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Judgment
Rajiv Sahai Endlaw, J.—The suit was registered upon arbitration award dated 22nd July, 1993 being filed by the arbitrators in this Court. Notice of filing of the award was issued. Objections (I.A. No. 4972/1994) u/s 30 & 33 of the Arbitration Act, 1940 of the Defendant to the award are for consideration. No objections to the award have been preferred by the Plaintiff. Usual issues were framed on 8th March, 1995. Synopses of submissions were filed by the parties. I.A. No. 12307/1999 has been filed by the Plaintiff u/s 17 of the 1940 Act contending that Arbitral Tribunal had sent intimation to the parties also of the filing of the award in this Court; that the objections to the award ought to have been filed by the Defendant within 30 days from such intimation and not within 30 days of the service of the notice of filing of the award issued by this Court; that the objections are liable to be dismissed on this ground only and seeking to immediately make the award rule of the court. The said application was also directed to be taken up for hearing along with the objections. However no arguments on the said application were urged at the time of hearing or in the written synopsis. The counsels for the parties have been heard on the objections to the award.
The disputes and differences arose between the parties out of the contract for the work of 400 KV Single Circuit Transmission Line from Cuddapah to Bangalore against Specification No. CC-35-176. The Arbitral Tribunal comprised of three technical experts with two being nominees of each of the parties and the third having been nominated by the President of the Institution of Engineers India in terms of the agreement between the parties. Both parties filed claims against each other before the Arbitral Tribunal. The time for making of the award was extended from time to time; 24 sittings held and a unanimous award announced allowing ten out of sixteen claims of the Plaintiff and disallowing all the claims of the Defendant.
Objections to the award running into 67 pages have been preferred by the Defendant. It is pleaded that the work was to be completed by 1st January, 1985; however the progress of the work from the very beginning was not commensurate with the Bar chart/work programme agreed upon under the contract; that the Plaintiff did not accelerate the progress of the work inspite of repeated reminders of the Defendant; on the contrary the Plaintiff requested for financial assistance and the Defendant though not bound to, agreed to and advanced monies on the condition that the same shall be paid directly to the producers and suppliers nominated by the Plaintiff and the Plaintiff shall furnish bank guarantee for equivalent amount to the Defendant; that the Plaintiff still delayed the completion even beyond the extension of 13 months, causing huge loss to the Defendant; that resultantly some part of the work was off-loaded from the scope of the work of the Plaintiff and awarded at the risk and cost of the Plaintiff to M/s Best & Crompton on 15th July, 1985; that the Plaintiff could not improve the progress of the remaining work inspite thereof; that resultantly some more work was off-loaded on 15th November, 1985, again to M/s Best & Crompton with the consent of the Plaintiff; that the Plaintiff could complete the work only on 30th June, 1986 and sought extension of time for completion till 31st August, 1986. It is further pleaded that the Plaintiff while filing claims before the Arbitrators, preferred new claims (i.e. 17 to 25) and which were not raised earlier and for which the Arbitral Tribunal had not been constituted; that upon objection being taken by the Defendant, the Arbitral Tribunal also held the said claims to be beyond its jurisdiction.
The senior counsel for the Defendant has at the outset contended that the award is liable to be set aside (i) because two claims have been allowed on equity inspite of finding the claims to be contractually impermissible; (ii) The Arbitral Tribunal has itself given extension of time for completion of work and which was beyond its jurisdiction; (iii) inspite of the letter of the Plaintiff that it will not claim any escalation, allowed the claim for escalation; (iv) claims have been allowed inspite of finding under Issue No. 15 of there being no proof; (v) allowed interest at the high rate of 18% per annum which itself runs into crores of rupees.
The senior counsel has thereafter made submission claim-wise.
Claim No. I of the Plaintiff of Rs..18.623 lacs for reimbursement of extra expenditure for vetting the designs by a foreign company has been allowed for Rs.6.18 lacs.
