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TMI Blog2014 (3) TMI 1143X X X X Extracts X X X X X X X X Extracts X X X X ..... rd was made till the money was deposited in the High Court and thereafter converted to fixed deposit receipts. Upon the amount being deposited in the High Court, no further interest could be paid to the Respondents. It is directed that the Respondents shall not be entitled to any interest on the amount which was recovered by the Appellant, till the date of award and thereafter till the date when the amount awarded was deposited in the High Court, i.e. from 12th July, 1997 - appeal allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 1,80,92,462/- was recoverable from M/s. Concrete Products and Construction Company, Respondent in C.A. No. 2950 (arising out of SLP(C) No. 5384 of 2013) and a sum of ₹ 1,78,09,789/- was recoverable from M/s. Kottukulam Engineers Private Limited, Respondent in C.A. No. 2951 (arising out of SLP(C) No. 5385 of 2013). It was also pointed out that the aforesaid sums would be recoverable from the sums due and payable to them in the current/running contracts. 5. The contractors (Respondents herein) challenged the aforesaid recovery by filing Writ Petition No. 11805 and 10814 of 1999, before the High Court of Madras. The railway administration took up the preliminary objection, pleading that the writ petition is not maintainable as the dispute has to be referred to arbitration. The objection of the Appellant was accepted. The High Court appointed a Former Judge of the Madras High Court as the arbitrator to adjudicate the dispute. The contractors/Respondents herein challenged the aforesaid order of the learned Single Judge by filing Writ Appeal Nos. 251 and 252 of 2000, on the plea that the arbitrator had to be appointed in terms of the agreement. By order dated 22nd March, 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Respondents to refund a sum of ₹ 1,78,09,789/- recovered from the Claimants and interest of ₹ 2,38,28,960/- and subsequent interest at 18% P.A. from 1.9.2005 on ₹ 1,78,09,789/- till date of payment in Kottukulam Engineers Pvt. Ltd. matter. Ana a sum of ₹ 1,69,78,883/- and interest of ₹ 2,25,25,513/- and subsequent interest at 18% P.A. from 1.09.2005 till date of payment in M/s. Concrete Product and Construction Company Trivalam. The counter claims made by the Appellants were dismissed. The railway administration challenged the common arbitration award in O.P. No. 142 and 143 of 2007 under Section 33 of the Arbitration and Conciliation Act, 1996 before High Court of Madras. The learned Single Judge dismissed the arbitration petitions filed by the railway administration by its order dated 30th November, 2010. Thereafter the contractors filed applications before the High Court for direction to the railways to make payments of the amount. Thereafter Application Nos. 780 and 781 of 2011 were filed in the O.P. Nos. 142 and 143 of 2007 by the contractors seeking a direction from the Court directing that the amounts awarded by the learned Sole Arbitrator be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of this Court is whether the contractors are entitled to interest for the amount withheld and if so at what rate. The contractors had claimed interest @18 per cent from the date of recovery till payment. Mr. Jain submitted that the High Court has wrongly held that the Appellant had no authority to exercise lien on the current payments in relation to the amount already released to the contractors. It is submitted by Mr. Jain that the arbitrator had no authority to award interest in view of the prohibition contained under Section 31(7) of the Arbitration Act, 1996. Learned Additional Solicitor General pointed out that the contract entered into between the parties did not provide for any payment of interest. Mr. Jain also pointed out that under Clause 2403, the railway administration has a lien on all the amounts of money that may be due to the contractors, in praesenti or in the futuro. Therefore, when the contractors were paid in excess of the amounts actually due, the Appellants were fully justified in recovering the amount from the Respondents by exercising the lien over the future bills in terms of Clause No. 2403. He submits that the sole arbitrator was wholly unjustified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellants had no authority to exercise lien on the amounts that accrued due to the works performed subsequent to 9th December, 1991 under Clause(s) 2401 or 2403 of the Contract. Mr. Vaidyanathan emphasized that such recovery of the time barred claims is clearly without any justification. The Appellants having failed to notify that 30 per cent of the amount due had been withheld, the invocation of Clause No. 2401 or 2403 would be wholly illegal. Learned senior counsel further submitted that the Appellant can not justify the recovery on the basis of the letter dated 22nd October, 1997 as it was written without prejudice to the rights of the contractors. The counter claims made by the Appellant were clearly time barred and hence, disallowed by the sole arbitrator. Mr. Vaidyanathan relied on a Constitution Bench decision of this Court in Executive Engineer, Dhenkanal Minor Irrigation Division, Orissa and Ors. v. N.C. Budharaj (Deceased) by L.Rs. and Ors. (2001) 2 SCC 721. Reliance was also placed upon Secretary, Irrigation Department, Government of Orissa and Ors. v. G.C. Roy (1992) 1 SCC 508 in support of the submission that a person deprived of his money is entitled to be compen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h to the contractor. 2403. Lien in respect of Claims in other Contracts: a) Any sum of money due and payable, to the Contractor (including the security deposit, returnable to him) under the contract may withhold or retain by way of lien by the Purchaser or Government against any claim of the Purchaser or Government in respect of payment of a sum of money arising out of or under any other contract made by the Contractor with the Purchaser or Government. b) It is an agreed term of the contract that the sum of money so withheld or retained under this clause by the Purchaser or Government will be kept withheld or retained as such by the Purchaser or Government till his claim arising out of the same contract or any other contract is either mutually settled or determined by the arbitrator, if the contract is governed by the arbitration clause or by the competent court under Clause 2703 hereinafter provided, as the case may be, and that the Contractor shall have no claim for interest or damages whatsoever on this account or on any other ground in respect of any sum of money withheld or retained under this clause and duly notified as such to the Contractor. 15. Clause 2401 provides t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 pre-reference 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. 19. This view has been reiterated by this Court in Sree Kamatchi Amman Construction (supra), wherein it has been held as follows: 19. Section 37(1) of the new Act by using the words "unless otherwise agreed by the parties" categorically clarifies that the arbitrator is bound by the terms of the contract insofar as the award of interest from the date of cause of action to the date of award. Therefore, where the parties had agreed that no interest shall be payable, the Arbitral Tribunal cannot award interest between the date when the cause of action arose to the date of award. 20. From the aforesaid it becomes apparent that the arbitrator could not have awarded any interest from the date when the recovery was made till the award was made. However, interest would have been payable from the date when the award was made till the money was deposited in the High Court and thereafter converted to fixed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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