{"id":152555,"date":"1997-10-21T00:00:00","date_gmt":"1997-10-20T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/ram-nath-international-vs-state-of-u-p-on-21-october-1997"},"modified":"2015-03-09T05:54:52","modified_gmt":"2015-03-09T00:24:52","slug":"ram-nath-international-vs-state-of-u-p-on-21-october-1997","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/ram-nath-international-vs-state-of-u-p-on-21-october-1997","title":{"rendered":"Ram Nath International … vs State Of U.P on 21 October, 1997"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Ram Nath International … vs State Of U.P on 21 October, 1997<\/div>\n
Author: M S Manohar<\/div>\n
Bench: Sujata V. Manohar, D.P. Wadhwa<\/div>\n
           PETITIONER:\nRAM NATH INTERNATIONAL CONSTRUCTION PVT. LTD.\n\n\tVs.\n\nRESPONDENT:\nSTATE OF U.P.\n\nDATE OF JUDGMENT:\t21\/10\/1997\n\nBENCH:\nSUJATA V. MANOHAR, D.P. WADHWA\n\n\n\n\nACT:\n\n\n\nHEADNOTE:\n\n\n\nJUDGMENT:\n<\/pre>\n
[with Civil  Appeal No\t7375 of\t 1997 [arising out of SLP[c)
\nNo. 20055 of 1997 (cc 6248\/97}]
\n\t\t      J U D G M E N T
\nMrs. Sujata V. Manohar, J.\n<\/p>\n
     Delay in  filing S.L.P.(c)\t No. 20055  \/97 (cc 6248) is
\ncondoned.\n<\/p>\n
     Leave in both the petitions is granted.\n<\/p>\n
     These cross appeals arise from a common judgment of the
\nAllahabad High\tCourt.\t For the  sake of  convenience,\t the
\nappellant, M\/s.\t Ram Nath  International  Construction\tPvt.
\nLtd., in  the appeal arising from S.L.P.(C) No. 4328 of 1997
\nis referred  to as  the appellant while the State of U.P. is
\nreferred to as the respondent.\n<\/p>\n
     The  appellant  entered  into  an\tagreement  with\t the
\nrespondent dated  17.2.1989 for\t the work  o lining  of\t the
\nUpper Ganga  Canal  from  kilometres  189.50  to  197.00  at
\nGesupur in  Bulandshahr. The  total amount  payable  to\t the
\nappellant under the agreement was Rs. 4,81,4,312.  Clause 32
\nof the\ttender which related to “Extra Items” stated, “Extra
\nterms  of   work  shall\t not  vitiate  the  contract.\t The
\ncontractor shall  be bound to execute extra items of work as
\ndirected by the Engineer Incharge.  The rates of extra items
\nare to\tbe mutually  agreed”. Clause  51 which\tprovides for
\narbitration is as follows:\n<\/p>\n
     “ARBITRATION:\n<\/p><\/blockquote>\n
     All  the  disputes\t in  respect  of
\n     which the\tdecision  has  not  been
\n     final  and\t  conclusive  shall   be
\n     referred for  arbitration to a sole
\n     arbitrator appointed as follows.
\n     The arbitration  shall be conducted
\n     in accordance  with the  provisions
\n     of the Indian Arbitration Act, 1940
\n     or\t  any\tstatutory   modification
\n     thereof.\t  The  decision\t of  the
\n     arbitrator\t shall\t be  final   and
\n     binding  on  the  parties\tthereto.
\n     The arbitrator  shall determine the
\n     amount of\tcosts of  arbitration to
\n     be awarded to either parties.<\/p><\/blockquote>\n
     Performance  under\t  the\tcontract
\n     shall    continue\t   during    the
\n     arbitration     proceedings     and
\n     payments due  to the  contractor by
\n     the owner\tshall  not  be\twithheld
\n     unless they  are the subject matter
\n     of the arbitration proceedings.
\n     All award\tshall be  in writing and
\n     in case  of awards amounting to Rs.
