JUDGMENT
Surinder Sarup, J.
1. The facts giving rise to this case are as follows:
The Himachal Pradesh State Electricity Board (hereinafter to be called “the Board”) had invited tenders for the construction of civil work of Baner
Project. In response to the same, five tenders were submitted. The tender of M/s. Sutlej Construction Company Ltd., Chandigarh, was accepted and the work in question was awarded to it, its bid being the lowest. Subsequently, the work of Baner Project originally awarded to the said Company was rescinded for reasons which are not germane for the decision of this case.
2. Thereafter, the Board invited M/s. Ansal Properties and, Industries Ltd., New Delhi (hereinafter to be called ‘the claimant-contractors’), the bid originally submitted by them being the second lowest in this behalf. They were to execute the balance works at Baner Project on the same rates, terms and conditions as that of the original Company i.e. Sutlej Construction. However, the claimant-Contractors offered to execute the works at the aid rates, terms and conditions except for revision of their rates of open excavation, underground excavation and final concreting, for which the rates which had been quoted in the original tender submitted by them were to be made applicable.
3. After protracted correspondence between the Board and the claimant-Contractors, they entered into an agreement on 21st February, 1991, according to which the claimant-Contractors were to execute the balance works of the Baner Hydel Project at a cost of Rs. 4.20 lacs as per rates quoted by Sutlej Construction Company Ltd. The period allowed for the said balance works was 24 months reckoned from the date of release of mobilisation advance.
4. Some claims made by the claimant-Contractors were rejected by the Board which resulted in disputes and differences arising between die parties relating to the performance as also with respect to the application and interpretation of certain terms and conditions of the contract agreement. Clause 25 of the said contract agreement between the parties provided for settlement of disputes between them arising out of the said contract agreement through arbitration of the sole Arbitrator, to be appointed by the Board. Invoking this arbitration clause the claimant-Contractors requested the Board to appoint an Arbitrator to settle the disputes which had thus arisen. Acceding to this request the Board appointed Shri O. C. Kaushal, Chief Engineer, as the sole Arbitrator vide letter dated 20th March, 1993.
5. The said Arbitrator entered upon the reference on 23rd August, 1993. He directed the claimant-Contractors to file statements of claims and such documents on which they wished to place reliance, within a period of one month. In pursuance thereof the claimant-Contractors submitted their statements of facts and claims on 30th October, 1993. The Board filed counter reply to the same on 6th April, 1994, to which the claimant-Contractors submitted their rejoinder on 1 st July, 1994. On permission being granted by the Arbitrator, the Board filed sub-rejoinder on the grounds that the claimaht-Contractors had raised some new issues in their rejoinder.
6. The Arbitrator framed the following Issues for decision:
” 1. Whether there is a valid binding contract between the parties and whether the claim filed by the claimant is arbitrable?
2. Whether the claimants are entitled to claim revised rates of tunnelling and if so, to what extent?
3. Whether the claimants are entitled to claim on account of provision of steel, supports and if so, to what extent?
4. Whether the claimants are entitled to claim on account of disposal of soil beyond specified limits and if so, to what extent?
5. Whether the claimants are entitled to claim on account of provision of centering and if so, to what extent?
6. Whether the claimants are entitled to claim for deviated quantities at market rates and if so, to what extent?
7. Whether the claimants are entitled to claim for deviated quantity of steel reinforcement at market rates and if so, to what extent?
8. Whether the claimants are entitled to interest on account of the claims raised and if so, at what rate?”
7. Ultimately, the Arbitrator gave his Award on 21-8-1995. As a result of the same, the claimant-Contractors were awarded a total amount of Rs. 20,76,655/- plus interest at the rate of 15% per annum for pendente lite interest from 23-8-1993. to 21-8-1995 on the principal amount. Both the, parties were directed to bear and pay their own respective costs and incidental expenses to the arbitration proceedings.
