1. The State of Andhra Pradesh represented by the Superintendin Engineer (Civil), Srisailam Project, Kurnool is the appellant in this batch of three Civil Miscellaneous Appeals. They arise out of proceedings udner the Arbitration Act X of 1940. The parties are the same in all the three appeals, and identical contentions are raised by the learned Advocate General in these appeals and hence it is enough if we state the facts in one case. We have reserved the judgment on 18-8-1983. At the instance of the learned counsel for the respondents we have reheard the case on 31-8-1983. Hence we are stating the case as per the final hearing.
2. C. M. A. No. 989 of 1982 arises out of O. S. No. 749/81 on the file of the Additional Judge, City Civil Court, Hyderabad and O. S. No. 859/81 on the file of the same Court. The Ist respondent in these appeals entered into an agreement for execution of works contract at Srisailam Project Disputes have arisen regarding the claims due to the contractor and the matter was referred to the sole Arbitrator Sri K. Srinivasarao, a retired Chief Engineer, Hyderabad, the 2nd respondent herein. The Arbitrator passed an award on 28-6-1981 specifying amount for each claim and granted interest at 10% p. a. from the date of the award. The 1st respondent filed an application under S. 14(2) of hteACt to direct the Arbitrator to file the award into Court to make it a rule of Court. It appears even before that notice was served on the Arbitrator, the Arbitrator himself filed the award into Court under S. 14(1) of the Act and the said application of the Arbitrator himself filed the award into Court under S. 14(1) of the Act and the said application of the Arbitrator was registered as O. S. No. 859/81 and the application of the Ist respondent was registered as O. S. No. 749/81. The appellant-the State herein filed a separate application in O. S. No. 859/81 under S. 33 of the Act to set aside the award but the said application was not separately registered but the court below tried both the suits together and after hearing the parties accepted the award and passed a decree for a sum of Rs. 3,53,590-45 ps. But modifying the interest clause only at 6% p. a. from the date of the suit viz. 7-7-1981 till the date of realisation. Similarly the other two appeals in respect of claims of other works were filed. Against O. S. No. 750/61 and O. S. No. 857/81 C. M. A. 990/82 was filed and C. M. A. 991/82 was filed against O. S. Nos. 747 and 859/81. The court similarly modified the awards in these two cases also, regarding interest only, and hence it is unnecessary to give other details of those appeals.
3. Apart from the general attack, that the awards ae vitiated by errors apparent on the face of the record, the learned Advocate General broadly raised two contentions. (1) The award is inconsistent and contradictory and must be set aside as the Arbitrator having rejected the claim for excess interest directed that the interest be waived beyond a period of twelve months from the date of the receipt of instalment of advance in C. M. A. 989/82, Similarly clause (e) relates to excess interest liability in C. M. A. 990/82 AND Claim No. 1 (5) in C. M. A. 991/82. (2) The Arbitrator has no power to grant future interest and in any view the Court having set aside that direction in the award erred in granting interest from the date of the suit which is wholly without jurisdiction and void as being opposed to S. 29 of the Act.
4. Sri Y. Sivarama Sastry, the learned counsel appearing for the Ist respondent raised a preliminary point stating that no appeal lies against the decrees and there was no application to set aside the award and consequently these appeals are incompetent under Sec. 39 of the Act. On merits he submitted that there is a reference in the award as per para 56 of the claims statement and consequently the Arbitrator was right in granting the future interest and the same was affirmed by the court below and hence this court should not interfere with the decree. However he further adds that if this court exercises jurisdiction and corrects the decree of the trial court so far it contravenes S. 29 of the Act it could do so consistent with the finding of the trial court. It is convenient to deal with the merits of the case first.
