M/S. Vijay Tractors Corporation vs Union Of India & Ors
2010 Latest Caselaw 2782 Del

* IN THE HIGH COURT OF DELHI AT NEW DELHI

+                      CS(OS) No.1534A/2006

                                            Date of Decision: May 26, 2010


M/S. VIJAY TRACTORES CORPORATION ..... Petitioner

                       Through:    Mr. S.K. Chandwani, Advocate

                            VERSUS


UNION OF INDIA & ORS.                           ..... Respondents

                       Through:    Mr. Darpan Wadhwa, Advocate.


%      CORAM:
       HON'BLE MS. JUSTICE ARUNA SURESH

(1)    Whether reporters of local paper may be allowed to see the
       judgment?

(2)    To be referred to the reporter or not?                           Yes

(3)    Whether the judgment should be reported in the Digest?           Yes

                            JUDGMENT

ARUNA SURESH, J.

CS(OS) No.1534A/2006 and IA No.981/2007 (u/s. 15, 16, 30 & 33 of Arbitration Act)

1. Petitioner filed a petition under Section 14 (2) of the Arbitration Act,

1940 (hereinafter referred to as „Act‟) seeking directions against

Respondent No.2, the Sole Arbitrator to file her Award dated

28.6.2006 together with entire proceedings recorded by her in

Arbitration Case No.GR-04/06 and thereafter to give notice to the

parties of filing of the Award inviting objections, if any to the said

Award.

2. Precisely, the facts of the case are that Union of India floated a

tender for supply of 5 DG Sets, 4 of 250 KVA and one of 200 KVA.

Objector submitted the tender as per NIT. Formal acceptance of the

tender was conveyed on 23.5.1985. It was preceded by a telegraphic

acceptance on 28.2.1985.

3. NIT specified that DGS&D-68 (Revised) and DGS&D-71 as

amended would be read as part of the tender documents. The

DGS&D has notified conditions of contract and has classified the

same as "DGS&D" Conditions of Contract. Terms contained therein,

by reference, get incorporated in various contracts entered into

through DGS&D by Union of India. Clause 24 of the Contract is an

Arbitration Agreement.

4. Two DG sets were to be supplied at Varanasi and one each at

Lucknow, Agra and Kanpur. Dispute arose between the parties as

Union of India did not release full payment. Union of India had

certain claims on the allegation that one DG set was not repaired

during the warranty period. There were disputes pertaining to the

commissioning of said DG set. Respondent had a claim for full

reimbursement of the amount of supply of DG Sets and also claim

for interest.

5. Shri Ram Bahadur, the Sole Arbitrator entered upon reference and

published his Award dated 31.3.1995. Petitioner herein filed

objections to the said Award under Section 30 read with Section 33

of the Act, in this Court. Vide order dated 4 th March, 2005, the said

Award was set aside with the directions for fresh arbitration and for

appointment of a new Arbitrator to reconsider the claim of the Union

of India and counter claim of the objector (Petitioner herein)

afresh.

6. In view of this order, Assistant Director (LIT) of Respondent No.1

appointed Shri B.S. Meena, Additional Legal Advisor to the Govt. of

India, Ministry of Law as a Sole Arbitrator vide letter dated

11.05.2005. Mr. Meena resigned and thereafter Dr. Geeta Rawat,

Additional Legal Adviser to the Ministry of Law and Justice was

appointed to act as Sole Arbitrator vide letter dated 8.2.2006.

7. After entering into reference and hearing the parties on their

respective claims, she pronounced and published the impugned

award dated 28.6.2006.

8. After the Award and the proceedings were filed on record by the

Arbitrator, Petitioner filed its objections under Section 15, 16, 30 and

33 of the Act, pertaining to his counter claim No. (f) and (g) in the

arbitration proceedings.

9. Objections which have been raised by the objector are :-

(1) The arbitrator had ignored completely the law while

disallowing the counter claim Nos. (f) and (g) for interest on

amount awarded i.e.

(a) On Rs.1,50,253/- forming subject matter of counter claim

No. (a) for the period from 15.10.1994 till the date of

payment.

(b) On Rs.75,000/- forming subject matter of counter claim

No. (b) for the period from November, 1985 till the date of

payment.

(c) On Rs.2,54,104/- forming subject matter of counter claim

No.(d) for the period from November, 1985 till the date of

payment.

