Delhi High Court
Union Of India vs Pradeep Vinod Const., Co. on 30 July, 2018
$~1
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision : 30th July, 2018
+ O.M.P. 296/2005 & I.A. 6390/2005
UNION OF INDIA ..... Petitioner
Through: Ms. Geetanjali Mohan, Advocate.
(M-9810017132)
versus
PRADEEP VINOD CONST., CO. ..... Respondent
Through: Mr. S. W. Haider, Advocate.
(M-9311307710)
CORAM:
JUSTICE PRATHIBA M. SINGH
Prathiba M. Singh, J. (Oral)
1. The present petition has been filed under Section 34 of the Arbitration
& Conciliation Act, 1996 („1996 Act‟), challenging the award dated 16th
May, 2005 passed by the Arbitral Tribunal. The only issue that has been
raised in the present petition is in respect of award of interest by the
Tribunal.
2. The submission of Ms. Geetanjali Mohan, learned counsel for the
Petitioner, is that the pre-reference interest and pendente lite interest cannot
be granted by the Arbitrators in view of clause 16 of the General Conditions
of Contract (hereinafter, „GCC‟). She relies upon the judgment of the
Supreme Court in Sri Chittaranjan Maity vs. Union of India 2017 (12)
SCALE 216 (hereinafter, „Chittaranjan Maity‟) wherein the Supreme Court
considered an identical clause i.e. clause 16(2) and held that interest is not
payable, in view of Section 31(7)(a) of the 1996 Act.
3. The matter was adjourned from time to time for awaiting the decision
Union of India vs. M/s Pradeep Vinod Construction Co. [Civil Appeal
No.2099/2017, Decided on - 3rd August, 2017] (hereinafter, „Pradeep Vinod
Construction Co.‟), which was between the same parties. The said decision
was rendered by the Supreme Court on 3rd August, 2017 wherein the award
of interest was upheld. Learned counsel for the Respondent has placed on
record a copy of the judgment of the Supreme Court.
4. The Parties have been heard. Learned counsel for the Petitioner
however submits that in view of the subsequent judgment in Chittaranjan
Maity (supra), interest cannot be awarded either for the pre-reference period
or pendente lite. However, insofar as post-award interest is concerned, she
does not dispute that the same can be awarded. She further submits that the
judgment in Chittaranjan Maity (supra) considers an identical clause of the
GCC and is subsequent to the Supreme Court's decision in Pradeep Vinod
Construction Co. (supra), and, would therefore be binding on this Court.
5. On the other hand, learned counsel for the Respondent submits that
clause 16 has to be considered in its entirety. The said clause relates only to
earnest money and security deposit and does not relate to other claims which
may be adjudicated/rejected by the Tribunal. Clause 16(2) and 16(3) cannot
be expanded in their scope and made applicable to all claims. According to
him, since the judgment in Pradeep Vinod Construction Co. (supra) was
between the same parties, the said judgment would be applicable. According
to him, Chittaranjan Maity (supra) does not consider clause 16(1) and
hence he submits that the said judgment should not be applied.
6. Mr. S.W. Haider, learned counsel for the Respondent also submits
that the judgment in Pradeep Vinod Construction Co. (supra) has been
followed by this Court in Union of India vs. M/s. Manraj Enterprises
[O.M.P.330/2011 decision dated 20th September, 2017] (hereinafter,
„Manraj Enterprises‟) wherein a learned Single Judge of this Court has
applied the judgment. Ms. Mohan, however, submits that the decision in
Manraj Enterprises (supra) was rendered prior to the judgment in
Chittaranjan Maity (supra) and hence there was no occasion for the learned
Single Judge to consider the said judgment.
7. Clause 16(3) of the agreement reads as under:
"(3) No interest will be payable upon the earnest
money of the security deposit or amounts payable to
the contractor under the contract, but Government
Securities deposited in terms of sub-clause (1) of this
clause will be repayable with interest accrued thereto."
8. The question of grant of interest under clause 16 of the General
Conditions of Contract has been considered in a large number of decisions.
