JUDGMENT
K.M. Mehta, J.
1. This appeal has been filed by the Union of India against the judgment and decree dated 30.8.1996 passed by Court No.20, City Civil Court, Ahmedabad in Civil Misc. Application No.434/95 under section 39 of the Arbitration Act 1934 (hereinafter referred to as the Act). The learned Judge by her judgment and award has been pleased to confirm the award of the arbitrators in respect of item under claims nos 1,2 and 3; whereas the claim no. 4 and 5 were set aside.
2. The facts giving rise to this appeal are as under:
2.1 Shri H.K.Dhruva respondent herein has worked as a Railway contractor at Rajkot from 1971 to 1983. The Railway allotted many major civil engineering work of civil construction at Rajkot Hapa etc. when the Viramgam-Okha-Porbander Broadgauge Conversion Project came to Saurashtra. In June 1979 the railway allotted work of “Various MPCI Structures in Rajkot Yard and a contract agreement between the respondent and the Union of India/Indian Railway was executed on 18.6.1979. H.K.Dhruva has entered into a contract agreement dated 18.6.1979 with Railways. Said agreement provided an arbitration clause.
2.1(A) Clauses 62 and 63 of the Contract read as under:
“Cl.62 – All disputes or differences of any kind whatever arising out of or in connection with the contract, whether during the progress of the works or after their completion and whether before or after the determination of the contract, shall be referred by the Contractor to the Railway and the Railway shall within a reasonable time after their presentation make and notify decisions thereon in writing. The decisions, directions and certificates with respect to any matters decision of which is specially provided for by these conditions, given and made by the Railway, or by the Engineer on behalf of the Railway, which matters are referred to hereinafter as Excepted Matters shall be final and binding upon the Contractor and shall not be set aside or be attempted to be set aside on account of any informality, omission, delay or error in proceeding in or about the same or on any other ground or for any other reason and shall be without Appeal.”
“Cl.63(1) – If the Contractor be dissatisfied with the decision of the Railway, or any matter in question, dispute or difference, on any account or as to the withholding by the Railway of any certificates to which the Contractor may claim to be entitled to or if the Railway fails to make a decision within a reasonable time, then and in any such case but except in any of the Excepted Matters referred to in Clause 62 of these conditions of the Contractor may within 10 days of the receipt of the communication of such decision or after the expiry of the reasonable time as the case may be, demand in writing that such matter in question, dispute or difference by referred to arbitration. Such demand for arbitration shall be delivered to the Railway by the Contractor and shall specify the matters which are in question, dispute or difference and only such dispute or difference of which the demand has been made and no other shall be referred to arbitration.”
2.1(B) Somewhere in the year 1980 the respondent completed the work and handed over the said work to the Union of India(Western Railway). The Western Railway however terminated the said contract and refused to make payment of dues of the contractor in this behalf.
2.2 Disputes and differences arose between the parties. The respondent contractor addressed an arbitration notice 1.7.1983 to the Railways under clause no.62 of the General Conditions of Contract raising therein his over due claims nos 1 to 4 with future running interest. The contractor asked the Railways to make immediate payment failing which the contractor requested the same to be referred to arbitration.
2.3 It appears that thereafter the contractor filed Civil Misc. Application No. 458 of 1984 in the City Civil Court for an appointment of two persons as joint arbitrators under section 8 and 9 of the Arbitration Act, 1940. The Railway resisted the said application and the City Civil Court passed an order dated 31.3.1986 directing the General Manager Western Railway to appoint two arbitrators to decide the dispute and differences that have arisen between the parties and to pass an award. Accordingly the General Manager Western Railway appointed two high ranking senior officers as joint arbitrators by letter dated 8.8.86 and gave the terms of reference in para 2 of the same.
2.3(A) A letter dated 8.8.86 in terms of reference the letter has stated as under:
(a) Whether the following claims made by the claimants are admissible at all, if so in part or in full?
Thereafter Claims No.1,2,3,4 and 5 have been set out and in para 6 it has been stated “You are requested to give break up of the sum of any awarded for each items of disputes in terms of general conditions of contract.”
2.4. Thereafter J.S.Gehlot Chief Engineer, Head Quarters Western Railway entered the reference and continued the arbitration proceedings, as Umpire.
2.5. Before the arbitrators the contractor has already filed his statement of claim for Rs. 7,94,002.55 with future running interest @ 24% p.a. till realisation of the amount. The Railway also filed its reply and the counter claim. The umpire held two meetings and finally made and declared his award on 28.4.1995 at Bombay. The arbitrator awarded Rs. 7,78,798.09 to be awarded to the contractor by the Western Railway in full and final settlement of all the disputes with interest @ 15% per annum till realisation.
2.5(A) The arbitrator gave his award as under:
—————————————————————–
Claim Description/nature Amount Amount
No. of claim Claimed of Award
Rs. Rs.
(1) (2) (3) (4)
-----------------------------------------------------------------
1. Losses of Business, 2,84,873.50 73,582.50
profits works and
allied matters of
finance and of the
name of reputation.
2. Payment for works 2,15,729.38 1,51,973.43
carried out at site
and taken over by the
Railway (Exc.
Rs.1,08,921.80 received
by him)
3. Extra Expenses -
i) Water 12,500.00 Nil
ii) Establishment
including site 25,000.00 14,500.00
watchman and staff,
etc. and transport.
iii) Office expenses 10,000.00 7,500.00
iv) Expenses for claims 2,500.00 Nil
4. Interest:
i) On Claim No.1 above 85,462.05 22,074.75
from 1.1.81 to
30.6.83 at 12% P.A.
ii) On claim No.2 above
from 1.1.81 to 1,29,437.62 45,592.03
30.6.83 at 24% P.A.
iii) On claim No.3 above
from 1.1.81 to 28,500.00 6,600.00
30.6.93 at 24% P.A.
5. 24% interest on amount of
claim till payment (Amount 22,54,903.72 4,56,975.38
not specified by the
contractor) worked out by
Umpire from 1.7.83 to
28.4.95 on claims 1 to 4 of
col.(3) i.e. Rs.7,94,002.55)
--------------- -------------
30,48,906.27 7,78,798.09
--------------- -------------
2.6 The award was filed in the City Civil Court, Ahmedabad and was numbered as Civil Misc. Application No. 434 of 1995.
2.7 The contractor filed Civil Misc. Application No. 442 of 1995 for passing a decree in terms of the award under sections 14 and 17 of the said Act. The Railway filed Civil Misc. Application No. 585 of 1995 for quashing and setting aside the said award under section 30 and 33 of the said Act.
2.8 All these three applications were heard jointly by the learned Judge, City Civil Court, Ahmedabad and by a common judgment and order dated 30.8.1996 partly set aside claim nos. 4 and 5 and future interest of the award. The learned Judge has been pleased to confirm the award of the arbitrators in respect of claim Nos. 1,2 and 3 and in para 4.1 of the award the learned Judge also directed the Railway to pay 9% interest per annum on the principal amount of Rs. 2,47,555,93 ps. for the period from 1.7.83 till 30.7.86 and further at the rate of 15% per annum on the principal amount from the date of 1.8.86 till the date of decree i.e. 30.8..1996. The learned Judge further directed to pay the entire amount as directed by the court within six weeks from the date of this order to the claimant, failing which the opponent would be liable to pay interest at the rate of 18% per annum on the principal amount thereafter.
3. Being aggrieved and dissatisfied by the aforesaid judgment and award of the learned Judge the Union of India filed First Appeals Nos.4394 of 1996 and 4395 of 1996 so far as the same is against the Western Railway and the contractor has also filed First Appeal being First Appeal No. 52 of 1996 is filed by Contractor so far as the same is against the contractor.
