UNION OF INDIAversusM/S V. PUNDARIKAKSHUDU AND SONS AND ANR.

A                              UNION OF INDIA
                                        v.
           MIS V. PUNDARIKAKSHUDU AND SONS AND ANR.

                             SEPTEMBER 9, 2003

B                  [V.N. KHARE, CJ. AND S.B. SINHA, J.]

         Arbitration Act, 1940-Sections JO-Misconduct-Meaning of-One
    part of the award inconsistent with the other part of the award-Held,
    amounts to legal misconduct-Award can be set aside.
c        Arbitration Act, 1940-Sections JO-Award-Setting aside of-Non
    application of mind by the arbitrator-Effect of-Arbitrator holding that
    a party is responsible for delay in execution ofthe contract-Still awarding
    award in favour of the defaulting party-Non-application of mind by the
D   arbitrator-Award can be set aside.

         Arbitration Act, 1940-Sections JO-Award-Challenge to--Arbitrator
    awarding claims of both parties holding that there was breach of contract
    by both-One party not challenging the award in favour ofanother-Held,
    the party must be held to have accepted the finding that it committed a
E   breach of contract-Finding attains finality-Acts as res judicata-Words
    and Phrases-Res Judicata.

        The appellant entered into an agreement with the first respondent
  for construction of an auditorium. The time for completion of the
F contract was extended from time to time and ultimately, the appellant
  terminated the contract under clause 54 of the agreement. The said
  clause empowered the appellant to rancel the contract, ifthe contractor
  failed to complete the work within stipulated date for completion and
  clear the site on or before the date of completion. As disputes and
  differences arose between the parties, the parties referred the matter
G for arbitration in terms of the agreement. Both the appellant as well as
  the first respondent raised claims before the arbitrator.

          The arbitrator made an award for Rs. 14,31,463 in favour of the
    first respondent upon arriving at a finding that the appellant was
    responsible for causing delay in completion of the contract. At the same
H   time, the arbitrator also awarded Rs. 33,95,000 to the appellant.
                                        506
           U.0.1. v. V. PUNDARIKAKSHUDU AND SONS                      507
      The first respondent filed petitions under Section 15, 16, 30 and 32   A
of the Arbitration Act praying for modification/setting aside of the
award in favour of the appellant and for judgment and decree in terms
of the award made in favour of the first respondent. The appellant, on
the other hand, filed a petition for judgment and decree in terms of the
award made in favour of the appellant.
                                                                             B
     The District Judge upheld the objections of the first respondent
holding that as the award of the arbitrator in favour of the first
respondent was made upon arriving at a finding that the appellant was
responsible for causing delay in completion of the contract, the award
made in favour of the appellant was inconsistent with the said finding
and could not have been granted. The District Judge also confirmed the       C
award of the arbitrator made in favour of the first respondent.

     The appellant filed appeals against the order of the District Judge,
which were dismissed by the High Court. Thereafter, the appellant filed
the present appeals.
                                                                             D
     The appellant had earlier filed special leave petitions against the
judgment and order of the High Court in respect of the order of the
District Judge whereby the District Judge had confirmed the award
made in favour of the first respondent. The said special leave petitions
were dismissed by his Court.
                                                                             E
     Dismissiug the appeals, the Court

     HELD: 1.1. If one part of the award is inconsistent with the other
and furthermore if in determining the disputes between the parties the
arbitrator failed to take into consideration the relevant facts or based F
his decision on irrelevant factors not germane therefor; the arbitrator
must be held to have committed a legal misconduct. The award suffering
from non-application of mind by the arbitrator is liable to be set aside. ·
                                                         (516-8, 517-H]

     Bharat Coking Coal Ltd. v. Mis Annapurna Construction, (2003) 7         G
Scale 20; KP. Poulose v. State of Kera/a, (1975) 2 SCC 236; Union of
India v. Jain Associates and Another, (1994) 4 SCC 665 and Dandasi
Sahu v. State of Orissa, (1990) 1 SCC 214, relied upon.