The first and foremost issue to be highlighted is that under Section 31(7) of
the 1996 Act, the power of the Arbitral Tribunal to award interest has been
clearly provided. Section 31(7)(a) of the 1996 Act deals with interest that the
Arbitral Tribunal can award "for the whole or any part of the period between
the date on which the cause of action arose and the date on which the award
is made". This period thus includes the entire period prior to making of the
award which is, for ease of reference referred to as pendente lite. The interest
can therefore be awarded by the Tribunal, for example from the date when
the first claim is raised by the contractor or when a legal notice is issued or
when the arbitration clause is invoked or the protest against the non-
clearance of certain amounts as part of a bill. Thus, the entire period from the
date when the cause of action arises till the date of award i.e., passing
through all stages of correspondence, invocation of arbitration clause,
reference is made, Arbitration Tribunal entering reference, pendency
of proceedings, and passing of the award is included in the scope of this
clause.
9. Section 31(7)(b) of the 1996 Act, however refers to interest payable
"from the date of award to the date of payment" i.e. the period after the
passing of the award which is for ease of reference referred to as future
interest.
10. In Sayeed Ahmed & Company v. State of Uttar Pradesh & Ors.
(2009) 12 SCC 26 (hereinafter referred as „Sayeed Ahmed‟), the Supreme
Court has categorically held that by virtue of Section 31(7), there exists no
difference between pre-reference period and the pendente lite period.
Paragraphs 13 and 14 of the said decision are set out below:
"13. The legislature while enacting the Arbitration
and Conciliation Act, 1996, incorporated a specific
provision in regard to award of interest by arbitrators.
Sub-section(7) of Section 31 of the Act deals with the
arbitrator's power to award interest. Clause (a) relates
to the period between the date on which the cause of
action arose and the date on which the award is made.
Clause(b) relates to the period from the date of award
to date of payment. The said sub- section (7) is
extracted below :
"31. (7)(a) Unless otherwise agreed by the
parties, where and insofar as an arbitral award is for
the payment of money, the Arbitral Tribunal may
include in the sum for which the award is made
interest, at such rate as it deems reasonable, on the
whole or any part of the money, for the whole or any
part of the period between the date on which the cause
of action arose and the date on which the award is
made.
(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."
Having regard to sub-section (7) of Section 31 of the
Act, the difference between pre-reference period and
pendentee lite period has disappeared insofar as
award of interest by arbitrator. The said section
recognises only two periods and makes the following
provisions :
(a) In regard to the period between the date on
which the cause of action arose and the date on which
the award is made (pre-reference period plus
pendentee lite), the Arbitral Tribunal may award
interest at such rate as it deems reasonable, for the
whole or any part of the period, unless otherwise
agreed by the parties.
(b) For the period from the date of award to the date of
payment the interest shall be 18% per annum if no
specific order is made in regard to interest. The
arbitrator may however award interest at a different
rate for the period between the date of award and date
of payment.
14. The decisions of this Court with reference to
the awards under the old Arbitration Act making a
distinction between the pre-reference period and
pendentee lite period and the observation therein that
arbitrator has the discretion to award interest during
pendentee lite period inspite of any bar against interest
contained in the contract between the parties are not
applicable to arbitrations governed by the Arbitration
and Conciliation Act 1996."
11. Thus, as per Sayeed Ahmed (supra), the difference between the
Arbitration Act, 1940 and 1996 Act is clear insofar as it relates to the
periods for which the interest can be awarded prior to the passing of the
award, no longer exists. In Sree Kamatchi Amman Constructions v.
