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FA/44/1989 9/ 9 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
FIRST
APPEAL No. 44 of 1989
For
Approval and Signature:
HONOURABLE
MR.JUSTICE JAYANT PATEL
HONOURABLE
MR.JUSTICE R.M.CHHAYA
=========================================================
1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
2
To be
referred to the Reporter or not ?
3
Whether
their Lordships wish to see the fair copy of the judgment ?
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?
5
Whether
it is to be circulated to the civil judge ?
=========================================================
STATE
OF GUJARAT - Appellant(s)
Versus
J
C PATEL & 1 - Defendant(s)
=========================================================
Appearance
:
MR
SONI, AGP for Appellant(s) : 1,
MR PR THAKKAR for Defendant(s) :
1,
MR KG SUKHWANI for Defendant(s) :
2,
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE JAYANT PATEL
and
HONOURABLE
MR.JUSTICE R.M.CHHAYA
Date
: 18/07/2011
ORAL
JUDGMENT
(Per
: HONOURABLE MR.JUSTICE JAYANT PATEL)
The
present appeal arises from the judgement and decree dated 20.7.1988
passed by the lower Court in Special Civil Suit No.167/88, whereby
the suit is decreed for the amount of Rs.17,70,186/- with the
interest at the rate of 11% per annum for the pre-arbitration period
on the amount of Rs.8,32,086/- and with the interest at the rate of
18% per annum from 29.12.1987 with the clarification that no
interest is allowed from 19.9.1986 to 29.12.1987 for the period of
pendente lite before the Arbitrator.
The
relevant facts are that one Mr.J.C. Patel was appointed as
Sole-Arbitrator upon the dispute arose between the parties for the
work of constructing earth work and lining of Vapi Distributory for
certain area for Damanganga Reservoir project. It appears that
thereafter, the award was passed by the Arbitrator on 29.12.1987.
The application was made to pass the decree based on the award being
Special Civil Suit No.167/88. The original respondent –
appellant herein filed objection and resisted the prayer. The lower
Court ultimately at the conclusion of the proceedings passed the
aforesaid decree. Under these circumstances, the present appeal
before us.
Heard
Mr.Soni, learned AGP for the appellant and Mr.Sukhwani, learned
Counsel for the respondent. We have considered the reasons recorded
by the lower Court and we have also considered the R & P.
Mr.Soni,
learned AGP, during the course of hearing, mainly raised the
grievance for maintaining the decision of the Arbitrator for
awarding of interest for the pre-reference period and also interest
after the award and he also made grievance for awarding of high rate
of interest.
Whereas,
Mr.Sukhwani, learned Counsel for the respondent, has supported the
judgement and decree of the lower Court.
In
our view, the examination of the contention raised on behalf of the
appellant shows that for the pre-reference period as per the reasons
recorded by the lower Court, the interest award is at the rate of
11% per annum. As per Clause 8 of General Condition, it was
expressly provided. However, the lower Court reduced the said rate
of interest for the post award period from 20% to 18% per annum.
The reasonings for such purpose are available at paragraph 19 of the
judgement, which read as under:-
“19. The
learned Advocate for the defendant No.1 has argued out that in file
No.5 page 147 and relevant page 153 rate of interest is shown 20%
and he has further argued out that the claim of interest was
specifically referred to the learned arbitrator as per the
Government Resolution and hence the objection of the defendant No.2
has to claiming interest pendentelite by the defendant No.2 is not
true and correct. He has further argued out that the learned
Arbitrator has rightly allowed the interest from 26.10.85. He has
further argued out that the learned Arbitrator has ample power to
award the interest. The learned Advocate for the defendant No.1 has
further argued out that in this connection the arbitrator clarified
in his award that the rate of 20% interest is just and proper. Now
as per clause 8 of the General condition of the contract advanced
given by the respondent for mobilization plant and machinery
acc.beaf interest at the rate of 20% per annum. The defendant No.1
also claimed interest at 20% per annum. On the costs of
non-judicial items issued by them vide deft. No.2’s counter claim
No.7. The rate of interest claimed by the defendant No.1 is 20% per
annum. The defendant No.1 is entitled to interest. The learned
Advocate for the defendant No.1 has argued out that the principles
of equity is required to be maintained and hence interest at 20% per
annum is just and proper and hence it should be allowed. In my
opinion the rate of interest at 18% per annum as just and proper.
18% interest can be adopted while working out the decree in terms of
award. As regards the period to the commencement of the arbitration
the learned Advocate for the deft. No.1 argued out that the rate of
interest be awarded and there is no bar to award the pre-arbitration
interest. Do agree with the argument No.1 it will be just and
proper to award interest for the period from the date of applying
for the arbitration up to the date of commencement of the
arbitration at the rate of 11% per annum, which will be the rate of
interest a reasonable in view of the interest available in the
market and in view of the interest Act no interest will be payable
from 19.9.1986 to 29.12.1987 i.e. the date of appointment of the
arbitrator till the date of award. The interest from 29.12.1987
till the date o realization of the amount will be 18% per annum, as
discussed above.”