The Arbitral Tribunal found that though collaboration with a specific foreign party was not envisaged in the invitation to tender, in the bid or even in the extensive post bid and pre-award correspondence but the Defendant had prevailed upon the Plaintiff to qualify themselves by suitable collaboration. However the Arbitral Tribunal in para 52.1.3 of the award agreed with the Defendant that the collaboration was not under duress as pleaded by the Plaintiff. It was however held that since the Defendant had reaped the benefit of access to diversified foreign know-how in design, it was liable to pay 50% of the foreign exchange expenditure incurred by the Plaintiff in this regard i.e. Rs.6.18 lac and which has been awarded to the Plaintiff.
The senior counsel for the Defendant has argued that the Plaintiff cannot possibly be entitled to expenditure incurred by it for being eligible to bid or to enter into the contract with the Defendant and in the face of the finding that the Defendant had not so compelled the Plaintiff, the award for Rs.6.18 lac is bad. It is further contended that the contract was an item rate contract and there is no item providing for the said claim; that the Arbitral Tribunal under Issue No. 10 has held that contractually the expenditure is not reimbursable but has sought to justify the claim by holding that neither of the parties at the time of award of the work were aware of the implications of adopting U.S. practice in carrying out the design and since there were difficulties and delays in obtaining release of foreign exchange and different practices in working out L/R ratio etc.; in equity, extra expenditure is to be considered for reimbursement in the relevant context. It is yet further shown that the Arbitral Tribunal under Issue No. 29 held that the Plaintiff did not possess the qualifying requirement as per NIT when it made the offer and became qualified only in March, 1982 when entered into the foreign collaboration and owing whereto the work was awarded to them. It is further shown that under Issue No. 31 the Arbitral Tribunal has held that the Plaintiff was contractually obliged to furnish to the Defendant designs duly vetted by the foreign collaborators.
Per contra, the counsel for the Plaintiff has contended that once an award is found to be fair and honest and not based on unsound legal proposition, the Court should not sit in appeal over it and no case of misconduct can be said to be made out. Reliance is placed on U.P. State Electricity Board Vs. Pateshwari Electricals and Associated Industries (P) Ltd., to contend that the Arbitrator can award any compensation/claim on the basis of equity. Reliance is also placed on Section 70 of the Indian Contract Act, 1872 to contend that it itself is an equitable law and its scope is much larger than the principle of quantum meriut as explained in Food Corporation of India and Others Vs. Vikas Majdoor Kamdar Sahkari Mandli Ltd., . Reliance is also placed on:
a) M/s. Ispat Engineering and Foundry Works, B.S. City, Bokaro Vs. M/s. steel Authority of India Ltd., B.S. City, Bokaro, ;
b) Pure Helium India Pvt. Ltd. Vs. Oil and Natural Gas Commission, ;
c) N. Chellappan Vs. Secretary, Kerala State Electricity Board and Another, ;
d) State of U.P. Vs. Allied Constructions, ;
e) Smt. Santa Sila Devi and Another Vs. Dhirendra Nath Sen and Others, ;
f) Goa, Daman and Diu Housing Board Vs. Ramakant V.P. Darvotkar, ;
g) Puri Construction Pvt. Ltd. Vs. Union of India (UOI), ;
h) Coimbatore District Podu Thozillar Samgam Vs. Balasubramania Foundry and Others, ;
i) Vikas Majdoor Kamdar Sahkari Mandli Ltd. (supra) (para 5,11,16,19,20 & 21);
j) K.N. Sathyapalan (Dead) by LRs. Vs. State of Kerala and Another, (distinguishes Alopi Parshad and Sons Ltd. Vs. Union of India (UOI), ;
k) Civil Engineers (India) Vs. Delhi Development Authority, ;
l) Municipal Corporation of Delhi Vs. Jagan Nath Ashok Kumar and Another, ;
m) M/s. Arosan Enterprises Ltd. Vs. Union of India and Another, .
n) Sudarsan Trading Co. Vs. Government of Kerala and Another, .
The settled position in law is that an Arbitral Tribunal is a creature of the agreement. Reference in this regard may also be made to -
(a) Rajasthan State Mines and Minerals Limited Vs. Eastern Engineering Enterprises and Another, ;
(b) Steel Authority of India Limited Vs. J.C. Budharaja, Government and Mining Contractor, ;
(c) Grid Corporation of Orissa Ltd. and Another Vs. Balasore Technical School, ; and
(d) Ramnath International Construction Pvt. Ltd. Vs. Union of India (UOI) and Another, .
