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TMI Blog2016 (3) TMI 653X X X X Extracts X X X X X X X X Extracts X X X X ..... (hereinafter referred to as the Act ). A Division Bench of this Court had doubted the correctness of the decisions in Board of Trustees for the Port of Calcutta v. Engineers-De-Space-Age (1996) 1 SCC 516; and Madnani Construction Corporation (P) Ltd. v. Union of India and Others (2010) 1 SCC 549. In view of the decision of the Constitution Bench judgment in Secretary, Irrigation Department, Government of Orissa Ors. v. G.C. Roy (1992) 1 SCC 508 and Executive Engineer, Dhenkanal Minor Irrigation Division, Orissa Ors. v. N.C. Budharaj (D) by L.Rs. Ors. (2001) 2 SCC 721 which held that the Arbitrator had the jurisdiction and authority to award interest for pre-reference period, pendente lite and future period if there was no express bar in the contract regarding award of interest. A doubt was expressed about the correctness of the decision in Engineers-De-Space Age (supra) in Sayeed Ahmed Co. v. State of U.P. Ors. (2009) 12 SCC 26 and Sree Kamatchi Amman Constructions v. Divisional Railway Manager (Works), Palghat Ors. (2010) 8 SCC 767. Hence the matter had been referred to a larger Bench for decision. 2. The case has a chequered history. The tender of M/s. Ambica Cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for pre-reference period and directed that interest would be allowed on the principal sum of ₹ 9,82,660/- at the rate of 10% per annum from 1.9.1992 the date from which the original Arbitrator entered upon the reference. An appeal was preferred before the Division Bench and the same had been partly allowed with regard to claim Nos.6 and 7. Aggrieved thereby, M/s. Ambica Construction had preferred S.L.P. [C] No.17219/2009 in this Court and Union of India has also assailed the judgment and order of the High Court in S.L.P. [C] No.11114/2009. 3. The only question for consideration is whether an Arbitrator has the power to award pendente lite interest in case contract bars the same in a case covered by Act and decisions of this Court in Engineers De-Space Age (supra) and Madnani Construction Corporation (P) Ltd. (supra) have been correctly decided. 4. It was submitted on behalf of the Union of India that the Arbitrator is bound by the terms of the contract and cannot award interest in case the contract bars the same. On the other hand, learned counsel appearing on behalf of M/s. Ambica Construction has contended that in view of the decision in Engineers-De-Space Age (supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Second Schedule as it has for the purpose of, and in relation to any proceedings before the Court: Provided that nothing in CI. (b) shall be taken to prejudice any power which may be vested in an Arbitrator or umpire for making orders with respect to any of such matters. The court can exercise the power specified in Second Schedule of the Act. However, Arbitrator is not a court. Arbitrator is the outcome of agreement. He decides the disputes as per the agreement entered into between the parties. Arbitration is an alternative forum for resolution of disputes but an Arbitrator ipso facto does not enjoy or possess all the powers conferred on the courts of law. 7. Section 29 of the Act confers on the court power to award interest from the date of decree. Section 34 of the C.P.C. confers on the court power to award interest prior to the institution of the suit and during pendency of the suit and post decree. 8. A Constitution Bench of this Court in G.C. Roy (supra) has considered the question of power of the Arbitrator to award pendente lite interest and it has been laid down that if the arbitration agreement or the contract itself provides for interest, Arbitra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spute in accordance with the ordinary law. This includes the basic rules as to procedure, although parties can expressly or impliedly consent to depart from those rules. The normal principles on which terms are implied in an agreement have to be considered in the context that the agreement relates to an arbitration. 37. At page 303, para 580 (4th edn., Vol. 2) dealing with the award of interest, it reads: 580. Interest.- A Arbitrator or umpire has power to award interest on the amount of any debt or damages for the whole or any part of the period between the date when the cause of action arose and the date of the award. Ultimately, in G.C. Roy (supra), this Court has answered the question whether Arbitrator has the power to award interest pendent lite. Their Lordships have reiterated that they have dealt with the situation where the agreement does not provide for grant of such interest nor does it prohibit such grant when the agreement is silent as to award of interest. This Court has laid down various principles in para 43 of the report thus: 43. The question still remains whether Arbitrator has the power to award interest pendente lite, and if so on what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions in the said judgment were not intended to lay down any such absolute or universal rule as they appear to, on first impression. Until Executive Engineer (Irrigation) Balimela Ors. v. Abhaduta Jena Ors., (1988) 1 SCC 418 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. 