4. Mr. J.J.Yagnik learned advocate for the Railway has raised the following contentions.
4.1 That the learned Judge has failed to consider and appreciate that the rights and liabilities of the parties are determined as per the terms and conditions of the contract as well as the general conditions of the contract which are binding to both the parties and conditions could never have been granted, the clause which is set out hereinbelow specifically states that interest would not be payable, in certain circumstances.
Clause 16(2)
” No interest will be payable upon the earnest money or the security deposit or amounts payable to the contractor under the contract but the Government Securities deposited in terms of sub-clause (1) of this clause will be repayable with interest accrued thereon.”
4.2 It was further submitted that in spite of the aforesaid clear clause the liability of interest has been fastened upon the appellant herein. The question as to the interest being payable or not payable is questionable only in cases in which the same has become the subject matter. In absence of any agreement between the parties to the contrary, general principles as to the grant of interest prevail.
4.2(A) As already stated above clause 16(2) takes away the right of the interest and when there is a specific clause operating against the claimant in the agreement with regard to interest, general provisions with regard to grant of interest was not applicable.
4.3 It was further submitted that the learned Judge has failed to see that the arbitrator has committed error apparent on the face of the record by not deciding the claim in confirmity with the terms enjoined in letter dated 8.8.1986. As per the said instructions he was required to give reasons in the award, as he has not given reasons in his award, he has committed misconduct. Hence the award was required to be quashed and set aside.
4.4 It was further submitted that the learned Judge has failed to see that some of the claims were not at all arbitrable being outside the contract. Hence the claimant was not entitled to any claims under claims nos. 1,3(ii), (iii), (iv),4(i),(ii), (iii) and 5 by virtue of the claimant having not completed the work within the stipulated time.
4.5 It was further submitted that after relying upon the letter dated 8.8.1986 addressed by the Chief Engineer(Construction) Western Railway which the Railway has directed the arbitrator to decide the dispute that have arisen between the Railways and the contractor. It was further submitted that certain scheme of work was outside the contract agreement and therefore it may be determined whether the aforesaid claims falls outside the contract agreement or not. It was therefore, submitted that under the term of reference itself, by a non speaking award and by not giving decision on each of the items separately referred and particularly as to whether the items referred to therein are falling outside the scope of the contract agreement or not, the umpire has committed misconduct. Hence the award is bad and illegal.
4.6 It was further submitted that the arbitrator is guilty of misconduct as he has not followed the terms of reference and/or has not remained in conformity with the terms of reference.
4.6(A) The arbitrator as well as learned City Civil Court have also erred in awarding Claims No.1,2 and 3 as claimed by the claimants.
4.6(B) As regards Claim Nos.4 and 5 so far relates to appeal filed by the contractor. He has tried to support the judgment of the learned City Civil Judge and stated that the learned City Civil Judge has rightly disallowed the claim No.4 of interest and also Claim No.5 which is interest on interest on amount of claim till payment.
Contractor’s Submissions:-
5. On behalf of the contractor it was submitted that the learned Judge has erred in misinterpreting the order of the City Civil Court in CMA No.439 of 1995 issued with the consent of all the parties.
5.1 The contractor further submitted that it ought to have been realised that the notice dated 1.7.83 was not the statutory notice under section 3(1) of the Interest Act 1978 but in fact was a notice required to be served in terms of arbitration clause no.62 of the Contract and that the court was not competent to rely on it as the arbitrator has neither referred to it nor enclosed it in the award.
5.2 The contractor further submitted that the learned Judge vitally erred in stating that claim no.16(c) of the Contract bars payment of interest.
5.3 The contractor further submitted that it ought to have been held that the respondent Railway had failed to prove that the umpire paid interest on interest on claim no.5 and paid pre-notice interest in claim no.4.
5.4 The contractor further submitted that the learned Judge erred in holding that interest on the awarded amount cannot be paid as it includes amount of interest awarded till date of the award because the arbitrator has given no reasons how he paid this future interest whether under any statutory provision or under the principles of equity, fairness and justice as well as good conscience.
5.5 The contractor submitted that it ought to have been realised that the view taken by the arbitrator for awarding interest @ 15% on the awarded amount was a possible view of law sustained by various High Court as well as by new Arbitration Clause 1996.
5.6 The contractor further submitted that the learned Judge ought not have interfered with the award of the arbitrator particularly when the arbitrator has given non speaking award.
6. Before we consider the rival contentions, few relevant statutory provisions may also be noted. Arbitration Act 1940 is an Act of Arbitration. Section 2(a) provides for definition of ‘ Arbitration Agreement’ which means a written agreement to submit present or future differences to arbitration whether an arbitrator is named therein or not and section 2(b) provides for ‘Award’ means an arbitration Award. Section 8 of the Act provides for power of the Court to appoint arbitrator or umpire. Section 14 of the Act provides for award to be signed and filed. Section 17 of the Act provides for judgment in terms of award. Section 29 provides for paying interest. Section 30 of the Act provides for setting aside award. Section 33 of the Act provides for Arbitration agreement or award to be contested by application and section 39 of the Act provides for filing of appeals. Sections 14,17,29,30 and 33 read as under:
“14. Award to be signed and filed.-(1) When the arbitrators or umpire have made their award, they shall sign it and shall give notice in writing to the parties of the making and signing thereof and of the amount of fees and charges payable in respect of the arbitration and award.
(2) The arbitrators or umpire shall at the request of any party to the arbitration agreement or any person claiming under such party of if so directed by the Court and upon payment of the fees and charges due in respect of the arbitration and award and of the costs and charges of filing the award, cause the award or a signed copy of it, together with any depositions and documents which may have been taken and proved before them to be filed in Court and the Court shall thereupon give notice to the parties of the filing of the award.
(3) Where the arbitrators or umpire state a special case under clause (b) of Section 13 the Court after giving notice to the parties and hearing them, shall pronounce its opinion thereon and such opinion shall be added to, and shall form part of, the award.
“17. Judgment in terms of award Where the Court sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award, the Court shall, after the time for making an application to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow, and no appeal shall lie from such decree except on the ground that it is in excess of, or not otherwise in accordance with, the award.”
“29. Interest on awards. Where and in so far as an award is for the payment of money the court may in the decree order interest from the date of the decree at such rate as the Court deems reasonable to be paid on the principal sum as adjudged by the award and confirmed by the decree.”
“30. Grounds for setting aside award. An award shall not be set aside except on one or more of the following grounds, namely.,
(a) that an arbitrator or umpire has misconducted himself or the proceedings;
(b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under section 35.
(c) that an award has been improperly procured or is otherwise invalid
“33. Arbitration agreement or award to be contested by application
Any party to an arbitration agreement or any person claiming under him desiring to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined shall apply to the Court and the Court shall decide the question on affidavits.
Provided that where the Court deems it just and expedient, it may set down the application for hearing on other evidence also, and it may pass such orders for discovery and particulars as it may do in a suit.”
7. Non-Reasons Order :-
7.1 Mr. Dhruva – party in person has submitted that arbitrator need not give reasoning in the award declared and in support of the same he relied upon a decision of the Apex Court in the case of Raipur Development Authority vs. M/s Chokhamal Contractors reported in AIR 1990 SC 1426 and in para 38 the Hon’ble Supreme Court has observed as follows:
“Having given our careful and anxious consideration to the contentions urged by the parties we feel that law should be allowed to remain as it is until the competent legislature amends the law. In the result we hold that an award passed under the Arbitration Act is not liable to be remitted or set aside merely on the ground that no reasons have been given in its support except where the arbitration agreement or the deed of submission or an order made by the Court such as the one under Section 20 of Section 21 or Section 34 of the Act or the statute governing the arbitration requires that the arbitrator or the umpire should give reasons for the award. These cases will now go back to the Division Bench for disposal in accordance with law and the view expressed by us in this decision.”
7.2 In our view, therefore, in view of the judgment of the Hon’ble Supreme Court in the case of Raipur Development Authority, the award of the arbitrator cannot be vitiated or set aside only on the ground that no reasons have been given by the arbitrator. In view of the same, the contention of the learned counsel for the railway that the arbitrator has committed misconduct as he has not given reasons is liable to be rejected in this behalf.
