Superintending Engineer, Irrigation Circle Nirmal vs I. Devender Reddy and another

The revisions and appeals arise out of an award dated 5-5-1991 passed by the Arbitrator and hence they are disposed of by a common judgment.

The factual matrix leading to the filing of these revisions and appeals are set out as hereunder:

CRF No.748 of 1995 has been filed by the revision petitioner-contractor against the judgment and decree in OS No.64 of 1991 on the file of the Subordinate Judge, Peddapalli to the extent of the Court holding that the plaintiff is not entitled to ''''pendents lite interest''. CMA No. 299 of 1995 has been filed by the appellant-contractor against the order of the Subordinate Judge, Peddapalli dismissing OP No.33 of 1993 seeking to remit the matter back to the Arbitrator to the extent of claims not determined by the Arbitrator, CRP No.2293 of 1994 is revision filed by the State against the judgment and decree of the Subordinate Judge, Peddapalli in decreeing the suit OS No.64 of 1991 by making it ''Rule of the Court''. CMA No. 903 of 1994 has been filed by the appellant-State against the judgment and decree in OP No.46 of 1992 on the file of the Subordinate Judge, Peddapalli declining to set aside the award.

The State entered into an agreement No.34/85-86 dated 4-3-1986 with the revision petitioner-contractor who was entrusted with the work of flood damage repairs of Anacut across Hussain Miya Vagu, Gangaram village of Srirampur Revenue Mandal, Karimnagar District. As per the terms and conditions of agreement the revision petitioner-contractor has to complete the work within a period of nine months from the date of taking possession of the site. According to the revision petitioner, possession was given on 5-3-1986 and according to the respondent, possession was given on 4-4-1986. But the work could not be completed for various reasons for which the contractor is not responsible. Ultimately the contractor invoked arbitration clause in the agreement and Arbitrator was appointed on 5-8-1988. The order of appointment was challenged by the respondent-State both in the High Court and in the Supreme Court and the same was confirmed both by the High Court and the Apex Court. The contractor has put as many as seven claims before the Arbitrator and the Arbitrator conducted a detailed enquiry and passed an award on 5-5-1991 and allowed claim Nos.1, 2-A, 2-B, 3, 6 and 7. The claimant-contractor filed OS No.64 of 1991 on the file of the Subordinate Judge, Peddapalli for making the award ''rule of the Court''. The Subordinate Judge has decreed the suit but negative the claim of ''pendente lite interest''. Aggrieved by the decree of the Subordinate Judge negativing the relief of ''pendente lite interest'' CRP No.748 of 1995 has been filed.

Sri I. Aga Reddy, the learned Counsel for the petitioner-contractor contended that the learned Subordinate Judge was not justified in negativing the claim of the contractor for ''pendente lite interest''. He relied on the judgment of the Apex Court reported in Secretary, Irrigation Department, Government of Orissa and others Vs. G.C. Roy, , for the proposition that the Arbitrator has the power to grant interest pendente lite. The learned Counsel also contended that the revision petitioner also filed CMA No.29 of 1995 against OP No.33 of 1991 declining to remit the matter back to the Arbitrator in respect of certain claims not decided by the Arbitrator.

I will first address myself to the issue whether the revision petitioner is entitled to ''pendente lite interest''. In State of A.P. and another Vs. Kapa Babu Rao, , the Constitutional Bench of the Supreme Court had an occasion to consider the issue relating to pendente lite interest'' and the correctness of the decision reported in Executive Engineer (Irrigation), Balimela and Others Vs. Abhaduta Jena and Others, and reviewed the entire law on the subject and enunciated the following propositions:

(i) A person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name. It may be called interest, compensation or damages. This basic consideration is as valid for the period me dispute is pending before the arbitrator as it is for the period prior to the arbitrator entering upon the reference. This is the principle of Section 34 CPC and there is no reason or principle to hold otherwise in the case of arbitrator.

(ii) An arbitrator is an alternative form for resolution of disputes arising between the parties. If so, he must have the power to decide all the disputes or differences arising between the parties. If the arbitrator has no power to award interest pendente lite, the party claiming it would have to approach the Court for that purpose, even though he may have obtained satisfaction in respect of other claims from the arbitrator. This would lead to multiplicity of proceedings.