8. The Arbitrator, thereafter, by his letter dated 25-8-1995 vide No. Arb. -1/91-634-38, sent his award to the Court to be made a rule of the
Court. On the Award being received in the Court, notice was directed to be issued to the parties. Out of them, the respondent-Board filed objections (OMP No. 410/95) under Sections 30 and 33 of the Arbitration Act, 1940 (hereinafter to be called “the Act”).
9. The claimant-Contractors also filed objections (OMP No. 40 of 96). Ultimately, this Court by its judgment dated 12th December, 19% rendered in OMPs 410 and 40 of 1995 in Civil Suit No. 227 of 1995 accepted the objections of both the parties to the extent that they had challenged the Award on the ground that it is not a speaking Award although the contract agreement between the parties provided for a reasoned Award.
10. The operative part of the judgment referred to above is as follows:
“For the reasons recorded above, both the objections of the respondent-Board as well as the claimant-Contractors are accepted to the extent indicated above. Consequently, the impugned Award of the Arbitrator is set aside and the respondent-Board is directed to appoint another Arbitrator other than Shri O. C. Kaushal to go into the claims and counterclaims as well as disputes between the parties, and give a reasoned Award in terms of the sub-clause in the arbitration clause No. 25 of the contract agreement between the parties. It is made clear that the Arbitrator shall not deviate from the terms of the contract agreement between the parties, while giving the Award. The record of the arbitration proceedings is directed to be remitted by the Registry of this Court forthwith and the Arbitrator so appointed by the respondent-Board shall decide the claims and counter-claims as well as me disputes between the parties within three months from the date of first appearance before him. The respondent-Board after appointing the Arbitrator shall fix a date for the parties appearance before him and direct a notice to be issued to them accordingly. The costs of these proceedings shall abide by the ultimate decision of the Arbitrator, subject to the decision of the objections, which may be filed thereto.”
11. An appeal under Section 39 of the Act was filed by the claimant-Contractors against the judgment of this Court referred to above, being FAO No. 43 of 1997. The Board preferred Cross-Objections in the same, being Cross-Objection No. 98 of 97. A Division Bench of this Court by its judgment dated 12th June, 1997, partly allowed the appeal of the claimant-Contractors and the operative part of the said judgment is as follows :
“Resultantly, the present appeal is partly allowed. The impugned order of the learned single Judge setting aside the Award and Directing the defendant-Board to appoint another Arbitrator to go into the disputes between the parties and to give a reasoned Award is modified to the extent that the Award dated 21-8-1995 is remitted to the Arbitrator, Shri O. C. Kaushal, under Section 16(1)(c), Arbitration Act, 1940, for reconsideration and to give reasons for the conclusions arrived at by him, after affording an opportunity to the parties of being heard. The Arbitrator shall decide the matter within a period of three months of appearance of the parties before him.
The parties are directed to appear before the Arbitrator on 5-8-1997. The record of the arbitration proceedings be remitted forthwith to the Arbitrator, so as to reach well before the date fixed.
No order as to costs.”
12. The Board took the matter further to the Supreme Court of India through a petition for Special Leave to appeal, being SLP (Civil) No. 19100-19101/97. By its order dated 20th October, 1997, the Apex Court disposed of the matter as follows :
“We do not consider it appropriate to entertain this Special Leave Petition since the Division Bench of the High Court has remitted the matter to the arbitrator forgiving a reasoned Award. This being so, all the points which may be available to the aggrieved party would remain open for begin raised and considered thereafter. This right to the party would ensue even in respect of the point like interest which may have been raised and considered at an earlier stage because the same will now have to be considered in the background of the reasons given by the Arbitrator for making the Award. This Special Leave petition is, therefore, dismissed with these observations.”
13. In compliance with the directions of this Court, as modified in appeal by the Division
Bench and thereafter by the Apex Court, the dispute between the parties was again relegated to the same Arbitrator i.e. Shri O. C. Kaushal. The first hearing, after remand, was held by him on 25th November, 1997. He then proceeded to hear both the parties and closed the hearing on 3rd January, 1998.
