Rakha Singh vs Executive Engineer

Arun Kumar Goel, J.—By means of this petition, Objector has questioned the award passed by the Arbitrator on 06.09.1996. The whole

thrust of the objections is that the Arbitrator has misconducted himself as well as the proceedings by allowing pendente lite interest, that too at the

rate of 15 per cent per annum from the date when first Arbitrator entered upon he reference, i.e., 16.04.1979. A perusal for the objections

indicates that those revolve around the power of Arbitrator to have allowed the interest. Alternate plea set up is that it could not have been allowed

at a higher rate thin the one as (claimed by the Objector. In order to properly understand the case few facts need to be noticed, which gave rise to

the present proceedings.

An agreement was entered upon between the parties to this Lis on 15.11.1972 regarding ""Excavation of Concrete Dim Non Overflow Blocks No.

1, 2 and 2 1/2 at Dhyangarh."" Work was executed by the NonObjector. However, disputes arose between the parties in relation to agreement

above referred. Therefore, nonobjector called upon General Manager, Salal Hydro Electric Project, Jyotiouram, for referring the disputes between

the parties for adjudication as well as for appointment of an Arbitrator in that behalf. This prayer of the nonobjector was allowed on 17.03.1979,

one Mr. Prithipal Singh Superintending Engineer was appointed sb Arbitrator.

The abovenamed Arbitrator entered upon reference on 16.04.1979. After having entered upon the reference, proceedings were undertaken by the

said Arbitrator and finally on 15.04.1983, he made and published his Award, which came for being made a rule of the Court before this Court.

Both the parties filed objections against this award of the Arbitrator and by means of Judgement dated 22.04.1987 in A. A. No. 123 of 1983, the

award was set aside. While setting aside the award, this Court directed the General Manager, Salal Hydro Electric Project for appointment of

another Arbitrator with a view to adjudicate the disputes between the parties.

In view of the aforesaid direction of this Court, General Manager appointed late Shri Justice V. S. Deshpande, (retired Chief Justice of Delhi High

Court) as the sole Arbitrator to decide the disputes between the parties. This Arbitrator entered upon the reference and started arbitration

proceedings. Unfortunately before he could finalise the proceedings and make his award, he left for his heavenly abode in the month of July, 1992.

Thus causing vacancy. This vacancy came to be filled in by the General Manager above referred, who on 18.12.1992 appointed Shri Justice

Avadh Behari Rohatgi (retired Judge of Delhi High Court). Said Arbitrator after entering upon the reference has made and published his award on

06.09.1996, which came to be filed in this Court for being made rule of the Court. After the award had been filed in the Registry of the Court,

notice was ordered to be issued to the parties on 27.11.1996. Afterrece4pt of notice, objections have been filed on behalf of the Objector in this

case on 22.01.1997.

As already observed, the objections for all intents and purpose relate to the authority of the Arbitrator to have allowed pendente lite interest as well

as the enhanced rate from 12% to 15%, which has been awarded in the impugned award. In his reply to the objections, claim of the Objector has

been contested and resisted by NonObjector, who at the same time has urged that the award as made deserves to be made a rule of the Court.

On the pleadings of the parties, following issues were framed on 04.05.1998 and evidence by way of affidavits has been produced by the parties :

(I) Whether the Arbitrator had the jurisdiction to award interest ?

If issue No. 1 is proved in the affirmative, to what rate of interest respondents are entitled to ?

Relief.

After having heard the learned counsel for the parties, authority of the Arbitrator to allow interest at a higher rate than the one as claimed in the

Claim Petition filed before the Arbitrator is being taken up first. Learned counsel for the nonobjector fairly stated that in the initial petition that the

interest claimed was at the rate of 1 per cent per mensum with effect from 31.03.1975 to 16.04.1979 with future interest to the date of payment of

the claims. However, he submitted that during the course of proceedings, a prayer was made for claiming the enhanced interest at the rate of 3%

per mensum, but such claimed had been declined by the Arbitrator? thus the situation remains that the claim of the nonobjector regarding payment

of interest remained as it was originally claimed, i.e. at the rate of 1 per cent per mensum for the period detailed above, besides interest till the date

of payment of his claims. There appears to be substance in the submission of Mr. Singh, learned counsel for the petitionerobjector that Arbitrator

could not have granted more than what was claimed. Admittedly, claim for enhanced interest had bean turned down by the Arbitrator regarding

which fact parties are not at variance, that being so, in the considered view of this Court Arbitrator could not have allowed interest at a rate higher

than 12% per annum and accordingly the grant of interest @15% is not sustainable and it is ordered accordingly. As a consequence of this it is

held that the Award made by the Arbitrator while allowing interest is modified to 12% from 16.04.1979 till the date of passing of the award, i.e.,

06.09.1996.

