Orissa High Court
Executive Engineer vs M/S. Budharaja Mining And on 19 May, 2023
THE HIGH COURT OF ORISSA AT CUTTACK
ARBA No.6 of 2021
and
W.P.(C) No.429 of 2022
(From the Judgment dated 18.02.2021 passed by the Learned
District Judge, Angul in Arbitration Case No.18 of 2018 arising
out of award dated 23.04.2018 passed in Arbitration Proceeding
No.51 of 2016 by the learned Sole Arbitrator)
In ARBA No.6 of 2021
Executive Engineer, Head Work .... Appellants
Division, Samal Barrage & Ors.
-versus-
M/s. Budharaja Mining and .... Respondent
Construction Limited, Jharpada,
Bhubaneswar
Advocates appeared in the case:
For Appellant : Mr. Tarun Patnaik, ASC
-versus-
For Respondents : Mr. Yashobanta Dash, Sr. Adv.
Mr. Avijit Pal, Adv.
W.P.(C) No.429 of 2022
M/s. Budharaja Mining and .... Petitioner
Construction Limited, Jharpada,
Bhubaneswar
-versus-
State of Odisha and Ors. .... Opp. Parties
Advocates appeared in the case:
For Petitioner : Mr. Yashobanta Dash, Sr. Adv.
Mr. Avijit Pal, Adv.
-versus-
For Respondents : Mr. Tarun Patnaik, ASC
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Location: Orissa High Court, Cuttack
Date: 25-May-2023 12:19:13
CORAM:
DR. JUSTICE S.K. PANIGRAHI
DATE OF HEARING:-16.02.2023
DATE OF JUDGMENT:-19.05.2023
Dr. S.K. Panigrahi, J.
1. Since both the ARBA and the Writ Petition arose out of arbitral
award dated 23.04.2018 passed in Arbitration Case No.51 of 2016
by the learned Sole Arbitrator, this Court proposed to hear both
the matters together and passes a common order.
2. This ARBA under Section 37 of the Arbitration and Conciliation
Act, 1996 (hereinafter referred to as "A & C Act") has been filed
by the judgment debtors, the present Appellants, seeking setting
aside of the judgment dated 18.02.2021 passed by the Learned
District Judge, Angul in Arbitration Petition No.18 of 2018 arising
out of arbitral award dated 23.04.2018 passed in Arbitration Case
No.51 of 2016 by the learned Sole Arbitrator.
3. The Writ Petition has been filed by the decree holder, the present
Respondent, challenging the order dated 21.12.2021 passed in
Execution Case No.1 of 2019 (arising out of Arbitration Appeal
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No.6 of 2021) by the learned District Judge, Angul rejecting its
application for release of the amount of Rs.3.50 crore deposited
by the judgment debtors, the present Appellants, before the
learned District Judge, Angul pursuant to the order dated
01.09.2021 passed by this Court in I.A. No.12 of 2021 arising out
of ARBA No.6 of 2021.
I. FACTUAL MATRIX OF THE CASE:
4. The Department of Water Resources, Government of Odisha
through its Executive Engineer invited tenders for execution of
"Balance New Works of Left Bank Canal from R.D. 17.60 Km. to
23.00 Km. including structures other than H.R. and C.R. and C.D.
at R.D. 20.888 Km. and N.H. Crossing - (Package No. 15)".
5. Respondent's bid was found most competitive and the tender
was awarded to the present Respondent for a contract value of
Rs.6,00,94,462/- vide Letter of Acceptance dated 24.5.1997.
Requisite performance security of Rs.30,04,723/- was furnished by
the present Respondent and thereafter a formal agreement vide
Contract No.2NCB/97-98/PCD dated 26.05.1997 was entered into
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between the parties herein. Accordingly, the present Respondent
commenced work on the stipulated date of commencement i.e.
26.5.1997. The work so awarded was to be completed within 30
months from the date of commencement of work in terms of the
contract.
6. During the execution of the contract, there were hindrances and
impediments which resulted in delay in execution of the work.
There also appears to be a change in the scope of work which led
to variation in the quantities of items. A supplementary
agreement was also executed on 24.01.2002 bearing No.2/2001-
2002 between the parties which approved the execution of extra
items and deviated quantities on agreed upon rates.
