Claim
No.","Nomenclature of
Claims","Amount of the
Claim as per
Applicant","Amount of
Claims as per
Award","Declaratory
Claim for
Interest as per
Applicant","Interest on
Claims as per
Award
1,"CLAIM No. 1
Variations ordered
as per Clause 51.1
for which new
rates are to be
paid as per market
rates in terms of
Clause
52.1 and 52.2","7,62,12,757/-","3,19,51,622/-","38,81,56,355/-","5,80,24,145/-
i.,"E2: Supplying and
fixing of Netlon
Geo- textile
behind abutments
and wing
walls","6,90,466/-","3,44,890/-","Amount
included above
in Claim No.1",
ii.,"E3: Removal of
existing tree
stumps","15,87,359/-","15,87,359/-",--do--,
iii.,"E4: Providing and
fixing m position
HYSD bars for
Median
Drain Chambers","1,33,85,106/-","72,42,390/-",--do--,
iv.,"E5: Sand filling in
open wells falling
in construction
area","7,52,005/-","5,22,413/-",--do--,
v.,"E12: Painting of
Kerbs","5,93,462/-","4,74,416/-",--do--,
vi.,"E16: Pedestrian
Guard Railing","6,30,840/-","5,12,188/-",--do--,
vii.,"Rl.02: PCC M:15
grade Cement
Concrete for RCC
Retaining Walls","3,13,367/-",Nil,--do--,
viii.,"Rl.03: PCC M:25
grade Cement
Concrete for
RCC Retaining
Walls","16,92,228/-",Nil,--do--,
ix.,"Rl.04: Providing
and fixing in
position HYSD
reinforcement
bars","32,49,271/-",Nil,--do--,
x.,"R2.05:
Construction of
Stone Masonry in
CM (1:3) for
Masonry
Retaining Wall","2,07,99,485/-","8,64,800/-",--do--,
xi.,"UD.02:
Construction of
RCC Urban
Drains as
per approved
Drawing","2,91,41,234/-","1,86,85,239/-",--do--,
xii.,"CD.02: Providing
Encasement to
Cross Ducts with
M: 15 Grade
Concrete","32,12,2611-","17,17,927/-",--do--,
xvi.,"CD.03: Providing
150 mm dia. PVC
Pipe m
Cross Ducts",,,,
2.,"CLAIM NO.2
New rates to be
paid for the
quantities
executed more
than 25% of Bill
of Quantities and
2% of
Contract Price as
per sub-clause
52.2","27,62,38,125/-","11,24,51,315/-","1,40,99,62,986
/-","20,42,11,587/-
3.,"CLAIM NO. 3
Escalation to be
paid on Base
Rates as per
clause 70.1 (Price
Adjustment) and
not
after discounting
the base rate by
the rebate","2,62,01,641/-",Nil,"13,37,37,306/-",Nil
4.,"CLAIM NO.4
Classification of
roadway
excavation
materials as per
clause
301.2.1 (ii)
attracting payment
under Item No.:
2.01(b), but
payment made
under item Nos.
1.02(a) and
2.01(a)","3,99,84,686/-","1,95,93,580/-","20,40,88,148/-","3,55,81,941/-
5.,"CLAIM NO.5
The rebate is
limited to BOQ
quantity only and
cannot be applied
to work done
beyond
BOQ quantities","9,65,26,231/-",Nil,"59,84,79,236/-",Nil
6.,"CLAIM No.6
Rocky Sub grade
is to be paid as
per clause
301.6 under item
No.:
2.10 of BOQ","3, 75,24,163/-",Nil,"19,15,29,250/-",Nil
7.,"CLAIM NO. 7
Payments not
made for the
diversions made
as per Engineer's
instructions with
200 mm thick
WMM and 40 mm
thick DBM","47,99,749/-","28,34,132/-","2,44,98,676/-","51,46,783/-
8.,"CLAIM N0.8
Payments for
routine
maintenance not
made. Payment to
be released as per
clause 3002","19,29,273/-","10,92,967/-","98,47,314/-","19,84,828/-
9.,"CLAIM NO.9
Balance payment
to be made under
item No
12.09 for planting
and maintenance
of median hedges
and tree sapling","7,18,183/-","7,18,183/-","36,65,719/-","13,04,220/-
10.,"CLAIM NO. 10
Payment of
Escalation for
Bitumen content
in Tack Coat and
Prime Coat to be
paid as per Clause
70.5(ii)a","30,18,985/-",Nil,"22,65,827/-",Nil
11.,"CLAIM NO. 11
Reimbursement of
Seigniorage
Charges
recovered from
the bill on account
of Earthwork
(minor minerals)","14,35,599/",Nil,"73,27,524/-",Nil
12.,"CLAIM NO. 12
Further sums are
to be paid for the
variations
exceeding 15% of
the Effective
Contract Price","22,63,81,902/-","3,93,83,321/-","72,98,79,504/-","6,66,05,072/-
13.,"CLAIM NO. 13
Bonus not paid for
early completion
of 6 months (only
paid for 2 months)","4,00,00,000/-",Nil,"20,41,66,313/-",Nil
14.,"CLAIM NO. 14
Costs to be paid
for idling of Men
and Machinery
due to
transporter's strike
and due to Mining
Department
Instructions","62,57,800/-","47,35,147
I-","2,01,75,818/-","80,08,080/-
16.,"CLAIM NO. 16
Cost to be paid for
rectification of
damages caused
due to accidents","68,59,334/-",Nil,"2,21,15,228/-",Nil
17.,"CLAIM NO. 17
Reimbursement
of amount
towards cost of
repairs after DLP
i.e. one year after
Taking Over
Certificate","42,63,034/-","7,69,350/-","1,37,44,478/-","13,01,124/-
19.,"CLAIM NO. 19
Losses suffered
