The Food Corporation of India vs Litak Shipping Company Ltd.

B.N. Patnaik, J.—Both the cases arise out of a common judgment. They were heard together and both are being disposed of by this

common judgment.

The Food Corporation of India the Petitioner in O.P. No. 39 of 1992 and the Respondent in O.P. No. 82 of 1992 on the file of the

Subordinate Judge''s Court, Kozhikode is the Appellant in the M.F.A. and the revision Petitioner in the C.R.P. O.P. No. 39 of L992 was an

application u/s 30 of the Arbitration Act, 1940, for short, the Act and O.P. No. 82 of 1992 was u/s 17 of the Act. The Respondent is the owner

of the Vessel Darya Ma.

By a Charterparty dated, 25th August, 1988, in the Baltimore Berth Grain Form between the owner (Respondent herein) and the Charterer

(Appellant herein), the Respondent let their Vessel M. V. Darya Ma to the Appellant for carriage of cargo of 27,500 Metric tons of wheat in bulk,

5 per cent more or less in owners option from 1'' or 2 safe berta(s) each 1 or 2 safe port(s) U.S. Gulf including Mississipi River Port but not North

of Baton Rouge. Pursuant to the said Charterparty a total quantity of 28,417-442 Metric tons of wheat in bulk as per bill of landing dated 29th

September 1988 was loaded in the said Vessel at the port of loading Galveston (Texas). The Appellant nominated Navlakhi (India) as the port of

discharge where the said Vessel arrived on 9th November, 1988. As the said Vessel was waiting at Navlakhi without discharge of any cargo, the

parties mutually agreed to divert the Vessel from Navlakhi to Calicut/Baypore port on the terms and conditions as set out in the Appellant''s telex

dated 28th November, 1988. The Vessel sailed from Navlakhi on 28th November, 1988, without discharging any cargo and arrived at Baypore

port on 12th December, 1988, commenced discharge of the cargo on 21st December, 1988 and completed the discharge on 28th January, 1989.

According to the terms of the Charterparty dated 25th August, 1988, all disputes arising under the Charter were agreed to be settled in

accordance with the provisions of the Act. Disputes arose between the parties relating to the claim of demurrage for undue detention of the Vessel,

for the determination of which the Appellant and Respondent appointed one arbitrator each and the arbitrators appointed an Umpire. The

Respondent made a claim of U.S. $ 2,97,186-46 on various counts. The Appellant denied its liability. After hearing both parties, the Arbitrators

made a non-speaking award on 18th February 1991. The award reads as follows:

(A) WE FIND AND HOLD that

(i) The Owners claims as recited in paragraph 6 above succeeds to the extent of U.S. $ 2,93,659-21 only as against their total claim of U.S. $

2,97,186-46.

(ii) The Charterers Counter Claims as recited in paragraph 6 above succeeds to the extent of U.S. $ 16,953-63 only as against their total Counter

Claim of U.S. $ 1,15,839-33.

(B)WE AWARD AND ADJUDGE that the Charterers do forthwith pay to Owners the sum of U.S. $ 2,76,705-58 (U.S. Dollars two hundred

seventy six thousand Seven hundred five and cents fifty eight only) or its rupee equivalent as the rate of exchange prevailing on the date of payment.

(C) We Award and Adjudge that each party to bear its own costs.

The Respondent filed O.P. No. 82 of 1992 to pass a judgment and decree according to the award and the Appellant filed O.P. No. 39 of 1992

to set aside the award for facilitating the parties to appoint new arbitrators or in the alternative remit the award back to the same arbitrators to

consider the disputes afresh. By a common order, the learned Sub Judge allowed O.P. No. 82 of 1992 and made the award a decree of the court

and dismissed O.P. No. 39 of 1992 on the ground that the Appellant had failed to prove that the arbitrators had misconducted themselves or the

proceedings or the award has been improperly procured or is otherwise invalid. No case was also made out before the learned Sub Judge that the

award has been made after the issue of an order by the court superseding the arbitration or that the arbitration proceedings have become invalid

u/s 35 of the Act.

