TMI Blog2010 (8) TMI 1086X X X X Extracts X X X X X X X X Extracts X X X X ..... exercised its discretion and refused award of interest for the period pendente lite, even if the principles in those two cases were applicable, the award of the arbitrator could not be interfered with. On this ground also the decisions in Engineers- De-Space-Age and Madnani are inapplicable. Be that as it may. For the aforesaid reasons, we find no merit in these appeals and they are dismissed. - R.V. Raveendran And Gokhale H.L., JJ. JUDGMENT R.V.Raveendran, Leave granted. 2. The first respondent entrusted certain construction work to the appellant under a contract in the year 1995. Alleging breach by the first respondent (for short Railways ) the appellant invoked the arbitration Clause and the disputes were referred to an arbitral tribunal of which respondents 2 to 4 are the members. The arbitral tribunal made a nonspeaking award dated 14.5.1999 in favour of the appellant. The High Court by order dated 9.1.2001 set aside the said award and remitted the matter to the arbitral tribunal with a direction to make a reasoned award after fresh consideration. The arbitral tribunal accordingly passed an award dated 5.12.2001 awarding certain amounts with a direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it denied interest for pre-reference period and pendente lite by relying upon Clause 16(2) was liable to be interfered with. (ii) As the arbitrators had recorded a clear finding that the delay in completion of the work was occasioned due to reasons attributable to Railways and not on account of the appellants, the appellant cannot be denied interest for pre-reference period and pendente lite. On the other hand Railways contended that the contract contained a specific bar against award of interest on any amount payable to the contractor under the contract or upon the earnest money or security deposit and therefore the arbitral tribunal was barred from awarding interest for the said periods under section 31(7)(a) of the Act. It was further submitted that if the contract between the parties barred payment of interest, arbitral tribunal cannot award interest for the period between the date on which the cause of action arose and the date on which the award was made and therefore the arbitral tribunal had rightly not awarded the interest for the same period. On the aforesaid contentions the following questions arise for consideration : (i) whether the contract between the parties con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P. [2009 (12) SCC 26]. Relying upon the earlier decisions of this court in Irrigation Department, Government of Orissa v. G C Roy [1992 (1) SCC 508], Executive Engineer, Dhenkanal Minor Irrigation Division v. N C Budharaj [2001 (2) SCC 721] and Bhagawati Oxygen Ltd. v. Hindustan Copper Ltd. [2005 (6) SCC 462] and State of Rajasthan v. Ferro Concrete Construction (P) Ltd. [2009 (12) SCC 1], this court held that the arbitrator had the jurisdiction and authority to award interest for three distinct periods namely, the pre-reference period (which referred to the period between date of cause of action to date of reference), pendente lite (which referred to the period between date of reference to date of award) and future period (which referred to the period between the date of award to date of payment) if there was no express bar in the contract regarding award of interest. This court then noticed the change under the new Act as follows : 13. The Legislature while enacting the Arbitration and Conciliation Act, 1996, incorporated a specific provision in regard to award of interest by Arbitrators. Sub-section (7) of Section 31 of the Act deals with the Arbitrator's power to award ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st in the contract, the arbitrator cannot award any interest for the pre-reference period or pendente lite. In view of the specific bar under Clause 16(2), we are of the view that the arbitral tribunal was justified in refusing interest from the date of cause of action to date of awards. 7. We may at this juncture refer to the contention of the appellant that even if the appellant was not entitled to interest for the pre-reference period, that is date of cause of action to date of reference, the appellant will be entitled to interest pendente lite, that is for the period from the date of reference to date of award, having regard to the decisions of this court in Board of Trustees for the Port of Calcutta v. Engineers-De-Space-Age [1996 (1) SCC 516] and Madnani Construction Corporation Pvt. Ltd. v. Union of India [2010 (1) SCC 549]. 8. In Engineers-De-Space-Age (supra) this court held : 4. We are not dealing with a case in regard to award of interest for the period prior to the reference. We are dealing with a case in regard to award of interest by the arbitrator post reference. The short question, therefore, is whether in view of Sub-Clause (g) of Clause 13 of the contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ratio in Engineers find that the said Clauses do not impose any bar on the arbitrator in granting interest. 9. At the outset it should be noticed that Engineers-De-Space-Age and Madnani arose under the old Arbitration Act, 1940 which did not contain a provision similar to section 31(7) of the new Act. This court, in Sayeed Ahmed held that the decisions rendered under the old Act may not be of assistance to decide the validity of grant of interest under the new Act. The logic in Engineers-De-Space-Age was that while the contract governed the interest from the date of cause of action to date of reference, the arbitrator had the discretion to decide the rate of interest from the date of reference to date of award and he was not bound by any prohibition regarding interest contained in the contract, insofar as pendente lite period is concerned. This Court in Sayeed Ahmed (supra) held that the decision in Engineers-De- Space-Age would not apply to cases arising under the new Act. We extract below, the relevant portion from Sayeed Ahmed: 23. The observation in Engineers-De-Space-Age (supra) that the term of the contract merely prohibits the department/employer from paying inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be payable, arbitral tribunal cannot award interest between the date when the cause of action arose to date of award. 11. We are of the view that the decisions in Engineers-De-Space-Age and Madnani are inapplicable for yet another reason. In Engineers-De-Space- Age and Madnani the arbitrator had awarded interest for the pendente lite period. This court upheld the award of such interest under the old Act on the ground that the arbitrator had the discretion to decide whether interest should be awarded or not during the pendente lite period and he was not bound by the contractual terms insofar as the interest for the pendente lite period. But in this case the arbitral tribunal has refused to award interest for the pendente lite period. Where the arbitral tribunal has exercised its discretion and refused award of interest for the period pendente lite, even if the principles in those two cases were applicable, the award of the arbitrator could not be interfered with. On this ground also the decisions in Engineers- De-Space-Age and Madnani are inapplicable. Be that as it may. 12. For the aforesaid reasons, we find no merit in these appeals and they are dismissed. Parties to bear t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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