5. Regarding the merits it is well settled the Arbitrator is not bound to give a reasoned award and if in passing the award he makes a mistake of law or of fact that is no ground for challenging the validity of the award. It is held in N. Chellappan v. Kerala S. E. Board : 2SCR811 that it is only when an erroneous proposition of law is stated in the award and which is the basis of the award, the award can be set aside or remitted on the ground of error of law apparent on the face of the record. A similar principle was laid down by the Supreme Court in Firm Madanlal Roshanlal v. Hukumchand Mills Ltd., : 1SCR105 and Bungo Steel Funiture v. Union of India. : 1SCR633 . What constituted the mistake apparent on the face fohte record was laid down bythe Supreme Court in Allen Berry and Co. v. Union of India, : 3SCR282 . It was ruled that 'even when an Arbitrator commits a mistake either in law or in fact in determining the matters referred to him, but such mistake does not appear on the face of the award or in a document appended to or incorporated in it so as to form part of it, the award will neither be remitted not set aside notwithstanding the mistake.' Applying the said tests let us examine the contentions of the learned Advocate General.
6. The learned Advocate General amplifies his first submission stating that when the claim of the Ist respondent for excess interest liability on advance for a lump sum of Rs. 50,000/- was rejected, the award begins to narrate that interest is waived beyond a period of twelve months from the date of the receipt of the instalment of the advance and hence the finding is inconsistent and contradictory and the same is liable to be struck down. Similar finding was given in other two appeals also as already stated. It is true the claim for excess interest was rejected but if we see the later part of the award wihc engrafts and exception to the limited extent of period of twelve months in C. M. A. 989/82 twenty one months in C. M. A. 990/82 and twenty seven months in C. M. A. 991/82, the Arbitrator adopted a clear method of accepting the claim. It is admitted that the contractor used to receive money in advance of the work done to enable him to do the work expeditiously. Such amount must carry the interest payable to the Government as the Contractor received the amount even before the completion of the work. But the claim of the Ist respondent is the original contract period of twelve months, twenty one months and twenty seven months respectively in those three contracts, covered by these three appeals, were extended beyond the contracting period due to the default of Government and consequently the Arbitrator awarded interest for the original period only and rejected the interest for the excess period over and above the contract period. Whether such rejection of the claim in part and accepting the claim in part, is valid or not cannot be examined by this court as the Arbitrator did not assign any reasons. We can only examine the limited question that the award on the face of the record is inconsistent and contradictory and on that ground alone the award is liable to be set aside. The Arbitrator having rejected the claim for excess interest proceeded to state the exception stating that 'but the interest is waived beyond a period of twelve months from the date of receipt of the instalments of advance.' This clause clearly operates as an exception as ti begins with the word 'but' which means except. Hence it is clear except to the extent of the contract period the claim for the excess interest is accepted. The Arbitrator has embodied the acceptance of the claim in the negative form embodying the clause of exception while rejecting the claim. But this itself cannot constitute an error of law apparent on the face of the record and there is no incongruity or inconsistency or any contradiction between the two clauses to vitiate that portion of the award and hence we have no hesitation to reject the contention of the learned Advocate General.
7. We think, the learned Advocate General is right in his submission so far it relates to the contravention of S. 29 of the Act by the trial court.
8. As in the case of S. 34, C. P. C. we can also visualise three periods of payment of interest under this Act. (1) Interest payable prior to the date of reference. (2) Interest payable from the date of reference till the date of the award or the date of the decree. (3) Interest payable from the date of decree till the date of realisation. So far the first period is concerned it is one prior to the commencement of the arbitration proceedings. The Supreme Court ruled that the same principles applicable in suits viz., that in the absence of any usage or contract or any provision of law to justify the award of interest an amount for a period before the institution of ahte suit cannot be allowed applies to arbitration proceedings also (Vide State of M. P. v. S. & S. Ltd. : 3SCR233 ) So far the remaining two periods are concerned the same is compendiously called future interest. It appears there is a conflict of opinion on this question. The Punjab High Court in State v. Ajit Singh, (FB) and the Rajasthan High Court in Manak Chand v. Ganesh Das, took the view that the Arbitrator can grant future interest till the date of realisation. The Delhi High Court in Kali Charan v. Delhi Municipality, AIR 1981 Delhi 301 and the Kerala High Court in Vulson v. Kelukutty. : AIR1959Ker174 took the contrary view. The examination of the cases which took the view that future interest after date of the award can be awarded by the Arbitrator discloses that they have not given due effect to S. 29 of the Act S. 29 is in the following terms:
'Where and in so far as an award is for the payment of money the Court may in the decree order interest, from the date of the decree at such rate as the Court deems reasonable to be paid on the principal sum as adjudged by the award and confirmed by the decree.' Section 41 is also necessary to be perused.