14. Ultimately, the Arbitrator gave his Award dated 24th February, 1998, as under:
“Claim
of the Contractor
Amount
awarded
Issue No. 1 Issue No. 2
Rs. 3,78,68,4 10/-
Rs. 19,86,655/-
Issue No. 3
Rs. 39,21,560/-
Nil
Issue No. 4
Rs. 6,60,000/-
Rs. 90.000/-
Issue No. 5
Rs. 7,46,429/-
Wilhdrawn
Issue No. 6
Rs. 18,54,676/-
Nil
Issue No. 7
Rs. 3,34,933/-
Nil
Total
Rs. 4,53,86,008/-
Rs. 20.76.655/-
Issue No. 8
Interest @ 18% for past pendente
lite and future period
Interest @ 15(%) per annum for
pendente lite period i.e. from 28-3-93 to 21-8-1995 on the awarded sum.”
15. The award of the Arbitrator was filed in this Court for making it rule of the Court on 7th March, 1998, On notice being issued to the parties, they put in appearance through their respective learned counsel and both of them have filed objections to the Award. The objections filed by the Board have been registered as OMP (M) No. 19/98 whereas the objections filed by the claimant-Contractors have been registered as OMP 406 of 1998. Replies and rejoinders have also been filed. The following Issues have been framed in respect of both the Objection Petitions, referred to above.
“1. Whether the impugned Award is liable to be set aside on the basis of the Objections of both are parties?
OP Parties
2. Relief.”
16. Parties have led evidence by way of their respective affidavits in support of their respective Objection Petitions.
In the Objection Petition filed by the Board, inter alia, the following grounds have been taken :
(1) That the Arbitrator has misconducted himself and the proceedings, hence there is an error apparent on the face of the impugned Award, which is based on misconstruction of law and important oral and documentary evidence;
(2) That the provisions of Sections 91 and 92 of the Evidence Act have been completely overlooked which has vitiated the Award;
(3) That the Arbitrator has gone beyond the terms of the agreement and in specific disregard thereof he has misconducted himself and the proceedings;
(4) That the interest pendente lite and future could not be granted as the contract prohibited the same. Interest has been awarded in complete violation of Clauses 9-B and 9-C of the agreement;
(5) That if interest is at all held to be payable, it could never have exceeded the rate of 9.5 per cent simple interest as would be found in Special Condition No. 4(A)(i) of the agreement.
(6) That the Arbitrator in arriving at his conclusion on Issue No. 1 has relied mostly on letter dated 13-12-1990 of the claimant-Contractors and the letter dated 18th February, 1991, of the Board, and has ignored the correspondence exchanged between these two dates, which was the basis for issuance of the Award letter dated 18th February, 1991.
17. In the Objection Petition filed on behalf of the claimant-Contractors the following grounds, inter alia, have been taken :
(i) That the award is based on surmises and conjectures;
(ii) That the Arbitrator has misconducted
himself as well as the proceedings by not giving reasoned/speaking Award;
(iii) That the Arbitrator being a serving employee of the Board has given a highly biased, unfair and erroneous Award in favour of the Board.
(iv) That the Award suffers from manifest errors which are apparent on the face of the Award; and
(v) That the Award against claim No. 7 (Issue No. 8) suffers from errors inasmuch as the Arbitrator has not awarded future interest in favour of the claimant-Contractors i.e. the interest from the date of the Award till the date of decree or payment whichever is earlier, without assigning any reasons whatsoever.
18. It has been submitted by Shri K. D. Sood, learned counsel for the Board, that the Arbitrator could not go beyond the contract between the parties and decide the matters beyond its purview. In this connection he has referred to certain documents on the record which are part of the proceedings before the Arbitrator. Ex. C-1/1 is a letter addressed by the Board to the claimant-Contractors dated 24th November, 1990. This is an offer by the Board inviting the claimant-Contractors to execute the balance works at Baner Project on the same rates, terms and conditions as originally stipulated with the previous contractor. In reply thereto the claimant-Contractors wrote a letter dated 13th December, 1990, vide Ex. C-2/1 in which there are certain points for consideration of the Board. One such point was that they shall be able to execute the construction work on the same rates as quoted by the previous contractor, except for the rates pertaining to open excavation, underground excavation and final concreting for which the rates as quoted by them in their original tender shall be applicable. He has also referred to other documents all of which in my considered view are not relevant for the purpose of deciding the dispute between the parties. What is relevant is that a perusal of these documents indicates that right from the inception the claimant-Contractors had been asking for higher rates of tunnelling. As mentioned above, after protracted correspondence the negotiations bore fruit and the Board issued the letter of award of work in question in favour of the claimant-Contractors vide letter dated 7th January, 1991 (Ex. C-4/1).