by the contractor
as a consequence
of failure to
release the
Performance
Bank Guarantee
on the expiry of
defect liability
period","55,78,89,631/-","4,07,91,985/-
(Including
interest)","67,69,71,248/-
(Including
interest)","1,73,70,736/-
(Including
interest)
20.,"CLAIM NO. 20
Interest payable to
the contractor for
delay in release of
Additional
Performance
Bank Guarantees","59,29,566/-",Nil,"1,91,17,556/-",Nil
22.,"CLAIM NO. 22
Interest is to be
paid for unpaid
executed items
from the date of
completion of the
work","461,90,07,700
/-","38,21,67,760/-","398,27,57,23/-","Sum of as
above
(Excluding
Claim No.19)
23.,"Declare that the
letter dated
29.07.2006 is
illegal, void, ab
initio and of no
effect, being
contrary to law
and in violation of
the terms and
conditions of the
contract",,Nil,,Nil
Claim No.,Nomenclature of Counter-Claims,"Amount of the Counter-
Claims as per Opposite
Party",,,
Claim- A,"Recoveries on various accounts (Non-
Refundable)",,,,
i.,Scrap Steel of RCC Slab & RC Pipes,"1,42,005/-",,,
ii.,Dismantled Mansory Stone,"5,48,029/-",,,
Claim â€"B,Recoveries in IPC's (Non-refundable),,,,
i.,"Recoveries on account of New Rock
rates and other items with interest","14,91,24,898/-",,,
Claim- C,"Amount to be withheld on account of
non- submission of NOC disputes etc.",,,,
i.,Mining Department dues (refundable),"1,70,87,188/-",,,
ii.,EPF dues (refundable),"66,56,014/-",,,
iii.,Labour Case (refundable),"3,00,000/-",,,
iv.,"Claims by M/s Akschat Farms
refundable)","8,00,000/-",,,
v.,"Withheld amount of escalation for want
of submission of invoices of material
consumed (refundable)","21,70,171/-",,,
14. The first question to be examined is whether the impugned award is vitiated by patent illegality as the Arbitral Tribunal has rejected KMC’s,,,,,
Claim No.3 â€" claim for escalation to be paid on the basis of rates as quoted by it.,,,,,
15. KMC had claimed a sum of Rs. 2,62,01,641/- on account of difference in price adjustment as accepted by NHAI and as claimed by KMC. In",,,,,
terms of Clause 70.1 of the COPA, KMC was entitled to price adjustment on the basis of rise and fall in the labour cost index. The said price",,,,,
adjustment was to be determined with reference to the base rates as quoted by KMC. The controversy between the parties relates to the base rates.,,,,,
NHAI claimed that the base rates as quoted by KMC for various BOQ items were required to be discounted as admittedly, KMC had offered certain",,,,,
rebates and discounts on the Contract Price as quoted by it. KMC claimed that although it had offered a discount but the same was on the overall,,,,,
Contract Price and not on rates as quoted for the individual items. Therefore, the price adjustment was required to be computed with reference to the",,,,,
rates of various BOQ items as quoted by it and not on the basis of a discount or rebate.,,,,,
16. KMC had submitted the bid quoting a Contract Price of Rs. 211,66,64,388/-. Subsequently, it had offered a rebate pursuant to which the Contract",,,,,
Price was reduced to Rs. 164,65,76,353/-. KMC claimed that the said discount was on the overall price and did not affect the rates for items quoted",,,,,
by it. Accordingly, KMC claimed that the price escalation under Clause 70.1 of the COPA â€" which was required to be computed according to the",,,,,
formula as specified in Clause 70.3 of the COPA â€" was required to be computed on the base rates.,,,,,
17. The Arbitral Tribunal found that KMC had in fact offered certain rebates on the tendered rates and therefore, its claim that the formula under",,,,,
Clause 70.3 of the COPA was required to be worked on the base rates as quoted by it by disregarding the discount or rebate as offered by it, was",,,,,
rejected.,,,,,
18. The Arbitral Tribunal rejected the contention that KMC had offered a rebate on the overall Contract Price without affecting the base rates as,,,,,
quoted by it for various items.,,,,,
19. This Court finds no infirmity with the Arbitral Tribunal’s decision. The tender submitted by KMC indicates that it had quoted the item rates,,,,,
against each item of the BOQ and had also quoted the value of the said work, which was a product of the rates quoted and the estimated quantity.",,,,,
