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TMI Blog2024 (12) TMI 1015X X X X Extracts X X X X X X X X Extracts X X X X ..... of the 1996 Act though such discretion is available to the arbitral tribunal. Natural corollary to the analysis would be that the sum so awarded by the arbitral tribunal which may include interest from the date when the cause of action arose to the date of the award, would carry further interest of 18 percent from the date of the award to the date of payment unless the arbitral award otherwise directs. Thus, the legislative intent is that the awarded sum whether inclusive of interest or not, in case included, then from the date of cause of action to the date of award, would carry further interest from the date of the award to the date of payment. Going by the provisions contained in Section 31(7) of the 1996 Act, it is evident that an arbitral tribunal has the power to grant (i) pre-award (ii) pendente lite (iii) post-award interest. Intention behind awarding pre-award interest is primarily to compensate the claimant for the pecuniary loss suffered from the time the cause of action arose till passing of the arbitral award - It primarily acts as a disincentive to the award debtor not to delay payment of the arbitral amount to the award holder. Clause (a) of sub-Section (7) of Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing. Therefore, viewed from this perspective also, it is not open to the appellant to raise the aforesaid issue again in the present proceeding. The clarification sought for and issued by the learned Arbitrator would be covered by the expression unless another period of time has been agreed upon by the parties appearing in Section 33 (1) of the 1996 Act. This is a case where court had permitted the respondent to seek clarification from the learned Arbitrator beyond the initial period of 30 days whereafter the appellant fully participated in the clarificatory proceeding. Therefore, the present case would be covered by the above expression. In the circumstances, contention of the appellant that the learned Arbitrator had become functus officio and therefore lacked jurisdiction to issue the clarification cannot be accepted and is thus rejected. There are no error or infirmity in the impugned order passed by the Division Bench of the High Court - the appeal lacks merit and is, accordingly, dismissed. - ABHAY S. OKA And UJJAL BHUYAN , JJ. JUDGMENT UJJAL BHUYAN , J. Heard learned counsel for the parties. 2. This civil appeal by special leave is directed against the impugned order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court seeking appointment of an arbitrator to arbitrate the dispute between the parties. High Court appointed Sh. S.P. Rai, Ex- Member(Personnel), Postal Services Board and Additional Secretary to the Government of India, Ministry of Communications, as the sole Arbitrator. It may be mentioned that on the consent of both the parties, the arbitration proceedings were carried out in terms of the Arbitration and Conciliation Act, 1996 whereafter award was passed by the sole Arbitrator on 16.12.1997. Learned Arbitrator awarded various sums under different heads out of the 26 claims, while rejecting a few of the claims of the respondent. Counter claim of the appellant was also allowed to a limited extent under three heads. After adjusting the two, an amount of Rs. 1,70,70,720.80 was awarded to the respondent with simple interest @ 18% per annum on the award amount w.e.f. 01.04.1990 upto the date of actual payment except on claim No. 23(b) which related to expenses incurred by the respondent on account of bank guarantee commission, margin money etc. for keeping the bank guarantee alive. 6.1. Thereafter, the sole Arbitrator issued a corrigendum dated 18.12.1997 pointing out certain typogr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench, respondent sought leave to approach the learned Arbitrator for seeking the clarification as to whether the interest awarded in the award was under Section 31(7)(a) of the 1996 Act or not? Division Bench vide the order dated 03.01.2005 granted such permission to the respondent with the clarification that the permission so granted should not be understood to contain any expression of opinion of the Division Bench about payment of interest under Section 31(7)(a) or Section 31(7)(b) of the 1996 Act. 13. Pursuant thereto, an application was filed by the respondent before the learned Arbitrator seeking clarification in terms of the order dated 03.01.2005. It was contended on behalf of the respondent that though under sub-Section (7) of Section 31 of the 1996 Act interest can be awarded, Arbitral Tribunal, however, had not clarified as to whether the said interest was awarded under clause (a) of sub-Section (7) of Section 31 of the 1996 Act or not. Appellant filed objection to such application primarily contending on merit that no such clarification was warranted in the facts and circumstances of the case. 14. Learned Arbitrator after hearing the parties issued a clarification on 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6/2008. Division Bench vide the order dated 23.02.2012 referred to the decision of this Court in S.L. Arora (supra) and held that the settled legal position that prevailed was that compound interest under the 1996 Act could not be granted in view of the decision in S.L. Arora (supra). Resultantly, the amount covered by the compound interest was not payable. It was observed that in view of the settled legal position that respondent was not entitled to compound interest as per the decision in S.L. Arora (supra), the appeal had become an academic exercise. Division Bench therefore declined to examine the reasoning of the learned Single Judge while passing the order dated 19.02.2008. The appeal of the appellant was dismissed in the aforesaid manner and not on the basis of the reasons given by the learned Single Judge. 