     1.2. The question as to whetheroneparty or the other was responsible
for delay in causing completion of the contract job squarely fell for        H
    508                  SUPREME COURT REPORTS (2003] SUPP. 3 S.C.R.

A consideration before the arbitrator. The arbitrator could not have arrived
    at a finding that both committed breaches of the terms of contract which
    was ex-facie unsustainable being wholly inconsistent. Clause 54 of the
    contract could be invoked only when the first respondent committed
    breach of the terms of the contract. An action in terms thereof could be
B   taken recourse to in its entirety or not at all. [515-G, H, 516-A)

          1.3. The arbitrator committed a legal misconduct in arriving at
    an inconsistent finding as regard breach of the contract on the 1>art
    of the party or the other. Once the arbitrator has granted damages to
    the first respondent which could be granted only on a finding that the
C   appellant had committed breach of the terms of contract and, thus, was
    responsible therefor, any finding contrary thereto inconsistent therewith
    while awarding any sum in favour of the appellant would be wholly
    unsustainable being self contradictory. [519-G, H, 520-A)

D         Mis. Sudarsan Trading Co. v. Government ofKera/a and Anr.. [1989)
    2 sec 38, distinguished.

          2.1. The appellant by accepting the award made in favour of the
    first respondent must be held to have accepted the finding that it
    committed a breach of contract and the said finding has attained
E   finality and would operate as res judicata. [520-A, Bl

         2.2. As the appellant failed to get that part of the award which
    was made by the arbitrator in favour of the first respondent, set aside,
    the basic conclusion of the High Court cannot be faulted. [521-B)

F        Sheodan Singh v. Daryao, (1966) 3 SCR 300 and Premier Tyres
    Limitedv. Kera/a State Road Transport Corporation, (1993) Supp 2 SCC
    146, relied upon.

          CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 8337-
G 8339 of 1997.
         From the Judgment and Order dated 6.1.97 of the Madras High Court
    in C.M.A. Nos. 364, 366 and 367 of 1995.

        N.N. Goswami, and C.V.S. Rao for Ms. Anil Katiyar for the
H   Appellant.
           U.0.1. v. V. PUNDARIKAKSHUDU AND SONS [SINHA, J.]                  509

         M.N. Rao, A. Subba Rao, A.P. Jyotish, A. Chandra Mohan, Ms.                 A
     Deepthi K. and Amar Jyothi for the Respondents.

'-        The Judgment of the Court was delivered by

           S.B. SINHA, J. : The appellant and the first respondent herein
     entered into a contract for construction of an auditorium complex at            B
     Willington Nilgiris for a sum of Rs. 64,79,982.95. The work commenced
     on 16.3.1979 and was to be completed on 15.3.1981. However, there had
     been amendment to the said agreement o.wing to increase in the scope of
     work. An extra time of six months was also given to the contractor in terms
     of the said amendment. The time for completion of the contract was              C
     extended from 16.9.1981 to 30.6.1982 and 1.7.1982 to 31.l2.1982. The
     contract amount was also increased, because of the aforementioned
     amendment therein owing to increase in the scope of work, to Rs. 85 .10
     lakhs. Although the period of contract was over and the appellant did not
     grant any further extension, the same was purportedly terminated by the         D
     appellant herein on 28.2.1983, i.e., after the due date for completion of
     work, !lamely, 31.12.1982. Disputes and differences having arisen, the
     arbitration agreement was invoked by the Respondent No. 1 and the claims
     and counterclaims of the parties were referred to one Brigadier M.M.L.
     Sharma who was appointed by the Engineer-in-Chief of the appellant.
     Before the arbitrator the first respondent submitted a claim for a total sum    E
     of Rs. 23,59,534.72 comprising 23 claims whereas the claim of the
     appellant herein amounted to Rs. 90,58,167.42 comprising 8 claims.

           The sole arbitrator awarded a sum of Rs. 14,31,463 in favour of the
     first respondent and a sum of Rs. 33,95,000 in favour of the appellant          F
     herein. The award was filed in the District Court of Nilgiris.