The said figures for each items were added to provide the cumulative value of different heads of works and their aggregate value amounted to Rs.,,,,,
211,66,64,388/-. KMC had offered rebate in terms of a letter dated 17.06.2001. The contents of the said letter are relevant and are reproduced below:",,,,,
“Please refer the bid submitted by us for the above work. In accordance with Clause 23, Section â€" I â€" instructions to bidders of Volume â€" I",,,,,
(Modification and withdrawal of Bids) we hereby offer rebated as follows.,,,,,
1) 22.59% (Percent twenty two point five nine only) rebate for all the items in Bill Nos.2,3,4,7,8,9,10,11 and 12 in BILL OF QUANTITIES.",,,,,
2) 18.36% (Percent eighteen point three six only) rebate for all the items in Bill Nos.1,5A,5B,6A, 6B and 6C in BILL OF QUANTITIES.â€",,,,,
20. It is clear from the above that KMC had offered discounts on “all items†of BOQ and not simply a discount on the overall price as claimed by,,,,,
it. Thus, the fundamental premise on which KMC had founded its claim does not hold good.",,,,,
21. In view of the above, the decision of the Coordinate Bench of this Court in National Highways Authority of India v. Oriental Engineer Pvt. Ltd.",,,,,
(supra) is of no assistance to KMC as in that case the contractor had given an overall discount on the price and not on all items of the BOQ. It is also,,,,,
important to note that in that case, the arbitral tribunal had accepted the contention that the price adjustment clause was required to be worked on the",,,,,
base rates as quoted by the contractor. The Coordinate Bench of this Court had rejected NHAI’s challenge to the arbitral award as the Court,,,,,
found that the arbitral tribunal’s interpretation of the clause was a plausible one and warranted no interference. The Division Bench of this Court,,,,,
had also concurred with the aforesaid view and found no ground to interfere with the impugned award or with the decision of the Single Bench,,,,,
rejecting NHAI’s challenge under Section 34 of the A&C Act. Rejection of a petition under Section 34 of the A&C Act does not imply that the,,,,,
decision of the Arbitral Tribunal is correct or that the Court concurs with the same. It merely means that no interference with the arbitral award is,,,,,
warranted as the grounds for setting aside the award under Section 34 of the A&C Act are not established.,,,,,
22. The second question to be examined is whether the Arbitral Tribunal’s decision to reject KMC’s Claim No.5 is patently illegal. KMC had,,,,,
claimed a sum of Rs. 9,65,26,231/- on account of additional payment for execution of items in excess of the specified quantities mentioned in the",,,,,
BOQ. The payments for such quantities executed by KMC were cleared at the discounted rates quoted by KMC. KMC claimed that it had offered,,,,,
the discount only in respect of the quantities under the BOQ and it had not agreed to extend that discount for quantities executed in excess of the,,,,,
BOQ. The Arbitral Tribunal found KMC’s contention to be unmerited.,,,,,
23. The Preamble to BOQ clearly stated that “the quantities given in the Bill of Quantities are estimated and provisional and are given to provide a,,,,,
common basis for bidding.†Thus, it was contemplated that the quantum of work executed may vary. The Arbitral Tribunal noticed that by a letter",,,,,
dated 17.06.2001, KMC had offered a discount in respect of all the items in the BOQ and had not mentioned any condition that the discount was",,,,,
limited only to the quantities as mentioned in the BOQ.,,,,,
24. The decision of the Arbitral Tribunal to reject KMC’s Claim No.5 cannot by any stretch be considered to be patently illegal or in conflict with,,,,,
the public policy of India. The Arbitral Tribunal’s view is clearly a plausible view and cannot be interfered with in these proceedings.,,,,,
25. The next question to be examined is whether the Arbitral Tribunal had erred in rejecting KMC’s claim for bonus for early completion of the,,,,,
Contract (KMC’s Claim No.13).,,,,,
26. KMC claimed that it was entitled to Rs. 4,00,00,000/- as bonus for completing the works prior to the stipulated date of completion, in terms of",,,,,
Clause 47.3 of the COPA. The stipulated date for completion of the Contract was 30.04.2004 and KMC claims that it had completed the works on,,,,,
