Union of India and another vs Paramjit Singh and Co., Patiala

This is civil revision by Union of India against the order of learned Addl. District Judge, Patiala dated 3-12-1998 whereby he has allowed interest to the respondent for the pre-reference period as well as future interest. Prayer of Union of India is that the Arbitrator could not have awarded interest for the pre-reference period and also future interest. Further prayer is that the Arbitrator could not have awarded any amount by way of damages suffered by the respondent on account of increase in the prices of diesel etc. and the cancellation of contract. This revision has arisen in the following circumstances :

"Dispute arose between the Union of India (petitioner) and M/s. Paramjit Singh and Company (respondent) regarding contract agreement No. G(P)PAT 5/90-91 Handling/Conveyance of stores of any description from Patiala to out station from out station to Patiala exceeding a distance of 10 Kms. Shri R. K. Gupta was appointed as Arbitrator for adjudication of the dispute. He gave award on 21-3-1994 awarding a sum of Rs. 1.50 lac in favour of the respondent along with interest at 15% per annum w.e.f. 20-11-1992 till payment of the amount awarded by the Arbitrator."

Respondent (M/s. Paramjit Singh and Company) filed an application under Sections 14 and 17 of the Indian Arbitration Act, 1940 (hereinafter to be referred as the Act) for award being made rule of the Court.

Additional Civil Judge (Senior Division) Patiala vide order dated 20-5-1997 accepted the application and made award dated 21-3-1994 the rule of the Court. Award which was made rule of the Court awarded a sum of Rs. 1.50 lac in favour of the respondent along with interest at 15% p.a. w.e.f. 20-11-1992 till payment.

Union of India went in appeal to the District Court, Patiala. Learned Additional District Judge, Patiala dismissed the appeal vide order dated 3-12-1998.

Aggrieved from the order dated 3-12-1998 passed by the learned Additional District Judge, Patiala affecting that of Additional Civil Judge (Sr. Division) Patiala dated 20-5-1997, Union of India has come up in revision to this Court.

It was submitted by the learned counsel for the petitioners that the Arbitrator awarded a sum of Rs. 70,000 to the respondent on account of reimbursement due to increase in the prices of diesel etc. without any basis any while doing so, the Arbitrator ignored the terms and conditions of the contract and thus misconducted the proceedings. It was also submitted that Arbitrator misconducted the proceedings while awarding Rs. 1,50 lac in lump sum without giving details thereof. It was submitted that the Arbitrator could not have awarded a sum of Rs. 7/5000 by way of damages suffered by the respondent on account of the cancellation of contract and while doing so, the Arbitrator travelled beyond the terms and conditions of the contract. It was further submitted that the Arbitrator granted interest at a higher rate i.e., 15% p.a., which could not have been granted. It was further submitted that Addl. Civil Judge (Senior Division) Patiala was not competent to award interest for the pre-reference period and he was not competent to award further interest. It was submitted that award of pre-reference period interest and future interest was bad in law. In this revision, the only question that requires determination by this Court is whether the pre-reference period interest could be awarded by the Court to the respondent, when pre-reference period interest had not been awarded by the Arbitrator and further whether future interest could be awarded by the Arbitrator.

Arbitrator awarded the amount the respondent under the following heads :

Extra expenditure on account of weighment of steel 5,000.00 Reimbursement of increase in the price of diesel etc. 70,000.00 Losses and damages suffered on account of cancellation of contract 75.000.00 ---------------- Total 1,50,000.00 ----------------