8. Contention of Railway that arbitrator cannot award interest in view of Clause 16 of the clause.
8.1 As regards the contention of the Railway that in view of Clause 16(2) arbitrator cannot grant interest. Against that Mr.Dhruva party-in-person has submitted that in fact clause 16(2) only provides that no interest will be payable upon the earnest money or the security deposit or amounts payable to the contractor under the contract but the Government Securities deposited in terms of sub-clause(1) of this clause will be repayable with interest accrued thereon. This clause do not bar the jurisdiction of the arbitrator to award interest as per the provisions of the Interest Act as well as Sec.34 of the Act particularly proviso of said section. He submitted that the contractor has already spend his money for the construction of the project as ordered by the railways. The contractor has also invested large sum of money in this behalf and for that purpose the contractor has also borrowed large sum of money in this behalf. He therefore submitted that in this case the interest is a compensation allowed by law for the use or detention of money in this behalf and, therefore, the contractor is entitled for the interest in this behalf.
8.2 In support of the same he has relied upon the judgment of the Hon’ble Supreme Court in the case of The Board of Trustees for the Port of Calcutta Vs. Engineers-De-Space-Age reported in Arbitration Law Reporter 1995 Supp.733, after considering the Constitution Bench judgment of the Hon’ble Supreme Court in para 8 in similar situation the Hon’ble Supreme Court has interpreted Clause which is pari materia to Clause 16. In para 8 the Hon’ble Supreme Court has observed as under:
“We are dealing with a case in regard to award of interest by the Arbitrator post reference. The short question, therefore, is whether in view of sub-clause (g) of Clause 13 of the contract extracted earlier the Arbitrator was prohibited from granting interest under the contract. Now the term in sub-clause (g) merely prohibits the Commissioner from entertaining any claim for interest and does not prohibit the Arbitrator from awarding interest. The opening words `no claim for interest will be entertained by the Commissioner’ clearly establishes that the intention was to prohibit the Commissioner from granting interest on account of delayed payment to the contractor. Clause has to be strictly construed for the simple reason that as pointed out by the Constitution Bench, ordinarily, a person who has a legitimate claim is entitled to payment within a reasonable time and if the payment has been delayed beyond reasonable time he can legitimately claim to be compensated for that delay whatever nomenclature one may give to his claim in that behalf. If that be so, we would be justified in placing a strict construction on the term of the contract merely prohibits the Commissioner from paying interest to the contractor for delayed payment but once the matter goes to arbitration the discretion of the Arbitrator is not, in any manner, stifled by this term of the contract and the Arbitrator would be entitled to consider the question of grant of interest pendente lite and award interest if he finds the claim to be justified. We are, therefore, of the opinion that under the clause of the contract the Arbitrator was in no manner prohibited from awarding interest pendente lite.”
8.3 Mr.Dhruva has further relied upon the judgment of the Andhra Pradesh High Court in the case of Union of India Vs. S.B.Patel, Arbitrator and Another reported in 2000(1) Arb.L.R. 228(A.P.) wherein in para 2 the learned Single Judge of Andhra Pradesh High Court after relying upon the Division Bench judgment of that Court in the case of N.G.Gunani Vs. The Union of India, rep. by its Chief Engineer, (Construction), South Central Railway, Secunderabad and another reported in 1996(4) ALT 1046 the Court has observed as under:
“But, the question for consideration in the instant case is, whether Clause 16(2) of the Standard General Conditions of Contract is a bar for grant of interest by the Arbitrator. This very clause fell for consideration of Division Bench of this Court in N.G.Gunani Vs. The Union of India, rep. by its Chief Engineer, (Construction), South Central Railway, Secunderabad and another, to which I was a party. On an analysis of the provisions contained in the said clause and the provisions of the other relevant clauses of the contract, the Division Bench held that the said clause contains only a restriction on the departmental officials to allow interest on delayed payments, but, it is not a fetter on the power of Arbitrator to grant interest on the amounts found due and payable to the contractor on adjudication of the disputes between parties. The question raised in this Civil Revision Petition is, therefore, covered by the decision of the Division Bench (2 supra) which is directly in point. Following the said Division Bench judgment, I have no hesitation in rejecting the contention of the learned Counsel for the petitioners.”
8.4 In view of the aforesaid submission, the contractor submitted that the contention of the railway that Clause 16 bar the jurisdiction of the arbitrator to grant interest has no substance in this behalf.
9. Controversy regarding interest :-
9.1 Mr. Dhruva – party in person has submitted that contractor has claimed the interest for following three periods:
(1) 1.1.81 to 1.7.83 (from the date of the demand till reference means pre-reference period).
(2) 1.7.83 to 28.4.95 i.e. date of entering reference till passing of the award, namely pendente lite interest.
(3) From Date of Award till date of decree.
(4) Fourth stage i.e. from date of decree till date of actual payment.
9.2 He has also relied upon the recent judgment of the Hon’ble Supreme Court in the case of Jagdish Rai Vs. Union of India, reported in AIR 1999 SC 1258 : (1999) 3 SCC 257, the Hon’ble Supreme Court indicated that there are four stages of grant of interest in arbitration proceedings:
(i) from the stage of accrual of cause of action till filing of the arbitration proceedings;
(ii) during pendency of the proceedings before the arbitrator;
(iii) future interest arising between the date of the award and the date of the decree; and
(iv) from the date of the decree till realisation of the awarded amount.”
9.3 He has submitted that the term interest is neither defined in the Code nor in the Interest Act, 1978. According to West’s Legal Thesaurus, “interest” may mean “a charge that is paid to borrow for use of money”. In the Concise Oxford Dictionary, the term has been defined as “money paid for the use of money lent”. In Black’s Law Dictionary, the expression “interest” has been defined thus:
“Interest is the compensation allowed by law or fixed by the parties for the use or forbearance or detention of money.”
9.4 He has also relied upon the provision of Sec.34 of the Code which reads as follows:
“Sec.34 Interest :- (1) Where and in so far as a decree is for the payment of money, the Court may, in the decree, order interest at such rate as the Court deems reasonable to be paid on the principal sum adjudged, from the date of the suit to the date of the decree, in addition to any interest adjudged on such principal sum for any period prior to the institution of the suit, [with further interest at such rate not exceeding six per cent per annum as the Court deems reasonable on such principal sum], from the date of the decree to the date of payment, or to such earlier date as the Court thinks fit:
[Provided that where the liability in relation to the sum so adjudged had arisen out of a commercial transaction, the rate of such further interest may exceed six per cent per annum, but shall not exceed the contractual rate of interest or where there is no contractual rate, the rate at which moneys are lent or advanced by nationalised banks in relation to commercial transactions.]
9.5 He has also relied upon the provisions of Sec.3 and Sec.4 of the Interest Act which reads as under:
“Sec.3 Power of court to allow interest:- (1) In any proceedings for the recovery of any debt or damages or in any proceedings in which a claim for interest in respect of any debt or damages already paid is made, the Court may, if it thinks fit, allow interest to the person entitled to the debt or damages or to the person making such claim, as the case may be, at a rate not exceeding the current rate of interest, for the whole or part of the following period, that is to say,-
(a) if the proceedings relate to a debt payable by virtue of a written instrument at a certain time, then, from the date when the debt is payable to the date of institution of the proceedings;
(b) if the proceedings do not relate to any such debt, then, from the date mentioned in this regard in a written notice given by the person entitled or the person making the claim to the person liable that interest will be claimed, to the date of institution of the proceedings:
Provided that where the amount of the debt or damages has been repaid before the institution of the proceedings, interest shall not be allowed under this section for the period after such repayment.”