           Original Petition No. 29 of 1986 was filed by the respondent No. 1
     herein under Sections 15, 16, 30 and 32 of the Arbitration Act praying to
     very modify or set aside to claim No. 1 under 'B' Claim of the Government       G
     in Award dated 6.2.1986 and confirm the award in Claim 'q' of the
     contractor made including the interest and decree in favour of the petitioner
     or in the alternative to set aside the award dated 6.2.1986.

          Original Suit No. 31 of 1986 was filed by the fir.t respondent for
     passing a judgment and decree in terms of the award passed in favour of         H
    510                  SUPREME COURT REPORTS [2003] SUPP. 3 S.C.R.

A the Plaintiff in claims serial No. 'A" claims of the contractor by the 2nd
    defendant and directing the first respondent to pay the plaintiff Rs.
    14,31,462 whereas Original Suit No. 47 of 1986 was filed by the Union
    of India for a decree and judgment in terms of the Award for a sum of
    Rs. 33,95,000 with interest at 18% per annum with costs.

B
         The learned District Judge upheld the said objections of the first
    respondent holding: as the arbitrator made an award in favour of the first
    respondent presumably upon arriving at a finding that the appellant herein
    was responsible for causing delay in completion of the contract; the award
C   made in favour of the appellant must be held to be inconsistent therewith.

            It was further held that the appellant herein 'pushed in' some
    calculation sheets on the last date of hearing which was accepted by the
    arbitrator without assigning any reason and without prior intimation to the
    fi,rst respondent which amounted to misconduct on the part of the arbitrator.
D   The Court further took into consideration the fact that the Union of India
    admittedly caused 1654 days' delay in accepting the designs and as the said
    admission was not taken into consideration by the arbitrator, that part of
    the award was vitiated.

E         The District Judge further held that having regard to the fact that the
    arbitrator had awarded compensation to the first respondent on various
    items including Claim A towards additional amount claimed due to
    escalation in prices of materials and men at 25% of the work done at the
    contract rates, loss sustained due to under-utilisation of cantering and
F   shuttering materials, loss sustained due to under utilization, compensation
    for loss sustained on overheads due to prolongation of work, the impugned
    award cannot be sustained.

          The learned District Judge furthermore laid emphasis on the
    claim towards extra expenditure incurred in dismantling of work done
G   due to delays in decisions wherefor a sum of Rs. 12,500 was awarded
    stating:

             "... Therefore it is clear that there was a delay on the part of the
             department in taking decisions. Because of the delay in taking
H            decisions, the Arbitrator has awarded the amount for delay solely
U.0.1. v. V. PUNDARIKAKSHUDU AND SONS [SINHA, J.] 511
   on the part of the contract. I failed to understand why the sole       A
   arbitrator should have awarded Rs.12,500/ under claim No. V(a)
   of the contractor.

Referring to clause 54 of the Contract, the District Judge said:
                                                                          B
   "... Therefore condition 54 makes it abundantly clear that if there
   was any default on the part of the contractor the Union of India
   has got every right to impound the materials of the contractor, and
   at any time sell the materials and appropriate the proceeds towards
   any losses. Curiously enough under claim No. VI the Arbitrator
   has passed an award stating that the materials should be returned      C
   to the contractor. The approximate costs of the materials has been
   given as Rs. 3,71,000 by the contractor. Once again, it has to be
   stated that if the sole Arbitrator has come to the conclusion that
   the default was on the part of the contractor, he is not justified
   in directing the Union of India to hand over the materials. Since      D
   he has come to the conclusion that the Union of India is
   responsible for the breach of contract, the sole arbitrator has
   directed the Union of India to return the materials as the Union
   of India cannot take recourse under condition 54 of the General
   conditions of the contract IAFW 2249. On the background of this        E
   we have now considered the amount awarded to the Union of
   India under claim No. 1, 2 and 4 under claim No.I Rs. 33,64,000
   has been awarded by the sole arbitrator towards extra expenditure
   involved to complete the incomplete item of work left by the
   defaulting contractor. Once again going back to contractor is
   claim under claim No. 6n it is clear that the findings of the (end     F
   of the original's 31st page) arbitrator under claim No.V of 'A'
   claim of the contractor and claim 1 of 'B' of the Government of
   India is inconsistent. Since the arbitrator has already come to the
   conclusion that the breach of contract was due to the 1st respondent
   and has directed the Union of India to return the materials to         G
   the contractor, the sole arbitrator should not have awarded
   Rs. 33,64,000 towards excess expenditure involved to complete
   the incomplete items of work left by th~ defaulting contractor.
   On the face of it the arbitrator awarded Rs. D,64,000 under claim
   No. I of 'B' claim of the Government is not sustainable.               H
    512                  SUPREME COURT REPORTS (2003] SUPP. 3 S.C.R.

