Union of India (UOI) vs Shri Suresh Chand Jain

Manmohan, J.—Present petition has been filed u/s 34 of Arbitration and Conciliation Act, 1996 (hereinafter referred to as "Act, 1996") challenging the arbitral Award dated 10th April, 2001 passed by Mr. R.K. Kardam, Sole Arbitrator and Adviser, Judicial Commission, Northern Railway.

Mr. Sanjay Kumar Pathak, learned Counsel for petitioner-objector submits that the Arbitrator has reached incorrect finding of facts. He further states that the Arbitrator has not applied his mind properly to the documents and evidence on record.

Mr. Pathak lastly submits that the Arbitrator could not have awarded any interest in view of Sub-clause 3 of Clause 16 of General Conditions of Contract (in short "GCC"), which reads as under:

(3) No interest will be payable upon the earnest money or the security deposit or amounts payable to the contractor under the contract, but Government Securities deposited in terms of Sub-clause (1) of this clause will be repayable with interest accrued thereto.

On the other hand, Mr. Vivekanand, learned Counsel for respondent-claimant states that this Court in Section 34 proceedings can neither sit in appeal nor re-appreciate facts. He further states that as the issue of interest is pending adjudication in the Supreme Court, he does not wish to press for interest prior to the date of the Award.

Having heard the parties at length and having perused the impugned Award, I am of the view that it would be appropriate to first outline the circumstances in which a Court can interfere with an arbitral award passed under the Act, 1996. The Supreme Court in McDermott International Inc. Vs. Burn Standard Co. Ltd. and Others, has succinctly summed up the scope of interference by this Court by stating "the 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc...."

It is well settled that if the parties have selected their own forum, the deciding forum must be conceded the power of appraisement of evidence. The arbitrator is the sole judge of the quality as well as the quantity of evidence and it will not be for the court to take upon itself the task of being a judge on the evidence before the arbitrator. It is equally well settled that reasonableness of reasons cannot be challenged in a petition filed u/s 34 of Act, 1996. Consequently, as this Court is not sitting in appeal over the Award passed by the Arbitrator, I am of the opinion that this Court need not re-appreciate the evidence. Moreover, in my view, the Arbitrator has given cogent and concise reasons for his findings. Accordingly, the objection petition with regard to the Award on merits is dismissed.

However, keeping in view the bar contained in Clause 16 of GCC as well as the statement made by Mr. Vivekanand before this Court, I deem it appropriate to modify the impugned Award to the extent that simple interest @ 12% per annum would be payable by petitioner-objector from the date of Award till the date of payment. I may mention that under Sub-section (7) of Section 31 of Act, 1996, the parties have the right to agree upon the rate of interest to be awarded by the arbitral tribunal between the date on which the cause of action arose and the date on which the award is made. However, for post award interest, the parties do not have any such autonomy and the rate of interest for such period is to be determined either by the Arbitrator or interest has to be awarded at the rate of 18% per annum. Since in the present case, Arbitrator has awarded interest at the rate of 12% per annum, I do not find any ground to interfere with the said rate for the post award period. With the aforesaid modification, present petition is dismissed but with no order as to costs.