19. But the matter did not rest there. The claimant-Contractors vide their letter dated 19th January, 1991, (Ex. C-5/1) addressed to the Board indicated that they had no objection in executing the works on the rates of the earlier contractor, except for tunnelling rates for which they requested for constitution of a Committee to look into the matter in totality. In reply thereto the Board wrote back to the claimant-Contractors through letter dated 18th February, 1991 (Ex. C-6/1) in which they clarified the points raised by the claimant-Contractors as under:
“1. Your request for referring the question of tunnelling rates to a Committee has not, been agreed to by the Board. You are required to do the tunnelling work as per rates quoted by M/s. Sutlej Construction Company, Chandigarh. However, you may send detailed justification for higher rates for tunnelling…..
7. You are requested to sign the contract immediately so that mobilisation advance can be released to you. In our opinion, entire correspondence, need not become part of the contract. However, all terms and conditions which have been mutually agreed to can be incorporated in the contract as special conditions.”
20. In this connection the Arbitrator in his impugned Award has formed the opinion that by asking the claimant-Contractors for detailed justification for higher rates of tunnelling the Board not only held a promise to look into the matter favourably but also rendered the validity and sanctity of tunnelling rates voidable and thus the contract agreement has been held by him not to be valid and binding as far as the tunnelling rates were concerned. The argument of Shri K. D. Sood is that the Arbitrator has misconstrued the correspondence between the parties and his finding in this behalf is erroneous. However, in my considered view the interpretation put by the Arbitrator on the matter of justification for higher rates of tunnelling cannot be said to be unreasonable or perverse. This is so because a combined reading of the correspondence between the parties, referred to above, clearly indicates that by its own conduct the Board itself had left the matter open when it was stated in its letter vide Ex. C-6/1, dated 18th February, 1991, that “however, you may send detailed justification for higher rates for tunnelling”. This aspect further stands clarified vide para 7 of the same letter, according to which
the claimant-Contractors were requested to sign the contract immediately so that mobilisation advance can be released. However, all terms and conditions which had been mutually agreed to could be incorporated in the contract as special conditions.
21. It is thus manifest that the door had not been finally closed from the side of either party in so far as the question of tunnelling rates were concerned. In this view of the matter, I do not find any error in the reasons and conclusions drawn therefrom by the Arbitrator in the impugned Award.
22. In support of his submissions Shri K. D. Sood has placed reliance on the case reported as Continental Construction Ltd. v. H. P. S. E. B., 1996 (2) Sim LC 264. He has laid stress on the observations contained from para 19 onwards of that report. At the outset it may be stated that the said observations were made in the context of the facts and points in issue in respect of that case, and the same have no bearing in so far as the present case is concerned. For the same reasons, the reliance placed by Shri K. D. Sood on the following decisions is of no avail in so far as the present case is concerned:
1. Asian Tech. Limited v. H. P. State Electricity Board, 1998 (2) Sim LC 66;
2. Jammu and Kashmir State Forest Corporation v. Abdul Karim Wani (1989) 2 SCC 701 : (AIR 1989 SC 1498), and
3. Associated Engineering Co. v. Government of Andhra Pradesh, 1991 (3) JT (SC)
123.