'Section 41. Subject to the provisions of this Act. And of rules made thereunder:-
(a) the provisions of the Code of Civil Procedure, 1908, shall apply to all proceedings before the Court, and to all appeals, under this Act, and
(b) the Court shall have, for the purpose of, and in relation to, arbitration proceedings the same powers of making orders in respect of any of the matters set out in the Second Schedule as it has for the purpose of, and in relation to, any proceedings before the Court.
Provided that nothing in Clause (b) shall be taken to prejudice any power which may be vested in an arbitrator or umpire for making orders with respect to any of such matters.'
In Firm Madanlal Roshanlal v. Hukumchand Mills : 1SCR105 the Supreme Court ruled that when the question of interest was referred to the Arbitrator the Arbitrator could decide the dispute and he could award pendents lite interest just as the Court would do so under Sec. 34, C. P. C. though S. 34 as such does not apply to arbitrations. That was a case where all the disputes in the suit were referred to the Arbitrator for his decision including interest. Union of India v. Bungo Steel Furniture : 1SCR324 is also a case where disputes were referred to an Arbitrator including claim for interest. Their Lordships explaining : 2SCR48 held that even though Sec. 34 C. P. C. has no application to arbitration proceedings the principle of that section would apply if a reference regarding interest is made to the Arbitrator and accordingly upheld the award of interest by Arbitrator from the date of award to the date of decree. This is case where a reference was made before the suit was filed, and the court accepted the interest awarded by the Arbitrator up to date f the decree.
9. Section 29 is a specific provision which empowers the court to grant interest from the date of the decree. In fact this provision is based upon S. 11 of the English Arbitration Act 1934. The Original Bill 34 of 1939 in which clause 30 which dealt with interest on awards has been drafted on lines similar to Sec. 11 of the English Act but when the Bill was referred to Select Committee, it suggested a deliberate change and a departure from the English Law and the same was accepted and that was the result of Sec. 29. (See Srikantia & Co. v. Union of India, : AIR1967Bom347 ). The Arbitration Act is both an Amending and a Consolidating Act intended to be a self contained Code and exhaustive on the law on the subject and is not permissible to draw analogies from other Acts.
10. The learned Advocate General relied on a Division Bench Judgment of the Kerala High Court in Vulson v. Kelukutty : AIR1959Ker174 . The facts disclose that the High Court proceeded on the basis that no reference regarding the claim of interest was made to the Arbitrator even though such claim is made in the suit and hence they deleted the claim of granting future interest by the Arbitrator. No doubt the judgment of the Division Bench of the Madhya Pradesh High Court in M. P. E. Board v. C. I. E. S. Co. : AIR1972MP47 supported the contention of the learned Advocate General as it was ruled that the Court has no power to award interest on principal sum adjudged by an award for any period prior to the date of the passing of the decree. In Kali Charan v. Delhi Municipality ( AIR 1981 Delhi 301) it was held that the awarding of interest beyond the period of date of decree is exclusively the function and privilege of the court and the Arbitrator has no power to grant the same. In P. V. Rangarao v. P. Viswanadham 1968 (1) Andh WR 308 this Court while construing Sec. 29 of the Act corrected the decree exsercising powers under Sec. 115, C. P. C. when the trial court did not grant interest from the date of the decree. Gopal Rao Ekbote, J., observed that Sec. 34 C. P. C. would not apply to a case of an award brought before the Court. Sec. 29 invests the Court with power to grant interest only from the date of the decree at such rate as the Court deems reasonable. Thus the legal position relating to the power of the Arbitrator to award future interest is :-
(1) If there is no reference regarding claim of interest either expressly or impliedly, the Arbitrator has no power to award interest.
