Chandok Machineries v S.N Sunderson

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para 10,11
Dissenting arbitrator is not to be excluded from the decision making process
2018 SCC OnLine Del 12782 : (2019) 1 Arb LR 153
In the High Court of Delhi at New Delhi

(BEFORE S. RAVINDRA BHAT AND PRATEEK JALAN, JJ.)
M/s. Chandok Machineries … Appellant;

Versus
M/s. S.N. Sunderson & Co. … Respondent.
FAO(OS) (COMM) 268/2018
Decided on December 10, 2018
Mr. Avi Singh, Advocate
Mr. Jayant K. Mehta, Mr. Pulkit Agarwal and Mr. Rahul Kukreja,
Advocates.
The Judgment of the Court was delivered by
PRATEEK JALAN, J.
CAV No. 1070/2018
1. Since learned counsel for the caveator has put in appearance, the
caveat stands discharged.
FAO(OS)(COMM) 268/2018 with CM Nos. 48573-74/2018
2. This appeal is directed against a judgment dated 28.08.2018
passed by a learned Single Judge, whereby the appellant's petition
under Section 34 of the Arbitration and Conciliation Act, 1996
[hereinafter referred to as the “Act”] has been dismissed. By the said
petition, the appellant had sought setting aside of an award dated
12.06.2017, passed by a three-member Arbitral Tribunal [hereinafter
referred to as “the Tribunal”] in respect of disputes which arose
between the parties.
Facts
3. The facts necessary for adjudication of this appeal are these : The
parties entered into two sets of Memorandums of Understanding
[hereinafter referred to as “MOU”] in respect of work to be carried out at
two mines in Katni District in the State of Madhya Pradesh. By two
MOUs dated 04.09.2012, one for services and the other for re-
imbursement of expenses [hereinafter collectively referred to as “the
first MOU”] the parties agreed to carry out de-watering, excavation,
crushing and transportation of lime stone/dolomite extracted at the
said mines. It is the appellant's case that it began to work on one of
the mines [Ahmeta Mine] and lump sum payments were made by the
respondent to it from time to time. On 31.08.2014, following a change
in the management of the respondent, the parties agreed to settle their
accounts for the work already done and to carry on further work under
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fresh agreements to be executed on 01.09.2014. Consequently, two