“Sec.4 Interest payable under certain enactments:- (1) Notwithstanding anything contained in Section 3, interest shall be payable in all cases in which it is payable by virtue of any enactment or other rule of law or usage having the force of law. (2) Notwithstanding as aforesaid, and without prejudice to the generality of the provisions of sub-section (1), the Court shall, in each of the following cases, allow interest from the date specified below to the date of institution of the proceedings at such rate as the Court may consider reasonable, unless the Court is satisfied that there are special reasons why interest should not be allowed, namely:-
(a) where money or other property has been deposited as security for the performance of an obligation imposed by law or contract from the date of the deposit;
(b) where the obligation to pay money or restore any property arises by virtue of a fiduciary relationship, from the date of the cause of action;
(c) where money or other property is obtained or retained by fraud, from the date of the cause of action;
(d) where the claim is for dower or maintenance, from the date of the cause of action.
9.6 Mr.Dhruva, party-in-person has submitted that he is entitled to interest from 1.1.81 till 1.7.83 i.e. pre-reference period on the ground that he has addressed a notice dtd.1.7.83 claiming interest from 1.1.81 (when dues become payable). He submitted that contractor can claim interest for the period which is prior to the date of issue of notice demanding the same as this was contemplated in the written notice particularly in view of Sec.34 of CPC read with Sec.3(1)(b) of the Interest Act. He submitted that contractor can claim his pre-reference interest from the date as the same became payable namely from the date the dues were illegally held back from payment as these were for ascertained amounts under written notice.
9.7 He has relied upon the judgment of the Hon’ble Apex Court in the case of B.V.Radha Krishna Vs. Sponge Iron India Ltd. reported in AIR 1997 SC 1324. In para 16 and 17 the Hon’ble Supreme Court has observed as under:
“Para 16. On the question of interest we think the learned counsel for the appellant is right in placing reliance on Section 3(1)(b) of the Interest Act. The appellant-Company (sic) had issued notice on 14.6.1984, demanding payment of the specified amount and interest on that specified amount at the rate of 21% per annum from 1.4.1983 till payment.”
“Para 17. In view of this, the learned counsel appearing for the respondent-Company could not support the order of the High Court in awarding interest from the date of notice, namely 14.6.1984, and not from the date mentioned in the notice viz.1.4.1983. In the result, we set aside the judgment of the High Court and restore the award of the arbitrator. There will be no order as to costs.”
9.8 Mr. Dhruva, party-in-person has also relied upon a judgment of the Hon’ble Supreme Court in the case of Executive Engineer vs. N.C.Budharaj & ors. reported in (2001) 2 SCC 721. In paras 22 and 25 of this judgment the Hon’ble Supreme Court has observed as under:
“There can be no controversy over the position that the Constitution Bench this Court in G.C.Roy case while declaring that the decision in Jena case does not lay down good law upheld, as a consequence the jurisdiction of the arbitrator to awards only pendente lite interest, as explained and highlighted in the subsequent decisions of this Court. When the claim involved for consideration in G.C.Roy case was only with reference to pendente lite interest it cannot be expected of the court to travel outside except for analysing the general principles, to academically adjudicate the other aspects of the matter also decided by the Bench in Jena case and overrule the same on such other points too. Be that as it may, the ratio or the basis of reasons and principles underlying a decision is distinct from the ultimate relief granted or manner of disposal adopted in a given case. While laying down Principle (i) in para 43 it has been in unmistakable terms declared (at SCC p.533) that the basic proposition that a person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation by whatever name it may be called viz. interest, compensation or damages, “as it is for the period prior to the arbitrator entering upon the reference” The efficacy and binding nature of this declaration of law cannot be either diminished or whittled down even on any known principle underlying the doctrine of “stare decisis” The same is the position with reference to Principles (ii) and (iii). It cannot be legitimately contended that these principles would either vary or could be different in a case relating to the award of interest for the pre-reference period and to assume such a contra position in juxtaposition would not only be distributive in nature but also illogical and self contradictory resulting in grave miscarriage of justice. Some of the very reasons and principles which weighed with the Constitution Bench in G.C.Roy case to sustain the jurisdiction of the arbitrator to award pendente lite interest in a claim arising out of an agreement which does not also prohibit the grant of interest, in our view would equally suffice and provide sound basis reasoning for upholding the power of the arbitrator to award interest in respect of the pre reference period, too. The further fact that decisions of this Court including the Jena case envisaged four circumstances or contingencies wherein such interest for pre-reference period can be countenanced by the arbitrator, is by itself sufficient to confer jurisdiction upon the arbitrator to entertain and consider the said claim also and consequently there is no justification to thwart the same even at the threshold denying the arbitrator power even to entertain the claim as such.”
“25. If that be the position, courts which of late encourage litigants to opt for and avail of the alternative method of resolution of disputes would be penalising or placing those who avail of the same in a serious disadvantage. Both logic and reason should counsel courts to lean more in favour of the arbitrator holding to possess all the powers as are necessary to do complete and full justice between the parties in the same manner in which the civil court seized of the same dispute could have done. By agreeing to settle all the parties through arbitration instead of having recourse to civil court to vindicate their rights the party concerned cannot be considered to have frittered away and given up any claim which otherwise it could have successfully asserted before courts and obtained relief. By agreeing to have settlement of disputes through arbitration the party concerned cannot be considered to have frittered away and given up any claim which otherwise it could have successfully asserted before courts and obtained relief. By agreeing to have settlement of disputes through arbitration, the party concerned must be understood to have only opted for a different forum of adjudication with less cumbersome procedure, delay and expense and not to abandon all or any of its substantive rights under the various laws in force, according to which only even the arbitrator is obliged to adjudicate the claims referred to him. As long as there is nothing in the arbitration agreement to exclude the jurisdiction of the arbitrator to entertain a claim for interest on the amounts due under the contract or any prohibition to claim interest of the amounts due and become payable under the contract the jurisdiction of the arbitrator to consider the award interest in respect of all periods subject only to Section 29 of the Arbitration Act 1940 and that too the powers of the court thereunder has to be upheld. The submission that the arbitrator cannot have jurisdiction to award interest for the period prior to the date of his appointment or entering into reference which alone confers upon him power is too stale and technical to be countenanced in our hands for the simple reason that in every case the appointment of an arbitrator or even resort to court to vindicate rights could be only after disputes have cropped up between the parties and continue to subsist unresolved and that if the arbitrator has the power to deal with and decide disputes which cropped up at a point of time and for the period prior to the appointment of an arbitrator it is beyond comprehension as to why and for what reason and with what justification the arbitrator should be denied only the power to award interest for the pre-reference period when such interest becomes payable and has to be awarded as a necessary or incidental to the sum awarded as due and payable, taking into account the deprivation of the use of such sum to the person lawfully entitled to the same.”
9.9 Relying upon both these two authorities, party-in-person submitted that the arbitrator had power to award interest for pre-reference period including the period mentioned in the written notice and in fact the arbitrator has given the interest in this behalf from that date and therefore arbitrator has not committed any error in awarding interest from 1.1.81. He submitted that this issue covers even the Claim No.4 which arbitrator has given which the learned City Civil Judge has set aside the same. He submitted that therefore the arbitrator was right and reasonings of the learned Judge setting aside claim No.4 is illegal and liable to be set aside as this issue pertains to pre-reference stage of interest. This aspect covered the appeal of the railway as well as Appeal No.52/97 which has been filed by the claimant in this behalf. The findings of pre-reference interest deal with both the contention of railway as well as contention of contractor in this behalf.
