Manoj Cable Company vs Union Of India
2018 Latest Caselaw 5986 Del

$-10
*    IN THE HIGH COURT OF DELHI AT NEW DELHI

                                    Date of decision: 3rd October, 2018

+      EX.P.424/2015
       MANOJ CABLECOMPANY                    ..... Decree Holder
                     Through: Mr.I.S. Alag, Sr. Adv. with
                              Mr.Vineet                  Kumar,
                              Mr.Gurmehar S.Sistani &
                              Mr.Dushyant Kumar, Advs.
                     versus
       UNION OF INDIA                  ..... Judgement Debtor
                     Through: Mr.Jagjit Singh, Sr. Standing
                              Counsel for Railways with
                              Mr.Preet Singh & Mr.Vipin
                              Chaudhary, Advs.
       CORAM:
       HON'BLE MR. JUSTICE NAVIN CHAWLA

       NAVIN CHAWLA, J. (Oral)

1. The only dispute left between the parties to be adjudicated is whether the Award dated 30.11.2012 passed by the Sole Arbitrator adjudicating the disputes that had arisen between the parties in relation to the Contract for supply of underground Railway Signalling Cable Size 19 Core x 1.5 sq. mm against the Purchase Orders dated 14.01.2009 and 24.02.2009, Awards pre-reference, pendent lite and post Award interest in favour of the petitioner or not.

2. The dispute between the parties was in relation to the claim of the petitioner for price variation for the supply made beyond March 2009. The respondent vide its reply filed to the

EX.P.424/2015 Page 1 present petition has placed on record the letter appointing the Arbitrator alongwith noting sheet of its office file approving such appointment. The noting sheet indicates that the respondent had calculated the effect of price variation claimed by the petitioner to be Rs.1,08,30,830.40, however, was disputing the payabilty of the same as a matter of principle and contractual interpretation. In that light, while appointing the Arbitrator vide its letter dated 22.10.2010, the following term of reference was framed:

"While re-fixing the delivery period vide amendment letter No.08079516193002 dated 21.07.2009, Northern Railway had not allowed price variation beyond March 2009 considering the fact that the firm had procured the raw materials, and offered the material for inspection in March 2009."

3. The Arbitrator vide his Award dated 30.11.2012 passed the following direction:

"......... I therefore, decide on the basic issue "While re-fixing the delivery period vide amendment letter no.08079516193002 dated 21 .07. 2009, Northern Railway had not allowed price variation beyond March, 2009 considering the fact that the firm had procured the raw materials and offered the material for inspection in 2009". The act of N.Rly. in not allowing the price variation beyond March' 2009 is not in accordance with the contract and therefore, contractually and legally not justified. As per the terms of references for this Arbitration, the Arbitrator is to decide the legality of the restriction imposed by N.Rly. on price variation

EX.P.424/2015 Page 2 beyond March' 2009. I therefore, conclude my judgement at this stage, leaving it further for N.Rly., COS's office to suitably settle the claim of the claimant which is found to be admissible in view of the foregoing judgement."

4. Learned senior counsel for the petitioner submits that in the Statement of Claim apart from the amount of Rs.1,09,03,123.89 claimed by the petitioner on account of the above issue, the petitioner had also claimed interest @ 18% p.a. from the date of accrual of the cause of action. He submits that as the Arbitrator has directed the respondent to suitably settle the claim of the petitioner, it is necessary that the respondent has to pay amount so arrived at alongwith interest from the date of the accrual of the cause of action. Without prejudice to the above argument, he submits that in terms of Section 31(7)(b) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Act'), even if it is assumed that the Arbitrator has not directed the payment of interest, as the Arbitrator has also not rejected the said claim, the amount so awarded has to carry interest @ 18% p.a. from the date of the Award till the date of payment. In this regard he places reliance on the order dated 16.09.2016 passed by this Court in Hindustan Prefab Ltd. v. Union of India, MANU/DE/2661/2016.

5. On the other hand, learned counsel for the respondent submits that the terms of reference were restricted and the claim of the petitioner for interest had not been referred to the

EX.P.424/2015 Page 3 Arbitrator. Therefore, the Arbitrator has rightly not considered the question of awarding interest and this Court, while exercising its power as an executing court, cannot modify the Award to grant interest in favour of the petitioner. He further submits that the Award is merely declaratory in nature and does not award any sum of money in favour of the petitioner. Therefore, the question of grant of interest in favour of the petitioner does not arise. Relying upon Clause 2401 of Standard Conditions of the Contract, he further submits that even otherwise grant of interest in favour of the petitioner is prohibited by the contract.