19. Assailing the order dated 23.02.2012 of the Division Bench, respondent preferred SLP(C) No. 18614/2012. This Court passed an order on 13.07.2012 to tag the aforesaid SLP with Civil Appeal No. 3148 of 2012 (M/s. Hyder Consulting (UK) Ltd. Vs. Governor, State of Orissa Thr. Chief Engineer). 20. On leave being granted, SLP(C) No. 18614/2012 came to be registered as Civil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to interest on the pre-award interest. Appellant was directed to verify the calculation of interest and to deposit the said amount before the High Court which would be without prejudice to the rights and contentions of the appellant. 23. Respondent filed a fresh application before the Single Bench being EA(OS) No. 34/2016 claiming a sum of Rs. 9,10,43,399.53 as on 31.12.2015 from the appellant in view of the order of this Court dated 12.03.2015 passed in C.A. No. 2841 of 2015. 24. Appellant also filed an application being EA(OS) No. 166/2017 before the executing court for recall of the direction for deposit of the additional interest. Learned Single Judge vide the judgment and order dated 19.04.2017 held that the arbitral award dated 16.12.1997 has to be considered in the light of the decision of this Court in M/s. Hyder Consulting (UK) Ltd. (supra). On the contention of the appellant that the learned Arbitrator had no jurisdiction to issue such clarification as the Arbitral Tribunal had become functus officio, the same was rejected by the learned Single Judge on the ground that such clarification was obtained in terms of the leave granted by the Division Bench; the special leave p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the appellant that the learned Arbitrator had no jurisdiction because by the order dated 12.03.2015, this Court had directed that the High Court would decide the issue of interest component payable to the respondent in accordance with the law laid down in M/s. Hyder Consulting (UK) Ltd. (supra) and not in accordance with S.L. Arora (supra). That apart, such a contention was not available to the appellant at the stage of execution proceeding. The matter had attained finality upto the level of this Court and, thus, cannot be interfered with on merit. Therefore, with the consent of the parties, Division Bench set aside the operative part of the order dated 19.04.2017 pertaining only to the calculations and permitted both the parties to make submissions restricted to the quantum of the amount payable to the respondent. Learned Single Judge was requested to decide the amount payable to the respondent after hearing both the sides. Pleadings 30. According to the appellant, learned Arbitrator had become functus officio after passing of the award dated 16.12.1997. Therefore, he had no jurisdiction to issue the clarification dated 15.03.2005. 30.1. In the garb of the clarification dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tled law that Section 33 is the only provision in the 1996 Act which allows correction of clerical errors. In the garb of clarification or correcting clerical errors, learned Arbitrator introduced substantial change in the award. In any view of the matter, the power under Section 33 of the 1996 Act could not have been exercised by the learned Arbitrator more than 6 years after passing of the award. 31. Respondent in its counter affidavit has stated that the special leave petition out of which the present civil appeal arises is totally misconceived and is an abuse of the process of law. 31.1. Learned Arbitrator vide the award dated 16.12.1997 had awarded a sum of Rs. 1,70,70,720.80 (corrected to Rs. 1,70,40,720.80) alongwith interest @ 18% per annum in favour of the respondent. In the course of the execution proceeding, the executing court i.e. the learned Single Judge referred the matter to the Division Bench on the question as to whether under Section 31(7) of the 1996 Act, post-award interest would be on the principal sum adjudged or would be on the principal sum plus interest on the principal sum which had accrued from the date of the cause of action to the date of passing of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of this Court in M/s. Hyder Consulting (UK) Ltd. (supra) and was on the verge of dismissing the miscellaneous application. It was at that stage that learned counsel for the appellant sought leave of this Court to withdraw the miscellaneous application and accordingly, the same was disposed of as withdrawn. However, no liberty was granted to the appellant to reagitate the said issue again in any other proceeding. That being the position, appellant is estopped from raking up the said issue again before this Court. 31.4. It is contended that learned Arbitrator was well within his powers under Section 33 of the 1996 Act to issue the clarification which has now attained finality. 