Aloke Chakrabarti, J.@mdashThe appeal and the cross objection are against the judgment and order dated 28th June, 2002 passed by a learned single Judge allowing an application under Sections 30 and 33 of the Arbitration Act, 1940 and thereby modifying the award only to the extent of award of costs and interest. As a dispute arose between the appellant and the respondent in respect of an agreement for execution of the work of "earth work in excavation and sand filling at the Mourigram Terminal of IOC", the matter was referred to arbitrator whereupon an arbitration proceeding was initiated which culminated in an award dated April 10, 2000. Application was filed under Sections 30 and 33 of the Arbitration Act, 1940 challenging the said award whereupon a learned single Judge of this Court considered the respective submissions of the parties and ultimately modified the award by allowing the application in respect of award of interest and costs.
2. Mr. Jayanta Kumar Mitra, assisted by Mr. Shibdas Banerjee, learned counsels, appearing, for the appellant, first contended that Section 15 of the Arbitration Act, 1940 does not give power to the Court to modify the award in the present facts and circumstances of the case and under Sections 30 and 33 of the Act, the Court cannot substitute its decision in place of the decision of the learned counsel Arbitrator far less in case of non speaking award.
3. Next contention of the appellant is that question of grant of interest comes up as and by way of compensation for deprivation of a party in his enjoyment of money legally due to him. Power of the learned Arbitrator in this respect particularly in case of a non speaking award under the Act of 1940 has been argued relying upon the judgment in the case of
4. It is contended by the learned counsel appearing for the appellant that in above view of the matter, the Court in consideration of an application under Sections 30 and 33 of the said Act could not question the correctness of the rate of interest as awarded. Further contention of appellant is that while considering the rate of interest the Court also erred in considering the rate of interest prevailing in the Banks in the country in the year 2002 though the award was admittedly passed in January 2000 and claim is of much earlier period. In this connection as regards scope of challenge of an award on aforesaid grounds, reliance was placed on the judgments in the case of
5. With regard to the judgment in the case of Sasanka Sekhar Rakshit v. Ashataru Das reported in 1982(1) CLJ 194 it is contended that propositions decided in the said case are not disputed by the appellant though it is contended that there is no material to hold that the award of costs of Rs. 3 lakh by the learned Arbitrator was not on the percentage assessed according to principles laid down in the case of Sasanka Sekhar Rakshit (supra).
6. Learned counsel relied on the judgment in the case of
7. Mr. P.K. Roy, learned counsel appearing for the respondent not only dealt with the contentions of appellant but also argued on the cross objection filed by his client challenging the impugned award on merit also.
8. With regard to merit, it is contended that before the learned Arbitrator there was no pleading that termination of agreement between the parties was bad in any manner and therefore, award of interest and costs could not be made in accordance with law. In this connection, the statement of facts filed on behalf of the claimant before the learned Arbitrator and particularly sub paragraph (d) of paragraph 25 was referred to. In support of such contention, reliance was placed on the judgment in the case of
9. With regard to award of interest, it has been contended by Mr. Roy, learned counsel for respondent that interest in such cases can be classified in three groups viz. pre reference interest, interest pendenti lite and post award interest.
10. With regard to pre reference interest, it has been contended that learned Arbitrator could not award interest for pre reference period and in this connection reliance was placed on the judgment in the case of
11. Contention has further been made referring to Section 34 of the CPC that only in case of a commercial transaction, said provision is available and in present case, the agreement being for excavation work and sand filing by contractor, same cannot be treated as a commercial transaction and therefore, Section 34 of the Code has no application. Definition of Commerce is given in the Black''s Law Dictionary, 5th Edition was relied on. Reference was made to the, judgment in the case of
12. With regard to award of cost, it has been contended on behalf of respondent that no interference should be made with the impugned judgment in this regard and reliance was placed on the judgment in the case of Heaven & Kesterton Ltd. v. Seven Widaeus A/B. reorted in 1958(1) All ER 420.
13. As regards the nature and scope of relief by grant of award of interest by learned Arbitrator, law is settled. No doubt a confusion was created after the judgment was passed by the Supreme Court in the case of
"Where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (along with the claim for principal amount or independently) is referred to the arbitrator he shall have the power to award interest pendente lite. This is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and therefore when the parties refer all their disputes - or refer the dispute as to interest as such-to the arbitrator, he shall have the power to award interest. This does not mean that in every case the arbitrator should necessarily award interest pendente lite. It is a matter within his discretion to be exercised in the light of all the facts and circumstances of the case keeping them end of justice in view."
14. The matter was further considered in the case of B.N. Agarwalla (supra) and it was held as follows:
"In view of the aforesaid decisions there can now be no doubt with regard to this jurisdiction of the Arbitrator to grant interest. The principles which can now be said to be well settled are that the Arbitrator has the jurisdiction to award pre-reference interest in cases which arose after the Interest Act, 1978 has become applicable. With regard to those cases pertaining to period prior to the applicability of the Interest Act, 1978, in the absence of any substantive law, contract or usage, the Arbitrator has no jurisdiction to award interest. For the period during which the arbitration proceedings were pending in view of the decision in G.C. Roy''s case (supra) and Hindustan Construction Ltd. case (supra), the Arbitrator has the power to award interest. The power of the Arbitrator to award interest for the post award period also exists and this aspect has been considered in the discussion relating to Civil Appeal No. 9234 of 1994 in the later part of this judgment."
