Adjudicatory Process

[(2014) 10 SCC 1]

Para 39: In the first instance, this Court for the first time declared the salient components of the functions exercised by a civil court , as under:-

"6. In the case of The Bharat Bank Ltd. V/s. Employees, AIR 1950 SC 188, this Court considered whether an Industrial Tribunal was a court. It said that one cannot go by mere nomenclature. One has to examine the functions of a Tribunal and how it proceeds to discharge those functions. It held that an Industrial Tribunal had all the trappings of a court and performed functions which cannot but be regarded as judicial. The Court referred to the Rules by which proceedings before the Tribunal were regulated. The Court dwelt on the fact that the powers vested in it are similar to those exercised by civil courts under the Code of Civil Procedure when trying a suit. It had the power of ordering discovery, inspection etc. and forcing the attendance of witnesses, compelling production of documents and so on. It gave its decision on the basis of evidence and in accordance with law. Applying the test laid down in the case of Cooper V/s. Wilson, (1937) 2 K.B. 309 at p.340, this Court said that "a true judicial decision presupposes an existence of dispute between two or more parties and then involves four requisites - (1) the presentation of their case by the parties; (2) ascertainment of facts by means of evidence adduced by the parties often with the assistance of argument; (3) if the dispute relates to a question of law, submission of legal arguments by the parties; and (4) by decision which disposes of the whole matter by findings on fact and application of law to facts so found. Judged by the same tests, a Labour Court would undoubtedly be a court in the true sense of the term. The question, however, is whether such a court and the presiding officer of such a court can be said to hold a post in the judicial service of the State as defined in Article 236 of the Constitution."

2015 (3) SCC 138

Para 24: In this context, we may usefully refer to the authority in State of U.P. V. Nahar Singh, 1998 3 SCC 561 wherein the Court has dealt with the effect of absence of cross-examination. True it is, the factual matrix was different therein, but the observations are salient. In the said case, it has been held:

13. ......In the absence of cross-examination on the explanation of delay, the evidence of PW 1 remained unchallenged and ought to have been believed by the High Court. Section 138 of the Evidence Act confers a valuable right of cross-examining the witness tendered in evidence by the opposite party. The scope of that provision is enlarged by Section 146 of the Evidence Act by allowing a witness to be questioned:

(1) to test his veracity,

(2) to discover who he is and what is his position in life, or

(3) to shake his credit by injuring his character, although the answer to such questions might tend directly or indirectly to incriminate him or might expose or tend directly or indirectly to expose him to a penalty or forfeiture.

14. The oft-quoted observation of Lord Herschell, L.C. in Browne v. Dunn, 1893 6 R 67 clearly elucidates the principle underlying those provisions. It reads thus:

"I cannot help saying, that it seems to me to be absolutely essential to the proper conduct of a cause, where it is intended to suggest that a witness is not speaking the truth on a particular point, to direct his attention to the fact by some questions put in cross-examination showing that that imputation is intended to be made, and not to take his evidence and pass it by as a matter altogether unchallenged, and then, when it is impossible for him to explain, as perhaps he might have been able to do if such questions had been put to him, the circumstances which, it is suggested, indicate that the story he tells ought not to be believed, to argue that he is a witness unworthy of credit. My Lords, I have always understood that if you intend to impeach a witness, you are bound, whilst he is in the box, to give an opportunity of making any explanation which is open to him; and, as it seems to me, that is not only a rule of professional practice in the conduct of a case, but it is essential to fair play and fair dealing with witnesses."

Be it stated in the said case, this Court did not approve the conclusion of the High Court that the explanation for the delay was not at all convincing and the said view was expressed as there was no cross- examination. In the instant case, in the absence of cross-examination of the witness, barring a bald suggestion to PW-12, we are inclined to hold that the appellant was the author of the letters and the same were not written under any pressure.

2011 (8) SCC 670

Para 16: We are surprised to note that the Division Bench of the High Court had overlooked the above mentioned vital facts while deciding the lis between the parties. Non-application of mind is writ large in the order of the High Court, not even an attempt or effort has been made to refer to the pleadings of parties or examine the documents produced, in spite of the fact that those materials were on record.

Para 17: Of late, we have come across several orders which would indicate that some of the judges are averse to decide the disputes when they are complex or complicated, and would find out ways and means to pass on the burden to their brethren or remand the matters to the lower courts not for good reasons. Few judges, for quick disposal, and for statistical purposes, get rid of the cases, driving the parties to move representations before some authority with a direction to that authority to decide the dispute, which the judges should have done. Often, causes of action, which otherwise had attained finality, resurrect, giving a fresh causes of action. Duty is cast on the judges to give finality to the litigation so that the parties would know where they stand.

Para 18: Judicial determination has to be seen as an outcome of a reasoned process of adjudication initiated and documented by a party based, on mainly events which happened in the past. Courts' clear reasoning and analysis are basic requirements in a judicial determination when parties demand it so that they can administer justice justly and correctly, in relation to the findings on law and facts. Judicial decision must be perceived by the parties and by the society at large, as being the result of a correct and proper application of legal rules, proper evaluation of the evidence adduced and application of legal procedure. The parties should be convinced that their case has been properly considered and decided.

Para 19: Judicial decisions must in principle be reasoned and the quality of a judicial decision depends principally on the quality of its reasoning. Proper reasoning is an imperative necessity which should not be sacrificed for expediency. The statement of reasons not only makes the decision easier for the parties to understand and many a times such decisions would be accepted with respect. The requirement of providing reasons obliges the judge to respond to the parties' submissions and to specify the points that justify the decision and make it lawful and it enables the society to understand the functioning of the judicial system and it also enhances the faith and confidence of the people in the judicial system.

Para 20: We are sorry to say that the judgment in question does not satisfy the above standards set for proper determination of disputes. Needless to say these types of orders weaken our judicial system. Serious attention is called for to enhance the quality of adjudication of our courts. Public trust and confidence in courts stem, quite often, from the direct experience of citizens from the judicial adjudication of their disputes.

Cellular Operators Association Of India Versus Union Of India: AIR 2003 SC 899

Para 1: ….Before the tribunal, large number of issues on facts and law had been raised, which can be broadly enumerated as under:

Para 2: The tribunal however by the impugned judgment, while dismissing the application filed before it, came to the conclusion that-

Para 4: The arguments of the appellants can be summarized thus:

(1) Though large number of highly debatable issues had been argued, the tribunal did not make any reference to those issues and such non-consideration and non-disposal would be an important question of law for which the order has to be interfered with.

(6) The conclusions of the tribunal without appreciating the evidence and materials adduced and without being backed by any reasons are unsustainable and the same has to be interfered with.

(7) The tribunal also has assumed several things even though not borne out by records and such assumption without any reference to any materials vitiates the ultimate conclusion and as such cannot be upheld by this Court.

Para 5: The arguments on behalf of the respondents on the other hand can be summarized thus:

Para 8: Mr. P. Chidambaram, Mr. Ram Jethmalani and Mr. C.S. Vaidyanathan, appearing for the appellants, on the other hand contended that non-consideration of the points raised and non-consideration of the relevant materials and failure to exercise jurisdiction vested in the tribunal would itself constitute a substantial question of law for this Court to interfere with the ultimate conclusion of the tribunal.

Para 17: I agree with the conclusions of the Judgment prepared by My Lord, the Chief Justice of India that the matter should be remitted back to the tribunal but 1 would like to assign additional reasons therefor.

Para 18: The basic fact on the matter has been noticed by My Lord, the Chief Justice of India.

Para 19: 1 may, however, point out that the learned counsels appearing on behalf of the parties have raised a large number of contentions.

Para 20: They not only filed written submissions before this Court, our attention has also been drawn to the written submissions filed before the learned TDSAT. The questions raised are numerous and varied. The learned counsels have also taken us through a large number of documents. A large number of charts have been filed before us for one purpose or the other. The parties had also relied upon the opinion of experts on technical matters. The learned counsels have also referred to a large number of authorities.

Para 23: It (TDSAT) arrived at certain findings without application of its mind on various vital issues including the issue of its jurisdiction.

Para 25: Each one of the aforementioned findings have been assailed as perverse.

Para 26: We, however, need not go into the aforementioned question in view of the order proposed to be passed by us in our opinion the learned Tribunal failed to assign sufficient or cogent reasons in support of its findings. In relation to some issues, no reason has been assigned. Some issues although noticed have not been adverted to. Some issues have even not been noticed. The impugned order of the TDSAT, therefore, does not fulfil the criteria of a judgment.

Para 27: A Judgment of a court or a Tribunal should contain concise statement of case, points of decisions, the reasons for such decisions and decisions thereupon.

Para 28: In BalrajTaneja and Anr. V/s. Sunil Madan and Anr. [(1999) 8 SCC 396] it has been held :

"Judgment" as defined in Section 2(9) of the Code of Civil Procedure means the statement given by the Judge of the grounds for a decree or order. What a Judgment should contain is indicated in Order 20 Rule 4(2) which says that a Judgment "shall contain a concise statement of the case, the points for determination, the decision thereon, and the reasons for such decision." It should be a self-contained document from which it should appear as to what were the facts of the case and what was the controversy which was tried to be settled by the court and in what manner. The process of reasoning by which the court came to the ultimate conclusion and decreed the suit should be reflected clearly in the judgment."

Para 29: In Union of India and Ors. V/s. Manager, M/s Jain and Associates [(2001) 3 SCC 277], this Court held as follows : "The result is - before pronouncing judgment, the court has to apply its mind to arrive at the conclusion whether there is any cause to modify or remit the award. Further the phrase "pronounce judgment" would itself indicate judicial determination by reasoned order for arriving at the conclusion that decree in terms of award be passed. One of the meanings given to the word "judgment" in Webster's Comprehensive Dictionary [International Edn., Vol. I (1984)] reads thus : "the result of judging; the decision or conclusion reached, as after consideration or deliberation". Further, Order 20 Rule 4(2) CPC in terms provides that 'judgment" shall contain a concise statement of case, the points for determination, the decision thereon, and the reasons for such decision. This is antithesis to pronouncement of non-speaking order.

Para 30: It did not follow the said guidelines. Even as an appellate authority the TDSAT was required to comply with the principles of or analogous to the provisions of Order 41 Rule 33 of the Code of Civil Procedure. See Rattan Dev V/s. Pasam Devi [(2002) 7 SCC 441] and B.S. Sharma V/s. State of Haryana and Anr. [(2001) 1 SCC 434],

Para 31: As regards the issue of jurisdiction, it posed a wrong question and gave a wrong answer.