31.5. In that view of the matter, the civil appeal being devoid of any merit should be dismissed. Submissions 32. Ms. Madhavi Divan, learned senior counsel for the appellant, at the outset, submitted that the clarification of the learned Arbitrator dated 15.03.2005 is a nullity in the eyes of law. Referring to the final award dated 16.12.1997, learned senior counsel submits that learned Arbitrator had awarded simple interest @ 18% per annum from the date of the cause of action i.e. 01.04.1990 till the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. It is a case of lack of subject-matter jurisdiction and, therefore, the clarification is non est in the eyes of law. In this connection, she has referred to a decision of this Court in Harshad Chiman Lal Modi Vs. DLF Universal Ltd. (2005) 7 SCC 791 , more particularly to paragraphs 30 to 33 thereof. Any order passed by a tribunal lacking inherent jurisdiction would be coram non judice. Such an order would be a nullity and is non est. The same can be questioned at any stage i.e. at the stage of execution or even in a collateral proceeding. 32.7. Proceeding further, learned senior counsel submits that this Court never had the opportunity in the earlier proceedings to examine the issue as to whether learned Arbitrator had acted without jurisdiction while issuing the clarification which resulted in modifying the original award. Therefore, the said issue may be examined and the civil appeal should be allowed. 32.8. Finally, learned senior counsel referred to the decision of this Court in M/s. Hyder Consulting (UK) Ltd. (supra) and submits that in that case this Court had clarified the expression the arbitral tribunal may include in the sum, for which the award is made , occurring in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 09.07.2007. Secondly, the clarification dated 15.03.2005 of the learned Arbitrator was challenged by the appellant by filing objection in the pending execution proceeding. The challenge was made on the ground that the learned Arbitrator had become functus officio and thus had no authority to issue any clarification. Learned Single Judge had set aside the clarification of the learned Arbitrator by accepting the contention of the appellant which order was upheld by the Division Bench. Special leave petition filed by the respondent against the aforesaid order of the Division Bench was allowed by this Court vide the order dated 12.03.2015; judgments of the learned Single Judge as well as of the Division Bench of the High Court whereby the clarification issued by the learned Arbitrator was set aside were reversed by this Court vide the order dated 12.03.2015. Thirdly, appellant had filed a miscellaneous application before this Court seeking clarification of the aforesaid order dated 12.03.2015. In the said application, it was specifically pleaded that the order dated 12.03.2015 only considered the issue of interest: whether governed by S.L. Arora (supra) or by M/s. Hyder Consulting ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the award that the pendente lite interest would merge with the principal or that it would bear future interest; rather, in view of the language used in Section 31(7)(b) of the 1996 Act, the pendente lite interest automatically merges with the principal so as to arrive at the sum for the purpose of calculation of future interest. Clarification given by the learned Arbitrator is completely in consonance with the law laid down by this Court in M/s. Hyder Consulting (UK) Ltd. (supra). A bare reading of the original award dated 16.12.1997 conveys the same meaning. Therefore, it cannot be said that the learned Arbitrator had made any modification of the award or had passed a completely new award. It was purely and simply a clarification of what was awarded. 33.5. Learned senior counsel for the respondent submits that this Court vide the order dated 12.03.2015 held that the interest component shall be calculated in accordance with the law laid down in M/s. Hyder Consulting (UK) Ltd. (supra). In the execution proceeding, respondent had lodged claim strictly in accordance with the law laid down in M/s. Hyder Consulting (UK) Ltd. (supra). This decision has been explained and reiterated by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment 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 award to the date of payment. 36.1. From a minute reading of sub-Section (7), it is seen that it has got two parts: the first part i.e. clause (a) deals with passing of award which would include interest up to the date on which the award is made. The second part i.e. clause (b) deals with grant of interest on the sum awarded by the Arbitral Tribunal. 36.2. Let us now discuss in detail the contours of the two clauses. As per clause (a), when an award is made by the arbitral tribunal for payment of money, the sum which is awarded may include interest at such rate as the arbitral tribunal deems appropriate, on the whole or any part of the money and for the whole or any part of the period. The period for which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the arbitral tribunal. However, no such discretion is available to the parties under Section 31(7)(b) of the 1996 Act though such discretion is available to the arbitral tribunal. 