10. Pendente-lite Interest :
10.1 As regards interest pendente lite is concerned, he has relied upon the Constitution Bench judgment of the Hon’ble Supreme Court in the case of Secretary, Irrigation Department, Government of Orissa and others Vs. G.C.Roy reported in AIR 1992 SC 732. In para 43 on page 748 the Hon’ble Supreme Court has observed as under:
“The question still remains whether arbitrator has the power to award interest pendente lite, and if so on what principle. We must reiterate that we are dealing with the situation where the agreement does not provide for grant of such interest nor does it prohibit such grant. In other words, we are dealing with a case where the agreement is silent as to award of interest. On a conspectus of aforementioned decisions, the following principles emerge:
(i) A person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name. It may be called interest, compensation or damages. This basic consideration as valid for the period the dispute is pending before the arbitrator as it is for the period prior to the arbitrator entering upon the reference. This is the principle of S.34, C.P.C. and there is no reason or principle to hold otherwise in the case of arbitrator.
(ii) an arbitrator is an alternative form for resolution of disputes arising between the parties. If so, he must have the power to decide all the disputes or differences arising between the parties, if the arbitrator has no power to award interest pendente lite, the party claiming it would have to approach the Court for that purpose, even though he may have obtained satisfaction in respect of other claims from the arbitrator. This would lead to multiplicity of proceedings.
(iii) An arbitrator is the creature of an agreement. It is open to the parties to confer upon him such powers and prescribe such procedure for him to follow, as they think fit, so long as they are not opposed to law. (The proviso to S.41 and S. 3 of Arbitration Act illustrate this point). All the same, the agreement must be in conformity with law. The arbitrator must also act and make his award in accordance with the general law of the land and the agreement.
(iv) Over the years, the English and Indian courts have acted on the assumption that where the agreement does not prohibit and a party to the reference makes a claim for interest, the arbitrator must have the power to award interest pendente lite. Thawardas has not been followed in the later decisions of this Court. It has been explained and distinguished on the basis that in that case there was no claim for interest but only a claim for unliquidated damages. It has been said repeatedly that observations in the said judgment were not intended to lay down any such absolute or universal rule as they appear to, on first impression. Until Jena case almost all the courts in the country had upheld the power of the arbitrator to award interest pendente lite. Continuity and certainty is a highly desirable feature of law.
(v) Interest pendente lite is not a matter of substantive law, like interest for the period anterior to reference (pre-reference period). For doing complete justice between the parties, such power has always been inferred.”
10.2 Our finding is based on the recent Constitution Bench judgment of the Hon’ble Supreme Court in the case of Secretary, Irrigation Department, Government of Orissa where the Hon’ble Supreme Court has clarified the power of arbitrator to grant interest for the period pre-reference interest.
10.3 In view of this Constitution Bench Judgment of the Hon’ble Supreme Court, the award of the arbitrator granting pendente-lite interest is absolutely legal and valid as the same is covered by the Constitution Bench judgment of the Hon’ble Supreme Court.
11. Post Award Interest:-
11.1 For that purpose he has also relied upon the judgment in the case of Hindustan Construction Co.Ltd vs. State of J & K, reported in AIR 1992 SC 2192 where the Hon’ble Supreme Court after referring to G.C.Roy’s case in para 5 the Hon’ble Supreme Court has observed as under:
“Para 5 :- 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 vs. G.C.Roy (1991) 6 JT 349(AIR 1992 SC 732). 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 an 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 S.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 vs. Bango Steel Furniture (P) Ltd. (1967) 1 SCR 324/329: (AIR 1967 SC 1032 at page 1035) may be seen as also the decision in Gujarat Water Supply & Sewage Board vs. Unique Erectors (1989) 1 SCR 318: (AIR 1989 SC 973) which upholds the said power though on a somewhat reasoning. We therefore, think that the award on item No.8 should have been upheld.”
11.1(A) In view of this judgment awarding of the interest by the arbitrator on the award passed by arbitrator till decree passed by the Court is legal and valid.
FORTH STAGE:
11.1(B) Interest to be given from the date of decree till actial payment received.
11.2 Interest to be given by the arbitrator for the fourth stage under Arbitration Act 1940 namely post decree in terms of the award and till the date of actual payment.
Under Sec.29 of the Act of 1940 specifically empowered the court to a award interest on the principal sum adjudged by the award and confirmed by the decree of court from the date of the decree till the date of payment or realisation, whichever is earlier, insofar as award was for payment of money.
11.3 In support of the aforesaid contention, the party-in-person has relied upon the judgment of the Hon’ble Apex Court in the case of T.P.George Vs. State of Kerala and Others reported in (2001) 2 SCC 758, in para 10 the Hon’ble Apex Court has observed as under:
“The next question is whether the High Court was right in setting aside the award of the interest from the date of the award. This Court has held in the case of Jagdish Rai and Bros. v. Union of India that the award of interest ought to be granted in all cases when there is a decree of money unless there are strong reasons to decline the same. In the case of Jagdish Rai & Bros. v. Union of India this Court has held that there are four stages of grant of interest, viz., (1) from the stage of accrual of cause of action till filing of the arbitration proceedings, (2) during pendency of the proceedings before the arbitrator, (3) future interest arising between date of award and date of the decree, and (4) interest arising from date of decree till realisation of the award. The power of court to grant interest from the date of decree is not in doubt. In the case of Hindustan Construction Co.Ltd. v. State of J&K this Court has held that the arbitrator is competent to award interest from the date of the award. This Court has held in the case of Secy., Irrigation Deptt., Govt. of Orissa v. G.C.Roy that the arbitrator has power to grant interest pendente lite. Recently in the case of Executive Engineer, Dhenkanal Minor Irrigation Division v. N.C. Budharaj this Court has held that an arbitrator can award interest for the pre-reference period. Thus as per law laid down by this Court interest can be awarded at all four stages. The reasoning given by the High Court that interest cannot be awarded by the arbitrator is thus fallacious and cannot be sustained. In our view the direction to pay interest from the date of award, cannot be faulted. The impugned judgment to the extent that it disallows the interest from the date of the award, is set aside.”
11.4 In view of the same, this Court has jurisdiction to pass an order of interest on the award as confirmed by decree of trial court till the claimant obtained the actual payment in this behalf.
11.5 In view of this aforesaid discussions which we had, in our view, the present appeals filed by the railway are to be rejected. Clause 16(2) does not bar awarding interest by the arbitrator to the claimants. In our view, the order given by arbitrator without assigning reasons is also legal and valid in view of the judgment in the case of Raipur Development Authority (supra) and in view of the earlier discussions which we had, the party-in-person is entitled to the interest as under:
(i) from the date of demand till reference means pre-reference period.
(ii) from 1.7.83 to 28.4.95 i.e. date of entering reference till passing of the award namely pendente lite interest.
(iii) from the date of award till the trial court passed the decree.
(iv) from the stage of date of decree till actual payment realised.
11.6 In our view, all these period of interest the party-in-person is entitled also in view of Sec.3 & 4 of the Interest Act, Sec.34 of the CPC and Sec.29 of the Arbitration Act and also all the judgments which we had referred earlier in this behalf.
FIRST APPEAL NO.52 OF 1997 APPEAL FILED BY CLAIMANT SO FAR AS CLAIMS NO.4 AND 5 WHICH WERE GRANTED BY ARBITRATOR WHICH HAVE BEEN SET ASIDE BY THE LEARNED CITY CIVIL JUDGE.
12. This appeal is filed by the claimant against the judgment and decree dated 30th August, 1996, passed by the City Civil Court, Ahmedabad, in Civil Misc. Application No.585/95 under sec.30 read with sec.33 of the Arbitration Act, 1940. This appeal is against the judgment and decree by which the learned City Civil Judge partly allowed the application of the Railway and set aside claim in respect of Claim Nos.4 and 5 awarded by the arbitrator contending para 4(1) of the award.
13. Mr.Dhruva, party-in-person raised the first contention that in this case the award is a non-reasoned order and Court cannot sit an appeal over the award. It was submitted that the learned Judge has set aside the claim No.s 4 and 5 as if the Court sit an appeal over the award in a civil suit and not an application under Sec.30 and 33 of the Arbitration Act. It was submitted that the trial court upheld without going into the merits and demerits of the claim. The learned trial Judge has no jurisdiction to judge the legality and validity of the award when the award is a non-reasoned award.