10. Respondent No.1 has refuted the claim of the objector alleging that

Arbitrator passed a well reasoned Award while granting interest on

counter claim No. (f) and (g) and no interest can be granted to the

Petitioner on security amount of Rs.75,000/-. The Arbitrator allowed

the claim of the Petitioner for Rs.2,54,104/- towards release of

wrongful amount deducted and recovered. Therefore, she rightly

applied the law and used her discretion in not awarding any interest

on the said amount.

11. The controversy, therefore, is narrowed down to awarding of interest

by the Arbitrator on various claims awarded to the

Petitioner/objector.

12. The Arbitrator while considering counter claim (f) and (g) of the

objector regarding interest held:-

"(f) & (g) Interest: (i) the interest on Rs.2,54,104/- is not allowed because the letter submitted in support of withheld amount itself speaks that the amount will be kept withheld in your name till the finalisation of the cost of recovery due from you in respect of supplies made by you in A/T No. 837 dt. 23.4.85.

(ii) Interest @ 8% on Rs.1,50,253/- is allowed from November, 1985 i.e. date of supply to Oct. 1994 because the claimant should not keep the amount withheld for an indefinite period. This amount is undisputed hence interest is allowed.

(iii) Interest on security amount is not justified as security is released on the finalisation of dispute.

(h) Is not allowed."

13. Section 30 of the Act lays down the grounds for setting aside an

award. They are :-

(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.

14. This section provides exhaustive list of grounds on which an Award

of the arbitrator can be set aside by the Court. The Award published

by an arbitrator cannot be set aside if it is not hit by any of the

grounds set out in Section 30 of the Act.

15. It is pointed out by Mr. S.K. Chandwani, counsel for the Petitioner

that Arbitrator has not given any reason while rejecting his claim No.

(f) and (g), while refusing to grant interest on security amount and

also on Rs.2,54,104/- towards release of wrongful amount deducted

and recovered.

16. Arbitrator was not required to give reasons for its findings on every

claim or counter claim as the case may be. Simply because

Arbitrator did not give any reason while declining interest on the

amounts awarded to the Petitioner, does not make the Award unjust,

illegal and improper. The Arbitrator on the basis of its findings on

the claim and counter claims disallowed interest to the Petitioner on

security amount of Rs.75,000/- and on the amount of Rs.2,54,104/-

(towards release of wrongful amounts deducted and recovered) and

Rs.1,50,253/- (pertaining to balance amount of the supplies) till the

date the awarded amount is paid to the objector. Therefore, it cannot

be said that the Arbitrator had acted arbitrarily, unjustly and

misconducted herself by not applying the law and by not giving

reasons for her decision.

17. In „Santa Sila Devi & Anr. vs. Dhirendra Nath Sen & Anr., AIR

1963 SC 1677', the Supreme Court has laid down some principles to

be kept in mind by the Court to judge an Award, if any interference

is required by the Court. They are:-

(a) The court should approach an award with a desire to support it, if that is reasonably possible, rather than to destroy it by calling it illegal.

(b) Unless the reference specifically so requires, the arbitrator is not bound to deal with each claim or matter separately. He may deliver a consolidated award. Unless, so specifically required, the award need not formally express the decision of the arbitrator on each matter of difference.

(c) Unless the contrary appears, the court will presume that the award disposes finally of all the matters in difference.

(d) If an award is made de praemissis, the presumption is that the arbitrator intended to dispose finally of all the matters in difference and his award is to be held final, if by any intendment it can be made so.

18. The Arbitrator need not decide every matter of the dispute unless

specifically required. Admittedly, there is no agreement inter se the

parties for award of interest. The Arbitrator is the final arbitor for

the dispute between the parties and it is not open to challenge the

award on the ground that the arbitrator has drawn his own conclusion

or has failed to appreciate the facts. The Court cannot substitute its

own evaluation of the conclusion of law or fact to come to the

conclusion that the arbitrator had acted contrary to the bargain

between the parties. Whether a particular amount was liable to be

paid as compensation is a decision within the competency of the

arbitrator. While considering the question whether award should be

set aside, Court cannot examine and reassess or re-appreciate the

material placed on record.

19. True that Section 3 (1) (b) of the Interest Act in unequivocal terms

specified that the Court / Arbitrator has the power to allow interest in

any proceedings for recovery of any debt or damage or in

proceedings in which claim of interest, in respect of debt or damage

already paid is made at a rate not exceeding the current rate of

interest for pre-reference period.

