Delhi Development Authority vs R.K. And Company
2007 Latest Caselaw 1258 Del

JUDGMENT

J.M. Malik, J.

1. Vide judgment dated 12th October, 2000, the Trial Court dismissed the objection filed against the award and made it a rule of the Court. Aggrieved by that order, the DDA/appellant has preferred the present appeal. I have heard the counsel for the parties. Learned Counsel for the appellant explained that he would press for grounds D & F listed in the grounds of appeal. He did not press the remaining grounds.

2. First of all, I advert to ground F which is reproduced as follows:

The award of future interest @ 18% p.a. Granted by the learned Arbitrator and up-held by the learned Addl. Distt. Judge, Delhi, is un-sustainable. Judgment 1999 V A.D. (DELHI) 860 in RFA 444/1998 titled Yogesh Kant Bhageria v. Deepak Jain referred.

I have heard the counsel for the parties. The learned Counsel for the respondent has drawn my attention towards few authorities. The first is reported in B.V. Radha Krishna v. Sponge Iron India Limited 1997 (1) Arbitration Law Reporter 412, wherein the rate of interest granted by the Arbitrator and the High Court at the rate of 18% per annum was upheld by the Apex Court.

3. He has also drawn my attention towards another authority reported in Bhagwati Oxygen Ltd. v. Hindustan Copper Limited , wherein it was held:

41. In our view, however, a relevant and germane factor weighed with the Arbitrator in awarding eighteen per cent interest that at that rate HCL had given advance to BOL. In view of the said circumstance, in our opinion, even that part of the award passed by the Arbitrator did not deserve interference and learned single Judge and the Division Bench were not right in reducing the rate of interest.

4. Lastly, he cited an authority reported in State of Rajasthan v. Puri Construction Co. Ltd. and Anr. , wherein it was held:

36. Considering the facts and circumstances of the case, we are, however, not inclined to award any interest from 24.02.1979 or from 30.05.1979 and the prayer for enhancement of the rate of interest at 18% is also not allowed. Since the total damages suffered by the respondent has been quantified by the arbitrator in the award at Rs 1 crore without indicating different heads for the computation of the said sum, it should be presumed that the arbitrators had taken into consideration all relevant facts in assessing the actual loss suffered up to the date of award. The appellant State of Rajasthan will be allowed to withdraw a sum of Rs. 25 lakhs or Rs 26 lakhs that has been realised from the sale of the respondent's assets under the order of this Court and as set out in the award, after the State of Rajasthan satisfies the award which is made a rule of court. The prayer for cost of Rs. 10 lakhs in addition to the amounts under the award to be paid to the respondent is also rejected.

This goes beyond the pale of my comprehension as to how this authority tips the scale in favor of the respondent.

5. I was able to locate some few latest authorities. One of those goes in favor of the respondent but other authorities and latest law laid down by the Apex Court certainly emboldens the case of the appellant. The authority which favors the respondent is reported in Manalal Prabhudayal v. Oriental Insurance Co. Ltd. , wherein it was held,

11. As far as arbitration proceedings are concerned, it is well established that an arbitrator, in absence of any prohibition in an arbitration agreement, has power to award interest. Though it is not a court within the meaning of Section 34 of the Code of Civil Procedure, 1908, an arbitrator has power to grant reasonable rate of interest at all the three stages; i.e. pre-reference period, pendente lite and post award period.

12. In Bhagwati Oxygen Ltd. v. Hindustan Copper Ltd. (2005) 6 SCC 462, one of us (C.K. Thakker, J.), after considering the relevant case law on the point, held:

Now Section 34 of the Code of Civil Procedure has no application to arbitration proceedings since the arbitrator cannot be said to be a court within the meaning of the Code. But an arbitrator has power and jurisdiction to grant interest for all the three stages provided the rate of interest is reasonable.

It is, thus, clear that arbitrator has power to award interest at all the three stages, namely, pre-reference period, pendente lite and post award period provided there is no provision to the contrary in an arbitration agreement and the rate of interest is not unreasonable.

13. Once it is conceded that an arbitrator has power to grant interest and has also discretion in granting interest at a particular rate provided it is reasonable, the award of the arbitrator cannot be held to be bad in law or interfered with on the ground that he could not have granted interest or could not have awarded it at a particular rate unless the court is convinced that the grant of interest was not at a 'reasonable rate'. From the record, it is clear that the arbitration proceedings started in 1995 and the award was passed in 1999. The arbitrator had granted uniform interest @ 12 per cent per annum all throughout. The award was made rule of the court and the Court of Civil Judge, (Senior Division), Bhubaneswar did not find illegality therein. The High Court, in our opinion, therefore, should not have interfered with the said order and reduced the rate of interest from the date of award till the date of realization of the amount.

14. The High Court, no doubt, referred to M/s Channa a Bros. In our opinion, however, the facts in that case were totally different. In that case, the arbitrator passed an award in favor of both the parties and granted interest in favor of one party and refused to award interest to the other party. This Court in the light of facts before it decided the matter. As we have already noted, this Court, in Bhagwati Oxygen Ltd. has held that an arbitrator has power to award interest at reasonable rate. In our considered opinion, the direction of the arbitrator cannot be termed as arbitrary or unreasonable and when it was affirmed by the trial court, it ought not to have been interfered with by the High Court.

6. However, in the latest authorities the Apex Court has taken a wee bit different view. This court is bound to follow the same. In the authority reported in Mcdermott International Inc. v. Burn Standard Co. Ltd. and Ors. , it was held:

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

170. In Pure Helium India (P) Ltd. (supra) this Court upheld the Arbitration award for payment of money with interest at the rate of 18% p.a. by the respondent to appellant. However, having regard to long lapse of time, if award is satisfied in entirety, respondent would have to any 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 award shall carry interest at the rate of 6% p.a. Instead and in place of 18% p.a.

