2019 (7) TMI 1989 - HC - Indian Laws

Validity of Arbitral Award - contract entered between the parties - appellant herein raised number of objections and the court below mechanically dismissed them holding that it cannot sit in appeal over the award and objections under Section 34 came to be rejected on the cryptic unreasoned order - HELD THAT - On the contours of Arbitration Act, 1996, it cannot be said that the proceedings were under the old Act of 1940 and, therefore, interest rate which has been granted should not have been 18%. It is submitted by Sri Tandon for the respondents that the statutory rate of interest should be 1 or 2 per cent higher or lower than the bank rate. While going through the record and the award it appears that while considering the claim of the contractor, the arbitrator was himself a engineer was taken pain to look into the amount which could be granted and which could be discarded - The contractor was subjected to filing of suit for appointment of arbitrator which was also vehemently opposed on the ground that it was a unregistered firm. It was only after intervention of the Court that arbitration proceedings continued. Though the arbitrator was appointed by concess objections were raised to contend that he had committed misconduct as he was a engineer with the State. As far as the rate of interest is concerned, the arbitral award and the order of the Court below shall stand modified to the extent that the rate of interest shall be 9% and not 18% as ordered by arbitrator. The appeal is partly allowed.

Summary

Issues involved:
Challenge to judgment accepting arbitrator's award, objections under Section 34 of Arbitration and Conciliation Act, 1936, interest rate granted by arbitrator, grant of compound interest, validity of amount granted under different items, interpretation of contract clauses on interest, interference with arbitral award.

Analysis:
1. The appellant challenged the judgment accepting the arbitrator's award, which was based on a contract dispute between the parties. The arbitrator awarded a specific amount with an 18% rate of interest, which was contested by the Union of India under Section 34 of the Arbitration and Conciliation Act, 1936.

2. The appellant argued against the interest rate granted by the arbitrator, citing recent judgments deprecating compound interest in arbitral matters. They contended that a 9% rate of interest would be more appropriate, considering legal precedents and statutory provisions.

3. Specific items in the award were scrutinized, such as the amount granted under the head of a new tender, where the appellant argued that the contractor failed to adhere to instructions and complete the work, justifying the Union of India's decision to rescind the contract. The validity of the amount granted under this item was questioned.

4. The interpretation of contract clauses on interest was crucial, with references made to recent judgments highlighting the arbitrator's power to award interest pendente lite. The court examined whether the clauses barring interest on delayed payments extended to interest pendente lite and upheld the arbitrator's decision in certain cases.

5. The court also considered the role of the arbitrator and the legal acumen applied in evaluating the claims made by the contractor. The judgment emphasized the importance of a thorough analysis of facts and legal principles in upholding or modifying arbitral awards.

6. Ultimately, the court modified the rate of interest awarded by the arbitrator from 18% to 9%, based on the prevailing legal principles and the specific circumstances of the case. The remaining aspects of the arbitral award were upheld, and the record was sent back to the tribunal for further proceedings.