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Food Corporation of India and ors. Vs. Sarwan Kumar Chowdhury - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberF.M.A. No. 645 of 1981
Judge
Reported inAIR1985Cal225
ActsArbitration Act, 1940 - Sections 8, 16(1) and 30
AppellantFood Corporation of India and ors.
RespondentSarwan Kumar Chowdhury
Appellant AdvocateMukul Prokash Banerjee and ;Alok Kumar Biswas, Advs.
Respondent AdvocateM.C. Surana, Adv.
DispositionAppeal dismissed
Cases ReferredTarapore & Co. v. Cochin Shipyard Ltd.
Excerpt:
- .....made in the above case did not lay down the proposition that the arbitrator has no power to award pendente lite interest. it was held that the arbitrator could decide the dispute regarding pendente lite interest and he could award pendente lite interest just as the court could do under section 34 of the code of civil procedure. it was further observed that though section 34 of the c.p. code does not in terms apply to arbitration, it is an implied term of the reference in the suit that the arbitrator can decide the dispute according to law and can give such relief with regard to the pendente lite interest as the court could give it if it decided the dispute. this power of the arbitrator is not fettered either by arbitration agreement or by the arbitration act, 1940. it was also.....
Judgment:

B.C. Ray, J.

1. This appeal is at the instance of the Food Corporation of India and two other defendants against the judgment and order passed in Title Suit No. 38 of 1981 by the Subordinate Judge, 2nd Court, Howrah passing a decree in terms of the Award on rejecting the objection under Section 30 of the Arbitration Act. The plaintiff Sarwan Kumar Chowdhury, a Transport Contractor carrying on business under the name and style of M/s. Hare Krishna Roadways as it's sole proprietor was appointed as carrying contractor to transport food-grains and other materials of the Food Corporation of India in or around Calcutta Ration Areas under the District Manager, West, the defendant No. 3 from the Railway Siding at Howrah. The said appointment of the plaintiff as carrying contractor was made for a period of two years with provision for extension of one year. An agreement was executed between the parties to that effect on 16th February 1977. In the said agreement there was an Arbitration Clause to the effect that all disputes and differences arising between the parties out of or in any way touching or concerning the agreement shall be referred to the sole Arbitration of any person appointed by the Managing Director of the Food Corporation of India. This Arbitration Clause was embodied in Clause XX of the said contract. It has been stated that after due performance by the plaintiff of his part of the contract strictly in accordance with the terms of the contract as a Transport and handling contractor during the stipulated period the plaintiff submitted bills from time to time in respect of works done for defendant No. 1. The defendants, however, did not pay off all the bill amounts and moreover the defendants illegally and arbitrarily deducted huge sums of money on account of alleged demurrage and wharfage charges. The defendants, it has been stated, have also arbitrarily and illegally deducted a sum of Rs. 71,069.91 paisa on account of shortage assessing penalty calculating three times of the rate payable. The plaintiff, therefore, served a notice under registered cover on 15th November, 1979 under Section 8(1) of the Arbitration Act to the Managing Director, Food Corporation of India for appointment of an Arbitrator under Section 8(1) of the Arbitration Act for adjudication of the disputes and differences between the parties touching the terms of the contract within 15 days from the date of receipt of the said notice. As this has not been done, the plaintiff filed an application under Section 8 Sub-section 2 of the Arbitration Act, 1940, in the 2nd court of the Subordinate Judge, Howrah which was registered as Misc. Case No. 1 of 1980 for appointment of an Arbitrator for adjudication of the disputes in terms of the Arbitration Clause 20 of the contract and for other reliefs.

