Amar Industries vs Union Of India (Uoi)
2006 Latest Caselaw 365 Del

JUDGMENT

Sanjay Kishan Kaul, J.

Page 993

IA No. 10046/1994 (Under Section 30 & 33 of the Arbitration Act, 1940)

1. The petitioner has filed objections under the provisions of Sections 30 & 33 of the Arbitration Act, 1940 (hereinafter referred to as the said Act), in respect of the award dated 19.1.1994 of Shri Ram Bahadur, the Sole Arbitrator.

2. The dispute relates to the Rate Contract dated 29.12.1988, which was valid for a period from 20.8.1988 to 15.12.1989. Clause 4 of the Rate Contract prescribe the said period while Clause 5 prescribe the period up to which the requisitions under the Contract could be placed on the petitioner, who was granted the Rate Contract by the respondent. In terms of the Clause 5 such requisition has to be placed so as to reach the Contractor on or before the last date of the currency of the Rate Contract.

3. There were certain amendments in the price issued on 20.3.1990 but that would not be relevant in the present matter. The sub-stratum of the disputes relates to the communication dated 5.2.1990 extending the validity period of the Rate Contract up to 15.3.1990. This is so Page 994 since a purchase order was placed on the petitioner on 20.3.1990 referring to the telegraphic advance acceptance of the supply order on 13.3.1990. The petitioner took the stand that the supply order had been placed beyond the period of the Rate Contract and thus the petitioner was not bound to make the supplies. Risk purchase was made at the risk and cost of the petitioner. The sole sub-stratum of the submission of the learned counsel is that at no stage of time petitioner had consented to the extension of the Rate Contract up to 15.3.1990. On perusal of the records of the Arbitration, I find that a letter dated 16.12.1989 issued by the petitioner is on record. The same is in the following terms:

Dated: 16-12-1989

The Director of Supplies (HW-4)

DGS & D

Parliament Street

New Delhi-110001.

Sub: R/C No. HW-4/HC-2055/Shoe Polich/88- 89/44/COAD/854 dt. 29.12.88 for supply of Shoe Polish

Dear Sir,

We acknowledge with thanks the receipt of your letter No. HW-4/RC-2055/Shoe Polish/88-89/44/COAD/854 dt. 14.12.89 and as desired by you we hereby confirm that we have no objection for extension in validity of R/C up to 15.3.1990 on the same prices and terms and conditions.

Thanking you,

Sd/-

Yours faithfully,

for AMAR INDUSTRIES'

4. A reading of the aforesaid letter thus leaves no manner of doubt that the petitioner himself had given the consent for the extension of the validity period of the Rate Contract up to 15.3.1990.

5. Learned counsel for the petitioner faced with this position seeks to contend that even if it be assumed that such an offer was made by the petitioner the same should be deemed to have been revoked in view of the provision of Section 6 of the Indian Contract Act, 1972. The said Section is as under:

'6. Revocation how made. - A proposal is revoked -

(1) by the communication of notice of revocation by the proposer to the other party;

(2) by the lapse of the time prescribed in such proposal for its acceptance, or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance;

(3) by the failure of the acceptor to fulfill a condition precedent to acceptance; or

Page 995

(4) by the death or insanity of the proposer, if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance.

6. Learned counsel for the petitioner contends that even if no time is prescribed for the acceptance of the proposal, in view of Sub-section (2) of Section 6 aforesaid by lapse of a reasonable time within which the acceptance was not communicated the same should be deemed to have been revoked.

7. It has to be appreciated that the petitioner clearly communicated vide letter dated 16.12.1989, which is after the expiry of the original period of the Rate Contract, that it was willing to supply up to 15.3.1990. The letter dated 16.12.1989 in turn refers to a communication of the respondent dated 14.12.1989 seeking no objection of the extension of the validity period. Thus what has really happened is that the respondent made an offer to the petitioner requesting for an extension of the Rate Contract and the petitioner accepted the same. On such acceptance the Contract came into being and all that had to be done was that a formal order had to be issued. This formal order was issued on 5.2.1990.

