Holding

The High Court was justified in setting aside the arbitral award and remitting the matter for redetermination because the arbitrator failed to decide all the disputes referred to him.

Summary

The State of Orissa and Orient Paper & Industries Ltd entered into an agreement granting exclusive rights to fell bamboos, which later gave rise to disputes over the measurement of bamboo quantities. The parties referred three specific questions to an arbitrator: the correctness of the Chief Conservator's determination of bamboo weight, the scientific validity of that calculation, and its applicability to all cases from 1‑Oct‑1973. The arbitrator’s award merely restated the Chief Conservator’s figures and failed to address the second and third questions. The Orissa High Court, invoking Section 16 of the Arbitration Act, 1940, set aside the award and remitted the matter for redetermination. The State appealed to the Supreme Court, arguing the award was sufficient, but the Court held that the arbitrator had not decided the disputes referred to him and therefore upheld the High Court’s decision. The Court also observed that the State’s further appeal was unnecessary and caused avoidable expense and delay.

Issues considered

Whether an arbitral award that does not decide all issues referred to the arbitrator is valid under the Arbitration Act, 1940.
Whether the High Court was justified in setting aside the award under Section 16 of the Arbitration Act, 1940.
Whether the State of Orissa could challenge the High Court’s order under Article 136 of the Constitution.
Whether a State must act as a private litigant in challenging every judicial order.

Legislation cited

Arbitration Act, 1940s. 16, s. 30
Constitution of Indias. Article 136

Subjects

arbitrationarbitral awardSection 16non‑speaking awardState litigationArticle 136bamboo licensingredetermination

Judgment

A STATE OF ORISSA
v.
ORIENT PAPER AND INDUSTRIES LTD.

APRIL 9, 1999

B [D.P. WADHWA AND N. SANTOSH HEGDE, JJ.]

Arbitration Act, 1940-S. 30-Dispute-Arbitration-Award-Arbitrator
not d2ciding the dispute referred to him-High Court setting aside the award
and remitting the matter back to the Arbitrator for redefermination-Validity
C of-Held, High Court justified in setting aside the award and remitting it
back for redetermination.

Co~stitution of India, 1950-Article 136-Arbitration-Award-
Arbitrator not deciding the dispute referred-High Court setting aside the
award and remitting it for redetermination-Appeal by State Government-
!). Necessity of-Held, in the circumstances of the case, it was not necessary for
the State Government to have challenged the order of High Court causing
unnecessary expense and delay in deciding the dispute-State can not act
like a private litigant challenging each and every order-Arbitration Act,
1940-S.16.
E
Disputes arose between the parties regarding exclusive right and licence
to fell, cut and remove bamboos. The disputes were referred to an Arbitrator
for determining (1) whether the decision of the Chief Conservator of Forests
that 2300 metres or 7475 running feet of sail bamboos and 600 metres or
1950 running feet of Daba bamboos would make a tonne in weight; (2)
·p whether this calculation is scientific; (3) whether the calculation will apply
in all cases, to take effect from 1.10.1973. Arbitrator passed an award
holding that the Chief Conservator had determined under clause 10 of the
Agreement that 2300 metres or 7475 running feet ofSalia bamboos and 600
metres or 1950 running feet ofDaba bamboo respectively make a tonne and
G the same was held to be final and binding on both the parties. The said award
was made rule of the Court. On appeal, High Court holding that the Arbitrator
had not decided the disputes referred to him for arbitration, set aside the
award and remitted the matter back to the Arbitrator for redetermination.
Hence the present appeal.

H On behalf of the appellant-State it was contended that a perusal of the
568
STATE v. ORIENT PAPER AND INDUSTRIES LTD. 569
award shows that the Arbitrator had in fact concurred with the decision A
taken by the Chief Conservator of Forests in regard to the methodology to
be adopted for determining the quantity of bamboos cut and removed. Since
the Arbitrator was agreeing with the methodology adopted by the Chief
Conservator of Forests, the question of giving reasons in a non-speaking
award does not arise.
B
On behalf of the respondent-company it was contended that Arbitrator
had not at all decided the various points that arose in the first dispute
referred to him and therefore, there was non-application of mind by the
Arbitrator and consequently the dispute referred to the Arbitrator remained
unanswered and to the High Court w'1sjustified in remitting the matter back C
to the Arbitrator.