The Arbitral Tribunal cannot award beyond the agreement. Once the Arbitral Tribunal had concluded that under the contract the Plaintiff was not entitled to the expenses incurred on foreign collaboration, the Arbitral Tribunal had no jurisdiction to allow the said claim for the reason of the Defendant having benefited there from. Moreover once it was found that the Plaintiff, to be eligible to enter into the contract, was required to have a foreign collaboration, the senior counsel for the Defendant is correct in contending that the expenses for becoming eligible could not be claimed. I have therefore no hesitation in allowing the said objection and in setting aside of the award in so far as allowing Claim No. I of the Plaintiff for Rs.6.18 lacs.
The Claim No. II of the Plaintiff for Rs.50.86 lacs towards reimbursement of extra expenditure incurred on account of difference in weight of fabricated tower parts and bolts & nuts i.e. difference between the actual weights and those as per LOA has been allowed for Rs.10.40 lacs.
It was the case of the Plaintiff that the foreign collaborator while following the Defendant''s specifications worked out the L/R ratio according to the practice prevailing in America - had Indian design practice been followed, there would have been a reduction in the tower height; owing thereto excess expenditure had to be incurred and which the Plaintiff computed to be of 319 tonnes costing Rs. 50.86 lacs. The Defendant though admitted increased weight owing to the US practice having been followed, contended that they had nothing to do with it. The Arbitral Tribunal without giving any reason under Claim No. II as to why the Plaintiff was entitled to the said amount assessed extra weight and the expenditure incurred thereon to be of Rs. 10.40 lacs which were awarded to the Plaintiff.
The senior counsel for the Defendant has drawn attention again to the finding of the arbitrators on Issue No. 10 holding that contractually the extra expenditure incurred is not reimbursable and the finding on Issue No. 13 to the effect that the design was to be made by the Plaintiff in collaboration with the foreign party and the Plaintiff was liable to execute the work at quoted rates. It is shown that the basis of the price payable under the contract was per tower basis and no claim for extra expenditure if any incurred by the Plaintiff in designing and manufacturing the tower could be claimed.
The arguments of the counsel for the Plaintiff in opposition are the same as in the case of Claim No. I above.
I am of the opinion that the award of Rs.10.40 lacs under Claim No. II is not only inconsistent to the findings under Issues No. 10&13 but again beyond the agreement and thus the said award also cannot be sustained and is set aside. The Apex Court decision in Union of India (UOI) Vs. V. Pundarikakshudu and Sons and Another, is also an authority on the proposition that arriving at inconsistent findings as regards breach of contract is a legal misconduct.
Claim No. III of the Plaintiff for Rs.2.04 lacs towards reimbursement of extra expenditure incurred on excavation and concreting has been allowed for Rs.51,000/- .
It was the case of the Plaintiff itself that excess work was caused owing to intervention of U.S. practice. The arbitrators for the same reasons as for Claim No. II, scaling down the amount of the claim, awarded Rs. 51,000/-.
The arguments of the counsels with respect to the said claim are the same as with respect to Claim No. II. The award for Claim No. II having been set aside, the award of Rs.51,000/- under Claim No. III has to necessarily go.
Claim No. IV of Rs.52.92 lacs for balance amount payable towards price variation i.e. difference of the amount entitled to and actually paid has been allowed for Rs.49.86 lacs.
The Arbitral Tribunal held that the date of completion was 1st January, 1985; owing to prevailing conditions the same was extended till 31st January, 1986; that the Defendant however withheld further extension to pressurize the Plaintiff into completion; that subsequent evidence and behaviour of the parties justified extension of the completion period up to 30th June, 1986 and the insistence of the Defendant for completion by 31st January, 1986 was not justified. On the said basis price variation was allowed and the claim of Rs. 49.86 lacs accepted.
