground that there
was no claim for interest pendenle file before it nor any argument was
advanced in that behalf, that part of the order of the High Court in relation to
D denial of interest to the Company, cannot be interfered with. However, there
is no good ground or valid reason to deny future interest from the date of the
decree, to the Company Having regard to the facts and circumstances of the
case, it is just and appropriate to award interest@ 18 per cent per annum
and future interest@ 12 per cent per annum from the date of decree till
E payment. 1676-G-H; 677-A-DI

Executive Engineer, Irrigation, Galima/a and others v. Abnaduta Jena,
AIR 119881 SC 1520 and SecretW)' lrrigalion Department, Government of
Orissa and others, v. G.C. Roy, 1199211 SCC 508, referred to.

3. There was no violation of principles of natural justice in passing the
F award. The contents of the award clearly indicate that fair and sufficient
opportunity was given to the parties by the Arbitrator. In fact, the parties did
not lead any oral evidence before the Arbitrator and relied only on the
correspondence between them. 1673-F-G; B-Cj

G 4. Generally an award passed by the arbitrator is considered binding
between the parties for the reason that the parties select the arbitrator, and
powers of the Court to set aside the award are restricted to cases set out in ,......_
Section 30 of the Act. It is not open to the Courts to guess or speculate
reasons for the award, when it is non-reasoned. Courts cannot attempt to
investigate the mental process by.. which the arbitrator arrived at a conclusion
H where it is no visible from the award. The Jurisdiction of courts including
PARADIP PORT TRUST v. UNIQUE BUILDERS [PATIL.J.] 671

High Courts is not independent of the statute. The arbitrator's award is final A
both on facts as well as on law. There is no appeal from his verdict. However,
an award can be set aside only in situations specified in Sections 30 and 33
of the Act. 1674-G-H; 675-AI

Jivarajbhai Ujamshi Sheth and others v. Chintamanrao Ba/aji and
others, AIR 119651 SC 214; Puri Construction Pvt. Ltd. v. Union of India. B
119891 I SCC 411; Gujarat Water Supply and Sewerage Board v. Unique
Erectors (Gujarat) (P) ltd. and another, AIR 119891 SC 973 and Rajasthan
State Mines an<j Minerals ltd. v. Eastern Engineering Enterprises and another,
II 9991 9 sec 283, referred to.
CIVIL AP PELLA TE JURISDICTION : Civil Appeal No. 3683 of C
1996.

From the Judgment and Order dated 25.8.92 of the Orissa High Court
in M.A. No. 228of1987.

With
D

C.A. No. 4144of1996.

Govind Das, Ms. T. Harshvardan, Ms. Sweta Verma, S.B. Upadhyay, Raj
Kumar Mehta and Ms. M. Sarada for the appearing parties.
E
The Judgment of the Court was delivered by

SHIV ARAJ V. PATIL, J. These two appeals are directed against the
order dated 25.8.1992 passed by the High Court of Orissa in Miscellaneous
~ Appeal No. 228/1987. For convenience, we will refer to Paradip Port Trust as F
'the Trust' and Unique Builders as 'the Company'.

2. The Trust entered into an agreement with the Company on 31.3.1981
for sale of scrap. Certain disputes arose between the parties. Pursuant to the
arbitration clause contained in the said agreement they came to be referred
to an arbitrator. Shri B.P. Das, Advocate, was appointed as Arbitrator; he G

-- entered into reference and after conducting the proceedings passed the award
on 1.6.1985 to the effect that the Company was entitled to receive a sum of
Rs. 8,51,315 together with the interest @ 18 per cent per annum from 28. 9.1992
from the Trust. The parties did not lead any oral evidence before the Arbitrator
and relied only on the correspondence between them. The award passed by
the Arbitrator did not contain any reasons and is a non-speaking one. The H
672 SUPREME COURT REPORTS 12001] 1 S.C.R.