6. I have considered the submissions made by the learned counsels for the parties. The reading of the noting sheet alongwith letter of appointment of the Arbitrator clearly indicates that there was no dispute between the parties as to the amount that the petitioner would be entitled to if its claim for price variation is allowed by the Arbitrator from March 2009. Therefore, the only question that was referred to the Arbitrator was whether the petitioner was entitled to such price variation or not. The Award when it finally directs the respondent to settle the claim of the petitioner, therefore, has to be read as awarding the sum of money that had already been worked out by the respondent itself even before making the appointment of the Arbitrator. In fact, the respondent has, after its objection against the Award were dismissed by this Court vide order dated 11.08.2014 passed in OMP 415/2013, paid the said

EX.P.424/2015 Page 4 amount to the petitioner in December, 2015. Therefore, I cannot agree with the contention of the counsel for the respondent that the terms of reference or the Award does not pertain to the claim of money or Award of money in favour of the petitioner.

7. At the same time, I am unable to agree with the submission made by the learned senior counsel for the petitioner that once the Arbitrator directed the respondent to settle the claim of the petitioner, it should be read so as to include the claim of the petitioner alongwith interest for the pre-reference and pendent lite period. There is no observation made by the Arbitrator in the entire Award in this regard.

8. Section 31 (7) (a) of the Act grants discretion to the Arbitral Tribunal to award interest on the whole or any part of the money being awarded in the said Award and 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. Such discretion therefore, has to be exercised by the Arbitrator and has to be supported by reasons for the same. In the present case, the Award cannot be read as awarding interest in favour of the petitioner for the pre-Award period. Such Award, even otherwise, would have been violative of Section 31(3) of the Act, which requires the Arbitrator to give reasons for the Award.

9. As far as the post award period is concerned, again the Award is silent on the same. However, this silence would have

EX.P.424/2015 Page 5 different consequences in view of Section 31(7)(b) of the pre- amended Act (as the Award is dated 30.11.2012), which is reproduced hereinbelow:-

"Section 31. Form and contents of arbitral award.- xxxx (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 award to the date of payment."

10. This Court in Hindustan Prefab Ltd.(supra), relying upon the Judgment of the Supreme Court in Hyder Consulting (UK) Ltd. v. Governor, State of Orissa, (2015) 2 SCC 189, has held that where the question whether any interest is payable post award, was not in contemplation of the Arbitrator, the Award must be read to be silent as to that question and the only conclusion that can be drawn is that the post award interest would be payable in terms of Section 31(7)(b) of the Act.

11. In the present case as the Award is silent on interest payable for the post award period, the provision of Section 31 (7)(b) shall become applicable and the petitioner would be entitled to the interest at the rate of 18% per annum from the date of the Award till the date of the payment.

12. As far as the contention of the learned counsel for the respondent based on Clause 2401 of the Standard Conditions of Contract is concerned, in my opinion, the same would not

EX.P.424/2015 Page 6 be applicable to the facts of the present case. Clause 2401 is reproduced hereinbelow:-

"2401. Whenever any claim or claims for payment of a sum of money arises out of or under the contract against the Contractor, the Purchaser shall be entitled to withhold and also have a lien to retain such sum or sums in whole or in part from the security, if any, deposited by the Contractor and for the purpose aforesaid, the Purchaser shall be entitled to withhold the said cash security deposit or the security, if any, furnished as the case may be and also have a lien over the same pending finalisation or adjudication of any such claim. In the event of the security being insufficient to cover the claimed amount or amounts or if no security has been taken from the Contractor, the Purchaser shall be entitled to withhold and have lien to retain to the extent of the such claimed amount or amounts referred to supra, from any sum or sums found payable or which at any time thereafter may become payable to the Contractor under the same contract or any other contract with the Purchaser or the Government pending finalisation or adjudication of any such claim.

It is an agreed term of the contract that the sum of money or moneys so withheld or retained under the lien referred to above, by the Purchaser will be kept withheld or retained as such by the Purchaser till the claim arising out of or under the contract is determined by the Arbitrator (if the contract is governed by the arbitration clause) or by the competent court as prescribed under Clause 2703 hereinafter provided, as the case may be, and that the Contractor will have no claim for interest or damages whatsoever on any account in respect of such withholding or

EX.P.424/2015 Page 7 retention under the lien referred to supra and duly notified as such to the Contractor."

13. A reading of the above Clause clearly shows that this is applicable only where the respondent withholds any sum payable to the contractor on account of any claim or claims that it may have against the contractor. The present is not such a case. It is not the case of the respondent that the disputed amount has been withheld by the respondent against any claim that it had against the petitioner. The amount was not being paid as in the opinion of the respondent the same was not payable at all. Therefore, Clause 2401 would have no application in the present case.

14. In view of the above, it is directed that the respondent shall recalculate the amount payable to the petitioner by adding interest at the rate of 18% p.a. on the sum awarded in favour of the petitioner from the date of the Award till the date of the payment. The amount that has already been paid by the respondent shall first be adjusted against the interest that is payable as on that date and thereafter towards the principal. The remaining principal amount shall carry further interest at the rate of 18% per annum till the final payment.

15. List on 28th November, 2018 for reporting compliance.

                                                 NAVIN CHAWLA, J

OCTOBER 03, 2018/Arya



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