8. Learned counsel for the petitioner also seeks to contend that the order was not placed within even the extended period of the Rate Contract. I am unable to accept this plea for the reason that the telegraphic advance acceptance supply order was issued on 13.3.1990, which is available in the Arbitral record. The fact that the formal order was thereafter issued on 20.3.1990 would not in any way affect the matter as the 13.3.1990 order is admittedly within the period of the Rate Contract. Thus the petitioner was liable to supply the goods in terms thereof.

9. Learned counsel for the respondent seeks to contend that on risk purchase being made the petitioner himself was a tenderer and was awarded contract on risk purchase. Be that as it may, the same would not in any manner affect the Arbitral proceedings.

10. The Arbitrator has considered all the aforesaid material and has come to a finding based on the material which has also been discussed above. This Court does not sit as a Court of appeal over the finding of an Arbitrator and as long as the conclusion reached by the Arbitrator is a plausible one, this Court ought not to interfere with the award even if on the same material this Court would come to a different conclusion. A reference in this behalf be made to Sudarsan Trading Co. v. Govt of Kerala and Food Corporation of India v. Joginderpal Mohinderpal and Anr. . In the facts of the present case this Court has come to exactly the same conclusion which was arrived at by the Arbitrator.

Page 996

11. In view of the aforesaid I find no merits in the objections and the same are dismissed.

CS (OS) No. 1663/2004

1. In view of the objections having been dismissed the award of the Sole Arbitrator, Shri Ram Bahadur, dated 19.1.1994 is made rule of the Court.

2. Learned counsel for the petitioner states that pendente lite interest cannot be granted in view of the judgment of the Supreme Court in Union of India v. Jain Associates and Anr. 1994 (1) Arb.L.R. 494, since the Arbitrator has not granted such interest. It was observed by the Apex Court as under:

4. The first question that arises for consideration is whether the court could award interest pendente lite. Section 29 of the Act says that insofar as 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 it deems reasonable, be be paid on the principal sum adjudged by the award and confirmed by the award and confirmed by the Decree. In Srikantia & Co v. Union of India, it was held that Section 29 carries with it the negative import that it shall not be permissible to the court to award interest on the principal sum adjudged in the award for a period prior to the date of the passing of the decree. The same principle was reiterated in Ramsingh v. Ramsingh and Anr. Section 29 of the Act empowers the court, that where the award is for payment of money, to grant reasonable rate of interest on the principal amount adjudged and confirmed in the decree, only from the date of the decree. Section 34 CPC empowers the Court, where there is a decree for payment of money to grant interest pendente lite and future, till the date of realisation. Since Section 29, of the Act enables the Court to grant interest on the principal amount adjudged in the award and confirmed in the decree only from the date of the decree, it carries a negative import with it that the Court has no power to grant interest pendente lite. The High Court, therefore, was not right in granting interest pendente lite, which the arbitrator himself and not granted.

3. Learned counsel for the petitioner also refers to the judgment of the Apex Court in State of Orissa v. B.N. Agarwalla, etc. . The principle of law laid down in the said judgment was that an Arbitrator has the jurisdiction to award pre-reference interest in cases, which arose after the Interest Act, 1978 had become applicable. Further it was held that the power of the Arbitrator to award interest for the post award period also exists. The Supreme Court had observed that the correct procedure however, would be to award future interest till the date of decree or date of payment whichever is earlier.

4. Learned counsel for the petitioner further refers to the judgment of the learned Single Judge in State of Orissa v. United Commercial Company Engineers & Builders Page 997 1997 (2) Arb.LR 243, holding that the Court is not empowered to award interest for the period exterior to the date of passing of the decree.

