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1986 DIGILAW 87 (PAT)

Union of India v. B. P. Verma

1986-03-13

HARI LAL AGRAWAL, YADUNATH SHARAN SINGH

body1986
JUDGMENT : Hari Lal Agrawal & Yadunath Sharan Singh, JJ.- This miscellaneous appeal is directed against the ORDER :of the Additional Subordinate Judge, Manger, refusing to set aside an award and granting pendente lite and future interest by a subsequent ORDER :. 2. The dispute arises out of an agreement between the parties for manufacture and supply of quarry products by the respondent no. 1 to North Eastern Railway administration. In execution of the contract for supply, some dispute arose between the parties and in pursuance of the arbitration clause the Arbitrator, through the intervention of the court gave an award in favour of the respondent no. 1 for a sum of Rs. 37,269/- in all, including the amount of security refundable to the respondent no.1 as well as the earnest money. The arbitrator also awarded interest @ 6% per annum on the principal amount till the' date of the filing of the application by the respondents no.1 in court, but refrained from granting future or pendente lite interest as he thought that this was beyond his power. 3. The Additional Subordinate Judge in the decree that he passed on the basis of the award, also did not pass any ORDER :in terms of section 29 of the Arbitration Act for payment of future interest. And the plaintiff-respondent no. 1 made as application under sections 151 and 152 of the Code of Civil Procedure (to' be referred only as 'the Code') after a lapse of about 18 months for grant of interest and on that application, the court below passed the subsequent ORDER :dated 15.1.1981 allowing interest. 4. Both the ORDER :s have been impugned by Mr. Ojha appearing for the appellant be fore us. So far the objections on the principal amount awarded in favour of the plaintiff, respondent in the original ORDER :under appeal is concerned, he failed to make out any ground which can be covered under section 30 of the Arbitration Act. It is well known that the power of the court to set aside an award is very much limited. The exceptions for interference are indicated in section 30 itself which are exhaustive. We, therefore, need not dilate upon the question. 5. It is well known that the power of the court to set aside an award is very much limited. The exceptions for interference are indicated in section 30 itself which are exhaustive. We, therefore, need not dilate upon the question. 5. Now we take up the correctness of the subsequent ORDER :dated 15.1.1981 by which On entertaining an application under section 151 read with section 152 of the Code, the court below has allowed interest to the plaintiff-respondent pendente lite @ 12% per annum and future @ 6% per annum on the view that failure to grant interest in the decree was due to a mere omission. 6. Since the question bas been debated at some length and we find paucity of precedents on this question, we propose to deal with this question in some greater detail. First of all we would deal with the right of the Arbitrator with respect to the grant or interest. It is, no doubt, true that generally the Arbitrator has no power to award interest pendente lite. But this general principle is subject to the circumstances of each case which is referred to him for determination of the dispute and in appropriate cases he can also award interest pendente lite.. Although section 34 (of the Code) does not apply to a proceeding before an Arbitrator, the principle of that section may be applied by the Arbitrator for the purpose of awarding interest. We find a high authority in support of this view, namely the case of Union of India Bungo Steel Furniture Private Ltd. reported in 1967 B.L.J.R. 393. The reason for this view is that it is an implied term of reference that the Arbitrator will decide the dispute according .to the existing law and give such relief with regard to interest as a court could give if it decided the dispute. The proposition that the principles of section 34 will be applied by the Arbitrator for awarding interest in cases where a court of law in a suit has jurisdiction on the subject matter, also finds support from this decision. The proposition that the principles of section 34 will be applied by the Arbitrator for awarding interest in cases where a court of law in a suit has jurisdiction on the subject matter, also finds support from this decision. A Division Bench of the Calcutta High Court in the case of Union of India v. Bungo Steel Furniture (Pvt.) Ltd. (A.I.R. 1963 Calcutta 70), on reference to a large number of cases on the subject, has decided that the Arbitrator even before the passing of the Arbitration Act, 1940, had the power to grant interest on the principal sum adjudged, from the date of the award upto the date of the decree to be passed by the court and that he continues to retain the said power after the passing of this Act, and that there was nothing in section 29 of the Arbitration Act which takes away this power. The same view has been expressed later on in a subsequent case by the same High Court in Brahma. Swaroop Gupta v. Diwan Chand Minotra (A.I.R. 1963 Calcutta 583). 7. Now we would come straightway to the impugned ORDER :awarding pedente lite and future interest by the subsequent ORDER :in purported exercise of the powers under sections 151 and 152 of the Code. Before that it would be relevant to extract section 29 of the Arbitration Act which reads as follows :- "29. Where and in so far as an award• is for the payment of money the Court may in the decree ORDER :interest, from the date of the decree at such rate as the Court deems reasonable to be paid on the principal sum as adjudged by the award and confirmed by the decree", This section has therefore authorised the court to allow reasonable rate of interest not from the date of the award but from the date of the decree as the Arbitrator had no jurisdiction to award future interest from the date of the award. This power has been conferred only on the court. 8. We have seen that the court below has awarded not only further interest but pendente lite interest as well. No such power appears to be available to the court under section 29 and, therefore, that part of the ORDER :must be set aside on this ground alone. 9. This power has been conferred only on the court. 8. We have seen that the court below has awarded not only further interest but pendente lite interest as well. No such power appears to be available to the court under section 29 and, therefore, that part of the ORDER :must be set aside on this ground alone. 9. With respect to the ORDER :for future interest it was submitted on behalf of the respondent that applying the principle of section 3.(2) of the Code laying down that where the decree is silent with respect to the payment of future interest from the date of the decree to the date of payment or other earlier date, the court shal1 be deemed to have refused such interest, the failure of the court below to award future interest in the decree must be held to be as implied ORDER :of refusal to grant such interest and, therefore, this could not be held to be a matter covered by section 151 of the Code. We have already noticed that the principles of section 34 have been held to be applicable to the case under the Arbitration Act and particularly when the court purported to act under the inherent power enshrined only under the scheme of the Code, it becomes all the more evident that the exercise of that power, on the argument advanced on behalf of the learned counsel for the respondent that the provisions of the Code could not be applied, would work against him equally. 10. This part of the appeal, therefore, must succeed. It is accordingly allowed in pare and the ORDER :dated 19.3.80 is hereby sot aside, 11. We find that the appellant was directed by this Court to deposit the decretal amount in the executing court with liberty to the decree-holder-respondent to withdraw the same, on furnishing security. It goes without saying that part of the amount representing the interest becomes refundable to the appellant and if the same has been withdrawn by the plaintiff-respondent, then he must pay back the same, within two months from today, falling which the appellant will be entitled' to proceed in accordance with law for recovery of the said amount, which should also carry interest @ 9% per annum from the date of default till the date of recovery. There will be no ORDER :as to costs.