Now examining the next submission of Mr. Singh that Arbitrator could not have awarded pendente lite interest during the period, the proceedings

remained pending before different Arbitrators

It may be worthwhile to notice that the matter need not detain us further in view of the Judgment passed by the Constitutional Bench of the

Supreme Court in (1992) 1 S. C. C. 508, Secretary Irrigation Department, Government of Orissa and others Vs. G. C. Rov and another

connected case. Here it may be worthwhile to lice that all claims of both the parties had en referred for adjuducation by the General Manager to

the Arbitrators) appointed from le to time, which include the claim of interest well. That being so, the observation made in paras 44 and 46 of the

above noted judgment may be reproduced, which will clinch matter :

Having regard to the above consideration, we think that the following is the correct principle which should be followed in this behalf:

Where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (along with the claim

for principle amount of independently) is referred to the arbitrator, he shall have the power to award interest pendente lite. This is for the reason

that in such a case it must be presumed that interest was an implied term of the agreement between the parties and therefore when the parties refer

all their disputes or refer the dispute as to interest as such to the arbitrator he shall have the power to award interest. This does not mean that in

every case the pendente lite. It is a matter within his discretion to be exercised in the light of all the facts and circumstances of the case, keeping the

ends of justice in view.

In view of the above discussion we hold that in two appeals namely Civil Appeal No. 1403 of 1986 and Civil Appeal No. 2586 of 1985 the

arbitrator acted with jurisdiction in awarding pendente lite interest and the High Court rightly upheld the award. In the result both the appeals fail

and are, accordingly, dismissed but there will be no order as to costs. Even though we have held that the decision in Jena case does not lay down

good law, we would like to direct that our decision shall only be prospective in operation, which means that this decision shall not entitle any party

nor shall it empower any court to reopen proceedings which have already become final. In other words, the law declared herein shall apply only to

pending proceedings.

In addition to this, it is not the case of the Objector nor any objection is raised to the effect that there was prohibition in the agreement for grant of

interest by the Arbitrator. That being so, the above noted Judgment of the Apex Court covers the present case, therefore, the plea urged on

behalf*of the Objector is hereby rejected.

Now next coming to the interest after the passing of the award by the Arbitrator. Keeping in view the fact that reference was made as far back as

on 17.03.1979 and the matter remained pending for one reason or the other, in the considered view of this Court, this is a fit case where power

vested in it under Section 29 of the Arbitration Act needs to be invoked. Thus this Court allows interest at the rate of 12% per annum on the

awarded amount with effect from 07.09.1996 till the date of payment.

A attempt was made by the learned counsel for the Objector to persuade the Court that interest should be allowed at the rate of 6% instead of

12% as ordered by the Arbitrator, aid in support of this plea was sought from Section 34 of the Code of Civil Procedure. Again looking to the

chequered history of the case and the value of the rupee, this argument has been raised simply to be rejected. This Court cannot loose sight of the

fact that had the matter been settled earlier and the amount paid to the nonobjector as far back as in the year 1979, in its own course even by

investing the amount in fixed deposit, interest earned would have been much more than what is being granted. The plea urged for modifying the

award by granting 6% interest is also rejected.

No other point has been urged.

As a result of the aforesaid discussion, objections are partly allowed and the award passed by the Arbitrator on 06.09.1996 is modified in the

aforesaid terms, i.e., instead of 15% per annum interest from 16.04.1979, it is substituted by 12% per annum from the said date till 06.09.1996

and from 07.09.1996 onwards till the date of payment shall be payable by the Objector to the NonObjector.

No costs.

Decree be drawn up accordingly.

A. A. No. 246/96 alongwith connected CMP is accordingly disposed of.