State of H.P. & Ors. v. Parkash Chand Thakur

For the non-Objector : Mr. Suneet Goel, Advocate. Kuldip Singh, Judge.

1. This judgment shall dispose of objections under Section 34 of the Arbitration and Conciliation Act, 1996 ( for short Act ) filed by the objectors against award dated 10.6.2004 passed by learned Arbitrator, awarding an amount of Rs.2,36,250/- to the respondent alongwith simple interest at the rate of Rs.18% per- annum from the date of award till payment and pendente lite 12% per annum simple interest.

2. The brief facts of the case are that objectors had issued notice for inviting tender on 22.9.1998 for dismantling and disposal of the material and clearance of the site of Old Reven(cid:146)s Wood Building at H.P. High Court. The work was awarded to Whether the reporters of the local papers may be allowed to see the Judgment? Yes (cid:133)2(cid:133) respondent on 31.10.1998 and an agreement to this effect was entered into between the parties on 31.10.1998. The tender amount was Rs. 8,21,000/-, which was increased to Rs.9,00,000/- after negotiations. The dismantling and disposal of the material and clearance of site was to be completed within one month. The respondent had deposited earnest money of Rs.1,50,000/- with the objectors. It was alleged that the award letter was received by the respondent on 14.11.1998 and he started the work on

25.11.1998. According to agreement, in case, the highest tenderer failed to hand over the clear site within stipulated period the earnest money deposited with the department was to be forfeited and the penalty of Rs.5,000/- per day would be charged from the stipulated date of the completion of the job. The time was the essence of contract. The whole of the building was not handed over to the respondent for dismantling. The left over building was handed over to the respondent in June 2003 and thereafter the work was completed. The respondent suffered huge loss due to prolongation of work without any fault of the respondent. The appellants contested the claim of respondent on the ground that only small portion of the building could not be handed over to the respondent due to unforeseen reasons. The dispute had arises between the parties, in these circumstances on the application of the respondent, High Court, vide order dated

22.8.2003 in Arbitration Case No.40 of 2003 appointed Arbitrator to adjudicate the dispute between the parties. The learned arbitrator ultimately passed the award against the appellants. (cid:133)3(cid:133) The objectors have filed the objections against the award. On

7.12.2004 following issues were framed:-

1. Whether the Arbitrator has no jurisdiction to cause the impugned award, as alleged?

2. Relief.

3. I have heard Mr. Anshul Bansal, learned Addl. Advocate General for the objectors and Mr. Suneet Goel, learned counsel for the respondent and gone through the record. Mr. Anshul Bansal on issue No.1 has confined his submissions only on the point of interest awarded by the learned Arbitrator in the impugned award. He has not pressed his objections on any other point. Mr.Anshul Bansal has submitted that there is no provision in the agreement for allowing interest to the respondent but learned Arbitrator has erred in awarding the interest in absence of any clause of payment of interest to respondent in the agreement. He has relied Oil & Natural Gas Corporation Ltd. vs. Saw Pipes Ltd. (2003) 5 SCC 705. Mr. Suneet Goel, learned counsel for the respondent has submitted that the learned Arbitrator has jurisdiction to award interest for pre and post reference period. He has submitted that learned Arbitrator has awarded 12% per annum simple interest pendente lite and 18% per annum simple interest from the date of award till payment. The learned Arbitrator has committed no error in awarding interest to the objector. In support of his submission Mr. Suneet Goel has taken help of Section 31 of the Act as well as Secretary, Irrigation Department, Government of Orissa and others vs (cid:133)4(cid:133) G.C. Roy, AIR 1992 Supreme Court 732. Sub section 7 of Section 31 of the Act is as follows:- (a) (cid:147)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. (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(cid:148). It is not the case of the objectors that it was agreed between the parties that in no case the respondent would be entitled to interest. In absence of such agreement between the parties, the learned Arbitrator has jurisdiction to award interest in a money claim. Clause(b) of sub section 7 of Section 31 of the Act permits payment of interest at the rate of 18% per-annum from the date of award to the date of payment. The learned Arbitrator in the award has awarded simple interest at the rate of 18% per annum from the date of award till payment, hence, future interest awarded by learned Arbitrator is in consonance with Clause(b) of sub section 7 of Section 31 of the Act. The learned Arbitrator has awarded pendente lite simple interest at the rate of 12% per annum, (cid:133)5(cid:133) which in the facts and circumstances of the case is not on higher side.

4. The learned Arbitrator has jurisdiction to award pendente lite interest as has been held by Hon(cid:146)ble Supreme Court in Secretary, Irrigation Department, Government of Orissa and others vs G.C. Roy, AIR 1992 Supreme Court 732, therefore, the learned Arbitrator while awarding interest in the present case has committed no illegality. Oil & Natural Gas Corporation Ltd. vs. Saw Pipes Ltd. (2003) 5 SCC 705 relied on behalf of the objectors on the point of public policy is not applicable in the facts and circumstances of the present case. There is no merit in the objections, accordingly issue No.1 is decided against the objectors.

6. No other point was urged. In view of the above discussion, the objections are dismissed. December 8 ,2008 (sks) ( Kuldip Singh ) Judge.