LexSETH THAWARDAS PHERUMAL versus THE UNION OF INDIA
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1955 March 24 48 SUPREME COURT REPORTS SETH THAW ARDAS PHERUMAL v. THE UNION OF INDIA (and connected <lppeal) [1955] • [VIVIAN BOSE, JAGANNADllAOAS and SINHA, J.J .J Arbitratio11 Act, 1940, (Act Xvi 1940), .-. l6t /)(c)-Arbitratio11 -Award-Legality thereof-\Flwn ca" be challenged-Arbitratvr·- Condition precedent for his jurisdiction-Award-\\i'hen Jinal-Both parties specifically referring a qut?stiun of law for the decision 11/ aTbitrator-Cases where question of law specifically referred aud cases where decision incidentally tnaterial (however necessary) in order to decide the question actually ref~rred-Distinction between -w·rong construction of contract-Error of law-Iuterest awarded-Contract not providing for it-Require1nents of Interest Act, 1839 !Act XXXII of 1839) not fulfilled--Specific type of loss actually contemplated by the partie.--Expres.- stipulatio" that no damage will be payab~e-Parties bound down to the agreement- Agreement on which s:;,it based no1 found in tlie written contract but implied under s. 9 of the fodian Contract Act, 1872-Matter not covered by the arbitration clause---Error of law apparent au the face of the award. 'The appellan;, a contractor, entered into a contract with the Dominion of India for the supply of bricks. A clause in the con- tract required all disputes arising out of or relating to the contract tq be referrt:d to arbitration. Disputes arose and the matter was duly referred. The arbitrator gave an award in the contractor's favour. The Union Government, which by thc'Il had displaced the Dominion of India, contested the a\vard on a nunibcr of grounds. Held: (1) that it is not enough for the contract to provide for arbitration; more is necessary. An arbitrator only gets jurisdiction when either, both the parties specifically agree to refer specified matters or, failing that, the court compels them to do so under the arbitration clause if the dispute is covered by it; (2) the legality of an award cannot be challenged on facts, but it can be challenged on questions of law provided the illegality is apparent on the face of the award: s. 16'l)!c) of the Arbitration Act; (3) the only exception is when both parties specifically refer a question of law for the decision of the arbitrator. In that event they are hound by his decision on that particular question as well as by his decision on the facts. But a distinction must be drawn bet- ween cases in which a question of law is specifically referred and those in which a deci,.ion is incidentally material (however neces- sary) in order to decide the question actually referred. The law about this is the sallll' in India as in England. 1923 A.C. 395 and 1933 A.C. 592, followed. 54 C.W.N. 74 at 79, 50 I.A. 324 at 330 & • r 2 s.c.R. SUPREME COURT REPORTS 49 331, 54 I.A. 427 at 430, 29 I.A. 51 at 60, 1942 A.C. 356 at 368 l'e- ferred to and 1950 S.C.R. 7.92 at 798, explained; 1955 Seth Thawa•das Quaere: -Whether the courts will interfere when a question of Phe~imal law is specifically referred if the arbitrator acts illegally in deciding The Unioi; of India it, such as deciding on inadmissible evidence or on principles of construction which the la\Y· does not countenance. 1923 A.C. 395 at 409, refen:.ed to; ( 4) a wrong construction of the contract is an error of law and can be challenged provided the error appears on the face of the award; (5) so is the awarding of interest when the <:ontract does not provide for interest and the requirements of the Interest Act are not fulfilled: 65 I.A. 66, referred to. Quaere: whether the Interest Act applies to arbitrations~ (6) when a specific type of loss is directly contemplated by the parties to a contract and they expressly stipulate that no damages will. be payable in respect of it they must be bound down to their agreement and any claim for damages in respect of such loss must be dismissed; (7) when the agreement on which the suit is based is not to be found in a contract which has been reduced to writing but has to be implied under s. 9 of the Contract Act then the matter is not covered by an arbitration clause of the kind referred to above because the dispute in such a case arises out of and relates to the implied agree- ment and not to the written contract; 1942 A.C. 356 at 371, referred to. CIVIL APPELLATE J!JRISDICTION: Civil Appeal No. 260 of 1953 and connected appeal (C.A. No. l2 of 1954). Appeals from t
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