TMI Blog2009 (7) TMI 1219X X X X Extracts X X X X X X X X Extracts X X X X ..... t and order dated July 4, 2006 passed in G.A.No.87/01: APOT No.792/01 with APO No.362/01 allowed the appeal, set aside the judgment of the Single Judge and fully restored the arbitrator's award in favour of the respondent on all the three issues in dispute. Against the judgment of the Division Bench of the High Court the appellant has come in appeal to this Court. The facts of the case are brief and simple and may be stated thus. For the work of handling of goods, parcels and booked luggage at a group of six stations falling in its Nagpur Division, the South Eastern Railway, Calcutta, invited tenders that were opened on May 16, 1990. The tender submitted by the respondent was the lowest. Hence, after some negotiations and extension of the validity of offer the respondent's tender was accepted on August 2, 1991 and it was given the work for a period of three years commencing from August 3, 1991. The grant of the contract was formalized in an agreement executed by the parties on December 3, 1991. The agreement was deemed to have come into force with effect from August 3, 1991 and it was to remain in force for a period of three years, till August 2, 1994 unless determined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were in force or might come into force and he would indemnify and keep the Railway Administration indemnified against all loss, damage, claims and costs arising in any manner whatsoever. Clause 20 reserved the right of the Railway Administration to deduct from the moneys due to the contractor or from his security deposit any sum required or estimated to be required for making good the loss suffered by the labour or labourers or any other person in his employment for the reasons of non-fulfillment of the conditions for the benefit of the labourers, non-payment of wages or deductions made from him or their wages which were unjustified or illegal. Clause 31 stipulated that no interest or damage would be paid to the contractor for delay in payment of the bill `for any reason whatsoever'. Clause 32 with its various sub-clauses contained the provision for arbitration and provided that the General Manager of the South Eastern Railway or a person appointed by him would be the sole arbitrator in respect of any dispute as to the respective rights, duties and obligations of the parties to the agreement or as to the construction or interpretation of any of the terms and conditions of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod January 1993 to August 1994. The respondent naturally declined to accept the paltry amount offered by the authorities and requested for a proper consideration of its claim as earlier promised. Finally, the Railway authorities appointed a high level committee to consider the respondent's claim for enhanced payment for the period January 1, 1993 to August 31, 1994. The committee fixed the respondent's claim at ₹ 3, 61,058=00 but it was not acceptable to the respondent. A departmental arbitrator was then appointed in order to resolve the disputes and differences arising between the parties. The departmental arbitrator gave his award on June 4, 1998. Not being satisfied with the award the respondent challenged it by filing an application under section 34 of the Act before the High Court. The High Court by its order dated February 12, 1999 upheld the award on items 1 2 but set it aside in respect of items 3, 4 5 and appointed a certain advocate, a member of the bar to decide afresh in regard to the respondent's claim under those three items. On an application made under section 11, the Acting Chief Justice of the High Court, by order dated July 1, 1999, subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant, submitted that in the absence of any escalation clause in the agreement the respondent's claim for enhanced payments for the period August 3, 1991 to December 31, 1992 during which the agreement was in force was quite unfounded and both the arbitrator and the Division Bench of the High Court were in error in granting the claim for that period. The submission made by Mr. Qadri is fully answered by the decision of this Court in Tarapore Co. vs. State of M.P., (1994) 3 SCC 521, (noticed both by the arbitrator and the Division Bench of the High Court). In paragraph 27 of the judgment this Court observed as follows: 27. But then, the terms at hand did require the appellant (who is the contractor) not to pay less than fair wages as would appear from what has been stated in Para 2.10 and Para 1 of Annexure-B. The Explanation to latter Para states that where fair wages have not been notified these wages would be the one prescribed by the PWD (Irrigation Department) for the division in which the work is done . Now these wages were being increased from time to time as would appear from the decisions of the wage committee referred to above; and if the appellant was being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim of any interest by the contractor and hence, the award was clearly unsustainable insofar as the grant of interest was concerned. The arbitrator gave to the respondent pre-reference, pendente lite and post-award interest on both its claims under items 3 4 as would be evident from the following passages from the award: However, I am allowing interest to the claimant at the rate of 16% per annum on and from 1st November, 1994 till 9th September, 2000 the date of award amounting to ₹ 15, 85,359.85 on the following basis. Interest calculated from 1.11.94 to 9.9.2000 as per demand notice dated 19th September, 1994 till the date of award on ₹ 16, 85,234.14 being the total amount of claim item Nos.3 and 4. **** **** **** Therefore, I, hereby award to the claimant (1) a sum of ₹ 6,05,777.34 for the claim item No.3 (ii) a sum of ₹ 10,79,456.80 for the claim Item No.4 and (iii) a sum of ₹ 15,86,539.85 towards interest on Item No.3 and 4 for the claim Item No.5. The aggregate sum of ₹ 32, 71,773.99 (Rupees Thirty two lacs seventy one thousand seven hundred seventy three and ninety nine paise only) rounded to ₹ 32, 71,774/-. I fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r would have power to award interest in the same way and same manner as a court. 39. Regarding interest pendent lite also, there was cleavage of opinion. The question was, therefore, referred to a larger Bench in Secy., Irrigation Deptt., Govt. of Orissa vs. G. C. Roy, 1992 (1) SCC 508. The Court considered several cases and laid down the following principles: (pp.532-33, para 43) 43. The question still remains whether arbitrator has the power to award the interest pendente lite, and if so on what principle. We must reiterate that we are dealing with the situation where the agreement does not provide for grant of such interest nor does it prohibit such grant. In other words, we are dealing with a case where the agreement is silent as to award of interest. On a conspectus of aforementioned decisions, the following principles emerge: (i) a person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name. It may be called interest, compensation or damages. This basic consideration is as valid for the period the dispute is pending before the arbitrator as it is for the period prior to the arbit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r is competent to award interest for the period from the date of the award to the date of decree or date of realization, whichever is earlier. In the case in hand, the respondent's claim was in regard to two periods; one from August 3, 1991 to December 31, 1992 when the agreement was subsisting and the parties were bound by its terms, and the other from January 1, 1993 to August 31, 1994 when the agreement was admittedly terminated and the respondent was carrying on the work on the request of the appellant. In our view the fact that the first period was covered by the agreement while the second fell beyond it is significant and on that score the two periods must receive different treatments. Clause 31 of the agreement provided as follows: 31. No interest or damage for delay in payment - No interest or damage shall be paid to the Contractor for delay in payment of the bill or any other amount due to the contractor for any reason whatsoever. The Railway Administration will, however, make every endeavour for payment of the bills or other amount due to the contractor within a reasonable time. (emphasis added) The Division Bench of the High Court took the view that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We are, therefore, clearly of the view that no pre-reference or pendente lite interest was payable to the respondent on the amount under Item No.3 and the arbitrator's award allowing pre-reference and pendente lite interest on that amount was plainly in breach of the express term of the agreement. The order of the High Court insofar as pre-reference and pendente lite interest on the amount under Item No.3 is concerned is, therefore, unsustainable. The position with regard to the claim under Item No.4 is quite different. That relates to the period after the termination of the agreement and hence, the bar of clause 31 would not apply to it in the same way as it would apply to Item No.3. We, therefore, find no infirmity in grant of pre- reference and pendente lite interest on the amount under Item No.4. In light of the discussions made above, the respondent shall be entitled to interest only on the sum of ₹ 10, 79,456=80, the amount determined under Item No.4, at the rate of 16% per annum for the period November 1, 1994 to September 9, 2000. The final amount under the award shall be accordingly worked out. The consolidated amount of the award after being re-calculated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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