23. In fairness to Shri K. D. Sood, he has laid great stress on the letter Ex. C-7, dated 21st February, 1991, from the claimant-Contractors to the Board whereby the letter vide Ex. C-6/1, dated 18th February, 1991, was acknowledged. For facility of reference the operative part of that letter is reproduced here-below :
“We shall be signing the Contract Agreement accordingly. Since the various points reflected in our letters, are to ensure a harmonious relationship, a good construction methodology, achieving of the project completion within the stipulated period, they should not be rejected summarily. We shall be approaching your goodselves at suitable junctures for getting the matters resolved with your healthy and work-oriented co-operation.”
24. Shri K. D. Sood has tried to derive benefit from the contents of the said letter by submitting that the claimant-Contractors had entered into the agreement with their eyes open and impliedly they had accepted the terms and conditions contained in the letter of the Board vide Ex. D-6/1, dated 18th February, 1991. No doubt, that was the case, but the fact remains that clauses No. 1 and 7 thereof, which have already been reproduced above, clearly indicate that the matter of justifying higher rates for tunnelling was left open. Viewed in that context, there is no error in the impugned Award.
25. It has next been argued by the learned counsel for the Board that the Arbitrator could only decide those disputes which were referred to him within the parameters of the contract agreement between the parties, but he has gone beyond his term of reference by awarding claims Nos. 1 and 2. He has also submitted that there is no process of reasonings given in the main Award by the Arbitrator as to how he has calculated the amount under Issue No. 2.
26. There is no merit in this contention of the learned counsel for the Board also. It is crystal clear from a bare reading of the impugned Award from page 15 onwards that there is a detailed process of reasoning given by the Arbitrator before arriving at his conclusions, in respect of these two issues. It is not for this Court to go into the sufficiency or otherwise of the reasons. Reference may be made to Hans Construction Co. v. Delhi Development Authority, AIR 1994 NOC 358 (Delhi) wherein it has been held that while considering objections under Section 30 of the Act, the Court does not sit as appellate Court. It cannot reappraise evidence and cannot also interfere on ground of insufficiency of reasons. All that the law requires in a case of this type is that the Award of the Arbitrator should be supported by reasons. It was for that reason that on the earlier occasion when the same Arbitrator had passed a non-speaking Award dated 21st August, 1995, this Court had remitted the dispute to the Arbitrator for reconsideration and to give reasons for conclusions arrived at by him, after affording an opportunity to the parties of being heard. This is precisely what has been done by the Arbitrator now while passing fresh Award dated 24th February, 1998.
27. The impugned Award has also been challenged on behalf of the. Board by the learned counsel, Shri K. D. Sood, in respect of the finding under Issue No. 4. He has submitted that the Arbitrator has not given any reason as to how he has arrived at the figure of Rs. 70/- per cubic meter while allowing an amount of Rs. 90,000/- to the claimant-Contractors as regards their claim on account of disposal of soil beyond specified limit. I see no error in this behalf inasmuch as it is clear from the Award itself that the Arbitrator inspected the site on 5-1-1995 and assessed the qualities of soil disposed of by the Contractors as about 6000 cubic meter. He also estimated the rate for the lead for which the soil was disposed of which comes to Rs. 70/- per cubic meter. This being a technical matter, and the conclusion being based on site inspection of the Arbitrator, who being an Engineer was fully qualified to assess and estimate as has been done by him. It cannot be said that there is any error in the impugned Award in so far as the finding under Issue No. 4 is concerned.
28. In support of his argument that there is an error apparent on the face of the Award, the learned counsel for the Board has invited the attention of this Court to the case reported as Trustees of the Port of Madras v. Engineering Constructions Corporation Limited, AIR 1995 SC 2423: (1995 AIR SCW 3584). It has been laid down therein that in the case of a reasoned Award, the Court can interfere if the Award is based upon a proposition of law which is unsound in law. The erroneous proposition of law must be established to have vitiated the decision. The error of law must appear from the Award itself or from any document or note incorporated in it or appended to it. It is not permissible to travel beyond and consider material not incorporated in or appended to the Award. Applying the test laid down by the Apex Court in the said case to the facts of the present case it is apparent that the impugned Award is neither based upon a proposition of law which is unsound, nor is it a case that there is an error of law apparent on the face of the Award.
