Award cannot be challenged on the ground that the arbitrator has drawn his own conclusion or has failed to appreciate the fact
In ATLANTA LIMITED THR. ITS MANAGING vs UNION OF INDIA, appeal against yet another challenge to an arbitration award and subsequent order against the same by the Division Bench of the Madras High Court, the Supreme Court gave some further insights into the process of challenging a arbitration award.
Referring to judgments in Kwality Manufacturing Corporation v. Central Warehousing Corporation, State of Rajasthan v. Puri Construction Co. Ltd., Arosan Enterprises Ltd. v. Union of India and NTPC Ltd. v. Deconar Services Pvt. Ltd., the Supreme Court observed that :-
It is also a well-settled principle of law that challenge cannot be laid to the Award only on the ground that the Arbitrator has drawn his own conclusion or failed to appreciate the relevant facts. Nor can the Court substitute its own view on the conclusion of law or facts as against those drawn by the Arbitrator, as if it is sitting in appeal.
Court cannot substitute 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. Whether a particular amount was liable to be paid is a decision within the competency of the arbitrator. By purporting to construe the contract the court cannot take upon itself the burden of saying that this was contrary to the contract and as such beyond jurisdiction. 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 cannot be examined by the court. Where the reasons have been given by the arbitrator in making the award the court cannot examine the reasonableness of the reasons.
As long as the Arbitrator has taken a possible view, which may be a plausible view, simply because a different view from that taken in the Award, is possible based on the same evidence, would also not be a ground to interfere in the Award.
In the event however two views are possible on a question of law as well, the court would not be justified in interfering with the award.
State of Rajasthan v. Puri Construction Co. Ltd. on a conspectus of the case law relating to an Award made under the Arbitration Act, 1940 and the scope of interference by courts in such an arbitral Award, the legal position was summarized by the court in the following words :
From the resume of the aforesaid decisions, it can be stated that:
(a) it is not open to the court to speculate, where no reasons are given by the arbitrator, as to what impelled arbitrator to arrive at his conclusion.
(b) It is not open to the court to admit to probe the mental process by which the arbitrator has reached his conclusion where it is not disclosed by the terms of the Award.
(c) If the arbitrator has committed a mere error of fact or law in reaching his conclusion on the disputed question submitted for his adjudication then the Court cannot interfere.
(d) If no specific question of law is referred, the decision of the arbitrator on that question is not final, however much it may be within his jurisdiction and indeed essential for him to decide the question incidentally. In a case where specific question of law touching upon the jurisdiction of the arbitrator was referred for the decision of the arbitrator by the parties, then the finding of the arbitrator on the said question between the parties may be binding.
(e) In a case of non-speaking Award, the jurisdiction of the court is limited. The Award can be set aside if the arbitrator acts beyond his jurisdiction.
(f) To find out whether the arbitrator has travelled beyond his jurisdiction, it would be necessary to consider the agreement between the parties containing the arbitration clause. The arbitrator acting beyond his jurisdiction is a different ground from the error apparent on the face of the Award.
(g) In order to determine whether arbitrator has acted in excess of his jurisdiction what has to be seen is whether the claimant could raise a particular claim before the arbitrator. If there is a specific term in the contract or the law which does not permit or give the arbitrator the power to decide the dispute raised by the claimant or there is a specific bar in the contract to the raising of the particular claim then the Award passed by the arbitrator in respect thereof would be in excess of jurisdiction.
(h) The Award made by the Arbitrator disregarding the terms of the reference or the arbitration agreement or the terms of the contract would be a jurisdictional error which requires ultimately to be decided by the Court. He cannot Award an amount which is ruled out or prohibited by the terms of the agreement. Because of specific bar stipulated by the parties in the agreement, that claim could not be raised. Even if it is raised and referred to arbitration because of wider arbitration clause such claim amount cannot be awarded as agreement is binding between the parties and the arbitrator has to adjudicate as per the agreement.............
(i) The arbitrator could not act arbitrarily, irrationally, capriciously or independently of the contract. A deliberate departure or conscious disregard of the contract not only manifests the disregard of his authority or misconduct on his part but it may tantamount to mala fide action.
(j) The arbitrator is not a conciliator and cannot ignore the law or misapply it in order to do what he thinks just and reasonable; the arbitrator is a tribunal selected by the parties to decide the disputes according to law.”
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