A                Since the award of Rs. 3,95,000 by the sole arbitrator is
            inconsistent and is a misconduct, the order of the Arbitrator in
            respect of claim No. I of 'B' claim of the Union of India in the
            award dated 6.3 .1986 has to be set aside."

B        Aggrieved thereby three appeals being A.A.O. No. 364 of 1995,
    A.A.O. No. 366 of 1995 and A.A.0. No. 367 of 1995 were filed by the
    appellant against the order of District C~urt dated 21.2.1994 in O.P. No.
    29/86, O.S. No. 31 of 1986 and 0.S. No. 47/86 respectively.

C        By reason of the impugned judgment dated 6.1.1997 the said appeals
    were dismissed.

        It, however, appears that the appellants herein also filed S.L.P.
  (Civil) .... 8317-8318/97 arising out of the judgment and order dated
  06.01.97 in Appeal Nos. 242/95 and 243 of 1995 of the High Court of
D Madras questioning the award made in favour of the first respondent
  herein. The same was dismissed by this Court by an order dated 24.11.1997.

          Mr. N.N. Goswami, the learned senior counsel appearing on behalf
    of the appellant would submit that the High Court as also the District Judge
E   committed a manifest error in setting aside the award made by the arbitrator
    in favour of the appellant in so far as it failed to take into consideration
    that the award was a non-speaking one.

        The learned counsel would contend that the appellant could be
F blamed for making delay in the matter and completion of job till 1982 but
  no finding has been arrived at nor could be arrived at on the basis of
  materials on records that thereafter it was at fault. No material has been
  shown in the impugned judgments which support the views taken by the
  courts below that the appellant was responsible for the delay caused beyond
  31.12.1982. Mr. Goswami would urge that the District Judge had no
G jurisdiction to analyse the materials on records as if it has an appellate
  jurisdiction over the award of the arbitrate. The learned counsel would
  contend that the jurisdiction of the High Court in setting aside an award
  being limited, the impugned judgments cannot be sustained. In support
  of the said contention, strong reliance has been placed on Mis. Sudarsan
H Trading Co. v. Government of Kera/a and Anr.. (1989] 2 sec 38.
      U.O.I. v. V. PUNDARIKAKSHUDU AND SONS [SINHA, J.]                   513

       Mr. M.N. Rao, the learned senior counsel appearing on behalf of the        A
respondent, per contra, would submit that a finding of fact has been arrived
at to the effect that the award of the arbitrator was inconsistent. The learned
counsel would submit that while considering the validity or otherwise of
an award the Court is not precluded from considering the totality of the
circumstances. It was pointed out that having regard to the fact that the         B
appellant admitted the delay of 1654 days on its part, the same ought to
have been taken into consideration by the arbitrator, which was relevant
for resolution of the dispute between the parties. The claims raised by the
appellant basing on the purported breach of contract on the part of the first
respondent herein must be held to be mala fide. The learned counsel has
placed strong reliance in support of his contention on Dandasi Sahu v.            C
StateofOrissa, [1990] l SCC214.

