M/S Bundel Khand Engineering ... vs Sri Mahendra Singh Arbitrator And ...
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HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

Court No. - 52
 

 
Case :- WRIT - C No. - 15336 of 2017
 

 
Petitioner :- M/S Bundel Khand Engineering Works
 
Respondent :- Sri Mahendra Singh Arbitrator And Another
 
Counsel for Petitioner :- Javed Husain Khan,Gulrez Khan
 

 
Hon'ble Kshitij Shailendra,J.

1. Heard Shri Javed Husain Khan, learned counsel for the petitioner and learned Standing Counsel for the State-respondents.

2. The petitioner was A-class Contractor and was assigned certain construction activity by the respondent-Irrigation Department. There is no dispute between the parties that the work was completed by the petitioner on 28.05.2011 with full satisfaction of the authorities, however the dispute was that the amount payable to the petitioner was not paid to him.

3. Since, the aforesaid work commenced and completed in pursuance of an agreement dated 03.03.2011, a copy whereof has been filed along with the supplementary affidavit, the dispute was to be resolved through arbitration.

4. Under the aforesaid facts of the case, the petitioner filed a petition being Arbitration and Conciliation Application under section 11(4) No. 27 of 2015 before this Court, during the course whereof, an Arbitrator was appointed with the consent of the parties and accordingly, the said case was dismissed as infructuous.

5. Later on, the respondent No. 1, Superintending Engineer, Irrigation Department, Vivek Khand Gomti Nagar, Lucknow in the capacity of an Arbitrator, passed an award dated 04.04.2016 holding the petitioner as entitled to get the entire amount and issuing direction for payment of sums to the petitioner within a period of three months, however, cost was denied under the award.

6. Learned counsel for the petitioner submits that there was an error in the award to the effect that though the petitioner had claimed 18% interest on the amount payable to him, the award is silent on the said aspect. He submits that for the correction of the aforesaid error, the petitioner moved an application dated 21.04.2016 before the Arbitrator under section 33 of the Arbitration and Conciliation Act, 1996 which was followed by another application dated 02.11.2016, however the same have not been considered by the Arbitrator.

7. The present writ petition has been filed with a prayer to issue a writ, order or direction in the nature of mandamus commanding the respondent No. 1, i.e. Arbitrator, to make an additional award as claimed by the petitioner through the aforesaid application and reminder.

8. Learned Standing Counsel submits that the award was made and the amount was directed to be paid after deduction of Sales Tax, Income Tax, etc., and, therefore, the award is valid.

9. I have perused the record of the proceedings as well as the agreement dated 03.03.2011. There is no clause under the agreement whereby the payment of interest has been denied, that is to say that there was no agreement in between the parties that whatever amount is found to be due to be paid to the Contractor, no amount of interest shall be payable.

10. Learned counsel for the petitioner has placed reliance upon section 31(7)(a) of the Arbitration and Conciliation Act, 1996, which reads as follows:

"31. Form and contents of arbitral award.

.....................

(7)(a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made."

11. He, therefore, submits that an Arbitrator has power to award interest, unless otherwise agreed by the parties and that there is no otherwise agreement in between the parties that interest shall not be paid.

12. He also placed reliance upon the judgment of Supreme Court in the case of Executive Engineer (R and B) and other vs Gokul Chandra Kanungo (Dead) through His Legal Heirs reported in AIR 2022 Supreme Court 4857, with special reference to paragraph 17 of the judgement, which is reproduced as follows:

"17. This Court, in the case of Mcdermott International Inc vs Burn Standard Co. Ltd. & Others reported in 2006 (11) SCC 181, has observed thus:

"154. The power of the arbitrator to award interest for pre-award period, interest pendente lite and interest post-award period is not in dispute. Section 31(7)(a) provides that the Arbitral Tribunal may award interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which award is made i.e. pre-award period. This, however, is subject to the agreement as regards the rate of interest on unpaid sums between the parties. The question as to whether interest would be paid on the whole or part of the amount or whether it should be awarded in the pre-award period would depend upon the facts and circumstances of each case. The Arbitral Tribunal in this behalf will have to exercise its discretion as regards (i) at what rate interest should be awarded; (ii) whether interest should be awarded on the whole or part of the award money; and (iii) whether interest should be awarded for the whole or any part of the pre-award period.

155. The 1996 Act provides for award of 18% interest. The arbitrator in his wisdom has granted 10% interest both for the principal amount as also for the interim. By reason of the award, interest was awarded on the principal amount. An interest thereon was up to the date of award as also the future interest at the rate of 18% per annum.

156. However, in some cases, this Court has resorted to exercise of its jurisdiction under Article 142 in order to do complete justice between the parties.

157. In Pure Helium India (P) Ltd. [(2003) 8 SCC 593] this Court upheld the arbitration award for payment of money with interest at the rate of 18% p.a. by the respondent to the appellant. However, having regard to the long lapse of time, if award is satisfied in entirety, the respondent would have to pay a huge amount by way of interest. With a view to do complete justice to the parties, in exercise of jurisdiction under Article 142 of the Constitution of India, it was directed that the award shall carry interest at the rate of 6% p.a. instead and in place of 18% p.a.

158. Similarly in Mukand Ltd. v. Hindustan Petroleum Corpn. Ltd. [(2006) 9 SCC 383 : (2006) 4 Scale 453], while this Court confirmed the decision of the Division Bench upholding the modified award made by the learned Single Judge, the Court reduced the interest awarded by the learned Single Judge subsequent to the decree from 11% per annum to 7½ % per annum observing that 7½ % per annum would be the reasonable rate of interest that could be directed to be paid by the appellant to the respondent for the period subsequent to the decree.

159. In this case, given the long lapse of time, it will be in furtherance of justice to reduce the rate of interest to 7½ %."

13. The Supreme Court in the case of Executive Engineer (R and B) (Supra), after observing various provisions of the Act, balanced the equities by awarding interest of pre-award and post-award periods in exercise of powers under Article 142 of Constitution of India.

14. In the present case, since the award is silent about payment of interest, the matter is covered by section 33 read with 31 (7)(a) of the Arbitration and Conciliation Act, 1996, and therefore, applications moved by the petitioner requesting correction of award are required to be considered by the Arbitrator.

15. Since, Shri Mahendra Singh, was appointed as an Arbitrator and has passed the award and has retired, the matter can be examined by the present Superintending Engineer as per the agreement dated 03.03.2011. In this regard, learned counsel for the petitioner has also placed reliance upon the judgment of Supreme Court in the case of M/s Laxmi Continental Construction Company vs State of U.P. and another, reported in AIR 2021 Supreme Court 4699, and submits that merely because the earlier Arbitrator has retired, his mandate does not cease to exist insofar as the power to correct the award is concerned.

16. In view of above, the writ petition is disposed of with a direction to the Superintending Engineer, Department of Irrigation, Vivek Khand Gomti Nagar, Lucknow, to consider and dispose of the application dated 21.04.2016 in exercise of power under section 33 read with 31(7)(a) of the Arbitration and Conciliation Act, 1996 as well as law laid down by Supreme Court in the case of Executive Engineer (R and B)(supra).

17. The entire exercise shall be carried out within a period of three months from the date a certified copy of this order is produced before him.

Order Date :- 10.4.2023

Sazia