5. Learned counsel for the respondent on the other hand relies upon the judgment of the Apex Court in Renusagar Power Co. Ltd. v. General Electric . This judgment has been considered by the learned single Judge of this Court (as he then was) in Babu Lal Barwa v. Delhi Development Authority and Ors. apart from the judgments of the Supreme Court in Gujarat Water Supply & Sewerage Board v. Unique Erectors (Gujarat) (P) Ltd. and Anr. , Union of India v. Jain Associates (Supra). The issue raised therein was also similar arising from the provisions of Section 29 of the Act and Section 34 of the Code of Civil Procedure (hereinafter referred to as the said Code). The contention of both the parties was set out in paragraphs 6 & 7 in the judgment which reads as under:

6. The learned counsel for the DDA has objected to my awarding interest on the amount of the Award upheld by me from the date of Award till realisation. She submits that in view of the provisions of Section 29 of the Arbitration Act, this Court can award interest only from the date of decree passed on teh basis of the Award and not from a prior date. In this behalf, the learned counsel has also relief on Union of India v. Jain Associates and Anr. Vol. 20 Arbitration Law Report p.494. This judgment proceeds on the basis of Section 29 of the Arbitration Act. Section 34 CPC which gives powers to the Court passing a money decree to grant interest pendente lite and future till the date of realisation was noted and the distinction between Section 34, CPC and Section 29 was pointed out. It was held that in view of the Section 29 of the Arbitration Act, the Court could not grant interest from a date prior to passing of a decree on the basis of the Award.

7. On the other hand, the learned Counsel for the petitioner submits that this Court is empowered to grant interest from the date of Award till realisation. He has invited my attention to a decision of the Supreme Court in Gujarat Water Supply & Sewerage Board v. Unique Erectors (Gujarat) (P) Ltd. and Anr. . In para 14 of this judgment, Page 998 the Supreme noted that reference to arbitration was made in that case after the commencement of the Interest Act, 1978. The Court also noted its earlier decision in Abnaduta Jena's case. ). It was observed that so far as interest for the period from the date of the Award till the date of the decree is concerned, the question was not specifically considered in Abnaduta Jena's case. It was held that interest should be allowed from the date of the Award till the date of the decree on the principle that once proceedings under Section 15 to 17 are initiated, the Court can grant interest pendente lite. The Court expressed a doubt about interest from the date of Award till decree being within the power of the Court to award in cases arising before the Interest Act, 1978 in view of the restricted scope of Section 29 of the Arbitration Act. However, it was expressly laid down that there can be no doubt about the Court's power to grant this interest in cases governed by the Interest Act, 1978 as Section 3(1)(a) which was applied by Abnaduta Jena to Arbitrators will equally apply to enable this Court to do this. It is to be noted here that Section 2(a) of the Interest Act, 1978 provides that Court 'includes a Tribunal and an Arbitrator'. Thus for purposes of application of the provisions of Interest Act, an Arbitrator has been placed at par with the Court.

6. The learned judge considered the impact of all the aforesaid judgments and the fact that judgment in Renusagar (Supra) was subsequent to the judgment in Union of India v. Jain Associates and Anr. (Supra) and on such consideration observed as under:

8. My attention has also been drawn to a later decision of the Supreme Court in Renusagar Power Co. Ltd. v. General Electric Company . The relevant paras in the said decision are following:

134. In an international commercial arbitration, like any domestic arbitration, the award of interest would fall under the following periods:

(i) Period prior to the date of reference to arbitration;

(ii) Period during which the arbitration proceedings were pending before the Arbitrators;

(iii) Period from the date of award till the date of institution of proceedings in a Court for enforcement of the award;

(iv) Period from the date of institution of proceedings in a Court till the date of the decree; and

(v) Period subsequent to the decree till payment.

Page 999

135. The interest in respect of the period covered by item (i) namely, prior to the date of reference to arbitration would be governed by the proper law of the contract and the interest covered by Items (ii) and (iii), i.e. during the pendency of the arbitral proceedings and subsequent to the award till the date of institution of the proceedings in the Court for the enforcement of the award would be governed by the law governing the arbitral proceedings. These are matters which have to be dealt with by the Arbitrators in the award and the award in relation to these matters cannot be questioned at the stage of enforcement of the award. At that stage the Court is only required to deal with interest covered by items (iv) and (v). The award of interest in respect of these periods would be governed by lex fori, i.e., the law of the Forum where the award is sought to be enforced. According to Alen Redfern and Martin Hunter'once an arbitral award is enforced in a particular country as a Court, the arbitral post-award interest rate may be overtaken by the rate applicable to civil judgments.' (See Redfren and Hunter, Law and Practice of International Commercial Arbitration, 2nd Edition, page 406).