Para 47: Sub-section (7) of Section 14A confers a wide jurisdiction upon the Tribunal. The Tribunal being an expert body is entitled to exercise its appellate jurisdiction both on fact as also in law over a decision of order / decision/ direction of the Authority. Its power to examine the correctness, legality or propriety of the order passed by the Authority as also in relation to the dispute must be held to be a wide one.

Para 48: The learned TDSAT should have borne in mind that its decision on fact and law is final and appeal lies to this Court in terms of Section 18 of the Act only on substantial questions of law. It, therefore, was obliged to determine the questions of law and facts so as to enable this Court to consider the matter if any substantial question of law arises on the face of the judgment.

Para 49: Furthermore, the question as to whether the procedural requirements have not been fulfilled or not had not been gone into by the learned TDSAT.

Para 55: The learned TDSAT, therefore, has posed absolutely a wrong question and thus its impugned decision suffers from a misdirection in law.

Para 56: In Union of India V/s. Tarachand Gupta and Bros. [(1971) 1 SCC 486], the law is stated as under :

"The words "a decision or order passed by an Officer of Customs under this Act" used in Section 188 of the Sea Customs Act must mean a real and not a purported determination. A determination, which takes into consideration factors which the officer has no right to take into account, is no determination. This is also the view taken by courts in England. In such cases the provision excluding jurisdiction of Civil Courts cannot operate so as to exclude an inquiry by them. In Anisminic Ltd. V/s. The Foreign Compensation Commissioner, Lord Reid at pages 213 and 214 of the Report stated as follows : "It has sometimes been said that it is only where a tribunal acts without jurisdiction that its decision is a nullity. But in such cases the word "jurisdiction" has been used in a very wide sense, and I have come to the conclusion that it is better not to use the term except in the narrow and original sense of the tribunal being entitled to enter on the enquiry in question. But there are many cases where, although the tribunal had jurisdiction to enter on the enquiry, it had done or failed to do something in the course of the enquiry which is of such a nature that its decision is a nullity. It may have given its decision in bad faith. It may have made a decision which it had no power to make. It may have failed in the course of the enquiry to comply with the requirements of natural justice. It may in perfect goods faith have misconstrued the provisions giving it power to act so that it failed to deal with the question remitted to it and decided some question which was not remitted to it. It may have refused to take into account something which it was required to take into account. Or it may have based its decision on some matter which, under the provisions setting it up, it had no right to take into account. I do not intend this list to be exhaustive. But if it decides a question remitted to it for decision without committing any of these errors it is as much entitled to decide that question wrongly as it is to decide it rightly."

To the same effect are also the observations of Lord Pearce at page 233, R. V. Fulham, Hammersmith and Kensington Rent Tribunal is yet another decision of a tribunal properly embarking on an enquiry, that is, within its jurisdiction, but at the end of its making an order in excess of its jurisdiction which was held to be a nullity though it was an order of the kind which it was entitled to make in a proper case. The principle thus is that exclusion of the jurisdiction of the Civil Courts is not to be readily inferred. Such exclusion, however, is inferred where the statute gives finality to the order of the tribunal on which it confers jurisdiction and provides for adequate remedy to do what the courts would normally do in such a proceeding before it. Even where a statute gives finality, such a provision does not exclude cases where the provisions of the particular statute have not been complied with or the tribunal has not acted in conformity with the fundamental principles of judicial procedure. The word "jurisdiction" has both a narrow and a wider meaning. In the sense of the former, it means the authority to embark upon an enquiry; in the sense of the latter it is used in several aspects, one of such aspects being that the decision of the tribunal is in non-compliance with the provisions of the Act. Accordingly, a determination by a tribunal of a question other than the one which the statute directs it to decide would be a decision not under the provisions of the Act, and, therefore, in excess of its jurisdiction"

Para 57: In Union of India and Anr. V/s. Paras Laminates (P) Ltd. [(1990) 4 SCC 453], this Court held as follows :

"There is no doubt that the Tribunal functions as a court within the limits of jurisdiction. It has all the powers conferred expressly by the statute. Furthermore, being a judicial body, it has all those incidental and ancillary powers which are necessary to make fully effective the express grant of statutory powers. Certain powers are recognized as incidental and ancillary, not because they are inherent in the Tribunal, nor because its jurisdiction is plenary, but because it is the legislative intent that the power which is expressly granted in the assigned field of jurisdiction is efficaciously and meaningfully exercised. The powers of the Tribunal are no doubt limited. Its area of jurisdiction is clearly defined, but within the bounds of its jurisdiction, it has all the powers expressly and impliedly granted. The implied grant is. of course, limited by the express grant and, therefore, it can only be such powers as are truly incidental and ancillary for doing all such acts or employing all such means as are reasonably necessary to make the grant effective. As stated in Maxwell on Interpretation of Statutes (11th edn.) "where an Act confers a jurisdiction, it impliedly also grants the power of doing all such acts, or employing such means, as are essentially necessary to its execution"."

Para 58: Furthermore, TDSAT failed to advert unto itself to the following issues :

Para 59: Having regard to the assertions made by the appellants herein that 85% of its business is related to SDCA only and only 15% subscribers have roaming facility. TDSAT ought to have addressed itself on the issue as to whether one service is a substitute of the other or not.

Para 60: TDSAT had also failed to give its findings on the following issues :

Para 61: The Tribunal has opined that the technology may or may not be known as early as in 1994-95 but it proceeded to decide the issues only from the angle of consumers' interest. Consumers' interest is only one of the relevant factors. It by itself cannot be decisive. Consumers' interest is required to be taken into consideration only when it is found that the actions of the Central Government as also the recommendation of Authority were within their respective jurisdiction.

Para 62: TDSAT proceeded on the basis that the Central Government is entitled to change its own policy decision without taking into consideration the fact that according to the Central Government itself it was merely a 'fine tuning of the policy' and not a change of policy.

Para 63: The jurisdiction of the Central Government to effect change in the policy decisions was also in question. If a National policy had been adopted by the Cabinet, having regard to the provisions contained in Section 14 of the General Clauses Act, although a change in the policy would be permissible, but the procedure laid down therefore were required to be followed. This aspect of the matter has also not been considered by the TDSAT.

Para 66: Before TDSAT, the appellants argued that the decision of the Central Government was arbitrary. The said question was also not answered.

Para 67: As regards the level playing field, the TDSAT did not refer to a large number of materials at all. It took a wrong decision that the appellants had conceded the power of the Central Government in the matter of change of policy and furthermore agreed thereto in the event, its offers are satisfied.

Para 68: We may notice that most of the findings recorded by the TDSAT are not supported by any cogent reason. It arrived at some findings .without referring to any material on records. As for example we may notice that it referred to a chart purported to have been handed over by Dr. Singhvi but the contents of the chart had not been disclosed. In any event, the materials on the basis whereof the chart was prepared had not been disclosed at all.

Para 69: It failed to notice that the requirement of increasing tele-density in rural areas was not in question. What was questioned was that encroachment by the FSPs in the area which is said to be within the exclusive privilege of the cellular operators having regard to the provision of the NTP-99 and the terms and conditions of the licences issued to them. It also failed to arrive at any finding as to whether the concessions given to the appellants by the Central Government were asked for by them or not and/or whether only because they received such concessions, they were estopped or precluded from raising the issues.

Para 70: The learned TDSAT further failed to take into consideration the question as to whether the terms of offer made to the appellants as regards for providing fixed service were similar to those offered to the fixed service providers or not. It merely held that the appellants can use latest technology including WLL with limited mobility as also the respondents without taking into consideration the materials to the effect that the letters of the respondents to the authorities of the Central Government for giving the same facilities fell on deaf ears. Furthermore, the issue relating to the grant of concessions to the appellants may be held to be redundant if the purported decision of the Central Government/or the recommendations of the authority were illegal and without jurisdiction.

Para 71: We have enumerated some of the issues raised before us only with a view to highlight that the TDSAT did not pose unto itself the correct question.

Para 72: The impugned order, therefore, cannot be sustained and it is set aside accordingly. The matter is remitted to TDSAT for consideration of the matter afresh in accordance with law.

2015 (3) SCC 49

Para 12: In as much as serious objections have been taken to the Division Bench judgment on the ground that it has ignored the parameters laid down in a series of judgments by this Court as to the limitations which a Judge hearing objections to an arbitral award under Section 34 is subject to, we deem it necessary to state the law on the subject.

Section 34 of the Arbitration and Conciliation Act reads as follows-

"Application for setting aside arbitral award.-

(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3).

(2) An arbitral award may be set aside by the Court only if-

(a) the party making the application furnishes proof that-

(i) a party was under some incapacity; or

(ii) The arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or

(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:

Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or

(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or

(b) the Court finds that-

(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or

(ii) the arbitral award is in conflict with the public policy of India.

Explanation.-Without prejudice to the generality of sub-clause (ii), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81.

(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under Section 33, from the date on which that request had been disposed of by the arbitral tribunal:

Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.

(4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award."

This Section in conjunction with Section 5 makes it clear that an arbitration award that is governed by part I of the Arbitration and Conciliation Act, 1996 can be set aside only on grounds mentioned under Section 34 (2) and (3), and not otherwise. Section 5 reads as follows:

"5. Extent of judicial intervention.-Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part."

It is important to note that the 1996 Act was enacted to replace the 1940 Arbitration Act in order to provide for an arbitral procedure which is fair, efficient and capable of meeting the needs of arbitration; also to provide that the tribunal gives reasons for an arbitral award; to ensure that the tribunal remains within the limits of its jurisdiction; and to minimize the supervisory roles of courts in the arbitral process.

It will be seen that none of the grounds contained in sub- clause 2 (a) deal with the merits of the decision rendered by an arbitral award. It is only when we come to the award being in conflict with the public policy of India that the merits of an arbitral award are to be looked into under certain specified circumstances.

In Renusagar Power Co. Ltd. V/s. General Electronic Co., 1994 Supp (1) SCC 644, the Supreme Court construed Section 7 (1)(b) (ii) of the Foreign Award (Recognition and Enforcement) Act, 1961.

"7. Conditions for enforcement of foreign awards.-

(1) A foreign award may not be enforced under this Act-

(b) if the Court dealing with the case is satisfied that-

(ii) the enforcement of the award will be contrary to the public policy."

