Naresh Kumar vs Union Of India (Uoi)
1998 Latest Caselaw 1088 Del

JUDGMENT

A.K. Srivastava, J.

1. This suit relates to a petition under Sections 14 and 17 of the Arbitration Act moved by one Naresh Kumar against Union of India and Mr. V. Nainai, the Arbitrator. In this petition it was prayed that respondent No.2, the Arbitrator, be directed to file award dated 26.7.1991 and the proceedings relating thereto in this Court and that the award of Rs 49,242.51 paise alongwith pendente lite and future interest at a rate of 18 per cent from 26.7.1991 be made a Rule of the Court. On filing of this petition, notice was issued to respondent No.2 with a direction to file the award alongwith the proceedings. The same were filed. Therefore petitioner Naresh Kumar as well as respondent Union of India filed objections against the award which are I.As. 9742/92 and 2635/94 respectively. Both the objections are under Sections 30 and 33 of the Arbitration Act, 1940. Petitioner Naresh Kumar challenged the award in respect of the awarded amount in claim No.3 and claim No.11 only. On the other hand, the respondent Union of India challenged the award in respect of all the claims, that is to say, claim No.l to claim No.12.

2. Heard the learned Counsels for the parties and perused the award.

3. Section 30 of the Arbitration Act provides the grounds on which the award may be set aside. The grounds are as follows :

"(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."

4. Learned Counsel for the parties concede that grounds (a) and (b) above are not the grounds in their objections. Therefore, the only thing to be seen is whether the award has been improperly procured or is otherwise invalid.

5. I have gone through the award and the objections. By no stretch of imagination it can be said that the award has been improperly procured. The objections are only on the grounds of the individual perceptions of the petitioner and the respondent Union of India so far as the factual position is concerned. I do not wish to enter into the factual merits of the award because the learned Counsel for the parties could not make out a case that there have been apparent factual errors in the award amount or that the conclusions arrived at by the learned Arbitrator are in absurdity.

6. There are some legal objections raised by the petitioner as well as by respondent No.1. I am inclined to consider those legal objections and to give findings.

7. One of the objections of the petitioner is that in item No.11, the learned Arbitrator has committed a legal error in not awarding pendente lite interest. According to him as per the law laid down by the Supreme Court in , the Arbitrator can award pendente lite interest. Learned Counsel further says that if the learned Arbitrator, in view of the law then prevailing when the award was made, did not consider himself legally competent to award pendente lite interest then now this Court may grant pendente lite interest for the period arbitration proceedings were pending before the learned Arbitrator. On perusal of the award at item No.l, it is to be found that the learned Arbitrator did not award pendente lite interest by nothing that in view of the Supreme Court judgment, no pendente lite interest could be awarded. He, however, awarded future interest at a rate of 12 per cent per annum from the date of the award to the date of payment or decree of the Court whichever was earlier. It is admitted by the learned Counsel for the parties that on the date when the award was made the legal position as laid down by the Supreme Court then was that the Arbitrator was not competent to award pendente lite interest. Therefore, it cannot be said that the learned Arbitrator committed an error in law in not awarding pendente lite interest. He, of course, could not have known that in future the Supreme Court would change the law. Therefore, the petitioner's ground of attack on this point is not legally sustainable. The objection of the petitioner in this ground is, therefore, rejected. Regarding grant of pendente lite interest by this Court is concerned, I am of the view, that when no pendente lite interest has been awarded by the Arbitrator this

Court should not exercise inherent jurisdiction to grant pendente lite interest for the period while the proceedings were pending before the learned Arbitrator. As such, I do not intend to interfere with the award on this count.

8. From the side of the Union of India, the one legal point raised was that the learned Arbitrator could not legally award pre-suit interest for the period from 5.10.1988 to 12.8.1990. On perusal of the award in claim No.11, it transpires that the learned Arbitrator has awarded pre-suit interest for amounts held payable against claim Nos. 1,3,7 and 9 for the period from 5.10.1988 to 12.8.1990 at a rate of 12 per cent per annum. The ground of attack from the side of the Union of India is based on the provisions of the Interest Act, 1978.

9. According to him, since the petitioner did not give a written notice to the respondent, Union of India that the Union of India would be liable to pay interest, the learned Arbitrator could not have awarded pre-suit interest. For that he invited attention of this Court to Section 3(1) of the Interest Act, 1978. It reads as follows:

"3. Power of Court to allow interest:- (1) 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."

10. According to him, the aforesaid Clause (b) of Sub-section (1) of Section 3 is attracted to the issue under hand. The amount found to be due to the claimant is admittedly not a debt payable by virtue of the written statement and, therefore, when the arbitration proceedings did not relate to such debt, then the learned Arbitrator could award pre-suit interest only 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. Learned Counsel for Union of India firmly asserted that no such notice was given by the claimant to the respondent, Union of India and, therefore, the learned Arbitrator was in legal error in awarding pre-suit interest.

11. Learned Counsel for the petitioner was asked to make a categorical statement whether any notice as is contemplated under Section 3(1)(b) of the Interest Act, 1978 was ever given by the petitioner to the respondent and if so what was the proof of the

same. Learned Counsel for petitioner, on instructions, gave a statement that perhaps no such notice was ever given. In these circumstances, it is clear that the learned Arbitrator could riot have given pre-suit interest, if the provisions of Section 3(l)(b) were not complied with by the claimant. Accordingly, I hold that the award is partly invalid so far as it relates to grant of pre-suit interest for the amounts held payable against claim Nos. 1 3,7 and 9 for the period from 5.10.1988 to 12.8.1990 at a rate of 12 per cent per annum. Except for that I do not interfere with the award.

12. The award be made Rule of the Court except to the extent of the aforesaid illegality.

13. Suit and the objections are disposed of, accordingly.

Let a decree be prepared accordingly for such sum as is admissible as a consequence of this order.

Award made Rule of Court.