(2) If there is a reference relating to the claim of interest the Arbitrator can award interest from the date of reference till the date of award or up to date of the decree if the reference is with the intervention of the Court.
(3) The Arbitrator has no power to award interest after the date of the decree and the court alone is competent to award interest after the date of the decree under Sec. 29 of the Arbitration Act.
(4) The Court has no power to award interest from the date of the award till the date of the decree ro from the date foh te suit till the date foa the decree as the same was impliedly prohibited by Sec. 29 of the Act and the Arbitrator alone is entitled to do so by virtue of the reference.
11. It is admitted in this case that there is a reference for the claim of interest as per Cl. 56 of the claims statement. The award granted future interest at 10% p. a. from the date of the award. No doubt it did not state whether it is granted up to the date of the decree or up to the date of realisaation. If it is construed that it is up to ahte date of realisation the award is bad to that extent as the Arbitrator cannot grant interest beyond the date of the decree. But the court while modifying the decree substituted a new clause granting interest from the date of the suit till the date of realisation. Now the question is whether the said direction can be corrected by this court in these appeals.
12. Now we have to examine the preliminary objection raised by Sri Sivarama Sastry.
13. The Arbitration Act is intended to shorten the procedure in civil courts and give expeditious relief to parties. The experience shows that far from achieving the said purpose the procedure has become more cumbersome and dilatory. It is pertinent to note the observation of His Lordship Desai, J. in M/s. Guru Nanak Foundation v. M/s. Rattan Singh & Sons, : 1SCR842 :
'Iunterminable, time consuming, complex and expensive court procedures impelled jurists to search for an alternative forum, less formal, more effective and speedy for resolution of disputes avoiding procedural claptrap and this led them to Arbitration Act, 1940 ('Act' for short) however, the way in which the proceedings under the Act are conducted and without an exception challenged in Courts, has made lawyers laugh and legal philosophers weep. Experience shows and law reports bear ample testimony that the proceedings under the Act have become highly technical accompanied by unending prolixity at every stage providing a legal trap to the unwary. Informal forum chosen by the parties for expeditious disposal of their disputes has by the decisions of the Courts been clothed with 'legalese' of unforeseeable complexity.
The present case shows how the procedure prescribed under the Act was given a go-by by the parties and the Court below, and unless we make this procedure subservient to the justice the appellant shall fail. The first mistake committed by the Court below is not registering the application filed by the State under Sec. 33 of the Act. The said application was filed in O. S. No. 859/81 which si the suit filed by the Arbitrator. The court ought to have registered it as a separate O. P. The State prayed for setting aside the award given by the Arbitrator and for other reliefs. Registering the application of the Arbitrator as a separate suit is unnecessary and superfluous. Instead of registering the application of the State as a O. P. eh court below registered the applications filed by the Arbitrator and also the claimant as separate suits. However the court considered the objections of the State and upheld the award in toto and threupon the decree was passed. As the order overruling the objections and directing passing of decree is a composite one an appeal lies under S. 39(1)(vi) as held by the Supreme Court in Madan Lal v. Sunderlal, : 3SCR147 . There is no specific form prescribed for making an application to set aside the award. It observed (at p. 1235) :-
'If a party wants an award to be set aside on any of the grounds mentioned in Sec. 30 it must apply within 30 days of the date of service of notice of filing of the award as provided in Art. 158 of the Limitation Act. If no such application is made the award cannot be set aside on any of the grounds specified in Sec. 30 of the Act. It may be conceded that there is no special form prescribed for making such an application and in an appropriate case an objection to an award in the nature of a written statement may be treated as such an application.'