In construing the expression "public policy" in the context of a foreign award, the Court held that an award contrary to

1. The fundamental policy of Indian law

2. The interest of India

3. Justice or morality,

would be set aside on the ground that it would be contrary to the public policy of India. It went on further to hold that a contravention of the provisions of the Foreign Exchange Regulation Act would be contrary to the public policy of India in that the statute is enacted for the national economic interest to ensure that the nation does not lose foreign exchange which is essential for the economic survival of the nation (see para 75). Equally, disregarding orders passed by the superior courts in India could also be a contravention of the fundamental policy of Indian law, but the recovery of compound interest on interest, being contrary to statute only, would not contravene any fundamental policy of Indian law (see paras 85,95).

When it came to construing the expression "the public policy of India" contained in Section 34 (2) (b) (ii) of the Arbitration Act, 1996, this Court in ONGC V/s. Saw Pipes, 2003 (5) SCC 705, held-

"31. Therefore, in our view, the phrase "public policy of India" used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term "public policy" in Renusagar case [1994 Supp (1) SCC 644] it is required to be held that the award could be set aside if it is patently illegal. The result would be - award could be set aside if it is contrary to:

(a) Fundamental policy of Indian law; or

(b) The interest of India; or

(c) Justice or morality, or

(d) in addition, if it is patently illegal.

Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged void.

74. In the result, it is held that:

(A) (1) The court can set aside the arbitral award under Section 34(2) of the Act if the party making the application furnishes proof that:

(i) a party was under some incapacity, or

(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or

(iii) the party making the application was not given proper notice of the

appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration.

(2) The court may set aside the award:

(i)(a) if the composition of the Arbitral Tribunal was not in accordance with the agreement of the parties,

(b) failing such agreement, the composition of the Arbitral Tribunal was not in accordance with Part I of the Act.

(ii) if the arbitral procedure was not in accordance with:

(a) the agreement of the parties, or

(b) failing such agreement, the arbitral procedure was not in accordance with Part I of the Act.

However, exception for setting aside the award on the ground of composition of Arbitral Tribunal or illegality of arbitral procedure is that the agreement should not be in conflict with the provisions of Part I of the Act from which parties cannot derogate.

(c) If the award passed by the Arbitral Tribunal is in contravention of the provisions of the Act or any other substantive law governing the parties or is against the terms of the contract.

(3) The award could be set aside if it is against the public policy of India, that is to say, if it is contrary to:

(a) fundamental policy of Indian law; or

(b) the interest of India; or

(c) justice or morality; or

(d) if it is patently illegal.

(4) It could be challenged:

(a) as provided under Section 13(5); and

(b) Section 16(6) of the Act.

(B)(1) The impugned award requires to be set aside mainly on the grounds:

(i) there is specific stipulation in the agreement that the time and date of delivery of the goods was of the essence of the contract;

(ii) in case of failure to deliver the goods within the period fixed for such delivery in the schedule, ONGC was entitled to recover from the contractor liquidated damages as agreed;

(iii) it was also explicitly understood that the agreed liquidated damages were genuine pre-estimate of damages;

(iv) on the request of the respondent to extend the time-limit for supply of goods, ONGC informed specifically that time was extended but stipulated liquidated damages as agreed would be recovered;

(v) liquidated damages for delay in supply of goods were to be recovered by paying authorities from the bills for payment of cost of material supplied by the contractor;

(vi) there is nothing on record to suggest that stipulation for recovering liquidated damages was by way of penalty or that the said sum was in any way unreasonable.

(vii) In certain contracts, it is impossible to assess the damages or prove the same. Such situation is taken care of by Sections 73 and 74 of the Contract Act and in the present case by specific terms of the contract."

The judgment in ONGC V/s. Saw Pipes has been consistently followed till date.

In Hindustan Zinc Ltd. V/s. Friends Coal Carbonisation, (2006) 4 SCC 445, this Court held:

"14. The High Court did not have the benefit of the principles laid down in Saw Pipes [(2003) 5 SCC 705] , and had proceeded on the assumption that award cannot be interfered with even if it was contrary to the terms of the contract. It went to the extent of holding that contract terms cannot even be looked into for examining the correctness of the award. This Court in Saw Pipes [(2003) 5 SCC 705] has made it clear that it is open to the court to consider whether the award is against the specific terms of contract and if so, interfere with it on the ground that it is patently illegal and opposed to the public policy of India."

In McDermott International Inc. V/s. Burn Standard Co. Ltd., (2006) 11 SCC 181, this Court held:

"58. In Renusagar Power Co. Ltd. V/s. General Electric Co. [1994 Supp (1) SCC 644] this Court laid down that the arbitral award can be set aside if it is contrary to (a) fundamental policy of Indian law; (b) the interests of India; or (c) justice or morality. A narrower meaning to the expression "public policy" was given therein by confining judicial review of the arbitral award only on the aforementioned three grounds. An apparent shift can, however, be noticed from the decision of this Court in ONGC Ltd. V/s. Saw Pipes Ltd. [(2003) 5 SCC 705] (for short "ONGC"). This Court therein referred to an earlier decision of this Court in Central Inland Water Transport Corpn. Ltd. V/s. Brojo Nath Ganguly [(1986) 3 SCC 156 : 1986 SCC (L&S) 429 : (1986) 1 ATC 103] wherein the applicability of the expression "public policy" on the touchstone of Section 23 of the Indian Contract Act and Article 14 of the Constitution of India came to be considered. This Court therein was dealing with unequal bargaining power of the workmen and the employer and came to the conclusion that any term of the agreement which is patently arbitrary and/or otherwise arrived at because of the unequal bargaining power would not only be ultra vires Article 14 of the Constitution of India but also hit by Section 23 of the Indian Contract Act. In ONGC [(2003) 5 SCC 705] this Court, apart from the three grounds stated in Renusagar [1994 Supp (1) SCC 644] , added another ground thereto for exercise of the court's jurisdiction in setting aside the award if it is patently arbitrary.

59. Such patent illegality, however, must go to the root of the matter. The public policy violation, indisputably, should be so unfair and unreasonable as to shock the conscience of the court. Where the arbitrator, however, has gone contrary to or beyond the expressed law of the contract or granted relief in the matter not in dispute would come within the purview of Section 34 of the Act. However, we would consider the applicability of the aforementioned principles while noticing the merits of the matter.

60. What would constitute public policy is a matter dependent upon the nature of transaction and nature of statute. For the said purpose, the pleadings of the parties and the materials brought on record would be relevant to enable the court to judge what is in public good or public interest, and what would otherwise be injurious to the public good at the relevant point, as contradistinguished from the policy of a particular Government. (See State of Rajasthan V/s. Basant Nahata [(2005) 12 SCC 77].)"

In Centrotrade Minerals & Metals Inc. V/s. Hindustan Copper Ltd., (2006) 11 SCC 245, Sinha, J., held:

"103. Such patent illegality, however, must go to the root of the matter. The public policy, indisputably, should be unfair and unreasonable so as to shock the conscience of the court. Where the arbitrator, however, has gone contrary to or beyond the expressed law of the contract or granted relief in the matter not in dispute would come within the purview of Section 34 of the Act."

104. What would be a public policy would be a matter which would again depend upon the nature of transaction and the nature of statute. For the said purpose, the pleadings of the parties and the materials brought on record would be relevant so as to enable the court to judge the concept of what was a public good or public interest or what would otherwise be injurious to the public good at the relevant point as contradistinguished by the policy of a particular government. (See State of Rajasthan V/s. Basant Nahata [(2005) 12 SCC 77].)"

In DDA V/s. R.S. Sharma and Co., (2008) 13 SCC 80, the Court summarized the law thus:

"21. From the above decisions, the following principles emerge:

(a) An award, which is

(i) contrary to substantive provisions of law; or

(ii) the provisions of the Arbitration and Conciliation Act, 1996; or

(iii) against the terms of the respective contract; or

(iv) patently illegal; or

(v) prejudicial to the rights of the parties;

is open to interference by the court under Section 34(2) of the Act.

(b) The award could be set aside if it is contrary to:

(a) fundamental policy of Indian law; or

(b) the interest of India; or

(c) justice or morality.

(c) The award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court.

(d) It is open to the court to consider whether the award is against the specific terms of contract and if so, interfere with it on the ground that it is patently illegal and opposed to the public policy of India.

With these principles and statutory provisions, particularly, Section 34(2) of the Act, let us consider whether the arbitrator as well as the Division Bench of the High Court were justified in granting the award in respect of Claims 1 to 3 and Additional Claims 1 to 3 of the claimant or the appellant DDA has made out a case for setting aside the award in respect of those claims with reference to the terms of the agreement duly executed by both parties."

J.G. Engineers (P) Ltd. V/s. Union of India, (2011) 5 SCC 758, held:

"27. Interpreting the said provisions, this Court in ONGC Ltd. V/s. Saw Pipes Ltd.[(2003) 5 SCC 705] held that a court can set aside an award under Section 34(2)(b)(ii) of the Act, as being in conflict with the public policy of India, if it is (a) contrary to the fundamental policy of Indian law; or (b) contrary to the interests of India; or (c) contrary to justice or morality; or (d) patently illegal. This Court explained that to hold an award to be opposed to public policy, the patent illegality should go to the very root of the matter and not a trivial illegality. It is also observed that an award could be set aside if it is so unfair and unreasonable that it shocks the conscience of the court, as then it would be opposed to public policy."

Union of India V/s. Col. L.S.N. Murthy, (2012) 1 SCC 718, held:

"22. In ONGC Ltd. V/s. Saw Pipes Ltd. [(2003) 5 SCC 705] this Court after examining the grounds on which an award of the arbitrator can be set aside under Section 34 of the Act has said: (SCC p. 727, para 31)

"31. ... However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term 'public policy' in Renusagar case [Renusagar Power Co. Ltd. V/s. General Electric Co., 1994 Supp (1) SCC 644] it is required to be held that the award could be set aside if it is patently illegal".

Fundamental Policy of Indian Law

Coming to each of the heads contained in the Saw Pipes judgment, we will first deal with the head "fundamental policy of Indian Law". It has already been seen from the Renusagar judgment that violation of the Foreign Exchange Act and disregarding orders of superior courts in India would be regarded as being contrary to the fundamental policy of Indian law. To this it could be added that the binding effect of the judgment of a superior court being disregarded would be equally violative of the fundamental policy of Indian law.