Dismissing the appeal, this Court

HELD : PER N. SANTOSH HEGDE, J.

1.1. High Court was justified in setting aside the award and remitting D
it back to the Arbitrator for redetermination. [573-A]

1.2. The award of the Arbitrator in regard to the first dispute referred
to him merely says that the Chief Conservator had determined under Clause
IO of the Agreement that 2300 metres or 7475 running feet ofSalia bamboos
and 600 metres or 1950 running feet ofDaba bamboo respectively make a E
tonne and the same is held to be final and binding on both the parties. He
did not even advert to the other points. The High Court was right in coming
to the conclusion that the Arbitrator did not decide the question whether the
method adopted by the Chief Conservator of Forests was scientific or not He
also did not determine whether this methodology could be made applicable F
to all cases w.e.f. 1.10.1973. By merely agreeing with the decision of the
Chief Conservator of Forests, the Arbitrator has not addressed himself to
other points arising in first dispute and has not answered those points.
(572-G-H)

PER D.P. Wadhwa (Supplementing)
G
It was not necessary that the State Government should have challenged
the order of the High Court in the circumstances of the case causing
unnecessary expense to the parties and the time this Court had to spend in
hearing the appeal. Had the State Government abide by the order of the High
Court the matter before the Arbitrator would have been completed years ago. H
570 SUPREME COURT REPORTS [1999] 2 S.C.R.

A State cannot act like a private litigant that it must challenge every order
made against it. State has to be advised properly if a case required
determination of this Court under Article 136 of the Constitution.(573-F-G)

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 522of1992.

B From the Judgment and Order dated 19 .11.86 of the Orissa High
Court in M.A. No. 260 of 1980.

P.N. Mishra and Ms. Kirti Mishra for the Appellant.

S.B. Sanyal and P.N. Gupta for the Respondent.
c The Judgments of the Court were delivered by

SANTOSH HEGDE, J. Disputes having arisen betWeen the State of
Orissa and the respondent in this civil appeal, in respect of exclusive right
and license to fell, cut and remove bamboos, parties opted to go for arbitration
D as provided in the agreement. The disputes referred to the Arbitrator for
determination are :-

I. "As provided in Note (i) under clause IO of the Agreement, the
C.C.F., Orissa has determined that 2300 mtrs, or 7475 running ft. of
Salia bamboos and 600 mtrs. Or 1950 running ft. of Daba bamboos
E respectively make a tonne vide his letter No. 24755 dated 17.12.1974
(copy of which is placed in the State's written argument and the same
is held to be final and binding on both parties."

2. "The respondent company was entitled to a refund of Rs.2,03,325
for excess royalty paid."
F
The Arbitrator by his award held as follows :-

"As provided in Note :-(i) under clause IO of the Agreement, the Chief
Conservator of Forests has determined that 2300 metres of 7475 running feet
of Salia bamboos and 600 metres of 1950 running feet of Daba bamboos
G respectively make a tone vide his letter No. 24755 dated 17.12.1974 copy of
which is placed in the State's written argument and the same is held to be
final and binding on both parties."

Based on the finding in dispute No. l, he made a consequential award
on the second issue. The said award of the Arbitrator was made a Rule of
H the Court by the judgment of the learned Sub-Judge, Bhubaneswar dated
,_

STATE v. ORIENT PAPER AND INDUSTRIES LTD. [SANTOSH HEGDE, J .] 571

/
7.8.1980 in Misc Case No. 442/78. A
Being aggrieved by the said order of the learned Sub-Judge, respondent-
company preferred Misc. Appeal No. 260/80 before the Hon'ble High Court
of Orissa at Cuttack. The High Court by its judgment dated 19th of November,
1986 allowed the Misc. Appeal setting aside the order of the Subordinate
Judge as well as the award of the Arbitrator and remitted the matter back to B
the Arbitrator for re-determination.