A Court of Subordinate Judge, Jagatsinghpur, ori receipt of the award, issued
notices to the parties. The Trust filed objections challenging the award on ..__
various grounds. The court after considering the objections under sections
30 and 33 of the Arbitration Act, 1940 (for short the ·Act') upheld them and
set aside t!1e award. Aggrieved by the same, the Company filed the
B Miscellaneous Appeal before the High Court. The High Court allowed the
appeal and made the award a rule of the court subject to the modification as
to the award of interest as indicated in the order. Hence the Trust has filed
this Civil Appeal No. 368311996 challenging the same in this court. The
Company has filed Civil Appeal No. 414411996 to the extent it was denied
interest.
c
3. Shri Gobind Das, learned senior counsel for the Trust urged that (I)
the High Court was not right in reversing the order of the learned Subordinate
Judge when the award had been passed in violation of principles of natural
justice inasmuch as certain documents were received without notice to the
Trust, after the closing of the proceedings before the Arbitrator and thereafter
D the award was passed; (2) The award passed by the Arbitrator was beyond
the scope of the arbitration agreement, as it could not be made in respect of
certain claims, the High court was not right in upholding the award; (3)
although recording of reasons in the award could not be insisted and on that
account itself, award could not be vitiated, yet no award could be passed
E arbitrarily.

4. Per contra, Shri Raj Kumar Mehta, learned counsel for the Company
made submissions supporting the impugned order upholding the award. He
added that the impugned judgment of the High court is based on the well-
settled principles of justice in the light of the law laid down by this Court.
p He urged that there was no justification for the High Court to deny pendente
lite and future interest.

5. We have considered the submissions made by the learned counsel
for the parties carefully. In para I I of the impugned judgment, the High Court
has recorded thus :
G "I I. some arguments were advanced by the learned counsel for the
. .___
respondents that the arbitrator has violated the principles of natural
justice as he accepted some documents after closing the argument
and the respondents were not given any opportunity thereafter either
to explain the said document or adduce fresh evidence in relation
H thereto. This argument was abandoned after perusal of the order-
PJ\RJ\DI I' PORT TRUST r. llNl(.>UE BUILDERS [PJ\TI L. J.] 673
sheet of the arbitrator which shows that at each stage adequate A.
opportu.nity was given to both parties. Thus the award in hand cannot .
be set aside on any of the grounds relied on by the learned court
below."

6. The learned senior counsel for the Trust was not in a position to say
that the statement made in the above paragraph is incorrect. If that be so, his B
contention that the arbitrator passed the award in violation of the principles
of natural justice, cannot be accepted. It may be added that the parties did
not lead any oral evidence and they were satisfied with the documents placed
before the Arbitrator.

7. In the operative portion.of the award it is stated thus: c
"I-laving perused and considered by the statements of claim filed by
the claimants, written statement and counter claim filed by the opposite
parties, documents filed by parties and having considered the
objections raised by the parties at different stages of hearing and
having carefully considered the documents/evidence on record and D
arguments of learned advocates of the parties assisted by their
respective clients I make the following awards.

Mis. Unique Builders Ltd., the claimant is entitled to receive from
Paradeep Port Trust (Respondent No. 3) a sum of Rs. 8,51,315.00
(Rupees Eight lakhs, fifty one thousand three hundred fifteen only) E
with interest at the rate of 18 per cent per annum with effect from 28th
September, 1982. The opposite Parties are directed to pay the aforesaid
amount within 60 days.

The counter claim made·by the opposite Parties I, 2 and Paradeep
Port Trust is disallowed."
F
8. The contents of this award also clearly indicate that fair _and sufficient
opportunity was given to the parties by the Arbitrator. This again shows that
there was no violation of principle of natural justice in passing the award.

9. The arbitration clause contained in the agreement entered into
between the parties reads thus: G

In the event of any dispute or difference of opinion between the Port
Trust and the Purchasers as to the respective rights and obligations H
674 SUPREME COURT REPORTS [2001] I S.C.R.

A of the parties hereunder or as lo the true intent and meaning of those
presents or any articles or conditions thereof, such dispute or difference ...,._ ·
of opinion (except the matter regarding which the decision has been
specifically provided for in the terms and conditions) shall be referred
to the sole arbitration of an officer of the Port Trust who shall be · •
nominated for the purpose for the time being and his decision shall
B be final, conclusive and binding on the parties. Fo· the purpose of
this contract, the Chairman will mean the head of the Organisation.