28.02.2004. Undeniably, KMC is entitled to bonus for completing the works two months prior to the stipulated date of completion of the Contract; and,",,,,,
the said bonus was paid to it. KMC claims that it is entitled to bonus for a period of six months â€" which was the maximum â€" as there were delays,,,,,
for reasons attributable to NHAI and the stipulated period for completing the works was required to be extended. KMC claimed that the works would,,,,,
have been completed even prior to 28.02.2004, if there were no defaults on the part of NHAI. The Engineer found that there was a delay of eighty-",,,,,
nine days in handing over the site and removing obstructions; a delay of ten days in providing a decision with regard to the drawings etc.; a delay of,,,,,
twenty- five days on account of additional work; and, a delay of over twenty- three days on account of force majeure events. KMC claimed that the",,,,,
Engineer had recommended an extension of time of 147 days, however, the same was not necessary as KMC had completed the works prior to the",,,,,
expiry of the original Contract period. Nonetheless, the said extension of time was required to be considered for the purpose of calculation of bonus.",,,,,
27. The Arbitral Tribunal held that in terms of Clause 47.3 of the COPA no adjustment of time, by reason of granting an extension of time, was",,,,,
required to be allowed for computing the bonus payable under the Contract. Clause 47.3 of the COPA is relevant and is set out below:,,,,,
“47.3 Bonus for early completion:,,,,,
If the contractor achieves completion of the whole works prior to the time completion prescribed by Clause 43, the Employer shall pay to the",,,,,
contractor a sum, stated in the appendix to Bid as bonus for every completed month which shall elapse between the date stated in Taking over",,,,,
certificate of whole of the works, including variations ordered by the Engineer and the relevant time prescribed in Clause 43.",,,,,
For the purpose of calculating the bonus payments, the time given in the Bid for completion of the whole of the works is fixed and unless otherwise",,,,,
agreed, no adjustment of the time by reason of granting an extension of time pursuant to clause 44 or any other clause of these conditions will be",,,,,
allowed. Any period falling short of a complete month shall be ignored for the purpose of computing the period relevant for the payment of bonus.â€,,,,,
28. As is apparent from the above, Clause 47.3 of the COPA expressly provides that the time for completion of the Contract is fixed and unless the",,,,,
parties otherwise agree, no adjustment of time by reason of granting extension of time would be allowed. Sensu stricto, KMC’s contention that it",,,,,
was entitled to bonus under Clause 47.3 of the COPA by taking into account its entitlement to extend the time for completion of work, which it was",,,,,
otherwise entitled to, is not admissible under the said clause. Considering that the Engineer had found certain delays on the part of NHAI, it was",,,,,
possible for the Arbitral Tribunal to take another view. However, this Court is unable to accept that the Arbitral Tribunal’s view is manifestly",,,,,
erroneous and renders the impugned award patently illegal.,,,,,
29. In Union of India v. N.N. Buildcon Pvt. Ltd. (supra), which is relied upon by KMC, the Arbitral Tribunal had accepted the contractor’s claim.",,,,,
This Court found no grounds to interfere with the same under Section 34 of the A&C Act. As noted above, dismissal of an application under Section",,,,,
34 of the A&C Act for setting aside an arbitral award cannot be construed to mean that the Court concurs with the decision of the Arbitral Tribunal; it,,,,,
merely means that the Court does not find any ground under Section 34(2) or Section 34(2A) of the A&C Act, to interfere with the award.",,,,,
30. It is also material to note that there is nothing in the said decision, which indicates that the contractual clause in the context of which the said",,,,,
decision was rendered, included any specific bar to adjustment on account of extension of time as is the case under Clause 47.3 of the COPA. In this",,,,,
view as well, the decision in Union of India v. N.N. Buildcon Pvt. Ltd. (supra), does not further KMC’s case.",,,,,
