Madras High Court
The General Manager vs C.T.Ramanathan Infrastructure ... on 3 September, 2021
Arb. O.P.(Com.Div.) No.57 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATE: 03.09.2021
CORAM
THE HONOURABLE MR.JUSTICE N.SATHISH KUMAR
Arb O.P.(Com.Div.) No.57 of 2021
1. The General Manager,
Southern Railway,
Head Quarters Office,
Park Town, Chennai-600 003.
2. The Chief Engineer,
Construction, Southern Railway,
Periyar E.V.R. High Road,
Egmore, Chennai-600 008. ... Petitioners
Vs.
C.T.Ramanathan Infrastructure Pvt. Ltd.,
New No.10, Old No.45,
Ground Floor, Front House,
4th Street 'D' Block, Anna Nagar East,
(Near Chinthamani), Chennai-600 102. ... Respondent
Prayer: Original Petition is filed under Section 34(2)(a)(iv), b(ii) of the
Arbitration and Conciliation Act, 1996, as amended by Amendment Act,
2015, praying to set aside the Arbitral Award passed by the learned
Arbitrator herein dated 09.09.2020 made in relation to disputes arising out
of Agreement No.72/CN/2008 dated 09.09.2008 in so far as Claim No.7
(Award of pendentelite interest @ 12% p.a. For a sum of Rs.1,53,02,341/-
https://www.mhc.tn.gov.in/judis/
1\7
Arb. O.P.(Com.Div.) No.57 of 2021
from 08.11.2012 to till the date of award) and Claim No.8 (post award
interest @ 18%) is concerned.
For Petitioners : Mr.P.T.Ramkumar
Standing counsel for Railways
For Respondent : Mr.K.K.Muralitharan
ORDER
(This case has been heard through video conference)
The award dated 09.09.2020 has been challenged under Section 34 of
the Act mainly on the ground that the Arbitrator has awarded a pendentelite
interest @ 12% p.a. from 08.11.2012 to till the date of award for the claim
Nos.2,3,4 and 5.
2. The learned Arbitrator has allowed the following claims :-
A. The claimant is awarded a sum of Rs.33,78,043/-
towards Final Bill under Claim No.2
B. The claimant is awarded a sum of Rs.57,53,775/-
towards the refund of Performance Bank Guarantee recovered
by the respondent under claim No.3
C. The claimant is awarded a sum of Rs.57,53,775/-
towards the refund of Security Deposit recovered by the
respondent under Claim No.4
https://www.mhc.tn.gov.in/judis/
2\7
Arb. O.P.(Com.Div.) No.57 of 2021
D. The Claimant is awarded a sum of Rs.4,16,748/- towards
payment of price variation to be paid by the respondent under
claim No.5
E. The claimant is awarded Rs.75,000/- towards cost of
arbitration under Claim No.9
The dispute is mainly with regard to the reference made on the basis of
tender awarded through the Letter of Acceptance
No.W.496/KOK/AIP/27/CN (7162), dated 16.07.2008 and the work has to
be completed on or before 15.04.2009 and further defect liability period of
six months as per Clause 42.0 of Special Conditions of Contract. The
claimant has raised claims on various grounds. The learned Arbitrator, after
considering the factual matters and various clauses found in the contract,
had passed an award.
3. The main contention of learned counsel appearing for petitioners is
that that the learned Arbitrator had allowed the main claims raised by the
respondent and also awarded pendentelite interest from 08.11.2012 to till
the date of award, which has been passed against clauses 17(A)(ii), 61(2),
61(3), 16(3) and 64(5) of General Conditions of Contract executed between
the parties. It is his further contention that the same company has filed a
https://www.mhc.tn.gov.in/judis/
3\7
Arb. O.P.(Com.Div.) No.57 of 2021
Original Petition before this Court in O.P.No.773 of 2019 in so far as
relating to pendentelite interest and this Court by an order dated 01.10.2019
has set aside the award in respect of granting pre-reference and pendentelite
interest.
4. The learned counsel appearing for respondent would submit that
the learned Arbitrator taking note of various factors, had allowed the claim.
It is submitted that the same cannot be interfered with. It is to be noted that
clause 64.(5) and 16.(3) of the General Conditions of Contract prohibits the
levy of interest on any of the amount, and the contract itself prohibits
payment of interest. The learned Arbitrator allowed the pendetelite interest
during the pendency of the claim, which cannot be sustained under law. In
this regard, this Court in O.P. No.305 of 2010, considering various
judgments had observed as follows :-
“12. Whereas, the learned counsel appearing for
respondent would contend that the judgment in Reliance
Celluloss Products Limited Vs. Oil and Natural Gas
Corporation Limited reported in 2018 (9) Supreme Court
Cases 266 has been referred in the subsequent judgment of the
Apex Court in the judgment in Jaiparakash Associates Ltd.
https://www.mhc.tn.gov.in/judis/
4\7
Arb. O.P.(Com.Div.) No.57 of 2021
(JAL) through its Director Vs. Tehri Hydro Development
Corporation India Ltd. (THDC), through its Director
reported in 2019 (2) CTC 577, the larger Bench of the Apex
Court considering clause 50 and 51 of General Conditions of
the Contract which bars the Arbitral tribunal to award interest
and finally held that when there is express bar against
awarding of pendentilite interest by the Arbitrator and the
same is not according to the contract and held that the clause
barring interest is very widely worded. It uses the words “any
amount due to the contractor by the employer” and these
words cannot be read as ejusdem generis along with the
earlier words “Earnest Money” or Security Deposit” by
holding so, the Apex Court has held that when the contract
stipulates bar of interest, pendentilite interest cannot be
ordered. Similar view was taken in the judgment of the Larger
Bench of the Apex Court in Bharat Heavy Electricals Limited
vs. Globe Hi Fabs Limited reported in 2015 (5) Supreme
Court Cases 718. Similarly, in the judgment in Reveechee and
Company Vs. Union of India reported in 2018 (7)
Supreme Court Cases 664, the Larger Bench of the Apex
https://www.mhc.tn.gov.in/judis/
5\7
Arb. O.P.(Com.Div.) No.57 of 2021
Court has held that in the absence specific bar to grant
interest, there is no bar for the Arbitrator to award interest.”
5. In such view of the matter, the interest portion awarded by the
learned Arbitrator, which is against the terms of contract cannot be
sustained. Accordingly, the award passed by the learned Arbitrator as far as
allowing pendetilite interest alone is set aside, however, with regard to
future interest, learned Arbitrator's award stands confirmed.
6. In such view of the matter, this Original Petition is allowed. No
costs.
03.09.2021
rpp
https://www.mhc.tn.gov.in/judis/
6\7
Arb. O.P.(Com.Div.) No.57 of 2021
N.SATHISH KUMAR, J.
rpp
Arb. O.P.(Com.Div.) No.57 of 2021
03.09.2021
https://www.mhc.tn.gov.in/judis/
7\7