Divisional Railway Manager (Works), Palghat Ors. (2010) 8 SCC 767
(hereinafter, „Kamatchi Amman Constructions‟), the Supreme Court upheld
the discretion of the Arbitral Tribunal in refusing to award interest for the
pendente lite period. Thereafter, in Union of India v. Bright Power Projects
(India) Private Limited (2015) 9 SCC 695 (hereinafter, „Bright Power
Projects‟), the Supreme Court considered clause 13(3) of the contract
therein, which is similarly worded to clause 16(3). The said clause 13(3) is
set out herein below:
"No interest will be payable upon the earnest money
and the security deposit or amounts payable to the
contractor under the contract, but government
securities deposited in terms of sub-clause (1) of this
clause will be repayable with interest accrued
thereon"
12. In the context of this clause, the Supreme Court distinguished the
decision in Secretary, Irrigation Department, Government of Orissa &
Ors. v. G.C. Roy (1992) 1 SCC 508 (hereinafter, „G.C. Roy‟) which was
decided under the 1940 Act and observed in para 13, 17 and 21 which read
as under:
"13. Section 31(7) of the Act, by using the words
"unless otherwise agreed by the parties", categorically
specifies that the arbitrator is bound by the terms of
the contract so far as award of interest from the date of
cause of action to date of the award is concerned.
Therefore, where the parties had agreed that no
interest shall be payable, the Arbitral Tribunal cannot
award interest.
...
17. It is also pertinent to note that G.C. Roy‟s case had
been decided on 12-12-1991 on the basis of the
provisions of the Arbitration Act, 1940, which was not
operative at the time when the dispute on hand was
decided by the Arbitral Tribunal.
...
21. For the aforestated reasons, we set aside the
impugned judgment and the award so far as it pertains
to payment of interest pendente lite and direct that no
interest would be paid on the amount payable under
the contract to the respondent from the date of the
reference till the date of the award."
13. In Union of India v. Ambica Construction (2016) 6 SCC 36
(hereinafter, „Ambica Construction‟) which was rendered by a three Judge
Bench of the Supreme Court, the Court was considering the power of the
Arbitrator to award pendente lite interest when the contract contains a bar
under the 1940 Act. The Supreme Court considered the judgments in G.C.
Roy (supra), Sayeed Ahmed (supra), Bright Power Projects (supra) and
Kamatchi Amman Constructions (supra) and observed as under:
"22. In our opinion, it would depend upon the nature
of the ouster clause in each case. In case there is
express stipulation which debars pendent lite interest,
obviously, it cannot be granted by the arbitrator. The
award of pendent lite interest inter alia must depend
upon the overall intention of the agreement and what is
expressly excluded.
..............................
25. ...Section 31(7)(a) of the 1996 Act confers the
power on the arbitrator to award interest pendent lite,
"unless otherwise agreed by parties". Thus, it is clear
from the provisions contained in Section 31(7)(a) that
the contract between the parties has been given
importance and is binding on the arbitrator. The
arbitration clause is also required to be looked into
while deciding the power of the arbitrator and in case
there is any bar contained in the contract on award of
interest, it operates on which items and in the
arbitration clause what are the powers conferred on
the arbitrator and whether bar on award on interest
has been confined to certain period or it relates to
pendency of proceedings before the arbitrator.
...
28. ...It is apparent from various decisions referred to
above that in G.C. Roy the Constitution Bench of this
Court has laid down that where the agreement
expressly provides that no interest pendete lite shall be
payable on amount due, the arbitrator has no power to
award interest.
...
34. Thus, our answer to the reference is that if the
contract expressly bars the award of interest pendent
lite, the same cannot be awarded by the arbitrator. We
also make it clear that the bar to award interest on
delayed payment by itself will not be readily inferred
as express bar to award interest pendent lite by the
Arbitral Tribunal, as ouster of power of the arbitrator
has to be considered on various relevant aspects
referred to in the decisions of this Court, it would be
for the Division Bench to consider the case on merits."
14. It is relevant to point out that Ambica Construction (supra) was a
case decided under the 1940 Act but a reference in respect of the various
decisions of the two Judge Benches of the Supreme Court which had taken
varying views and only the reference was answered.
15. In Pradeep Vinod Construction Co. (supra), the Supreme Court
again considered a clause which is identical to the clause falling for
interpretation in the present case and after considering Ambica Construction
(supra) observed as under:
"7. Having given our thoughtful consideration to
the contractual obligations entered into by the parties
through clause 16, we have no reason to doubt, firstly,
that the clause related exclusively to earnest money
and security deposit. The above Clause did not relate
to the other contractual obligations between the
parties. A perusal of clause 16 (1) further clarifies the
position, inasmuch as, even if some payment under the
contractual obligation was diverted to make good the
security deposit payable, no interest would be payable
thereon as well. Therefore, there can be no doubt, that
non-payment of interest, contemplated between the
parties under clause 16, was exclusively limited to the
component of earnest money and the security deposit,
which was held by the appellant and nothing else. Even
though, there can be no dispute whatsoever, that
Clause 16(2) is in pari materia with the clause taken
into consideration in Tehri Hydro Development Corpn.
