1/21/2020 Inadequacy Of Reasons In Arbitral Award And Unintelligible Awards: SC Explains Difference [Read Judgment]

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Inadequacy Of Reasons In Arbitral Award And

Unintelligible Awards: SC Explains Difference
[Read Judgment]
LIVELAW NEWS NETWORK 20 Dec 2019 11:19 AM

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1/21/2020 Inadequacy Of Reasons In Arbitral Award And Unintelligible Awards: SC Explains Difference [Read Judgment]

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'Ordinarily unintelligible awards are to be set aside, subject to party

autonomy to do away with the reasoned award.'
The Supreme Court has, in a judgment delivered on Wednesday, highlighted the

difference to be noted by the Courts between inadequacy of reasons in an award and

unintelligible awards under the Arbitration and Conciliation Act, 1996.

The bench headed by Justice NV Ramana observed that ordinarily unintelligible awards

are to be set aside, while the challenge on inadequacy of reasons, has to be adjudicated

based on the degree of particularity of reasoning required having regard to the nature of

issues falling for consideration.

In Dyna Technologies Pvt. Ltd vs. Crompton Greaves Ltd, the bench, also comprising of

Justice Mohan M. Shantanagoudar and Justice Ajay Rastogi was considering an appeal
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1/21/2020 Inadequacy Of Reasons In Arbitral Award And Unintelligible Awards: SC Explains Difference [Read Judgment]

against the High Court judgment which had set aside an Arbitral Award. The High Court

had observed that the award does not contain su cient reasons and the statements

contained in the award does not provide any reasons, discussions or conclusion.

Referring to Sections 31 of the Act, the bench noted that the mandate under Section

31(3) of the Act is to have reasoning which is intelligible and adequate and, which can in

appropriate cases be even implied by the Courts from a fair reading of the award and

documents referred to thereunder, if the need be. The aforesaid provision does not

require an elaborate judgment to be passed by the arbitrators having regards to the

speedy resolution of dispute, it added. It observed:

When we consider the requirement of a reasoned order three characteristics of a

reasoned order can be fathomed. They are: proper, intelligible and adequate. If the

reasoning in the order are improper, they reveal a aw in the decision making

process. If the challenge to an award is based on impropriety or perversity in the

reasoning, then it can be challenged strictly on the grounds provided under Section

34 of the Arbitration Act. If the challenge to an award is based on the ground that

the same is unintelligible, the same would be equivalent of providing no reasons at

all. Coming to the last aspect concerning the challenge on adequacy of reasons,

the Court while exercising jurisdiction under Section 34 has to adjudicate the

validity of such an award based on the degree of particularity of reasoning required

having regard to the nature of issues falling for consideration. The degree of

particularity cannot be stated in a precise manner as the same would depend on

the complexity of the issue. Even if the Court comes to a conclusion that there were

gaps in the reasoning for the conclusions reached by the Tribunal, the Court needs

to have regard to the documents submitted by the parties and the contentions

raised before the Tribunal so that awards with inadequate reasons are not set aside

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1/21/2020 Inadequacy Of Reasons In Arbitral Award And Unintelligible Awards: SC Explains Difference [Read Judgment]

in casual and cavalier manner. On the other hand, ordinarily unintelligible awards

are to be set aside, subject to party autonomy to do away with the reasoned award.

Therefore, the courts are required to be careful while distinguishing between

inadequacy of reasons in an award and unintelligible awards.

It further observed:

In case of absence of reasoning the utility has been provided under of Section

34(4) of the Arbitration Act to cure such defects. When there is complete perversity

in the reasoning then only it can be challenged under the provisions of Section 34

of the Arbitration Act. The power vested under Section 34 (4) of the Arbitration Act

to cure defects can be utilized in cases where the arbitral award does not provide

any reasoning or if the award has some gap in the reasoning or otherwise and that

can be cured so as to avoid a challenge based on the aforesaid curable defects

under Section 34 of the Arbitration Act. However, in this case such remand to the

Tribunal would not be bene cial as this case has taken more than 25 years for its

adjudication. It is in this state of affairs that we lament that the purpose of

arbitration as an effective and expeditious forum itself stands effaced.

Perusing the ' muddled and confused form of the award', the bench, in the instant case,

observed that it is unintelligible and cannot be sustained.

Case Details

Title : M/s Dyna Technologies Pvt Ltd vs M/s Crompton Greaves Ltd

Case No : Civil Appeal No. 2153 of 2010

Coram : Justices N V Ramana, Mohan M. Shantanagoudar and Ajay Rastogi

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1/21/2020 Inadequacy Of Reasons In Arbitral Award And Unintelligible Awards: SC Explains Difference [Read Judgment]

Click here to Read/Download Judgment

Page 1 of 30 WWW.LIVELAW.IN Reportable

IN THE SUPREME COURT

CIVIL
OF APPELLATE
INDIA
CIVIL APPEAL NO. 2153
JURISDICTION
OF 2010
M/S. DYNA TECHNOLOGIES PVT. LTD.
...APPELLANT(S)
VERSUS
M/S. CROMPTON GREAVES LTD.
...RESPONDENT(S)
JUDGMENT
N. V.
RAMANA,
1. The question involved herein revolves around
J.
the requirement
reasoned awardofand the cautionary tale for the
parties and
arbitrators to have a clear award, rather than to
have an
which is award
muddled in form and implied in its
content,
inevitablywhich
leads to wastage of time and
resources
get clarity, of
andthe
inparties to
some cases, frustrate the
very
an reason for going for
2.arbitration.
This appeal is filed against the final order and
judgment dated
27.04.2007, passed by the High Court of
Judicature
whereby theatHigh
Madras
Court partly allowed the
appeal filed and
respondent by the
set aside the award of Arbitral
Tribunal relating to
1

Page 2 of 30 WWW.LIVELAW.IN
claim no. 2 for payment of compensation for
the losses suffered
to unproductive usedue
of
machineries.
3. Brief facts of the case are that a contract was
entered into between
DCM Shriram Aqua Foods Limited (hereinafter
referred
in short)to asM/s.
and ‘DCM’Crompton Greaves Limited
(hereinafter referred
to as “CGL” in short) for an aquaculture unit to
be set up by
Principal, such DCM. CGL invited tenders for
namely,
carryingworks
certain out for construction of ponds,
channels, drains
associated and
works. The appellant M/s Dyna
Technologies
gave Pvt. estimate
its proposal, Ltd. and quotation for
carrying out the work.
Thereafter, the respondent CGL placed a letter
of intent
July, dated
1994, 25thportions of
relevant
which are as under:
“10. In the event that you are forced
equipment
to keep your and manpower idle due
availability
to non of work fronts due to
attributable
reasons to DCM or due to legal
connected
disturbances with
notyou, you shall be
follows:
compensated as
(i) Maximum seven days of
withoutofany
stoppage workthe right to advice
(ii) CGL reserves
compensation.
youdemobilize
to
compensation
partially or fully in
lieu of paying for
circumstances,
such delays.
you shall be paid
Under such
such
2

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1/21/2020 Inadequacy Of Reasons In Arbitral Award And Unintelligible Awards: SC Explains Difference [Read Judgment]

TAGS #ARBITRATION AND CONCILIATION ACT  #SUPREME COURT 

#JUSTICE MOHAN M SHANTANAGOUDAR  #JUSTICE AJAY RASTOGI  #JUSTICE NV RAMANA 

#SECTION 34 ARBITRATION AND CONCILIATION ACT 

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