Bharat Coking Coal Ltd. v. Durga Prasad — 1994 DIGILAW 186 (PAT)

Judgment GURUSHARAN SHARMA, J. 1. This appeal, under Sec. 39 of the Arbitration Act, 1940 (hereinafter referred to as the Act) is directed against the judgment and decree dated 28.9.1992 passed by the 5th. Subordinate Judge, Dhanbad, in Title (Arbitration) Suit No. 46 of 1982/TR No. 70 of 1992 whereby the suit has been decreed in terms of the award submitted by the Arbitrator and the said Award has been made the Rule of the court. 2. M/s Bharat Coking Coal Limited (hereinafter referred to as the BCCL), a company within the meaning of Sec. 617 of the Company Act invited tenders on 27.2.1975 for construction of certain quarters at Seraidhella in response to which one Durga Prasad submitted his tender, which was accepted on 16.5.1975 by the Senior Engineer of the BCCL, who was incharge of the works. The work was completed on 31.5.1977. 3. On account of certain differences between the parties, Durga Prasad contractor requested the BCCL to make a reference of the disputes to an Arbitrator as provided under Clause 23 of the Agreement No. 13 dated 1.10.1975. As no reference was made, the said Durga Prasad filed an application under Sec. 20 of the Act. The BCCL did not file any show cause by way of objection and, therefore, the court appointed arbitrator as per terms of the agreement and disputes between the parties were referred to the said Arbitrator. 4. The arbitrator after hearing the parties and considering the evidence adduced by them, submitted the Award, whereby the BCCL was liable to pay a sum of Rs. 2, 73, 136.82 paise to Durga Prasad. The Arbitrator also held that the BCCL was liable to pay simple interest at the rate of 15% per annum from 31.8.1977 till the date of payment of the aforesaid amount or the date of decree, whichever is later. 5. On 13.4.1989, the Arbitrator submitted the Award in court. The BCCL filed objection to the said award on 11.7.1989 and a rejoinder thereto was filed on behalf of the contractor Durga Prasad on 28.8.1989. 6. The trial court by the impugned judgment and decree dated 28.9.1992 passed in Title (Arbitration) Suit No. 46 of 1982/T.R. No. 70 of 1992 decreed the suit in terms of the Award, which was made Rule of the court. The said Award was also directed to form part of the decree. 6. The trial court by the impugned judgment and decree dated 28.9.1992 passed in Title (Arbitration) Suit No. 46 of 1982/T.R. No. 70 of 1992 decreed the suit in terms of the Award, which was made Rule of the court. The said Award was also directed to form part of the decree. The plaintiff Durga Prasad was held entitled to realise a sum of Rs, 2, 73, 136.82 P alongwith simple interest 15% per annum on the said amount from 31.8.1977 till the date of payment. 7. The defendant BCCL aggrieved by the aforesaid judgment and decree making the Award Rule of the court has preferred this appeal. 8. Mr. Debi Prasad, Senior counsel appearing on behalf of the appellants in his arguments raised the following questions. (a) whether the Award is vitiated due to non-consideration of the counter claim made by the appellants ? (b) whether the Arbitrator had the jurisdiction to award interest for the preference period and the rate of interest granted was excessive ? 9. It appears that according to the rejoinder filed by the BCCL before the Arbitrator, the total payment due to the contractor was Rs. 10, 52, 567.50 Paise only, against which payment of Rs. 10, 86, 508.25 P was made and, therefore, the BCCL claimed that the contractor was liable to refund the excess amount of Rs. 33, 940.75 P only to the BCCL alongwith interest. According to Mr, Prasad the said counter claim of the BCCL against the contractor was not considered by the Arbitrator. The defendant BCCL in its objection to the Award being made rule of the court raised this question and pleaded that the award was bad in law in view of the fact that the learned Arbitrator failed to take into consideration the counter claim of the opposite party against the claimant to the extent of Rs. 33, 940.75 Paise with interest thereon. 10. In connection with the second question, Mr. Prasad submitted that the Arbitrator in terms of Clause 7 of the Agreement held that the final bill was to be prepared by the opposite party within one month of the date of completion of the work and it may be that another two months would be taken by the opposite party for processing the final bills and making payment to the claimant. Since it was not done, the claimant was awarded payment of simple interest on the amount due from three months after completion of the work i.e. from 31.8.1977. The Arbitrator further held that interest 15% as claimed by the claimant was in order and it was lower than the minimum as prevalent for Bank advances and as such directed that the awarded amount shall carry simple interest 15% per annum from 31.8.1977 till the date of payment or the date of decree, whichever is later. 