S.C. Parija, J.@mdashThis appeal is directed against the order dated 09.05.2012, passed by the learned District Judge, Cuttack, in Arbitration Petition No. 229 of 2010, partly allowing the application of the respondents filed under Section 34 of the Arbitration and Conciliation Act, 1996, by setting aside the pre-award interest awarded by the learned Arbitrator and confirming the award passed in favour of the respondents (employer) for payment of Rs. 71,13,110/- minus Rs. 62,589/-, with 18% interest from the date of the award, till final payment is made.
2. The brief facts of the case is that the respondents (employer) floated a Global Tender for construction of "Birupa Barrage With One Regulator (Civil Works)" for Rs. 50,00,000/- through the erstwhile Department of Irrigation and Power, which has been subsequently renamed as "Department of Water Resources, Government of Orissa". The appellant-Contractor was one of the tenderers for the said work and the contract valued for Rs. 5,30,92,822.65 paise was awarded in favour of the appellant-Contractor with the stipulation to commence the work on 14.12.1981 and complete the same on 13.02.1986. Thereafter, there was dispute and differences between the appellant-Contractor and the respondents (employer) with regard to measurement and final payment of the bill of the appellant-Contractor. Hence, the appellant-Contractor sent a notice on 02.11.2005 to the employer to resolve the dispute. When the same was not responded to, the appellant-Contractor filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 ("the Act" for short), and on the intervention of the Hon''ble Chief Justice of Orissa High Court, the sole Arbitrator Shri Justice Basudev Panigrahi was appointed to arbitrate the dispute between the parties.
3. The appellant-Contractor filed the claim statement before the learned Arbitrator, making claim on 15 heads, as according to the appellant-Contractor, due to change of the drawings and designs and the extra work required to be done at the instance of the employer during execution of the work, which was beyond the terms of the contract, resulted in extra cost in execution. It was the case of the appellant-Contractor that the aforesaid extra cost incurred in execution of the work being attributable to the direction of the employer, the appellant-Contractor was entitled to claim on those heads with interest @18% per annum. The abstract of the claims made by the appellant-Contractor on 15 heads were as follows:
4. The employer (respondents) resisted the claim by filing of defence statement, wherein it was pleaded that the claim of the appellant-Contractor was not maintainable, being hopelessly barred by limitation as it had accepted the full and final measurement, except the measurement in respect of the earth work, as mention in item No. 1, through its Managing Director, while signing the final bill on 03.03.1992. The claims had also been resisted to be not maintainable on the ground of waiver and estoppel, inasmuch as, the appellant-Contractor had not raised any dispute within the time stipulated, even though it had received the reply to his letter dated 30.07.2005 from the employer-Executive Engineer. So far as the claim of the appellant-Contractor in respect of item No. 1, it was admitted that the said measurement was not final, but subsequently the Department having allowed the claim in part in respect of the said item, by approximation of the measurement of the extra work and agreeing to pay on 02.06.2001 for Rs. 2,21,000/- instead of Rs. 3,06,000/-, the claim was without any basis. The rest of the claims under other heads had been resisted to be not maintainable and also without any basis. It was also the plea of the respondents (employer) that the appellant-Contractor was not entitled to interest on any claim for any period prior to the date of the award or for the period from the date of the award till the date of payment, in view of the stipulation in Clause-57(e) of the General Conditions of Contract.
5. On the pleadings of the parties, learned Arbitrator framed the following issues:--
"ISSUES
1. Whether the claim made by the Claimant is maintainable in law? If so, whether it is barred by the law of limitation?
2. Whether the Claimant can maintain this proceeding after having signed in the Final Bill?
3. Whether there is any cause of action for the Claimant to file this proceeding?
4. Whether the Claimant is entitled to any amount as claimed? If so, what is the quantum?
5. Whether the respondents could deny the claim of the Claimant?
6. To what relief, if any, the parties are entitled?"
6. Answering all the issues in favour of the appellant-Contractor, the learned Arbitrator passed the award, holding that under claim item Nos. 1, 4, 5, 6, 10, 12 and 13, the appellant-Contractor is entitled to an amount of Rs. 71,13,110/-, together with pre-award interest of Rs. 1,44,44,515/- minus Rs. 2,35,313/- (as awarded in favour of the employer), with 18% interest from the date of the award, till payment. The abstract of the award is as follows:--
7. Being aggrieved by the award passed by the learned Arbitrator dated 30.07.2010, in ARBP No. 60 OF 2005, the respondents moved the learned District Judge, Cuttack, in Arbitration Petition No. 229 of 2010, under Section 34 of the Act, for setting aside the award.
8. Learned District Judge, Cuttack, after considering the materials on record and examining the findings recorded by the learned Arbitrator, set aside the award with regard to grant of interest for the pre-award period amounting to Rs. 1,44,44,515/- and confirmed the award for payment of Rs. 71,13,110/- minus Rs. 62,589/-, with 18% interest from the date of the award, till final payment is made.