The Court also observed (at p. 1236) :-
'There can be no doubt on the scheme of the Act that any objection even in the nature of a written statement which falls under Sec. 30 cannot be considered by the Court unless such an objection is made within the period of limitation (namely, 30 days), though if such an objection is made within limitation that objection may in appropriate cases be treated as an application for setting aside the award.'
This court also took the same view in A. M. Habeebur Rahman v. A. Varamma, : AIR1974AP113 . In this case once an application is filed and it was entertained on merits and court adjudged the matter the adjudication squarely falls within S. 39(1)(vi). Hence an appeal lies against the order overruling the objections to set aside the award.
14. Further the award granting future interest was modified substituting a new clause directing interest payable from the date of the suit till the date of realisation. This clearly constitutes a modification or correction of an award within the meaning of S. 30(1)(iii) and as such an appeal lies against that order. The learned counsel for the respondents contended that the award was not modified He relied on the last two sentences in the judgment which may be extracted as follows: 'So I see no reason to interfere with the award in this case. I find the issue against the Government and decree both the suits as prayed for with costs and future interest at 6% per annum from the date of the suit till the date of realisation.' It is contended that the latter apart of the second sentence 'future interest at 6% p. a. from the date of the suit till the date of realisation' does not constitute modification. We cannot agree. It is the decree which is made the rule of the Court alone that is executable. In fact S. 15 of the Arbitration Act of 1899 may be referred in this connection: 'An award on a submission, on being filed in the Court in accordance with the foregoing provisions. Shall (unless the Court remits it to the reconsideration of the arbitrator or umpire or sets it aside) be enforceable as if it were a decree of the Court.' Now this was modified and S. 15 enumerates the grounds of modifying or correcting the award and S. 17 of the present Act directs that if the court does not set aside the award and the time for setting aside the award has expired it shall proceed to pronounce judgment according to the award and upon the judgment so pronounced, a decree shall follow. So it is the decree that is executable but not the award as such. (Vide Srikantia & Co. v. Union of India, : AIR1967Bom347 ). It might be that the power of the court to modify kthe award is restricted as per Sec. 15. If the Court exceeded the jurisdiction it must be corrected by the superior court. But the decree as affirmed by the court alone is enforceable in execution and hence we have no hesitation in rejecting the contention of Sri Sivarama Sastry.
15. Thus, we hold that the present appeals are maintainable against the orders modifying or correcting the award under Sec. 39(1)(iii) or setting aside or refusing to set aside the award under Sec. 39(1)(vi) and the appellants are entitled to canvass the correctness of these orders. Htus we dealt the case on merits accordingly.
16. The contention of the learned counsel for the respondents is that the present question of contravention of Sec. 29 by the trial court pertains to the correction of the decree and hence no appeal lies against the decree and this court cannot grant the relief to the appellants even assuming that Sec. 29 is contravened. The learned Advocate-General did not raise the contention that the rate of interest granted by the Arbitrator at 10% is excessive. Evidently the transaction is a commercial transaction relating to the industry. However he contended the plaintiff did not file the appeal and hence this court cannot correct the decree of the trail court rejecting the interest to the plaintiff up to the date of the decree.