In a recent judgment, ONGC Ltd. V/s. Western Geco International Ltd., 2014 (9) SCC 263, this Court added three other distinct and fundamental juristic principles which must be understood as a part and parcel of the fundamental policy of Indian law. The Court held-

"35. What then would constitute the "fundamental policy of Indian law" is the question. The decision in ONGC [ONGC Ltd. V/s. Saw Pipes Ltd., (2003) 5 SCC 705] does not elaborate that aspect. Even so, the expression must, in our opinion, include all such fundamental principles as providing a basis for administration of justice and enforcement of law in this country. Without meaning to exhaustively enumerate the purport of the expression "fundamental policy of Indian law", we may refer to three distinct and fundamental juristic principles that must necessarily be understood as a part and parcel of the fundamental policy of Indian law. The first and foremost is the principle that in every determination whether by a court or other authority that affects the rights of a citizen or leads to any civil consequences, the court or authority concerned is bound to adopt what is in legal parlance called a "judicial approach" in the matter. The duty to adopt a judicial approach arises from the very nature of the power exercised by the court or the authority does not have to be separately or additionally enjoined upon the fora concerned. What must be remembered is that the importance of a judicial approach in judicial and quasi-judicial determination lies in the fact that so long as the court, tribunal or the authority exercising powers that affect the rights or obligations of the parties before them shows fidelity to judicial approach, they cannot act in an arbitrary, capricious or whimsical manner. Judicial approach ensures that the authority acts bona fide and deals with the subject in a fair, reasonable and objective manner and that its decision is not actuated by any extraneous consideration. Judicial approach in that sense acts as a check against flaws and faults that can render the decision of a court, tribunal or authority vulnerable to challenge.

38:. Equally important and indeed fundamental to the policy of Indian law is the principle that a court and so also a quasi-judicial authority must, while determining the rights and obligations of parties before it, do so in accordance with the principles of natural justice. Besides the celebrated audi alteram partem rule one of the facets of the principles of natural justice is that the court/authority deciding the matter must apply its mind to the attendant facts and circumstances while taking a view one way or the other. Non-application of mind is a defect that is fatal to any adjudication. Application of mind is best demonstrated by disclosure of the mind and disclosure of mind is best done by recording reasons in support of the decision which the court or authority is taking. The requirement that an adjudicatory authority must apply its mind is, in that view, so deeply embedded in our jurisprudence that it can be described as a fundamental policy of Indian law.

39. No less important is the principle now recognised as a salutary juristic fundamental in administrative law that a decision which is perverse or so irrational that no reasonable person would have arrived at the same will not be sustained in a court of law. Perversity or irrationality of decisions is tested on the touchstone of Wednesbury principle [Associated Provincial Picture Houses Ltd. V/s. Wednesbury Corpn., (1948) 1 KB 223: (1947) 2 All ER 680 (CA)] of reasonableness. Decisions that fall short of the standards of reasonableness are open to challenge in a court of law often in writ jurisdiction of the superior courts but no less in statutory processes wherever the same are available.

40. It is neither necessary nor proper for us to attempt an exhaustive enumeration of what would constitute the fundamental policy of Indian law nor is it possible to place the expression in the straitjacket of a definition. What is important in the context of the case at hand is that if on facts proved before them the arbitrators fail to draw an inference which ought to have been drawn or if they have drawn an inference which is on the face of it, untenable resulting in miscarriage of justice, the adjudication even when made by an Arbitral Tribunal that enjoys considerable latitude and play at the joints in making awards will be open to challenge and may be cast away or modified depending upon whether the offending part is or is not severable from the rest."

It is clear that the juristic principle of a "judicial approach" demands that a decision be fair, reasonable and objective. On the obverse side, anything arbitrary and whimsical would obviously not be a determination which would either be fair, reasonable or objective.

The Audi Alteram Partem principle which undoubtedly is a fundamental juristic principle in Indian law is also contained in Sections 18 and 34 (2) (a) (iii) of the Arbitration and Conciliation Act. These Sections read as follows:

"18. Equal treatment of parties.- The parties shall be treated with equality and each party shall be given a full opportunity to present his case.

34. Application for setting aside arbitral award.-

(2) An arbitral award may be set aside by the Court only if-

(a) the party making the application furnishes proof that-

(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; "

The third juristic principle is that a decision which is perverse or so irrational that no reasonable person would have arrived at the same is important and requires some degree of explanation. It is settled law that where-

a finding is based on no evidence, or

an arbitral tribunal takes into account something irrelevant to the decision which it arrives at; or

ignores vital evidence in arriving at its decision,

such decision would necessarily be perverse. A good working test of perversity is contained in two judgments. In H.B. Gandhi, Excise and Taxation Officer-cum-Assessing Authority V/s. Gopi Nath & Sons, 1992 Supp (2) SCC 312 at p. 317, it was held:

"7. ...................It is, no doubt, true that if a finding of fact is arrived at by ignoring or excluding relevant material or by taking into consideration irrelevant material or if the finding so outrageously defies logic as to suffer from the vice of irrationality incurring the blame of being perverse, then, the finding is rendered infirm in law."

In Kuldeep Singh V/s. Commr. of Police, (1999) 2 SCC 10 at para 10, it was held:

"10. A broad distinction has, therefore, to be maintained between the decisions which are perverse and those which are not. If a decision is arrived at on no evidence or evidence which is thoroughly unreliable and no reasonable person would act upon it, the order would be perverse. But if there is some evidence on record which is acceptable and which could be relied upon, howsoever compendious it may be, the conclusions would not be treated as perverse and the findings would not be interfered with."

It must clearly be understood that when a court is applying the "public policy" test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score.

Very often an arbitrator is a lay person not necessarily trained in law. Lord Mansfield, a famous English Judge, once advised a high military officer in Jamaica who needed to act as a Judge as follows:

"General, you have a sound head, and a good heart; take courage and you will do very well, in your occupation, in a court of equity. My advice is, to make your decrees as your head and your heart dictate, to hear both sides patiently, to decide with firmness in the best manner you can; but be careful not to assign your reasons, since your determination may be substantially right, although your reasons may be very bad, or essentially wrong".

It is very important to bear this in mind when awards of lay arbitrators are challenged.

Once it is found that the arbitrators approach is not arbitrary or capricious, then he is the last word on facts. In P.R. Shah, Shares & Stock Brokers (P) Ltd. V/s. B.H.H. Securities (P) Ltd., (2012) 1 SCC 594, this Court held:

"21. A court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or reappreciating the evidence. An award can be challenged only under the grounds mentioned in Section 34(2) of the Act. The Arbitral Tribunal has examined the facts and held that both the second respondent and the appellant are liable. The case as put forward by the first respondent has been accepted. Even the minority view was that the second respondent was liable as claimed by the first respondent, but the appellant was not liable only on the ground that the arbitrators appointed by the Stock Exchange under Bye-law 248, in a claim against a non-member, had no jurisdiction to decide a claim against another member. The finding of the majority is that the appellant did the transaction in the name of the second respondent and is therefore, liable along with the second respondent. Therefore, in the absence of any ground under Section 34(2) of the Act, it is not possible to re-examine the facts to find out whether a different decision can be arrived at."

It is with this very important caveat that the two fundamental principles which form part of the fundamental policy of Indian law (that the arbitrator must have a judicial approach and that he must not act perversely) are to be understood.

Interest of India

The next ground on which an award may be set aside is that it is contrary to the interest of India. Obviously, this concerns itself with India as a member of the world community in its relations with foreign powers. As at present advised, we need not dilate on this aspect as this ground may need to evolve on a case by case basis.

Justice

The third ground of public policy is, if an award is against justice or morality. These are two different concepts in law. An award can be said to be against justice only when it shocks the conscience of the court. An illustration of this can be given. A claimant is content with restricting his claim, let us say to Rs. 30 lakhs in a statement of claim before the arbitrator and at no point does he seek to claim anything more. The arbitral award ultimately awards him 45 lakhs without any acceptable reason or justification. Obviously, this would shock the conscience of the court and the arbitral award would be liable to be set aside on the ground that it is contrary to "justice".

Morality

The other ground is of "morality". Just as the expression "public policy" also occurs in Section 23 of the Indian Contract Act, so does the expression "morality". Two illustrations to the said section are interesting for they explain to us the scope of the expression "morality".

"(j) A, who is B's Mukhtar, promises to exercise his influence, as such, with B in favour of C, and C promises to pay 1,000 rupees to A. The agreement is void, because it is immoral.

(k) A agrees to let her daughter to hire to B for concubinage. The agreement is void, because it is immoral, though the letting may not be punishable under the Indian Penal Code (XLV of 1860)."

In Gherulal Parekh V/s. Mahadeo Dass Maiya, 1959 Supp (2) SCR 406, this Court explained the concept of "morality" thus-

"Re. Point 3 - Immorality: The argument under this head is rather broadly stated by the learned Counsel for the appellant. The learned counsel attempts to draw an analogy from the Hindu Law relating to the doctrine of pious obligation of sons to discharge their father's debts and contends that what the Hindu Law considers to be immoral in that context may appropriately be applied to a case under s. 23 of the Contract Act. Neither any authority is cited nor any legal basis is suggested for importing the doctrine of Hindu Law into the domain of contracts. Section 23 of the Contract Act is inspired by the common law of England and it would be more useful to refer to the English Law than to the Hindu Law texts dealing with a different matter. Anson in his Law of Contracts states at p. 222 thus:

"The only aspect of immorality with which Courts of Law have dealt is sexual immorality........... ."

Halsbury in his Laws of England, 3rd Edn., Vol. 8, makes a similar statement, at p. 138 :

"A contract which is made upon an immoral consideration or for an immoral purpose is unenforceable, and there is no distinction in this respect between immoral and illegal contracts. The immorality here alluded to is sexual immorality."

In the Law of Contract by Cheshire and Fifoot, 3rd Edn., it is stated at p. 279:

"Although Lord Mansfield laid it down that a contract contra bonos mores is illegal, the law in this connection gives no extended meaning to morality, but concerns itself only with what is sexually reprehensible."

In the book on the Indian Contract Act by Pollock and Mulla it is stated at p. 157:

"The epithet "immoral" points, in legal usage, to conduct or purposes which the State, though disapproving them, is unable, or not advised, to visit with direct punishment."

The learned authors confined its operation to acts which are considered to be immoral according to the standards of immorality approved by Courts. The case law both in England and India confines the operation of the doctrine to sexual immorality. To cite only some instances: settlements in consideration of concubinage, contracts of sale or hire of things to be used in a brothel or by a prostitute for purposes incidental to her profession, agreements to pay money for future illicit cohabitation, promises in regard to marriage for consideration, or contracts facilitating divorce are all held to be void on the ground that the object is immoral.

