TMI Blog2009 (12) TMI 1007X X X X Extracts X X X X X X X X Extracts X X X X ..... ogbook No.4 came to a clear finding that there were manipulations/alterations/over writings by the railways and as a result of which the volume of work done by the contactor has been reduced. It is well settled that the arbitrator is the master of facts. When the arbitrator on the basis of record and materials which are placed before him by the railways came to such specific findings and which have not been stigmatized as perverse by the High Court, the High Court in reaching its conclusions cannot ignore those findings. But it appears that in the instant case, the High Court has come to the aforesaid finding that the items mentioned above are excepted matters and non-arbitrable by completely ignoring the factual finding by the arbitrator and without holding that those findings are perverse. It goes without saying that in order to deny the claims of the contractor as covered under excepted matters, the procedure prescribed for bringing those claims under excepted matters must be scrupulously followed. The clear finding of the arbitrator is that it has not been followed and the High Court has not expressed any dis-agreement on that. Therefore, the finding of the High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - SUPREME COURT] in passing the impugned judgment and order. In view of such consistent views taken by both the Constitution Bench judgments, in G.C. Roy (supra) and N.C. Budharaj (supra), we are of the view that in the facts of this case, no interference is called for with the award passed by the arbitrator. The judgment of the High Court is, therefore, set aside and the award is upheld. The appeal is allowed. - Katju Markandey And Ganguly Asok Kumar, JJ. JUDGMENT Ganguly Asok Kumar, 1. The subject matter of challenge in this appeal is the judgment and order dated 29.04.2003 passed by the High Court of judicature at Allahabad in F.A.F.O. No. 40 of 1993, in a matter arising from the order dated 1.12.1992 of the learned Senior Civil Judge, making the Award a Rule of the Court, and whereby the High Court had partly allowed the Appeal filed by the respondent. 2. The appellant, a private limited company, is carrying on, inter alia, various construction works for both the State and Central Government and their undertakings. The appellant s case is that an agreement dated 03.11.1981 was entered between the appellant and the North Eastern Railway for the constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lations/alterations/overwritings had resulted in reducing the quantities of the work done by the appellant. It was further observed that clause 21 (iv) of the special conditions was not followed by the respondent Railways at all. Moreover in utter violation of the Railway rules and orders on the subject, the measurements were hardly entered in the measurement book directly and mostly entries in the measurement books were copied down from subsidiary records or note books. After recording such findings, the Arbitrator gave the aforesaid award. 5. Thereafter on 08.05.1992 the appellant filed an application under Section 17 of the Act for pronouncing judgment and making decree according to the award. 6. On 20.5.1992 the respondent Railways filed application under Section 30 read with Section 33 (Section 30/33) of the Act before the Civil Judge for setting aside the award. Then on 24.08.1992 they also filed their objections against the application filed by the contractor under Section 17 of the Act. The following facts were recorded in the judgment of the High Court. The Railways filed an application before the District Judge for transfer of the application filed by the contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue was left to be decided by the Arbitrator who has held that none of the claims of the contractor were excepted matters. It was held that as the question was not decided in the earlier litigation, it cannot be said that the Railways are precluded from raising this question in these proceedings. 13. On the issue of excepted matters the High Court held that Item Nos. 1 to 3 and 5 to 8 were excepted matters and were non-arbitrable and the Arbitrator committed an illegality in allowing them. For the remaining items viz. item No. 9 (a) (d) relating to supply of boats, 11 (b) relating to cost of wastage of labour, it was held that these were not covered by Clause 22 (5) or 45 (a) of the GCC, as such they do not fall in the category of non-arbitrable matters and are arbitrable. 14. On the award of interest it was contended that clause 16 (1) read with 16 (2) of GCC prohibits payment of interest on amounts payable to the appellant under the contract except the Government securities mentioned therein. In this regard, the High Court considered Clause 30 of SCC and Clause 52 of GCC and found them to be similar and these clauses, according to High Court, bar interest and damages ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) are strictly followed, (c) no claim whatsoever by the contractor shall be entertained about the classification or the accuracy of the measurement. 20. Under Clause 62 of the GCC it is provided that matters for which provisions have been made in Clause 45(a) shall be excepted matters. 21. The arbitrator in his award after perusal of the level Book No.1, Graph-Sheets, Logbook No. 1A and Logbook No.4 came to a clear finding that there were manipulations/alterations/over writings by the railways and as a result of which the volume of work done by the contactor has been reduced. 22. It is well settled that the arbitrator is the master of facts. When the arbitrator on the basis of record and materials which are placed before him by the railways came to such specific findings and which have not been stigmatized as perverse by the High Court, the High Court in reaching its conclusions cannot ignore those findings. 