State Of U.P. vs Harish Chandra and Co., New delhl

Mohapatra, J.—This is an appeal under Section 39 of the Arbitration Act, 1940.

On basis of an agreement no.6/S.E./7980 dated 26th October,1979, respondent entered into an agreement with appellant for excavation of Khara Power Channel from Km 8 to km.9.8 & for constuction of Drainage crossing at Chhoti Lui at Km. 9.2 and Bari Lui at Km. 9.6. On basis of agreement the work commenced on 1121979. In respect of this work respondent raised dispute that it is to get some amount towards work done & interest. This dispute was referred to an Arbitrator as per the written clauses in the agreement. Arbitrator gave a reasoned award and allowed various claims, which was the grievance of appellant for which it filed the objection under sections 30 and 33 of the Act before the court. Trial court on consideration of objection held that the same is not sustainable and accordingly, made the award rule of court. Refusal to entertain objection of appellant before trial court is its grievance in this appeal.

Arbitrator awarded compensation in respect of claims No. 1.2,3,7,9,12 and 16. Mr. Bisaria learned standing counsel submitted that Arbitrator having misread the clauses of the written agreement, trial court ought to have interfered with award and set aside the same. Since heavy amount of award is involved, we allowed Mr Bisaria to place before us the claim statement, statement in defence, agreement clauses & the award. On consideration of these materials we are satisfied that Arbitrator has given cogent reason for accepting part claims as indicated in the award itself

In the decision reported in AIR 1994 SC 2562 (Bijendra Nath Srivastava (dead) through L Rs. v. Mayank Srivastava and others) it has been observed that if the arbitrator or umpire chooses to give reasons in support of his decision it would be open to the court to set aside the award if it finds that an error of law has been committed by the arbitrator or umpire on the basis of the recording of such reasons. The reasonableness of the reasons given by the arbitrator cannot, however, be challenged. The arbitrator is the sole judge of the quality as well as the quantity of the evidence and it will not be for the court to take upon itself the task of being a Judge of the evidence before the arbitrator. The court should approach an award with a desire to support it if that is reasonably possible rather than to destroy it by calling it illegal.

This principle has been laid down by the Supreme Court keeping earlier decisions in view. All claims in this case relate to interpretation of clauses in the agreement. In some of the claims arbitrator says that the work was extra and would not be covered under the tender rate. There is no dispute that where the works were found to be extra not covered under the tender items arbitrator can award amounts at higher rate. When the arbitrator, who is Engineer himself on interpretation of the agreement and tender items, considered the nature of the work and found that there is extra work not covered under the tender item for which it granted rate as it found to be reasonable, it is not possible for the court to interfere with the same, since reasons appear to be reasonable. If the rate would be unreasonable, the question might have been different. We find that the arbitrator has given cogent reason both in quality as well as quantity of the work done and the amount receivable for those qualities of work. He visited the spot and found that the claim of the State Government that the work indicated to have been done is not correct in view of the report of Geological Survey of India cannot be said to be unreasonable. Therefore, consideration of various claims as the appellate authority not being permissible keeping in view of the principle laid down by Supreme Court, we have no jurisdiction to interfere with the award.

Mr. Bisaria has submitted that grant of interest by arbitrator as on the face of the award is illegal. It is profitable to extract the passage in the award granting interest.

"Interest is, therefore, allowed on the amounts due at the rate of 15% p. a. from the dates given below;

Claim No. 3,9, & 12 from 161183 to 51088

Claim No. 1 and 7 from 161183 to 20889

Claim No. 2 and 16 from 1688 to 23889.

The interest pendentelite is also allowed @ 15% p.a. on the amounts from 611988 or 21889 (as applicable) to the date previous to the date of award.

The interest @ 6% per annum is allowed on the amounts from the date of the award to the date of actual payments or date of decree, whichever is earlier."

Form these it will be seen that 15% per annum has been granted as pendente lite interest from 161988 or 2181989 to the date previous to the date of award. Arbitrator ought to have held that rate is on the principal amount only. Added to it having granted interest as regards first item relating to 3,9 and 12 from 16111983 to 2081988 @15% per annum, the grant of pendentelite interest from 1688 or 2181989 cannot be interfered with. As regards claim no. 1 and 7 and claim no. 2 and 16 interest having been awarded till 2081989 to the date previous to the date of award as has been indicated. Interest @ 6% per annum from the date of actual payment is also justified.

Mr. Bisaria submitted that there is specific provision prohibiting grant of interest in clause 1. 9 of the agreement and, accordingly, the arbitrator has no jurisdiction to award the interest. On perusal of this clause, we find that where amount unpaid on account of some dispute, no interest is payable, where there is dispute relating to admissibility of the payment of amount, has not been qualified interest can be awarded and the clause would not prohibit the arbitrator in awarding interest on the principal amount determined to be payable. Now a Constitution Bench of Supreme Court in AIR 1992 SC 732 (Secretary Irrigation Department, Government of Orissa v. G. C. Roy) has made the position clear. In this view of the matter, there is no scope left to the court to interfere with the award.

Mr. Bisaria, thereupon, challenged the order itself stating that arbitrator having awarded interest @ 6% per annum from the date of award till realisation or decree, whichever is earlier, trial court ought not to have granted interest @ 15.5% per annum after decree. There appears to be force in the contention of Mr. Bisaria When the arbitrator has found interest @ 6% per annum to be reasonable trial court ought to have adopted same rate of interest awarded by the arbitrator. We, accordingly, modify the rate of interest and hold that the claimant is entitled interest @ 6% per annum from the date of decree till the date of payment

In result, appeal is allowed to the extent indicated above. There still be no order as to costs.