29. On the other hand in that very case of Trustees of the Port of Madras (AIR 1995 SC 2423) (ibid) the Apex Court has held that the High Court cannot reappraise the evidence, material before Umpire and come to different finding of fact. In that case the Apex Court came to the conclusion that the finding of the learned Umpire
was based upon the material placed before him by both the parties and was a pure finding of fact. It was held that the order of the High Court setting aside the Award was illegal especially when it was not indicated on which grounds it was set aside and that the Award was shown to be vitiated by an error of law apparent on the face of it, nor did the High Court say that the learned Umpire was guilty of any misconduct in conducting the proceedings or otherwise. It is thus apparent that it is not for this Court to reappraise the evidence in the proceedings before the Arbitrator through a mangifying glass and come to a different finding than the one given by the Arbitrator in the impugned Award.
30. Lastly, the impugned Award has been attacked by the learned Counsel for the Board in respect of the finding under Issue No. 8 whereby pendente lite interest at the rate of 15 per cent per annum has been awarded on the principal sum. He has also submitted that if at all any interest was to be awarded by the Arbitrator it should have been only 9.5 per cent per annum as per Clause 4(A)(i) of the Special Conditions contained in the contract agreement. The said clause provides that the advance shall bear a simple interest at the rate of 9.5 percent per annum. This advance relates to the execution of the balance work which, if required by the Contractors, can be granted on the value of the balance work. In other words, the argument of Shri K. D. Sood appears to be that whatever was the rate of interest provided in respect of advance to be given to the Contractors, could at the most be granted by the Arbitrator as interest pendente lite.
31. Coming to the main plank of the argument relating to the jurisdiction of the Arbitrator to award interest, it will be seen that one of the points raised before the Division Bench of this Court in appeal (FAO No. 43 of 1997) was whether the Arbitrator was debarred from awarding interest in view of Clause 9-C of the agreement. The learned Judges constituting the Division Bench, following the ratio laid down by the Apex Court in the case of Board of Trustees for the Port of Calcutta v. Engineers-De-Space-Age (1996) 1 SCC 516 : (AIR 1996 SC 2853), held that Clause 9-C of the agreement does not prohibit the Arbitrator to award pendente lite interest. It was further held that the Arbitrator was, therefore, well within his jurisdiction in awarding such interest.
32. As regards this aspect of the case, when the
Board took the matter further to the Supreme Court of India by way of Special Leave to Appeal, the Apex Court by its order dated 20th October, 1997, had observed that “the right to the aggrieved party to raise all the points which may be available would remain open and that this right would ensue even in respect of the point like interest….”
33. Apart from the authoritative pronouncement of the Apex Court in Board of Trustees of Calcutta (AIR 1996 SC 2853) (supra), there are numerous authorities for the proposition that the Arbitrator has the jurisdiction in awarding interest. In Ram Nath International Construction Pvt. Ltd. v. State of U. P., AIR 1998 SC 367 :(1998 All LJ 212), it has been held that the Arbitrator is not debarred from granting interest and such power can be exercised analogous to Section 34, CPC. As per this ruling, grant of interest is a question of discretion of the Arbitrator and interest can be granted to do complete justice between the parties. It has further been held that contractor is entitled to interest from the date of reference to date of Award, but not to any interest for prereference period.
34. In the case of State of U. P. v. Harish Chandra and Co., (1999) 1 SCC 63, the same proposition has been decided i.e. that the Arbitrator has power to grant interest. Similar is the view taken in the case of Steeman Ltd. v. State of H. P., (1997) 9 SCC 252. In Santokh Singh Arora v. Union of India, AIR 1992 SC 1809:(1992 All LJ 1168) “grant of interest pendente lite by the Arbitrator was approved and upheld”. The Madras High Court in the case of the Superintending Engineer, T.N.U.D.P., Madras Circle v. A. V. Rangaraju, AIR 1994 Mad 217, has held that the correctness with regard to the rate of interest fixed by the Arbitrator cannot be considered in proceedings under Section 30 of the Act.
