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The Executive Engineer, Rural Engineering Division, Cuttack West, Cuttack Vs. Surendranath Kanungo - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtOrissa High Court
Decided On
Case NumberMisc. Appeal No. 22 of 1979
Judge
Reported inAIR1980Ori119; 48(1979)CLT555
ActsArbitration Act, 1940 - Sections 13 and 29; Code of Civil Procedure (CPC) , 1908 - Sections 34
AppellantThe Executive Engineer, Rural Engineering Division, Cuttack West, Cuttack
RespondentSurendranath Kanungo
Appellant AdvocateD.P. Mohapatra, Addl. Govt. Adv.
Respondent AdvocateR. Mohanty, Adv.
DispositionAppeals dismissed
Cases ReferredUnion of India v. Bungo Steel Furniture
Excerpt:
.....agreement can be referred to and settled by arbitration as per clause 12 read with clause 23 of such agreements (see the decisions in c. it is now well settled by a series of decisions of this and of the supreme court that, unless there is specific clause in the agreement prohibiting award of interest, the arbitrator has jurisdiction to grant interest on the principal amount awarded by him on the different items of claim referred to him for arbitration. of income-tax, orissa ilr 1977 cut 664. in view of the above well settled law on this point, the jurisdiction of the arbitrator to award interest cannot be questioned. do not in terms apply to the arbitration proceedings, the principles underlying the said section and the rate of interest fixed therein should better befollowed by..........was any way vitiated. the impugned order shows that the award so far as it relates to the claim items nos. 11, 18, 19, 20 and 21 was not challenged by either party in fee court below. the court below has also held that fee claims in respect of items 1, 2, 3, 6, 7, 9, 12, 14, 15, 16, 17, 22 and 23 arise out of the work for the execution of which agreement no. f/2 of 1972-73 was executed by both fee parties. the appellant's objection against the award in respect of these items on the ground of improper assessment of evidence was rightly dismissed by the court below, as the court was not to act as an appellate court in such matters. the court below alsofinds that the objections against the arbitrator's award in respect of the aforesaid items are not well founded or based on any.....
Judgment:

S. Acharya, J.

1. This is an appeal Under Section 39(1) of the Arbitration Act (hereinafter referred to as the 'Act') against the order passed by the learned Subordinate Judge, Cuttack in T. S. No. 229 of 1978.

2. The Arbitrator's award in respect of certain disputes between the partieswas submitted to the court below to make the same a rule of the court. The award was challenged Under Section 30 of the Act in the court below by the appellant herein. The court below, on rehearing both the parties, has partly allowed the objection by only scaling down the rate of interest awarded by the Arbitrator from 12 per cent to 6 per cent per annum and has dismissed all the other objections against the award.

3. It was urged by Mr. Mohapatra, the learned counsel for the appellant, that the court below acted illegally in not appreciating the contention of the appellant that as the items of claim on which the award was passed were all in respect of extra work done by the respon-dent-contrator, the claims on those items were beyond the scope and ambit of the arbitration Clause 23 of the agreement between the parties, and hence fee Arbitrator had no jurisdiction to pass any award in respect of the same, and so the award in respcet of the said items of claim was illegal, without any force of law, and could not be given effect to. It was further contended feat the grant of interest by the Arbitrator, in the absence of specific claim to that effect, was illegal and without jurisdiction and so fee court acted illegally in directing payment of interest in the decree passed by it.

4. The court below has overruled the appellant's objections against the Arbitrator's award which relates to the items of claim regarding fee work done by the contractor on the ground that the award on fee face of it does not show that the appellant's objections against these claims were not considered, or that the Arbitrator in any way violated the principles of natural justice or misconducted himself while conducting the arbitration proceeding, or that fee arbitration proceeding was any way vitiated. The impugned order shows that the award so far as it relates to the claim items Nos. 11, 18, 19, 20 and 21 was not challenged by either party in fee court below. The court below has also held that fee claims in respect of items 1, 2, 3, 6, 7, 9, 12, 14, 15, 16, 17, 22 and 23 arise out of the work for the execution of which Agreement No. F/2 of 1972-73 was executed by both fee parties. The appellant's objection against the award in respect of these items on the ground of improper assessment of evidence was rightly dismissed by the court below, as the court was not to act as an appellate court in such matters. The court below alsofinds that the objections against the Arbitrator's award in respect of the aforesaid items are not well founded or based on any good ground on which the same can be legally challenged. Nothing substantial is urged on which the award in respect of these items or the order of the court below in this connection can any way he interfered with. It is now also well set-tied by a series of decisions of this Court that disputes regarding claims made in respect of extra work done in connection with the main work entrusted to the contractor under the arbitration agreement can be referred to and settled by arbitration as per Clause 12 read with Clause 23 of such agreements (See the decisions in C. R. Nos. 8 and 10 to 16 of 1979, Reported in (1979) 48 Cut LT 505 and C. R. No. 159 of 1976 of this Court). Thus the appellant's objection against the award on this score is without any weight or substance.