7. Upon regular representations being made to the authorities, the
present Respondent was granted extension of time on six
separate occasions, i.e. from 26.11.1999-24.11.2000, 25.11.2000 -
23.11.2000, 24.11.2001 - 24.12.2002, 25.12.2002 - 21.3.2003,
01.04.2003 - 30.6.2003, 01.07.2003 - 31.12.2003.
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8. During the extended period from 24.11.2001 - 24.12.2002, the
Head Works Division issued a termination letter on 02.11.2002.
Upon receiving a representation from the present Respondent
requesting time till 31.03.2003 to complete the work, though the
present Appellants granted the same and even proceeded to
grant two further extensions, it was submitted that the contract
stood closed and fresh bids were invited.
9. As the matter stood thus, vide letter dated 10.02.2004, the
Appellants intimated the present Respondent that the contract
had been terminated as per the General Conditions of Contract.
10.Aggrieved, the Respondent made a representation to the
nominated Adjudicator Er. N.C. Rout in terms of the contract
entered into between the parties but the same was not accepted.
Thereafter, the present Respondent approached this Court in
W.P.(C) No.4419 of 2005 wherein vide order dated 18.01.2012, the
Chairman, Institute of Engineers (India), Orissa State Centre was
directed to appoint an Adjudicator in lieu of Er. N.C. Rout within
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two weeks. Consequently, Er. Ajit Kumar Ray, Retd. Chief
Engineer was appointed as the Adjudicator.
11.The present Respondent submitted a total of 15 claims before the
Learned Adjudicator. The present Appellants in return raised 6
claims in their counter claim.
12.The Learned Adjudicator with reference to the documents on
record in his award dated 13.05.2016, rejected all the counter
claims of the present Appellant. He proceeded to allow six of the
present Respondent's claims in full, two in part and rejected
seven.
13.Both the parties were not satisfied with the award dated 13.5.2016
of the Learned Adjudicator for different reasons and therefore,
the present Respondent approached this Court in an application
under Section 11(6) of the A & C Act numbered as ARBP No.41 of
2016. The said application was disposed of on 21.9.2016
nominating Sri Justice L. Mohapatra (Retd.) as the Sole Arbitrator.
14.The Arbitral Tribunal entered into reference and a claim
statement was filed by the present Respondent seeking
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confirmation of the award of the Learned Adjudicator dated
13.5.2016 and award an amount of Rs.2,55,77,488.72 towards
interest at 12% per annum from 01.07.2004 till the date of the
award apart from seeking future interest at 18% per annum from
the date of the award till payment.
15.While the arbitration was pending as such, the present
Appellants approached this Court in an application under Section
11(6) of the A & C Act numbered as ARBP No.9 of 2017 seeking
the appointment of an Arbitrator to adjudicate the dispute
between the parties afresh. The said application was disposed of
vide order dated 20.03.2017 wherein the present Appellants were
asked to file their counter claims before the Learned Sole
Arbitrator and the same was directed to be considered on merits.
16.Thereafter, the present Appellants challenged the award of the
Learned Adjudicator and also claimed a total sum of
Rs.9,31,75,793.78/- against the present Respondent before the
Learned Sole Arbitrator.
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17.It is pertinent to mention that the present Respondent was
satisfied with the quantum of money allowed in its favour by the
Learned Adjudicator and wanted only confirmation of the same
apart from interest. Whereas, the present Appellants had
countered the same with the claims that no item of claim should
have been awarded in favour of the present Respondent and also
sought the grant of their own counter claim. Therefore, the
Learned Sole Arbitrator has examined the submissions of the
parties only with respect to the claims that were awarded in
favour of the present Respondent either in part or full and all the
counter claims raised by the present Appellants.
18.Multiple witnesses were produced from both sides, various
documents were brought on record and after hearing both
parties, the Learned Arbitral Tribunal was pleased to pass an
award totaling Rs.1,77,50,015.87/- excluding pre reference interest
at the rate of 12% from 01.07.2004 till the date of the award and
future interest at the rate of 18% per annum from the date of
award till payment in favour of the present Respondent. The
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Learned Sole Arbitrator also awarded a total of Rs.1,94,439/-
excluding pre reference interest at the rate of 12% per annum
from 28.02.2017 till date of award and future interest at the rate of
18% per annum from the date of award till payment in favour of
the present Appellants.