31. The next question required to be considered is whether the Arbitral Tribunal’s decision in respect of KMC’s Claim No.19 â€" claim for,,,,,
loss suffered by KMC as a consequence of failure on the part of NHAI to release the Performance Bank Guarantee within the stipulated period â€",,,,,
is patently illegal.,,,,,
32. NHAI had issued the Taking Over Certificate on 28.02.2004. The Defect Liability Period of twelve months expired on 28.02.2005 in terms of,,,,,
Clauses 10.2 and 10.4 of the GCC. NHAI was obliged to return the Performance Bank Guarantee for a sum of Rs. 16,47,57,636/-(hereafter ‘the",,,,,
PBG’) furnished by KMC within a period of fourteen days thereafter. However, NHAI issued the Defect Liability Certificate on 24.05.2006.",,,,,
Thus, the PBG was required to be released latest by 07.06.2006, that is, within the fourteen days period after the issuance of the Defect Liability",,,,,
Certificate. However, NHAI did not release the PBG and this resulted in KMC incurring additional costs on account of commission paid to the Bank",,,,,
for extending the PBG along with further interest on that commission. KMC also claimed interest on the said amount.,,,,,
33. NHAI contested the aforesaid claim. NHAI contended that it had attempted to invoke the PBG but this Court had, at the instance of KMC,",,,,,
interdicted the invocation of the PBG and directed that the PBG be kept alive till the conclusion / completion of the arbitral proceedings. NHAI,,,,,
claimed that KMC had not disputed the said direction and therefore, was not entitled to any claim, which was premised on the PBG being kept alive.",,,,,
34. The Arbitral Tribunal had considered the disputes and had rejected NHAI’s contention. The Arbitral Tribunal noted that the Engineer had,,,,,
issued the Defect Liability Certificate certifying that “The contractor has fulfilled all of its physical and contractual obligation under the above said,,,,,
contract†and therefore, NHAI was required to release the PBG. However, NHAI had failed to do so. The Arbitral Tribunal also held that the",,,,,
directions issued by this Court to keep the PBG alive were occasioned due to wrongful actions on the part of NHAI in attempting to invoke the PBG.,,,,,
35. The principal PBG was for a sum of Rs. 16,47,57,636/-. The said amount was not paid by KMC and therefore, its claim for interest on the said",,,,,
amount was rejected. However, the Arbitral Tribunal found that KMC had paid commission for keeping the PBG alive during the extended period and",,,,,
quantified the said amount at Rs. 2,34,21,249/-. In addition, the Arbitral Tribunal also awarded interest at the rate of 12% per annum on the said",,,,,
amount to be computed from various dates on which commission was paid.,,,,,
36. The principal controversy in the present case relates to the computation of the amount of commission. According to KMC, it had updated its claim",,,,,
for commission to Rs. 2,70,65,979/- and its calculation of Rs. 2,33,97,855/- submitted earlier was erroneous. KMC also contends that the Arbitral",,,,,
Tribunal had erroneously not granted bank commission for the period 01.05.2007 to 20.04.2009. KMC had also filed an application under Section 33 of,,,,,
the A&C Act seeking rectification of the award to that extent since KMC’s claim had been accepted but according to KMC, there was a",,,,,
computation error in computing the awarded amount against the said claim.,,,,,
37. The Arbitral Tribunal rejected KMC’s application under Section 33 of the A&C Act by an order dated 21.11.2019. It clarified that it had,,,,,
computed the amount of bank commission payable to KMC on the basis of the certificates issued by Andhra Bank, which were produced by KMC in",,,,,
evidence; and, not on the basis of the computation as provided by KMC. Therefore, there was no computational error in the impugned award. Insofar",,,,,
as KMC’s claim for award of commission and interest after 31.03.2018 is concerned, the Arbitral Tribunal held that since the claim for future",,,,,
amounts after 31.3.2018, was not made in the Statement of Claims, the same could not be granted.",,,,,
38. It is necessary to refer to Paragraph 19.4.8 of the impugned award, which indicates the basis on which the Arbitral Tribunal has computed the",,,,,
