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TMI Blog2024 (8) TMI 1141X X X X Extracts X X X X X X X X Extracts X X X X ..... 37 is enunciated in many decisions of this Court, and we apply the principles laid down therein to the facts of the present case. The judgment of the High Court in relation to claim no. 4 is set aside - the Award is restored and thereby the judgment of the District Court upheld the Award. Interest claim - HELD THAT:- While pendente lite interest is a matter of procedural law, prereference interest is governed by substantive law. CENTRAL BANK OF INDIA VERSUS RAVINDRA [ 2001 (10) TMI 1065 - SUPREME COURT] . Therefore, the grant of pre-reference interest cannot be sourced solely in Section 31(7)(a) (which is a procedural law), but must be based on an agreement between the parties (express or implied), statutory provision (such as Section 3 of the Interest Act, 1978), or proof of mercantile usage - the High Court had no reason to interfere with the Arbitral Award with respect to grant of pre-reference interest, since the Contract between parties does not prohibit the same. Appeal disposed off. - PAMIDIGHANTAM SRI NARASIMHA And PANKAJ MITHAL , JJ. For the Petitioner : Mr. Saurav Agrawal, Adv. Mr. Priyankar Saha, Adv. Mr. Sarad Kumar Singhania, AOR Mr. Anshuman Choudhary, Adv. Ms. Rash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rbitrator didn t account for the loss of 135 days at the behest of the appellant while determining the alleged 200 days of wasted machine . 4.2. Aggrieved by the decision of the District Judge, the appellant filed an appeal under Section 37 of the Act against the order setting aside the award on claims 1 and 2. On the other hand, the Respondent filed a cross appeal seeking setting aside of the rest of the claims as well. By the order impugned before us, the Calcutta High Court exercising jurisdiction under Section 37 of the Act set aside claim no.1 as well as claim nos. 3 and 4, but restored the Award with respect to claim no.2. However, while retaining claim no. 5 as it is, the High Court slightly modified claim no. 6 relating to pre-reference interest. 5. A comprehensive table of the claims and the decision in the Award, Section 34 and Section 37 jurisdiction is as follows Claim no. Arbitral Award Section 34 Section 37 1. Loss of business Awarded Rs.3,87,530. Award Set aside, because it was never claimed by the appellant and was the basis for granting of-site expenses. Affirmed the decision of District judge. 2. Uneconomic utilization of plant and machinery Awarded Rs. 61,22,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs of the Arbitrator cannot be held to be irrational, insensible or unrealistic and also that they are not in conflict with public policy. We may state at this very stage that this common reasoning of the District Court while upholding the Award for claim nos. 3, 4, 5 and 6. The standard reasoning of the District Court for these claims is as follows: I have gone through the observation of the learned Arbitrator in respect of claim Nos. 3, 4, 5 and 6. On meticulous scrutiny of the award with reference to the documents produced by the parties to the ease, I find that the reasons and findings given by the learned Arbitrator cannot be said to be irrational, insensible or unrealistic. In fact, award in respect of claim Nos. 3, 4, 5 6 cannot be said to be.in conflict with the public policy of India even by stretch of Imagination. On the other hand, it is apparent that cogent and acceptable reasons have been furnished by the learned Arbitrator in respect of these four heads of claims (claim Nos. 3 to 6). The award in respect of such four claims does not call for any interference. 7.3. While exercising jurisdiction under Section 37, the High Court examined the relevant clauses of the contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons under Section 34 with a standard phrase as extracted hereinabove. High Court exercising jurisdiction under Section 37 did its duty and we are of the opinion that the conclusions of the High Court are correct and cannot be interfered with. 8. Re claim no. 4: This claim relates to interest on delayed payment of running account bills. 8.1. The Arbitrator held that the Claimant is entitled to receive compensation for any loss and/or damage of capital which arose naturally from breach or which parties knew to be likely to arise from breach. Payments on running account bills is guided by clause 7 of the Contract and there is no prohibition in the contract regarding payment of interest on the blocked capital . Therefore, holding that the injured party ought to be placed in the same financial position he would have been but for the other party s fault, the Arbitrator awarded interest on delayed payments at the rate of 12% p.a., which was quantified to Rs. 54,84,024. As indicated above, the District Court upheld the Award. 