44. Having regard to the above consideration, we think that the following is the correct principle which should be followed in this behalf: Where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (along with the claim for principal amount or independently) is referred to the Arbitrator, he shall have the power to award interest pendente lite. This is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted for a different forum of adjudication with less cumbersome procedure, delay and expense and not to abandon all or any of its substantive rights under the various laws in force, according to which only even the Arbitrator is obliged to adjudicate the claims referred to him. As long as there is nothing in the arbitration agreement to exclude the jurisdiction of the Arbitrator to entertain a claim for interest on the amounts due under the contract, or any prohibition to claim interest on the amounts due and become payable under the contract, the jurisdiction of the Arbitrator to consider and award interest in respect of all periods subject only to Section 29 of the Arbitration Act, 1940 and that too the powers of the court thereunder, has to be upheld. The submission that the Arbitrator cannot have jurisdiction to award interest for the period prior to the date of his appointment or entering into reference which alone confers upon him power, is too stale and technical to be countenanced in our hands, for the simple reason that in every case the appointment of an Arbitrator or even resort to court to vindicate rights could be only after disputes have cropped up between the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Arbitrator to award interest pendente lite, the principle of the decision makes it clear that the Arbitrator is competent to award interest for the period commencing with the date of award to the date of decree or date of realisation, whichever is earlier. This is also quite logical for, while award of interest for the period prior to an Arbitrator entering upon the reference is a matter of substantive law, the grant of interest for the post-award period is a matter of procedure. Section 34 of Code of Civil Procedure provides both for awarding of interest pendente lite as well as for the post-decree period and the principle of Section 34 has been held applicable to proceedings before the Arbitrator, though the section as such may not apply. In this connection, the decision in Union of India v. Bungo Steel Furniture (P) Ltd. AIR 1967 SC 1032 may be seen as also the decision in Gujarat Water Supply Sewerage Board v. Unique Erectors (Gujarat) P. Ltd. 1989 1 532 SCC which upholds the said power though on a somewhat different reasoning. We, therefore, think that the award on Item No. 8 should have been upheld. 11. In Sayeed Ahmed (supra) various decisions of this Court h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) the said decision is also of no assistance. In B.N. Agarwalla (supra) this Court has observed that Clause 4 of the contract dealing with Rates, materials and workmanship did not bar award of interest by the Arbitrator on the claims of the contractor. The stipulation was no interest was payable on amount withheld under the agreement. 13. In Sayeed Ahmed (supra), this Court has referred the decision in State of U.P. v. Harish Chandra Co. (1999) 1 SCC 63, in which this Court has interpreted the stipulation contained in clause 1.9 of the agreement which came up for consideration before a 3 Judges Bench of this Court. Clause 1.9 is extracted hereunder: 1.9 No claim for delayed payment due to dispute etc.-No claim for interest or damages will be entertained by the Government with respect to any moneys or balances which may be lying with the Government owing to any dispute, difference; or misunderstanding between the Engineer-in- Charge in marking periodical or final payments or in any other respect whatsoever. This Court has interpreted the clause 1.9 and held that there is no provision which could be culled out against the respondent-contractor that he could no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specifically provides that no interest shall be payable in respect of any money that may become due owing to any dispute, difference or misunderstanding between the Engineer-in-Charge and contractor or with respect to any delay on the part of the Engineer-in-Charge in making periodical or final payment or in respect of any other respect whatsoever. The bar under Clause G1.09 in this case being absolute, the decision in Harish Chandra (supra) will not assist the appellant in any manner. In Harish Chandra (supra), this Court has laid down that clause 1.09 did not bar award of interest for claim of damages for payment for work done and which was not paid for would not obviously cover any money which may be said to be lying with the Government. 14. In our opinion, it would depend upon the nature of the ouster clause in each case. In case there is express stipulation which debars pendente lite interest, obviously, it cannot be granted by Arbitrator. The award of pendente lite interest inter alia must depend upon the overall intention of the agreement and what is expressly excluded. 15. In Sayeed Ahmed (supra), this Court has referred the decision in Superintending Engineer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Bright Power Projects (India) Pvt. Ltd. (2015) 9 SCC 695 has considered the provisions contained in section 31(7)(a) of the Arbitration and Conciliation Act, 1996 and considered the words unless otherwise agreed by parties in the said section and held that the Arbitrator is bound by the terms of the contract so far as award of interest from the date of execution to the date of award is concerned. This Court considered clause 13(3) of the contract and came to the conclusion that once agreed that contractor would not claim any interest on the amount to be paid under the contract, he could not have claimed the interest. The Arbitrator while awarding interest failed to consider the provisions of section 31(7)(a) and binding nature of clause 13(3) of the terms of agreement. With respect to section 31(7)(a) of the Arbitration Conciliation Act, 1996 this Court in Union of India v. Bright Power Projects (supra) has observed thus : 18. Section 31(7)(a) of the Act ought to have been read and interpreted by the Arbitral Tribunal before taking any decision with regard to awarding interest. The said section, which has been reproduced hereinabove, gives more respect to the agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te lite, even if the principles in those two cases were applicable, the award of the Arbitrator could not be interfered with. On this ground also the decisions in Engineers-De-Space-Age (supra) and Madnani (supra) are inapplicable. Be that as it may. 18. This Court in Union of India v. Krafters Engineering Leasing Pvt. Ltd. (2011) 7 SCC 279 has held that by a provision in the agreement, the jurisdiction of the Arbitrator to award interest can be excluded. This Court considered the nature of the claim vis- -vis the provision contained in the relevant clause. 