State of Rajasthan vs M/s. Kapoor Chand Singhal

Bela M. Trivedi, J.—The present appeal has been filed by the appellant u/s 37 of the Arbitration Act, 1940 (hereinafter referred to as ''the said Act'') challenging the order dated 4.10.10 passed by the Addl. District & Sessions Judge, Fast Track No. 1, Karauli (hereinafter referred to as ''the court below'') in Arbitration Case No. 10/09 (58/05), whereby the court below has dismissed the application of the appellant filed u/s 30 and 33 of the said Act. It appears that in the instant case the respondent was awarded a contract concerning the work of construction of diversion road from 43 to 47 Kms. on Karauli-Mandrayal-Hindaun Road upto Teekhapur Zone-A, vide the agreement No. 29/1984-85. It further appears that certain disputes had arisen between the parties during the aforesaid execution of the work, for which the matter was referred to the arbitrator. The arbitrator passed the award dated 29th November, 04 holding that the respondent-claimant would be entitled to sum of Rs. 1,85,371/- with interest @ 12% per annum on the said amount from the date 1.5.90 to the date of award. The appellant being aggrieved by the said award had filed the application u/s 30 and 33 of the said Act raising objections and prayed for setting aside the said award. The said application has been dismissed by the court below vide the impugned order, against which the present appeal has been filed.

It has been sought to be submitted by the learned Government counsel Mr. Hari Barath for the appellant that the award was passed by the Arbitrator beyond the period of four months, without extension of time either with the consent of the parties or by the court below and therefore, the award itself had vitiated. He also submitted that the court below had failed to appreciate that as per clause 45 of the agreement, the value of work being below Rs. 5 lacs, the escalation clause was not applicable. According to him the rate of interest @ 12% per annum was also on the very higher side and the Arbitration had no authority to award pre-award interest.

However, the learned counsel Mr. R.P. Garg for the respondent relying upon the decision of the Apex Court in case of Jatinder Nath Vs. Chopra Land Developers Pvt. Ltd. and Another, has submitted that a bare failure of an arbitrator to make an award within the time allowed by law will not involve the consequences of it being set aside only on that ground and that the court has ample power to extend the said time limit u/s 28 of the said Act. He further submitted that the total value of the work was more than Rs. 5 lacs and, therefore, the Arbitrator has rightly awarded the claim under the head of price escalation. Mr. Garg has fairly submitted that the rate of interest be awarded as may be deemed proper by the court.

Having regard to the submissions made by the learned counsel for the parties and to the impugned order passed by the court below as well as the impugned award made by the Arbitrator, it appears that the award was made by the Arbitrator beyond the period of four months, however as rightly submitted by the learned counsel for the respondent, the court below had the power to extend the said time limit u/s 28 of the said Act. It also appears that the appellant had not raised any objection before the Arbitrator with regard to the said issue and had participated in the proceedings even after the expiry of the said time limit, which implied that the appellant had also consented for the arbitration proceedings beyond the stipulated time limit. The trial court has also rightly relied upon the decision of the Apex Court, as relied upon by the learned counsel for the respondent for the extension of the said time limit.

So far as value of work is concerned, the Arbitrator has observed in the impugned order that the execution of work for Rs. 4,94,412/- was by the claimant and the extra item slips for Rs. 36,889/- were also admitted by the appellant and, therefore, the total value of the work was more than Rs. 5 lacs. The Arbitrator, therefore, awarded the claim of the respondent towards the price escalation in view of clause 45 of the said agreement. In view of the said observation made by the Arbitrator, the court does not find any substance in the submission of the learned counsel for the appellant that the respondent-claimant was not entitled to any price escalation in view of clause 45 of the agreement.

It was sought to be submitted by the learned counsel for the appellant that the Arbitrator did not have power to award interest for the pre-award period i.e. from 1.5.90. However, the said submission cannot be accepted in view of the decision of the Apex Court in case of Executive Engineer, Dhenkanal Minor Irrigation Division, Orissa, Vs. N.C. Budharaj (Dead) by Lrs. etc. etc., wherein it has been held as under:--

The arbitrator appointed with or without the intervention of the Court, has jurisdiction to award interest, on the sums found due and payable for the pre-reference period, in the absence of any specific stipulation or prohibition in the contract to claim or grant any such interest.

So far as the rate of interest is concerned, the learned counsel for the appellant has rightly submitted that the Arbitrator should not have awarded the interest more than 9% per annum, hence the rate of interest awarded by the Arbitrator and confirmed by the court below is required to be reduced from 12% to 9% per annum. In view of the above, the impugned order passed by the court below and the award made by the Arbitrator are confirmed except to the extent of rate of interest, which is reduced from 12% per annum to 9% per annum. The respondent-claimant is, therefore, entitled to the awarded amount with interest @ 9% per annum in place of 12% per annum. The appeal stands partly allowed accordingly.