19.Aggrieved by the said arbitral award, the present Appellants filed
ARBP No.18 of 2018 under Section 34 of the A & C Act before the
Court of the learned District Judge, Angul. The learned District
Judge after hearing both parties, vide order dated 18.02.2021 set
aside the arbitral award to the extent that pre reference interest
computed at 12 % per annum and future interest at 18% per
annum on Rs.1,77,50,015.87/- awarded to the present Respondent
was reduced to simple interest at 9% per annum on
Rs.1,77,50,015.87/- i.e. the total amount awarded, from 01.07.2004
till the date payment is made.
20.Being still aggrieved, the present Appellants have approached
this Court in ARBA No.6 of 2021,challenging the judgment and
order of the learned District Judge dated 18.2.2021.
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21.At this juncture, it is relevant to note that vide order dated
24.08.2021 in I.A. No.11 of 2021 in the present Appeal, this Court
had condoned the delay in filing the present appeal. Thereafter,
while issuing the notice to the Respondent this Court vide order
dated 01.09.2021 passed in I.A. No.12 of 2021 granted stay further
proceeding in Execution Proceeding No.1 of 2019 pending before
the learned District Judge, Angul subject to deposit of a sum of
Rs.3.50 crore by the Appellants before the executing Court. The
Respondent being the decree holder filed an application i.e. I.A.
No.29 of 2021 in this Appeal for withdrawal of the said amount.
This Court vide order dated 23.11.2021 permitted the
Respondent, decree holder to move such application before the
executing court. Accordingly, the Respondent, decree holder,
filed an application for release of the security amount in its
favour by furnishing adequate security before the learned District
Judge, Angul on 29.11.2021. However. the learned District Judge,
Angul without considering the order dated 23.11.2021 passed by
this Court in the ARBA rejected the application filed by the
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Respondent/ decree holder observing that the Executing Court
was denuded with the power to deal with the security money in
any way without the direction of this Court. Being aggrieved, the
Respondent/ decree holder has filed W.P.(C) No.429 of 2022.
Later, the order dated 24.08.2021 passed in I.A. No.11 of 2021 by
this Court condoning the delay in filing the present Appeal was
belatedly sought to be recalled by the present Respondent in I.A.
No.28 of 2022 in the present Appeal. Vide order dated 21.10.2022
passed in I.A. No.28 of 2022 wherein this Court had rejected the
present Respondent's prayer for recall of the order dated
24.08.2021 passed in I.A. No.11 of 2021 in the present Appeal
whereby delay was condoned. As the matter stands decided thus,
the issue of limitation and condonation of delay in filing the
present Appeal shall not be taken up in the present judgment,
having already been decided.
22.Now the facts leading to the instant Appeal have been laid down,
this Court shall make endeavour to summarise the contentions of
the Parties and the broad grounds that have been raised to seek
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the exercise of this Court's rather limited jurisdiction available
under Section 37 of the A&C Act.
II. APPELLANTS' SUBMISSIONS:
23.The counsel for the Appellants assails the arbitral award and the
judgment of the Learned District Judge mainly on the ground
that there has been improper consideration of evidence by the
Learned Tribunal. The same, according to the Learned Counsel is
in contravention to the public policy of India and was
erroneously not looked into by the Learned District Judge. It is
contended that the arbitral award contravenes the terms of the
contract entered into between the parties. It is further contended
that the Respondent is not entitled to any amount awarded to it
as the Learned Sole Arbitrator has misinterpreted certain clauses
of the contract.
24.Furthermore, it is also alleged that the counter claim of the
present Appellants pertaining to loss of the farmers was genuine
and should have been awarded in their favour.
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III. RESPONDENT'S SUBMISSIONS:
25.Per contra, learned counsel for the present Respondent states that
the Appellants have not been able to present any reasonable
ground for interfering with the impugned judgment apart from
making bald assertions. It was vehemently submitted that the
scope of interference of this Court in an application under Section
37 of the A&C Act is extremely limited and this Court cannot
reappreciate evidence at this stage. It was also further contended
that the Learned District Judge ought not to have reduced the
rate of interest awarded to the present Respondent as such a
modification is unsustainable in law.
IV. ISSUES FOR CONSIDERATION:
26.Having heard the parties and perused the materials available on
record, this Court here has identified the following issues to be
determined:
A. What is the scope of this Court's power under Section 37 of the A
& C Act and whether the arbitral award is in contravention of the
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public policy of the State under Section 34(2)(b)(ii) as alleged by
the Appellants?