137. Unlike Section 34 of the Code of Civil Procedure whereunder the Court can award interest for the period of pendency of the suit as well as for the period subsequent to the decree till realisation, Section 29 of the Arbitration Act empowers the Court to award interest from the date of decree only. It has, however, been held that while passing a decree in terms of the award, the Court can award interest for the period during which the proceedings were pending in the Court, i.e., the period from the date of institution of proceedings for the enforcement of the award in the Court till the passing of the decree in cases arising after the Interest Act, 1978. (See: Gujarat Water Supply and Sewerage Board v. Unique Erectors (Gujarat) (P) Ltd. ).

9. Thus, the aforesaid two decisions of the Supreme Court make it absolutely clear that the Court has power to grant interest from the date of Award till decree and from the date of decree till realisation. Basing myself on these decisions of the Supreme Court, I reject the contention of the learned counsel for the respondent that the interest cannot be awarded by this Court from the date of Award till the date of passing of a decree.

7. In view of the aforesaid position, it is apparent that the conclusion arrived at in Babu Lal Barwa (Supra) is that the Court has a power to grant interest from the date of award to decree and from date of decree till the date of realisation.

8. Learned counsel for the petitioner still seeks to contend that the view taken in Babu Lal Barwa (Supra) does not correctly reflect the legal Page 1000 position in view of the judgment of the Supreme Court in State of Orissa v. B.N. Agarwalla (Supra), which was not brought to the notice of the Court. Learned counsel also relies on the provisions of Section 29 of the said Act which are as under:

29. Interest on awards. - Where and in so far as an award is for the payment of money the Court may in 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.

9. I am unable to accept the plea of the learned counsel for the petitioner for the reason that the ratio of the judgment of the Supreme Court in State of Orissa v. B.N. Agarwalla (Supra) is not that the Court is devoid of the power to grant interest during the pendente lite period before the Court but that the Arbitrator is empowered to grant interest during the said period of time.

10. A reading of the provisions of Section 29 of the said Act also shows that the Court is empowered to grant interest from the date of decree till the date of realisation but the Court has not been denuded of the power to grant interest during the pendente lite period. This provision has been construed along with the provisions of Section 34 of the Code, which empowers the Court to grant such interest. Section 34 of the said Code reads as under:

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 additional 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.

Explanation I. - In this sub-section,'nationalised bank' means a corresponding new bank as defined in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970).

Explanation II. - For the purposes of this section, a transaction is a commercial transaction, if it is connected with the industry, trade or business of the party incurring the liability.]

Page 1001

(2) Where such a decree is silent with respect to the payment of further interest [on such principal sum] from the date of the decree to the date of payment or other earlier date, the Court shall be deemed to have refused such interest, and a separate suit therefore shall not lie.

11. I am in full agreement with the view taken in Babu Lal Barwa case (Supra).

12. Learned counsel for the petitioner contends that there is no prayer for the grant of interest made in the present case. In my considered view once the objections have been filed by the petitioner and are pending consideration this Court is fully empowered to grant interest both for the pendente lite period and for the future period.

13. It is also to be kept in mind that at times the matter is pending in the Court for which neither of the parties can be blamed. A contrary view to that which is now sought to be taken would result in the succeeding party being deprived of the interest on the amount which falls to its share pursuant to the award. The present case is one where the matter has been pending since 1994 and the respondent cannot be held to be not entitled to interest for this period of almost 12 years when the money of the respondent is blocked which would have enured interest under the award.

14. I am thus of the considered view that the respondent is entitled to interest @ 12 per cent per annum simple interest from the date of award till the date of decree, which is the prevailing rate of interest at the relevant time and the interest rate being awarded by this Court in various matters. The respondent shall also be entitled to future interest from the date of decree till the date of realisation @ 9 per cent per annum simple interest.

15. Parties are left to bear their own costs.

16. Decree sheet be drawn up accordingly.