(iii) An arbitrator is the creature of an agreement. It is open to the parties to confer upon him such powers and prescribe such procedure for him to follow, as they think fit, so long as they are not opposed to law. (The proviso to Section 41 and Section 3 of Arbitration Act illustrate this point). All the same, the agreement must be in conformity with law. The arbitrator must also act and make his award in accordance with the general law of the laud the agreement.

(iv) Over the years, the English and Indian Courts have acted on the assumption that where the agreement does not prohibit and a party to the reference makes a claim for interest, the arbitrator must have the power to award interest pendents lite...... Until Jena''s case (supra) almost all the Courts in the country had upheld the power of the arbitrator to award interest pendente lite. Continuity and certainty is a highly desirable feature of law.

(v) Interest pendente lite is not a matter of substantive law, like interest for the period anterior to reference (pre-refence period). For doing complete justice between the parties such power has always been inferred."

In the recent judgment reported in State of Orissa Vs. Sudhakar Das (Dead) by Lrs., , the Apex Court has reiterated the principle laid down in G.C. Roy''s case (supra) and upheld granting of decree for pendente lite interest and held as follows:

"It is contended by Ms. Mana Chakraborty, learned Counsel for the State that the issue relating to the power of the arbitrator to grant interest pendente lite where the agreement between the parties, as in the present case, did not prohibit grant of interest and the dispute referred to the arbitrator included the claim of interest, is no longer res integra and stands settled in favour of the claimant and against the State in Secretary, Irrigation Department Government of Orissa v. G.C. Roy (supra) overruling the view to the contrary as expressed in Executive Engineer (Irrigation) v. Abhaduta Jena (supra). The decree to the extent it awards pendente lite interest in favour of the respondents, therefore, is sustained and the challenge to it fails."

In view of the afore-mentioned discussion and following the judgmemt of the Apex Court, I hold that the Revision Petitioner-contractor is entitled to ''pendente lite interest''.

The revision petitioner also filed CMA No.299 of 1995 against the order of the Subordinate Judge, Peddapalli dismissing OP No.33 of 1993 declining to remit the matter back to the arbitrator on certain claims not determined by him. I do not deem it a fit case to remit the matter back to the Subordinate Judge at this point of time. The Apex Court in a judgment reported in Hindustan Tea Co. Vs. K. Sashikant Co. and Another, , has held that the award is not open to be challenged on the ground that the arbitrator reached wrong conclusion or he failed to appreciate the facts. I do not deem ii a fit case to remit the matter back to the Subordinate Judge, Peddapalli and CMA No.299 of 1995 is accordingly dismissed.

The learned Government Pleader for Arbitration appearing in CRP No.2293 of 1994 and CMA No.903 of 1994 has assailed the award, decree and judgment in OS No.64 of 1991 on the file of the Subordinate Judge, Peddapalli. It is contended on behalf of the Government that the contractor is not entitled to ''pendente lite interest'' and it is beyond the scope of agreement. Since the contractor has failed to execute the agreement and it has stopped in the middle, contends the Government Pleader, the contractor is not entitled to any relief from the Government. The Government pleader placed strong reliance on the judgment of the Supreme Court reported in Executive Engineer Vs. N.C. Budhi Raj (Dead) by Lrs., and contended that the decision in G.C, Roy''s case (supra) is under consideration for review by the supreme Court. As on to-day this Court is bound by the decision of G.C. Roy''s case (supra) which has been followed in subsequent cases. I, therefore, do not see any grounds fro interfering with the award of the Arbitrator and CRP No.2293 of 1994 and CMA No.903 of 1994 filed by the State are liable to be dismissed and they are accordingly dismissed. There will be no order as to costs.

For the afore-mentioned discussion, I hold that the revision petitioner is entitled to ''pendents lite interest'' and the judgment and decree in OS No.64 of 1991 on the file of the Subordinate Judge, Peddapalli is set aside to the extent of refusing to grant ''pendente lite'' interest and mother respects it is confirmed. CRP No.748 of 1995 is allowed. CRP No.2293 of 1994, CMA No.903 of 1994 and CMA.No.299 of 1995 are dismissed. There will be no order as to costs.