B. Whether the District Court erred in reducing the rate of interest
awarded to the present Respondent i.e. pre reference and future
interest from 12% and 18% respectively to 9% simple interest
while choosing to uphold the award otherwise?
ISSUE A: WHAT IS THE SCOPE OF THIS COURT'S POWER
UNDER SECTION 37 OF THE A&C ACT AND WHETHER
THE ARBITRAL AWARD IS IN CONTRAVENTION OF THE
PUBLIC POLICY OF STATE UNDER SECTION 34(2)(B)(II) AS
ALLEGED BY THE APPELLANTS?
27.In the present matter, this Court is solely concerned with an
application preferred under Section 37(1)(c) A & C Act which
states that an appeal lies under Section 37 from an order setting
aside or refusing to set aside an arbitral award under Section 34 A
& C Act.
28. It may be noted that the present position of law, as laid down by
the Supreme Court confines the supervisory role of the courts
while testing the validity of an Arbitration Award. The Supreme
Court, has repeatedly reiterated in Mcdermott International
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Inc. v. Burn Standard Co. Ltd.1, UHL Power Co. Ltd. v. State of
H.P.2, NHAI v. M. Hakeem3 and K. Sugumar v. Hindustan
Petroleum Corpn. Ltd.4among others, that the 1996 Act makes
provision for the supervisory role of courts, for the review of the
arbitral award only to ensure fairness. The intervention of the
court is envisaged in few circumstances only, like, in case of fraud
or bias by the Arbitration Tribunals, violation of natural justice,
etc. The court cannot correct errors of the Arbitration Tribunals. It
can only quash the award leaving the parties free to begin the
arbitration again if it is desired.
29.The contours of judicial scrutiny under Section 34 of the A&C Act
are limited and the scope of interference is narrow. Under Section
37 of the A & C Act, the extent of judicial scrutiny and scope of
interference is further narrower. An appeal under Section 37 is
like a second appeal, the first appeal being to the court by way of
objections under Section 34. Where there are concurrent findings
(2006) 11 SCC 181
(2022) 4 SCC 116
(2021) 9 SCC 1
(2020) 12 SCC 539
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of facts and law, first by the Arbitral Tribunal which are then
confirmed by the court while dealing with objections under
Section 34, in an appeal under Section 37, the Appellate Court
should be very cautious and reluctant to interfere in the findings
returned in the award by the Arbitral Tribunal and confirmed by
the court under Section 34.
30.Furthermore, it is no longer res integrathat an arbitral award may
be set aside only if it is against the public policy of India, that is to
say, if it is contrary to:
(a) fundamental policy of Indian law; or
(b) the interest of India; or
(c) justice or morality; or
(d) if it is patently illegal.
31.After the Apex Court's judgment and findings in Oil & Natural
Gas Corporation Ltd. v. Western Geco International Limited5
were subsequently discussed in Associate Builders v. Delhi
(2014) 9 SCC 263
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Development Authority6 the position of law was clarified and laid
down recently by the Supreme Court in Ssangyong Engg. &
Construction Co. Ltd. v. NHAI7, wherein the Court was pleased
to broadly stipulate the aforementioned four constituents of what
makes an award against the "public policy of India".
32.It is also generally recognised that when the Arbitration Tribunal
has thoroughly evaluated the materials and evidence presented
to them, the court, when considering objections under Section 34
of the A&C Act, does not act as a court of appeal and is not
required to "re-examine" all of the evidence or the parties' case on
merits. An award made by an Arbitration Tribunal cannot be
revoked on the ground that another viewpoint is conceivable in
the court's eyes. In these cases, the court's responsibility is to
determine whether the Arbitration Tribunal's point of view on
the relevant facts, pleadings, and evidence is a reasonable one.
The court should be reluctant to intervene even if, after
(2015) 3 SCC 49
(2019) 15 SCC 131
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considering the objections under Section 34, it were determined
that there were two possible assessments of the material and that
the Arbitral Tribunal had taken one route instead of the other. If
the Arbitration Tribunal's viewpoint is reasonable, the court is not
permitted to substitute its own opinion for that of the Learned
Arbitrator. The same has been previously reiterated by this Court
in State of Orissa v. Bhagyadhar Dash8 and more recently in
judgment dated 09.01.2023 in ARBA No.39 of 2018 titled as
United India Insurance Company Ltd., Bhubaneswar v. Suryo
Udyog Ltd.