amount of the PBG commission. The said paragraph is set out below:,,,,,
“19.4.8 The AT has examined the updated claim and decides as follows:,,,,,
i) The principal amount of the Performance Bank Guarantee of Rs.l6,47,57,636/- was not actually paid to the Bank and hence it is not an expenditure",,,,,
incurred by the Claimant. In view of this, the Claimant is not entitled to interest on the amount of Performance Bank Guarantee for the period",,,,,
07.06.2006 to 31.03.2018 as claimed by the Claimant. Hence the amount of Rs.50,53,72,664/-claimed towards Performance Bank Guarantee amount",,,,,
and interest thereon is not admissible and is disallowed.,,,,,
ii) It is seen from the statements (page 954 of Vol 4 and page 2525 of CH-29) furnished by Andhra Bank that the total commission paid by the,,,,,
Claimant on various dates for keeping Bank Guarantee alive for the extended period amounts to Rs.2,34,21,249/-. The bank commission for the",,,,,
Period of Extension,"BG Commission
Amount",,,,
01.05.2007 to 31.10.2007,"Â Rs. 9,24,732.00",,,,
01.11.2007 to 30.04.2008,"Â Rs. 9,25,721.00",,,,
01.05.2008 to 31.10.2008,"Â Rs. 9,25,721.00",,,,
01.11.2008 to 30.04.2009,"Â Rs. 9,25,721.00",,,,
stated in the claim under reply is denied except specifically admitted herein. There should not be any deemed admission on the part of the Respondent,,,,,
for want of specific denial.,,,,,
Quantification done by the claimant is vague and baseless. Figures mentioned in the quantification are baseless. In these circumstances the claim,,,,,
under reply is liable to be dismissed.â€,,,,,
47. It is apparent from the above that, NHAI did not dispute that KMC was entitled to interest at the contracted rate or the interest rate as specified",,,,,
under the Contract was exorbitant and in the nature of penalty.,,,,,
According to NHAI, KMC’s claim were untenable and therefore, it was not entitled to any interest.",,,,,
48. It is important to note that the Arbitral Tribunal had accepted KMC’s claim and held that “as per the Contract, the claimant is entitled to",,,,,
interest from due date till the date of paymentâ€.,,,,,
49. It is material to note that it was not NHAI’s defence that interest under Clause 60.8 of the COPA is not payable on the amounts due for the,,,,,
works executed by KMC as no payment certificate had been issued in respect of the said amounts. The contention to this effect before this Court is,,,,,
clearly an afterthought.,,,,,
50. This Court is also not persuaded to accept that merely because an interim payment certificate has not been issued for the work done, the",,,,,
contractor would lose his right to receive the interest under the Contract if he prevails in his claim for payment for the work done. This would clearly,,,,,
imply that the interim certificate has been wrongly withheld. Surely, the contractor cannot be penalised for the same. It is not necessary for this Court",,,,,
to dilate on this issue any further as this was not the defence raised by NHAI before the Arbitral Tribunal. More importantly, the Arbitral Tribunal has",,,,,
accepted that KMC was entitled to interest as per the Agreement in respect of its claims except, the amount in respect of loss suffered on account of",,,,,
non-release of the Bank Guarantees.,,,,,
51. Having found that KMC was entitled to interest, the Arbitral Tribunal had reduced the rate of interest from 1% per month (12% per annum",,,,,
compounded monthly) to simple interest at the rate of 16% per annum (that is, 2% above the current Prime Lending Rate of SBI). The Arbitral",,,,,
Tribunal was of the view that the award of interest at the contracted rate would become exorbitant in view of the provision regarding compounding,,,,,
interest on monthly rests. The Arbitral Tribunal had, therefore, increased the rate of interest but deleted the provision for compounding interest.",,,,,
52. There is substance in KMC’s contention that the award of interest runs contrary to the terms of the Agreement. Merely because the interest,,,,,
burden becomes large, is not a ground to deny interest as contracted for by the parties. The increase in the quantum of interest is mainly due to the",,,,,
period spent by KMC in securing the award. While KMC has been denied its dues, NHAI has enjoyed the benefit of retaining the funds.",,,,,
