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1982 DIGILAW 71 (KER)

A. v. Abraham VS The Food Corpn Of India

1982-03-02

G.BALAGANGADHARAN NAIR, V.KHALID

body1982
JUDGMENT V. Khalid, J. 1. The Judgment of the court was delivered by Khalid, J.- The appellant is a government contractor. The first respondent is the Food Corporation of India and the second respondent, the Executive Engineer (Construction), Kerala Region, F. C. I. Vazhuthakkadu, Trivandrum. The appellant entered into a contract for the first respondent through the 2nd respondent for the construction of a 5000 tonnes capacity godown at Avaneswaram. Certain disputes and differences arose between the parties, which according to the terms had to be settled by arbitration. The appellant filed O.P. No. 11 of 1977 before the court of the Subordinate Judge at Kottarakkara, who by his order dated 14th August 1977, appointed Sri S. Ramanatha Pillai, Chief Engineer, Kerala State Housing Board, as the Arbitrator. The Arbitrator entered upon the reference on 13th December, 1977 and made his award on 11th May, 1978. The appellant filed O.P. No. 16 of 1978 under S.14 and 17 of the Arbitration Act, to pass a decree in terms of the award. The court below passed an order passing a decree in terms of the award but modifying the award of interest made by the Arbitrator, from 1st January, 1973 to 14th September, 1977. It is this part of the order that is under challenge in this appeal. 2. The claim No. 12 before the Arbitrator related to the award of interest. The appellant claimed interest at 18 per cent per annum from 30th July, 1972 when the amount became due. The respondents in their reply generally repudiated this claim for interest but did not specifically question the jurisdiction of the Arbitrator to decide this claim. Though the claim made by the appellant was with effect from 30th July, 1972, the Arbitrator restricted it to take effect from 1st January, 1973 at the rate of 9 per cent. The court below modified that part of the award relating to interest and granted interest with effect from 14th September, 1977. Though the claim made by the appellant was with effect from 30th July, 1972, the Arbitrator restricted it to take effect from 1st January, 1973 at the rate of 9 per cent. The court below modified that part of the award relating to interest and granted interest with effect from 14th September, 1977. The learned counsel for the appellant assails the order of modification on the following grounds: (1) The court below can modify the award only under one or the other clauses mentioned in S.15 of the Arbitration Act, (2) the order of modification is not based on any of the grounds enumerated therein and for this reason the order of modification has to be faulted, (3) the respondents not having raised the question of jurisdiction of the Arbitrator in going into the question of interest before him, should not have been permitted to raise the question of jurisdiction before the court below, and (4) the court below committed an error of law in allowing this question to be raised afresh before it. 3. In support of the submission made by the learned counsel for the appellant on the second ground, he invited our attention to "Russell" on Arbitration Nineteenth Edition, at page 490, under the caption "Disability of party" which can be usefully read: "Although a party may, by reason of some disability, be legally incapable of submitting matters to arbitration, that fact is not one that can be raised as a ground for disputing the award by other parties to a reference who were aware of the disability. If one of the parties is incapable, the objection should be taken to the submission. A party will not be permitted to lie by and join in the submission, and then, if it suits his purpose, attack the award on that ground. The presumption, in the absence of proof to the contrary, will be that the party complaining was aware of the disability when the submission was made". He also invited our attention to a decision of this court reported in State of Kerala v. Ithappiri (ILR 1979 (2) Ker. 669), wherein after discussing the case law on the point it was held that the question of lack of jurisdiction in the Arbitrator could not be raised for the first time before the court. To the same affect is the principle enunciated in State v. Consolidated Construction Co. 669), wherein after discussing the case law on the point it was held that the question of lack of jurisdiction in the Arbitrator could not be raised for the first time before the court. To the same affect is the principle enunciated in State v. Consolidated Construction Co. (AIR 1981 Orissa 166 (para 8)). We respectfully agree with the principle so stated. We hold that the court below was in error in allowing the plea of lack of jurisdiction to be raised before it for the first time when it was not raised before the Arbitrator. 4. Coming to the award of interest, it is clear from the pleadings that the appellant had grounded the question of interest in Claim No. 12 setting out the amount and rate of interest in clear terms. It is also evident from the reply that the respondents had only in general terms repudiated this claim. The Arbitrator after considering the materials placed before him, awarded interest at 9 per cent from 1st January, 1973. The court below has relying upon the decision of this court in Varkey v. Pacific Procon Ltd. ( 1976 KLT 815 ) held: "So, the award of interest from 1st January, 1973 is clearly illegal and beyond the jurisdiction of the Arbitrator. So in the instant case the award has to be modified so far as the date from which interest is to be awarded. Apart from this, the contention of the respondents is not substantiated. Under S.15 of the Arbitration Act, this court can modify the award. Hence in item No. 12 of the award, the date from which interest accrues is to be modified as 14th September, 1977, instead of 1st January, 1973". This observation by the court below is, according to us, on a clear misconception of the principle involved in the Division Bench case cited in the order. In 1976 KLT 815 , what this court held was that the Arbitrator was competent to give relief with regard to interest as a court could give on the basis of the principle underlying S.34, CPC. The position is made clear in Para.8 and 11 of the decision. The portion extracted by the court below in support of its conclusion that interest for a period before the date of reference cannot be granted was therefore misplaced. The position is made clear in Para.8 and 11 of the decision. The portion extracted by the court below in support of its conclusion that interest for a period before the date of reference cannot be granted was therefore misplaced. That the court had jurisdiction to award interest for a period prior to the date of reference is settled by the pronouncement of the Supreme Court in the decision reported in State of M. P. v. S. and S. Ltd. ( AIR 1972 SC 1507 ), which was followed in 1976 KLT 815 . We quote below para 35 of the Supreme Court decision, which has settled the law in this behalf: "If the contention of Mr. Shroff that under no circumstances an arbitrator can award interest prior to the date of the Award, or prior to the date of reference, is accepted, then the position will be very anomalous. As an illustration, we may point out that there may be cases where the only question that is referred to the arbitrator it whether any of the parties is entitled to claim interest on the amounts due to him from a date which may be long anterior to the date of reference. When such a question is referred to the arbitrator, naturally he has to decide whether the claim for award of interest from the date referred to by the parties is acceptable or not. If the arbitrator accepts that claim, he will be awarding interest from the date which will be long prior even to the date of reference. Therefore, the question ultimately will be whether the dispute referred to the Arbitrator included the claim for interest from any particular period or whether the party is entitled by contract or usage or by a provision of law for interest from a particular date." It is not necessary to multiply citations though the learned counsel for the appellant invited us to the decisions reported in AIR 1981 Orissa 166, AIR 1981 Orissa 124 AIR 1981 Orissa 188, where the same principle has, been enunciated. 5. 5. Relying upon the Supreme Court decision and following other decisions mentioned above, we hold that there is ample jurisdiction in the Arbitrator to award interest for a period anterior to the date of reference especially when the question of interest was a matter specifically referred to the Arbitrator and where the lack of jurisdiction in the Arbitrator to decide this question was not put forward by the contesting respondent before the Arbitrator. 6. We may in passing refer to another submission made by the learned counsel for the appellant in his criticism against the order of the court below. According to him, the court below has approached the question of award of interest by the Arbitrator as something in excess of his jurisdiction. If that be so, the proper order to be made by the court below was not to modify the award but to set it aside. We find that this submission is well founded. 7. We hold that the appellant is entitled to succeed. The order of modification effected by the court below is accordingly set aside and we direct the decree to be appropriately modified in terms of the award passed by the Arbitrator. We allow this appeal with costs.