TMI Blog2019 (2) TMI 375X X X X Extracts X X X X X X X X Extracts X X X X ..... eneral law of the land and the agreement. 1940 Act was silent about the jurisdiction of the arbitrator in awarding pendente lite interest. However, there is a significant departure on this aspect insofar as 1996 Act is concerned. In the 1940 Act, there was no provision which prohibited the arbitrator from awarding interest for the pre-reference, pendente lite or post-award period, whereas the 1996 Act contains a specific provision which says that if the agreement prohibits award of interest for the pre-award period, the arbitrator cannot award interest for the said period. The grant of pendente lite interest depends upon the phraseology used in the agreement, clauses conferring power relating to arbitration, the nature of claim and dispute referred to the arbitrator, and on what items the power to award interest has been taken away and for which period. Also, the position under Section 31(7) of the 1996 Act, is wholly different, inasmuch as Section 31(7) of the 1996 Act sanctifies agreements between the parties and states that the moment the agreement says otherwise, no interest becomes payable right from the date of the cause of action until the award is delivered. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Arbitrators. The appellant preferred intra-court appeal which has been dismissed by the Division Bench of the High Court, thereby upholding the judgment of the Single Judge. The effect is that the High Court has held that no interest is payable as Clauses 50 and 51 of GCC bar the arbitrators from granting interest. 4) It may be pointed out that on interpreting Clauses 50 and 51 of the General Conditions of Contract, the view taken by the High Court is that these clauses categorically provide that no interest would be payable to the contractor on the money due to him. The said Clauses read as under: Clause 50.0 Interest on money due to the contractor No omission on the part of the Engineer in charge to pay the amount due upon measurement or otherwise shall vitiate or make void the contract, nor shall the contractor be entitled to interest upon any guarantee or payments in arrears nor upon any balance which may on the final settlement of his account, be due to him. Clause 51.0 No claim for delayed payment due to dispute etc. No claim for interest or damage will be entertained or be payable by the corporation in respect of any amount or balance which may be lying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from awarding interest pendente lite. 5) As stated above, the High Court, on the other hand, has taken the view that if interest is prohibited as per the expressed terms of the contract between the parties, the Arbitrator does not get jurisdiction to award interest. Further, insofar as interpretation to the aforesaid clauses is concerned, the High Court noticed that these Clauses were on the same terms as Clause 1.2.14 and 1.2.15 of the contract which were subject matter of construction in Tehri Hydro Development Corporation (THDC) Limited Anr. v. Jai Prakash Associates Limited (2012) 12 SCC 10. In the said judgment, this Court has categorically held that those clauses to mean that no interest was payable on claim for delayed payment due to the contractor. Therefore, same construction needed to be given to Clauses 50 and 51 of GCC in the instant case. 6) Mr. Rupinder S. Suri, learned senior counsel appearing for the appellant made two-fold submissions before us, which are to the following effect: (i) In the first place, it is submitted that judgment in Jayprakash Associates Limited case is contrary to the earlier judgment rendered by this Court in State of Uttar Pra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded clauses, came to the conclusion that the Arbitrators were precluded from granting any interest. His another contention was that there was a difference between the scheme provided under the Arbitration Act, 1940 (hereinafter referred to as the 1940 Act ) when contrasted with the 1996 Act. He argued that most of the judgments cited by the appellant including Harish Chandra were under 1940 Act whereas in the instant case award was passed under the 1996 Act. He also referred to certain recent judgments which have been rendered by this Court touching upon this very aspect. The precise manner in which he structured his arguments are recapitulated below: 10) In the first instance, he pointed out that even the arbitrators accepted, on the interpretation of GCC Clauses 50 and 51, that these clauses deny interest on the appellant s dues by the respondent due to dispute etc. Notwithstanding the same, the majority opinion awarded the interest relying upon the judgment of this Court in Board of Trustees for the Port of Calcutta. The learned Single Judge of the High Court, while reversing the aforesaid view, pointed out that 1996 Act had altered the position contained in the 1940 Act. Un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the following reasoning: 43. The question still remains whether arbitrator has the power to award 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 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if agreement between the parties was silent as to whether interest is to be awarded or not. (c) Conversely, if the agreement between the parties specifically prohibits grant of interest, the arbitrator cannot award pendente lite interest in such cases. This proposition is predicated on the principle that an arbitrator is the creature of an agreement and he is supposed to act and make his award in accordance with the general law of the land and the agreement. This position was made amply clear in G.C. Roy case in the discussion that ensued thereafter: 44. Having regard to the above consideration, we think that the following is the correct principle which should be followed in this behalf: Where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (along with the claim for principal amount or independently) is referred to the arbitrator, he shall have the power to award interest pendente lite. This is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and therefore when the parties refer all their disputes - or refer the dispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest on delayed payments in favour of the appellant? After noticing that clause 16(2) of GCC in that case bars the payment of interest, it was held that under the 1996 Act, the position wherein is different from 1940 Act, the interest could not be awarded. Following observations from this judgment may be noted: 16. Relying on a decision of this Court in Ambica Construction v. Union of India [Ambica Construction v. Union of India, (2017) 14 SCC 323] , the learned Senior Counsel for the appellant submits that mere bar to award interest on the amounts payable under the contract would not be sufficient to deny payment on pendente lite interest. Therefore, the arbitrator was justified in awarding the pendente lite interest. However, it is not clear from Ambica Construction [Ambica Construction v. Union of India, (2017) 14 SCC 323] as to whether it was decided under the Arbitration Act, 1940 (for short the 1940 Act ) or under the 1996 Act. It has relied on a judgment of Constitution Bench in State of Orissa v. G.C. Roy [State of Orissa v. G.C. Roy, (1992) 1 SCC 508] . This judgment was with reference to the 1940 Act. In the 1940 Act, there was no provision which prohibited the arbi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (7) of the 1996 Act sanctifies agreements between the parties and states that the moment the agreement says otherwise, no interest becomes payable right from the date of the cause of action until the award is delivered. 15) After discussing and analysing almost all the judgments on this subject, the legal position is summed up in the following manner: 24. A conspectus of the decisions that have been referred to above would show that under the 1940 Act, an arbitrator has power to grant pre-reference interest under the Interest Act, 1978 as well as pendente lite and future interest. However, he is constricted only by the fact that an agreement between the parties may contain an express bar to the award of pre-reference and/or pendente lite interest. Since interest is compensatory in nature and is parasitic upon a principal sum not having been paid in time, this Court has frowned upon clauses that bar the payment of interest. It has therefore evolved the test of strict construction of such clauses, and has gone on to state that unless there is a clear and express bar to the payment of interest that can be awarded by an arbitrator, clauses which do not refer to claims before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bar on the arbitral tribunal. Even the majority award of the arbitral tribunal recognised this. Notwithstanding the same, it awarded the interest by relying upon Board of Trustees for the Port of Calcutta case. The High Court, both Single Bench as well as Division Bench, rightly noted that the aforesaid judgment was under the 1940 Act and the legal position in this behalf have taken a paradigm shift which position is clarified in Sayeed Ahmed and Company case. This rationale given by the High Court is in tune with the legal position which stands crystallised by catena of judgments as noted above. 17) Another reason given by the High Court is equally convincing. The Clauses 50 and 51 of GCC are pari materia with Clauses 1.2.14 and 1.2.15 of GCC in THDC case. Those clauses have Civil Appeal arising out of SLP (C) No. 13551 of 2013 Page 18 of 25 been interpreted by holding that no interest is payable on claim for delayed payment due to the contractor. Same construction adopted in respect of these clauses, which, in fact, is a case between the same parties, is without any blemish. 18) In this backdrop, the only argument of the appellant that remains to be considered is as to whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntertained against the Government with respect to only a specified type of amount, namely, any moneys or balances which may be lying with the Government owing to any dispute, difference between the Engineer-in-Charge and the contractor; or misunderstanding between the Engineer-in-Charge and the contractor in making periodical or final payments or in any other respect whatsoever. The words or in any other respect whatsoever also referred to the dispute pertaining to the moneys or balances which may be lying with the Government pursuant to the agreement meaning thereby security deposit or retention money or any other amount which might have been with the Government and refund of which might have been withheld by the Government. The claim for damages or claim for payment for the work done and which was not paid for would not obviously cover any money which may be said to be lying with the Government. Consequently, on the express language of this clause, there is no prohibition which could be culled out against the respondent contractor that he could not raise the claim for interest by way of damages before the arbitrator on the relevant items placed for adjudication. (emphasi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ognate sense and take colour from each other but only if there is a distinct genus or a category. Where this is lacking i.e. unless there is a category, the rule cannot apply. As rightly held, the rule of ejusdem generis would be applied only if there is distinct genus or a category, which is lacking in the instant case. This rule is applicable when particular words pertaining to a clause, category or genus are followed by general words. In such a situation, the general words are construed as limited to things of same kind as those specified. In that sense, this rule reflects an attempt to reconcile incompatibility between the specific and general words in view of the other rules of interpretation that all words in a statute are given effect if possible, that a statute is to be construed as a whole and that no words in a statute were presumed to be superfluous . (See Lokmat Newspapers Pvt. Ltd. v. Shankarprasad (1999) 6 SCC 275). In fact, construing the similar clause, this Court in the case of Bharat Heavy Electricals Limited v. Globe Hi- Fabs Limited (2015) 5 SCC 718 has held that rule of ejusdem generis is not applicable inasmuch as: 12. The rule of ejusdem generis h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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