33. This Court had the opportunity to peruse Arbitral Award and
the Learned District Judge's judgment and order. It is pertinent to
first note the meticulousness showcased by the Learned Sole
Arbitrator in assessing each claim. Every disputed claim that was
taken up was divided into the Claimant's (present Respondent)
case, the Respondents (present Appellants) case, any document or
2016 SCC OnLine Ori 1039
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witness testimony on record which pertains to the same and then
the finding. Similarly, for each counter claim as well, the Learned
Sole Arbitrator has shown a similar conscientiousness. The
present Appellants claim that apart from the claims award in
favour of the present Respondent, they are gravely aggrieved by
the disallowance of their Counter Claim, especially Counter
Claim No.1.
34.Counter Claim No.1 as presented before the Learned Sole
Arbitrator pertains to "compensation towards loss of farmers"
wherein the present Appellants claims Rs.8,56,03,424/-. It was the
present Appellants' case that on account of the delay in
completion of the project, the farmers sustained a loss. A farmer
of the area was also produced as a witness but the Learned Sole
Arbitrator took note that the said witness did not state the extent
of the loss he sustained due to delay in completion of the project,
nor did he give any concrete particulars about the inconvenience
and monetary loss that was caused to him as a result of delay in
completion of the project. The present Appellants also did not
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produce a single document which would indicate any farmer in
the area having sought compensation on account of delay in
completion of the project. It was the Learned Sole Arbitrator's
view that if no proof or material has been brought on record to
showcase that the farmers have in fact raised any claim for
compensation, there is no basis for the State to recover this
unsubstantiated/ unquantifiable compensation from the present
Respondent company.
35.This Court doesn't find this view of the Learned Sole Arbitrator
to be unreasonable. The Learned Sole Arbitrator in his award, has
appreciated all relevant pieces of evidence, examined witness
statements, and simultaneously evaluated the tenacity of the
claims of the parties in light of the terms of contract, to arrive at a
reasoned conclusion.
36.It is seen that in general, the Learned Sole Arbitrator has
elaborately considered the various documents, submissions and
evidence led by the parties in respect of each claim, particularly
this one. The Learned Sole Arbitrator has extensively gone into
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the evidence and evaluated the entire material before him to
publish a detailed speaking award.
37.The Supreme Court in P.R. Shah Shares & Stock Broker (P)
Ltd. v. B.H.H. Securities (P) Ltd.9 has held that a Court does not
sit in appeal over the award of an Arbitrator by re-assessing or re-
appreciating the evidence. An award can be challenged only on
the grounds mentioned in Section 34(2) of the Act and in absence
of any such ground, it is not possible to re-examine the facts to
find out whether a different decision could have been arrived at.
This view was reiterated by the High Court of Delhi in M/S
Pragya Electronics Pvt. Ltd. v. M/s Cosmo Ferrites Ltd.10and the
Apex Court in Swan Gold Mining Ltd. v. Hindustan Copper
Ltd.11. In light of the aforesaid facts, and the present Appellant's
inability to substantiate its case, this Court does not doubt that
there is no patent illegality in the present case much less, any
(2012) 1 SCC 594
2021 SCC OnLine Del 3428
(2015) 5 SCC 739
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apparent violation of any terms of public policy in the present
case.
ISSUE B: WHETHER THE DISTRICT COURT ERRED IN
REDUCING THE RATE OF INTEREST AWARDED TO THE
PRESENT RESPONDENT I.E. PRE REFERENCE AND
FUTURE INTEREST FROM 12% AND 18% RESPECTIVELY
TO 9% SIMPLE INTEREST WHILE CHOOSING TO UPHOLD
THE AWARD OTHERWISE?
38. This Court is to preface this issue by stating that as per the
present position of law, in terms of Section 34 of the A&C Act, an
arbitral award can only be confirmed or set aside in its entirety,
but not modified. Reliance is placed on the Supreme Court's
recent judgment and order in NHAI v. M. Hakeem(supra),
wherein the Supreme Court held that:
"48. Quite obviously if one were to include the power to
modify an award in Section 34, one would be crossing
the Lakshman Rekha and doing what, according to the
justice of a case, ought to be done. In interpreting a
statutory provision, a Judge must put himself in the
shoes of Parliament and then ask whether Parliament
intended this result. Parliament very clearly intended
that no power of modification of an award exists in
Section 34 of the Arbitration Act, 1996. It is only for
Parliament to amend the aforesaid provision in the light
of the experience of the courts in the working of the
Arbitration Act, 1996, and bring it in line with other
legislations the world over."