53. It is also important to note that it was not NHAI’s case that the interest rate provided under the Agreement was in the nature of penalty or in,,,,,
terrorem. As noticed above, no such defence was taken. The Agreement is a commercial contract between the parties and the parties are bound to",,,,,
honour the same. It is common knowledge that any finance obtained from banks is on interest compounded monthly or quarterly. Although, the",,,,,
Arbitral Tribunal had referred to the Prime Lending Rate of State Bank of India, it did overlook that the finance provided by SBI is on compound",,,,,
interest and not simple interest.,,,,,
54. It is also material to note that the Supreme Court has rendered several decisions holding that where a contract between the parties proscribes,,,,,
awards of interests, the Arbitral Tribunal would not have the power to award interest under Section 31(7)(a) of the A&C Act and for the period prior",,,,,
to the date of the award. [See: Sayeed Ahmed And Company v. State of Uttar Pradesh And Ors.: (2009) 12 SCC 26; Sree Kamatchi Amman,,,,,
Constructions v. Divisional Railway Manager (Works), Palghat And Ors.: (2010) 8 SCC 767; Ambica Construction v. Union of India: (2017) 14 SCC",,,,,
323; and Jaiprakash Associates Limited (JAL) v. Tehri Hydro Development Corporation (India) Limited (THDC): 2019 17 SCC 786 ].,,,,,
55. In a recent decision by the Supreme Court rendered in Union of India v. Manraj Enterprises: Civil Appeal no. 6592 of 2021, decided on",,,,,
18.11.2021, the Supreme Court had referred to the earlier decision in Union of India v. Bright Power Projects (India) (P.) Ltd.: (2015) 9 SCC 695 and",,,,,
had observed that the words ‘unless otherwise agreed by the parties’ as used in Section 31(7)(a) categorically specify that “the arbitrator is,,,,,
bound by the terms of the contract insofar as award of interest from the dater of cause of action to the date of award is concerned.â€,,,,,
56. The Court also observed that the arbitrator is a creature of the contract and it has no power to award interest contrary to the terms of the,,,,,
agreement/contract between the parties. The principle that an arbitrator is bound by the terms of the contract resonates through in various other,,,,,
decisions rendered by the Supreme Court as well. The said principle will also hold good, where the parties have expressly agreed that the same would",,,,,
be payable.,,,,,
57. In cases, where the agreement expressly provides for payment of interest; unless the terms of the contract in regard to interest are found to be",,,,,
invalid or inapplicable, the arbitral tribunal is required to render an arbitral award in conformity with the terms of the Contract. In cases where the",,,,,
agreement proscribes award of interest, the arbitral tribunal cannot award interest. In cases, where the contract is silent as to payment of interest, the",,,,,
arbitral tribunal would have the discretion to award interest as Section 31(7)(a) of the A&C Act empowers the arbitral tribunal to do so.,,,,,
58. The Arbitral Tribunal also denied interest to KMC for the period when the arbitration proceedings were at a standstill. This Court finds that there,,,,,
is no justifiable reason for the same. It is conceded that during the course of the arbitral proceedings, the parties had without prejudice to their",,,,,
respective rights and contentions attempted to resolve their disputes amicably. Considering that it is conceded that such discussions were without,,,,,
prejudice to all rights and contentions; the decision of the Arbitral Tribunal to deny KMC the interest for the period that the parties were endeavouring,,,,,
to resolve their disputes, that is, for a period from 24.10.2013 to 23.06.2015 is, ex facie, erroneous. The time taken for discussion between the parties",,,,,
could not be to the advantage of NHAI or a disadvantage to KMC. It certainly did not absolve NHAI to pay interest which the Tribunal held was,,,,,
payable under the Agreement.,,,,,
59. In view of the above, the impugned award to the extent it rejects KMC’s claim for interest at the contracted rate for the period from which",,,,,
the amount became due to the date of the award, is set aside.",,,,,
60. The petition is disposed of in the aforesaid terms.,,,,,