23. But it appears that in the instant case, the High Court has come to the aforesaid finding that the items mentioned above are excepted matters and non-arbitrable by completely ignoring the factual finding by the arbitrator and without holding that those findin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal and an arbitrator. 32. Under the Interest Act, Section 3 empowers the Court to allow interest. But sub-Section (3) of Section 3 contains a proviso, namely, Section 3, sub-Section (3), Clause (a) (ii), to the following effect:- 3. (3) Nothing in this section, - (a) shall apply in relation to - (i) xxx xxx (ii) any debt or damages upon which payment of interest is barred, by virtue of an express agreement 33. In the context of the aforesaid provision in the Interest Act, the Clauses in the agreement quoted hereinabove assume importance. 34. Normally there are three periods for which interests are awarded - (a) pre-reference period i.e. from the date of the cause of action for going to arbitration and to the date of reference; (b) the pendente lite period i.e. from the date of reference to the date of award; and (c) the postreference period i.e. from the date of the award to the date of realization. 35. Initially there was a judgment of this Court in the case of Executive Engineer (Irrigation), Balimela and Others Vs. Abhaduta Jena and Others [1988 (1) SCC 418] which held, the arbitrator has no power to award interests in the absence of contract or an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e question as above, the Constitution Bench laid down the following principles in paragraph 43 at page 532 to 533: (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 arbitrator entering upon the reference. This is the principle of Section 34, Civil Procedure Code and there is no reason or principle to hold otherwise in the case of arbitrator. (ii) An arbitrator is an alternative form (sic forum) for resolution of disputes arising between the parties. If so, he must have the power to decide all the disputes or differences arising between the parties. If the arbitrator has no power to award interest pendente lite, the party claiming it would have to approach the court for that purpose, even though he may have obtained satisfaction in respect of other claims from the arbitrator. This would lead to multiplicity of proceedings. (iii) An arbitrator is the creature of an agreement. It is open to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n view. 45. For the reasons aforesaid we must hold that the decision in Jena, insofar as it runs counter to the above proposition, did not lay down correct law. 42. Following the Constitution Bench ratio in G.C. Roy (supra), another three-Judge Bench in the case of Hindustan Construction Company Limited vs. State of Jammu and Kashmir (1992) 4 SCC 217, while referring to the ratio in G.C. Roy (supra), held in paragraph 5 at page 220: Though the said decision deals with the power of the arbitrator to award interest pendente lite, the principle of the decision makes it clear that the arbitrator is competent to award interest for the period commencing with the date of award to the date of decree or date of realisation, whichever is earlier. This is also quite logical for, while award of interest for the period prior to an arbitrator entering upon the reference is a matter of substantive law, the grant of interest for the post-award period is a matter of procedure. Section 34 of Code of Civil Procedure provides both for awarding of interest pendente lite as well as for the post-decree period and the principle of Section 34 has been held applicable to proceedings before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the Government owing to any dispute, difference; or misunderstanding between the Engineer-in-Charge in marking periodical or final payments or in any other respect whatsoever. 47. Considering the said clause, the Court held that the prohibition in the said clause does not prevent the contractor from raising the claim of interest by way of damages before the arbitrator on the relevant items placed for adjudication. (see paragraph 10 page 67). In saying so, the learned Judges relied on the ratio in the case of B.N. Agarwalla (supra) and G.C. Roy (supra). 48. In Board of Trustees for the Port of Calcutta v. Engineers-De-Space-Age, (1996) 1 SCC 516, a twojudge Bench of this Court considered the same question. That was a case under the 1940 Act. In Engineers (supra), the so-called prohibition in the contract relating to payment of interest was in Clause 13(g), which is set out below:- 13(g) No claim for interest will be entertained by the Commissioners with respect to any money or balance which may be in their hands owing to any dispute between themselves and the Contractor or with respect to any delay on the part of the Commissioners in making interim or final payment or o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the bills or other amount due to the contractor within a reasonable time. 52. The learned Judges in Saraswat Trading (supra) in paragraph 16 held that Clause 31 is different from Clause 13(g) which was considered in Engineers (supra). The ratio in Engineers (supra) was not questioned. 53. In the instant case also the relevant clauses, which have been quoted above, namely, Clause 16(2) of GCC and Clause 30 of the SCC do not contain any prohibition on the arbitrator to grant interest. Therefore, the High Court was not right in interfering with the arbitrator s award on the matter of interest on the basis of the aforesaid clauses. We therefore, on a strict construction of those clauses and relying on the ratio in Engineers (supra), find that the said clauses do not impose any bar on the arbitrator in granting interest. 54. Reference in this connection may be made to another Constitution Bench judgment of this Court in the case of Executive Engineer, Dhenkanal Minor Irrigation Division, Orissa and others v. N.C. Budharaj (deceased) by Lrs. and others, (2001) 2 SCC 721. 55. In N.C. Budharaj (supra), Justice Raju, speaking for the majority, considered the question of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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