TMI Blog2008 (9) TMI 935X X X X Extracts X X X X X X X X Extracts X X X X ..... all disputes or differences arising out of the provisions as contained in the preceding paragraphs, [a] to [f] of Clause 10 shall be referred to the Managing Director of Employer, whose decision shall be final, conclusive and binding and shall not be referred to arbitration or to any court of law. Clause 11 of the contract reads as follows: All disputes and differences between the parties regarding the construction or interpretation of any of the terms and conditions herein contained or conditions of contract being the integral part of this contract [except those which are subject matter of the decision of Managing Director of the Employer or/are expressly forbidden and excluded from being referred to arbitrator under any clause by the contract documents and such decision shall be final, conclusive and binding upon the parties hereto] or determination of and liability or any disputes of whatever nature whether during the course of progress or work or thereafter or after recession of the contract, shall be referred to the arbitration as provided in the condition No.51 of the Heading scope and performance in the Tender documents and shall be deemed to be reference within th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the award. Subject as aforesaid the provisions of the Arbitration Act, 1940 or any statutory modification or reenactment thereof and the rules made there under and for the time being in force shall apply to the arbitration proceeding under this clause. It is a term of the contract that the party invoking arbitration shall specify the dispute or disputes to be referred to arbitration under this clause together with the amount or amounts claimed in respect of each such dispute. The arbitrator[s] may from time to time with consent of the parties enlarge the time, for making and publishing the award. The work under the contract shall, if reasonably possible, continue during the arbitration proceedings and no payment due or payable to the contractor shall be withheld on account of such proceedings. The Arbitrator shall be deemed to have entered on the reference on the date he issues notice to both the parties fixing of the date of the first hearing. The Arbitrator shall give a separate award in respect of each dispute or difference referred to him. The venue of arbitration shall be such place as may be fixed by the Arbitrator in his sole discretion. The award of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant to pay a sum of ₹ 32,68,805.80 to the respondent along with interest at the rate of 15% till the date of final payment. On or about 14th of December, 1989, the appellant filed an application for setting aside the said award before the High Court. By a judgment and order dated 19th of October, 1994, a learned Judge of the High Court dismissed the said petition of the appellant, inter alia, on the following findings: [1] The claim of the appellant that they were entitled to deduct certain amounts from the final payment to the respondent on account of his having consumed extra cement was rejected. [2] The Arbitrator did not have any jurisdiction in rejecting the claim in view of Clause 10 of the agreement. [3] The claim of the appellant that it was entitled to deduct certain amount from the final bill on account of non utilization of steel was rejected. [4] The Arbitrator awarded escalation price to the respondent on account of increase in prices even after the stipulated time of completion. [5] The Arbitrator disallowed the claim of the appellant for deduction of amounts from the final bill on account of poor workmanship. [6] The claim towards purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor had given certain deductions based on balance steel under three heads. Mr. Dwivedi, therefore, contended that the appendices were part of the award itself which is to be interpreted in conjunction with Appendix `C' and, therefore, in the light of Appendix `C' where a finding of unutilized steel under three heads lying unutilized the Arbitrator should have awarded the respondent to pay at penal rates and by not doing so and directing the payment at issue rates it was against the express terms of the contract and liable to be interfered with. In response to this argument, the learned counsel for the respondent, however, contended that Appendix `C' could not be construed to be a part of the award, since, in the award the observation was that there was no clear evidence as to the balance steel, payment at penal rates could not have been awarded. It was further contended by learned counsel for the respondent that if anyone, it was the respondent who should be aggrieved and at any rate, the appendix did not give the appellant to contend that there was a finding of unutilized balance steel. The Arbitrator in his award clearly stated that in the absence of a positive findin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... courts below, it is not open to this Court to interfere with such conclusions until and unless it is manifest that such conclusions are perverse or arbitrary. That apart, we are of the view that this would not be a ground for setting aside the award under the Arbitration Act, 1940. 9. That apart, in our view, the High Court was justified in holding that the poor workmanship did not fall under any of the sub-clauses of Clause 10 of the Articles of Agreement, which enumerates the matters in which the Managing Director will have the exclusive authority to decide the dispute as per Clause 11 of the Agreement. Clause 10(b) provides that all special losses and damages suffered by the Employer, as certified by the certificate of the Engineer-in-charge, shall be final, conclusive and binding. Clause 10(c) of the agreement makes losses suffered by the employer or damages due to negligence or lack of proper care on the part of the contractor shall be liable to be reimbursed and the certificate of the Engineer-in-charge as to the extent of damage and its value is declared to be final, conclusive and binding upon the contractor. Clause 11 provides that all disputes and differences arisin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions of the contract while coming to the findings of fact relating to the extra items on rates other than the CPWD rates also. 11. The next ground of attack of the impugned judgment rests on payment of interest. From the impugned judgment, it appears that three limbs of the argument of the parties were dealt with by the Division Bench of the High Court. It is not in dispute that the learned Arbitrator entered upon the reference on 1st of March, 1989. The Arbitrator having found that the appellant was liable to pay a total sum of ₹ 32,68,805.80 p. directed that if the said amount is not paid by the appellant to the respondent on or before 15th of December, 1989, the same would carry interest @ 15% per annum till the payment was made. The total sum of Rs.32,68,805.80 as found by the learned Arbitrator included the following three claims :- Claim No.1 : ₹ 17,36,994.97 Claim No.2 : ₹ 2,40,615.96 Claim No.8 : ₹ 2,68,000.000 So far as Claim No.1 was concerned, the Arbitrator found that what was due was ₹ 13,62,349/- to which he added interest from January 1987 to October, 1989 @ 15% which worked out to ₹ 3,74,645.97. Thus the total amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the High Court was not justified in awarding interest for pre-reference period in view of Section 3 of the Interest Act, 1978 which was pursuant to a special clause in the Contract. As in the present case there was no such clause in the agreement and hence it was not within the power of the Arbitrator to make an award with respect to interest. 12. In our view, this argument lacks substance. The position of law, as found by the High Court in its impugned judgment on consideration of various other judgments of this Court, would clearly show that in those judgments the High Court relied on also did not stipulate any express agreement with respect to interest as a precondition to the authority of the Arbitrator to award interest for the pre-reference period. The matter would have a different issue altogether if there had been a specific provision prohibiting grant of interest which was, of course, not the case of the appellant. 13. In the case of State of Rajasthan and Anr v. Ferro Concrete Construction Pvt. Ltd, [2009 (8) SCALE 753], the same work was advanced in which this Court observed: But this Court has held that in the absence of an express bar, the arbitrator has the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is concerned, we are of the view that we do not find any infirmity in the said findings of the High Court relating to that ground. Since the legislature by way of an amendment in the year 1956 deleted Section 35(3) of the Code of Civil Procedure which empowered the court to award interest, the Arbitrator, on analogy, cannot have the power to award interest on costs. Therefore, the High Court has failed to justify in holding that the powers of the Arbitrator are not effected by changes made to the Code of Civil Procedure. The power of the Arbitrator, if any, shall be located from the act itself. We may note that awarding costs is a matter of discretion of the Arbitrator under the 1940 Act. Sir Mohd. Akbar Khan vs. S.Attar Singh (deceased) [AIR 1945 PC 170] is an answer to the aforesaid ground. Paragraph 8 of the First Schedule to the Arbitration Act, 1940 which contains Implied Conditions of Arbitration Agreements lays down that - the costs of the reference and award shall be in the discretion of the arbitrators or umpire who may direct to, and by, whom, and in what manner, such costs or any part thereof shall be paid, and may tax or settle the amount of costs to be so paid or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, having regard to long lapse of time, if award is satisfied in entirety, respondent would have to pay a huge amount by way of interest. With a view to do complete justice to the parties, in exercise of jurisdiction under Article 142 of the Constitution of India, it was directed that award shall carry interest at the rate of 6% p.a. instead and in place of 18% p.a.Similarly in Mukand Ltd. vs. Hindustan Petroleum Corpn. [2006 (4) SCALE 453], while this Court confirmed the decision of the division bench upholding the modified award made by the learned single Judge, the court reduced the interest awarded by the learned single judge subsequent to the decree from 11% per annum to 7% per annum observing that 7% per annum would be the reasonable rate of interest that could be directed to be paid by the appellant to the respondent for the period subsequent to the decree. In this case, given the long lapse of time, it will be in furtherance of justice to reduce the rate of interest to 7%. 19. Following the aforesaid decision and considering the fact that there was a long lapse of time and for the ends of justice, we are, therefore, of the view that the judgment of the Division ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question of decision by implication does not arise since his jurisdiction to decide the dispute on merits hinges upon his jurisdiction to decide the arbitrability of the dispute. 22. The aforesaid decision of this Court, therefore, in our view cannot come to help the appellant. 23. So far as the decision in the case of Trustees of the Port of Madras vs. Engineering Constructions Corpn. Ltd. (supra) is concerned, this case also has no application in the facts of this case. In that case, the principles have been laid down in the case of a reasoned award and the court can interfere if the award is passed upon a proposition of law which is unsound in law. The error apparent on the face of the award contemplated by Section 16(1)( c) as well as Section 30 (c) of the Arbitration Act is an error of law apparent on the face of the award and not an error of fact. Therefore, this decision, in our view, is also of no help. The Arbitrator has passed his award on the basis of the conditions of the clauses in the agreement and passed an award and nothing could be shown from which it could be held that the court could interfere with the award if the same was passed upon the proposition o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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