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TMI Blog2009 (7) TMI 1329X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the Engineering Charge in making periodical or final payment; or (iv) any other respect whatsoever. The clause is comprehensive and bars interest under any head in clear and categorical terms. In view of clause (a) of sub-section (7) of section 31 of the Act, it is clear that the Arbitrator could not have awarded interest upto the date of the award, as the agreement between the parties barred payment of interest. The bar against award of interest would operate not only during the preference period that is up to 13.3.1997 but also during the pendente lite period that is from 14.3.1997 to 31.7.2001. The arbitrator awarded interest at the rate of 18% per annum on 24,18,586/-, 14% per annum on amount found due on finalisation the final bill and 12% per annum on the security deposit amount if any that has to be refunded. As noticed above, clause (b) of sub-section (7) of section 31 of the Act provides that if the award does not otherwise direct, the amount awarded shall carry interest as directed by the award and in the absence of any provision of 18% per annum. Any provision in the contract barring interest, will therefore operate only till the date of award and not thereafter. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court held that having regard to the bar contained in clause G 1.09 of the contract, the arbitrator had no power to award interest and consequently, set aside that part of the award granting interest till date of award. The High Court however granted interest at 6% PA from the date of award till the date of payment. Aggrieved by the deletion of interest upto the date of award and reduction of interest from the date of award to 6% per annum, the appellant has filed this appeal. 4. At the outset, it is necessary to refer to an erroneous assumption made by the High Court in para 31 of the impugned judgment. It has proceeded on the basis that the sum of ₹ 24,18,586/- awarded by the Arbitrator includes the amount due in regard to the final bill as also the amount of security deposit and that interest has been awarded from different dates, on different parts of the said sum of ₹ 24,18,586/-. But the award of ₹ 24,18,586/- did not include the amount due in regard to the final bill or security deposit . In fact the arbitrator did not quantify the amount due in regard to the final bill or the security deposit, but directed the respondents to calculate and pay the same w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right by virtue of any agreement; or to any debt or damages upon which payment of interest is barred by virtue of an express agreement. 8. The Arbitration Act, 1940 did not contain any specific provision relating to power of Arbitrator to award interest. That led to considerable confusion about the power of Arbitrators in regard of award of interest from the date of cause of action to date of award, that is pre-reference period (from the date of cause of action upto the date of reference) and pendente lite (from the date of reference to date of award). Ultimately, this Court made it clear that the Arbitrator had the jurisdiction and authority to award interest for the three periods namely pre-reference period, pendente lite and future period (from the date of award) if there was no express bar in the contract regarding award of interest - vide Secretary, Irrigation Department, Govt. of Orissa vs. G.C. Roy - 1992 (1) SCC 508, Executive Engineer, Dhenkanal Minor Irrigation Division vs. N.C. Budharaj - 2001 (2) SCC 721 as also the decision in Bhagawati Oxygen Ltd. vs. Hindustan Copper Ltd. - 2005 (6) SCC 462. 9. Two more decisions dealing with cases arising under Arbitration Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below : "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. (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 the award to the date of payment. Having regard to sub-section (7) of section 31 of the Act, the difference between pre-reference period and pendente lite period has disappeared in so far as award of interest by arbitrator. The said section recognises only two periods and makes the following provisions : (a) In regard to the period between the date on which the cause of action arose and the date on which the award is made (pre-reference period plus pendente lite), the arbitral tribunal may award interest at such rate as it deems reasonable, for the whole or any part of the period, unless otherwise ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t held that the said clause did not bar award of interest on any claim for damages or for claim for payment for work done. We extract below the reasoning for such decision : "A mere look at the clause shows that the claim for interest by way of damages was not to be entertained against the Government with respect to only a specified type of amount, namely, any moneys or balances which may be lying with the Government owing to any dispute, difference between the Engineer-in-Charge and the contractor; or misunderstanding between the Engineer-in-Charge and the contractor in marking periodical or finally payments or in any other respect whatsoever. The words 'or in any other respect whatsoever" also referred to the dispute pertaining to the moneys or balances which may be lying with the Government pursuant to the agreement meaning thereby security deposit or retention money or any other amount which might have been with the Government and refund of which might have been withheld by the Government. The claim for damages or claim for payment for the work done and which was not paid for would not obviously cover any money which may be said to be lying with the Government. Consequently, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different from the clause considered in B.N. Agarwalla (supra), the said decision is also of no assistance. 14. The learned counsel for the appellant submitted that even though the bar in clause G-1.09 may prohibit the employer from paying interest, it does not bar the Arbitrator from awarding interest. For this purpose, he relied upon the decision of this Court in Board of Trustees for Port of Calcutta vs. Engineers- De-Space-Age [1996 (1) SCC 516]. In that case, this Court considered the validity of award of interest pendente lite by the Arbitrator notwithstanding the prohibition contained in the contract against payment of interest on delayed payments. The following clause fell for consideration of this Court in that case : "No claim for interest will be entertained by the Commissioners with respect to any money or balance which may be in their hands owing to any dispute between themselves and the Contractor or with respect to any delay on the part of the Commissioners in making interim or final payment or otherwise." After referring to the Constitution Bench decision in G. C. Roy (supra) this Court held : "We are not dealing with a case in regard to award of interest for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and grant the interest pendente lite, cannot be used to support an outlandish argument that bar on the Government or department paying interest is not a bar on the arbitrator awarding interest. Whether the provision in the contract bars the employer from entertaining any claim for interest or bars the contractor from making any claim for interest, it amounts to a clear prohibition regarding interest. The provision need not contain another bar prohibiting Arbitrator from awarding interest. The observations made in the context of interest pendente lite cannot be used out of contract. 15. The learned counsel for appellant next contended on the basis of the above observations in Engineers-De-Space-Age, that even if clause G-1.09 is held to bar interest in the pre-reference period, it should be held not to apply to the pendente lite period that is from 14.3.1997 to 31.7.2001. He contended that the award of interest during the pendency of the reference was within the discretion of the arbitrator and therefore, the award of interest for that period could not have been interfered by the High Court. In view of the Constitution Bench decisions in G.C. Roy and N.C. Budharaj (supra) rendere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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