West Bengal State Electricity Board and Another vs B.B.M. Enterprise

Pratibha Bonnerjea, J.—This is an application for setting aside the award, dated 20-11-86 made and published by the Umpire.

The parties entered into a contract, dated 12-1-82 and the work Order, dated 20-11-82 was issued by the petitioner for filling up and developing the land within the plant area of Kolaghat Thermal Power Project by the respondent. Thereafter a notification, dated 4-11-86 was issued by the State Government directing the petitioner No. 1 to make over possession of Kolaghat Thermal Power Project Stages I and II with all its assets and liabilities as on 1-4-86 to the petitioner No. 2 subject to the terms and conditions Specified in the said notification, and the petitioner No. 1 complied with the same. The value of the work Order, dated 20-11-82 was Rs. 56,31,000. The respondent executed the said work for some time. Thereafter dispute arose between the parties which were referred to two arbitrators in terms of the arbitration clause contained in the contract. The arbitrators entered upon the reference after appointing an umpire. The joint arbitrators subsequently differed in their opinion. Thereupon, the respondent, as the claimant, referred the matter to the umpire who declined to take up the matter. Under the circumstances, the respondent claimant took out an application for appointment of an umpire and, by consent of the parties, the present umpire was appointed by Order, dated 5-5-86. The umpire made and published his award, dated 20-11-86 which is now under challenge.

The grounds attacking the award have been set out in paragraph 63 of the petition. The counsel for the petitioners pressed grounds Nos. (II), (III), (IV) and (V) alleging that the umpire misconducted the proceeding by allowing the claimant to produce certain documents and to rely on the same which were admitted in evidence by the umpire in spite of objection by the petitioners. According to the petitioners, the respondent-claimant was not entitled to rely on any other document save and except the measurement books, level books and site khatas produced by the petitioners before the umpire because the entires made therein were binding on the claimant. In the opinion of this Court, the umpire was well within his jurisdiction to allow the parties to produce all the relevant documents and papers for Adjudication on the disputes referred to him. If the petitioners were truly aggrieved, they should have moved the Court for redress at that stage. But it is evident from the facts pleaded that the petitioners proceeded with the reference and made submissions on those documents which were admitted in evidence after hearing both the parties. It is not for this Court to go through the evidence to find out whether the umpire admitted those documents rightly or not. This Court cannot sit on appeal and re-hear the matter. The arbitrator or the umpire is the sole Judge of facts and laws and no appeal lies from his award. The present award is a non-speaking award and it does not disclose the basis on which the umpire has come to his decision. It is also clear from the petition that the umpire gave the petitioners full opportunity to make their submissions regarding the documents produced by the respondent. It is a settled law that the Evidence Act in terms does not apply to the arbitration proceeding and, in accepting documentary or oral evidence, the arbitrator or the umpire has to follow the principles of natural justice. The authorities in support are Chandrabhan Bilotia and Another Vs. Ganpatrai and Sons, and Haji Ebrahim Kassam Cochinwalla Vs. Northern Indian Oil Industries Ltd., . Hence these grounds must fail.

In the award, the umpire awarded Rs. 23,90,000 to the respondent in full and final settlement of its claims. It is argued on behalf of the petitioners that the respondent had executed works upto the value of Rs. 28,56,412 and 7 running bills were prepared for that. The respondent had accepted payment under 6 bills keeping the 7th bill outstanding. In that view of the matter, under no circumstances, Rs. 23,90,000 could be due to the respondent. On what consideration the umpire has arrived at this figure does not appear from the award. It is not possible for the Court to probe into the mind of the umpire. The Court can go into the merit of the case only when there is an error apparent on the face of the award disclosing that the award is based on a wrong proposition of law or there is an obvious mistake appearing on the face of the award. The Court has no jurisdiction to look into the documents tendered unless they are incorporated in the award or appended thereto. No roving inspection can be made by the Court.

The next point taken by the petitioners'' counsel is that the umpire has held that if the awarded amount is not paid within 90 days from the date of publication of the award, then the awarded amount will carry interest at the rate of 10% per annum from the date of publication till the date of payment or the decree by the Court on the award whichever is earlier. According to the petitioners'' counsel, the umpire has no jurisdiction to award this interest as Section 34 of the Code of the Civil Procedure does not apply to arbitration proceedings as the arbitrator or the umpire is not a ''Court'' within the meaning of Section 34 of the C.P.C. In support of his contention, the counsel for the petitioners strongly relies on the latest decision of the Supreme Court reported in Executive Engineer (Irrigation), Balimela and Others Vs. Abhaduta Jena and Others, . The counsel for the respondent on the other hand relies on Firm Madanlal Roshanlal Mahajan Vs. Hukumchand Mills Ltd., Indore, in support of his contention that an arbitrator can award interest pendente lite. In Firm Madanlal Roshanlal Mahajan Vs. Hukumchand Mills Ltd., Indore, , the reference was made in a suit. It is not so in the present case.

In that case, the Supreme Court held :

"In the present case, all the disputes in the suit were referred to the arbitrator for his decision. One of the disputes in the suit was whether the respondent was entitled to pendente lite interest just as a Court could do so u/s 34 of the Civil Procedure Code. Though, in terms, Section 34 of the CPC does not apply to arbitrations, it was an implied term of the reference in the suit that the arbitrator would decide the dispute according to law and would give such relief with regard to pendente lite interest as the Court could give, if it decided the dispute. This power of the arbitrator was not fettered either by the arbitration agreement or by the Arbitration Act, 1940. The contention that in an arbitration in a suit the arbitrator had no power to award interest pendente lite must be rejected."

