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2015 (11) TMI 1751 - HC - Indian LawsLiability of Interest on the amounts awarded by the Arbitrator to the respondent/contractor - Clause 16(2) of the General Conditions of Contract (GCC) - scope of word 'immoral' - it is argued that even if the petitioner/UOI is found liable to pay any amount to the contractor, whether in a civil suit or any arbitration proceedings by an award, petitioner because of Clause 16(2) of the GCC cannot be called upon to pay interest for the pre-reference/present period or the post reference period including pendente lite period and till passing of the Award/decree. Held that:- The entire concept of rule of law and existence of relevant legislations in any country in this age (or in any age for that matter) is to prevent dishonesty. This principle that dishonesty is not promoted is as absolute and inviolable as the rising of the sun in the east. It can never ever be argued that a legislation or a contract can be so interpreted by courts, or that they be so applied by courts, which will result in promoting of dishonesty. Dishonesty is an anathema to the rule of law. Illegal holding on to the principal amounts by one person clearly leads to dishonesty on his part as such person wrongly benefits from the moneys illegally/wrongfully retained by him - In today's date and age to say that moneys can be retained for years and years and decades is clearly immoral and has to be held against public policy otherwise there will be gross injustice to the existence of the commercial world which cannot survive without payment of moneys in time. The four Sub-clauses of sub-Section (2) of Section 4 of the Interest Act do not restrict immorality to instances of sexual immorality as the only immorality, and hence in today's age and date the expression 'immoral' will have to be interpreted to include immorality arising in commercial transactions especially because a whiff of the same surely exists in the first Sub-clause (a) of sub-Section (2) of Section 4 of the Interest Act, 1978 which deals with payment of interest on a deposit, and deposit of moneys is generally and ordinarily a commercial transaction - Once Section 5 of the Interest Act, again with a non obstante clause, allows overriding effect and power of Section 34 CPC for grant of pendente lite interest, clearly, the post reference interest till the passing of the award is clearly payable to a person and it cannot be argued that pendente lite period would stand exempted because of the language of a clause such as the Clause 16(2) of the GCC in the present case. Non-payment of interest can under no circumstances be justified in today's world and it is clear that illegal retention of moneys for a long period of time will clearly amount to immorality and violation of the public policy. Therefore there is not even an iota of doubt that illegal retention of principal amounts of moneys which are to be paid by a person to another person at an appropriate point of time, on account of a contractual clause, such as Clause 16(2) of the GCC, results in an immoral action which is violative of public policy and hence such a clause having the language of Clause 16(2) of the GCC in the present case, is liable to be and is accordingly struck down in view of Section 23 of the Indian Contract Act. There is no merit in the objection petition that interest has been wrongly granted by the Arbitrator because of the bar of Clause 16(2) of the General Conditions of Contract in question, as this Clause 16(2) is invalid and void as the same is hit by Section 23 of the Indian Contract Act, 1872 - petition dismissed.
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