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TMI Blog2008 (9) TMI 935X X X X Extracts X X X X X X X X Extracts X X X X ..... ween 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 the relevant provisions of the Indian Arbitration Act, 1940, and or any statutory modification of enactment there under." Clause 51 of the General Conditions of contract provided for arbitration. This clause reads as follows: "51. The contractor will become nominal member of the Federation and will abide by the rules and regulation laid down from time to time. Except where otherwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 the Arbitrator shall be final, conclusive and binding on all parties to this contract." 2. The respondent was given extension of time for execution and completion of the project pursuant to Clause 13 of the General Conditions of Contract. It may be kept on record that Clause 32 clearly postulates that the extended time was also to be the essence of the contract. After the expiry of stipulated perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing 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 of surplus wood by the respondent was allowed along with the claim for filling of earth. [7] The claim of the respondent towards transport charges for carrying wood was allowed despite the fact that the contract provided for local wood to be used. [8] Expenses towards litigation and interest at the rate of 18% prior to the reference were also allowed. 5. Feeling aggrieved, an appeal was carried to the Division Bench of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 finding of the same, the penal rate cannot be awarded. The Court, therefore, rightly held that Appendix `C' did not mean to be a positive finding by the Arbitrator that such steel was unutilized and had been appropriated by the respondent. Accordingly, we do not find any infirmity either in the award of the Arbitrator or in the findings of the Division Bench as well as of the learned Single Judge on this ground. 8. It was next contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 arising out of the contract as contained in the proceedings in 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. In this connection, as noted herein earlier, the High Court was fully justified in holding that "lack of proper care or negligence" appearing in Clause 10(c), was not synon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st of March, 1989. The Arbitrator having found that the appellant was liable to pay a total sum of Rs. 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 : Rs. 17,36,994.97 Claim No.2 : Rs. 2,40,615.96 Claim No.8 : Rs. 2,68,000.000 So far as Claim No.1 was concerned, the Arbitrator found that what was due was Rs. 13,62,349/- to which he added interest from January 1987 to October, 1989 @ 15% which worked out to Rs. 3,74,645.97. Thus the total amount in respect of Claim No.1 as mentioned above worked out to Rs. 17,36,645.97 (there is an apparent inconsistency in the figures of claim No.1 reproduced with this figure), but the thing remains that the learned Arbitrator calculated interest @ 15% for the period from January 1987 to October, 1989 and added it to make up the claim No.1. Similar was the exercise carried out by the learned Arbitrator in regard to claim No.2 in which the Arbitrator having found that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 jurisdiction and authority to award interest for all the three periods - pre-reference, pendente lite and future (vide decisions of Constitution Bench in Secretary, Irrigation Department, Government of Orissa vs. G. C. Roy - 1992 (1) SCC 508, Executive Engineer, Dhenkanal Minor Irrigation Division vs. N. C. Budharaj - 2001 (2) SCC 721 and the subsequent decision in Bhagawati Oxygen vs. Hindustan Copper Ltd -2005 (6) SCC 462). In this case as there was no express bar in the contract in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 any part thereof and may award costs to be paid as between legal practitioner and client." 17.A plain reading of this paragraph would show that there is a provision in this clause which does not permit or prohibit the imposition of interest on costs of arbitration. 18. The High Court has also observed in the impugned judgment that the principles in relation to payment of interest on interest will apply in this context as well and that there is no principle or precedent prohibiting award of intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pholding 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 Bench can be modified only to the extent that the rate of interest should be reduced from 15% to 7%. As we also find in this case that such reduction of interest is warranted because the award was passed on 20th of October, 1989, now 20 years have passed since then. 20. This Court in Mcdermott International Inc. vs. Burn Standard Co.Ltd. & Ors. (supra) S.B.Sinha,J., (as His Lordship then was), following the two earlier decisions of this Court in the case of Pure Helium India (P) Ltd. vs. ONGC [(2003) 8 SCC 593] ..... X X X X Extracts X X X X X X X X Extracts X X X X
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