35. In view of the above discussion 1 hold and conclude that the Arbitrator has not gone beyond the contract between the parties and has not decided the matters beyond its purview. He has only decided those disputes which have been referred to him for arbitration under Clause 25 of the contract agreement between the parties. The Award of the Arbitrator contains reasons and it is not for this Court to go into the merits of those reasons. Lastly, I hold that there is no error in the impugned Award to the extent that the Arbitrator
has granted 15 percent interest per annum pendente lite on the awarded sum.
36. Coming now to the objection petition filed on behalf of the claimant-Contractors, their learned counsel has supported the Award of the Arbitrator. He has submitted that the Award contains elaborate reasons and there is no error either of fact or law on the face of the Award in respect of the acceptance of the claims of the Contractors under Issues Nos. 1, 2 and 4 viz. the claim for revised rates of tunnelling to the extent of amount awarded and the claim on account of disposal of soil beyond specified limit also to the extent of the amount awarded.
37. I have already indicated above, a bare perusal of the Award makes it obvious that the Arbitrator has complied with the directions of the Court that a reasoned Award should be passed. It will also not be out of place to state that the Arbitrator appointed in this case is a Chief Engineer of the Board. In other words, he is an expert and well versed in the field of engineering. He has decided claims which are of a technical nature and selection shows that the parties wanted a person who was an expert in the specialised field as an Arbitrator. It is thus manifest that there is force in the submission of the learned Counsel for the claimant-Contractors and the respective amounts thus awarded, after appreciation of evidence of the parties and consideration of their respective claims and counter-claims, and thereafter supported by valid reasons, necessarily would point to only one conclusion that there is no error arising in the impugned Award which would call for rectification or interference by this Court.
38. The learned Counsel for the claimant-Contractors has supported the Award of pendente lite interest at the rate of 15 percent per annum. As regards submission of Shri K. D. Sood that if at all any interest was to be awarded by the Arbitrator it should have been only 9.5 per cent per annum, the same is misconceived because the said rate was provided as per Clause 4(A)(i) of the Special Conditions contained in the contract agreement only to be paid by the Contractors to the Board in respect of the advance mentioned therein. In other words, it has no bearing on the jurisdiction or power of the Arbitraor to award interest at a reasonable rate, and in the facts and circumstances of the present case, the rate of 15 per cent cannot be deemed to be unreasonable or excessive.
39. However, it appears that while awarding pendente lite interest at the rate of 15 per cent per annum, the Arbitrator lost sight of the fact that the same was to be awarded from the date of reference to the date of Award. (Reference may be made to AIR 1998 SC 367 (1998 All LJ 212) (supra). In the present case the Arbitrator has, no doubt, allowed interest pendente lite from the date of reference i.e. 23rd August, 1993, but he has fixed the date of his Award as “21st August, 1995” i.e. the previous Award which has been set aside by the Court in the circumstances already referred to above. The date of the Award is to be taken as ’24th February, 1998′, and not 21st August, 1995, as that Award ceased to have any legal existence on its being set aside. In conclusion, the impugned Award is required to be modified to the extent that the impugned Award of the Arbitrator i.e. Rs. 20,76,655/- shall carry interest at the rate of 15 per cent per annum pendente lite from 23rd of August, 1993 (the date on which he entered upon the reference) up to the date of the Award which is 24th February, 1998.
40. The learned Counsel for the claimant-Contractor has contended that the Award against claim No. 7 (Issue No. 8) suffers from an error inasmuch as the Arbitrator has not awarded future interest from the date of the Award till the date of decree or payment, whichever is earlier. Reliance has been placed on two decisions of the Apex Court, namely, Secretary Irrigation Department, Government of Orissa v. G. C. Roy (1992) 1 SCC 508 : (AIR 1992 SC 732) and Hindustan Construction Co. Ltd. v. State of Jammu and Kashmir, AIR 1992 SC 2192 : (1992 AIR SCW 2647).
