State of Orissa vs B.N. Agarwala

P.K. Mohanti, J.—This is an appeal u/s 39(vi) of the Indian Arbitration Act against the order of the learned Subordinate Judge of Bhubaneswar refusing to set aside an award.

The respondent was entrusted with the work (Construction of Chhatrang M. I. P. Head Works) by the Ex ecutive Engineer, R. E. Division, Phulbani after acceptance of the tender sub mitted by him. An agreement was en tered into between the parties and in terms thereof the respondent took up execution of the work. Disputes having arisen between the parties in respect of the work, the Chief Engineer, R. E. O. appointed Shri B. N. Das, Superintend ing Engineer as Arbitrator. The Arbi trator submitted his award on 25-2-1980 awarding a sum of Rs. 50,465.12 in favour of the respondent. The details of the award are as follows :

(1) Payment for drilling of holes for blasting work Rs. 1383.94

(2) Refund of depart mental recovery as costs for blasted stones Rs. 4435.00

(3) Payment for sorting out and breaking of blasted stones Rs. 2216.00

(4) Extra payment for dewatering and shutter-ing in foundation work Rs. 20978.31

(5) Extra payment for dewatering of sleapage water and scaffolding etc., during execution of random rubble masonry work Rs. 5353.00

Rs. 34,366.25

(6) Interest '' 6% per annum from due date of payment (1-5-72 till 22-2-80) Rs. 16,898.93

Rs. 50,465.18

The State Government filed objections to the award which were overruled by learned Subordinate Judge and the award was made rule of the Court. It is urged in this appeal that the claims as per items 4 and 5 being in respect of additional items of work done by the contractor were not available to be adjudicated upon in the arbitration proceeding as they are outside the scope of the agreement and the arbitration clause. It is also contended that the award of interest is without jurisdiction and the Arbitrator was not competent to direct payment of interest from due date of payment in absence of any reference of such specific dispute to him.

Regarding the first objection, it is now well settled by the decisions of this Court that the Arbitrator has jurisdiction to decide matters regarding the additional work, as in deciding those matters, disputes and questions arising out of the contract, may have to be considered and decided by the Arbitrator. Similar objections raised on behalf of the State were overruled by a Division Bench of this Court in the case of A. C. Parija v. Secretary in charge of the General P. W. D. of Union of India: 36 (1970) CLT 1089 and by another Division Bench of this Court in the case of Hindustan Steel Ltd. v. P. Boner : ILR (1973) Cut 1218. These decisions were followed in a single Judge decision reported in State of Orissa Vs. G.C. Kanungo, . In a very recent decision in the case of State of Orissa v. Rama Chandra Sahu: 51 (1981) CLT 263 Hon''ble Mr. Justice R. N. Misra (as he then was) relied on the Division Bench decision in ILR (1973) Cut 1218, for the proposition that additional work can be taken to be a part of the principal work and the same arbitration clause would be applicable for disputes arising out of the additional work. In view of the settled position of law, the learned Subordinate Judge was justified in repelling the contention raised on behalf of the appellant.

The contention that an Arbitrator has no power to award interest from due date of payment is untenable. It is well settled by the decisions of this Court that the Arbitrator has jurisdiction to award interest from the due date of payment. His power to award interest, however, comes to an end upon the passing of the decree. The period thereafter is covered by Section 29 of the Act. In this connection reference may be made to 37 (1971) CLT 937 Executive Engineer Vs. Sankar Maharana, and 51 (1981) CLT 263 (State of Orissa v. Rama Chandra Sahu).

In the present case, the Arbitrator allowed interest '' 6% from the due date of payment till 24-5-1980 and directed that in case the payment was not made by that date, interest would run '' 9% per annum from 26-6-80 (sic) (D/ 25-5-1980?) towards until payment or until the decree whichever was earlier. The learned Subordinate Judge while making the award rule of the Court directed that interest would run '' 6% per annum from the date of award and also at the same rate from the date of decree until payment. Apparently he overlooked the provision in the award for payment of interest '' 9% per annum from 25-5-1980 until payment or until the decree whichever was earlier. He could in exercise of his power u/s 29 of the Arbitration Act, award interest from the date of the decree until payment. No payment having been made before 25-5-1980, the respondent was entitled to interest '' 9% per annum from that date till the date of the decree, as per the award.

The result is that the appeal is dismissed and the cross-objection filed by the respondent is allowed in part. The provision as to interest will be that the amount of Rs. 50,465,18 paise payable by the appellant to the respondent will carry interest at the rate of 6 per cent per annum from 1-5-72 to 24-5-1980 and at the rate of 9 per cent per annum from 25-5-1980 till 18/7/1980 and at the rate of 6 per cent per annum from 19-7-1980 until realisation. The decree passed by the learned Subordinate Judge is modified accordingly. Parties are left to bear their own costs in this appeal.