      The short question which arises for consideration in these appeals is
as to whether the District Judge and the High Court, Madras exceeded their
jurisdiction in passing the impugned judgments.                                   D

      It is not in dispute that the claims and counterclaims of the parties
centred round determination by the arbitrator as to whether the appellant
or the first respondent had committed a breach of contract. The power of
the appellant to terminate the contract and to put forth the claim for extra      E
expenditure involved to complete the incomplete items of work left out by
the first respondent revolved round the issue as to whether it was a defaulter
or not. The appellant could terminate the contract and get the work
completed through another agency entitling it to lay the said claim, but its
justifiability therefor indisputably would depend upon the interpretation of      F
clause 54 of the Contract. The said clause empowers the appellant to cancel
the contract, only ifthe contractor "fails to complete the works, work order
and items of work, with individual dates for completion, and clear the site
on or before the date of completion". Thus, the 'failure' must be on the
part of the contractors and not by reason of acts of omissions and
commissions of the appellant herein.                                              G

     The following was furthermore contained in the said clause:

         "The Government shall also be at liberty to use the materials,
         tackle, machinery and other stores on Site of the Contractor as          H
           514                   SUPREME COURT REPORTS [2003] SUPP. 3 S.C.R.

       A            they think proper in completing the work and the Contractor will
                    be allowed the necessary credit The value of the materials and
                    stores and the amount of credit to be allowed for tackle and
                    machinery belonging to the Contractor and used by the Government
                    in completing the work shall be assessed by the G.E. and the
                    amount so assessed shall be final and binding.
       B
                    In case the Government completes or decides to complete the
                    works or any part thereof under the provision of this condition,
                    the cost of such completion to be taken into account in determining
                    the excess cost to be charged to the contractor under the condition
       c            shall consist of the cost or estimated cost (as certified by G.E.)
                    of materials purchased or required to be purchased and/ or the
                    labour provided or required to be provided by the Government as
                    also the cost of the Contractor's materials used with an addition
                    of such percentage to cover superintendence and establishment
       D            charges as may be decided by the C. W.E., whose decision shall
                    be final and binding. n

                The said clause could, thus, be invoked only on default on the part
           of the contractor and not otherwise.
       E
                Apart from the findings of the District Judge, as noticed hereinbefore,
           the High Court also came to conclusion that the contract could not have
           been terminated after the date of completion of work holding:

                    "... Misconduct as defmed under Section 30 is not a moral lapse.
       F            If the Arbitrator on the face of the award arrives at an inconsistent
                    conclusion, it would also amount to misconduct as per the
                    decision reported in Poulose v. State of Kera/a, AIR (1975) SC
                    1259. Therefore, the finding of the learned District Judge that
                    there is an inconsistent conclusion by the arbitrator who has
       G            admitted the delay on the part of the Government in my opinion
                    well-founded. It is more so, when the Government has not chosen
                    to set aside that portion of the award which implies that there is
                    delay on the part of the Government"

       H         The High Court further opined:




.•..
     U.0.1. v. V. PUNDARIKAKSHUDU AND SONS [SINHA, J.]                 515

        "Clause 54 of the agreement provides for utilization of the            A
        materials machinery, tackle etc. for completion of the incomplete
        work and sell the same at any time and appropriate the sale
        proceeds towards the loss which may arise from the cancellation
        of the contract. In the case on hand, the cancellation of the
        contract is after the expiry of the time contended for completion      B
        of the contract. The materials, machineries etc. were ordered to
        be returned to the contractor or pay the costs of the same to the
        contractor. The non-utilisation of the materials has not been taken
        into consideration by the Arbitrator. It is contended that no
        payment was made to the machineries and the contract was at
        liberty to take in back the machineries and therefore the non-         C
        utilisation of the materials cannot be said to be a conduct which
        would absolve the liability of the Government. But, this contention
        is not tenable since when the contractor has attempted to remove
        the materials on the work it has been prevented and a complaint
        has also been lodged with the police. Therefore, awarding certain      D
        sum towards loss sustained by the Government on account of the
        delay said to have been committed by the contractor, is inconsistent
        with the award granted in favour of the contractor to get back the
        materials or value thereof from the Government. When the order
        of the Arbitrator is inconsistent, it amounts to a misconduct.         E
        Therefore, the learned District Judge has rightly set aside the
        claim No. 1 under 'B' claim of the Government and I am of the
        opinion that it is not a matter to be interfered with this Court."