15. The entire cause of action including the agreement itself arose after the Interest Act was enforced in the present facts.
16. Judgment has been cited in the case of M.C. Clelland Engineers (supra) where it has been held that Arbitrator has power to award interest on interest i.e. on damages or compensation on delayed payment which become part of principal. The case of Deb Dutt Pandia (supra) was cited wherein it has been held that Arbitrator can award interest at rate higher than 6% in commercial transaction as u/s 5 of Interest Act. Section 34 of the CPC applies in Arbitration proceedings and under Interest Act Court including Arbitrator. Admittedly notice had been issued with claim for interest. Considering the nature of transaction here we are of the opinion that it was a commercial transaction. Therefore, the award of interest by the learned Arbitrator at a rate higher than 6% does not justify interference under Sections 30 and 33 when award is non-speaking award.
17. With regard to next contention as regards power of the Court under Sections 30 and 33 of the Act to reduce the rate of interest as awarded by the learned Arbitrator, we have considered the judgments cited by the respective parties. It appears that law in this regard is settled that ordinarily award of the learned Arbitrator as regards rate of interest is not to be interfered under Sections 30 and 33 of the Act. We do not find any special circumstances here under which such interference can be made. Consideration in the impugned judgment as regards prevailing rate of interest does not appear to be correct rate of interest prevailing in the nationalised bank in the country in the year 2002 is not at all relevant as the award was passed in January, 2000 and cause of action arose much before that date.
18. The learned Judge in the impugned judgment held as follows:
"It is apparent from the award that the learned Arbitrator has granted pre-reference and pendente lite interest. The pre-reference interest can be awarded under the Interest Act, 1978. Pendente lite interest can be awarded u/s 34 of the Code of Civil Procedure. The Interest Act provides for payment of interest for the pre-reference period at the "current rate of interest". The expression "current rate of interest" has been defined in the Interest Act in Section 2(b) as follows:
"2(b). "Current rate of interest" means the highest of the maximum rates at which interest may be paid on different classes of deposits (other than those maintained in savings account or those maintained by charitable or religious institutions) by different classes of scheduled banks in accordance with the directions given or issued to banking companies generally by the Reserve Bank of India under the Banking Regulation Act, 1949.
Interest was claimed before the Arbitrator under this provision. It is common knowledge that the rate of interest allowed by scheduled banks on account of different classes of deposits varies between 6 to 9 per cent per annum. I wonder how could the learned arbitrator award interest at the rate 15 per cent per annum."
19. Therefore, in finding the highest of the maximum rates, particulars were required on record showing rates of interest on different classes of deposits of different classes of scheduled banks for finding out current rate of interest u/s 2(b). In absence of such sufficient particulars the application of "common knowledge" does not appear to be correct particularly when period relevant for the purpose was not noticed in the judgment.
20. With regard to contention of cost, the learned counsel for the appellant did not dispute the proposition laid down in the case of Shasanka Sekhar Rakshit (supra). But the other contention of the appellant with regard to award of cost requires a consideration. Contention of the appellant is that the learned Arbitrator has awarded a cost of Rs. 3 lakhs and there is no material to contend that the said cost has not been awarded following the proposition laid down in the case of Shasanka Sekhar Rakshit (supra). It appears that principle has been accepted by the learned Judge in the impugned judgment. But though the respondent vehemently opposed the contention of the appellant as regards application of the said principle in the impugned award, we do not find any material to show that the learned Arbitrator assessed the said figure of Rs. 3 lakhs as a proportionate cost or as a total cost. In that view of the matter, there is no material to interfere with the said award of the cost also particularly when the award was not a reasoned award. In the judgment impugned learned Judge was also apparently not certain about the same and expression "If I proceed on the basis that the sum of Rs. 3 lakhs awarded by the arbitrator represents the entire costs incurred by him" shows the same. Interference under such circumstances with a non-speaking award under Sections 30 and 33 does not appear to be correct.
21. With regard to contention on merit as advanced by the learned counsel for the respondent in support of the cross objection filed by the respondent, we find that there is no sufficient material on such aspect justifying interference with a non-speaking award rejecting counter claim when facts show that some claims were accepted which normally raises a presumption as regards finding on the question of validity of the termination in favour of the appellant. Law in this regard cited by the learned counsel for the respondent supports such view.
In view of the above findings, the impugned order is set aside and the award of the learned Arbitrator is restored in toto. Appeal is allowed.
In view of the contentions made by the learned advocate for the respondent that they will approach the Hon''ble Supreme Court which is now closed for summer vacation, there will be a stay of operation of the judgment and order for a period of four weeks.
All parties are to act on a xeroxed certified copy of this judgment on the usual undertaking.
Aniruddha Bose, J.
22. I agree.