38. Natural corollary to the above analysis would be that the sum so awarded by the arbitral tribunal which may include interest from the date when the cause of action arose to the date of the award, would carry further interest of 18 percent from the date of the award to the date of payment unless the arbitral award otherwise directs. Thus, the legislative intent is that the awarded sum whether inclusive of interest or not, in case included, then from the date of cause of action to the date of award, would carry further interest from the date of the award to the date of payment. 39. Generally, going by the provisions contained in Section 31(7) of the 1996 Act, it is evident that an arbitral tribunal has the power to grant (i) pre-award (ii) pendente lite (iii) post-award interest. Intention behind awarding pre-award interest is primarily to compensate the claimant for the pecuniary loss suffered from the time the cause of action arose till passing of the arbitral award. Further, this is also to ensur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to preaward period, interest has to be awarded as specified in the contract and in the absence of any contract, as per the discretion of the arbitral tribunal. On the other hand, in regard to the postaward period, interest is payable as per the discretion of the arbitral tribunal and in the absence of exercise of such discretion, at the mandatory statutory rate of 18% per annum. According to the Bench, the award of interest under sub-Section (7) of Section 31, like award of cost under sub-Section (8) of Section 31 of the 1996 Act, are ancillary matters when the arbitral tribunal decides the substantive dispute(s) between the parties. Therefore, the expressions sum for which the award is made and a sum directed to be paid by an arbitral award contextually refers to the award on the substantive claims and not ancillary or consequential directions relating to interest and costs. The Bench explained that clause (b) of Section 31(7) is intended to ensure prompt payment by the award debtor once the award is made. The higher rate of interest is provided in clause (b) with the deliberate intent of discouraging award debtors from adopting dilatory tactics and to persuade them to comply with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ire pre-award period between the date on which the cause of action arose and the date on which the award is made. To put it differently, subsection (7)(a) contemplates that an award, inclusive of interest for the pre-award period on the entire amount directed to be paid or part thereof, may be passed. The sum awarded may be the principal amount and such interest as the Arbitral Tribunal deems fit. If no interest is awarded, the sum comprises only the principal. The significant words occurring in clause (a) of sub-section (7) of Section 31 of the Act are the sum for which the award is made . On a plain reading, this expression refers to the total amount or sum for the payment for which the award is made. Parliament has not added a qualification like principal to the word sum , and therefore, the word sum here simply means a particular amount of money . In Section 31(7), this particular amount of money may include interest from the date of cause of action to the date of the award. 41.1. Insofar clause (b) is concerned, the majority opined as under: 7. ..In other words, what clause (b) of sub-section (7) of Section 31 of the Act directs is that the sum , which is directed to be paid b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection (7) of Section 31 of the Act, at which stage the amount would be the sum arrived at after the merging of interest with the principal; the two components having lost their separate identities. 14. In fact this is a case where the language of sub-section (7) clauses (a) and (b) is so plain and unambiguous that no question of construction of a statutory provision arises. The language itself provides that in the sum for which an award is made, interest may be included for the pre-award period and that for the post-award period interest up to the rate of eighteen per cent per annum may be awarded on such sum directed to be paid by the arbitral award. 41.3. The majority declared that S.L. Arora (supra) was wrongly decided in that it holds that a sum directed to be paid by an arbitral tribunal and the reference to the award on the substantive claim does not refer to interest pendente lite awarded on the sum directed to be paid upon award and that in the absence of any provision of interest upon interest in the contract, the arbitral tribunal does not have the power to award interest upon interest or compound interest either for the pre-award period or for the post-award period. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral tribunal to award interest qua the agreement and held as follows : 17. It could thus be seen that the part which deals with the power of the Arbitral Tribunal to award interest, would operate if it is not otherwise agreed by the parties. If there is an agreement between the parties to the contrary, the Arbitral Tribunal would lose its discretion to award interest and will have to be guided by the agreement between the parties. The provision is clear that the Arbitral Tribunal is not bound to award interest. It has a discretion to award the interest or not to award. It further has a discretion to award interest at such rate as it deems reasonable. It further has a discretion to award interest on the whole or any part of the money. It is also not necessary for the Arbitral Tribunal to award interest for the entire period between the date