l 0. The clause relating to the arbitration extracted above, is wide enough
to cover all disputes or differences of opinion between the parties as to their
C respective rights and obligations or as to the .true intent and meaning of those
presents or any articles or conditions thereof (except the :natter regarding
which the decision has been specifically provided for in the terms and
conditions). The claims made in the statement by the Company, in our view,
are clearly covered and they fall within the scope of arbitrntion clause. The
learned counsel, referring to the claim nos. 2 and 7 urged ·:hat these claims
D were outside the terms of agreement. The Company made a claim for
Rs. 12,93,260 against various heads and the Arbitrator granted Rs. 8,61,315
with interest as stated in the award. It is an award made in lump sum. It is
not possible to say whether the Arbitrator awarded any amount under claim
nos. 2 and 7 when the award was made only for Rs.8,61,315 i\S against the 'T
E total claim of Rs. 12,93,260. It is not possible to read mental process of the
Arbitrator as to how he came to the conclusion in passing th·~ award for lump
sum amount. Further the award passed by the Arbitrator cannot be set aside
assuming that another view is possible. Thus we are unable to agree with the
contention of the learned counsel that the award passed by the Arbitrator
was beyond the scope of either the arbitration clause or the terms of the
F contract or it was in excess or opposed to the terms of reference. In view of
what is stated above, it is not possible to take a view that the award passed
by the Arbitrator was arbitrary or unsustainable.

11. From several decisions of this Court and the provisions contained
G in the Act, it is clear that generally an award passed by the arbitrator is
considered binding between the parties for the reason that the parties select
the arbitrator and powers of the court to set aside the award are restricted
to cases set out in Section 30 of the Act. It is not open to the courts to guess
or speculate reasons for the award, when it is non-reasoned. Courts cannot
attempt to investigate the mental process by which the arbitrator arrived at
H conclusion where it is not visible from the award. The jurisdiction of courts
•
'
l'ARADIP PORT TRUST v. UNIQUE BUILDERS [PATIL, .I.] 675
includitig High Courts is not independent of the statute. The arbitrator's A
award 's final both on facts as well as law. There is no appeal from his verdict.
However, an award can be set aside only in situations specified in Sections
30 and 33 of the Act. In the light of law already settled by this Court, we
consider it unnecessary to cite long list of decisions in this regard. We will
refer to few of them, including those relied upon by the learned counsel for B
the parties in support of their respective contentions, hereinafter.

12. In Jivarajbhai Ujamshi Sheth and others v. Chinlamanrao Balaji
and others, AIR (1965) SC 214, this Court, in para 18, has stated that "An
award made by an arbitrator is cone lusive as a judgment between the parties
and the Cou1t is entitled to set a!>ide an award ifthe arbitrator has misconducted C
himself in the proceedings or 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 S. 35 of the Arbitration Act or where
an award has been improperly procured or is otherwise invalid (S. 30 of the
Arbitration Act). An award may 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 D
by a process of inference and agreement it may be demonstrated that the
arbitrator has committed some mistake in arriving at his conclusion."
'
''
13. This Court in Puri Cons/ruction Pvt. ltd. v. Union of India, (1989]
SCC 411, has taken the view that "Even on accepting the suggestion and
interpreting the objection petition of the respondent liberally, the decision of E
the High Court cannot be maintained. When a court is called upon to decide
the objections raised by a party against an arbitration award, the jurisdiction
of the court is limited, as expressly indicated in the Arbitration Act, and it has
no jurisdiction to sit in appeal and examine the correctness of the award on
merits."
F
14. This Court in State of Orissa and others v. Mis. Lall Brothers, (1988]
4 sec 153, has held that the fact that there is a non-reasoned award, is no
ground to set it aside and that lump sum award is not bad per se, as such.

15. In Gujarat Water Supply and Sewerage Board v. Unique Erectors
(Gujarat) (P) ltd and another. AIR (1989] SC 973, in para 11 of the judgment G
it is observed by this Court that "Reasonableness as such of an award unless
the award is per se preposterous or absurd is not a matter for the court to
consider. Appraisement of evidence by the arbitrator is ordinarily not a matter
for the court.

