2017 (12) TMI 1846 - SC - Indian Laws

Award of interest on various claims for different periods to the claimant (Respondent No. 1) - interest for a pre-reference period, i.e., 04.03.1996 to 05.05.1999 @ 15% p.a - pendent lite, i.e., for the period from 06.05.1999 to 09.09.2002 @ 12% p.a. - post reference period, i.e., 09.09.2002 till payment @ 18% p.a., total (first and second) Rs. 12,89,033/- on the awarded sum - HELD THAT - In Section 11(5) proceedings, the Appellant did not raise this objection in their reply and instead gave their express consent to refer the issue of award of interest payable on various claims (1 to 17) to Arbitral Tribunal considering the said claim to be arbitrable under the contract - the Appellant could have registered their objection before the Single Judge at the time of making a reference to the Arbitral Tribunal by pointing out Clause 13(3) of GCC or could have reserved their right to raise such objection before the Arbitral Tribunal. It was, however, not done. If a plea is available-whether on facts or law, it has to be raised by the party at appropriate stage in accordance with law. If not raised or/and given up with consent, the party would be precluded from raising such plea at a later stage of the proceedings on the principle of waiver. If permitted to raise, it causes prejudice to other party. In our opinion, this principle applies to this case - the Appellant is otherwise not entitled to raise the plea on yet another ground. It is not in dispute that the Appellant's application filed Under Section 34 of the Act was partly allowed by the Single Judge only to the extent of two claims regarding award of interest. In other words, the application suffered dismissal substantially on all other claims except two claims mentioned above. However, despite suffering substantial dismissal, the Appellant did not file any appeal to challenge the part dismissal of their application. The grant of award of interest on arbitrable claims by the Arbitral Tribunal is not inherently illegal or against any public policy or per se bad in law or beyond the powers of the Arbitral Tribunal. In other words, it is permissible to award interest in arbitrable claims by the Arbitral Tribunal - Section 31(7) (a) and (b) of the Act empowers the Arbitral Tribunal to award interest on the awarded sum and secondly, it is always subject to the agreement between the parties. Appeal dismissed.

Summary

Issues Involved:
1. Whether the Arbitral Tribunal was justified in awarding interest on various claims for different periods.
2. Whether the Union of India (Appellant) could raise the plea based on Clause 13(3) of the General Conditions of Contract (GCC) for the first time before the Supreme Court.
3. Whether the Single Judge's modification of the arbitral award regarding the date of interest was legally sustainable.
4. Whether the Division Bench of the High Court was correct in setting aside the Single Judge's order and upholding the entire arbitral award.

Issue-wise Detailed Analysis:

1. Justification of the Arbitral Tribunal in Awarding Interest:
The primary question in this appeal was whether the Arbitral Tribunal was justified in awarding interest on various claims for different periods to the claimant. The Tribunal awarded interest for the pre-reference period (04.03.1996 to 05.05.1999) at 15% p.a., pendent lite (06.05.1999 to 09.09.2002) at 12% p.a., and post-reference period (09.09.2002 till payment) at 18% p.a., amounting to Rs. 12,89,033/- on the awarded sum. The Supreme Court upheld the Tribunal's decision, stating that the award of interest on arbitrable claims is permissible under Section 31(7)(a) and (b) of the Arbitration and Conciliation Act, 1996, and is subject to the agreement between the parties. The Court emphasized that an arbitral award is binding on the parties unless it is inherently illegal, against public policy, or beyond the powers of the Tribunal.

2. Raising Plea Based on Clause 13(3) of GCC:
The Union of India argued that the Arbitral Tribunal mis-conducted by awarding interest, citing Clause 13(3) of the GCC, which states that no interest will be payable on earnest money, security deposit, or amounts payable under the contract, except on Government securities. However, the Supreme Court noted that this plea was not raised at any stage of the proceedings before the Arbitral Tribunal, Single Judge, or Division Bench. The Court held that raising this plea for the first time before the Supreme Court was not permissible due to the principle of waiver or abandonment of a plea. The Court emphasized that a plea available on facts or law must be raised at the appropriate stage, and failure to do so precludes raising it later, as it causes prejudice to the other party.

3. Single Judge's Modification of the Arbitral Award:
The Single Judge had modified the arbitral award concerning the date of interest on two claims, making the interest payable from the date of the award till realization. The Union of India did not appeal against the substantial dismissal of their application under Section 34 of the Act by the Single Judge. The Supreme Court observed that the Union of India's failure to appeal against the part dismissal meant that the Single Judge's order attained finality. Therefore, the Union of India could not challenge the modification regarding the interest date at this stage.

4. Division Bench's Decision to Set Aside Single Judge's Order:
The Division Bench of the High Court allowed the claimant's appeal and set aside the Single Judge's order, holding that no ground under Section 34 of the Act had been made out by the Union of India to modify the award regarding the interest. The Supreme Court upheld the Division Bench's decision, agreeing that the grounds for limited interference by the Single Judge did not fall under Section 34 of the Act. The Court reiterated that the parties must respect the decision of the Arbitrator they chose unless the decision is bad in law based on specified grounds in Section 34.

Conclusion:
The Supreme Court dismissed the appeal, finding no merit in the Union of India's arguments. The Court emphasized the importance of raising all relevant pleas at the appropriate stage and respecting the binding nature of arbitral awards unless they fall under the specified grounds for setting aside. The decision underscores the principle that technical legal points should not be pursued to defeat just claims, especially when not raised at earlier stages of the proceedings.