171. Similarly in Mukand Ltd. v. Hindustan Petroleum Corporation , 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 7% per annum observing that 7% 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.

172. In this case, given the long lapse of time, it will be in furtherance of justice to reduce the rate of interest to 7%.

7. In the recent authority reported in Krishna Bhagya Jala Nigam Ltd. v. G. Harish Chandra Reddy and Anr. , it was held,

10. On the merits of the claims made by the contractor we find from the impugned Award dated 25.06.2000 that it contains several heads. The arbitrator has meticulously examined the claims of the contractor under each separate heads. We do not see any reason to interfere except on the rates of interest and on the quantum awarded for letting machines of the contractor remaining idle for the periods mentioned in the Award. Here also we may add that we do not wish to interfere with the Award except to say that after economic reforms in our country the interest regime has changed and the rates have substantially reduced and, therefore, we are of the view that the interest awarded by the arbitrator at 18% for the pre-arbitration period, for the pendente lite period and future interest be reduced to 9%.

8. Keeping in view the above said legal position, I hereby reduce the rate of future interest to 9% p.a. from 18% p.a.

9. Now, I turn to ground D which runs as follows:

D. The learned Addl. Distt. Judge failed to appreciate that the respondent was responsible for inaction between 1991-1992 to 1995, the period during which no proceedings have taken place after the resignation of the previous Sole Arbitrator and, therefore, the respondent could not be rewarded by allowing pendente lite interest in the said period when the respondent had taken no prompt action to seek filling up of the vacancies and, therefore, it was a case of unjust enrichment to the respondent. Judgment in Suit No. 1018/92 titled Chander Kant & Co. v. Delhi Development Authority and Anr., referred.

Counsel for the respondent has also cited another authority reported in A.S. Sachdeva & Sons v. DDA, 1996 (1) Arbitrator Law Reporter 448. To my mind this authority does not create propitious condition for the respondent.

10. However, I find force in this argument in a measure. By no stretch of imagination, it can be said that the respondent/claimant was only responsible for the delay of proceedings between 1991 to 1995 period. On the contrary, it is apparent from Clause 25 of Arbitration Agreement that the Engineer, DDA was only authorised person to appoint arbitrator and that the fault, if any, lies at the doors of the appellant itself. The relevant portion of Clause 25 of the agreement reads:

Clause 25 : Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, designs, drawings and instruction hereinbefore mentioned and as to the quality or workmanship or materials used on the work or as to any other questions claim, right, matter or thing whatsoever, in any way arising out of or relating to the contract designs, drawings, specifications, estimates, instruction, orders or these conditions or otherwise concerning the works or the execution or failure to execute the same whether arising during the progress of the work or after the completion or abandonment thereof shall be referred to the sole arbitration of the person appointed by the Engineer Member Delhi Development Authority at the time of dispute. It will be no objection to any such appointment that the arbitrator so appointed is a Delhi Development Authority employee that he had to deal with the matters to which the contract relates and that in the course of his duties as Delhi Development Authority employee he had expressed view on all or any of the matters in dispute of difference. The arbitrator to whom the matter is originally referred being transferred or vacating his office of being unable to act for any reason, such Engineer Member Delhi Development Authority as aforesaid at the time of such transfer, vacation of office or inability to act shall appoint another person to act as arbitrator in accordance with the terms of the contract. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is also a term of this contract that no person other than a person appointed by such Engineer Member, Delhi Development Authority as aforesaid should act as arbitrator and, if for any reason that is not possible, the matter is not to be referred to arbitration at all. In all cases where the amount of the claim in dispute is Rs. 50,000/- (Rupees Fifty thousand) and above, the arbitrator will give reason for the award.

11. The first arbitrator Shri B.L. Khurana was appointed on 20.12.1991. The reference made to him was further submitted by the claimant's counter claim vide letter dated 27th March, 1992. The reference was further modified by the claiumant vide its letter dated 07.05.1992. Complainant filed statement of claim before Shri B.L. Khurana immediately on his entering upon the reference on 10.2.92. Shri B.L. Khurana appeared on reference on 17.1.92. The appellant filed their counter claims on 8.5.92 after repeated reminders. Few preliminary objections raised by the appellant were heard on 7.9.92, 23.9.92, 28.10.92 and 23.11.92 respectively. The respondent/claimant protested those objections vide its letter dated 16.12.92. Shri B.L. Khurana resigned as an arbitrator on 12.7.93. The appellant did not appoint any other arbitrator in the place of Shri B.L. Khurana. The respondent/claimant made requests to the appellant to appoint arbitrator vide their letters dated 16.08.1994 and 29.09.1995 resultantly, Mr. M. Kuppuswamy was appointed as an arbitrator by the appellant's department on 20.11.1995. Mr. Kuppuswamy entered upon the reference on 05.12.1995 and ultimately resigned as an arbitrator on 18.12.1995. Again, Shri Suresh Mehta was appointed as an arbitrator on 15.01.1996 and consequently made and publish the award on 29.05.1997.

12. It is thus apparent that no proceedings could take place from July 1993 to November 1995 due to the absence of an arbitrator. The arbitrator was to be appointed by the appellant's department.

13. In view of the discussion on the first ground above, the rate of interest of pendente lite interest is reduced to 9% per annum from 12% per annum.

14. The appeal stands partly accepted. There will be no order as to costs. LCR and copy of this order be sent to the trial court forthwith.