The Union of India and Another vs S.P. Construction

L.N. Mittal, J.—Judgment debtors Union of India and its Chief Engineer have filed this revision under Article 227 of the Constitution of India impugning order dated 16.3.2010 Annexure P/2 passed by the executing court. Dispute between petitioners and respondent-contractor S.P. Construction was referred to Arbitrator who gave award dated 29.3.1994, extract whereof has been placed on record as Annexure P/3. By the said award, the Arbitrator awarded Rs. 9,09,231.46 payable to respondent-contractor by the petitioners. Besides it, the Arbitrator also awarded interest @ 10% per annum on the amount withheld illegally. In addition to it, the Arbitrator also awarded interest for pre-reference period as well as pendente lite interest @ 10% per annum and future interest @ 6% per annum from the date of award till the date of payment or date of decree whichever is earlier.

The award was made rule of the court and decree was passed accordingly and the court also awarded interest @ 12% from the date of decree till recovery.

Respondent-decree holder (DH) in the execution petition claimed the awarded amount with interest till the date of award and claimed further interest on the said total amount from the date of award till recovery. Judgment debtors/JDs opposed the aforesaid prayer of the DH and pleaded that the DH is entitled to interest on the base amount of Rs. 9,97,025/- only and not on the total amount of Rs. 20,42,126.22 which included interest amount of Rs. 10,45,101/- with effect from 6.10.1983 till 29.3.1994.

Learned executing court vide impugned order Annexure P/2 has upheld the claim of the respondent-decree holder to interest on the gross amount which included interest amount till date of award. Feeling aggrieved, JDs have filed this revision petition to challenge the said order.

I have heard counsel for the parties and perused the case file.

Counsel for the petitioners relying on judgment of Hon''ble Supreme Court in State of Haryana and Others Vs. S.L. Arora and Company, contended that interest on interest cannot be awarded.

On the other hand, counsel for the respondent relying on judgments in the cases of Union of India (UOI) Vs. Roshni Devi and Others, ; Union of India (UOI) Vs. Harbans Singh Tuli and Sons Builders (P) Ltd., ; U.P. Cooperative Federation Ltd. Vs. Three Circles, and Oil and Natural Gas Commission Vs. M.C. Clelland Engineers S.A., contended that the interest amount till date of award became principal amount and therefore, interest thereon has been rightly granted by the executing court. I have carefully considered the rival contentions. Judgment in the case of M/s. S.L. Arora and Company (supra) is not applicable to the present case. By the said judgment, provisions of section 34 of the CPC (in shot, CPC) and the Arbitration and Conciliation Act, 1996 were interpreted regarding entitlement of interest on the amount of awarded by the Arbitrator. However, in the instant case, neither section 34 CPC nor the Arbitration and Conciliation Act, 1996 is applicable. On the other hand, in the instant case, award of the Arbitrator was made rule of the court under the Arbitration Act, 1940 and even future interest from the date of decree by the trial court till recovery was awarded @ 12% per annum. Consequently, judgment in the case of M/s. S.L. Arora and Company (supra) has not applicability to the instant case. On the contrary judgments in the cases of Roshni Devi and others, M/s. Harbans Singh Tuli and Sons Builders (P) Ltd., Uttar Pradesh Cooperative Federation Limited and Oil & Natural Gas Commission (supra) cited by counsel for the respondent dealt with the question of interest on the award of Arbitrator made under the Arbitration Act, 1940. It has been categorically laid down in all these judgments that interest till date of award being in the form of damages becomes principal amount and therefore, future interest is payable on the said amount of interest as well. In view of these judgments, learned executing court has rightly accepted claim of respondent-DH. Consequently, there is no perversity, illegality or jurisdictional error in the impugned order of the executing court so as to call for interference by this Court in exercise of power of superintendence under Article 227 of the Constitution of India. The revision petition lacks any merit and is accordingly dismissed. However, if there is any calculation error in the claim Annexure P/1 submitted by the respondent-DH, the same can be verified/rectified by the parties/executing court.