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39. It now becomes pertinent to assess the law relating to award of
interest especially in cases where the agreement between the
parties is silent as to the nature, manner and rate of such interest.
40. The legal provision in connection with this issue is contained in
Section 31(7)(a) and Section 31(7)(b) of the A&C Act. The relevant
portion is reproduced hereinbelow:
"31. Form and contents of arbitral award.--
xxx
(7) (a) Unless otherwise agreed by the parties, where and
in so far 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.
1[(b) A sum directed to be paid by an arbitral award
shall, unless the award otherwise directs, carry interest
at the rate of two per cent. higher than the current rate of
interest prevalent on the date of award, from the date of
award to the date of payment.
Explanation.--The expression "current rate of interest"
shall have the same meaning as assigned to it under
clause (b) of section 2 of the Interest Act, 1978 (14 of
1978).]"
41.The Supreme Court in Bhagwati Oxygen Ltd. v. Hindustan
Copper Ltd.12 wherein it has been held that if there is no provision
AIR 2005 SC 2071
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in the arbitration agreement for a rate of interest, then it is in the
discretion of the Learned Arbitrators only to determine the rate
of interest to be granted based on the facts and the circumstances
of the matter in hand. The Learned Arbitrators further have the
power and jurisdiction to grant interest in all three stages of an
arbitration i.e. pre reference period, pendente lite and post award
period. The Learned Arbitrators in this regard are only bound by
the terms of the agreement entered into between the parties, but
in cases such as this matter at hand, when the agreement is silent
about the question of interest, the Learned Arbitrators are
required to use the test of reasonableness and exercise their
discretion in awarding interest.
42. Conclusively laying down the principles to govern such matters,
the Supreme Court in Irrigation Deptt., Govt. of Orissa v. G.C.
Roy13, has held that:
"43. The question still remains whether arbitrator has
the power to award interest pendente lite, and if so on
what principle. We must reiterate that we are dealing
with the situation where the agreement does not provide
(1992) 1 SCC 508
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for grant of such interest nor does it prohibit such grant.
In other words, we are dealing with a case where the
agreement is silent as to award of interest. On a
conspectus of aforementioned decisions, the following
principles emerge:
(i) A person deprived of the use of money to which he is
legitimately entitled has a right to be compensated for
the deprivation, call it by any name. It may be called
interest, compensation or damages. 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. This is the
principle of Section 34, Civil Procedure Code and there
is no reason or principle to hold otherwise in the case of
arbitrator.
(ii) An arbitrator is an alternative form (sic forum) for
resolution of disputes arising between the parties. If so,
he must have the power to decide all the disputes or
differences arising between the parties. If the arbitrator
has no power to award interest pendente lite, the party
claiming it would have to approach the court for that
purpose, even though he may have obtained satisfaction
in respect of other claims from the arbitrator. This would
lead to multiplicity of proceedings.
(iii) An arbitrator is the creature of an agreement. It is
open to the parties to confer upon him such powers and
prescribe such procedure for him to follow, as they think
fit, so long as they are not opposed to law. (The proviso
to Section 41 and Section 3 of Arbitration Act illustrate
this point). All the same, the agreement must be in
conformity with law. The arbitrator must also act and
make his award in accordance with the general law of the
land and the agreement.
(iv) Over the years, the English and Indian courts have
acted on the assumption that where the agreement does
not prohibit and a party to the reference makes a claim
for interest, the arbitrator must have the power to award
interest pendente lite. Thawardas [Seth
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ThawardasPherumal v. Union of India, (1955) 2 SCR 48
: AIR 1955 SC 468] has not been followed in the later
decisions of this Court. It has been explained and
distinguished on the basis that in that case there was no
claim for interest but only a claim for unliquidated
damages. It has been said repeatedly that observations in
the said judgment were not intended to lay down any
such absolute or universal rule as they appear to, on first
impression. Until Jena case [(1988) 1 SCC 418 : (1988)
1 SCR 253] almost all the courts in the country had
upheld the power of the arbitrator to award interest
pendente lite. Continuity and certainty is a highly
desirable feature of law.