8.2. The relevant portion of the Award is as follows:- 23.1 As the claimant is entitled to payment of R/A bills when the amount is Rs. 1 crore and above, I accept the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to hold any discussion on such questions. In this view of the matter, the High Court proceeded to set aside Award of claim no. 4. The relevant portion of the High Court Judgment is as follows:- The learned Arbitrator proceeded on the basis of the statement submitted by the appellant that there was delay in the payment of these bills. The unpaid running account bills were described as blocked capital . He viewed the delay in receiving this blocked capital as loss and damage to the appellant and granted Rs. 54,84,024/- on that reasoning, as interest . The learned Judge upheld this award. It is challenged by the respondent. The respondent relies on Clauses 7, 8 and 9 of the contract by which monthly bills had to be raised by the appellant on the measurement made. These payments against the monthly running account bills were to be treated as advance under Clause 7. Payment could have been made only when the gross amount exceeded Rs. 1 crore. According to the respondent no bill was raised by the appellant. According to the statement of claim of the appellant, the first bill for Rs. 1,32,91,180/- was prepared on 29th August, 2011 and paid on or about 30th August 2011. Similarly, the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thing perverse in it. Nor such conclusion is against our public policy. The scope of Section 37 is enunciated in many decisions of this Court, and we apply the principles laid down therein to the facts of the present case. 8.6. For these reasons, we set aside the judgment of the High Court in relation to claim no. 4 and restore the Award and thereby the judgment of the District Court upholding the Award. 9. Re claim no. 6: This claim relates to Interest 9.1. Arbitrator awarded interest @12% on sum awarded from 12.04.2016, which is the date when appellant claimed breach of contract, to 30.01.2018, which is the date of the Award, and further interest @ 9.25% p.a. from date of Award till actual payment. This was confirmed by the District Judge under Section 34. 9.2. High Court held that the contract between the parties prohibits grant of pre-reference interest and therefore interest could not have been granted for this period. As per the High Court, as the Arbitrator could have granted interest only for pendent lite and post award, the Award was modified directing - pendente lite interest @12% p.a. from 03.08.2016 till date of award i.e. 30.01.2018, along with post award interest @ 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest is an implied term of the agreement, and therefore, the Arbitrator has the power to decide the same. G.C. Roy (supra), paras 43(iv) and 44. II. Under the 1940 Act, this Court has adopted a strict construction of contractual clauses that prohibit the grant of interest and has held that the Arbitrator has the power to award interest unless there is an express, specific provision that excludes the jurisdiction of the Arbitrator Board of Trustees for the Port of Calcutta v. Engineers-de-Space-Age, (1996) 1 SCC 516, paras 4 and 5; Madnani Construction Corporation Private Limited v. Union of India, (2010) 1 SCC 549; Tehri Hydro Development Corporation Ltd. v. Jai Prakash Associates Ltd., (2012) 12 SCC 10, paras 18-20; Union of India v. Ambica Construction, (2016) 6 SCC 36 (First Ambica Construction Case); Ambica Construction v. Union of India, (2017) 14 SCC 323 (Second Ambica Construction Case); Raveechee and Company v. Union of India, (2018) 7 SCC 664; Reliance Cellulose Products Ltd. v. ONGC Ltd., (2018) 9 SCC 266. from awarding interest for the dispute in question State of U.P. v. Harish Chandra and Co., (1999) 1 SCC 63. . III. Under the 1996 Act, the power of the Arbitrator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust be based on an agreement between the parties (express or implied), statutory provision (such as Section 3 of the Interest Act, 1978), or proof of mercantile usage Central Bank of India (supra), para 39; Secy./GM, Chennai, Central Coop. Bank Ltd. v. S. Kamalaveni Sundaram, (2011) 1 SCC 790, para 13. 9.6. In view of the above, the High Court had no reason to interfere with the Arbitral Award with respect to grant of pre-reference interest, since the Contract between parties does not prohibit the same. 10. Having analysed the reasoning in the Award and the judgment of the District Judge under Section 34 of the Act and of the High Court under Section 37 with respect to claim nos. 3, 4 and 6, we; (a) Uphold the decision of the High Court in setting aside the Award with respect to claim no. 3 and dismiss the Civil Appeal to this extent. (b) Allow the appeal and set aside the judgment of the High Court in so far as it rejected and set aside claim no. 4 awarded by the Arbitrator, as upheld by the District Judge under Section 34. (c) Allow the appeal and set aside the judgment of the High Court in so far as it modified claim no. 6, to the extent of rejecting pre-reference interest award ..... X X X X Extracts X X X X X X X X Extracts X X X X
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