\n     100 lakhs\tabove, such awards shall
\n     state  reasons   for  the\t amounts
\n     awarded.\n<\/p><\/blockquote>\n
     Neither party  is entitled to bring
\n     a\tclaim\tto  arbitration\t if  the
\n     arbitrator has  not been  appointed
\n     before  the  expiration  of  thirty
\n     days   after    defect    liability
\n     period.”<\/p><\/blockquote>\n
     Disputes arose between the appellant and the respondent
\nin connection  with the\t execution of  the work specified in
\nthe tender as also in relation to payment for extra items of
\nwork.\tUltimately by  an Office Memorandum dated October 4,
\n1992 disputes  between the parties were referred to the sole
\narbitration of\tShri Thakur  Das, Chief Engineer, Design and
\nResearch, I.D.U.P.,  Lucknow.\tThe terms  of  reference  as
\nrecorded in the Office Memorandum are as follows:-\n<\/p>\n
     “as such  Shri  Thakur  Das,  Chief
\n     Engineer,\tDesign\t and   Research,
\n     I.D.,  U.P.,   Lucknow  is\t  hereby
\n     appointed\tas  Arbitrator\tfor  the
\n     following claims  as raised  by the
\n     contractor vide  his  letter  dated
\n     13.12.1991\t against  the  agreement
\n     No.B2-02A-033    dated    17.2.1989
\n     according\tto   para  51\tof   the
\n     Agreement.\n<\/p><\/blockquote>\n
     i) Rate  for extra\t item  of  earth
\n     work beyond  lip cutting  in  reach
\n     km. 189.50 to km.190.70.\n<\/p><\/blockquote>\n
     ii) Bailing out of standing water.\n<\/p><\/blockquote>\n
     iii) Earth\t work beyond lip cutting
\n     in reach km.190.70 to km. 197.00.\n<\/p><\/blockquote>\n
     iv) Claims\t of idle  labour due  to
\n     non supply of cement.”<\/p><\/blockquote>\n
     The arbitrator  has given\ta  detailed  speaking  award
\ndated 23.5.1994\t under which,  inter alia, in respect of the
\nextra item  of earth  work beyond  lip cutting\tin reach  km
\n189.50 to km.190.70. the arbitrator has awarded a sum of Rs.
\n72.22.740\/. The arbitrator has also awarded to the appellant
\ninterest at the rate of 18% per annum on the total amount of
\nclaim (Rs.  1,71,11,208\/-) with\t effect from 1.1.1991 to the
\ndate of the award and further interest at the rate of 6% per
\nannum of the said amount from the date of the award till the
\ndate of the decree or payment whichever is earlier.\n<\/p>\n
     The appellant  applied for\t a decree  in terms  of\t the
\naward while  the respondent  filed objections.\tThe District
\nJudge granted  decree in  terms of the award.  In the appeal
\nwhich was  filed before\t the High Court, the High Court has,
\ninter alia. disallowed the claim for extra earth work beyond
\nlip cutting in the reach 189.50 to 190.70 kms. on the ground
\nthat the  arbitrator  travelled\t beyond\t the  scope  of\t his
\nreference in  granting the  said amount.   The appeal of the
\nappellant before  us challenged\t this finding  of  the\tHigh
\nCourt.\t The respondent\t in its\t cross appeal has challenged
\nthe award  of interest\tby the arbitrator at the rate of 18%
\nper annum for 1.1.1991 to the date of the award.\n<\/p>\n
     The first\titem of\t dispute  relates  to  the  work  of
\nexcavating the canal section from kms. 189,50 to kms. 190.70
\nin addition  to the  earth work\t involved in lip cutting for
\nthis section and lining it.  According to the respondent, in
\nthe  Technical\t Specifications\t annexed  to  the  contract,
\nparagraph 2.09.01  stated that\tfrom kms. 190.70 to kms. 197
\nearth work  involved is\t in lip cutting; and from kms. 189.5
\nto kms.190.7  whole of\tthe anal section is to be excavated.
\nIn the pre-bid conference which was held, the minutes of the
\nmeeting record\tthat departmental  machines will  be working
\nfrom  kms.190.7\t  to  kms.197.\t  The  canal  cross  section
\navailable will\tbe irregular and the contractor will have to
\nexcavate the  remaining quantity  to the  dimensions  shown.