9. Learned counsel for the appellant-Contractor submitted that the award of interest for the pre-award period is the discretion of the learned Arbitrator, as per Section 31(7)(a) of the Act. In the present case, learned Arbitrator having awarded interest amounting to Rs. 1,44,44,515/- for the pre-award period on consideration of the fact situation, learned District Judge, Cuttack, was not justified in interfering with the same, in exercise of power under Section 34 of the Act.
10. Learned counsel for the appellant-Contractor has relied upon a decision of the apex Court in
Learned counsel for the appellant-Contractor further contended that even if the appellant was not entitled to interest for the pre-reference period, that is, from the date of cause of action to the date of reference, the appellant-Contractor will be entitled to interest pendente lite, that is, for the period from the date of reference to the date of award, having regard to the decisions of the apex Court in
11. Learned Additional Standing Counsel appearing for the respondents submitted that Clause-57(e) of the General Conditions of Contract specifically bars award of any interest on claims for any period prior to the date of the award or for the period from date of the award till the date of payment. It is submitted that Section 31(7)(a) of the Act provides that unless otherwise agreed by the parties, the Arbitrator may award interest for the period between the date on which the cause of action arose and the date on which the award is made (pre-reference period plus pendente lite), at such rate its deems reasonable. Referring to the ratio laid down by the apex Court in S.L. Arora (supra), learned counsel for the respondents submitted that with regard to pre-award period, interest has to be awarded as specified in the contract and in the absence of any such contract, as per the discretion of the Arbitrator.
12. Learned counsel for the respondents has relied upon a decision of the apex Court in
It is accordingly submitted that in view of the specific bar in the contract for award of any interest for the pre-award period, learned District Judge, Cuttack, was fully justified in setting aside the award of Rs. 1,44,44,515/- by the learned Arbitrator towards interest for the pre-award period.
13. In S.L. Arora (supra), the apex Court while dealing with the power of the Arbitrator to award interest under Section 31(7)(a) and (b) of the Act, has observed as under:
"(i) Clause (a) relates to pre-award period and clause (b) relates to post-award period. The contract binds and prevails in regard to interest during the pre-award period. The contract has no application in regard to interest during the post-award period.
(ii) Clause (a) gives discretion to the arbitral tribunal in regard to the rate, the period, the quantum (principal which is to be subjected to interest) when awarding interest. But such discretion is always subject to the contract between the parties. Clause (b) also gives discretion to the arbitral tribunal to award interest for the post-award period but that discretion is not subject to any contract; and if that discretion is not exercised by the arbitral tribunal, then the statute steps in and mandates payment of interest, at the specified rate of 18% per annum for the post-award period.
(iii) While clause (a) gives the parties an option to contract out of interest, no such option is available in regard to the post-award period."
In short, with regard to pre-award period, interest has to be awarded as specified in the contract and in the absence of contract as per discretion of the Arbitrator. On the other hand, in regard to the post-award period, interest is payable as per the discretion of the Arbitrator and in the absence of exercise of such discretion, at a mandatory statutory rate of 18% per annum.
14. In
"Having regard to Sub-section (7) of Section 31 of the Act, the different between pre-reference period and pendente lite period has disappeared insofar as award of interest by the arbitrator. The said Section recognizes only two periods and makes the following provisions:
(a) In regard to the period between the date on which the cause of action arose and the date on which the award is made (pre-reference period plus pendente lite), the Arbitral Tribunal may award interest at such rate as it deems reasonable, for the whole or any part of the period, unless otherwise agreed by the parties"
(b) For the period from the date of award to the date of payment the interest shall be 18% per annum if no specific order is made in regard to interest. The arbitrator may however award interest at a different rate for the period between the date of award and date of payment."
15. In
16. The apex Court in
17. The legal principles with regard to the power of the Arbitrator to award interest for the pre-award period and post-award period under Section 31(7)(a) and (b) of the Act, decided in S.L. Arora (supra), Sayeed Ahmed (supra) and Sree Kamatchi Amman Constructions (supra), have been affirmed and reiterated in a very recent three-Judge Bench decision of the apex Court in
18. In the present case, Clause-57(e) of the General Conditions of Contract provides as under:--
"(e) no interest will be allowed on any claim for any period prior to the date of the award as well as for the period from the date of the award till the date of the decree;"
19. In view of such bar against payment of interest in the contract between the parties, learned Arbitrator was not justified in exercising his discretion in awarding interest for the pre-award period between the date when the cause of action arose to the date of award. However, the award of interest @18% per annum from the date of award till payment is within the domain of the learned Arbitrator, which cannot be faulted.
20. For the reasons as aforestated, I do not find any infirmity in the impugned order of the learned District Judge, Cuttack, dated 09.05.2012, passed under Section 34 of the Act, setting aside the award of interest for the pre-award period by the learned Arbitrator, so as to warrant any interference.
The appeal being devoid of merits, the same is accordingly dismissed. No costs.