2. By order dated 21st June 1980, Mr. D. P. Chatterjee was appointed as Sole Arbitrator to decide the disputes between the parties as referred to in the petition. The Arbitrator after hearing the parties and considering the documents filed by the parties passed an Award in favour of the claimant for a sum of Rs. 8,53,261.95 paisa to be recovered from the opposite party and also interest of Rs. 1,48,856.25 paisa till the date of reference and further interest @ 9% per annum on the sum of Rs. 8,53,261.95 paisa from the date of reference till the date of payment or decree whichever is earlier. The opposite party was also directed to return the Fixed Deposit Receipt No. 867997 for Rs. 25,000/- issued by the United Bank of India, Kalakar Street, which was furnished as security by the claimant-petitioner and also for refund of Rs. 25,000/- to the claimant-petitioner which was deducted as security from his bills within one month from the date of this Award. The plaintiff thereafter made an application under Section 17 of the Arbitration Act for judgment in terms of the award. The defendant No. 1, the Food Corporation of India filed an objection under Section 30 of the Arbitration Act challenging the award on various grounds mentioned therein. The plaintiff also raised an objection that the application under Section 30 of the Arbitration Act was barred by limitation.

3. On 27th June 1981 Shri Malay Sengupta, Subordinate Judge, 2nd Court, Howrah, after hearing the parties allowed the petition under Section 17 of the Arbitration Act and rejected the objection filed under Section 30 of the Arbitration Act holding, inter alia, that the objection under Section 30 that was filed was not barred by limitation and that the Arbitrator was within his competence to make a lump award without making a separate reference to specific claims and counter-claims. It was also held that the award could not be questioned as bad because it was not a speaking award. It was lastly held that the Arbitrator was within his competence to award interest pendente lite and also interest even up to the date of the decree.

4. Against this judgment and order the instant appeal has been preferred by the defendants/Respondents.

5. Mr. Mukul Prokash Banerjee, learned Advocate appearing on behalf of the appellants has urged the only point that the award of interest by the Arbitrator is bad and it amounts to a legal misconduct within the meaning of Section 30(a) of the Arbitration Act, 1940 and this is an error apparent on the face of the award within the meaning of Section 16(c) of the said Act and as such the award so far as it awards interest is bad and the same should be set aside. Mr. Banerjee further submitted that there is no specific reference of payment of interest in the stipulation embodied in the contract entered into between the parties. In this connection, Mr. Banerjee cited some decisions at the Bar.

6. Mr. Sankar Das Banerjee, learned Advocate appearing on behaif of the Respondents has on the other hand joined issue and submitted that the award was rightly held by the court below as not vitiated by legal misconduct nor there was any apparent illegality on the face of the award for which the award could be set aside. The Arbitrator has got jurisdiction to award interest pendente lite and also interest subsequent to the passing of the decree till the realisation of the amount. In support of this submission Mr. Banerjee has also cited some decisions at the Bar.

7. Undoubtedly, the plaintiff-respondent has claimed interest pendente lite up to the date of the decree or rule of the Court on award in his application for appointment of an Arbitrator for deciding the disputes snd is such the issue regarding determination of interest pendente lite was one of the issues referred to the Arbitrator for decision. The question is whether the Arbitrator has got jurisdiction to award interest pendente lite and thereafter till the realisation of the decretal amount. It has been contended by Mr. Banerjee on behalf of the appellant that the Arbitrator is not competent to award interest both pendente lite as well as interest subsequent to the passing of the decree till the date of realisation of the decretal amount. In support of this submission Mr. Banerjee has relied upon the decision in : [1955]2SCR48 (Thawardas Pherumal v. Union of India). In this case it has been held by Sinha, J., that the Interest Act 1839 applies where interest is not otherwise payable by law (sic) in this kind of case. It was further observed that 'even if it be assumed that the Arbitrator is a 'Court' within the meaning of that Act, (a fact that by no means appears to be the case), the following among other conditions must be fulfilled before interest can be awarded under the Act : - (i) There must be a debt or a sum certain; (ii) it must be payable at a certain time or otherwise; (iii) these debts or sums must be payable by virtue of some written contract at a certain time; (iv) there must have been a demand in writing stating that interest will be demanded from the date of the demand. No one of these elements is present, so the Arbitrator erred in law in thinking that he had power to allow interest simply because he thought the demand was reasonable.' It was further held in the said case that the Arbitrator was not a court and as such Section 34 of the Code of Civil Procedure did not apply to Arbitrator and he had no power to give interest after the suit, This decision was considered by the Supreme Court subsequently in : [1967]1SCR105 Firm Madanlal Roshanlal Mahajan(sic) Hukumchand Mill Ltd., Indore and it was held that the observations made in the above case did not lay down the proposition that the Arbitrator has no power to award pendente lite interest. It was held that the Arbitrator could decide the dispute regarding pendente lite interest and he could award pendente lite interest just as the court could do under Section 34 of the Code of Civil Procedure. It was further observed that though Section 34 of the C.P. Code does not in terms apply to Arbitration, it is an implied term of the reference in the suit that the Arbitrator can decide the dispute according to law and can give such relief with regard to the pendente lite interest as the court could give it if it decided the dispute. This power of the Arbitrator is not fettered either by Arbitration Agreement or by the Arbitration Act, 1940. It was also held in the said case that the Arbitrator is not bound to give a separate award for each claim and the award on both fact and law is final. The court cannot review his award and correct any mistake in his adjudication unless an objection to the legality of the award is apparent on the face of the award.

