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TMI Blog2010 (8) TMI 1086X X X X Extracts X X X X X X X X Extracts X X X X ..... if it failed to do so, the appellant will be entitled to simple interest at 10% per annum on the amounts awarded from 5.12002 till date of payment. That is, the arbitral tribunal awarded only future interest and refused to award the interest for pre-reference period and interest pendente lite. It may be mentioned that the award rejected two of the claims of the appellants and rejected all the claims of the Railways. 3. Feeling aggrieved by the award, the Railways filed a petition under section 34 of the Arbitration and Conciliation Act, 1996 ('Act' for short). Aggrieved by the rejection of its claims 1 and 2 and the failure to award interest for the pre-reference period and pendente lite, the appellant also filed a petition under section 34 of the Act. A learned Single Judge of the High Court rejected both the challenges to the award. Insofar as interest is concerned the learned Single Judge held that having regard to the bar contained in Clause 16(2) of the General Conditions of Contract, the contractor was not entitled to it. Again both Railways and the appellant filed appeals against the order of the learned Single Judge. The Division Bench of the Madras High Court by the impug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal was justified in refusing interest for the period between the date of cause of action to date of award? Re : Point (i) 5. Clause 16(2) of the General Conditions of contract governing the contract between the parties bars payment of interest and the same is extracted below : "16(2). No interest will be payable upon the earnest money or the security deposit or amounts payable to the Contractor under the Contract, but Government Securities deposit in terms of sub-Clause (1) of this Clause will be repayable (with) interest accrued thereon". (emphasis supplied) The two claims on which amounts are awarded are with reference to claim No. (4) relating to erroneous billing and claim No. (6) relating to security deposit. Clause 16(2) in terms specifically bars payment of interest on security deposit. Insofar as claim No. (4) is concerned, the question is whether the amount awarded is an "amount payable to the contractor under the contract". Learned counsel for the appellant made a faint attempt to contend that the award relating to claim No. (4) was not in regard to an amount payable to the contractor under the contract. This contention has absolutely no merit as the award ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te on which the award is made. Clause (b) relates to the period from the date of award to date of payment. The said Sub-section (7) is extracted below: "31.7(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 pende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (g) merely prohibits the Commissioner from entertaining any claim for interest and does not prohibit the arbitrator from awarding interest. The opening words `no claim for interest will be entertained by the Commissioner" clearly establishes that the intention was to prohibit the Commissioner from granting interest on account of delayed payment to the contractor. Clause has to be strictly construed for the simple reason that as pointed out by the Constitution Bench, ordinarily, a person who has a legitimate claim is entitled to payment within a reasonable time and if the payment has been delayed beyond reasonable time he can legitimately claim to be compensated for that delay whatever nomenclature one may give to his claim in that behalf. If that be so, we would be justified in placing a strict construction on the term of the contract on which reliance has been placed. Strictly construed the terms of the contract merely prohibits the Commissioner from paying interest to the contractor for delayed payment but once the matter goes to arbitration the discretion of the arbitrator is not, in any manner, stifled by this term of the contract and the arbitrator would be entitled to consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n any manner stifled by the terms of the contract and the arbitrator will be entitled to consider 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. 24. 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 Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X
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