Kataria Builders vs State of H.P.

Kuldeep Chand Sood, J.—The Question Raised in this Petition

Whether a claimant decree holder is entitled to interest of 18% per annum u/s 31(7)(b) of the Arbitration and Conciliation Act, 1996 when the Arbitrator allowed interest at the rate of 12% per annum upto the date of Award and kept silent so far interest from the date of Award till the date of payment is concerned ?

Facts, Necessary, may be Noticed

An Award was made in favour of the petitioner-decree holder by the Arbitrator (Superintending Engineer, Arbitration, HP, PWD, Solan) in case No. SE-ARB-244/96 on 26th October, 1999 in the following terms :

"Award in favour of plaintiff-M/s. Kataria Builders, 224 Saingarh Pathankot (Punjab)--Claimant

Sr No.

Particulars of Claim

Amount Demanded

Amount Awarded

Remarks

1

2

3

4

5

Claims

1.

Due to prolong-ation contract

Rs. 8,84,000

Rs. 56,375

2.

On account of Final bill

Rs. 1,42,222

Rs. 1,06,885

3.

On account of items not paid

Rs. 80,000 (Modified to Rs. 54,731)

NIL

4.

Works executed beyond deviation limit

Rs. 1,50,000

Rs. 80,279

5.

Reimbursement of material

Rs. 59,800

NIL

6.

Items executed not paid

Rs. 1,50,000

Rs. 17,799

7.

Refund of Security

Rs. 46,820

Rs. 46,820

8.

10-C Claim

Rs. 70,000

Beyond jurisdiction of Arbitrator.

& 10.

Interest

18% per annum

� 12% per annum simple interest on Rs. 3,08,158 for Eight years till date of Award.

11.

Arbitration cost

Rs. 10,000

NIL

Total

Rs. 3,08,158 +interest as awarded against Claim No. 9 and 10.

Award in favour of respondent-Executive Engineer Nurpur Division, HP, PWD, Nurpur

Sr. No.

Description of Counter-claim

Amount Demanded

Amount Awarded

Remarks

1

2

3

4

5

Counter-claims :

1.

On account of Final bill

Rs. 87,900

NIL

2.

Cost of Arbitration

Rs. 2,500

NIL

Total

NIL

The petitioner-decree holder claims interest on the amount of Award at the rate of 18% per annum from the date of the Award till the payment of the Award amount in terms of Section 31(7)(b) of the Arbitration and Conciliation Act, 1996 (Act for short). The respondent-State resist the claim of the petitioner for this interest on the grounds that Arbitrator has allowed interest at the rate of 12% per annum and, therefore, the decree holder is not entitled to future interest at a rate exceeding 12% per annum.

Sub-section (7) of Section 31 of the Act provides for the interest on the payment of Arbitral Award for the payment of money. Sub-section (7) of Section 31 is reproduced for convenience :

"31(7)(a) Unless otherwise agreed by the parties, where and in so far as an Arbitral Award is for the payment of money, the Arbitral Tribunal may include in the sum for which the Award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the Award is made.

(b) A sum directed to be paid by an Arbitral Award shall, unless the Award otherwise directs, carry interest at the rate of eighteen per centum per annum from the date of Award to the date of payment,"

(emphasis given)

A perusal of Sub-section (7) shows that an Arbitral Award, if it is for the payment of money may carry interest at such rate as is deemed reasonable by the Arbitrator on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the Award is made.

Clause (b) of Sub-section (7) of Section 31 provides for the future interest i.e. interest from the date of the Award till the payment of the amount of Award. This clause stipulates that in addition to the sum payable under the Award, which indeed include the interest under Clause (a) of Sub-section (7) of Section 31, the decree holder shall also be entitled to an interest at the rate of 18% per annum from the date of the Award to the date of the payment unless the Award otherwise directs.

Mr. Chaudhary, relying upon the judgment of this Court in M/s. Gurbax Singh Sukhwant Singh v. State of H.P., Execution Petition No. 33 of 2001, decided on 26th July, 2002, submits that as the Arbitrator has directed the payment of interest at the rate of 12%, under Clause (a) of Sub-section (7) of Section 31, therefore, the decree holder is entitled to future interest at the rate of 12% per annum and not at the rate of 18% per annum. The contention is misplaced.

In Gurbax Singh (supra), the Arbitrator had directed the payment of interest at the rate of 10% per annum till the date of the payment or decree whichever was earlier. Construing this direction of the Arbitrator in harmony with Clause (b) of Sub-section (7) of Section 31 of the 1996 Act, this Court held that future interest from the date of the Award till the date of the payment of the amount of Award is liable to be paid at 10% and not 18%.

In the present case the Arbitrator has not said anything about the payment of future interest. Gurbax Singh (supra), is of no assistance to the respondent.

To conclude the decree holder is entitled to the interest at the rate of 18% per annum from the date of the Award till the date of the payment in terms of Clause (b) of Sub-section (7) of Section 31 of the Act. There is no merit in the objections which are dismissed.

The balance amount payable to the decree holder as future interest shall be paid by the State-judgment debtor within six weeks from today.

The execution petition is disposed of.