Being aggrieved by the order of the High Court referred to above, this
appeal is preferred. The High Court came to the conclusion that the learned
Arbitrator had not decided the disputes referred to him for arbitration. Therefore,
the award was unsustainable in law. Consequently, the High Court held such
c
an award could not have been made a rule of the court by the learned
Subordianted Judge.

Before us, Shri P.N. Misra, the learned Senior Advocate appearing for
the State of Orissa contended that a perusal of the award shows that the D
Arbitrator had in fact concurred with the decision taken· by the Chief
Conservator of Forests, Orissa in regard to the methodology to be adopted
for determining the quantity of bamboos cut and removed. Since the Arbitrator
was agreeing with the methodology adopted by the Chief Conservator of
Forests, the question of giving reasons in a non speaking award does not
arise. Therefore, the High Court ought not to have interfered with the award E
, and the consequential order passed by the Subordinate Judge. On behalf of
the respondent, Shri S.B. Sanyal, Senior Advocate contended that the High
Court was right in setting aside the award in question since the learned
Arbitrator had not at all decided the various points that arose in the first
dispute referred to him, therefore, there was non-application of mind by the F
Arbitrator and consequently the dispute referred to the Arbitrator remained
unanswered, hence the High Court was justified in remitting the matter back
" to the Arbitrator.

A perusal of the first dispute referred to the Arbitrator shows that he
had to determine three specific points, namely, G
(1) Whether the decision of the Chief Conservator of Forests that 2300
metres or 7475 running feet ofSalia bamboos and 600 metres or 1950 running
feet of Daba bamboos would make a tonne in weight;

(2) Whether this calculation is scientific; H
572 SUPREME COURT REPORTS [1999] 2 S.C.R.

A (3) Whether this calculation will apply in all cases, to take effect from
1.10.1973.

The award of the learned Arbitrator in regard to the first dispute referred
to him merely says that the Chief Conservator had determined under Clause
10 of the Agreement that 2300 metres or 7475 running feet ofSalia bamboos
B and 600 metres or 1950 running feet of Daba bamboos respectively make a
tonne and the same is held to be final and binding on both the parties. He
did not even advert to the other points. In my opinion, the High Court was
right in coming to the conclusion that the learned Arbitrator did not decide
the question whether the method adopted by the Chief Conservator of
C Forests was scientific or not. He also did not determine whether this
methodology could be made applicable to all cases w.e.f. 1.10.1973. In my
opinion by merely agreeing w.ith the decision of the Chief Conservator of
Forests, the Arbitrator has not addressed himself to other points arising in
first dispute and has not answered those points. Therefore, in my opinion the
High Court is justified in setting aside the award and remitting it back to the.
D arbitrator.

This appeal fails and is accordingly dismissed with costs.

D.P. WADHWA, 1. I agree.
E
I may, however, add that in this case the agreement was entered into
in January, 1974. After disputes and differences arose and parties went for
arbitration, the Arbitrator gave his Award on November 30, 1978. The Award
was challenged by the respondent before the sub-Judge, Bhubaneshwar who ·
upheld the Award by judgment and order dated August 7, 1980. The matter
F was taken in appeal before the Orissa High Court by the respondent. High
Court by its judgment dated November 19, 1986 allowed the appeal holding
that the Arbitrator had failed to decide the actual disputes specifically referred
to him and remitted the matter to the Arbitrator for reconsideration under
Section 16 of the Arbitration Act. This appeal was filed by the State of Orissa
G against the judgment of the High Court and it has taken more than 12 years
for the decision of the appeal. However, it was not necessary that the State
Government should have challenged the order of the High Court in the
circumstances of the case causing unnecessary expense to the parties and the
time this Court had to spend in hearing the appeal. Had the State Government
abide by the order of the High Court the matter before the Arbitration would
H have been completed years ago. State cannot act like a private litigant that

r
STATE v.ORIENTPAP~RANDINDUSTRIES LTD. [D.P. WADHWA,J.] 573
- it must challenge every order made against it. State has to be advised properly A
if a case required determination of this Court··under Article 136 of the
Constitution.

S.V.K.l Appeal dismissed ..

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