(v) Interest pendente lite is not a matter of substantive
law, like interest for the period anterior to reference (pre-
reference period). For doing complete justice between the
parties, such power has always been inferred."
43.On this point, this Court considers it apposite to going back to
reading Dispute/Claim No. 15 framed by the Arbitral Tribunal in
its award pertaining to the rate of interest to be granted in the
matter, wherein the Arbitral Tribunal has prescribed its reasoning
for awarding interest to the Claimant i.e. present Respondent.
The relevant portion of the discussion is reproduced herein:
"... Having found that the Claimant is entitled to the
above amount there is no reason for me to deny the claim
of interest both pre reference and future. Clause 43.1 of
the agreement provides for payment of 12% interest per
annum for delayed payment. Therefore, the Adjudicator
granted future interest at 12%. Since I hold that the
Claimant is entitled to both pre-reference and future
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interest, the Claimant is entitled to pre-reference interest
at the rate of 12% per annum from 10.2.2004 when the
contract was terminated. However, the Claimant having
claimed pre-reference interest from 1.7.2004, I allow
interest at the rate of 12% per annum from 1.7.2004 till
the date of award which comes to Rs. 81,05,820/- and I
also allow future interest at the rate of 18% per annum
from the date of award till payment, in the event, the
Respondents fail to satisfy the award within three
months from the date of award..."
44.Similarly, the Learned Sole Arbitrator has been fair and in the
interest of equity, deemed the present Appellants to also be
entitled to pre reference interest on the awarded amount in their
favour at the rate of 12% per annum, i.e. from the date of
termination of contract dated 2.11.2002 till the date of the award
and from the date of the award till payment. However, as the
present Appellants have claimed pre-reference interest only from
28.02.2017, therefore, pre-reference interest was awarded at the
rate of 12% from 28.02.2017 till the date of the award.
Additionally, future interest was awarded at the rate of 18% from
the date of the award till the date of payment.
45.Having regard to the aforesaid position of law and the facts of the
matter in hand, this Court comes to the conclusion that the
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Learned District Judge should not have interfered with the rate
of interest awarded by the Learned Arbitral Tribunal, a
modification which in itself is impermissible in law given the
Supreme Court's judgment and order recently in NHAI v. M.
Hakeem (supra).It was therefore, not appropriate to reduce the
rate of interest awarded to the present respondent i.e. pre
reference and future interest from 12% and 18% respectively to
9% simple interest while choosing to uphold the award otherwise
while pertinently choosing to not simultaneously reduce the rates
of interest awarded to the present Appellants.
V. CONCLUSION:
46.Therefore, in light of the above discussion, keeping the settled
principles of law in mind and for the reasons given above, this
Court is of the considered view that the learned Sole Arbitrator
acted well within his jurisdiction in awarding the appropriate
relief.
47. The award Rs.1,77,50,015.87/- excluding pre reference interest at
the rate of 12% from 1.7.2004 till 23.04.2018 and future interest at
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the rate of 18% per annum from 23.04.2018 till the date of
payment in favour of the present Respondent and Rs.1,94,439/-
excluding pre reference interest at the rate of 12% per annum
from 28.2.2017 till 23.4.2018 and future interest at the rate of 18%
per annum from 23.04.2018 till the date of payment in favour of
the present Appellants vide arbitral award dated 23.04.2018 is
reinstated in its entirety and upheld The parties are directed to
make good their respective share of the payments without any
further delay.
48.Consequently, it is observed that the present appeal i.e. ARBA
No.6 of 2021 bears no merit and is hereby dismissed. However, it
is clarified that interest is to be calculated as per the rates
originally awarded by the Learned Sole Arbitrator in his award
dated 23.04.2018. The Arbitral Award is hereby upheld. ARBA
No.6 of 2021 is disposed on the abovementioned terms. No order
as to costs.
49. In view of the dismissal of the present ARBA, the interim order
dated 01.09.2021 passed by this Court in I.A. No.12 of 2021 arising
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out of ARBA No.6 of 2021 stands vacated. Accordingly, the
Executing Court is at liberty to proceed with the Execution Case
No.1 of 2019.
50. With such observations, W.P.(C) No.429 of 2022 is also disposed
of.
(Dr. S.K. Panigrahi)
Judge
Orissa High Court, Cuttack,
Dated the 19th May,, 2023/B. Jhankar
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