Supreme Court of India: Whether An Unreasoned Award Is Sustainable When The Parties Had Explicitly Agreed For The Award To Be Reasoned?

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In Chandigarh Construction Co. Pvt. Ltd. v. State of Punjab & Anr., Civil Appeal no. 867-870 of 2013 decided on 14 Feb 2020, the Supreme Court of India was called upon to decide whether an unreasoned award passed contrary to the agreement between the parties which required the Arbitrator to pass a reasoned Award is sustainable.

Before delving further, it will be pertinent to discuss the Indian legal position on this issue which is no longer res integra. Unlike the Arbitration & Conciliation Act, 1996, the Arbitration Act of 1940, contained no provisions regarding arbitrator giving reasons for the award. It may be noted that the Supreme Court in the case of Indian Oil Corporation v. Indian Carbon Ltd.[1]observed that it is one thing to say that reasons should be stated and another thing to state that a detailed judgment be given in support of an award. Even if it be held that it is obligatory to state the reasons, it is not obligatory to give a detailed judgment in an award.[2] However, the Constitution Bench of the Supreme Court in Raipur Development Authority and Ors. etc. v. Chokhamal Contractors and Ors. etc.[3] held that arbitrator was not obliged to give reasons for his award except where arbitration agreement or deed of submission requires him to give reasons. This decision of the Constitution Bench of the Supreme Court set at rest the controversy and held that arbitrator need not give reasons in support of his award while at the same time carving out an exception to the rule that in case the agreement between the parties stipulates the award to be reasoned, then the arbitrator is required to pass a reasoned award. However, the Constitutional Bench also noted another decision of the Supreme Court[4] wherein it was inter alia held that where an authority makes an order in exercise of a quasi­-judicial function[5] it must record its reasons in support of the order it makes.

The above exception is supported by the Supreme Court decision of Gora Lal vs. Union of India[6] wherein the Court held that where the agreement of the parties required the arbitrator to indicate his findings along with the sums awarded, separately on each individual item of the dispute and where the arbitrator did not record findings on each item, the same was held to be a ground for setting aside of the award. I may, however, note that the Supreme Court in the said judgment made it clear that the same was confined to the facts of that case and to the interpretation of the clause of the agreement in that case.

In the present case, there was a similar condition provided in the agreement between the parties which required the Arbitrator to pass the Award in a particular manner whereunder the reasons were required to be assigned. However, arbitrator had not assigned any reasons for its conclusion but had unilaterally in a cryptic fashion awarded the claim.

The award was passed in favor of Claimant and in challenge, was partially upheld by the Court of the Senior Sub­-Judge. The parties filed appeal and cross-appeal before the Court of District Judge who rejected Claimant’s cross appeal and partially set aside the award. The Claimant preferred a revision before the High Court which concurred with Court of District Judge in its decision. Aggrieved Claimant appeal against the order of the High Court in the Supreme Court in the instant case.

The Supreme Court albeit concurred with the view of the High Court that the act of arbitrator in passing an unreasoned award was not justified, the Supreme Court noted that in this scenario, the appropriate course in the normal circumstance ought to have been to set aside the Award and remit the matter to the Arbitrator to make a fresh consideration which was not duly followed by the Appellate Courts below.

The Court further noted that such course ought to have been adopted by the Supreme Court as well. But keeping in view the time lapse since the claim was made under the Arbitration Act, 1940 in respect of an agreement dated 05.12.1985 and the claim before the Arbitrator itself was of the year 1994, the Court examined the matter with regard to the validity of the claim in an appeal and opened the award which in itself an exception.

[1] AIR 1988 SC 1340

[2] At [8]

[3] AIR 1990 SC 1426

[4] Siemens Engineering and Manufacturing Company of India Ltd. v. Union of India [1976] Su. S.C.R. 489

[5] The proceedings before an arbitrator are recognised as quasi-judicial proceedings see Dewan Singh v. Champat Singh [1970] 2 SCR 903

[6] (2003)12 SCC 459

Disclaimer: The views expressed in this post are mine and do not reflect the views of the organisation(s) I am engaged with

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