17. Now we have to examine the power of the court while exercising the appellate powers under Sec. 39 of the Act as we have held the appeals are maintainable both under Cls. (ii) and (vi) of Section 39 (1). Sec. 17 of the Act enjoins on the court after hearing the objections to the award to pronounce judgment according to the award and upon judgment so pronounced a decree shall follow. The scheme of the Act is to enforce the award as far as possible. The civil court is not empowered to make an independent adjudication. It may set aside the award in whole or modify it in part but nonetheless it must pass the decree in accordance with the ultimate terms of the award upheld by the court. Hence, it is obvious that when the order upholding the award in whole or modify it in part but nonetheless it must pass the decree in accordance with the ultimate terms of the award upheld by the court. Hence, it is obvious that when the order upholding the award in whole or in part is the subject-matter of the appeal, the appellate court can exercise the same powers that can be exercised by the trial court . in fact though a decree was passed consequent on the order of the court upholding the award, so long the appeal is pending against the order upholding the award the decree will not becoem final and it will be subject to the modifications that will be made by the appellate court. No doubt the modification will be to the award in the further appeal to the appellate court, but, once the appellate Court modifies or affirms the award a fresh decree shall follow in accordance with the final judgment of the appellate court. Hence in Amod Kumar v. Hari Prasad, : AIR1958All720 a Division Bench of the Allahabad High Court held that in appeal from an order refusing to set aside an award, when disposing of the appeal it is open to the appellate court to set aside any consequential or incidental order passed by the trial court . we share the said view which represents the correct law.
18. So far the power under Sec. 29 is concerned it is an independent power of adjudication given to the civil court under the Arbitration Act. It has got a limited jurisdiction to award interest from the date of the decree. The terms 'court' in Sec. 29 of the Arbitration Act may well include the appellate court and consequently the appellate court has power to pass necessary orders as contemplated by the said section. The said view was taken in State of Punjab v. Surrinder Nath, . We agree with the said view.
19. Thus, it is seen the appellate court while exercising the powers under Sec. 39 against the orders refusing to set aside the award, has got power to correct the errors of the trial court in excess of its powers and it can also exercise the powers of the trial court given to it under Sec. 29.
20. If we apply the above principle to the facts of the present case we discover two mistakes, one by the Arbitrator in passing the award and another by the trial court . the Arbitrator has no jurisdiction to grant future interest beyond the decree. The award clearly contemplates payment of interest till realisation.; such award was held to be without jurisdiction and in excess of the powers of the Arbitrator and cannot be construed to be one granting interest up to the date of the decree. The earlier view of the Calcutta High Court expressed in Union of India v. Bungo Steel Furniture (Pvt.) Ltd., : AIR1963Cal70 holding that where Arbitrator has awarded payment of interest till the date of payment of amount and a judgment is passed on such award, it should be taken to be an award up to the date of the decree, was expressly dissented by a later Division Bench of the Calcutta High Court in Lal Chand v. Nerode Kanta : AIR1966Cal478 the later view is in accordance with view of the Supreme Court. Hence the trial court is wrong in upholding the award in toto. So we must necessarily modify the award and direct a decree to be passed in accordance with the award so modified by us. In doing so, we are exercising the powers conferred on us under Sec. 39 of the Act. So the award shall be modified restricting the payment of interest of 10% from the date of the award till the date of decree.
21. So far the powers of the trial court exercised under Sec. 29 are concerned while accepting the award it exceeded the jurisdiction in substituting a new clause directing payment of interest from the date of the suit till the date of realisation. It has no jurisdiction to grant interest prior to the decree. While it committed the mistake in affirming the award and passing the consequential and incidental orders we are clear that we can correct that mistake while exercising powers as an appellate Court. Further we also hold that once such order is bad and beyond it powers and the same is set aside we can pass fresh orders under Sec. 29 directing that the further interest on the same amount at 6% is payable from the date of the decree till the date of realisation.
22. As we are correcting the award and also the order of the trial court which exceeded its jurisdiction in confirming the award we can direct that the decree shall follow in accordance with the judgment now finally rendered by us as per the terms of Sec. 17 of the Act.
23. In view of the foregoing we direct that the following clause shall be substituted for Cl. (1) in the decree:-
'(1) The defendant No. 1 do pya to the plaintiff a sum of Rs. 3,53,590-45 ps. With interest at 10% p. a. from the date of the award i. e. 23-6-1981 till the date of the decree i. e. 19-4-1982 and with a further interest on the same amount at 6% p. a. from the date of the decree till the date of realisation.'
Similar direction shall issue in other two appeals also.
24. In the result, these appeals are allowed in part and we make no order as to costs.
25. Appeals partly allowed.