We
may, at this stage, refer to the decision of the Apex Court in the
case of Uttar Pradesh Cooperative Federation Limited Vs. Three
Circles, reported in (2009) 10 SCC, 374,
wherein the Apex Court has observed at paragraphs 27 to 30 as
under:-
“27. So
far as the payment of interest is concerned, the Division Bench of
the High Court after analyzing the decisions of this Court, namely,
Executive Engineer, (Irrigation) Balimela & Ors. vs. Abhaduta
Jena & Ors. [1988 (1) SCC 418], Secretary, Irrigation
Department, Government of Orissa & Ors. vs. G. C. Roy [1992 (1)
SCC 508] came to the conclusion of law which was that the Arbitrator
has power to award pendente
lite interest and where the contract was silent as to the awarding
of interest, the Arbitrator has the power to award interest for the
pre-reference period if there is a substantive law which empowers
him to do so or if there is a usage of trade for payment which has
the force of law. In our view, the High Court was perfectly
justified in holding that the Arbitrator has the power to award
interest for the pre-reference period. It needs to be repeated at
this juncture that the arbitration in question was governed not by
the present Act of 1996 but by the provisions of Arbitration Act,
1940. However, as this power emanates from Section 3 of the Interest
Act, 1978, the High Court noted that the rate of interest cannot be
more than `the current rate of interest’ as stipulated by the said
Section. Accordingly the High Court had reduced the rate of interest
for pre-reference period from 18% to 15%.
28. It
was, however, argued on behalf of the appellant that the High Court
was not justified in awarding interest for pre-reference period in
view of Section 3 of the Interest Act, 1978 which was pursuant to a
special clause in the Contract. As in the present case there was no
such clause in the agreement and hence it was not within the power
of the Arbitrator to make an award with respect to interest. In our
view, this argument lacks substance.
29. The
position of law, as found by the High Court in its impugned judgment
on consideration of various other judgments of this Court, would
clearly show that in those judgments the High Court relied on also
did not stipulate any express agreement with respect to interest as
a precondition to the authority of the Arbitrator to award interest
for the pre-reference period. The matter would have a different
issue altogether if there had been a specific provision prohibiting
grant of interest which was, of course, not the case of the
appellant.
30.In
the case of State of Rajasthan and Anr v. Ferro
Concrete Construction Pvt. Ltd, [2009 (8) SCALE 753], the same work
was advanced in which this Court observed:
“But this Court has held that in
the absence of an express bar, the arbitrator has the
jurisdiction and authority to award interest for all the three
periods – pre reference, pendente lite and future (vide decisions of
Constitution Bench in Secretary, Irrigation Department, Government
of Orissa vs. G. C. Roy – 1992 (1) SCC 508, Executive Engineer,
Dhenkanal Minor Irrigation Division vs. N. C. Budharaj – 2001 (2)
SCC 721 and the subsequent decision in Bhagawati Oxygen vs.
Hindustan Copper Ltd -2005 (6) SCC 462). In this case as there
was no express bar in the contract in regard to interest, the
Arbitrator could award interest.”
In
view of the above decision in law now settled by this Court, we are
unable to hold that the Arbitrator was not entitled to award
interest on the pre-reference period because there was no clause in
the agreement prohibiting such awarding of interest. However, the
High Court had reduced the rate of interest to the current rate of
interest’ and, therefore, it is not open for us to interfere with
such rate of interest at this stage in this appeal. Therefore, there
is no substance in this argument, accordingly it is rejected.”
If
the facts of the present case are considered in light of the above,
it appears that for the pre-reference period the lower Court has
awarded interest at the rate of 11% per annum, such, in our view,
can be said as a current rate of interest prevailing then. The
another interest awarded for the post award period is at the rate of
18% per annum as against the interest at the rate of 20% per annum
expressly provided under the Contract Agreement. Therefore, it was
not a case where the contact did not provide for any express
stipulation of interest when the Arbitrator had exercised the power.
The lower Court has already exercised the discretion by reducing to
18% as against the express stipulation of interest at the rate of
20% per annum.
Under
these circumstances, we find that the exercise of power by the lower
Court for awarding of interest for the pre-reference period and for
the post award period is not erroneous, which may call for
interference for the appellate jurisdiction.
No
other contentions are raised.
In
view of the above, the appeal is meritless. Hence, dismissed.
(Jayant Patel, J.)
(R. M. Chhaya, J.)
vinod
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