The senior counsel for the Defendant has with reference to Clauses 22.3, 22.4.3, 13.7 of the GCC Volume-I and Clause 6 of Letter of Award dated 31st March, 1982 contended that no escalation was payable for the period of time between the scheduled date of shipment and the actual date of shipment. Attention is next invited to the finding returned under Issue No. 12 holding the off-loading of part of the work as justified and the targets given being very high and incapable of performance. It is argued that the Arbitral Tribunal cannot re-write the contract or extend time of performance of the contract. It is also argued that once the targets had been agreed to, the question of arbitrators holding the same to be high did not arise. It is argued that there is no calculation or formula or basis given for arriving at the figure of Rs.49.86 lacs awarded. It is urged that the price variation granted is for the extension allowed from 1st February, 1986 to 30th June, 1986. It is also urged that while on the same evidence Claim No. V also on account of price variation has been rejected, Claim No. IV has been allowed. Attention is also invited to the finding under Issue No. 15 where the risk between the owner and the contractor was directed to be borne in the percentage of 60% by the Defendant and 40% by the Plaintiff. It is argued that even if the Claim No. IV were to be allowed, there is no reason why the entire burden has been put on the Defendant and at least 40% not directed to be shared by the Plaintiff.
The counsel for the Plaintiff has argued that the findings of the arbitrators with respect to the time for performance cannot be interfered with. Reliance in this regard is placed on:
i. Jagan Nath Ashok Kumar (supra);
ii. Arosan Enterprises Ltd. (supra);
iii. McDermott International Inc. Vs. Burn Standard Co. Ltd. and Others,
iv. J.K. Industries Ltd. Vs. Texmaco Limited
v. Hind Construction Contractors by its Sole Proprietor Bhikamchand Mulchand Jain (Dead) by Lrs Vs. State of Maharashtra, .
Though I agree with the contention of the Plaintiff that the findings regarding time of performance returned in the award are not to be interfered but I am unable to find any reason in the award for allowing the claim for Rs.49.86 lacs. The award does not state that the Defendant had admitted the said claim, for there being no need for the Plaintiff to prove the same. The award does not even state as to how and in accordance with which formula price variation has been worked out.
It is also not the case that the arbitrators were required to give a non-speaking award. The arbitrators are required to give reasons and not finding any reason whatsoever for allowing the claim in entirety of Rs.49.86 lacs, there is no option but to set it aside.
Claim No. VI of Rs.11,29,711/- was for refund of amount recovered unjustly on account of off-loading portion of the work of tower erection and stringing to M/s Best & Crompton. The said claim has been allowed in entirety for the findings under Issue No. 12 i.e. of the targets set being high.
It is undisputed that the work was off-loaded with the consent of the Plaintiff and at the cost and risk of the Plaintiff. Once that was so, the reasoning of the arbitrators that the targets were high and incapable of achievement is nothing but misconduct. The arbitrators again have entered into the arena of changing the contract between the parties and of which the Arbitral Tribunal being itself a creature of the contract, could not have done. Once the Plaintiff had agreed to the targets, it did not lie in the mouth of the Plaintiff to plead that the targets were unrealistic or beyond achievement. The Plaintiff could have been relieved of the said targets only on the ground of a contributory failure on the part of the Defendant. That is not the case here. Without that being the case, the Defendant was justified in deducting from the amounts due to the Plaintiff the extra amount incurred by it in off-loading part of the work to M/s Best & Crompton at the risk of the Plaintiff. The award against Claim No. VI is also accordingly set aside.
Claim No. VII of Rs..20.46 lacs for reimbursement of extra expenditure incurred on extra cut points for single and double circuits of the transmission line has been allowed for Rs.13,81,000/- .
The defence of the Defendant to the said claim was that such variation was a normal feature. The Arbitral Tribunal found the variation to be against the industry norm and assessed in Appendix-12 to the award the amount to which the Plaintiff was entitled to on this account at Rs.13,81,000/-.
The senior counsel for the Defendant has argued that the arbitrators, for allowing the said claim have relied on their own professional experience in the matter and also claimed to have consulted practicing professionals in the field. It is argued that neither any notice of the same was given to the Defendant nor the Defendant given any opportunity to cross examine the said professionals. From the Tender documents/contract it is shown that there is no mention of cut points. It is thus urged that no award for additional work for excess cut points could have been made.
