M/s. Devchand Construction Thokkottu vs The Divisional Railway Manager (Works) Southern Railway Palakkad Division Palakkad Kerala and Sri. G. Radhakrishnan Nair Sole Arbitrator and Deputy'' Chief Engineer Southern Railway Tribandrum, Kerala

N. Kumar, J.—The question of law involved in these appeals is one and the same, that is question of interest.

By consent of the learned counsel for the parties, these appeals are taken up for final hearing and are disposed of by this common judgment.

The appellant is the contractor. He entered into a contract independently with the Railways for executing certain work. In the course of execution of the work, the dispute arose between the parties. The dispute entered into between the parties provided for arbitration. He requested for referring the dispute to the arbitration with the Railways and an application was filed u/s 11 of the Arbitration and Conciliation Act, 1996, for short hereinafter referred to as the "Act". An Arbitrator came to be appointed. The appellant preferred his claim. The respondents filed objection and also preferred counter claim. The Arbitrator after hearing both the parties allowed certain claims and disallowed the certain claims. Insofar as the claims which are allowed, he has not awarded any interest till the date of passing of the award, but he has awarded interest from the date of award at 18% p.a. Aggrieved by the said award, the appellant preferred A.S.No.6/07 before the Civil Court u/s 34 of the Act. The Civil Court allowed the certain claims, but he declined to grant any interest from the date of cause of action till the date of award, It as that, portion of the award and order of the Civil Court declining to grant interest from the date of claim petition till the date of the award, these two appeals are filed.

The learned counsel for the appellant submits that in the contract entered into between the parties there is an express provision prescribing awarding interest from the date of claim petition till the date of award. He also submits that the Arbitrator has the power to award interest and the Arbitrator has not awarded interest, it is exfacie illegal. Lastly, he submitted that the amount, which was ordered to be paid to the appellant, was due nearly 11 years back. It is injustice to deny the benefit of the interest. The appellant filed a memo stating that he is not claiming any interest, subsequently, he filed, the appeal to withdraw the memo.

Be that as it may, the question is whether the claimant is entitled to any interest from the date of claim petition till the date of passing of the award.

A person can claim interest either under a contract or under statutory provision. If a claims for Interest is made under the provision of Indian interest Act, the claimant has to satisfy the requirement prescribed under the Act. If there is no contract and if there is no statutory provision, the claimant is not entitled so Interest solely on the ground that the money given to him was withheld by the opposite party. Clause 64 - 3 of the Contract which is pressed into service read as under;

64.3. Appointing of an Arbitrator tribunal.

(a) (i) In cases where the total value of all claims in question added together does not exceed Rs.10,00,000/- (Rupess Ten Lakh Only) the Arbitral Tribunal shall consist of a sole arbitrator who shall be a gazetted officer of Railway not below JA grade nominated by the General Manager in that behalf. The sole arbitrator shall be appointed within 60 days from the day when the written and valid demand for arbitration is received by the General Manager.''

(ii) In cases not covered by Clause 64(3) (a)(i) the Arbitral Tribunal shall consist of a panel of three gazetted Railway officers not below JA grade or two Railway gazetted officers not below JA grade and a retired Railway officer retired not below the rank of SAG officer, as the arbitrators, for this purpose, the Railway will send a panel of more than 3 names of gazetted Railway officers of one or more departments, of the Railway, which may also include the name(s) of retired Railway officer(s), empanelled to work as Railway arbitrator to the Contractor within 60 days from the day when the written and valid demand for arbitration is received by the General Manager Contractor will be asked to suggest to the General Manager upto 2 names out of the panel for appointment as the Contractor''''s nominee within 30 days from the date of despatch of the request by Railway. The General Manager shall appoint atleast one out of them as the Contractor''s nominee and will, also simultaneously appoint the balance number of arbitrators either from the panel or from the outside the panel, duty indicating the "Presiding Arbitrator" from amongst the 3 arbitrators so appointed. General Manager shall complete the exercise of appointing the Arbitral Tribunal within 30 days from the receipt of the names of contractor''s nominee. While nominating the arbitrators it will be necessary to ensure that one of them is from the Accounts department An officer of selection Grade of the Accounts Department shall be considered of equal status to the officers in SA grade of other departments of the Railways for the purpose of appointment of arbitrators.