It appears that in the suit in Firm Madanlal Roshanlal Mahajan Vs. Hukumchand Mills Ltd., Indore, no express prayer was made by the plaintiff for pendente lite interest. The Court has the jurisdiction to award such interest u/s 34 of the C.P.C. Therefore, when all the disputes in the suit were referred to arbitration, it was held that the question of allowing pendente lite interest also became an implied term of the reference. On that basis, the Supreme Court held that although the arbitrator on his own could not have awarded such interest as it was not a Court within the meaning of Section 34 of the C.P.C, still the arbitrator in that reference in suit had the jurisdiction to award pendente lite interest as that issue was an implied term of the reference. When an arbitrator or an umpire is not a ''Court'' within the meaning of Section 34 of the C.P.C. and has no jurisdiction to exercise the power conferred off the Court under that Section, that jurisdiction cannot be conferred on an arbitrator or the umpire by the Court by passing an order for reference u/s 21 of the Arbitration Act. u/s 21, the Court can refer the disputes in suit for arbitration on the basis of the agreement of the parties but it is not competent to confer jurisdiction u/s 34 of the C.P.C. on the arbitrator or the umpire. That jurisdiction, if any, will flow from the agreement of reference. If on the basis of the implied terms of the reference, the arbitrator can award pendente lite interest in a reference in suit, why such jurisdiction cannot be exercised by the arbitrator or the umpire in a private reference when such a claim is made expressly by the claimant ? In both types of references, private or through intervention of Court, the arbitrator or the Umpire derives his jurisdiction from the terms of the agreement. By a Bench decision of the Supreme Court consisting of three Hon''ble Judges, reported in Executive Engineer (Irrigation), Balimela and Others Vs. Abhaduta Jena and Others, , the Supreme Court while reaffirming the principle laid down in Firm Madanlal Roshanlal Mahajan Vs. Hukumchand Mills Ltd., Indore, :-

"In regard to pendente lite interest, that is interest from the date of reference to the date of the award, the claimant would not be entitled to the same for the simple reason that the arbitrator is not a Court within the meaning of Section 34 of the C.P.C, nor were the reference to the arbitration made in course of suit."

This finding in the above case was arrived at on the basis of the facts and circumstances of the cases before the Court. The facts of the cases, as recorded in the judgment, show that the references were private references and only the interests due on the amount prior to the date of references were claimed by the claimants as will be evident from the last three lines of paragraph 2 at page 423 of this report. Obviously, interest pendente lite was not claimed in the references. Hence the arbitrators could not allow pendente lite interest on their own by exercising jurisdiction u/s 34 of the C.P.C. That they could award, only if such claims were the implied terms of the reference as was held in Firm Madanlal Roshanlal Mahajan Vs. Hukumchand Mills Ltd., Indore, or were expressly claimed by the claimants. This Court does not find any thing in Executive Engineer (Irrigation), Balimela and Others Vs. Abhaduta Jena and Others, or the earlier decision reported in Firm Madanlal Roshanlal Mahajan Vs. Hukumchand Mills Ltd., Indore, whereby it can be said that an arbitrator in a private reference cannot allow pendente lite interest even if such a claim is expressly made by the claimant. Therefore, the arbitrator or the umpire will have jurisdiction to award such interest provided such claim is expressly made in a private reference. In Executive Engineer (Irrigation), Balimela and Others Vs. Abhaduta Jena and Others, , the Court was concerned with arbitrator''s power to award in- terest for the period prior to the reference and from the date of reference till the award is made as will be evident from page 421 :

"Special leave was not granted in regard to the award of interest subsequent to the date of arbitrator''s award. This question, therefore, does concern us in these appeals."

Therefore, this decision is not helping the petitioners to establish that the umpire has no jurisdiction to award interest on the awarded amount till the date of payment or till the decree is passed on the award. It would be significant to note that Court''s jurisdiction to award interim interest and interest on judgment both flow from the provisions of Section 34 of the C.P.C. Therefore, in a private reference, when pendente lite interest and interest on the awarded amount are expressly claimed, the arbitrator will have the jurisdiction to award interim interest and the interest on the amount awarded on the principles underlying Section 34 of the C.P.C. because that jurisdiction can only be exercised by the arbitrator on the basis of the express terms of the reference. A prayer for pendente lite, interest would include a claim for interest on the amount awarded as well. The observation of the Supreme Count in Firm Madanlal Roshanlal Mahajan Vs. Hukumchand Mills Ltd., Indore, that an arbitrator should "decide the disputes according to law" would equally apply to private references. A careful scrutiny of Firm Madanlal Roshanlal Mahajan Vs. Hukumchand Mills Ltd., Indore, and Executive Engineer (Irrigation), Balimela and Others Vs. Abhaduta Jena and Others, leads to an unavoidable conclusion that if the claim for pendente lite interest is made either as an, express or implied term of the reference, the arbitrator will have the jurisdiction to award such interest on the basis of the term of the reference. It would be arbitrary to hold that the arbitrator would derive such jurisdiction only in a reference in suit and not in a private reference although in both the cases the arbitrator''s jurisdiction flows from the terms of the reference and/or from the arbitration agreement.

In this case, the statement of fact filed before the umpire is annexed to the petition at pages 62 to 84. At page 75, the respondent, as the claimant, expressly prayed for interest on the sum awarded at the Bank rate from 1-7-84 till the date of judgment. In Clause 2 of the award, the umpire awarded 10% interest per annum on the awarded amount from the date of publication of this award till the date of payment or the decree whichever was earlier. On the principle laid down in Firm Madanlal Roshanlal Mahajan Vs. Hukumchand Mills Ltd., Indore, , this Court holds that on the facts and circumstances of this case the umpire derived its jurisdiction to award interest on the sum awarded on the basis of the claims made in the reference.

For all these reasons, the application fails. The respondent will be entitled to the cost of this application from the petitioners.