     It is not the case of the appellant that the contractor was allowed to
work after 31.12.1982 on grant of further extension for the completion of      F
the work. The rights and obligations of the parties were, thus, required to
be considered as on the said date and not thereafter. The fact that there
had been delay of 1654 days on the part of the appellant in accepting the
designs and there had been an amendment of the Schedule of the work
stands admitted.                                                               G
      The question as to whether one party or the other was responsible for
delay in causing completion of the contract job, thus, squarely fell for
consideration before the arbitrator. The arbitrator could not have arrived
at a finding that both committed breaches of the terms of contract which       H
    516                     SUPREME COURT REPORTS [2003] SUPP. 3 S.C.R.

A was ex facie unsustainable being wholly inconsistent. Clause 54 of the
    contract could be invoked only when the first respondent committed breach
    of the terms of the contract. An action in terms thereof could be taken
    recourse to in its entirety or not at all. If one part of the award is inconsistent
    with the other and furthermore if in determining the disputes between the
B   parties the arbitrator failed to take into consideration the relevant facts or
    based his decision on irrelevant factors not germane therefor; the arbitrator
    must be held to have committed a legal misconduct.

          In Bharat Coking Coal Ltd v. Mis. Annapurna Construction (Civil
C   Appeal Nos. 5647-48of1997) disposed of on 29th August, 2003 this Court
    noticed:

             "So far as these items are concerned, in our opinion, the learned
             sole arbitrator should have taken into consideration the relevant
             provisions contained in the agreement as also the correspondences
D            passed between the parties. The question as to whether the work
             could not be completed within the period of four months or the
             extension was sought for on one condition or the other was
             justifiable or not, which are relevant facts which were required to
             be taken into consideration by the arbitrator.
E
                    It is now well settled that the Arbitrator cannot act arbitrarily,
              irrationally, capriciously or independent of the contract.

                   In Associated Engineering v. Govt. of A.P., [1991] 4 SCC
             93, this Court clearly held that the arbitrators cannot travel beyond
F            the parameters of the contract. In Mis. Sudarsa11 Trading Co. v.
             The Govt. of Kera/a, [1989] 2 SCC 38, this Court has observed
             that an award may be remitted or set aside on the ground that the
             arbitrator in making it had exceeded his jurisdiction and evidence
             of matters not appearing on the face of it, will be admitted in order
G            to establish whether the jurisdiction had been exceeded or not,
             because the nature of the dispute is something which has been
             determined outside the award, whatever might be said about it in
             the award by the Arbitrator. This Court further observed that an
             arbitrator acting beyond his jurisdiction is a different ground from
H            the error apparent on the face of the award.
      U.0.1. v. V. PUNDARIKAKSHUDU AND SONS (SINHA, J.]                    517

         There lies a clear distinction between an error within the jurisdiction   A
         and error in excess of jurisdiction. Thus, the role of the arbitrator
         is to arbitrate within the terms of the contract. He has no power
         apart from what the parties have given him under the contract. If
         he has travelled beyond the contract, he would be acting without
         jurisdiction, whereas if he has remained inside the parameter of          B
         the contract, his award cannot be questioned on the ground that
         it contains an error apparent on the face of the records."