19. It is apparent from various decisions referred to above that in G.C. Roy (supra) Constitution Bench of this Court has laid down where agreement expressly provides that no interest pendente lite shall be payable on amount due. The arbitrator has no power to award interest. In N.C. Budharaj (supra) a Constitution Bench has observed that in case there is nothing in the arbitration agreement to exclude jurisdiction of arbitrator to entertaining claim for interest, the jurisdiction of arbitrator to consider and award interest in respect to all periods is subject to section 29 of the Act. In Hindustan Construction Co. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Civil Procedure. Their Lordships pointed out that there was no reason or principle to hold otherwise in the case of an Arbitrator. Pointing out that Arbitrator is an alternative forum for resolution of disputes arising between the parties, it said that he must have the power to decide all disputes and differences arising between the parties and if he were to be denied the power to award interest pendente lite, the party entitled thereto would be required to go to a court which would result in multiplicity of proceedings, a situation which the court should endeavour to avoid. Reliance was, however, placed on the observation in sub-para (iii) wherein it is pointed out that an Arbitrator is a creature of an agreement and if the agreement between the parties prohibits the payment of interest pendente lite the Arbitrator must act in accordance therewith. In other words, according to their Lordships the Arbitrator is expected to act and make his award in accordance with the general law of the land but subject to an agreement, provided, the agreement is valid and legal. Lastly, it was pointed out that interest pendente lite is not a matter of substantive law, like interest for the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was a specific provision under new Act regarding award of interest by the Arbitrator. From the discussion made in Sayeed Ahmed (supra) it is apparent that this Court has emphasized that it would depend upon the nature of clause and claim etc. and it is required to be found on consideration of stipulation whether interest is barred, if yes, on what amounts interest is barred under the contract. 22. A three-Judge Bench of this Court in Tehri Hydro Development Corporation Limited and Another v. Jai Prakash Associates Limited, (2012) 12 SCC 10, has considered the question which has been referred in the instant case and it has been laid down in the context of clauses 1.2.14 and 1.2.15 imposed a clear bar on either entertainment or payment of interest in any situation of non-payment or delayed payment of either the amounts due for work done or lying in security deposit. Thus, the arbitrator had no power to grant pendente lite interest. This Court has also doubted the correctness of the decisions in Engineers-De-Space Age (supra) and Madnani Construction Corporation (P) Ltd. (supra). This court has considered the aforesaid clauses and various decisions in Tehri Hydro Development ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Ltd., (2011) 7 SCC 279. In Krafters Engineers's case (supra) the ratio of the decision in G.C. Roy's case (supra) was identified to mean that if the agreement between the parties does not prohibit grant of interest and the claim of a party to interest is referred to the arbitrator, the arbitrator would have the power to award the interest. This is on the basis that in such a case of silence (where the agreement is silent) it must be presumed that interest was an implied term of the agreement and, therefore, whether such a claim is tenable can be examined by the arbitrator in the reference made to him. The aforesaid view, specifically, is with regard to pendente lite interest. In the subsequent decision of the Constitution Bench in N.C. Budharaj's case (supra) a similar view has been taken with regard to interest for the prereference period. 16. In Krafters Engineers' case (supra), the somewhat discordant note struck by the decisions of this Court in Port of Calcutta v. Engineers-De-Space-Age (supra) and Madnani Construction Corporation Private Limited v. Union of India and Ors. (supra), were also taken note of. Thereafter, it was also noticed that the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not assist the respondent contractor in any manner to sustain the claim of award of interest pendente lite, inasmuch, as Para 7-A of the First Schedule, as amended, is only an enabling provision which will have no application to a situation where there is an express bar to the entertainment or payment of interest on the delayed payment either of an amount due for the work done or of an amount lying in deposit as security. The decision in B.N. Agarwalla case (supra) on which reliance has been placed by the learned counsel for the respondent, once again, does not assist the claim of the respondent to interest pendente lite inasmuch as in B.N. Agarwalla case (supra) the views of the Constitution Bench in G.C. Roy case (supra) with regard to interest pendente lite could not have been and, in fact, were not even remotely doubted. The observation of the Bench in B.N. Agarwalla case that in G.C. Roy case (supra) the decision in Deptt. of Irrigation v. Abhaduta Jena (1988) 1 SCC 418 was not overruled was only in the context of the issue of award of interest for the pre- reference period. The decision in Asian Techs Limited case (supra) also relied on by the respondent takes note of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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