Learned Counsel for the Appellant challenges the aforesaid order of the learned Sub Judge mainly on two grounds: (i) The learned Sub Judge

has failed to see that the Arbitrators in violation of clauses 14 and 44 of the Charterparty, made an award in favour of the Respondent by travelling

beyond the terms of the Charterparty and ignoring the express stipulations therein and (it) the Arbitrators did not pass a reasoned award in terms

of their appointment. It is argued that per the terms of the agreement between the parties, time was not given upto 12th December 1988. Though

notice of arrival was served at 10 hours on 1st December 1988, on the steamer agents as per the terms of the agreement between the parties, lay

time was not to count upto 12th December 1988. On 13th December 1988, when the cargo was inspected it was found that cargo in all the

hatches was abnormally infested with live insects. The Respondent was requested by the Appellant to conduct fumigation. But the Respondent

failed. to do it. Hence the Appellant arranged to cause fumigation on 16th December 1988. The hatches were opened after fumigation on 18th

December 1988. It is submitted that the hatches cannot be opened for 48 hours after fumigation. After opening, since the hatches had to be kept

open for aeration, laborers could not board the vessel on 18th December 1988. Under the, terms of the Charterparty, the lay time lost on account

of fumigation is to the owner''s account. Even on 19th December 1988, no work of discharging the cargo could be done due to labour dispute

which was beyond the control of the Appellant, for which circumstance, the charterparty provides exception. Under these circumstances, lay time

commenced only after 21st December 1988 as provided in the Charter party. Further it is submitted that as per restrictions imposed by the Calicut

Port Authorities, no discharging of the vessel could take place between 18.00 hrs. and 06.00 on each day. Hence 12 hours out of 24 hours cannot

be taken as time used for discharging as per the terms and conditions of the Charterparty in clauses Nos. 14 and 4.4.

Learned Counsel for the Respondent contended that the Appellant wanted the discharge of the cargo at Calicut Port knowing fully well that

there were restrictions for discharge or the cargo between 18.00 hrs. and 06.00 hrs. Moreover, in terms of Clause 29 of the Charterparty, the

fumigation time is to the account of the Respondent only at the time of loading and not at the time of unloading the cargo. It is not shown by the

Appellant that the Arbitrators acted in excess of the jurisdiction or powers conferred on them under the Charterparty. Interpretation of the terms of

the contract is left to the arbitrators and the possible interpretation made by them cannot be interfered with even if there can be an alternative

interpretation.

The only point that arises for consideration is whether the arbitrators have acted beyond their Jurisdiction.

The award in question is an unreasoned and non speaking award, No document or any paper has been appended thereto. It is now well-settled

in a number of decisions of the Supreme Court that the court cannot interfere with the award if reasons for making the same are not given by the

arbitrator.

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 conclusion. 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 has done he has narrated only how he came to

make the award. In absence of any reasons for making the award, it is not open to the court to interfere with the award. Furthermore, in any event,

reasonableness of the reasons 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 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.

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Once there is no dispute as to the contract, what is the interpretation of that contract, is a matter for the arbitrator and on which court cannot

substitute its own decision. If on a view taken of a contract, the decision of the arbitrator on certain amounts awarded, is a possible view, though

perhaps not the only correct view, the award car not be examined by the court.

Sudarsan Trading Co. Vs. Government of Kerala and Another, .

The Court in dealing with an application to set aside an award has not to consider whether the view of the arbitrator on the evidence is justified.

The arbitrator''s adjudication is generally considered binding between the parties, for he is a tribunal selected by the parties and the power of the

Court to set aside the award is restricted to cases set out in Section 30 of Arbitration Act, 1940. It is not open to the Court to speculate, where no

reasons are given by the arbitrator, as to what impelled the arbitrator to arrive at his conclusion. On the assumption that the arbitrator must have

arrived at his conclusion by a certain process of reasoning, the Court cannot proceed to determine whether the conclusion is right or wrong. It is

not open to the Court to attempt to probe the mental process by which the arbitrator has reached his conclusion where it is not disclosed by the

terms of his award.

Jivarajbhai Ujamshi Sheth and Others Vs. Chintamanrao Balaji and Others,

The arbitrator cannot act arbitrarily, irrationally, capriciously or independently of the contract. His sole function is to arbitrate in terms of the

contract. His authority is derived from the contract and is governed by the Arbitration Act which embodies principles derived from a specialised

branch of the law of agency. If he has remained inside the parameters of the contract and has construed the provisions of the contract, his award

cannot be interfered with unless he hat given reasons for the award disclosing an error apparent on the face of it.

If the arbitrator commits an error in the construction of the contract, that is an error within his jurisdiction. But if he wanders outside the contract

and deals with matters not allotted to him, he commits a jurisdictional error. An umpire or arbitrator cannot widen his jurisdiction by deciding a

question not referred to him by the parties or by deciding a question otherwise than in accordance with the contract. A deliberate departure from

contract amounts to not only manifest disregard of his authority or a misconduct on his part, but it may tantamount to a mala fide action. A

conscious disregard of the law or the provisions of the contract from which he has derived his authority vitiates the award.

