An award cannot be sustained on the ground that it doesn’t disclose reasons for its decision

Harshit Sharma | Amity Law School, Madhya Pradesh | 23rd January 2020

State of West Bengal V/s. Bharat Vanijya Eastern Private LimitedAPO No. 349 of 2017

FACTS OF THE CASE

1. In December, 1991 the State awarded a contract in favour of the contractor for construction of the Falakata to Pundari stretch of NH 31 in Cooch Behar. 
2. The State says that even the Comptroller and Auditor General had questioned the State allowing the contractor’s claim on account of additional expenses and, despite a substantial portion of the work not being completed ten years after the award of the contract, the contractor purported to lodge a claim and, ultimately, obtained an award for a sum in excess of Rs.15 crore. 
3. The contractor, on the other hand, blames the State for the delay in the work and says that the land was not made available to the contractor within reasonable time for the work to be completed within the time stipulated in the contract. The contractor says that it was the State which was to blame for the delay in the work and the failure in the completion thereof some ten years after the work commenced.
4. On the State’s challenge to the arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996, the amounts awarded by the arbitrator under the second and fourth heads out of the ten heads of claim were set aside on the ground that no reasons had been furnished in allowing such heads of claim, whether in part or in full. The amounts awarded under the ninth and tenth heads of claim by the arbitrator were also annulled by the judgment and order impugned, on the ground that such two heads of claim overlapped. 
5. APO 398 of 2017 is the State’s attempt to have the entirety of the award set aside on the ground that no reasons were furnished in making the award and the award betrays a complete non-application of mind and the total absence of any adjudication. And on the same ground 2 other appeals bearing number APO No. 349 of 2017 & APO No. 419 of 2017 is preferred before this court itself. 

ISSUES RAISED

1. Whether the few independent sentences expended by the arbitrator in support of each head of claim could be regarded as reasons? 
2. Whether this was a procured award or whether anyone involved or connected with the arbitral reference had acted in a manner unbecoming of such person or whether any corruption was involved in the process?

RULING OF THE COURT/ THE COURT HELD THAT

Therefore, holding the award to be opposed to public policy, the High Court set aside the award and asked the contractor to refund the entire amount received by him, together with interest thereon. He was also directed to pay and bear the expenses of the proceedings before the arbitrator and in the court. The following observations paved way for disposing the present petitions: 

1. “Reasons are the links between the fact and the conclusion and they reveal the application of mind to the matters in issue and trace the journey from the narrative to the directive. Reasons are the lifeblood of any acceptable process of adjudication and, as to whether an award or an order is reasoned or not, it depends more on the quality than the quantity of the words expended.”
2. “The award cannot stand on the ground that it does not provide any reasons in support of any head of claim. Such a ground also amounts to the award being opposed to public policy within the meaning of the relevant expression in Section 34 of the Act.”
3. “The arbitral award in this case falls well short of what was required of it by the governing statute as and by way of reasons. The bases of the claims under the individual heads are not alluded to in any discussion, whether as to the issues or as to the heads of claim. In a few cases the subjective satisfaction of the arbitrator is revealed in the use of the expression “fair estimate” without any objective grounds indicated for such subjective satisfaction. 

“Even if the language and the unintelligible expression as evident from what is quoted above are ignored, what is apparent is that an estimate of the damages was disclosed and the arbitrator made an estimation of such estimate without indicating the basis of how the contractor had made its estimation or even how the arbitrator arrived at the “fair estimate” thereof. The nature of reasons that the applicable statute mandates should be furnished in course of assessment, is singularly lacking in the adjudication.”