The word "immoral" is a very comprehensive word. Ordinarily it takes in every aspect of personal conduct deviating from the standard norms of life. It may also be said that what is repugnant to good conscience is immoral. Its varying content depends upon time, place and the stage of civilization of a particular society. In short, no universal standard can be laid down and any law based on such fluid concept defeats its own purpose. The provisions of S. 23 of the Contract Act indicate the legislative intention to give it a restricted meaning. Its juxtaposition with an equally illusive concept, public policy, indicates that it is used in a restricted sense; otherwise there would be overlapping of the two concepts. In its wide sense what is immoral may be against public policy, for public policy covers political, social and economic ground of objection. Decided cases and authoritative text-book writers, therefore, confined it, with every justification, only to sexual immorality. The other limitation imposed on the word by the statute, namely, "the court regards it as immoral", brings out the idea that it is also a branch of the common law like the doctrine of public policy, and, therefore, should be confined to the principles recognized and settled by Courts. Precedents confine the said concept only to sexual immorality and no case has been brought to our notice where it has been applied to any head other than sexual immorality. In the circumstances, we cannot evolve a new head so as to bring in wagers within its fold."

This Court has confined morality to sexual morality so far as section 23 of the Contract Act is concerned, which in the context of an arbitral award would mean the enforcement of an award say for specific performance of a contract involving prostitution. "Morality" would, if it is to go beyond sexual morality necessarily cover such agreements as are not illegal but would not be enforced given the prevailing mores of the day. However, interference on this ground would also be only if something shocks the court's conscience.

Patent Illegality

We now come to the fourth head of public policy namely, patent illegality. It must be remembered that under the explanation to section 34 (2) (b), an award is said to be in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption. This ground is perhaps the earliest ground on which courts in England set aside awards under English law. Added to this ground (in 1802) is the ground that an arbitral award would be set aside if there were an error of law by the arbitrator. This is explained by Lord Justice Denning in R V/s. Northumberland Compensation Appeal Tribunal. Ex Parte Shaw., 1952 1 All ER 122 at page 130:

"Leaving now the statutory tribunals, I turn to the awards of the arbitrators. The Court of King's Bench never interfered by certiorari with the award of an arbitrator, because it was a private tribunal and not subject to the prerogative writs. If the award was not made a rule of court, the only course available to an aggrieved party was to resist an action on the award or to file a bill in equity. If the award was made a rule of court, a motion could be made to the court to set it aside for misconduct of the arbitrator on the ground that it was procured by corruption or other undue means: see the statute 9 and 10 Will. III, c. 15. At one time an award could not be upset on the ground of error of law by the arbitrator because that could not be said to be misconduct or undue means, but ultimately it was held in Kent V/s. Elstob, (1802) 3 East 18, that an award could be set aside for error of law on the face of it. This was regretted by Williams, J., in Hodgkinson V/s. Fernie, (1857) 3 C.B.N.S. 189, but is now well established."

This, in turn, led to the famous principle laid down in Champsey Bhara Company V/s. The Jivraj Balloo Spinning and Weaving Company Ltd., AIR 1923 PC 66, where the Privy Council referred to Hodgkinson and then laid down:

"The law on the subject has never been more clearly stated than by Williams, J. in the case of Hodgkinson V/s. Fernie (1857) 3 C.B.N.S. 189.

"The law has for many years been settled, and remains so at this day, that, where a cause or matters in difference are referred to an arbitrator a lawyer or a layman, he is constituted the sole and final judge of all questions both of law and of fact ...... The only exceptions to that rule are cases where the award is the result of corruption or fraud, and one other, which though it is to be regretted, is now, I think firmly established viz., where the question of law necessarily arises on the face of the award or upon some paper accompanying and forming part of the award. Though the propriety of this latter may very well be doubted, I think it may be considered as established."

"Now the regret expressed by Williams, J. in Hodgkinson V/s. Fernie has been repeated by more than one learned Judge, and it is certainly not to be desired that the exception should be in any way extended. An error in law on the face of the award means, in their Lordships' view, that you can find in the award or a document actually incorporated thereto, as for instance, a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which is the basis of the award and which you can then say is erroneous. It does not mean that if in a narrative a reference is made to a contention of one party that opens the door to seeing first what that contention is, and then going to the contract on which the parties' rights depend to see if that contention is sound. Here it is impossible to say, from what is shown on the face of the award, what mistake the arbitrators made. The only way that the learned judges have arrived at finding what the mistake was is by saying: "Inasmuch as the Arbitrators awarded so and so, and inasmuch as the letter shows that then buyer rejected the cotton, the arbitrators can only have arrived at that result by totally misinterpreting Cl.52." But they were entitled to give their own interpretation to Cl. 52 or any other article, and the award will stand unless, on the face of it they have tied themselves down to some special legal proposition which then, when examined, appears to be unsound. Upon this point, therefore, their Lordships think that the judgment of Pratt, J was right and the conclusion of the learned Judges of the Court of Appeal erroneous."

This judgment has been consistently followed in India to test awards under Section 30 of the Arbitration Act, 1940.

In the 1996 Act, this principle is substituted by the 'patent illegality' principle which, in turn, contains three sub heads -

(a) a contravention of the substantive law of India would result in the death knell of an arbitral award. This must be understood in the sense that such illegality must go to the root of the matter and cannot be of a trivial nature. This again is a really a contravention of Section 28(1)(a) of the Act, which reads as under:

"28. Rules applicable to substance of dispute.-

(1) Where the place of arbitration is situated in India,-

(a) in an arbitration other than an international commercial arbitration, the arbitral tribunal shall decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in India;"

(b) a contravention of the Arbitration Act itself would be regarded as a patent illegality- for example if an arbitrator gives no reasons for an award in contravention of section 31(3) of the Act, such award will be liable to be set aside.

(c) Equally, the third sub-head of patent illegality is really a contravention of Section 28 (3) of the Arbitration Act, which reads as under:

"28. Rules applicable to substance of dispute.- (3) In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction."

This last contravention must be understood with a caveat. An arbitral tribunal must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground. Construction of the terms of a contract is primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could be said to be something that no fair minded or reasonable person could do.

In McDermott International Inc. V/s. Burn Standard Co. Ltd., (2006) 11 SCC 181, this Court held as under:

"112. It is trite that the terms of the contract can be express or implied. The conduct of the parties would also be a relevant factor in the matter of construction of a contract. The construction of the contract agreement is within the jurisdiction of the arbitrators having regard to the wide nature, scope and ambit of the arbitration agreement and they cannot be said to have misdirected themselves in passing the award by taking into consideration the conduct of the parties. It is also trite that correspondences exchanged by the parties are required to be taken into consideration for the purpose of construction of a contract. Interpretation of a contract is a matter for the arbitrator to determine, even if it gives rise to determination of a question of law. (See Pure Helium India (P) Ltd. V/s. ONGC [(2003) 8 SCC 593] and D.D. Sharma V/s. Union of India [(2004) 5 SCC 325]).

113. Once, thus, it is held that the arbitrator had the jurisdiction, no further question shall be raised and the court will not exercise its jurisdiction unless it is found that there exists any bar on the face of the award."

In MSK Projects (I) (JV) Ltd. V/s. State of Rajasthan, (2011) 10 SCC 573, the Court held:

"17. 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. Extrinsic evidence is admissible in such cases because the dispute is not something which arises under or in relation to the contract or dependent on the construction of the contract or to be determined within the award. The ambiguity of the award can, in such cases, be resolved by admitting extrinsic evidence. The rationale of this rule is that the nature of the dispute is something which has to be determined outside and independent of what appears in the award. Such a jurisdictional error needs to be proved by evidence extrinsic to the award. (See Gobardhan Das V/s. Lachhmi Ram [AIR 1954 SC 689], Thawardas Pherumal V/s. Union of India [AIR 1955 SC 468], Union of India V/s. Kishorilal Gupta & Bros. [AIR 1959 SC 1362], Alopi Parshad & Sons Ltd. V/s. Union of India [AIR 1960 SC 588], Jivarajbhai Ujamshi Sheth V/s. Chintamanrao Balaji [AIR 1965 SC 214] and Renusagar Power Co. Ltd. V/s. General Electric Co. [(1984) 4 SCC 679 : AIR 1985 SC 1156])."

In Rashtriya Ispat Nigam Ltd. V/s. Dewan Chand Ram Saran, (2012) 5 SCC 306, the Court held:

"43. In any case, assuming that Clause 9.3 was capable of two interpretations, the view taken by the arbitrator was clearly a possible if not a plausible one. It is not possible to say that the arbitrator had travelled outside his jurisdiction, or that the view taken by him was against the terms of contract. That being the position, the High Court had no reason to interfere with the award and substitute its view in place of the interpretation accepted by the arbitrator.

44. The legal position in this behalf has been summarised in para 18 of the judgment of this Court in SAIL V/s. Gupta Brother Steel Tubes Ltd. [(2009) 10 SCC 63: (2009) 4 SCC (Civ) 16] and which has been referred to above. Similar view has been taken later in Sumitomo Heavy Industries Ltd. V/s. ONGC Ltd. [(2010) 11 SCC 296: (2010) 4 SCC (Civ) 459] to which one of us (Gokhale, J.) was a party. The observations in para 43 thereof are instructive in this behalf.

45. This para 43 reads as follows: (Sumitomo case [(2010) 11 SCC 296 : (2010) 4 SCC (Civ) 459] , SCC p. 313)

"43. ... The umpire has considered the fact situation and placed a construction on the clauses of the agreement which according to him was the correct one. One may at the highest say that one would have preferred another construction of Clause 17.3 but that cannot make the award in any way perverse. Nor can one substitute one's own view in such a situation, in place of the one taken by the umpire, which would amount to sitting in appeal. As held by this Court in Kwality Mfg. Corpn. V/s. Central Warehousing Corpn. [(2009) 5 SCC 142 : (2009) 2 SCC (Civ) 406] the Court while considering challenge to arbitral award does not sit in appeal over the findings and decision of the arbitrator, which is what the High Court has practically done in this matter. The umpire is legitimately entitled to take the view which he holds to be the correct one after considering the material before him and after interpreting the provisions of the agreement. If he does so, the decision of the umpire has to be accepted as final and binding."