3.1 Mr.Dhruva, party-in-person without prejudice to the aforesaid contention also raised that even if the trial court had jurisdiction to consider claim No.4 and 5 and thereafter set aside claim no.4 and 5 awarded by the arbitrator it was submitted that the learned Judge has not properly considered the provisions of sec.3(1)(a) and sec.3(1)(b) of the Interest Act, 1976. As regards jurisdiction of the arbitrator to award interest in pre-reference period, pendente-lite and other interest is concerned, we have already discussed this aspect in our discussion in Appeal No.4393 of 1996 filed by Railway and therefore we are not repeating what we have held in that behalf. However, the party-in-person relied upon sec.3 and 4 of the Interest Act and Sec.34 of the Code of Civil Procedure which we have already referred in earlier appeals in this behalf and therefore we are not again quoting this section here in this appeal.
14. While discussing the pre-reference interest, we have already dealt with the contention of contractor that contractor can claim amount of interest from the period mentioned in the written notice and we have also held that the contractor is entitled to pre-reference interest in view of the recent Constitution Bench judgment of the Hon’ble Supreme Court. In view of the same, as regards Claim No.4 which has been set aside by the learned City Civil Judge to that extent we have already dealt with this submission earlier part and therefore we are not repeating the same finding here. We only say that Appeal No.52/97 setting aside the claim No.4 by the learned City Civil Judge is concerned is allowed in this behalf.
15. CLAIM NO. 5 :-
15.1 As regards claim No.5 is concerned, the contractor submitted that actually this is what in trade circles namely interest for the period if it is unpaid during litigation in legal parlance it became due from the date of suit to date of judgment and then further to the date of judgment to the date of realisation. He submitted that the learned Judge has set aside the said claim on the ground that the arbitrator has given interest on interest.
15.2 The party-in-person submitted that as regards arbitrator award, the operative order which has been set out in para 2.5(a) provides that there are three different claims, claim No.4 relates the period of interest from various dates and claim No.5 relates to interest on the amount of claim till payment i.e. interest worked out by Umpire from 1.7.1983 to 28.4.1995 on claim Nos. 1 to 4 of Clause 3. He submitted that the total claim was Rs.22,54,903/- whereas the arbitrator awarded only Rs.4,56,975.38p/-. So the arbitrator has not given entire amount of interest in this behalf. Therefore one cannot say that arbitrator has given interest on interest. It is submitted that therefore the findings of the learned City Civil Judge that the claim No.5 pertains to interest on interest is not wholly incorrect and the learned City Civil Judge has clearly erred in setting aside the award of the arbitrator qua Claim No.5. He submitted that words in Sec.30 (Old Act) are that award shall not be set aside were imperatives, and take away the jurisdiction of the Court to set aside the award except one or more grounds specified in section. So in order to ascertain whether there is any ground for setting aside of award it is necessary to look at the provisions of the section. As per Sec.30 of the Act which provides ground for setting aside the award only provides that the award shall not be set aside except one or more grounds namely (i) arbitrator or umpire has misconducted himself; (ii) award has been made after the supersession of the arbitration or the proceedings becoming invalid; and (iii) award has been improperly procured or otherwise invalid. He submitted that the railway has failed to prove any of the grounds in this behalf and therefore the judgment of the learned Judge for setting aside the said award qua Claim No.5 is illegal and bad in law. The party-in-person further submitted that the railway has neither objected to giving such claim before arbitrator nor before the learned City Civil Judge while challenging the award of the arbitrator regarding claim No.5. Therefore, in any view of the matter, the railway is barred from challenging this type of claim before the learned City Civil Judge in this behalf. In view of this, the setting aside the award of the learned City Civil Judge is also bad in law and liable to be set aside. The party-in-person further submitted that the Court in dealing with an application to set aside an award has not to consider whether the view of the arbitrator on the evidence is justified. The arbitrator’s adjudication is generally considered binding between the parties, for he is a tribunal selected by the parties and the power of the court to set aside the award is extremely restricted to cases set out in S. 30. It is not open to the court to speculate, where no reasons are given by the arbitrator, as to what impelled the arbitrator to arrive at his conclusion. On the assumption that the arbitrator must have arrived at his conclusion by a certain process of reasoning, the court cannot proceed to determine whether the conclusion is right or wrong. It is not open to the court to attempt to probe the mental process by which the arbitrator has reached his conclusion where it is not disclosed by the terms of his award.
15.3 In support of the same the party-in-person has relied upon the judgment of the Hon’ble Supreme Court in the case of Rajasthan State Mines and Minerals Ltd.(supra), Arosan Enterprises Ltd.(supra), Indu Engineering & Textiles Ltd.(supra) in this behalf.
16. Scope of interference of award of arbitrator.
16.1 Mr. Dhruva – party in person further contended that here the arbitrators have given break up of each claim as directed by the letter of the General Manager Western Railway and they have also considered the counter claim of the Railway and therefore, the arbitrators have acted within the terms of the reference and there is no illegality committed by the arbitrators. Mr. Dhruva has also stated that this court has very limited jurisdiction to consider the legality and validity of the award of the arbitrators as confirmed by the trial court. For that purpose learned counsel has relied upon the recent judgment of the Hon’ble Supreme Court in the case of Rajasthan State Mines & Minerals Ltd. vs. Eastern Engg.. Enterprises reported in 1999(9) SCC 283 particularly para 44 (at page No. 309) clause (a)(b) (c) and (f)
Para 44- From the resume of the aforesaid decisions, it can be stated that:
(a) It is not open to the court to speculate, where no reasons are given by the arbitrator as to what impelled the arbitrator to arrive at his conclusion.
(b) It is not open to the court to admit to probe the mental process by which the arbitrator has reached his conclusion where it is not disclosed by the terms of the award.
(c) If the arbitrator has committed a mere error of fact or laws in reaching his conclusion on the disputed question submitted for his adjudication then the court cannot interfere.
(d) xxxx
(e) xxxx
(f) To find out whether the arbitrator has travelled beyond his jurisdiction, it would be necessary to consider the agreement between the parties containing the arbitration clause. The arbitrator acting beyond his jurisdiction is a different ground from the error apparent on the face of the record”
16.2 The party-in-person has also relied upon the recent judgment of the Hon’ble Supreme Court in the case of M/s. Arosan Enterprises Ltd. Vs. Union of India & Another reported in 1999(9) SCC 449 (Civil Appeal Nos.8010 of 1995 decided on 16th September, 1999). On page 474 (para 34) the Hon’ble Supreme Court has observed as under:
“(Para 34 of SCC) : Turning attention on the other focal point, namely the interference of the court, be it noted that Section 30 of the Arbitration Act, 1940 providing for setting aside an award for an arbitrator is rather restrictive in its operation and the statute is also categorical on that score. The use of the expression `shall’ in the main body of the Section makes it mandatory to the effect that the award of an arbitration shall not be set aside excepting for the grounds as mentioned therein to wit: (i) arbitrator or umpire has misconducted himself; (ii) award has been made after the supersession of the arbitration or the proceedings becoming invalid; and (iii) award has been improperly procured or otherwise invalid.”
“(Para 35 of SCC) : The above noted three specific provisions under Section 30 thus can only be taken recourse to in the matter of setting aside of an award. The legislature obviously had in its mind that the Arbitrator being the judge chosen by the parties, the decision of the Arbitrator as such ought to be final between the parties.”
16.3 In para 37 on page 475 of the said judgment the Hon’ble Supreme Court has observed as under:
“(Para 37 of SCC) : The common phraseology `error apparent on the face of the record’ does not itself, however, mean and imply closer scrutiny of the merits of documents and materials on record. The court as a matter of fact, cannot substitute its evaluation and come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. If the view of the arbitrator is a possible view the award or the reasoning contained therein cannot be examined.”