5. It is next contended by Mr. Mohapatra, the learned counsel for the appellant, that there is nothing in any relevant statute or contract enabling the Arbitrator to grant interest on the principal amount, and so his direction to that effect in the award is without jurisdiction and hence the decree for payment of interest is illegal and has to be set aside. It is now well settled by a series of decisions of this and of the Supreme Court that, unless there is specific clause in the agreement prohibiting award of interest, the Arbitrator has jurisdiction to grant interest on the principal amount awarded by him on the different items of claim referred to him for arbitration. (See Firm Madanlal Roshanlal v. Hukumchand Mills Ltd. : [1967]1SCR105 Union of India V. Bunco Steel Furniture (P) Ltd. : [1967]1SCR324 Ashok Construction Co. v. Union of India 1970 SCO 530 State of Orissa v. Govinda Choudhury 1971-37 Cut LT 937 State of Orissa v. Govinda Choudhury & Sons 1974 (2) Cut WR 917 Executive Engineer v. Sankar Maharana : AIR1978Ori121 and Executive Engineer v. D.N. Senapati (1979) 47 Cut LT 472. The natural conception of the word 'interest' is the ordinary or normal profit which the person entitled to the principal money might lave made if he had the use of the said money, or his expected loss under usual or ordinary circumstances due to the nonpayment of the same at the proper time. Apart from the express provisions for payment of interest in different statutes or in the contracts between the parties, interest can be directed to be paid in anarbitration proceeding on ex gratia basis by way of compensation for me deprivation of the use of the principal amount. This principle has been adopted by the Kerala High Court in the case reported in Commr. of Income-tax, Kerala v. Perivar and Pareekanni Rubbers Ltd. : [1973]87ITR666(Ker) Commrs. of Inland Revenue v. Ballantine 1924 8 Tax Cas 591 Simpson v. Maurice's Executors (1929) 14 Tax Cas 580 and by this Court in Messrs Govinda Choudhury & Sons v. Commr. of Income-tax, Orissa ILR 1977 Cut 664. In view of the above well settled law on this point, the jurisdiction of the arbitrator to award interest cannot be questioned.

6. It is then contended by Mr. Mohapatra that if at all it is decided that the Arbitrator has jurisdiction to grant interest, then he can grant only pendente lite interest, as decided in Firm Madanlal Roshanlal v. Hukumchand Mills Ltd. : [1967]1SCR105 or interest from the date of the award to the date of the decree, as decided in Union of India v. Bungo Steel Furniture (P) Ltd. : [1967]1SCR324 but he cannot grant future interest as has been done in the present case, I do not see any substance in this contention either. Award of interest by the Arbitrator can be made on ex gratia basis by way of compensation as stated earlier. If interest can be awarded by the Arbitrator on that basis in order to compensate the loss suffered by the man entitled to the principal amount due to deprivation of the use of the said amount, there is no reason why the Arbitrator cannot on the same principle grant future interest from the due date till its realisation. True, it is that provision of Section 34 C. P. C. is not applicable to the proceedings before the Arbitrator but there is nothing wrong for the Arbitrator to call into aid the principles of that section for awarding interest, especially when one of the disputes referred to him for adjudication relates to payment of interest (See M/s. Ashok Construction Co. v. Union of India 1970 SCD 530 Union of India v. Bungo Steel Furniture (P) Ltd. : [1967]1SCR324 and 1951 1 KB 240. In the case on hand the respondent had demanded under Item No. 23 of his claim, payment of interest on the principal sum to be awarded on the other items of his claim from the due date till its payment. A court of law in a suit on a similar subject matter can grant a decree for interest for the above period. That being so, the Arbitrator was within his jurisdictionto direct payment of interest for the aforesaid period, which includes future interest. Even without such a prayer also the Arbitrator can grant reasonable interest, as he deems fit on the facts and circumstances of the case, for the said period, after giving an opportunity of hearing to both the parties on this aspect of the matter. (See Union of India v. Bungo Steel Furniture (P) Ltd. (supra)).

There is nothing in the decisions in Firm Madanlal Roshanlal v. Hukumchand Mills Ltd. : [1967]1SCR105 or Union of India v. Bungo Steel Furniture (P) Ltd. : [1967]1SCR324 (referred to by Mr. Mohapatra) to counter the above view taken by me on this point. In the case of Union of India v. Bungo Steel Furniture (P) Ltd. the specific objection before the Supreme Court against the award was that the 'Arbitrator had no power to award interest during the pendency of the suit,' and in answering that question their Lordships held that the Arbitrator had power to grant pendente-lite interest. In the second case the specific question raised was whether the ARbitrator had or had not the authority to award interest from the date of the award to the date of the decree, and their Lordships answered that question in the affirmative. Their Lordships in both the cases did not say that the Arbitrator had no authority to grant future interest on the principal amount, nor were they called upon to decide that question. So those two cases are of no avail or consequence to decide the question raised by Mr. Mohapatra in this case.

On the above reasons and considerations, I do not find any merit in the above mentioned contentions of Mr. Mohapatra.

7. The impugned judgment is not assailed by the appellant on any other ground. The appeal accordingly is dismissed.

8. The respondent has filed a cross-objection against the order of the court below scaling down the interest awarded by the Arbitrator at the rate of 12 per cent per annum to 6 per cent per annum on the principal amount awarded on Items 1 to 22 of the claim and also on the security deposits. The court below in scaling down the interest on the principal amount from 12 per cent to 6 per cent states that though the provisions of Section 34 C. P. C. do not in terms apply to the arbitration proceedings, the principles underlying the said section and the rate of interest fixed therein should better befollowed by the Arbitrator. On that basis the court below has directed payment of the principal amount as well as future interest at the rate of 6 per cent per annum. It is expected that the rate of interest provided in Section 34 C. P. C. has been fixed on a consideration of various different aspects, and so one should not differ from the said rate fixed Under Section 34 without any definite data or basis for the same. It is also common knowledge that the nationalised Banks do not offer interest at the rate of 12 per cent per annum on deposit for 4 or 5 years. Considering the same, the order of the court below for the payment of interest at the rate of 6 per cent per annum is confirmed.

9. In the circumstances the appeal and cross-appeal both are dismissed with out costs.


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