     It was held that if the arbitrator bas committed a jurisdictional error,
the court can intervene. This Court in Bharat Coking Coal Ltd. (supra)
noticed its earlier decision in KP. Pou/ose v. State ofKera/a, (1975] 2 SCC        C
236 wherein it was observed that the case of legal misconduct would be
complete if the arbitrator on the face of the award arrives at an inconsistent
conclusion even on bis own finding or arrives at a decision by ignoring
the very material documents which throw abundant light on the controversy
to help a just and fair decision.                                                  D
      In Union of India v. Jain Associates and Anr. (1994] 4 SCC 665,
this Court upon following KP. Poulose (supra) and Dandasi Sahu (supra)
held:

         "8. The question, therefore, is whether the umpire had committed          E
         misconduct in making the award. It is seen that claims 11 and 12
         for damages and loss of profit are founded on the breach of
         contract and Section 73 encompasses both the claims as damages.
         The umpire, it is held by the High Court, awarded mechanically,
         different amounts on each claim. He also totally failed to consider       F
         the counter-claim on the specious plea that it is belated counter-
         statement. These facts would show, not only the state' of mind of
         the umpire but also non-application of the mind, as is demonstrable
         from the above facts. It would also show that he did not act in
         a judicious manner objectively and dispassionately which would            G
         go to the root of the competence of the arbitrator to decide the
         disputes."

      In Dandasi Sahu (supra) this Court held that the award suffering from
non-application of mind by the arbitrator is liable to be set aside. It was
held:                                                                              H
    518                   SUPREME COURT REPORTS [2003] SUPP. 3 S.C.R.

A            "In this connection we have to keep in mind that we are concerned
             with a situation where the arbitrator need not give any reason and
             that even if he commits a mistake either in law or in fact in
             determining the matter referred to him, where such mistake does
             not appear on the face of the award, the same could not be
             assailed. The arbitrator, in the case of a reference to him in
B
             pursuance of an arbitration agreement between the parties, being
             a person chosen by parties is constituted as the sole and the final
             judge of all the questions and the parties bind themselves as a rule
             to accept the award as final and conclusive. The award could be
             interfered with only in limited circumstances as provided under
c            Sections 16 and 30 of the Arbitration Act. In this situation we have
             to test the award with circumspection. Even with all this limitations
             on the powers of court and probably because of these limitations,
             we have to hold that ifthe amount awarded was disproportionately
             high having regard to the original claim made and the totality of
D            the circumstances it would certainly be a case where the arbitrator
             could be said to have not applied his mind amounting to legal
             misconduct."

          In Mis. Sudarsan Trading Co. (supra) this Court clearly held that the
E Court can look to the agreement where the question arises as to whether
    an award may be remitted or set aside on the ground that the arbitrator in
    making it has exceeded its jurisdiction. Drawing distinction between the
    disputes as to the jurisdiction of the arbitrator and the dispute as to in what
    way that jurisdiction should be exercised, this Court opined:

F            "The next question on this aspect which requires consideration is
             that only in a speaking award the court can look into the reasoning
             of the award. It is not open to the court to probe the mental process
             of the arbitrator and speculate, where no reasons are given by the
             arbitrator, as to what impelled the arbitrator to arrive at his
G            conclusion. See the observations of this Court in Hindustan Steel
             Works Construction Ltd. v. C. Rajasekhar Rao, [I 987] 4 SCC 93.
             In the instant case the arbitrator has merely set out the claims and
             given the history of the claims and then awarded certain amount.
             He has not spoken his mind indicating why he has done what he
H            has done; he has narrated only how he came to make the award.
      U.O.I. v. V. PUNDARIKAKSHUDU AND SONS [SINHA, J.]                   519

         In absence of any reasons for making the award, it is not open          A
         to the court to interfere with the award. Further-more, in any
         event, reasonableness of the rea~ons given by. the arbitrator,
         cannot be challenged. Appraisement of evidence by the arbitrator
         is never a matter which the court questions and considers. If the
         parties have selected their own forum, the deciding forum must          B
         be conceded the power of appraisement of the evidence. The
         arbitrator is the sole judge of the quality as well as the quantity
         of evidence and it will not be for the court to take upon itself the
         task of being a judge on the evidence before the arbitrator. See
         the observations of this Court in MCD v. Jagan Nath Ashok               C
         Kumar, (1987] 4 SCC 497."