16.4 In para 38 on Page 477 of the said judgment the Hon’ble Supreme Court has observed as under:
“(Para 38 of SCC) : It is on the basis of this well settled proposition that the learned Single Judge came to a conclusion that the findings of the Arbitrators in regard to the extension of delivery period and failure to fix the fresh date has resulted in breach of the contract on the part of the Government and the same being purely based on appreciation of material on record by no stretch it can be termed to be an error apparent on the face of the record entitling the court to interfere. The Arbitrators have, in fact, come to a conclusion on a closer scrutiny of the evidence in the matter of re-appraisal of evidence by the court is unknown to a proceeding under Section 30 of the Arbitration Act. Re-appreciation of evidence is not permissible and as such we are not inclined to appraise the evidence ourselves save and except what is noticed herein before pertaining to the issue as the time being the essence of the contract. In this context, reference may be made to a decision of this Court in the case of M.Chellapan Vs. Secretary, Kerala State Electricity Board and Another (1975(1) SCC 289). Mathew, J. speaking for the three-Judge Bench in paras 12 and 13 observed as below:(SCC pp.296-97)
“12. The High Court did not make any pronouncement upon this question in view of the fact that it remitted the whole case to the arbitrators for passing a fresh award by its order. We do not think that there is any substance in the contention of the Board. In the award, the umpire has referred to the claims under this head and the arguments of the Board for disallowing the claim and then awarded the amount without expressly adverting to or deciding the question of limitation. No mistake of law appears on the face of the award. The umpire as sole arbitrator was not bound to give a reasoned award and if in passing the award he makes a mistake of law or of fact, that is no ground for challenging the validity of the award. It is only when a proposition of law is stated in the award and which is the basis of the award, and that is errorneous, can the award be set aside or remitted on the ground of error of law apparent on the face of the record.
“Where an arbitrator makes a mistake either in law or in fact in determining the matters referred, but such mistake does not appear on the face of the award, the award is good notwithstanding the mistake, and will not be remitted or set aside.”
“The general rule is that as the parties choose their own arbitrator to be the judge in the disputes between them, they cannot, when the award is good on its face, object to his decision, either upon the law or the facts. (see Russell on Arbitration, 17th Ed.p.322).”
“13. An error of law on the face of the award means that you can find in the award or a document actually incorporated thereto, as for instance, a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which is the basis of the award and which you can then say is errorneous (see Lord Dunedin in Champsey Ehara & Co. V. Jivray Baloo Spg. & Wvg. Co.Ltd). In Union of India V. Bungo Steel Furniture Pvt. Ltd. this Court adopted the proposition laid down by the Privy Council and applied it. The Court has no jurisdiction to investigate into the merits of the case and to examine the documentary and oral evidence on the record for the purpose of finding out, whether or not the arbitrator has committed an error of law.”
16.5 In para 39 on page 478 of the said judgment the Hon’ble Supreme Court has observed as under:
“(Para 39 of SCC) : In any event the issues raised in the matter on merits relate to default, time being the essence, quantum of damages these are all issues of fact, and the arbitrators are within their jurisdiction to decide the issue as they deem it fit – the Courts have no right or authority to interdict an award on a factual issue and it is on this score the Appellate Court has gone totally wrong and thus exercised jurisdiction which it did not have. The exercise of jurisdiction is thus wholly unwarranted and the High Court has thus exceeded its jurisdiction warranting interference by this Court. As regards issues of fact as noticed above and the observations made hereinabove obtains support from a judgment of this Court in the case of Olympus Superstructures Pvt.Ltd. Vs. Meena Vijay Khetan & Others (1999 (5) SCC 651).”
16.6 The party-in-person has also relied upon the latest judgment of the Hon’ble Supreme Court in the case of Indu Engineering & Textiles Ltd. Vs. Delhi Development Authority reported in (2001) 5 SCC 691, particularly para 5 of the said judgment which reads as under:
“The scope for interference by the court with an award passed by the arbitrator is limited. Section 30 of the Arbitration Act, 1940 (for short “the Act”) provides in somewhat mandatory terms that an award shall not be set aside except on one or more of the grounds enumerated in the provision. The three grounds set out in the section are:
(a) that an arbitrator or umpire has misconducted himself or the proceedings;
(b) that an award has been made after the issue of an order by the court superseding the arbitration or after arbitration proceedings have become invalid under Section 35.
(c) that an award has been improperly procured or is otherwise invalid.
Interpreting the statutory provision courts have laid stress on the limitations on exercise of jurisdiction by the court for setting aside or interfering with an award in umpteen cases. Some of the well-recognised grounds on which interference is permissible are:
(1) violation of the principle of natural justice in passing the award;
(2) error apparent on the face of the award;
(3) the arbitrator has ignored or deliberately violated a clause ion the agreement prohibiting dispute of the nature entertained;
(4) the award on the face of it is based on a proposition of law which is errorneous, etc.”
16.7 The party-in-person has relied upon Russell on Arbitration (21st Edition) Chapter 8 The Role of the Court after the award particularly sub-chapter 4 which provides Challenge of Awards para 8.027 reads as under:
“8.027 Introduction A party to the arbitral proceedings may apply to the court to challenge an award on the grounds of serious irregularity affecting the tribunal, the proceedings or the award or that the arbitral tribunal had no substantive jurisdiction over the dispute in question. It is possible to appeal against an award on a question of law.”
16.8 For that purpose the party-in-person has relied upon the commentary of Mulla on Code of Civil Procedure in Sec.34 Vol.1 page 323 reads as under:
“In a reference to arbitration where all disputes in a suit are referred to arbitration and one of such disputes relates to interest pendente lite, the arbitrator has jurisdiction to award such interest. That is because though this section does not in terms apply to arbitrations, it would be an implied term of the reference that he should decide the dispute according to law and would give such relief with regard to interest pendente lite as a Court would do if it decided the dispute. In 1988, the Supreme Court held that the Interest Act, 1978 does not provide for the period after institution of the suit. That Act covers arbitrators also, for the above period. But arbitrators cannot award interest, pendente lite unless the question is expressly made the subject matter of reference. This has now been overruled by the Supreme Court (Bench of 5 Judges), holding that the arbitrator has such a power. Section 34 does not in terms, apply to arbitrators. But the arbitrators has been held to have power to award interest for the period of pendency of arbitration. Contrary decisions are no longer good law. The interest for the future period from the date of the arbitration award till payment can be granted by the court.”
16.9 After relying upon the aforesaid passage of Mulla, the party-in-person has relied upon the judgment of the Hon’ble Apex Court in the case of Jugal Kishore Prabhatilal Sharma and others Vs. Vijayandra Prabhatilal Sharma and another reported in 1993(1) Arbitration Law Reporter p.488 where the Hon’ble Supreme Court also considered the commentary of Mulla and on Page 504 the Hon’ble Supreme Court has observed as under:
“In our view, it will be reasonable and proper to direct the payment of interest from 1.1.1983 onwards. We direct accordingly. We see, however, no reason to otherwise modify the award on the question of interest, either in regard to the rate of interest or in regard to the addition of interest till the date of award to the principal amount determined as payable to the applicants which is permissible under Section 34 of the Code of Civil Procedure. The award on interest will be modified accordingly.”
16.10 The party-in-person has also relied upon the judgment of the Hon’ble Apex Court in the case of Oil & Natural Gas Commission Vs. M.C.Clellant Engineers S.A. reported in 1999(2) Arb.L.R. 509. In para 4 the Hon’ble Supreme Court has observed as under:
“There cannot be any doubt that the arbitrators have powers to grant interest akin to Section 34 of the C.P.C. which is the power of the court in view of Section 29 of the Arbitration Act, 1940. It is clear that interest is not granted upon interest awarded but upon the claim made. The claim made in the proceedings is under two heads – one is the balance of amount claimed under invoices and letter dated 10.2.1981 and the amount certified and paid by the appellant and the second is the interest on delayed payment. That is how the claim for interest on delayed payment stood crystallized by the time the claim was filed before the arbitrators. Therefore, the power of the arbitrators to grant interest on the amount of interest which may, in other words, be termed as interest on damages or compensation for delayed payment which would also become part of the principal. If that is the correct position in law, we do not think that Section 3 of the Interest Act has any relevance in the context of the matter which we are dealing with in the present case. Therefore, the first contention raised by Shri Datta, though interesting, deserves to be and is rejected.”