2015 AIR SC 125

Para 8: Having said that, this Court declared that Government and their instrumentalities should - as a matter of policy and public interest - if not as a compulsion of law, ensure that whenever they enter into an agreement for resolution of disputes by way of private arbitrations, the requirement of speaking awards is expressly stipulated and ensured. Any laxity in that behalf might lend itself and perhaps justify the legitimate criticism that government failed to provide against possible prejudice to public interest. The following passage is in this regard apposite:

"There is, however, one aspect of non-speaking awards in non-statutory arbitrations to which Government and governmental authorities are parties that compel attention. The trappings of a body which discharges judicial functions and is required to act in accordance with law with their concomitant obligations for reasoned decisions, are not attracted to a private adjudication of the nature of arbitration as the latter, as we have noticed earlier, is not supposed to exert the State s sovereign judicial power. But arbitral awards in [pic]disputes to which the State and its instrumentalities are parties affect public interest and the matter of the manner in which Government and its instrumentalities allow their interest to be affected by such arbitral adjudications involve larger questions of policy and public interest. Government and its instrumentalities cannot simply allow large financial interests of the State to be prejudicially affected by non-reviewable except in the limited way allowed by the statute non-speaking arbitral awards. Indeed, this branch of the system of dispute resolution has, of late, acquired a certain degree of notoriety by the manner in which in many cases the financial interests of Government have come to suffer by awards which have raised eyebrows by doubts as to their rectitude and propriety. It will not be justifiable for Governments or their instrumentalities to enter into arbitration agreements which do not expressly stipulate the rendering of reasoned and speaking awards. Governments and their instrumentalities should, as a matter of policy and public interest if not as a compulsion of law ensure that wherever they enter into agreements for resolution of disputes by resort to private arbitrations, the requirement of speaking awards is expressly stipulated and ensured. It is for Governments and their instrumentalities to ensure in future this requirement as a matter of policy in the larger public interest. Any lapse in that behalf might lend itself to and perhaps justify, the legitimate criticism that Government failed to provide against possible prejudice to public interest."

Para 13: It is evident from the above that English language and law dictionaries and the Law Lexicons give a wide range of meaning to the expression finding . The predominant use of the expression is in relation to determination by a Judge, Jury, Administrative Agency, Arbitrator or a Referee. The determination is described either as a finding, decision or conclusion; upon disputed facts. It is also described as a determination of a fact supported by evidence on the record. It is interchangeably used as a conclusion or decision a term used by the legal profession and by Courts. The term "conclusion" is in turn defined by Black s Law Dictionary as under:

"The final part of a speech or writing (such as jury argument or a pleading);

a judgment arrived at by reasoning;

an inferential statement;

the closing, settling, or final arranging of a treaty, contract, deal, etc."

Para 14: It is trite that a finding can be both; a finding of fact or a finding of law. It may even be a finding on a mixed question of law and fact. In the case of a finding on a legal issue the Arbitrator may on facts that are proved or admitted explore his options and lay bare the process by which he arrives at any such finding. It is only when the conclusion is supported by reasons on which it is based that one can logically describe the process as tantamount to recording a finding. It is immaterial whether the reasons given in support of the conclusion are sound or erroneous. That is because a conclusion supported by reasons would constitute a "finding" no matter the conclusion or the reasons in support of the same may themselves be erroneous on facts or in law. It may then be an erroneous finding but it would nonetheless be a finding. What is important is that a finding presupposes application of mind. Application of mind is best demonstrated by disclosure of the mind; mind in turn is best disclosed by recording reasons. That is the soul of every adjudicatory process which affects the rights of the parties. This is true also in the case of a finding of fact where too the process of reasoning must be disclosed in order that it is accepted as a finding in the sense the expression is used in Clause 70.

Para 15: The above exposition matches even the contextual interpretation of Clause 70 which provides a mechanism for adjudication of disputes between the parties and not only requires the Arbitrator to indicate the amount he is awarding in regard to each item of claim but also the "findings on each one of such items". The underlying purpose of making such a provision in the arbitration clause governing the parties, obviously was to ensure that the Arbitrator while adjudicating upon the disputes as a Judge chosen by the parties gives reasons for the conclusions that he may arrive at. The expression finding appearing in Clause 70, therefore, needs to be so construed as to promote that object and include within it not only the ultimate conclusion which the Arbitrator arrives at but also the process of reasoning by which he does so. Clause 70 could not, in our opinion, have meant to be only a wooden or lifeless formality of indicating whether the claim is accepted or rejected. Any such statement would have made no qualitative addition to the adjudication of the claim for the arbitrator would award a sum of money but withhold the reasons for the same. We are in respectful agreement with the view taken by this Court in Gora Lal s case (supra) when it said:

"The point for determination in this case is: whether the arbitrator ought to have given reasons in support of his findings, along with the sums awarded, on each item of dispute. To decide this point, we have to go by the text and the context of clause 70 of the arbitration agreement quoted above. Under the said clause, the arbitrator was required to identify each individual item of dispute and give his findings thereon along with the sum awarded. In this context, one has to read the word "findings" with the expression "on each item of dispute" and if so read it is clear that the word "finding" denotes "reasons" in support of the said conclusion on each item of dispute. The word "finding" has been defined in "Words and Phrases, Permanent Edn., 17, West Publishing Co." to mean "an ascertainment of facts and the result of investigations". Applying the above test to clause 70, we are of the view that the arbitrator was required to give reasons in support of his findings on the items of dispute along with the sums awarded. We make it clear that this order is confined to the facts of this case and our interpretation is confined to clause 70 of the arbitration agreement in this case."

Para 16: In the case at hand the Arbitrator s award was admittedly unsupported by any reason, no matter the Arbitrator had in the column captioned findings made comments like sustained , partly sustained , not sustained . The High Court was, therefore, justified in setting aside the award made by the Arbitrator and remitting the matter to him for making of a fresh award.

SUPREME COURT OF INDIA: Greenseas Shipping Co. Pvt. Ltd. Versus Chairman And Managing Director, Indian Bank; Civil Appeal No. 12223 of 2000 ; *J.Date :- SEPTEMBER 25, 2000

Para 3: This is an original petition filed in the National Commission. A more detailed order referring to the contentions and dealing with each of the items with regard to which relief was claimed should have been passed. The Commission has to give reasons as to which of these claims falls within the provisions of the Consumer Protection Act and which falls outside the Act. Dismissal of the matter, without considering which of the item falls within the Act and which of the items is not within the Act, appears to us to be not correct.

Para 4: We therefore, set aside the order dated 27.4.2000 passed by the National Consumer Disputes Redressal Commission in Original Petition No. 264 of 1996 and remit the said original petition to the National Commission to deal with each of the claims made by the Appellant and decide whether each of the items comes within the purview of the Act.

2009 (224) CTR 284 (BHC)

Para 5: The petitioner carried an appeal to the Tribunal. By order dt. 10th July, 2007 the Tribunal dismissed the petitioner's appeal. As the order of the Tribunal suffered from various mistakes apparent on record the petitioner filed M.A. No. 730/Mum/2007 paying for rectification of mistakes. By the impugned order the said application was dismissed. The main grievance of the petitioner before the Tribunal was that the Tribunal relied upon certain judgments of which the petitioner had no notice. They were not cited by the Departmental Representative. The Tribunal also did not indicate that it was relying on those judgments. The petitioner is particularly aggrieved by the reliance placed on the Supreme Court's judgment in CIT V/s. P. Mohanakala and Ors. According to the petitioner, no opportunity was given to him to explain how the said judgment is not applicable to the facts of the case. The petitioner is also aggrieved by the fact that the statement of the donor Mr. Punjabi dt. 9th Aug., 1999 was not considered by the Tribunal.

Para 6: Learned Counsel for the petitioner reiterated the same grievance. We find substance in his submission. In view of the fact that the impugned judgment is delivered without taking into consideration the donor's statement, we deem it proper to set aside the order and remand the application to the Tribunal with direction to decide it afresh after hearing the parties in accordance with law. Order accordingly.

Guidelines by BHC for conduct of hearing by quasi judicial bodies

WP 4101 of 2007 – 24.03.2009

Procedural Guidelines for Quasi-Judicial Authority :

--------------------------------------------------

17. This Court in exercise of powers conferred under Articles 226 and 227 of the Constitution of India prescribes the following procedure to be adopted by quasi-judicial authorities including the Ministers, Secretaries, officials and litigants while hearing and determining appeals, revisions, review applications and interim applications etc.:

(1) Memo of appeal or revision, review and or any application shall specifically mention under which enactment and/or under what provisions of law the said appeal/ review/ revision or application is filed.

(2) The appellant/ applicant shall give a synopsis of concise dates and events along with the memo of appeal or revision.

(3) The appeal, revision and/or application shall be filed within a period stipulated under the law governing the subject from the receipt of the order/ decision which is impugned in the above matter. In the event of delay, it should only be entertained along with application for condonation of delay.

(4) At the time of presentation of the appeal, review or revision, the applicant shall, if, filed in person, establish his identity by necessary documents or he shall file proceedings through authorized agent, and/or advocate.

(5) The application shall be accompanied by sufficient copies for every opponents/ respondents and also supply 2 extra copies for the authorities.

(6) For issuance of summons to the opponents/ respondents, court fees/ postal stamps of sufficient amount shall be affixed on the application form/ memo of appeal or revision as the case may be.

(7) In addition to service through the authority, appellant/ applicant may separately send the additional copies to each of the opponents/ respondents by registered post acknowledgement due and may file affidavit of service along with evidence of despatch. The postal and acknowledgment alone should be treated as evidence of service in the event of service through postal authority.

(8) In the event of an urgency of obtaining an interim relief like stay, injunction/ other interim order or direction or status-quo etc, a specific case of urgency should be made out in the application, which the authority may entertain subject to the brief reasons recorded. The said order shall also be communicated immediately to all the effected persons. The proof of timely despatch of the Registered A.D.s and all the acknowledgments shall be separately maintained.

(9) If there is real urgency, the concerned authority may grant ex parte interim/ ad-interim relief for the reasons to be recorded for a particular period only within which time the service on the concerned opponents/ respondents shall be effected. Appellant/ applicant should file affidavit of service, if such party requires early hearing or continuation for interim relief or of an appeal, revision or review.

(10) The competent authority shall also communicate the next date of hearing to all the parties along with time and place and shall, as far as possible, adhere to the said date and time of hearing.

(11) The concerned official in every department should be asked to remain present at the time of hearing and assist the concerned authority in the matter.