MOUs were executed on 01.09.2014 [hereinafter collectively referred to
as “the second MOU”] whereunder the appellant was entrusted with the
task of crushing, gitti breaking, transportation, loading and related
works at both the mines, for a term of 18 months i.e. until 29.02.2016.
The respondent sought to terminate the second MOU dated 01.09.2014
by a letter dated 15.12.2014, which gave rise to the disputes between
the parties.
4. Both the first and the second MOU contained arbitration clauses.
The litigation between the parties commenced with the appellant filing
a petition under Section 9 of the Act before the District Court at Katni
District, Madhya Pradesh. The said Court disposed of the petition
holding that the appropriate forum for relief, was the courts in Delhi as
the seat of the proposed arbitration was Delhi. Although this order was
challenged before the Madhya Pradesh High Court, that appeal was
rendered infructuous, as the appellant had in the meanwhile filed OMP
No. 99/2015 in this Court. In that petition, directions were given for
quantifying/measuring the materials extracted by the appellant, both
crushed and uncrushed, and for removal of its machines. The appellant
invoked arbitration by a notice dated 27.12.2014. The final constitution
of the Tribunal took place on 27.11.2015 when this Court appointed
Hon'ble Mr. Justice Anil Kumar, a former Judge of this Court, as the
presiding Arbitrator, in addition to the arbitrators nominated by the
parties. Although claims and counterclaims were filed before the
Tribunal by the appellant and respondent herein respectively, the
Tribunal ultimately adjudicated only the counterclaims as the appellant
did not deposit the fees fixed by the Tribunal in respect of the claims
sought to be urged by it.
5. The Tribunal's proceedings culminated in an award which bears
the date 12.06.2017, just prior to the date on which the mandate of the
Tribunal would have terminated under Section 29A of the Act i.e.
13.06.2017. It is undisputed that on 12.06.2017 the award was in fact
signed by two of the three arbitrators. The third arbitrator signed the
award only on 28.06.2017. By a subsequent order dated 05.08.2017,
while disposing of an application filed by the respondent under Section
33(1)(a) of the Act, the Arbitral Tribunal has given the reason for the
later signing of the award by the third arbitrator.
6. The appellant approached this Court under Section 34 of the Act
for setting aside of the award. It appears from the impugned judgment
of the learned Single Judge that the appellant urged the following
principal grounds:
a. That the mandate of the Tribunal having terminated on
13.06.2017, the award which was signed by the third arbitrator
on 28.06.2017 and dispatched to the parties on 07.07.2017 was
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non est.
b. That the award ought to be set aside on the ground that the fees
fixed by the Tribunal were exorbitant and in excess of the fees
prescribed in the Fourth Schedule to the Act.
c. That the claims granted by the Tribunal were beyond the terms of
reference as the Tribunal had considered claims for the period
prior to 01.09.2014, when the second MOU was executed.
d. That the Arbitral Tribunal has accepted export figures given by the
respondent without requiring proof of the same.
7. The learned Single Judge has rejected each of these contentions
in the impugned order, which has led the appellant to file the present
appeal. In this appeal, arguments were advanced mainly on two issues,
viz. (i) making of the award after termination of the Tribunal's
mandate, and (ii) the scope of the reference before the Tribunal. In
addition, brief submissions were also made on the merits of the award
of the Tribunal.
Re : Making of the award after termination of the Tribunal's
mandate
8. The resolution of the first of these issues turns on an
interpretation of Sections 29, 29A, 31 and 33 of the Act, the relevant
provisions of which are set out below:
“29. Decision making by panel of arbitrators.—
(1) Unless otherwise agreed by the parties, in arbitral proceedings
with more than one arbitrator, any decision of the arbitral tribunal
shall be made by a majority of all its members.
xxxx xxxx xxxx
29A. Time limit for arbitral award—(1) The award shall be
made within a period of twelve months from the date the arbitral
tribunal enters upon the reference.
Explanation.— For the purpose of this sub-section, an arbitral
tribunal shall be deemed to have entered upon the reference on the
date on which the arbitrator or all the arbitrators, as the case may
be, have received notice, in writing, of their appointment.
xxxx xxxx xxxx
(3) The parties may, by consent, extend the period specified in
subsection (1) for making award for a further period not exceeding
six months.
(4) If the award is not made within the period specified in
subsection (1) or the extended period specified under subsection
(3), the mandate of the arbitrator(s) shall terminate unless the Court
has, either prior to or after the expiry of the period so specified,
extended the period:
Provided that while extending the period under this subsection, if
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the Court finds that the proceedings have been delayed for the
reasons attributable to the arbitral tribunal, then, it may order
reduction of fees of arbitrator(s) by not exceeding five per cent for
each month of such delay.
(5) The extension of period referred to in sub-section (4) may be
on the application of any of the parties and may be granted only for
sufficient cause and on such terms and conditions as may be
imposed by the Court.
xxxx xxxx xxxx
31. Form and contents of arbitral award.— (1) An arbitral
award shall be made in writing and shall be signed by the members
of the arbitral tribunal.
(2) For the purposes of sub-section (1), in arbitral proceedings
with more than one arbitrator, the signatures of the majority of all
the members of the arbitral tribunal shall be sufficient so long as the
reason for any omitted signature is stated.
xxxx xxxx xxxx
(5) After the arbitral award is made, a signed copy shall be
delivered to each party.
xxxx xxxx xxxx
33. Correction and interpretation of award; additional
award.—
(1) Within thirty days from the receipt of the arbitral award,
unless another period of time has been agreed upon by the
parties—
(a) a party, with notice to the other party, may request the
arbitral tribunal to correct any computation errors, any
clerical or typographical errors or any other errors of a
similar nature occurring in the award;
(b) if so agreed by the parties, a party, with notice to the other
party, may request the arbitral tribunal to give an
interpretation of a specific point or part of the award.
(2) If the arbitral tribunal considers the request made under
subsection (1) to be justified, it shall make the correction or
give the interpretation within thirty days from the receipt of the
request and the interpretation shall form part of the arbitral
award.
(3) The arbitral tribunal may correct any error of the type referred
to in clause (a) of sub-section (1), on its own initiative, within
thirty days from the date of the arbitral award.
(4) Unless otherwise agreed by the parties, a party with notice to
the other party, may request, within thirty days from the
receipt of the arbitral award, the arbitral tribunal to make an
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additional arbitral award as to claims presented in the arbitral