Ltd. case (supra), yet in the case before us, having read
the clause in its entirety, we are satisfied, that the
parties had agreed, that payment of interest would not
be due, only with reference to earnest money and
security deposit. Thus viewed, we have no hesitation in
concluding, that the determination in the arbitral
award, of component of interest, payable by the
appellant to the respondent, was in terms of the
contractual obligation. Nothing in the contract
provided for non-payment of interest on the
contractual obligations."
16. Thus, in Pradeep Vinod Construction (supra), the Supreme Court
took the view that Clause 16(3) applies only in respect of earnest money
and/or security deposit.
17. Subsequent to the decision in Pradeep Vinod Construction (supra),
the Supreme court in Chittaranjan Maity (supra), was considering a case
where there were various claims which were raised and amounts awarded
even beyond security deposit and earnest money. This is evident from a
perusal of the table in paragraph 10 of the said judgment. On the issue of
interest, the Supreme Court considered Section 31(7)(a) of the 1996 Act and
clause 16 of the GCC. In Chittaranjan Maity (supra), the Supreme Court,
was considering clause 16(2) which is similarly worded to Clause 16(3) and
held as under:
"19. In Sayeed Ahmed and Co. v. State of Uttar
Pradesh and Ors. (2009) 12 SCC 26, this Court noted
that the 1940 Act did not contain any provision
relating to the power of the Arbitrator to award
interest. However, now a specific provision has been
created Under Section 31(7)(a) of the 1996 Act. As per
this Section, if the agreement bars payment of interest,
the Arbitrator cannot award interest from the date of
cause of action till the date of award. The Court has
observed that in regard to the provision in the 1996
Act, the difference between pre-reference period and
the pendente lite interest has disappeared insofar as
award of interest by the Arbitrator is concerned.
Section 31(7)(a) recognizes only two periods, i.e. pre-
award and post-award period.
20. In Sree Kamatchi Amman Constructions v.
Divisional Railway Manager (Works), Palghat and
Ors. (2010) 8 SCC 767, this Court was dealing with an
identical case wherein Clause 16 of the GCC of
Railways had required interpretation. This is the same
Clause 16(2) of the GCC prohibiting grant of interest
which is also applicable in the facts of the present
case. The Court held that where the parties had agreed
that the interest shall not be payable, the Arbitral
Tribunal cannot award interest between the date on
which the cause of action arose to the date of the
award.
21. In Union of India v. Bright Power Projects
(India) Private Limited (2015) 9 SCC 695, a three-
Judge Bench of this Court, after referring to the
provisions of Section 31(7)(a) of the 1996 Act, held
that when the terms of the agreement had prohibited
award of interest, the Arbitrator could not award
interest for the pendente lite period. It has been held
thus:
"10. Thus, it had been specifically understood
between the parties that no interest was to be paid
on the earnest money, security deposit and the
amount payable to the contractor under the
contract. So far as payment of interest on
government securities, which had been deposited
by the Respondent contractor with the Appellant
is concerned, it was specifically stated that the
said amount was to be returned to the contractor
along with interest accrued thereon, but so far as
payment of interest on the amount payable to the
contractor under the contract was concerned,
there was a specific term that no interest was to
be paid thereon.
11. When parties to the contract had agreed to the
fact that interest would not be awarded on the
amount payable to the contractor under the
contract, in our opinion, they were bound by their
understanding. Having once agreed that the
contractor would not claim any interest on the
amount to be paid under the contract, he could
not have claimed interest either before a civil
court or before an Arbitral Tribunal."
