Nityananda Samantray vs State of Orissa

L. Rath, J.—This revision is directed against the judgment passed by the learned Subordinate Judge, Bhubaneswar in O.S. No. 149 of 1982(1) disallowing future interest on the award which has been made rule of, the Court.

The petitioner had undertaken the work "Improvement to Jeerang-Koinpur Road" in agreement No. 531F-2 of 1972-73 for an amount of Rs. 8,57,218.60. A dispute having arisen between the parties, the matter was referred to the arbitration and the sole Arbitrator submitted a non-reasoned lump-sum award of Rs. 3,12,914/- including interest '' 12 per cent per annum from the date of the award till the date of the final payment or decree whichever is earlier. After the award was submitted in the Court, both the parties were noticed to file their objections. After hearing the parties the award was remitted back to the Arbitrator for specification of the claimed amount and the interest awarded by him and to re-submit the award.

The Arbitrator re-submitted the award as per the directions of the Court supplying of break up of the award as follows : --

A) Amount allowed on the claim items including with-held security deposit

Rs. 3,10,947.00

B) Amount allowed as interest on security deposit of Rs. 8,2127- (held up by the respondent) at 12% from October, 77 to April, 82 4� years.

Rs. 2,586.00

(A + B) Rs. 3,13,533.00

C) Amount allowed on counter-claims of the Respondent

(-) Rs. 619.00

Balance Rs. 3,12,914.00

On consideration of the objections raised, the learned Subordinate Judge, Bhubaneswar overruled the objections and made the award rule of the Court. While passing the order making the award rule of the Court, the learned Subordinate Judge observed as follows : --

"XXX Since the arbitrator has awarded interest '' 12% per annum from the date of award till the date of payment or decree whichever is earlier, no future interest is allowed. Draw up decree accordingly."

It is this observation of the learned Subordinate Judge which is in challenge in this revision. It is urged by the petitioner that the learned Subordinate Judge has failed to exercise his jurisdiction u/s 29 of the Arbitration Act disallowing future interest though admittedly he agreed with the arbitrator granting 12% interest per annum from the date of the award till the date of payment or decree whichever is earlier.

In support of such contention, Mr. Sanganeria, appearing for the petitioner has relied on Union of India (UOI) and Another Vs. Vishwanath Sud and Another, in which it has been held that once a sum is found due to the contractor, there is no reason as to why he should not be entitled to interest on such sum from the date of decree and accordingly the Court allowed interest '' 6 per cent on the due sum as a reasonable interest. Mr. N. C. Panigrahi, learned Additional Government Advocate appearing for the State placed reliance on 42 (1976) CLT 787 (State of Orissa v. Nityananda Samantray) and The State of Madhya Pradesh and Others Vs. Nathabhai Desaibhai Patel, . In 42 (1976) CLT 787 it has been merely held that the grant of interest u/s 29 of the Act in the discretion of the Court. The State of Madhya Pradesh and Others Vs. Nathabhai Desaibhai Patel, is a decision u/s 34 of the Civil P. C. and holds likewise that the grant of interest is at the discretion of the Court.

It is indisputable that in making an award the Arbitrator has power to grant interest from the due date up to the date of the decree but the question of grant of interest after the decree is within the domain of the Court. The Court has to decide regarding the future interest which may be paid and at such rate which appears to it to be reasonable. Section 29 of the Arbitration Act is exhaustive on the subject and Section 41 of the Act cannot be resorted to draw inspiration from Section 34 of the Civil P.C. regarding grant of interest. Thus The State of Madhya Pradesh and Others Vs. Nathabhai Desaibhai Patel, relied upon by the learned Additional Government Advocate offers no assistance in the matter.

Admittedly, the Court below has upheld the award of the Arbitrator and has also found that the grant of interest '' 12 per cent per annum till the date of decree is reasonable. No cogent reason has however been supplied for refusal of future interest from the date of decree till the date of payment. Discretion vested in the Court u/s 29 of the Arbitration Act regarding grant of interest is a judicial one which cannot be allowed to be injudiciously exercised. Award of future interest from the date of decree till the date of payment puts a load and tension on the other party to pay of the sum promptly since otherwise payment of the sum may be delayed indefinitely. The very purpose of resorting to an arbitration is a prompt disposal of the claim and unless future interest is granted, the whole purpose of the arbitration may be frustrated. The award of future interest thus should be the normal rule unless there are very strong reasons to depart from it.

Mr. Panigrahi, learned Additional Government Advocate very fairly also cited a decision of this Court reported in State of Orissa Vs. S.L. Narayana and Others, wherein it was held that grant of future interest serves as a pressure for satisfying the decree at the earliest convenience and though the power to grant interest u/s 29 is discretionary, yet the Court in dealing with such a matter should act judiciously and if it decides to reject the prayer, it must do so expressly stating reasons for the same.

As it appears the learned Subordinate judge has not at all applied his mind to this aspect of the matter and has exercised jurisdiction vested in him with material irregularity and hence the order calls for interference.

Thus considering the case from all aspects it is considered reasonable that the petitioner should be entitled to future interest from the date of the decree till the date of payment at the same rate as had been granted by the Arbitrator i.e. '' 12 per cent per annum.

In the result, the judgment of the learned Subordinate Judge is modified to the extent as above regarding grant of future interest from the date of the decree till the date of payment, but there shall be no order as to costs.