I am unable to agree. The parties had chosen technical persons as their own nominees as arbitrators and had entrusted the appointment of the third arbitrator also to an expert body. The appointment of such experts was not without reason. The parties understood that the adjudication required expert knowledge possessed by the Arbitral Tribunal and relied on that for making of the award. The Defendant cannot now be heard to state that such experts ought not to have used their knowledge and expertise in the field. The Division Bench of this Court in Em and Em Associates Vs. Delhi Development Authority and Another, has held that the modern tendency especially in commercial arbitrations is to uphold the awards of skilled persons that the parties themselves have selected. Similarly the consultation by the arbitrators with professionals currently in the field also cannot tantamount to misconduct. The arbitrators though experts were no longer in active practice. No error can be found in their re-assuring themselves that their knowledge/expertise had not been outdated and as to the prevalent norms. The arbitrators were not required to involve the parties or to give an opportunity of cross examination qua the said consultation. The arbitrators have in Appendix-12 given the reasons for arriving at the awarded amount of Rs.13,81,000/-. Thus the objections qua award on Claim No. VII are without any merit and are dismissed.
Claim No. IX of Rs.15.03 lacs for reimbursement of extra cost incurred in fabricating extra tonnage of tower parts has been allowed for Rs.9 lacs. It was the admitted position that in the exigencies and urgencies of the project the Plaintiff was required to carry out the said work. The arbitrators as aforesaid had apportioned the said liability as 60% of the Defendant and 40% of the Plaintiff. There does not appear to have been any dispute of the amount spent in the same. The arbitrators accordingly apportioned the liability of the Defendant as 60% i.e Rs.9 lacs.
The senior counsel for the Defendant has argued that the said claim is the same as Claim No. II (supra). I am unable to agree. The said claim was not on account of the American design but owing to extra cost admittedly incurred owing to exigencies and urgencies of the project.
The senior counsel has next argued that the arbitrators have overlooked the contention of the Defendant, of the Plaintiff under the contract being required to take out insurance against such risks. Attention is invited to the terms of the contract in this regard. It is also argued that the award is in ignorance of the pleadings. It is thus contended that the responsibility for the risk was to be solely of the Plaintiff and 60% thereof could not have been saddled on the Defendant. 29. The courts have held that merely because an arbitrator has wrongly construed a contractual provision is no ground for setting aside of the award. When the parties agree to refer their disputes to arbitration they are bound by the interpretation by the Tribunal of the terms of the contract whether right or wrong. Reference in this regard can be made to -
(a) Hindustan Construction Co. Ltd. Vs. State of Jammu and Kashmir, ;
(b) Himachal Pradesh State Electricity Board Vs. R.J. Shah and Company, .
If such grounds were to be permitted, then the jurisdiction exercised in the matter of the perversity would be appellate and which the legislature has not provided for. A case for interference is made out only when perversity is shown. I am unable to find any element of perversity in the award qua Claim No. IX. The objections of the Defendant to the award under the said claim are accordingly dismissed.
Claim No. XII for Rs.124.21 lacs towards extra expenditure incurred on overheads beyond the stipulated agreement period has been allowed for Rs.23 lacs.
While it was the contention of the Defendant that the delays beyond 1stJanuary, 1985 were attributable to the Plaintiff and thus the Plaintiff should bear the entire costs in full, the Plaintiff attributed the delays to the Defendant. The Arbitral Tribunal in view of the finding aforesaid that insistence by the Defendant on completion by 31st January, 1986 was not justified, and further in view of the finding that the Plaintiff after 31st January, 1986 repeatedly promised performance to agreed levels and then repeatedly failed, held that both parties should share the overheads equally. The Arbitral Tribunal computed the overheads for 18 months of delay i.e. from 1st January, 1985 to 30th June, 1986 at Rs.44.34 lacs and accordingly passed an award for half of that amount i.e. Rs.22.17 lacs say Rs.23 lacs as aforesaid.
The senior counsel for the Defendant has argued that the heading of the claim itself shows that the claim is de hors the contract. It is contended that the said claim again amounts to re-writing of the contract by the arbitrators. Reliance is placed on:
1) M/s. Rickmers Verwaltung GMB H Vs. The Indian Oil Corporation Ltd., ;
2) Assistant Excise Commissioner and Others Vs. Issac Peter and Others, ;
3) Shin Satellite Public Co. Ltd. Vs. Jain Studios Limited, ;
4) Forbes Gokak Ltd. v. Central Warehousing Corporation 2003 (1) RAJ 200 (Del) (paras 50,51).
