Union Of India (Uoi) And Anr. vs P.C. Sharma And Co.
2006 Latest Caselaw 1669 Del

JUDGMENT

Hima Kohli, J.

1. The appellants have preferred this appeal against the order dated 10th February, 2005 passed by the learned single Judge in the execution proceedings holding that the respondent/decree holder is entitled to a sum of Rs. 1,53,991/- being the interest payable at the rate of 18% per annum from 25th November, 2000 to 25th September, 2003, on the sum awarded by the arbitrator under an award dated 24th November, 2000.

2. The brief facts of the case are that an execution petition was filed by the respondent/decree holder against the appellants/judgment debtors praying inter alia, for execution of an award dated 24th November, 2000 published by Dr. Y.P.C. Dangay, an arbitrator appointed by the Chief Engineer (CDZ), New Delhi vide letter dated 5th June, 1998. The learned arbitrator published the award on 24th November, 2000 under which he awarded a sum of Rs. 3,03,178/- in favor of the respondent herein, claimant in the arbitration proceedings and against the appellants herein, respondents in the arbitration proceedings along with interest as awarded against claim No. 14, in full and final settlement of all the claims and counter claims raised before him.

3. Pursuant to the aforementioned award, the appellants filed two applications for rectification, dated 12th December, 2000 and 25th January, 2001 pointing out certain errors in the award against the claims No. 10 & 11 and claim No. 9 respectively. After going through the said applications and the replies thereto, the learned arbitrator rejected the first application for rectification dated 12th December, 2000 stating that there was no error in the award published against claims No. 10 & 11. With respect to the second application for rectification dated 25th January, 2001, the learned Arbitrator modified the amount awarded under Claim No. 9, by reducing it from Rs. 24,450/- to Rs. 23,215/-, vide order dated 8th February, 2001 thus reducing the total awarded amount to Rs. 3,01,943/- along with interest as awarded in the original award dated 24th November, 2000.

4. Aggrieved by the aforementioned award, the appellants challenged the same by filing a petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred as 'the Act'). However, the said petition was dismissed by the learned single Judge. As a consequence thereof, the respondent filed an execution petition seeking execution of the award dated 24th November, 2000 by way of execution petition No. 160/2001. During the pendency of the aforesaid execution proceedings, a sum of Rs. 4,68,753/- was received by the respondent/decree holder on 26th September, 2003. Subsequently, vide application under Section 31(7)(b) of the Act filed by the respondent/decree holder on 31st August, 2004, it was submitted that while the appellants/judgment debtors had paid the sum of Rs. 4,68,753/-, they had not paid interest thereon at the rate of 18% per annum from 25th November, 2000 to 25th September, 2003, which comes to Rs. 1,53,991/-, to which the respondent/decree holder was also entitled. The said application was allowed by the impugned order whereunder, warrants of attachment were directed to be issued attaching a sum of Rs. 1,53,991/- in the account of the appellants/judgment debtors with their bankers.

5. Aggrieved by the said order, the appellants have preferred the present appeal stating, inter alia, that by awarding interest at the rate of 18% per annum on the, sum awarded and directed to be paid under the arbitral award, with effect from the date of the award to the date of payment i.e. from 25th November, 2000 to 25th September, 2003, the executing Court sought to modify or interpret the award, which is not permissible. It was also submitted that in the said process, the executing Court awarded a further sum of Rs. 1,53,991/- to the respondent in addition to the amount payable under the award, which already stood satisfied. Lastly, it was contended that by passing the impugned order, the executing Court sought to exercise the powers under Section 33 of the Act which were conferred only on the arbitrator and not on the executing Court.

6. Having heard the submissions of learned Counsel for the parties and perused the records placed before us, including the award and the impugned order, we are of the opinion that there is no infirmity in the impugned order dated 10th February, 2005 inasmuch as the provisions of Section 31(7)(b) contained in the Act, are self explanatory and leave nothing to imagination and interpretation. Section 31, sub-section (7)(b) of the Act reads as under:

31(7)(b) : A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of eighteen per centum per annum from the date of the award to the date of payment.