A dispute as to the jurisdiction of the arbitrator is not a dispute within the award, but one which has to be decided out side the award. Therefore,

evidence of matters not appearing on the face of the award would be admissible to decide whether the arbitrator traveled outside the bounds of the

contract and thus exceeded his jurisdiction. In order to see what the jurisdiction of the arbitrator is, it is open to the court to see what dispute was

submitted to him. If that is not clear from the award, it is open to the court to have recourse to outside sources. The court can look at the affidavits

and pleadings of parties the court can look at the agreement itself.

Associated Engineering Co. Vs. Government of Andhra Pradesh and another,

In State of Rajasthan v. Puri Construction Co. Ltd. (1994) 6 S.C. 485 the Supreme Court, referring to a number of decisions held:

Since the arbitrator is a judge by choice of the parties, and more often than not, a person with little or no legal background, the adjudication of

disputes by an arbitration by way of an award can be challenged only within the limited scope of several provisions of the Arbitration Act and the

legislature in its wisdom has limited the scope and ambit of challenge to an award in the Arbitration Act. By and large the courts have disfavored

interference with arbitration award on account of error of law and fact on the score of misappreciation and misreading of the materials on record

and have shown definite inclination to preserve the award as Car as possible. As reference to arbitration of disputes in commercial and other

transactions involving substantial amount has increased in resent times, the courts were impelled to have fresh look on the ambit of challenge to an

award by the arbitrator so that the award does not get undesirable immunity. In recent times, error in law and fact in basing an award has not been

given the wide immunity as enjoyed earlier, by expanding the import and implication of legal misconduct"" of an arbitrator so that award by the

arbitrator does not perpetrate gross miscarriage of justice and the same is not reduced mockery of a fair decision of the lis between the parties to

arbitration However, in the anxiety to render justice to the party to arbitration, the court should not reappraise the evidence intrinsically with a close

scrutiny for finding out that the conclusion drawn from Some fact? by the arbitrator is, according to the understanding of the court, erroneous. Such

exercise of power which can be exercised by an appellate court with power to reverse the finding of fact, is alien to the scope and ambit of

challenge of an award under the Arbitration Act. If a question of law is referred to arbitrator and the arbitrator comes to a conclusion, it is not open

to challenge the award on the ground that an alternative view of law is possible. Even if it is assuaged that on the materials on record, a different

view could have taken and the arbitrators have failed to consider the documents materials on record in their proper perspective, the award is not

liable to be struck down in view of judicial decisions referred to hereinbefore. Error apparent 011 the face of the record does not mean that on

closer scrutiny of the import of documents and materials on record, the finding made by the arbitrator may be held to be erroneous. An error of

law or fact committed by an arbitrator by itself does not constitute misconduct warranting interference with the award.

Similar contentions which are raised now were also raised before the Arbitrators by both the parties. In this context, paragraphs 5 and 6 of the

reply-cum-rejoinder submitted by the Appellant before the Arbitrators and the Contentions in paragraphs 7 and 8 of the Respondent''s rejoinder

are relevant. After hearing the respective contentions and submission of the parties including those mentioned in their affidavits, the arbitrators are

deemed to have taken them into consideration while making the award.

On the basis of the agreement between the parties and in terms of the nomination of the respective arbitrator by the parties, the dispute and

differences covered by the written agreement have been referred for arbitration by the joint arbitrators. It was open to the arbitrators to interpret

the terms and conditions of various clauses of the Charterparty including computation of the period of 24 hours of all working days while the ship

was lying at the Calicut Port. It is not the case of either of the parties that any extraneous matter outside the scope of reference has been taken into

consideration by the arbitrators. There is no allegation that reasonable opportunity of being heard has not been given to either of the parties or the

arbitrators have considered any document behind the back of any party. It appears that in basing the findings in the award, the arbitrators have

referred to and relied upon the materials on record and it cannot be reasonably contended that there was no basis whatsoever to base the findings

made by the arbitrators upon consideration of the materials on record.

The Appellant has, therefore, failed to demonstrate that any finding made by the arbitrators is either fanciful or not referable to the materials on

record.

What is contended is that the arbitrators have failed to properly appreciate various clauses of the Charter party and that they have

misappreciated and misunderstood the same. Court cannot substitute its own evaluation of the conclusion of law or fact to come to the conclusion

that the arbitrators had acted contrary to the bargain between the parties. Whether a particular amount was liable to be paid under the terms of a

contract is a decision within the competency of the arbitrators. By purporting to construe the terms of the Charterparty, the court cannot take upon

itself the burden of saying that this was contrary to the contract and as such beyond jurisdiction if the decision of the arbitrators is a possible view

though perhaps cannot be said to be the only view.

On a consideration of the facts and circumstances of the case, we hold that the impugned award is not liable to be set aside. We confirm the

decision of the Subordinate Judge, Kozhikode.

In the result, the appeal and the revision are dismissed. Parties are directed to bear their cost.