It is further urged that though in para 35.1 the arbitrators have held that the damages for respective breaches have to be arrived at on the basis of actual loss sustained, in paragraphs 52.12.2, "in the absence of hard unchallengeable evidence" assessment has been made on rough estimates. It is thus argued that the award is without any basis. Claiming inconsistency and relying on:
1) K.P. Poulose Vs. State of Kerala and Another, ;
2) V.G. George Vs. Indian Rare Earths Ltd. and Another, ;
3) Bombay Ammonia Pvt. Ltd. v. UOI AIR 1987 Delhi 148,
setting aside of the award is sought.
Reliance is also placed on:
A. M/s. Sikkim Subba Associates Vs. State of Sikkim, ;
B. Bombay Ammonia Pvt. Ltd. (supra)
to contend that award without evidence is liable to be set aside.
It is yet further pleaded that the contract period having been extended from 1st January, 1985 to 31st January, 1986, no overhead for the said period in any case could have been awarded. Attention is also invited to para 52.12.2 (a) of the award where it is recorded that the PV formula applied by the arbitrators comprised of overheads also.
Per contra, the counsel for the Plaintiff has contended that the arbitrators having recorded that full and fair opportunity had been given to the parties, no case for misconduct can be said to have been made out. Reliance is also placed on paras 85 to 88 of McDermott International Inc. (supra) to contend that time is not of the essence in construction contracts. Attention is invited to the letter dated 3rd September, 1984 listing delays attributable to the Defendant and to the bid proposal to show that the prices were valid for six months. It is contended that all specifications were as per Indian standards and arbitrators having returned a factual finding of American standards having been used and the Defendant having benefitted therefrom, there is no defect capable of interference in the award.
The senior counsel for the Defendant has rejoined by drawing attention to para 108 of the judgment in McDermott International Inc. to contend that in that case also the Ld. Arbitrator had insisted that sufferance of actual damages must be proved by bringing on record books of accounts.
Having held the extension of period of performance from 1st February, 1986 to 30th June, 1986 by the arbitrators to be bad, the award awarding overheads for the said period has to be axiomatically set aside. The question which arises is whether the award for the period 1st January, 1985 to 31st January, 1986 requires interference or not. Need is not felt to go into the said question since from the award as it stands, the amount awarded of Rs.23 lacs cannot be segregated. Thus the entire award under Claim No. XII has to be set aside.
I am also of the opinion that no award could have been made on "imponderables and rough estimate" admittedly used by the arbitrators. The PV formula used of 25% was for the fixed elements "including" overheads and not overheads alone. There is no basis whatsoever for the arbitrators assuming that overheads formed 50% of the fixed elements. Similarly, the other formula adopted was also on estimates. The arbitrators failed to render an award of the claim on merits and to return a finding on whether the claim of the Plaintiff of overheads of Rs.124.21 lacs was established or not. The only conclusion which follows is that the Plaintiff had failed to establish the claim. The arbitrators instead of dismissing the claim tried to make out a new case and which is not permissible in law.
Claim No. XIII of Rs..3.40 lacs towards reimbursement of extra expenditure incurred in furnishing bank guarantee beyond the stipulated agreement has been allowed for Rs. 1,51,526/-
The said amount was claimed by the Plaintiff for expenses incurred in furnishing Bank Guarantee beyond the originally stipulated completion date of 1st January, 1985. The arbitrators on the basis of finding that both parties were equally to blame for the delays awarded half of that amount i.e. Rs.1,51,526/-.
The senior counsel for the Defendant has contended that as per the contract the Plaintiff was bound to keep the Bank Guarantee alive for a period of 15 months from the original date of completion; that the Plaintiff had completed the line on 30th June, 1986 and as such was bound to keep the bank guarantee alive in any case till 30th September, 1987 and thus the claim for expenses incurred could not have been allowed. The counsel for the Plaintiff has again contended that the findings are factual in nature not capable of interference. The senior counsel for the Defendant also invited attention to statement XIII A giving the computation of the amount of Rs.3.40 lacs claimed by the Plaintiff. It is shown that though the claim was in respect of contract performance guarantee only but the amount claimed included expenses of other guarantees also and with respect to which no claim was made.