16.11 The party-in-person therefore submitted that in view of provisions of Sec.30 read with Sec.33 of the 1940 Act and in view of the judgment of the Hon’ble Supreme Court in the case of Rajasthan State Mines & Mineral Ltd.(supra), Arosan Enterprises Ltd.(supra) and also in the case of Indu Engineering & Textiles Ltd.(supra) and other judgments which has been referred by us the Court has extremely limited jurisdiction to set aside the award particularly when arbitrator has given no reasons in this case arbitrator has not given any reasons for coming to the conclusion of Claim No.5. He submitted that therefore when the learned City Civil Judge has set aside the said claim, the learned Judge has not properly exercised the jurisdiction vested in the provisions of the Act and the same is contrary to and inconsistent with the aforesaid judgment of the Hon’ble Apex Court in this behalf and therefore the judgment of the learned City Civil Judge ought to have been set aside in this behalf and this Court may restore the award of the arbitrator. He further submitted that when a Court is called upon to decide the objections raised by a party against an arbitral award, the jurisdiction of the Court is limited has expressly interpreted in Sec.34 of the Act and the Court has no jurisdiction to sit in appeal and examine the correctness of the award on merits with reference to the materials produced before the arbitral tribunal. The court cannot sit in appeal over the views of the arbitral tribunal by re-examining and re-assessing the materials. An arbitral award cannot be challenged on the ground of application of principles of law when the principles have been correctly laid down by the arbitral tribunal. The party-in-person submitted that in this case the learned City Civil Judge has tried to re-examine and re-assess the material on record and therefore committed the error apparent on the face of the record and has not properly exercised the jurisdiction vested in the provisions of the Arbitration Act.
OUR CONCLUSION REGARDING APPEAL No.52/97
17. In our view, in view of the judgment of the Hon’ble Supreme Court in Rajasthan State Mines & Minerals Ltd. case the Court has very limited jurisdiction to interfere with the award of the arbitrator, particularly where arbitrator has not given any reasons in this behalf. We have considered the agreement between the parties containing arbitration clause. In our view, the arbitrator has not committed any error while passing the award in this behalf.
17.1 In our view before arbitrator as regards Claim No.5 total amount claimed was Rs.22,54,903.72p/-. Out of that arbitrator has awarded only Rs.4,56,975.38. The award of the arbitrator is non-reasoned order and, therefore, it will be difficult for this Court to come to a conclusion that arbitrator under Claim No.5 has given interest on interest by considering the demand of interest for total amount of claims No.1,2,3 and 4. In our view, the Umpire has allowed only 20% claim stating nothing about how he arrived at conclusion. It is therefore not proper for this Court to come to the conclusion that arbitrator has given interest on interest. As we have referred to the judgment of the Hon’ble Supreme Court in Arosan Enterprises Ltd. (supra), judgment of Jugal Kishor and also O.N.G.C. case (supra) the Court has very extremely limited jurisdiction to interfere with the award of the arbitrator particularly when no reasons have been given by the arbitrator. In fact railway had failed to prove that arbitrator has awarded interest on interest in Claim No.5. In our view, none of the condition laid down under Sec.30 are specified and, therefore, the learned City Civil Judge was clearly erred in setting aside the award of the arbitrator qua regarding Claim No.5. As regards Claim No.4 is concerned, we have already dealt with in earlier portion of our judgment in para 16 of the judgment and therefore both the award regarding Claims No.4 and 5 we set aside the judgment of the learned City Civil Judge and allow the appeal of the claimant in this behalf.
17.2 We have also considered Sec.30 and Sec.33 of the Arbitration Act and the ground for challenging the award of arbitrator in this case arbitrator has not given any reasons and it was not open to the City Civil Court to speculate what has been awarded by the arbitrator in absence of reasons. In our view, the arbitrator has not committed any mistake apparent on the face of the record and when parties have selected arbitrator to be a Judge in dispute between them thereafter parties cannot object to his decision that arbitrator has given award incorrect. The Court cannot sit in appeal over the award of the arbitrator and, therefore, in our view, the award of the arbitrator has to be upheld and the order of the City Civil Court will have to be quashed and set aside as regards Claim Nos.4 and 5 is concerned.
FINAL CONCLUSION:-
18. In view of this, we dismiss the First Appeals No.4394 of 1996, 4393 of 1996 and 4395 of 1996 filed by the Railway and confirmed the judgment and decree dated 30th August, 1996, passed by the City Civil Court, Court No.20, Ahmedabad, in Civil Misc.Application No.442/95 and others under Sec.9 of the Act. We also confirmed the award of the arbitrator in this behalf.
18.1 In view of the same, following reliefs can be granted.
18.2 In view of the aforesaid discussions, in our view, the arbitrator was perfectly justified in awarding interest from 1.1.81 to 1.7.83 i.e. from the date of demand till reference means pre-reference period. The Arbitrator was also perfectly justified in awarding interest from 1.7.83 to 28.4.95 i.e. the date of reference till passing of the award namely pendente-lite interest. In our view, therefore, the arbitrator was also perfectly justified in awarding interest from the date of the award i.e. 28.4.95 till realisation and, therefore, the award of the arbitrator is perfectly legal and valid in this behalf.
18.3 The claimant had claimed interest to be paid till payment is made by railway which includes the future interest also. In this case the Umpire awarded an amount of total Rs.7,78,798/- and stated that Railway should pay this amount within 45 days failing which 15% interest to accrue on the amount awarded till paid.
18.4 As Railway failed and neglected to make the payment as contemplated by the award of the arbitrator, the contractor is entitled to future interest also in this behalf.
19. As regards First Appeal No.52 of 1997 filed by the claimant is concerned, the same is allowed. We hereby set aside the judgment and decree dated 30th August, 1996, passed by the City Civil Court, Ahmedabad, in Civil Misc. Application No.585/95 so far as the learned Judge allowed the application in respect of Claims No.4 and 5 award by arbitrator in this behalf. We confirmed the award of the arbitrator so far as Claims No.4 and 5 are concerned. We, therefore, allowed the First Appeal No.52/97 filed by the claimant in this behalf.
20. In this matter the Contractor has worked from 1971 to 1983. Thereafter difference and dispute arose between the Contractor and the Railway. Somewhere in 1986 arbitrator was appointed. The arbitrator declared his award on 28th April, 1995, at Bombay. Thereafter proceedings were initiated in City Civil Court, Ahmedabad, and the City Civil Court by its judgment and decree dated 30th August, 1996, upheld the award of the arbitrator towards Claims No.1,2 and 3 and set aside the Claim No.4 and 5 awarded by the arbitrator. Thereafter we have heard the matter and ultimately we have rejected the appeal of the Railway so far as Claims No.1,2 and 3 are concerned, and we have allowed the Appeal No.52 of 1997 filed by the claimant as regards Claims No.4 and 5. In view of the peculiar facts and circumstances of the case, we are of the view that the Contractor has been unnecessary harassed for a very long period in this behalf. In view of the same, we have indicated that Railway has to pay 12% interest on the final amount which was awarded by the arbitrator from the date of the decree till the payment is realised if the payment has been made three months after the receipt of the copy of the judgment of this Court. If the Railway failed and neglect to make the payment beyond three months after receipt of the copy of the judgment the railway has to pay 15% interest accrued on the amount till the amount is paid. In view of the same, we also award full cost to the party-in-person from the railway both in the trial court as well as the appellate court. Decree to be drawn accordingly.