\nBetween kms.  189.5 and\t kms. 190.7 whole of the canal cross
\nsection is  to\tbe  excavated  below  ground  level  by\t the
\ncontractor.   The respondent  contends that  excavating\t the
\ncanal is  not extra work.  But the rate for this work is not
\nspecified anywhere.  Bill of Quantity, which is also annexed
\nto the\tcontract specified  the rates for different kinds of
\nwork which  the contractor has to carry out.  Item at S.No.1
\nprovides for payment at the rate of Rs. 19\/- per cubic metre
\nof earth  for “the earth work in lip cutting, transportation
\nin  embankment\tor  spoil  bank\t including  all\t lead  lifts
\nmechanical   compaction,   dressing,   dewatering   as\t per
\nspecification”.\t  The rate for the work of excavation of the
\ncanal does  not appear\tto be  specified.    The  respondent
\ncontended before  the arbitrator that payment at the rate of
\nRs. 19\/-  per cubic  metre covered  every kind of earth work
\nand not\t just the earth work involved in lip cutting.  While
\naccording to  the appellant,  this was\textra work for which
\npayment had  not been  specified and  had to be agreed upon.
\nThere was  clearly a  dispute on the issue and the reference
\nto arbitration\tclearly covers this dispute.  The first item
\nof Office  Memorandum referring\t the dispute  to arbitration
\nrelates to  rate for  extra work  of earth  work beyond\t lip
\ncutting in the reach kms. 189.50 to Kms. 190.70.  In view of
\nthe  fact  that\t this  dispute\twas  expressly\treferred  to
\narbitration, we\t fail to  see how  it can  be said  that the
\ndecision on  this dispute  by the  arbitrator is  beyond the
\nscope of  the reference.   Both parties argued this question
\nbefore the  arbitrator.\t The arbitrator has given a speaking
\naward giving  detailed reasons why he considers this work as
\nextra work  for which  payment is required to be made to the
\ncontractor.    We  are\tnot  examining\tthe  correctness  or
\notherwise of  the  conclusion reached by the arbitrator.  It
\nis a  matter of\t interpretation\t of  the  contract  and\t was
\nreferred by  the parties to arbitration.  The High Court was
\nnot right in coming  to the conclusion that this dispute was
\nbeyond the scope of the reference to arbitration.\n<\/p>\n
     The other\tdispute between\t the parties  relates to the
\naward by  the arbitrator of interest for the period 1.1.1991
\ntill the  date of  the award.  The appellant has very fairly
\nconceded that  the arbitrator  has no  jurisdiction to grant
\nany interest  for the  pre-reference period.  Clause 1.18 of
\nthe  Technical\t Specifications\t annexed   to  the  contract
\nprovides as follows:\n<\/p>\n
     “No claim\tfor interest  or  damage
\n     will   be\t  entertained\tby   the
\n     Government\t with\trespect\t to  any
\n     money or balance which may be lying
\n     with the  Government or  may become
\n     due   owing    to\t any\tdispute,
\n     difference\t  or\tmisunderstanding
\n     between the  Engineer-in-Charge  on
\n     the one  hand and the contractor on
\n     the other\thand or\t with respect to
\n     any  delay\t  on  the  part\t of  the
\n     Engineer-in-Charge\t   in\t  making
\n     periodical or  final payment  or in
\n     any other respect whatsoever.”<\/p><\/blockquote>\n
     Clause 51\tof the contract which deals with arbitration
\nprovides that  all the disputes or differences in respect of
\nwhich the  decision has not been final shall be referred for
\narbitration to\ta  Sole\t arbitrator  as\t specified  therein.
\nNeither Clause\t1.18  of  the  Technical  Specification\t nor
\nclause 51  excludes the\t jurisdiction of  the arbitrator  to
\nward interest  pendente lite.\tAs  far back  as in  1992  a
\nconstitution Bench  of this  Court in the case of Secretary,
\nIrrigation Department,\tGovernment of Orissa & Ors. vs. G.C.