The counsel for the Plaintiff has not argued that the objections now raised by the Defendant did not form the defence of the Defendant to the claims before the arbitrators. The award is completely silent with respect to the defences of the Defendant. I find the arbitrators to have misconducted themselves in not adjudicating the dispute raised before them and in not even considering the pleas of the Defendant. The award is liable to be dismissed on this ground alone.
The Arbitral Tribunal has awarded interest
(i) at 18% per annum pre reference amounting to Rs. 25,07,436/-,
(ii) at 18% per annum pendente lite from the date of reference i.e. 20th June, 1988 to the date of award and also
(iii) at 18% per annum from the date of the award i.e. 22nd July, 1993 till the date of actual payment or date of decree whichever is earlier.
The senior counsel for the Defendant has contended that the award of pre reference interest is contrary to the Interest Act, 1978; it is urged that the notice claiming interest as mandated by Section 3(b) of the Interest Act, 1978 was given only on 15th November, 1987 and thus interest prior thereto could not have been awarded. Reliance in this regard is placed on Superintending Engineer and Others Vs. B. Subba Reddy, . Objection is also taken to the rate of interest awarded claiming it to be highly excessive. Lastly, it is contended that no interest could have been awarded for the period for making the award Rule of the Court. Reference in this regard is made to Section 29 of the Arbitration Act, 1940.
I am unable to, in exercise of jurisdiction under Sections 30 & 33 of the 1940 Act find a ground for interference with the award of interest for pre reference period. The Supreme Court recently in Sree Kamatchi Amman Constructions Vs. The Divisional Railway Manager (Works), Palghat and Others, relying upon the Constitution Bench judgment in Dhenkanal Minor Irrigation Division v. N.C. Budharaj (2001) 2 SCC 721 held that the arbitrator has the jurisdiction to award interest pre-reference, pendente lite and future if there is no express bar in the contract regarding award of interest. No such bar has been shown in the present case. As far as award of interest pendente lite is concerned also, in view of the judgments in
(a) Manalal Prabhudayal Vs. Oriental Insurance Co. Ltd., ;
(b) Bihar Sponge Iron Ltd. (BSIL) v. Rail India Technical & Economic Services Ltd. 132 (2006) DLT 489 (DB);
(c) MMTC Ltd. v. Sineximco Pte. Ltd. 2009 (V) AD (Delhi.) 748;
(d) Union of India (UOI) Vs. Saraswat Trading Agency and Others, and
(e) Sayeed Ahmed and Co. Vs. State of U.P. and Others, ,
interference with rate awarded is impermissible. Section 29 of the Act only empowers the Court to award interest from the date of the decree to the date of payment. However the fact remains that the proceedings for making the award Rule of the Court have remained pending in the Court for an unusually long time. On account thereof only, it is deemed appropriate to balance the equities. The Supreme Court in
(i) Pure Helium India (P) Ltd.(supra)
(ii) Krishna Bhagya Jala Nigam Ltd. Vs. G. Harischandra Reddy and Another, and
(iii) U.P. Cooperative Federation Ltd. Vs. Three Circles,
has reduced the rate of interest from 18% per annum. In the facts and circumstances of the case, it is deemed expedient to vary the rate of interest from the date of filing of the award in this Court and till this date from 18% per annum to 10% per annum. The Plaintiff shall also be entitled to interest from the date of the decree till the date of payment at 10% per annum.
In so far as the counter claims of the Defendant are concerned, the senior counsel for the Defendant has made submissions only with respect to the rejection of the Counter Claim No. V of Rs. 22.99 lacs for liquidated damages. The Arbitral Tribunal has rejected the said counter claim of the Defendant on account of the Defendant being equally responsible for the delays.
The finding of the Arbitral Tribunal of the Defendant also being responsible for delay, is a finding of fact and cannot be interfered with in exercise of jurisdiction under Sections 30 & 33 of the Act. No merit is therefore found in the objections of the Defendant to the rejection of the said counter claim. The said objection is accordingly rejected.
No other arguments have been raised.
The award as modified hereinabove is accordingly made Rule of the Court and a decree in terms thereof is passed as aforesaid. The Plaintiff shall be entitled to interest on the principal amount from the date of the decree till the date of payment @10% per annum. No order as to costs.