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Judgment
The appellant is questioning the concurrent findings of the award passed by the Arbitrators before the Arbitral Tribunal, Bangalore, dt. 15.4.2003 which has been confirmed by the City Civil Judge, Bangalore in AS NO. 37/2003 Dt. 3.10.2009. The facts leading to this case are as hereunder:
The 1st respondent is carrying on business in processing of Quality Cashew Kernels having its factory at Belur Industrial Area, Hubli. The 1st respondent had obtained two Fire Insurance Policies from the Plaintiff, one to cover the stock and stock in process, raw cashew and cashew kernels and another policy covering the plant and machinery, factory buildings, godowns, sheds, electrical fittings, furniture and fittings etc. On 25.2.2001 there was a fire accident in the factory of the 1st respondent which resulted in loss of stock and damage to the building. The appellant''s Surveyors examined the extent of loss and assessed the value of the loss suffered by the 1st respondent. According to the Surveyors report, the loss suffered by the 1st respondent was to an extent of Rs. 60,43,453/- in respect of the stock in trade and Rs. 4,96,286/- towards the damage caused to the building. The valuation of the Surveyor was not accepted by the 1st respondent. In view of the terms and conditions of the policy, the matter was referred to the Arbitrators. Accordingly, the Arbitral Tribunal considering the claim statement made by both the parties and recording the evidence held that the 1st respondent was entitled for a sum of Rs. 10,87,554/- being the additional sum towards the loss of raw materials which is inclusive of cashew and cashew kernels and further held that the respondent is entitled to recover a sum of Rs. 13,44,529/- towards interest and further ordered that the respondent-1 is entitled for a total award amount of Rs. 26,34,538/- and stamp duty and interest from 15.4.2003 at 18% p.a. till the date of payment. The award passed by the Arbitral Tribunal dt. 15.4.2003 was questioned by the appellant in AS No. 37/2003 before the City Civil Judge, Bangalore. The arbitration suit filed by the appellant u/s 34 of the Arbitration and Conciliation Act was dismissed by the City Civil Judge on 3rd October 2009 confirming the award passed by the Arbitral Tribunal. Challenging the concurrent findings, the present appeal is filed.
We have heard the learned counsel for the parties.
The appellant''s counsel has raised three points before us. According to him, the Tribunal as well as the court below have committed a serious error in not considering the case of the appellant in regard to the value of the cashew furnished by the appellant. According to him, the Surveyor''s report was based on the documents collected from the importers to show the value of the cashew on the date of the fire accident. He further submits that the Arbitral Tribunal having accepted the valuation made by the 1st respondent could not have rejected the contention of the appellant. Though there was no agreement to pay the interest under the policy, interest has been wrongly awarded till the passing of the award at 18% and he lastly contends that, the Tribunal has further erred in awarding interest on the interest arrived by it, as it amounts to compound interest. Relying upon the Judgment of the Hon. Supreme Court in State of Haryana & Others vs. M/s. S.L. Arora and Company reported in 2010 AIR SCW 1715, he requests the court to set aside the interest awarded on interest and to set, aside awarding of interest as there was no contract between the parties and also to allow the appeal and dismiss the claim made by respondent-1 before the Tribunal.
Per contra, the learned counsel for the respondent contends that all the three grounds urged by the appellant are to be discarded. According to him based on the documents produced by the respondent, the Arbitral Tribunal has come to the conclusion what was the value of the cashew and cashew kernels purchased by the respondent No. 1 and therefore the first point has to be rejected. He further contends that the value arrived at by the Arbitral Tribunal in regard to loss caused in the fire accident is a question of fact and the same cannot be interfered with in a second appeal u/s 37 of the Act He further contends that the interest has been awarded at 18% based on the evidence let in by the 1st respondent that cashew and cashew kernals had purchased by the 1st respondent by borrowing loan from the Bank and that the 1st respondent was made to pay the interest to its bankers without utilising the raw material. He lastly contends that the interest awarded from the date of the award till the payment cannot be considered as a compound interest and that the 1st respondent is entitled to under the law. Therefore, he requests the court to dismiss the appeal.
Having heard the counsel for the parties, we have to consider the following three points in this appeal:
1) Whether the findings of the Arbitral Tribunal that the respondent has suffered loss of Rs. 10,87,554/- in addition to the loss already satisfied by the appellant is just and proper?
2) Whether the interest awarded in a sum of Rs. 13,44,529/- till the date of passing of the awarded at 18% is proper or not?
3) Whether the interest awarded at 18% p.a. on the aforesaid two sums is just and proper, does it amounts to compound interest?
So far as the first point is concerned, both the courts below have concurrently held the extent of loss sustained by the 1st respondent is a question of fact and not a question of law. Therefore, this court cannot consider the same. Accordingly, we answer point-1 against the appellant.
So far as the 2nd point is concerned, even though there is no contract between the parties to pay interest, when the respondent-1 had purchased the cashew and cashew kernels by borrowing loan from the Bankers, when the respondent-1 had paid interest to its Bankers, when the Tribunal has held that the respondent-1 was entitled for an additional sum of Rs. 10,87,554/-, naturally the respondent No. 1 is entitled to claim interest even though such a clause is not provided in the policy. Therefore, the second point is answered against the appellant.
So far as the last point is concerned, when a sum of Rs. 13,44,529/- is awarded towards interest till the date of passing of the award and again awarding of interest at 18% p.a. on the aforesaid interest amounts to compound interest and in view of the law laid down by the Hon. Supreme Court in State of Haryana & Others vs. M/s S.L. Arora and Company, we are of the view that compound interest awarded has to be set aside. Accordingly, we do so and point No. 3 is answered accordingly. In the result, the appeal is allowed-in-part. The award passed by the Arbitral Tribunal which is confirmed by the City Civil Judge, Bangalore in AS NO. 37/03 is confirmed to the extent of Rs. 26,34,583/-and stamp duty payable on the award end interest awarded at 18% p.a. from 15.4.2003 till the date of payment is set aside and modified holding that the respondent No. 1 is entitled to recover a sum of Rs. 10,87,554/- with interest at 18% p.a. from 15.4.2003 till the date of payment.
At this stage, the appellant''s counsel submits that there is an error in calculating the interest at Rs. 13,44,529/- If it is so, it is for the appellant to make necessary application for correction of interest. If any amount is deposited by the appellant, the respondent is entitled to withdraw the same and such withdrawal could be adjusted out of the decretal amount.