     In that case the Court was concerned with the first issue and not the
second one wherewith we are concerned herein. In the fact situation
obtaining therein the court distinguished a large number of authorities
placed before it holding:                                                        D
         "But, in the instant case the court had examined the different
         claims not to find out whether these claims were within the
         disputes referable to the arbitrator, but to find out whether in
         arriving at the decision, the arbitrator, had acted correctly or
         incorrectly. This, in our opinion, the court had no.jurisdiction to     E
         do, namely, substitution of its own evaluation of the conclusion
         of law or fact to come to the conclusion that the arbitrator had
         acted contrary to the bargain between the parties."

     Such is not the position here.                                              F
      In this case the District Judge as also the High Court of Madras clearly
held that the award cannot be sustained having regard to the inherent
inconsistency contained therein. The arbitrator, as has been correctly held
by the District Judge and the High Court, committed a legal misconduct
in arriving at an inconsistent finding as regard breach of the contract on       G
the part of one party or the other. Once the arbitrator had granted damages
to the first respondent which could be granted only on a finding that the
appellant had committed breach of the terms of contract and, thus, was
responsible therefor, any finding contrary thereto and inconsistent therewith
while awarding any sum in favour of the appellant would be wholly                H
    520                   SUPREME COURT REPORTS [2003] SUPP. 3 S.C.R.

A unsustainable being self contradictory.
           The Union of India while accepting the award made in favour of the
    first respondent must be held to have accepted the finding that it committed
    a breach of contract and the said finding has attained finality and would
B   operate as res judicata in view of the decisions of this Court in Sheodan
    Singh v. Daryao, [1966] 3 SCR 300.

         Furthermore, as noticed hereinbefore, the appeal preferred by the
    appellant against the award of the arbitrator made in favour of the first
    respondent herein has been dismissed.
c
         Jn Premier Tyres limitedv. Kera/a State Road Transport Corporation,
    [1993] Supp 2 SCC 146 this court held:

             "The question is what happens where no appeal is filed, as in this
             case from the decree in connected suit. Effect of non-filing of
D            appeal against a judgment or decree is that it becomes final. This
             finality can be taken away only in accordance with law. Same
             consequences follow when a judgment or decree in a connected
             suit is not appealed from.

E            5. Mention may be made of.a Constitution Bench decision in
             Badri Narayan Singh v. Kamdeo Prasad Singh, AIR (1962) SC
             338: [1962] 3 SCR 759: 23 ELR 203. In an election petition filed
             by the respondent a declaration was sought to declare the election
             of appellant as invalid and to declare the respondent as the elected
             candidate. The tribunal granted fir_:;t relief only. Both appellant
F
             and respondent filed appeals in the High Court. The appellant's
             appeal was dismissed but that of respondent was allowed. The
             appellant challenged the order passed in favour of respondent in
             his appeal. It was dismissed and preliminary objection of the
             respondent was upheld. The Court observed,
G
             "We are therefore of opinion that so long as the order in the
             appellant's Appeal No. 7 confirming the order setting aside his
             election on the ground that he was a holder of an office of profit
             under the Bihar Government and therefore could not have been
H            a properly nominated candidate stands, he cannot question the
          U.O.l. v. V. PUNDAJllKAKSHUDU AND SONS [SINHA, J.] 521
             finding about his holding an office of profit, in the present appeal,   A
             which is founded on the contention that that finding is incorrect."


-         As the appellant failed to get that part of the award which was made
    by the arbitrator in favour of the first respondent, set aside, the basic
    conclusion of the High Court cannot be faulted. The Court upon setting
    aside the whole award could have remitted back the matter to the arbitrator      B
    in terms of Section 16 of the Act or could have appointed another arbitrator,
    but at this juncture no such order can be passed as the award in part has
    become final. For the reasons aforementioned, we are of the opinion that
    the impugned judgment does not suffer from any legal infirmity. These
    appeals are, therefore, dismissed. No costs.                                     C
    B.K.M.                                                   Appeals dismissed.