Food Corporation of India and 1 vs Aiyub Bachu and Co.

Honourable The Acting Chief Justice Mr. Bhaskar Bhattacharya

This Appeal is at the instance of the Food Corporation of India and is directed against an order dated 17th April 1993 passed by the Joint Civil Judge (S.D.), Kutch at Bhuj in Special Civil Suit No.54 of 1983, thereby disposing of a proceeding u/s 15 of the Arbitration Act, 1940 (for short, ''the Act'') by modifying the award passed by the Arbitrator.

Being dissatisfied, the Food Corporation of India, a party to the award, has preferred this Appeal under the provisions of Section 39 of the Act.

The only point raised by the learned advocate appearing on behalf of the appellant is that the Court, dealing with an application u/s 15 of the Act, acted without jurisdiction in awarding interest on the awarded sum from the date of the suit. According to the learned advocate, in view of the provisions contained in Section 29 of the Act, a Court dealing with a proceeding under the said Act can award interest only from the date of passing of the decree till realization and not from a date prior to the date of passing of the final decree.

The learned advocate appearing on behalf of the respondent, on the other hand, has opposed the aforesaid contention and has contended that in view of the provisions contained in Section 41 of the Act, the CPC applies to a proceeding u/s 15 of the Act and, consequently, the Court is vested with authority to grant interest even from the date of institution of the suit by taking aid of Section 34 of the Code of Civil Procedure, 1908 (for short, ''the Code''). According to him, the learned trial Judge did not commit any error of law in taking recourse to Section 34 of the Code and rightly awarded interest from the date of institution of the suit.

Therefore, the only question that falls for determination in this Appeal is, whether a Court in exercise of power conferred u/s 15 of the Act is vested with authority to grant interest from the date of institution of the suit till the date of passing of the decree.

In order to appreciate the aforesaid question, it will be profitable to refer to the provisions contained in Sections 29 and 41 of the Act and also the provisions contained in Section 34 of the Code, which are quoted below :-

Section 29 and 41 of the Arbitration Act, 1940

Interest on awards. -Where an in so far as an award is for the payment of money the Court may in the decree order interest, from the date of the decree at such rate as the Court deems reasonable, to be paid on the principal sum as adjudged by the award and confirmed by the decree.

Procedure and powers of Court. -Subject to the provisions of this Act and of rules made thereunder -

(a) the provisions of the Code of Civil Procedure, 1908 (5 of 1908), shall apply to all proceedings before the Court and to all appeals, under this Act; and

(b) the Court shall have, for the purpose of, and in relation to, arbitration proceedings, the same power of making orders in respect of any of the matters set out in the Second Schedule as it has for the purpose of, and in relation to, any proceedings before the Court :

Provided that nothing in clause (b) shall be taken to prejudice any power which may be vested in an arbitrator or umpire for making orders with respect to any of such matters.

Section 34 of the Code of Civil Procedure, 1908

Interest. -(1) Where and in so far as a decree is for the payment of money, the Court may, in the decree, order interest at such rate as the Court deems reasonable to be paid on the principal sum adjudged, from the date of the suit to the date of the decree, in addition to any interest adjudged on such principal sum for any period prior to the institution of the suit, with further interest at such rate not exceeding six per cent per annum as the Court deems reasonable on such principal sum, from the date of the decree to the date of payment, or to such earlier date as the Court thinks fit:

Provided that where the liability in relation to the sum so adjudged had arisen out of a commercial transaction, the rate of such further interest may exceed six per cent per annum, but shall not exceed the contractual rate of interest or where there is no contractual rate, the rate at which moneys are lent or advanced by nationalised banks in relation to commercial transactions.

(2) Where such a decree is silent with respect to the payment of further interest on such principal sum from the date of the decree to the date of payment or other earlier date, the Court shall be deemed to have refused such interest, and a separate suit therefor shall not lie.

On a plain reading of the aforesaid provisions, it is clear that Section 29 of the Act authorizes the Court dealing with any proceeding under the Act to order interest from the date of decree at such rate as the Court deems reasonable to be paid on the principal sum as adjudged by the award and confirmed by the decree. Apart from the said provisions of Section 29 of the Act, there is no other provision in the Act authorizing the Court to grant interest on any award.

It is true that Section 41 of the Act makes the provisions of the Code applicable to all the proceedings under the Act before the Court or to appeal under the Act but the very first clause of the said Section points out that such application would be subject to the provisions of the Act and the rules made thereunder.

Therefore, Section 34 of the Code can be applicable subject to the provisions of Section 29 of the Act. In other words, if there is a conflict between Section 29 of the Act and Section 34 of the Code, the former will prevail over the latter.

We have already pointed out that although Section 34 of the Code authorizes a Court to grant interest not only from the date of decree till realization but also from a time prior to passing the decree, yet Section 29 restricts the power of the Court in a proceeding under the Act to grant interest only from the date of passing of the decree.

We, therefore, find that Section 29 of the Act did not authorize the Court dealing with an application u/s 15 of the Act to award interest from a period prior to the passing of the decree and, as such, the Court below acted without jurisdiction in awarding interest from the date of institution of the suit by taking recourse to Section 34 of the Act.

We, therefore, modify only that part of the decree by which the Court awarded interest from the date of institution of the suit till the passing of the decree.

We do not touch any other part of the decree impugned in this Appeal. The Appeal is, thus, disposed of. The decree passed herein is modified to the extent indicated above. No order as to cost.

We are told that pursuant to an interim order passed by this Court the appellant has already deposited the entire awarded sum with interest before the trial Court and the respondent has withdrawn the entire amount by giving security. In such circumstances, we direct the respondent to return the excess amount obtained pursuant to the said interim order to the appellant within two months from today. So long as the said amount is not returned, the security will not be released by the learned trial Judge.