20. Similarly, principle underlying Section 34 of the CPC is that a

person deprived of the use of money to which he is legitimately

entitled has a right to the compensation in the deprivation, which

may be called as interest, compensation or damage. This basic

consideration is as valid for the period, the dispute is pending before

the arbitrator as it is for the period prior to the arbitrator entering

upon the reference. The Arbitrator is an alternative forum for

resolution of disputes arising between the parties and therefore he

must have the power to decide all the disputes and differences arising

between them including award of interest in accordance with general

law.

21. In „Secretary to Govt. of Orissa vs. Raghunath Mohapatra, JT 1996

(6) SC 349', referred to by the Petitioner, it was observed:-

"44. Having regard to the above considerations, we think that the following is the correct principle which should be followed in this behalf:-

Where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (alongwith the claim for principal amount or independently) is referred to the arbitrator, he shall have the power to award interest pendent lite. This is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and therefore when the parties

refer all their disputes - or refer the dispute as to interest as such - to the arbitrator, he shall have the power to award interest. This does not mean that in every case the arbitrator should necessarily award interst pendent lite. It is a matter within his discretion to be exercised in the light of all the facts and circumstances of the case, keeping the ends of justice in view."

22. Thus, it is clear that arbitrator is not bound to award interest pendent

lite in every case. It is a matter within his discretion to be exercised

in the light of facts and circumstances of case, keeping the ends of

justice in view. There is no substantive law which mandates the

arbitrator to, in all circumstances award interest. Even under the

Interest Act, the award of interest is discretionary. Under these

circumstances, Section 30 of the Act does not permit interference

with such an award declining interest. To do complete justice

between the parties such power is inferred. It is well settled principle

of law that so far as award of interest is concerned, the Court shall

not normally interfere in the award rendered by the arbitrator.

Reference is made to 'M/s. Steeman Ltd. vs. The State of Himachal

Pradesh, 1997 III AD SC 449' and 'N.D.R. Israni vs. Delhi

Development Authority, 2008 (2) ARB LR 410 (Delhi)'.

23. In this case, the Arbitrator having regard to the facts and

circumstances of the case consciously did not award interest

pendente lite to the Petitioner. Therefore, no interference in the

award pertaining to claims No. (f) and (g) is called for nor is

warranted.

24. The next question for consideration is whether the court can grant

interest pendente lite.

25. Section 29 of the Act empowers the Court to award interest from the

date of decree till realization only. However, keeping in mind the

provision of Section 34 CPC it has been repeatedly held that while

passing a decree in terms of the award, the Court can award interest

for the period during which proceedings were pending in the Court

i.e. the period from the date of institution of proceedings for

enforcement of the Award in the Court till the passing of the decree.

26. In „Amar Industries vs. Union of India, 2006 (88) DRJ 361', this

Court while relying upon 'Renusagar Power Co. Ltd. vs. General

Electric Company, AIR 1994 SC 860', observed that Court has the

jurisdiction to award interest from the date of Award till date of

passing of a decree and period subsequent to the decree till payment.

It was observed in para 13 as under:-

"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."

27. Thus, it is clear that court has the power to award interest pendent

lite from the date of the Award till the passing of the decree and from

the date of decree till realization. Reference is made to „Gujarat

Water Supply and Sewerage Board vs. Unique Erectors (Gujarat)

(P) Ltd. AIR 1989 SC 973 at page 978'.

28. In „C.L. Gupta vs. Development Authority, 2006 (I) ARB LR 576

(Delhi)', it was observed:-

"... Where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute Along with the claim for principal amount or independently) is referred to the arbitrator, he shall have the power to award interest pendente lite. This is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and therefore when the parties refer all their disputes „ or refer the dispute as to interest as such to the arbitrator, he shall have the power to award interest. This does not mean that

in every case the arbitrator should necessarily award interest pendente lite. It is a matter within his discretion to be exercised in the light of all the facts and circumstances of the case, keeping the ends of justice in view."

29. Hence, objection petition being without any merit is hereby

dismissed.

30. Award of the Sole Arbitrator, Dr. Geeta Rawat dated 28.6.2006, is

hereby made a Rule of the Court. Petitioner is awarded simple

interest @ 9% per annum on the decretal amount from the date of the

institution of the suit till passing of the decree. Petitioner shall also

be entitled to claim simple interest @ 9% per annum from the date of

the decree till realization, if respondent No.1 fails to pay decretal

amount within three months from the date of the order. There are no

orders as to costs. Decree be prepared accordingly.

ARUNA SURESH (JUDGE)

MAY 26, 2010 vk