Therefore, it is clear that the Appellant is not entitled
for any interest on the amount awarded by the Arbitral
Tribunal"
18. More recently however, in Raveechee and Co. v. Union of India
[C.A. 5964-5965 of 2018, decision dated 3rd July, 2018] (hereinafter,
„Raveechee and Co.‟), the Supreme Court was considering a case where the
Arbitrator had awarded interest @ 12% p.a. on the award excluding the
amount of security deposit. The Court considered clause 16(3) of the GCC
and held that the Arbitral Tribunal did not award interest on security
deposits in view of clause 16(3). The observation is in para 8, which is
reproduced below:
"8. In the present case, the Arbitral Tribunal
giving effect to the purport of Clause 16(3) did not
award any interest on security deposits. The clause in
terms states that no interest will be payable on earnest
money, security deposits or on any amounts payable to
the contractor under the contract.
The Arbitrators in their award have relied on
Clause 16(3) of the contract to deny interest on the
security deposit. The Arbitrators held that what was
intended under Clause 16(3) barred the grant of
interest on earnest money, security deposit and
amounts payable to the appellant, it does not in any
way bar grant of interest pendent lite."
19. However, in Raveechee and Co. (supra) it was argued that no
pendente lite interest could have been awarded at all. In this context, the
Supreme Court interpreted clause 16(3) and held that the term `or amounts
payable‟ does not include damages that are awarded by the Arbitral
Tribunal. The court held as under:
"10. On behalf of the Union of India, it is contended
that the Arbitrators by reason of Clause 16(3) could
not have awarded interest pendente lite. This
contention is incorrect. Ex facie the clause does not
deal with interest pendente lite. In terms, the clause
only bars interest upon earnest money and security
deposits or amounts payable to the contractor under
the contract. The above mentioned amounts are
amounts which in a sense belong to the contractor.
They are amounts voluntarily deposited with the other
contracting party in order to be refunded or forfeited
depending on performance of the contract. As such
they are not amounts of which the contractor is
deprived the use of against his wishes, so as to attract
interest.
It is not the case of the Government before us
that interest has been awarded to the contractor under
any of the three heads. Neither does any question of
interest payable on Government security arise in the
present case. The contention put forth by the
Government is that the above clause in the agreement
bars the Arbitrators from awarding interest pendete
lite. On a plain reading we find that there is no such
bar.
11. In fact, the Arbitrators have awarded amounts to
the claimant on account of the losses suffered by them
for various reasons, mainly due to the ban on mining.
These amounts are not awarded on account of any
payment due under the contract but are awarded on
losses determined in the course of arbitration or the
„lis‟.
A claimant becomes entitled to interest not as
compensation for any damage done but for being kept
out of the money due to him. Obviously, in a case of
unascertained damages such as this, the question of
interest would arise upon the ascertainment of the
damages in the course of the lis. Such damages could
attract interest pendente lite for the period from the
commencement of the arbitration to the award.
Thus, the liability for interest pendente lite does
not arise from any term of the contract, or during the
terms of the contract, but in the course of
determination by the Arbitrators of the losses or
damages that are due to the claimant. Specifically, the
liability to pay interest pendente lite arises because the
claimant has been found entitled to the damages and
has been kept out from those dues due to the pendency
of the arbitration i.e. pendente lite.
12. We are, therefore, of the view that the Arbitrators
rightly awarded interest pendente lite for the period
from 26.09.1988 to 23.03.2001 which is the date of the
award, on the amounts found due to the claimant.
Undoubtedly, such a power must be considered
inherent in an Arbitrator who also exercises the power
to do equity, unless the agreement expressly bars an
Arbitrator from awarding interest pendente lite. An
agreement which bars interest is essentially an
agreement that the parties will not claim interest on
specified amounts. It does not bar an Arbitrator, who is
never a party to the agreement from awarding it.
We are not called upon, in this case, to decide
whether parties can agree that they will not claim
interest pendente lite even in respect of unascertained
damages determined in the course of arbitration. The
present case must be decided on the general rule that
an arbitrator has the power to award interest unless
specifically barred from awarding it; and the bar must
be clear and specific."