41. In the former case it has been laid down that where the agreement between the parties does not prohibit grant of interest, the Arbitrator shall have the power to award interest pendente lite. (In the present case there is nothing in the agreement between the parties which prohibits grant of interest pendente lite by the Arbitrator). In the latter while considering this aspect it was observed by the Apex Court as follows :
“The question of interest can be easily disposed of as it is covered by recent decisions of this Court. It is sufficient to refer to the latest decision of a five-Judge Bench of this Court in Secretary, Irrigation Department of Orissa v. G. C. Roy,
(1991) 6 JT (SC) 349 : AIR 1992 SC 732 : (1992 AIR SCW 389). Though the said decision deals with the power of the Arbitrator to award interest pendente lite, the principle of the decision makes it clear that the arbitrator is competent to award interest for the period commencing with the date of award to the date of decree or date of realisation, whichever is earlier. This is also quite logical for, while award of interest for the period prior to a arbitrator entering upon the reference is a matter of substantive law, the grant of interest for the post-award period is a matter of procedure. Section 34 of the Code of Civil Procedure provides both for awarding of interest pendente lite as well as for the post-decree period and the principle of Section 34 has been held applicable to proceedings before the arbitrator, though the section as such may not apply. In this connection, the decision in Union of India v. Bango Steel Furniture (P) Ltd., (1967) 1 SCR 324/329 : AIR 1967 SC 1032 at p. 1035 may be seen as also the decision in Gujarat Water Supply and Sewage Board v. Unique Erectors, (1989) 1 SCR 318: AIR 1989 SC 973, which upholds the said power though on a somewhat different reasoning. We, therefore, think that the award on item No. 8 should have been upheld.”
Similarly, in a recent decision the Supreme Court in the case of Jagdish Rai and Brothers v. Union of India, 1999 (1) Sim LJ 767 : (AIR 1999 SC 1258) has laid down that ‘there are four stages of grant of interest. Firstly, from the stage of accrual of cause of action till filing of the arbitration proceedings; secondly, during pendency of the proceedings before arbitrator; thirdly, future interest arising between date of award and date of the decree; and fourthly, interest arising from date of decree till realisation of award’.
42. In view of the above decisions of the Apex Court there is force in the submissions of the learned Counsel for the claimant-Contractors. In this connection he has submitted that future interest from the date of Award i.e. 24th February, 1998 to the date of decree and thereafter from the date of decree to the date of realisation should be at the rate of 18 per cent, in view of Section 31(7)(b) of the Arbitration and Conciliation Act, 1996. In the facts and circumstances of the case and the protracted nature of the dispute between the parties this Court is of the considered view that future interest from the date of the Award i.e.
24th February, 1998, till today i.e. the date of decree and thereafter with effect from today till’. the date of realisation should be at the same rate as awarded for pendente lite interest by the Arbitrator i.e. 15 per cent per annum simple interest. This would be a reasonable and proper rate under the circumstances.
43. In view of the above discussion, I hold that there is no such error of law or fact, in the impugned Award which would make it liable to be set aside by this Court in so far as the award of the principal amount of the claimant-Contractors is concerned. However, the Award is required to be modified to the extent indicated above in the matter of grant of pendente lite interest and future, interest. Issue No. 1 is decided accordingly.
RELIEF
44. For the reasons recorded above, the objections filed by the Board (OMP (M) No. 19 of 1998) are dismissed, but the objections filed by the claimant-Contractors (OMP No. 406 of 1998) are accepted to the extent indicated above and hereinafter. The Award of the Arbitrator dated 24th February, 1998, is made a rule of the court with the following modifications :
(i) The principal amount awarded under Issues Nos. 1, 2 and 4 i.e. Rs. 20,76,655/- is upheld and confirmed;
(ii) The principal amount shall carry an interest at the rate of 15 per cent per annum from the date of the reference(23-8-1993) to the date of the Award (24-2-1998) and thereafter from the date of the Award (24-2-1998) to the date of the decree (3-6-1999); and
(iii) In addition, the principal amount shall carry future interest at the rate of 15 per cent per annum from the date of the decree (3-6-1999) to the date of realisation.
Decree-sheet be prepared accordingly.