16. In a recent decision this Court in Rajasthan State Mines and H
676 SUPREME COUR r REPORTS [2001 j I S.C.R ..

A Minerals ltd v. Eastern Engineering Enterprises and another. [ 1999] 9 SCC
283, after referring to large number of decisions on the subject, in para 44 has
reiterated the position of law as stated above. The learned counsel for the
Trust, when specifically asked under which clause of para 44 the case of the
Trust falls, pointed out to clauses (h) and (i) of para 44 of the said judgment.
B Clause (h) refers to the award made by the arbitrator disregarding the terms
of the reference or the arbitration agreement or the terms of the contract and
states that in such a case it would be jurisdictional error, which requires
ultimately to be decided by the court. This has no application to the present
case as it is not shown to us how the award was made by the Arbitrator
disregarding the terms of the reference or the arbitration agreement or the
C terms of the contract. Clause (i) also does not help the Trust having regard
to the facts of the case in hand and the award made by the Arbitrator based
on documentary evidence. It is not a case where the arbitrator has acted
arbitrarily, irrationally, capriciously or independently of the contract. It is
difficult for us to take a view that there has been a deliberate departure or
conscious disregard of the contract to say that the arbitrator misconducted
D himself. The other clauses contained in the same paragraph, if applied to the
facts of the case on hand, support the Company.

17. This Court in Firm Madan/a/ Roshanlal Mahajan v. Hukumchand
Mills ltd, AIR (1967) SC 1030, has held that the arbitrator could give a lump
E sum award and that he would not be bound to give a separate award for each
claim; his award on both fact and law is final; there is no appeal from his
verdict.

18. The learned counsel for the Company pointed out that the High
Court, placing reliance on the judgment of this Court in Executive Engineer,
F lrrigalion, Galimala and others v. Abnadula Jena, AIR ( 1988) SC 1520,
denied interest pendenle file. But in a subsequent decision by the Constitution
Bench of this Court in Secretary, Irrigation Department, Government of
orissa and Ulhers V. G.C. Roy, [1992] I sec 508, it is held that the decision
in Abnaduta Jena's case did not lay down good law on this aspect. The
G Constitution Bench decided the case on 12.12.1991. The impugned order of
the High Court was passed on 25.8.1992. We agree with the submission of
the learned counsel for the Company as to the power of the arbitrator to
award interest pendenle lite. However, the High Court having denied the
interest on the ground that there was no claim for interest pendente lile
before it nor any argument was advanced in that behalf, we are not inclined
H to upset that part of the order of the High Court in relation to denial of interest
PARADIP PORT TRUST v. UNIQUE BUILDERS [PATIL. J.J 677
to the Company. However, we do not fin"d any good ground or valid reason A
to deny future interest from the date of the decree to the Cortipany. Hence,
having regard to the facts and circumstances of the case we consider it just
and appropriate to award future interest @ 12 per cent per annum from the
date of decree till payment. The award of interest from 28.9;1982 to 10.1.1985
was justified by the High Court in the impugned judgment. The contention
that there was no basis for choosing the date 28.9.1982 fs answered in the B
judgment of the High Court itself stating that it was on 28.9.1982 that the
Trust repudiated the contract and forfeited the deposit made by the Company
and that the Arbitrator entered into referef1ce on 10.1.1985. We agree with the
reasons recorded by the High Court in this regard. Further as already noticed
above, the award is made in lump sum. As rightly observed by the High C
Court, unless there appears to be a mistake on the face of the award and the
documents appended or incorporated thereto which form part of the award,
it cannot be set aside even with respect to interest part of it. In this view of
the matter, we hold that the Company is entitled for interest @ 18 per cent
per annum from 28.9.1982 to 10.1.1985 and future interest@ 12 per cent per D
annum from the date of decree till payment.

19. The learned senior counsel for the Tl'Ust drew our attention to the
"'f order dated 26.7 .1993. passed by this Court, which reads;-

"Issue notice.
E
Since the respondent is represented by counsel, no further notice to
the respondent is necessaiy.

The money would be paid to the respondent subject to the respondent
furnishing sufficient security to the satisfaction of the executing court."
F
He added that the Trust has paid money to the Company pursuant to
the said order. If the amount is paid to the Company, that shall be taken into
consideration in satisfying the amount awarded to the Company.

20. For the reasons stated hereinabove Civil Appeal No. 3683 of 1996,
being devoid of any merit, is dismissed. Civil Appeal No. 4144 of 1996 is G
_,... allowed to the extent indicated in para 18 above in regard to the payment of
interest and the order of the High Court to that extent stands modified. In the
facts and circumstances of the case the parties shall bear their own costs.

M.P. C.A. No. 3683/96 dismissed and
C.A. No. 4144/96 allowed. H