20. The Supreme Court concluded as under:
"18. Thus, when a dispute is referred for
adjudication to an arbitrator, a term of such a nature
as contained in clause 16(3) of GCC, that is binding on
the parties cannot be extended to bind the Arbitrator.
The Arbitrator has the power to award interest
pendente lite where justified."
21. Since the clause itself has not been challenged, this Court is not
venturing into the legality of the same. The legal position, upon a
cumulative reading of all the judgments can be summarized as under:
i) There is no distinction between the pre-reference and pendente lite
period under the 1996 Act (Sayeed Ahmed);
ii) If the contract has a specific stipulation in respect of award of
interest, the same would be applicable and the Arbitral Tribunal under
Section 31(7) would be bound by the same (Bright Power Projects
and Ambica Construction);
iii) The express exclusion in a contract has to be determined after a
reading of a clause and the overall intention of the agreement as also
the exact exclusion (Ambica Construction);
iv) Clause 16 primarily relates to earnest money and security deposits
and does not relate to other payments (Pradeep Vinod Construction
Co.);
v) In respect of security deposit, earnest money deposit and other
amounts payable under the contract, no interest is payable
(Chittaranjan Maity).
vi) In respect of security deposit, earnest money deposit and
amounts payable under the contract, no interest is payable. However,
in respect of unascertained damages, the same would not be an
amount payable under the contract, hence interest would be payable
(Raveechee and Co.).
22. The above conclusions are arrived at after looking at the factual
background and the findings in the decisions of the Supreme Court referred
to above. There may be a few observations which could lead to an argument
that there are conflicting interpretations by coordinate Benches of the
Supreme Court in decisions iv), v) and vi) above. For the time being,
however, after appreciating the factual background in each of the decisions,
and the fact that some of the earlier judgements may not have been brought
to the notice of the Benches rendering the subsequent decisions, the above
conclusions can be arrived at.
23. In Union of India v. N.K. Garg 2016 (155) DRJ 197, a Learned
Single Judge of this Court has held that clause 16(2) which is in pari
materia to clause 16(3), here, is contrary to law and is illegal in view of the
various provisions of the Interest Act, 1978 and the judgment of the
Supreme Court in G.C. Roy (supra). The said judgment is under challenge
before a Division Bench of this court and has been stayed. Before this Court,
the legality and validity of clause 16 has not been challenged and the same is
being argued as being applicable. Only its interpretation is being contested.
The legality as to whether a clause such as Clause 16(3) which bars grant of
interest, would stand the test of reasonableness, is not therefore being gone
into in the present case.
24. Applying the principles laid down by the various decisions of the
Supreme Court, to the facts of the present case, it is seen that the award of
amounts in favour of the Respondent, are in respect of the following claims:
Claim Title Amount Amount Reasons for award
No. Claimed Awarded
(in Rs.) (in Rs.)
1 Extra/additional 6,00,000/- 1,50,000 Claim partly allowed.
expenses for The claimant had
bailing out water executed work of
other than sub soil bailing out water which
at different bridge was more than the
locations. reasonable quantities
expected in sub soil
water.
2 Extra/additional 60,000 20,000 Claim partly allowed.
expenses for Claimant could not give
supplying labour sound proof of full
for removing and amount of the claim of
putting ballast, Rs.60,000, however
replacement of since the Respondent
M.C. girders with had admitted that
P.S.C. slabs at labour was provided by
various bridges the claimant and they
had processed payment
only for the work done,
the relief was granted.
3 Extra/additional 1,40,000 35,000 The Respondents
expenses for admitted that the ballast
shifting of ballast stacks were
stacks coming in removed/shifted during
the alignment of the course of the work.
new platform at Respondents had
Bijwasan and processed for the
Palam Railway payment of Rs. 5,440/-
station to new for the work done
location including which was not agreed to
stacking as by the claimant. Ballast
identified by the register could not be
administration produced by the
Qty. 2000 m 3 respondents. Based on
@Rs.70/- per cum the documents
produced before us,
Rs.35,000/- is
considered reasonable
compensation.
4 Extra/additional 3,50,000 50,000 Claim partially allowed.
expenses
providing
examination pits
for bridges to
verify the
foundation details
as there was
inconsistency in
the approved plans
and site plans Qty.