(iii) If one or more of the arbitrators appointed as above refuses to act as arbitrator, withdraws from his office as arbitrator or vacates his/their office/offices or is/are unable or unwilling to perform his functions as arbitrator for arty reason whatsoever or dies or in the opinion of the General Manager fails to act without undue delay, the General Manager shall appoint new arbitrator/arbitrators had been appointed Such restituted Tribunal may, at its discretion, proceed with the reference from the stage at which it was left by the previous arbitrator(s).

(iv) The Arbitral Tribunal shall have power to call for such evidence by way of affidavits or otherwise as the Arbitral Tribunal shall think proper, and it shall be the duty of the parties hereto to do or cause to be done all such things as may he necessary to enable the Arbitral Tribunal to make the award without any delay.

(v) White appointing arbitrator(s) under Sub-Section (i) and (iii) above, due care shall be taken that he/they is/are not the one those who had an opportunity to deal with the matters to which the contract relates or who in the course of his/their duties as Railways servant(s) expressed views on all or any of the matters under dispute or differences. The proceedings of the Arbitral Tribunal or the award made by such Tribunal will however, not be invalid merely for the reason that one or more arbitrator, had, in the course of his service, opportunity to deal with the matters to which the contract relates or who in the course of his/their duties, expressed views on all or any of the matters under disputes.

(b) (i) The arbitral award shall stats itemwise, the sum and reasons upon which it is based.

(ii) The party may apply for corrections of any computational errors, any typographical or derical errors of similar nature occurring in the award and interpretation of a specific point of award to Tribunal within 30 days of receipt of award.

(iii) A party may apply to Tribunal within 30 days of receipt of award to make an additional award as to claims presented in the arbitral proceedings tut omitted from the arbitral award.

Then go to (5), which reads as under;-

(5) Where the arbitral award is for the payment of money, no interest shall be payable on whole or any part of the money for any period till the date of which the award is made.

Therefore, the dispute between the parties is for non-payment of interest from the date of claim petition till the date of award. The argument is, the clause is binding only when the arbitrator is appointed by the Railways under the contract and it does not bind the arbitrator appointed by this Court. We do not see any justification to distinguish an appointment of the arbitrator by the Railways or by this Court, Even if one of the parties to the contract decline to appoint an arbitrator, the Act applies and therefore. Section 11 is invoked and the arbitrator is appointed. The arbitrator appointed by this Court is in place of the Arbitrator, who should have been appointed by the Railways in terms of the contract, The power of the arbitrator and the terms and condition of the agreement are one and the same in law and there cannot be any distinction, as such award passed by the Arbitrator is in accordance with law.

Section 31 of the Arbitration and Conciliation Act deals with all the powers of the Arbitrator in the matter of awarding of interest it reads as under;

Section 31(7)(a) Unless otherwise agreed by the parties, where and in so far as an arbitral, award is far 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 dale on which the award is made.

Clause (b) provides a sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of 18% p.a. from the date of the award till the date of payment.

Therefore, the aforesaid statutory provision empowers the arbitrator to award interest prior to passing at the award subsequent, to passing of the award. This provision should not be confused to the entitlement of the claimant to claim interest. As stated earlier, if the claimant makes out a case i.e. entitlement to & particular rate of interest either under the contract or under the statutory provision or under the Indian Interest Act and put forth the claims under Section. 31(7)(a), which empowers the arbitrator to award interest from the date of cause of action arose till the date on which the award is made, in addition to actual claims subject to only one condition that if there is no contract between the parties or contract not to claim the interest, the arbitrator has no power to award the interest during the said period.

Therefore, Clause 64(3)(a)(v) R/w. 31 (7) (a) makes it very clear that where the parties agreed that no interest is payable by them from the date of cause of action till the date of award of the arbitrator, the arbitrator has no jurisdiction to grant interest during the said period, notwithstanding a claim is made out by the claimant, therefore the arbitrator and the Civil Court has not granted the same.

Section 31(7)(b) provides for future interest at 7% p.a., which the arbitrator as well as the Court has granted. In that view of the matter, we do not see any merits in these appeals. Accordingly, these are dismissed.