He awarded interest on the amount at the rate of 15% p.a., w.e.f 20-11-1992 till the date of actual payment. Award is dated 21-3-1994 which was made rule of the Court. Learned counsel for the Union of India contended that an interest could have been awarded for the period from 20-11-1992 to 21-3-1994. Similarly no interest could have been awarded for the period when even reference had no been made. In support of this submission, the drew my attention to State of Orissa Vs. Niranjan Swain, ), where it was held that Arbitrator had no jurisdiction to grant interest for any period either upto date of submission of claim or pendente lite up to date of submission of claim or pendente lite up to date of award. In State of Orissa v. Niranjan Swain (supra), "the respondent''s claim before the Arbitrator was for the amount of Rs. 19,04,689.00 as the balance amount due to him and for return of the security deposit of Rs. 28,000 or in all the total of Rs. 19,32,689.00 as the principal amount. Respondent also claimed interest on the sum of Rs. 19,04,689.00 at the rate of 18% p.a. from 15-4-1977 to 15-5-1978 namely the date of submission of the statement of claim before the Arbitrator amounting to Rs. 3,71,414 and interest on the security deposit Rs. 28,000 at the same rate from 15-9-1977 to 15-5-1978 amounting to Rs. 3,360. Respondent further claimed at the rate of 18% p.a. from 16-5-1978 till payment of amount to the respondent by the appellant. In the statement of claim the total amount claimed was mentioned as Rs. 23,07,463.00 together with interest at 18% p.a. on Rs. 19,32,689 from 16-5-1978 to the date of award. The Arbitrator gave award in the sum of Rs. 21,11,835 in full and final satisfaction of his claims till the date of award from the respondent. Respondent is not entitled to get any amount towards his counter claim from the claimant. Hon''ble Supreme Court observed that Arbitrator had no jurisdiction to grant interest for any period either from the date of its claim or pendente lite upto the date of the award. In para 13 of the report the Hon''ble Supreme Court observed that "it cannot, therefore, be disputed that in the present case whether the reference to Arbitrator was made and even the award was given prior to commencement of the Interest Act, 1978 on August 19, 1981 the Arbitrator had no jurisdiction to grant any amount as interest for any period either upto the date of submission of its claim before him or pendente lite upto the date of the award.

Learned counsel for the respondents on the other hand submitted that the Arbitrator could very well award interest for the pre-reference period and pendente lite interest and future interest in case as case arose after the enforcement of the Interest Act, 1978. In support of this contention, he drew may attention of State of Orissa Vs. B.N. Agarwalla, etc., ), where it was held that "Arbitrator had jurisdiction to award pre-reference period interest and pendente lite interest. Court may allow interest from the date of decree till payment. Award of future interest till date of payment is valid. In Secretary, Irrigation Department, Government of Orissa and others Vs. G.C. Roy, ), it was held that the "Arbitrator could award pre-reference, pendente lite and future interest. In State of Orissa Vs. Lal Chand Kapani, ), the Hon''ble Supreme Court observed as follows (At page 930, para 16 of AIR) :

"It is thus clear that before the 1978 Interest Act came into force there was no provision under which the interest for the pre-reference period could be granted. In this case, the Supreme Court also held that the interest pendente lite i.e., from the date of reference to the date of the award, the claimants would not be entitled to the same for the reason that Arbitrator is not a Court within the meaning of Section 34, C.P.C. since the reference was not be a Court in a pending suit. This view regarding the interest pendente lite however has been reversed in Secretary, Irrigation Dept. Govt. of Orissa v. G. C. Roy (supra). Regarding the interest during the pre-reference period, the view taken in Abhaduta Jena case is not disturbed. Therefore, the interest during the pre-reference period can be awarded provided on the date of the award 1978 Interest Act was in force."

It is thus clear that the Arbitrator could award interest for the pre-reference period. He could award interest for the period during which the reference remained pending with the Arbitrator up to the date of award. Arbitrator could award future interest also. Arbitrator could thus award pre-reference period interest, pendente lite interest and future interest till payment, Arbitrator was not required to give reasons in support of the award. In Raipur Development Authority v. Chockamal Contractors (1989) 2 SCC 721 : AIR 1990 SC 1426 : 1989(1) Arb. LR 430 (SC)), the Constitution Bench of Supreme Court observed that "absence of the reasons in the award does not by itself result of its validity except where the giving of reasons by Arbitrator for the award is requirement of the Arbitrator agreement or the deed of submission or an order made by the Court or statute governing the Arbitrator. In this case, there was no clause in the arbitration agreement that the Arbitrator was required to give reasons in support of his award. In my opinion, learned Addl. Civil Judge (Senior Division) Patiala was justified in making award the rule of the Court. Learned Addl. District Judge, Patiala was justified in dismissing the appeal.

Revision dismissed.

Petition dismissed.