\nRoy<\/a> (1992  1 SCC  508), considered  an arbitrator’s power to
\naward interest\tpendente lite.\t It held that when the terms
\nof  the\t  arbitration  agreement   did\t not   exclude\t the
\njurisdiction of\t the arbitrator\t to entertain  a  claim\t for
\ninterest the  arbitrator was  competent\t to  award  interest
\npendente lite.\t His power was analogous to the power of the
\ncourt under  Section 34 of the Civil Procedure Code to award
\ninterest  in  order  to\t do  complete  justice\tbetween\t the
\nparties.    In\tparagraph  43  of  the\tsaid  judgment,\t the
\nConstitution Bench  has enumerated  the principles for grant
\nof interest  pendente lite  by\tthe  arbitrator.    Interest
\npendente lite  is not  a  matter  of  substantive  law\tlike
\ninterest for the period anterior to reference (pre-reference
\nperiod).  The power to award interest pendente lite has to e
\ninferred on the analogy of section 34 of the Civil Procedure
\nCode for  doing complete  justice between the parties.\tThis
\ndecision has  been followed  in many  subsequent case.\t One
\nsuch decision  shown to\t us is\tSudhir\tBrothers  vs.  Delhi
\nDevelopment Authority  & Anr.<\/a>  (1996 1\tSCC 32),  where this
\ncourt observed\tthat the decision in G.C. Roy’s case (supra)
\nholds  the  field  as  far  as\tinterest  pendente  lite  is
\nconcerned.   The respondent, however, relied upon a decision
\nof this\t Court in  Durga Ram Parsad vs. Government of Andhra
\nPradesh (1995  1 SCC  418).   The substantial  body  of\t the
\njudgment deals\twith the  power of  the arbitrator  to grant
\ninterest for  the pre-reference\t period.   The judgment\t has
\nalso relied  upon  G.C.\t Roy’s\tcase  (supra)  for  interest
\npendente lite.\t However,  in  the  last  paragraph  of\t the
\njudgment the  Court has\t declined to  grant interest for the
\npre-reference  period\tas  also   interest  pendente  lite.
\nPresumably this\t is because  of clause\t69 of  the  contract
\nwhich is  set out in paragraph 3 of the judgment although no
\nreasons are  given in  the judgment  for excluding  interest
\npendente lite.\t In  the  present  case,  however,  we\thave
\nproduced clause 1.18 on which the respondent is relying.  In
\nour view  this clause  does not\t debar\tan  arbitrator\tfrom
\ngranting interest  during the  pendency of the reference if,
\nin his\tdiscretion, he considers it appropriate to award it.
\nAs is held by the Constitution Bench in the case of G.C. Roy
\n(supra), the  power of\tthe  arbitrator\t to  grant  interest
\npendente lite is based on principles analogous to Section 34
\nof the\tCivil Procedure\t Code.\t Such interest is granted by
\nthe arbitrator\tin order  to do complete justice between the
\nparties.   This is not a matter of substantive law as is the
\ncase regarding\tthe arbitrator’s power to grant interest for
\nthe  pre-reference  period.    Whether\tinterest  should  be
\nawarded pendente  lite or  not is a matter of discretion for
\nthe court  or the  arbitrator.\t When parties  go before  an
\narbitrator, they  expect that  the disputes  will be decided
\nhad the\t decision been\tof  a  court  of  law.\t  Hence\t the
\narbitrator can exercise a power analogous to the power given
\nto the\tcourts under Section 34 of the Civil Procedure Code.
\nThe appellant  is, therefore,  entitled to  interest on\t the
\nprincipal amount  awarded by the arbitrator from the date of
\nthe reference till the date of the award.  The appellant is,
\nhowever, not  entitled to any interest for the pre-reference
\nperiod.\n<\/p>\n
     In the  premises the  appeal arising  out of S.L.P. (c)
\nNo. 4328\/1997  is allowed save and except that the appellant
\nwill not be entitled to any interest on the principal amount
\nawarded prior to the arbitrator entering upon the reference.
\nThe appeal  of the  respondent is  dismissed with  the above
\nmodification.\tThere will,   however,\tbe no  order  as  to
\ncosts.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Ram Nath International … vs State Of U.P on 21 October, 1997 Author: M S Manohar Bench: Sujata V. Manohar, D.P. Wadhwa PETITIONER: RAM NATH INTERNATIONAL CONSTRUCTION PVT. LTD. Vs. RESPONDENT: STATE OF U.P. DATE OF JUDGMENT: 21\/10\/1997 BENCH: SUJATA V. MANOHAR, D.P. WADHWA ACT: HEADNOTE: JUDGMENT: [with Civil Appeal No […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-152555","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nRam Nath International ... vs State Of U.P on 21 October, 1997 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/ram-nath-international-vs-state-of-u-p-on-21-october-1997\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Ram Nath International ... vs State Of U.P on 21 October, 1997 - 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