SANJAY CONSTRUCTION CO. ENGINEERS AND CONTRACTORS v. UNION OF INDIA
1993-07-14
A.SEETHARAM REDDY, S.C.MOHAPATRA
body1993
DigiLaw.ai
JUDGMENT S. C. Mohapatra, J. - This is an appeal under Section 39 of the Arbitration Act, 1940 (hereinafter referred to as the Act) by claimant. 2. Claimant is contractor. It entered into an agreement with the opposite parties for execution of work. In course of execution of the work a dispute arose. On account of the dispute a reference was made to the arbitrator, who having resigned another arbitrator was appointed and he gave an award on 19.5.1979 directing the opposite parties to pay a sum of Rs. 1,23,390/- to the claimant. Claimant filed an application to make the award a rule of court. Opposite Parties, however, objected to the award under Sections 30 and 33 of the Act. One of the grounds in the objection is that the arbitrator has no power to award interest. This objection was accepted by the learned trial Judge, who had set aside the said award directing payment of interest on the principle amount. Appellant is aggrieved by this order. 3. Although, there was some controversy about the power of the arbitrator to award interest in the past now the legal position has been made clear by the Supreme Court in a decision Secretary Irrigation Department, Govt. of Orissa v. G. C. Roy ( 1992 (1) SCC 508 ). However, in the present case, we need not consider the aforesaid decision since in the year 1976. Uttar Pradesh Legislature has amended the First Schedule of the Act by Act No. 57 of 1976, which came into force, from 1st January, 1977.
of Orissa v. G. C. Roy ( 1992 (1) SCC 508 ). However, in the present case, we need not consider the aforesaid decision since in the year 1976. Uttar Pradesh Legislature has amended the First Schedule of the Act by Act No. 57 of 1976, which came into force, from 1st January, 1977. In the amended Para 7-A was added to the First Schedule, which reads as follows : "Where and in so far as an award is for the payment of money, the arbitrators or the umpire may, in the award, order interest at such rate as the arbitrators or umpire may deem reasonable to be paid on the principal sum awarded, from the date of the commencement of the arbitration, as defined in sub-section (3) of Section 37 to the date of award, in addition to any interest awarded on such principal sum for any period to such commencement, with further interest at such rate not exceeding 6 per cent per annum as the arbitrators or umpire may deem reasonable on such principal sum from the date of the award to the date of payment or to such earlier date as the arbitrators or umpire may think fit, but in no case beyond the date of the decree to be passed on the award." 4. There is no specific clause in the agreement excluding payment of interest. Payment of interest is also not inconsistent with any clause of the agreement. Accordingly, para 7-A of the First Schedule shall be deemed to be part of the agreement, in view of Section 3 of the Act. A plain reading of this paragraph leaves no room for doubt that in Uttar Pradesh, arbitrator has wide power to award interest till the date of payment, but the same is limited to 6% only. This provision was not brought to the notice of learned trial Judge, as a result of which on the principles laid down in some earlier decisions that the arbitrator had no jurisdiction to award interest, trial court held that the award of interest has to be set aside. 5. From a plain reading of para 7-A, it is clear that arbitrator has wide power to award interest till the date of realisation, which obviously would be before the award is made a rule of court.
5. From a plain reading of para 7-A, it is clear that arbitrator has wide power to award interest till the date of realisation, which obviously would be before the award is made a rule of court. We come to the conclusion that arbitrator was correct in awarding interest from the date of entering into a reference on 17.4.1975 till the date of realisation of the amount. It goes without saying that no sooner application is filed to make the award a rule of court, payment of interest from the date of application for making award a rule of court till the date of decree and subsequently shall be within the jurisdiction of learned trial Judge. 6. In result, this appeal is allowed. There shall be no order as to costs. Appeal allowed.