proceedings but omitted from the arbitral award.
(5) If the arbitral tribunal considers the request made under
subsection (4) to be justified, it shall make the additional
arbitral award within sixty days from the receipt of such
request.
(6) The arbitral tribunal may extend, if necessary, the period of
time within which it shall make a correction, give an
interpretation or make an additional arbitral award under
subsection (2) or sub-section (5).
(7) Section 31 shall apply to a correction or interpretation of the
arbitral award or to an additional arbitral award made under
this section.”
9. Mr. Avi Singh, learned counsel for the appellant submitted that
Section 31(1) lays down a general rule that an award must be signed
by all the members of the Tribunal, and the exception engrafted in
Section 31(2) is conditional - in the event of any arbitrator not signing
the award, the reasons for the same must be given. It is his contention
that such reason must be given at the time of making the award itself,
and cannot be subsequently supplied by the Tribunal. Mr. Jayant Mehta,
learned counsel for the respondent, on the other hand, submitted that a
procedural defect in the form of an award, which too was subsequently
rectified, does not vitiate an award and the parties ought not to be
relegated to a fresh round of litigation.
10. As far as the substantive decisions of an arbitral tribunal are
concerned, Section 29(1) of the Act clearly provides that an award
made by a majority of the members prevails. Although Section 31(1)
requires the award to be signed by the members of the tribunal,
Section 31(2) provides for a contingency where the award is not signed
by all the members of the of the tribunal, but a majority thereof. The
purpose, in our view, is to ensure that the absence of a minority of the
members of the tribunal, for whatever reason, does not necessitate a
fresh round of litigation; if a majority of the tribunal [whose decision
would, in any event, prevail by virtue of Section 29(1)] is available to
sign the award, that is regarded as sufficient. A learned Single Judge of
the Bombay High Court held in Moti v. Sheroo, (2009) 6 Mah LJ 535
(paragraph 16) as follows:
“Where an award has been signed by a majority of the arbitral
Tribunal that award constitutes in fact and in law an award of the
arbitral Tribunal. The omission of one of the Arbitrators to sign the
award, or for that matter, to deliver his or her award would not affect
the legitimacy or validity of the award of the majority. Nor for that
matter does the fact that one of the Arbitrators has delivered a
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dissenting award affect the validity of the award of the majority. The
Act now places the matter beyond doubt by providing that what is
required in law for a valid award is an award of the majority
constituting an arbitral tribunal. The reasons for the omission of the
signature of an Arbitrator have to be stated.
11. The general rule of Section 31(1), and the requirement in
Section 31(2) that reasons be given for the absence of the signature of
any member of the tribunal, are more in the nature of procedural
safeguards to ensure that all members of the tribunal had the
opportunity to participate in the decision-making process.
12. In this view of the matter, it is not of great significance that the
reasons for the absence of one of the signatures on the award are
supplied later, rather than at the time the award is signed by the
majority of the tribunal. In general, a procedural irregularity of this
nature ought not to vitiate the entire decision-making process,
particularly when it is capable of being cured subsequently. The learned
Single Judge has, in the impugned judgment, noticed the discussion on
the draft arbitration rules before the concerned United Nations
Committee, while considering the corresponding clause of the
UNCITRAL Model Law, upon which the Act is based:
“16…………..The relevant quotation from the discussions of the
United Nations Committee as held in the 328th meeting and recorded
in the Year Book of the United Nations Commission International
Trade Law, 1985, Vol. XVI is reproduced herein below:
“Article 31. Form and contents of award.
Article 31(1)
25. Mr. LAVINA (Philippines) said that the words “provided that
the reason for any omitted signature is stated” should be deleted. In
his view, whether the reason for an omitted signature was stated or
not, the signatures of the majority of the members of the arbitral
tribunal should be sufficient to validate the award. He asked what
the position would be if the reason for an omitted signature was not
given.
26. The CHAIRMAN said that paragraph (1) represented a
compromise between two extreme positions : on the one hand, that
the majority of the arbitrators could take any decision they wished;
on the other, that all the arbitrators must sign an award. The latter
position could lead to difficulties in the event of an arbitrator's death,
illness, prolonged absence or refusal to sign. If the reason for an
omitted signature was not given, the users of the arbitral award
should request the reason from the arbitrators. He noted that a
similar provision to paragraph (1) was found in article 32(4) of the
UNCITRAL Arbitration Rules. He suggested that the Commission
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should retain the existing wording.”