(12) Reasonable sufficient time be provided between the date of receipt of notice and the actual date of hearing. If any party is unable to remain present at the time of hearing for a sufficient cause, one further opportunity should be given to such party for hearing.

(13) The authority hearing quasi-judicial matters shall duly fix a date, time and venue for such hearing. Such authority shall refrain from interacting with third party during the course of hearing either in person or on phone and shall not do any act which would tend to affect or prejudice fair hearing.

(14) A speaking order shall be passed by the authority hearing the matter as early as possible after the hearing is concluded and, as far as possible, within a period of four to eight weeks from the conclusion of the hearing, on the basis of the record before it as well as the submissions made at the hearing. The order must contain reasons in support of the order.

(15) The authority shall not receive information or documents after the hearing is concluded and/or shall not pass the speaking order on the basis of such documents and/or information unless such material is brought to the notice of the parties to the proceedings following rules of natural justice.

(16) The order passed by the quasi-judicial authority on the hearing shall be forthwith communicated to all the parties by Registered A.D.

(17) No application or request or prayer from the political worker, Member of Legislative Assembly, Member of Parliament or third party shall be entertained in the quasi-judicial proceedings unless such person is a party respondent or intervenor in the proceedings.

(18) The order pronounced shall be communicated to the parties immediately.

(19) Record of hearing shall be meticulously maintained in a separate Roznama.

(20) The notings of concerned officials/ law assistants to assist the authority shall include only content of facts and legal provisions along with case laws, if any.

(21) The notings made by the law officials/ concerned officials shall not be in the form of order.

Para 18: In addition to the above guidelines, the quasi-judicial authorities shall also follow the parameters laid down by this Court in the case of Lokmanya Nagar Priyadarshini v. State of Maharashtra, 2007 (1) Bom.C.R. 929, which read as under:

PARAMETERS

"(a) While considering the stay application, the authority concerned should at least briefly set out case of the applicant/ appellant, as the case may be.

(b) While granting the ex parte order, it should be granted for a shorted duration with short notice to the opponent(s).

(c) If ex parte stay is to be granted, then the authority passing the order should specify the reasons in short for grant of ex parte order.

(d) The Authority passing the order should,

(i) record its findings as to whether or not a prima facie case is made out with short reasons in support of the finding;

(ii) record its finding as to in whose favour balance of convenience lies, and

(iii) record its finding whether non-grant of interim relief would cause any prejudice to the person seeking interim relief.

(e) The ingredients at (d) (i) to (iii) should be discussed and positive finding should

be recorded while granting or refusing to grant interim relief."

Para 19: The aforesaid procedural guidelines shall also be applicable to all quasi-judicial authorities in respect of hearing of appeals, revisions, review applications/ interlocutory applications, where there are no specific rules prescribed for hearing under a specific law like Maharashtra Co-operative Societies Act, Bombay Tenancy and Agricultural Lands Act, etc.

[(2009) 2 MhLJ 50]

Para 15: Perusal of the impugned Orders passed by the Competent Authority, in the facts of the case, shows that it lacks in reasoning. The Competent Authority in very brief words, as prescribe in the Form-A, passed the Orders. There is no dispute on the point that all the provisions of the Code of Civil Procedure, 1908 and the Indian Evidence Act are not strictly applicable to the proceedings undertaken before the Competent Authority.

Para 16: The Competent Authority was supposed to pass final Orders on the notices of eviction issued to the Petitioners. The Petitioners filed reply to the said notice and raised certain grounds. I have perused the said reply filed by the Petitioners. For example, the Petitioners raised issues like lease period, bona fide requirements of the premises of the Municipal Council for construction of shopping complex, application of the provisions of the Act, 1955, the Transfer of Property Act, the Rent Control Act and the sanctioned plan of the subject construction.

Para 17: The roznama dated, 16th October, 2007 recorded by the Competent Authority reads that apart from reply filed by the Petitioners they had nothing to say before the Competent Authority. In the facts of the case, considering the provisions of the Act, 1955 I am of the opinion that the Competent Authority ought to have addressed the basic issues raised by the Petitioners and after hearing the parties on the said issues appropriate Orders were passed by recording reasons. It is not necessary for the Competent Authority to hold a full dressed trial as if it is a Civil Court, by framing issues, but being the authority exercising powers akin to powers which are exercised by quasi judicial authorities it was incumbent on the Competent Authority to observe the principles of natural justice and provide appropriate opportunity to the parties and then deal with the issues in accordance with law. Appropriate reasoning on the issues raised by the parties would facilitate to appreciate the grounds on which the Competent Authority was satisfied for passing the eviction Order. This exercise is required to be done by the Competent Authority keeping in mind that the nature of enquiry conducted by the Competent Authority is summary.

Para 18: I rnay refer to the Judgment delivered by Division Bench of this Court (Coram: Swatanter Kumar CJ. and J.P. Devadhar, J.) in the case of Nandini J Shah V/s. Life Insurance Corporation of India 2008 (4) Mh.L.J. 106. The Division Bench referred to the observations of the Apex Court made in Special Leave Petition (C) Nos. 8232 of 2006 and 10348 of 2006 wherein the Supreme Court held as under:

33. The Estate Officer with a view to determine the lis between the parties must record summary of the evidence. Summary of the evidence and the documents shall also form part of the record of the proceedings.

34. Procedure laid down for recording evidence is stated in the Rules. The Estate Officer being a creature of the statute must comply the same. When a notice is issued, the occupant of the public premises would not only be entitled to show cause but would also be entitled to produce evidence in support of the cause shown.

Concept of Fairness. -

35. The procedural aspect as to who should lead evidence first, thus may have to be determined on the basis of the issues arising in the matter. When we say so, we do not mean that the procedure involved being a summary one; the issues are required to be specifically framed but that which is the principal issue(s) between the parties must be known to the Estate Officer.

44. If some facts are to be proved by the landlord, indisputably the occupant should get an opportunity to cross-examine. The witness who intends to prove the said fact has the right to cross-examine the witness. This may not be provided by under the statute, but it being a part of the principle of natural justice should be held to be indefeasible right. (See 1984(1) SCC 43: K.L. Tripathi V/s. State Bank of India and Ors. and 2005 (10) SCC 634: Lakshaman Exports Limited V/s. Collector of Central Excise].

Para 19: I am not in agreement with the submission raised by learned Counsel Smt. Jadhav for the Municipal Council that as the Appellate Court heard the contesting parties in detail and delivered an elaborate Judgment the issue of absence of reasons in the Order passed by the Competent Authority gets diluted. The Appellate Court was hearing appeals against the Order of eviction passed by the Competent Authority. Unless the Competent Authority had dealt with the issue, the evidence placed before it and after appreciating the contesting claims passes a reasoned Order it was not possible for a higher forum to go behind the Order and search or imagine the reasoning which weighed with the Competent Authority in passing the eviction Order.

Para 20: The Competent Authority, therefore, was required to hold summary proceeding but in the manner which is in consonance with the Act, 1955 and the Rules, 1960. In para 12 of the Judgment the District Court observed:

12. ... The Competent Authority ought to have scrutinised those documents while passing eviction Order in the said case, but the said Order does not indicate that really the Competent Authority has considered all material documents while passing eviction Order in that case.....

... In the instant case, the Competent Authority has given opportunity to the Appellant and thereafter it has also considered the objections of Appellant while passing eviction Order, by which it can be said that the Competent Authority has followed procedure laid down under Section 4 of the Act while passing eviction Order in the said Eviction case ... .

In para 13 the Lower Appellate Court further observed:

13. ... The Competent Authority has not given detail reasoning while passing eviction Order, but only on that count it is not desirable to interfere in the said impugned Order of the Competent Authority... .

21 Considering the reasoning adopted by me, as aforesaid, and in view of the reported Judgment in the case of Nandini (cited supra) I am of the view that, the impugned Judgments and Orders deserve to be quashed and set aside. The matters need to be remanded back to the Competent Authority.

2007 (14) SCC 108

Para 25: ….It is clear that even the Bench hearing the review petition had been mislead by the respondent-University by making a false statement, the review order dated 5.5.2005 was vitiated by fraud and was liable to be recalled by the High Court. It was also contended that the High Court erred in dismissing the writ petition in a cursory manner by the impugned order dated 3.8.2005 without appreciating the contentions raised by the appellant which were fully supported by indisputable documents on record, which documents emanated from the College and the University. The writ petition clearly indicates how the High Court had been mislead by the false statements made by the University and the High Court ought to have considered the submissions made by the appellant.

Para 26: The High Court, in our opinion, has erred in law rejecting the writ petition without considering the merits of the matter though the merits of the matter were specifically argued by the appellant and the misrepresentations made by the University were brought to the notice of the High Court.

AIR 2006 SC 3533

Para 19: We are unable to agree with this view of the Division Bench. In Roshan Di Hatti V/s. Commissioner of Income-tax, Delhi, this Court, while considering the question of perversity of a finding, held that when the finding of fact was arrived at without any material or upon a view of the facts which could not reasonably be entertained or the facts found were such that no person acting judicially and properly instructed as to the relevant law would have come to that determination, the decision can be said to be perverse.

AIR 1995 J&K 77

Para 8: The first question to be considered is that the respondents have failed to file any counter after the writ petition was admitted to hearing, and therefore, what sort of presumption is to be drawn against them, if any Admittedly, no such counter has been filed by the respondents despite a reasonable opportunity granted to them in this behalf. They did not even file any application for extension of time in filing the counter.

Para 9: The admitted position of law is that if no counter is filed to the averments made in the writ petition on an affidavit, the contentions made therein are to be deemed as correct.

Para 10: In this view of the matter, without going any further, the writ petition is liable to be allowed, and the prayer made therein to be granted.

2015 AIR SC 125

Para 6: On behalf of the respondent it was per contra argued by Mr. P.S. Patwalia and Mr. J.S. Attri, learned senior counsel that the question was no longer res-integra having been addressed in Gora Lal s case (supra) 2003 12 SCC 459 where this Court held that the expression "finding on each individual item of dispute" clearly meant that reason in support of the findings must also be recorded by the Arbitrator. It was contended that a finding which is unsupported by any reason is no finding in the eye of law.