on which the cause of action arose and the date on which the award is made. It can grant interest for the entire period or any part thereof or no interest at all. 44. Again in the case of Morgan Securities Credits (P) Ltd. Vs. Videocon Industries Ltd. ( 2023 ) 1 SCC 602 , the issue before this Court was whether the expression unless the award oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all make the correction or give the interpretation within thirty days from the receipt of the request and the interpretation shall form part of the arbitral award. (3) The arbitral tribunal may correct any error of the type referred to in clause (a) of sub-section (1), on its own initiative, within thirty days from the date of the arbitral award. (4) Unless otherwise agreed by the parties, a party with notice to the other party, may request, within thirty days from the receipt of the arbitral award, the arbitral tribunal to make an additional arbitral award as to claims presented in the arbitral proceedings but omitted from the arbitral award. (5) If the arbitral tribunal considers the request made under sub-section (4) to be justified, it shall make the additional arbitral award within sixty days from the receipt of such request. (6) The arbitral tribunal may extend, if necessary, the period of time within which it shall make a correction, give an interpretation or make an additional arbitral award under sub-section (2) or sub-section (5). (7) Section 31 shall apply to a correction or interpretation of the arbitral award or to an additional arbitral award made under this section. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od of time has been agreed upon by the parties assumes critical significance. 46. Reverting back to the facts of the present case, learned Arbitrator passed the award on 16.12.1997. After adjusting the claims and counter claims, learned Arbitrator granted principal amount of Rs. 1,70,70,720.80 (corrected to Rs. 1,70,40,720.80 as per the corrigendum dated 18.12.1997). On the question of interest, learned Arbitrator awarded simple interest @ 18% per annum on the award amount from 01.04.1990 i.e. the date of cause of action to the date of actual payment except on claim No. 23(b). 47. In the execution proceeding before the learned Single Judge, an order was passed on 26.08.2004. Learned Single Judge framed an issue for consideration as to whether post-award interest under Section 31(7) of the 1996 Act would be calculated on the principal amount adjudged or on the principal amount plus interest on the principal amount which has accrued from the date of cause of action to the date of passing of the award as under the 1996 Act, award is to be enforced as a decree of the court. According to the learned Single Judge, it was an important issue affecting a large volume of litigation. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt had participated in the clarificatory proceeding before the learned Arbitrator taking the stand that no clarification as sought for was required on merit. 51. Learned Arbitrator issued the clarification on 15.03.2005. It was clarified that the amount awarded alongwith interest for the pre-reference and pendente lite periods become the decretal amount. As per Section 31(7)(b), this amount would carry further interest @ 18% per annum. Thus, learned Arbitrator clarified that post-award interest shall be payable on the awarded sum i.e. the amount of claim awarded (principal amount) plus interest for the pre-reference period and pendente lite upto the date of the award at the rate mentioned thereunder. 52. Appellant did not challenge the clarification dated 15.03.2005 under Section 34 of the 1996 Act; instead appellant questioned the same in the execution proceeding before the learned Single Judge. Learned Single Judge in his order dated 19.02.2008 held that learned Arbitrator had become functus officio and thus had no authority to entertain the application for clarification. Learned Arbitrator, in his award, had granted simple interest @ 18% per annum on the awarded amount i.e. the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as awarded but also on the pre-award interest as well as on the interest pendente lite. The quantum of pre-award interest and the interest pendente lite would be calculated and included in the amount awarded i.e. the sum and the post-award interest would run on the said sum i.e. principal amount plus interest (preaward interest plus interest pendente lite). 56. When the appellant assailed this order before the Division Bench, vide the impugned order dated 01.07.2019, the Division Bench held as follows : 17. We, thus, reject the contentions of the learned counsel for the appellant for the reason that in the order dated 12.03.2015, the Supreme Court has directed that the High Court would decide the issue of interest component payable to the respondent in accordance with law laid down in M/s Hyder Consulting (UK) Ltd. (supra) and not in accordance with law laid down in S.L. Arora (supra). The other reason for rejecting the contentions of the appellant is that the grounds, which are sought to be urged before us, are not available to the appellant at this stage in these proceedings, which are execution proceedings. The matter had attained finality upto the Apex Court and we cannot inte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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