13. This discussion too supports the conclusion that a belated supply
of reasons for a missing signature on the award is permissible.
14. We are also unable to accept the appellant's argument that the
despatch of the award on 07.07.2017 would be the relevant date for
determination of the date of making the award. The requirement of
Section 31(5) of the Act - that a signed copy of the award be delivered
to each party - expressly arises only after the award is made. The date
of making the award is to be determined by reference to Sections 31(1)
and 31(2), and the date of despatch to the parties is not of any
significance for that purpose.
15. In the present case, the third arbitrator has in fact signed the
award, albeit belatedly. The reason for his inability to sign the award at
the same time as the other two arbitrators has also been disclosed by a
subsequent order of the Tribunal, which was passed on an application
by the respondent under Section 33(1) of the Act. In our view, these
steps are sufficient to cure the original lacuna in the award dated
12.06.2017 and constitute sufficient compliance with Section 31(2) of
the Act. We note that a Division Bench of the Andhra Pradesh High
Court has reached a similar conclusion in its judgment dated
30.08.2017 in Superintendent Engineer v. P. Ramaiah, (2018) 1 ALT 39
(DB) (although the reason for the omission of one of the arbitrators'
signatures in that case was communicated in advance of the award,
and not later). We therefore hold that the award was properly made
within the time limit stipulated under the Act, and affirm the findings of
the learned Single Judge to this effect.
16. In the impugned judgment, the learned Single Judge has also
considered the power of the Court under Section 29A(4) to extend the
time limit for making the award and observed that this power can be
exercised even on an oral application of one of the parties. In the view
we have taken, it is not necessary to examine this issue.
Re : Scope of reference before the Arbitral Tribunal
17. To determine whether the Tribunal has acted beyond the scope
of its reference, we note at the outset that both the MOUs contained
arbitration clauses, and claims arising out of both agreements were
raised by the appellant before the same three-member arbitral tribunal.
The appellant contends, however, that the award under challenge was
made in respect of disputes arising under the second MOU, and its
grievance is that a sum of Rs. 2,27,36,444.88 awarded to the
respondent was in respect of an advance given by the respondent to
the appellant under the first MOU. The appellant therefore urges that
the award, to this extent, be set aside as it is beyond the subject
matter of the reference. The respondent's case, on the other hand, is
that the reference initiated by the appellant under the first MOU [which
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was initiated later in point of time] was not maintainable, and the
respondent made its counterclaims only in the first reference.
18. The course of the arbitral proceedings, as noticed by the learned
Single Judge, demonstrate that the appellant was itself ambivalent
about the scope of the respective proceedings. It filed an amendment
application in the first reference [arising out of the second MOU], which
was allowed by the Tribunal vide order dated 10.06.2016 subject to
payment of costs. The appellant thereafter filed an application for
review of the order of costs, but this was filed in the second reference
[arising out of the first MOU]. The record reveals that the review was
dismissed, but the costs remained unpaid, and the amended claim was
therefore not considered by the Tribunal. The appellant thereafter filed
applications for amendment of the second reference, and for
consolidation of the proceedings, which were also dismissed.
19. In this factual background, the Tribunal rejected the objection of
the appellant as to the scope of the reference before it, on the ground
that the appellant had not challenged the jurisdiction of the Tribunal in
respect of the claim in question, either in its pleadings or by way of an
application under Section 16 of the Act. The Tribunal found that the
pleadings of the appellant in the first reference [arising out of the
second MOU] also referred to transactions that took place prior to
01.09.2014 and that the appellant has maintained a single account in
respect of transactions under both the MOUs, which has been debited
and credited continuously by the appellant in respect of both the MOUs.
20. In these circumstances, the learned Single Judge has rejected
the contentions of the appellant, observing that the appellant's conduct
in the proceedings was intended to cause confusion rather than
ventilate a genuine grievance. The learned Single Judge has declined to
interfere with the finding of the Tribunal based on appreciation of
evidence before it, holding that such interference would be beyond the
scope of Section 34 of the Act.
21. The appellant's contentions regarding the scope of the reference
are, in our view, untenable in view of its own conduct during the
arbitral proceedings. As noticed above, the appellant itself failed to
maintain a clear distinction between the proceedings arising out of each
of the MOUs. It did not challenge the jurisdiction of the Tribunal in
respect of the counterclaim in question. On facts, the Tribunal found
the transactions under the second MOU to have been accounted for by
the parties in continuation of the transactions under the first MOU. The
factual findings of the Tribunal are not susceptible to interference under
Section 34 of the Act on any of the grounds enumerated therein. We
therefore agree with the reasoning and the conclusion of the learned
Single Judge and reject the appellant's contention that the award of the
Tribunal was beyond the scope of the reference before it.
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Merits of the award:

22. Before the learned Single Judge, the appellant had also
challenged the award on the ground that export figures given by the
respondent had been accepted without formal proof thereof. The
learned Single Judge has repelled this challenge on the ground that the
Arbitral Tribunal is the final judge of the evidence led before it. In our
view, the impugned judgment does not call for interference on this
ground. The relevant evidence was discussed in detail by the Tribunal,
as extracted in the impugned judgment. The adequacy, materiality and
quality of evidence are not matters which the Court can revisit under
Section 34 of the Act, as held by the Supreme Court inter alia in
Associated Builders v. Delhi Development Authority, (2015) 3 SCC 49
(paragraph 33).
Conclusion
23. In the facts and the circumstances aforesaid, we are of the
opinion that the impugned order of the learned Single Judge, upholding
the award, does not call for interference. The appeal is accordingly
dismissed.
———
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SCC Online Web Edition, © 2024 EBC Publishing Pvt. Ltd.

Page 1 Thursday, December 05, 2024

In the High Court of Delhi at New Delhi

M/s. Chandok Machineries … Appellant;

fresh agreements to be executed on 01.09.2014. Consequently, two

additional arbitral award as to claims presented in the arbitral

should retain the existing wording.”

Merits of the award:

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