Para 14: It is trite that a finding can be both; a finding of fact or a finding of law. It may even be a finding on a mixed question of law and fact. In the case of a finding on a legal issue the Arbitrator may on facts that are proved or admitted explore his options and lay bare the process by which he arrives at any such finding. It is only when the conclusion is supported by reasons on which it is based that one can logically describe the process as tantamount to recording a finding. It is immaterial whether the reasons given in support of the conclusion are sound or erroneous. That is because a conclusion supported by reasons would constitute a "finding" no matter the conclusion or the reasons in support of the same may themselves be erroneous on facts or in law. It may then be an erroneous finding but it would nonetheless be a finding. What is important is that a finding presupposes application of mind. Application of mind is best demonstrated by disclosure of the mind; mind in turn is best disclosed by recording reasons. That is the soul of every adjudicatory process which affects the rights of the parties. This is true also in the case of a finding of fact where too the process of reasoning must be disclosed in order that it is accepted as a finding in the sense the expression is used in Clause 70.

Para 15: The above exposition matches even the contextual interpretation of Clause 70 which provides a mechanism for adjudication of disputes between the parties and not only requires the Arbitrator to indicate the amount he is awarding in regard to each item of claim but also the "findings on each one of such items". The underlying purpose of making such a provision in the arbitration clause governing the parties, obviously was to ensure that the Arbitrator while adjudicating upon the disputes as a Judge chosen by the parties gives reasons for the conclusions that he may arrive at. The expression finding appearing in Clause 70, therefore, needs to be so construed as to promote that object and include within it not only the ultimate conclusion which the Arbitrator arrives at but also the process of reasoning by which he does so. Clause 70 could not, in our opinion, have meant to be only a wooden or lifeless formality of indicating whether the claim is accepted or rejected. Any such statement would have made no qualitative addition to the adjudication of the claim for the arbitrator would award a sum of money but withhold the reasons for the same. We are in respectful agreement with the view taken by this Court in Gora Lal s case (supra) when it said:

"The point for determination in this case is: whether the arbitrator ought to have given reasons in support of his findings, along with the sums awarded, on each item of dispute. To decide this point, we have to go by the text and the context of clause 70 of the arbitration agreement quoted above. Under the said clause, the arbitrator was required to identify each individual item of dispute and give his findings thereon along with the sum awarded. In this context, one has to read the word "findings" with the expression "on each item of dispute" and if so read it is clear that the word "finding" denotes "reasons" in support of the said conclusion on each item of dispute. The word "finding" has been defined in "Words and Phrases, Permanent Edn., 17, West Publishing Co." to mean "an ascertainment of facts and the result of investigations". Applying the above test to clause 70, we are of the view that the arbitrator was required to give reasons in support of his findings on the items of dispute along with the sums awarded. We make it clear that this order is confined to the facts of this case and our interpretation is confined to clause 70 of the arbitration agreement in this case."

Para 16: In the case at hand the Arbitrator s award was admittedly unsupported by any reason, no matter the Arbitrator had in the column captioned findings made comments like sustained , partly sustained , not sustained . The High Court was, therefore, justified in setting aside the award made by the Arbitrator and remitting the matter to him for making of a fresh award.

AIR 1977 SC 1867

Para 2: We have admitted the appeal and have heard learned counsel for both sides. The learned counsel for the respondents strenuously contends that the management has, by its conduct, forfeited its right to examine witnesses before the Tribunal. We are not impressed by this argument. The Tribunal refused to allow that management an opportunity to examine witnesses on the sole ground that it has not earlier submitted the written statement. That ground in an industrial matter, would not be sufficient to refuse examination of witnesses when the management later on pressed for it. This is against the principles of natural justice.

(2010) 13 SCC 427

20 The show cause notice dated 23.01.2008 was issued by the third respondent in exercise of this power.

22 Relying on the underlined portions in the show cause notice, learned counsel for the appellant urged that even at the stage of the show cause notice the third respondent has completely made up his mind and reached definite conclusion about the alleged guilt of the appellant. This has rendered the subsequent proceedings an empty ritual and an idle formality.

23 This Court finds that there is a lot of substance in the aforesaid contention.

24 It is well settled that a quasi-judicial authority, while acting in exercise of its statutory power must act fairly and must act with an open mind while initiating a show cause proceeding. A show cause proceeding is meant to give the person proceeded against a reasonable opportunity of making his objection against the proposed charges indicated in the notice.

26 A Constitution Bench of this Court in Khem Chand V/s. Union of India and others, reported in AIR 1958 SC 300, of course in the context of service jurisprudence, reiterated certain principles which are applicable in the present case also.

27 Chief Justice S.R. Das speaking for the unanimous Constitution Bench in Khem Chand (supra) held that the concept of `reasonable opportunity' includes various safeguards and one of them, in the words of the learned Chief Justice, is:

"(a) An opportunity to deny his guilt and establish his innocence, which he can only do if he is told what the charges leveled against him are and the allegations on which such charges are based;"

37 The appellant gave a reply to the show cause notice but in the order of the third respondent by which registration certificate of the appellant was cancelled, no reference was made to the reply of the appellant, except saying that it is not satisfactory. The cancellation order is totally a non-speaking one.

38 Therefore, the bias of the third respondent which was latent in the show cause notice became patent in the order of cancellation of the registration certificate. The cancellation order quotes the show cause notice and is a non-speaking one and is virtually no order in the eye of law. Since the same order is an appealable one it is incumbent on the third respondent to give adequate reasons.

40 On the requirement of disclosing reasons by a quasi- judicial authority in support of its order, this Court has recently delivered a judgment in the case of Kranti Associates Pvt. Ltd. & Anr. V/s. Sh. Masood Ahmed Khan & Others on 8th September 2010.

41 In M/s Kranti Associates (supra), this Court after considering various judgments formulated certain principles in para 51 of the judgment which are set out below

a. In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially.

b. A quasi-judicial authority must record reasons in support of its conclusions.

c. Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done it must also appear to be done as well.

d. Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power.

e. Reasons reassure that discretion has been exercised by the decision maker on relevant grounds and by disregarding extraneous considerations.

f. Reasons have virtually become as indispensable a component of a decision making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies.

g. Reasons facilitate the process of judicial review by superior Courts.

h. The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favour of reasoned decisions based on relevant facts. This is virtually the life blood of judicial decision making justifying the principle that reason is the soul of justice.

i. Judicial or even quasi-judicial opinions these days can be as different as the judges and authorities who deliver them. All these decisions serve one common purpose which is to demonstrate by reason that the relevant factors have been objectively considered. This is important for sustaining the litigants' faith in the justice delivery system.

j. Insistence on reason is a requirement for both judicial accountability and transparency.

k. If a Judge or a quasi-judicial authority is not candid enough about his/her decision making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism.

l. Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or `rubber-stamp reasons' is not to be equated with a valid decision making process.

m. It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision making not only makes the judges and decision makers less prone to errors but also makes them subject to broader scrutiny. (See David Shapiro in Defence of Judicial Candor (1987) 100 Harward Law Review 731-737).

n. Since the requirement to record reasons emanates from the broad doctrine of fairness in decision making, the said requirement is now virtually a component of human rights and was considered part of Strasbourg Jurisprudence. See (1994) 19 EHRR 553, at 562 para 29 and Anya V/s. University of Oxford, 2001 EWCA Civ 405, wherein the Court referred to Article 6 of European Convention of Human Rights which requires, "adequate and intelligent reasons must be given for judicial decisions".

o. In all common law jurisdictions judgments play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of "Due Process".

Breach of Principles of Natural Justice

Article 226 – Recording of reasons by HC – may be brief reasoning – but must be there – U P State Road Transport – Sureshchand Sharma – 2010 AIR SCW 3859 – Paras 15, 19

Article 14 – Speaking orders – Necessity of – Order of HC setting aside Interlocutory Order without assigning any reason – Not proper – AIR 2011 SC 1353.

Article 226 – Orders passed must be reasoned – AIR 2011 SC 1883 –Para 27.

Article 14 – Non speaking orders – Unreasoned – AIR 2012 Jhar 2 – Para 7

Natural Justice – Integral part of Article 14 –

(2011) 13 SCC 733;

(2011) 8 SCC 670;

(2010) 13 SCC 427;

(2010) 13 SCC 735;

(2011) 12 SCC 513;

(2011) 11 SCC 625 (Para 12).

State of Uttranchal versus Sunil Kumar Vaish – (2011) 8 SCC 670 (Para19)

Reasoned Judgment: 2010 (1) Goa LR 374 (Bom) (PB)

DUTY TO GIVE REASONS

(2010) 13 SCC 427 – detailed principles laid down – reasonable opportunity

Reasoned order / judgment in Writs –

(2010) 13 SCC 336 – Para 27 - ***** Dismissal in limine in Article 226 –

(2011) 5 SCC 484 – Paras 27, 28;

(2011) 5 SCC 417.

(2011) 11 SCC 625 – Para 12

(2011) 8 SCC 670 – Paras 17, 18, 19 - ******

(2011) 8 SCC 695

Passing of speaking order, discussion of relevant case law, analysis of defence pleas, and recording of findings is an essential requirement of natural justice. Govan Soma Tandel versus C C (Prev) – (2000) 115 ELT 772.

An extension of principles of natural justice requires a reasoned decision – R B Desai versus UOI – (1987) 3 Comp LJ 111 (Del).

Article 14 – State arbitrariness – rejection without reason – directed to reply with reasoned order – 2011 (3) ABR (NOC) 300 Bom – Paras 11, 12, 13 – WP: 3631/2010 – 18.11.2010.

Article 226 – Order by public authority – reasons must be stated – East Coast Railways versus Mahadev Appa – AIR 2010 SC 2794 – Para 8

Article 14, 16, 226 – Type writing test – cancelled on receipt of complaint – without making any enquiry into the complaint – No reason stated in the order / decision – Held – decision taken mechanically and without application of mind – East Coast Railways versus Mahadev Apparao 2010 All SCR 1873 – Paras 20 to 24; AIR 2010 SC 2794

Analysis of defence plea – is one of the essential requirement of natural justice – Govan Soma Tandal versus C C (Prev) (2000) 115 ELT 772.

Reasons for rejection of – requirement of – (2011) 7 SCC 289 – Para 9 ********

(2011) 4 SCC 394

Speaking order – Natural Justice – An authority is required to pass an order which makes reasons clear – santosh ChandanSingh versus The Divisional Commissioner – 2009 (6) All MR 570

Reasoned order of the Court – Article 14 – Municipal Council versus Sudhir kumar Krushnakumar Sahani – 2010 (2) All MR 733 – Para 20;

Mallikarjun Transport versus Dr Baba Saheb Ambedkar Sahakari sakhar Karkhana Ltd – 2010 (4) All MR 780 – Para 5

Sandeep Jalan

Advocate

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