8. In the instant appeal, the award of pendente lite interest by the Arbitrator in his award, in our considered opinion, is wholly within the jurisdiction of the Arbitrator while deciding the disputes referred to him. Moreover the issue regarding the grant of interest on the claim made by the claimant was specifically referred to the Arbitrator. Therefore, it cannot be said that the Arbitrator has committed a legal misconduct within the meaning of Section 30(a) of the Arbitration Act in awarding interest or there is any illeglity apparent on the face of the award within the meaning of Section 16(1)(c) of the Arbitration Act.

9. It is pertinent to mention here the observations of the Supreme Court in the case of N. Chellapan v. Secretary, Kerala State Electricity Board, : [1975]2SCR811 which are :-- 'An error of law on the face of the award means that you can find in the award or a document actually incorporated thereto, as for instance, a note appended by the arbitrator stating the reasons for his judgment, some legal propositions which is the basis of the award and which you can say is erroneous. This Court adopted this proposition laid down by the Privy Council AIR 1923 PC 66 and applied. The Court has no jurisdiction to investigate into the merits of the case and to examine the documentary and oral evidence on the record for the purpose of finding out, whether or not the arbitrator has committed an error of law.' In the instant case the arbitrator made a lump award without referring to any document not to speak of the agreement entered into between the parties and no reasons for his award have been given nor any legal proposition had been laid down which was the basis of the award. In such circumstances the terms of the contract cannot be referred to determine if there was an error apparent on the face of the award.

10. The decision in : AIR1975SC1259 K. P. Poulose v. State of Kerala is not applicable to this case inasmuch as in that case the arbitrator made a speaking award giving reasons for rejecting the claim of the appellant for additional amount for the work of jetting which was resorted to on the instructions of the Research Institute, (the Department) as it was not covered by the agreement. It has been held that misconduct under Section 30(a) of the Arbitration Act has not a connotation of moral lapse. It comprises legal misconduct which is complete if the Arbitrator on the face of the award arrives at an inconsistent conclusion even on his own finding or arrives at a decision by ignoring material documents which throw abundant light on the controversy to help a just and fair decision.' In the instant case as I have held hereinbefore that the award is a lump award and it does not give any reasons nor it refers to the agreement at all. Therefore this award cannot be questioned as bad by referring to the terms of the agreement regarding non payment of interest. Similar observation has been made by Supreme Court in a recent case in : [1984]3SCR118 Tarapore & Co. v. Cochin Shipyard Ltd., Cochin. It has been held that 'if the parties agree to refer the specific question whether the dispute raised is covered by the arbitration agreement, it becomes a specific question of law even if it involves the jurisdiction of the arbitrator and if it is so, a decision of the arbitrator on specific question referred to him for decision even if it appears to be erroneous to the court is binding on the parties.

11. There is, therefore, no reason to interfere with the judgment and order passed by the Court below. In the premises aforesaid, the appeal is dismissed. The judgment and order of the Court below is hereby affirmed. The appellants will pay 30 G. Ms. as costs of this appeal to respondent. No formal decree needs to be drawn up.

S.K. Mookerjee, J.

I agree.


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