70 Pits
@Rs.5000.00 per
Pit
13 Extra/additional 7,25,000 1,80,000 Claimant could not give
expenses for sound proof of his
carrying earth claim, however, based
manually as on the facts and
vehicle with earth documents in the case,
not allowed to ply the claim was partly
on platform. Qty. allowed.
14500 m3
@Rs.50,000 per
cum
18 Extra/additional 12,60,000 3,15,000 Claimant could not give
expenses for sound proof for the
providing entire claim, but based
controlled on the documents on
concrete instead of record, partial relief
nominal mix as was granted.
provided in the
agreement Qty.
2100 cum
@Rs.600/- per
cum
21 Claim as 7,43,400 7,43,400 Claim fully allowed as
difference in rate the Respondents could
as some quantity not give justification for
of N.S.9 had been having paid the item of
in correctively control concrete in an
paid as NS item -7 item which concerns
Qty 708 m3 concreting with
@Rs.2250 nominal mix.
Rs.1200 Rs.1050-
99 per cum
Total amount awarded Rs.14,93,400
25. In view of Section 31(7)(a) of the 1996 Act, if there is an agreement
between the parties, insofar as award of interest is concerned, then the said
agreement prevails. Since clause 16(3) refers to an amount payable to the
contractor under the contract, and not merely to earnest money and security
deposit, though clause 16(3) falls in the same clause which relates to earnest
money and security deposit, the decision in Chittaranjan Maity (supra) is
applicable in the facts of the present case.
26. Moreover, none of the above amounts constitute un-ascertained
damages as contemplated in Raveechee and Co. (supra). Neither do they
relate to damages awarded for loss suffered. They are amounts payable
under the contract, which were claimed and partially awarded. Apart from
the above claims, several of the claims made were also rejected by the
Tribunal. These amounts would be covered clearly under clause 16(3) and
as per the judgment in Chittaranjan Maity (supra) and Raveechee and Co.
(supra), no interest would be awardable. The decision of Raveechee and
Co. (supra) is relied upon by the Respondent to argue that a clause such as
16(3) cannot extend to bind the Arbitrator. However, the dictum in
Raveechee and Co. (supra) is as under:
"18. Thus, when a dispute is referred for
adjudication to an arbitrator, a term of such a nature as
contained in clause 16(3) of GCC, that is binding on the
parties cannot be extended to bind the Arbitrator. The
Arbitrator has the power to award interest pendente lite
where justified."
27. The power of Arbitrator to award pendente lite interest is
contemplated and recognized, only "where justified". Under section
31(7)(a) of the 1996 Act, if there is an agreement between the parties
excluding interest, the same would prevail. The various judgments of the
Supreme Court in Pradeep Vinod Construction Co. (supra), Chittaranjan
Maity (supra) and Raveechee and Co. (supra) lead this Court to conclude
that insofar as the amounts, which are covered by Clause 16(3) of the GCC
are concerned, no interest would be payable even by the Tribunal as there is
a bar under Section 31(7)(a) of the 1996 Act. The question as to whether
clause 16(3) is itself legally valid is something that has not been raised in the
present petition and hence the same is not being gone into. Under such
circumstances, on the amounts awarded, no pre-award interest is payable.
28. Present petition was initially heard on 30th July, 2018 and the order
disposing of the OMP was dictated in open Court. However, while
finalizing the order, the judgment of the Supreme Court in Raveechee and
Co. (supra) came to the notice of the Court and counsels were allowed to
make additional oral submissions dealing with findings in Raveechee and
Co. (supra).
29. The arbitral award in the present case grants interest to the Claimant,
pre-reference and pendente lite. The said amount of interest is liable to be
set aside i.e. as contained in paragraph 9 of the award. However, the
principal amount and the future interest i.e., post the award, is upheld as the
same is not questioned before this Court.
30. The petition is, accordingly, disposed of. All pending I.A.s also stand
disposed of.
PRATHIBA M. SINGH
JUDGE
JULY 30, 2018
Rekha/Rahul/dk