7. In the award, the claim of interest is contained in claim No. 14 the relevant part of which is reproduced herein below:

Grant of interest is also presumed to be an implied term of the agreement. Under the provision of Arbitration Act, arbitral proceedings commence from the date when the request is received by the respondents stating that the dispute(s) be referred to arbitration. The Hon'ble Supreme Court in the case of V. Bhaskaran v. Sponge Iron India Ltd. , has confirmed an award of simple interest @ 21% p.a. Under the provisions of Arbitration & Conciliation Act, every arbitration award shall carry an interest @ 18% p.a., if not specified otherwise. I see no reason to disallow the claim of interest of the claimants which I award @ 14% per annum (simple interest) with effect from 20-12-1996 i.e. the, date of invocation of Clause 25 of the agreement on the amounts awarded above, till the date of award.

8. A bare perusal of the aforesaid award makes it manifest that the learned arbitrator was conscious of the provisions of Section 31(7)(b) of the Act.

9. Hence, the provision of the Statute itself makes it abundantly clear that unless an award otherwise specifies, any sum directed to be paid under an award shall automatically carry interest at the rate of 18% per annum from the date of the award till the date of payment. In view of the fact that in the present case, the award did not direct otherwise. It must be presumed that the amount directed to be paid under the award would carry interest at the rate of 18% per annum from the date of the award to the date of payment. So understanding the relevant provisions of the statute, in the context of the award rendered by the learned arbitrator, the learned single Judge while passing the impugned order dated 10th February, 2005, held that the respondent/decree holder shall be entitled to a sum of Rs. 1,53,991/- being the sum payable towards interest at the rate of 18% per annum with effect from 24th November, 2000 i.e. date of publishing the award, till 25th September, 2003, that is the date on which the respondent/decree holder received the sum of Rs. 4,68,753/- (which included the principal awarded amount along with interest at the rate of 14% per annum with effect from 20th December, 1996 i.e. the date of invocation of Clause 25 of the agreement till the date of the award).

10. It is, therefore, explicit from a perusal of the said provision that any sum which is directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of 18% per annum from the date of the award to the date of payment. This being the mandate of the provision of the Act, even if it was not so spelled out in the award, it has to be read into the award and the executing Court cannot be faulted in doing so in the present case. This cannot be termed as a modification of the award. The submission of the learned Counsel for the appellants that the award already stood satisfied on payment of Rs. 4,68,753/- and that the provisions of Section 33 could only be invoked by the arbitral tribunal and not by the Court for carrying out any correction and/or interpreting an award or passing an additional award, is devoid of merits inasmuch as the executing Court has not exercised its powers under the said provision at all. Nor has it corrected the original award or passed any additional award. The learned single Judge has only amplified the relevant provisions of the Act and given effect to them by holding that the respondent/decree holder is entitled to receive interest on the awarded amount at the rate of 18% per annum from 25th November, 2000 to 25th September, 2003.

11. Even otherwise, it is a well settled rule of justice, equity and fair play that the Court has inherent jurisdiction to award interest even in the absence of any legislation, agreement or custom to that effect, though subject to contrary agreement. As held by the Supreme Court in the case of South Eastern Coalfields Ltd. v. State of M.P. reported as , "applicability of the rule to award interest in equity is attracted on the existence of a state of circumstances being established which justify the exercise of such equitable jurisdiction and such circumstances can be many...."

12. In the above said judgment, reference was also made to an earlier decision rendered by the Supreme Court in the case of Executive Engineer, Dhenkanal Minor Irrigation Division, Orissa v. N.C. Budharaj (Deceased) by LRs. reported as , wherein the controversy relating to the power of an arbitrator (under the Arbitration Act, 1940) to award interest for pre-reference period has been set at rest by the Constitution Bench which opined that the basic proposition of law is 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 and his proposition is unmistakable and valid; the efficacy and binding nature of such law cannot be either diminished or whittled down. It was also held that in absence of anything in the arbitration agreement, excluding the jurisdiction of the arbitrator to award interest on the amount due under the contract, and in the absence of any other prohibition, the arbitrator can award interest.

13. In the present case, as already observed hereinabove, the statute itself mandates under Section 31(7)(b) that any sum directed to be paid under an arbitral award, unless the award directs otherwise, shall carry interest at the rate of 18% per annum from the date of award till the 'date of payment.

14. We, therefore, find no infirmity in the impugned order dated 10th February, 2005 passed by the learned single Judge. The appeal is devoid of merits and dismissed. No order as to costs.

15. The respondent is at liberty to withdraw the amount of Rs. 1,53,991/- deposited by the appellant with the registry in terms of the order dated 5th April, 2005.