11. According to Mr. Prasad, the Arbitrator had no jurisdiction to grant interest for the preference period. In support of his contention he has relied upon the Supreme Court decision in the case of Executive Engineer, Irrigation Gali Mali and Ors. V/s. Abnaduta Jena -- in which it was held that the claimants are not entitled to claim interest for the period prior to the commencement of the Arbitration proceedings for the reason that the interest Act, 1839 does not apply to their case and there is ho agreement to pay interest or any usage of trade having the force of law or any other provision of law under which the claimants were entitled interest. 12. Further, the Supreme Court in the case of Eastern Construction Co. V/s. Regional Institute of Technology, Jamshedpur vide Civil Appeal No. 4603 of 1992 arising out of S.L.P. No. 4485 of 1992 disposed of on 23.10.1992 held that interest in regard to period prior to reference was not payable. 13. On the other hand, Mr. Kameshwar Prasad, Senior Counsel, appearing on behalf of the respondents submitted that on consideration of the contentions of the parties as well as the evidence on record, the Arbitrator held the claimant respondent to be entitled to a sum of Rs. 13, 59, 645.02 P and deducting the total payment of Rs. 10, 86, 508.20 P therein a further sum of Rs. 2, 73, 136.82 Paise was payable. As such there was no occasion to consider the alleged counter claim of Rs. 33, 940.75 Paise which according to the BCCL was the excess amount having been paid to the claimant. The BCCL calculated the said excess amount on the basis that the claimant was paid Rs. 10, 86, 588.20 Paise whereas the total work done was to the tune of Rs. 10, 52, 567.50 Paise only. 33, 940.75 Paise which according to the BCCL was the excess amount having been paid to the claimant. The BCCL calculated the said excess amount on the basis that the claimant was paid Rs. 10, 86, 588.20 Paise whereas the total work done was to the tune of Rs. 10, 52, 567.50 Paise only. Under the circumstances, the award cannot be said to be bad in law for non-consideration of the aforesaid counter claim of the BCCL. 14. With regard to the question of payment of interest for the pre-reference period, it was submitted on behalf of the respondents that in the instant case, since reference was made through the court and the question of interest on the amount of final bills from the date of completion i.e. 31.5.1977 till the date of payment at the rate of 15% per annum was also one of the terms of reference, the arbitrator had the jurisdiction and power to grant such interest and accordingly the same has rightly been granted. 15. In support of his contention, Mr. Kameshwar Prasad cited a Constitution Bench decision in the case of Secretary, Irrigation Department, Government of Orissa and Ors. V/s. G. C, Roy -- in which the following observations have been given: 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. 16. Since the parties are not challenging the amount held to have been payable to the claimant, in my opinion, the first question raised by Mr. Prasad relating to the counter claim is not tenable, the arbitrator found the claimant to have been entitled to the payment of the sum of Rs. 13, 596, 45.02 Paise for the works done and admittedly out of the same sum Rs. 10, 86, 508.20 Paise was already paid and, therefore, balance sum of Rs. 2, 73, 136.82 Paise was payable. In the circumstances, the counter claim, if any, made by the BCCL that the claimant was entitled to payment of total sum of Rs. 10, 52, 567.56 Paise only for the works done, whereas, he was paid Rs. 10, 86, 508.20 Paise was already paid and, therefore, balance sum of Rs. 2, 73, 136.82 Paise was payable. In the circumstances, the counter claim, if any, made by the BCCL that the claimant was entitled to payment of total sum of Rs. 10, 52, 567.56 Paise only for the works done, whereas, he was paid Rs. 10, 86, 508.25 Paise" and, therefore, he was liable to refund the excess amount of Rs. 33, 940.75, Paise no longer remains to be considered at all. The awajrd in question which has been made Rule of the court cannot, therefore, be said to have been vitiated for non-consideration of such counter claim. 17. So far as the award of interest for the pre-reference period is concerned, I find that the claim No. (if) which was referred to the Arbitrator for arbitration is as follows: Interest on the above from the date of completion i.e. on 31.5.1977 till the date of payment @ 15% per annum. 18. Therefore, one of the claiihs made by the contractor was related to the award of interest @ 15% per annum from the date of completion of the work till the date of payment of the awarded amount. In other words, the claim of interest was one of the matters referred to the Arbitrator. The arbitrator in para 7 of the award dealt with the matter and held that as the payment of final bills were not made to the claimant within three months from the date of completion of the work, he was entitled to 15% simple interest from 31.8.1977 i.e. three moths after completion of the work till the payment of the awarded amounts. 19. The general statutory provisions in regard to the award of interest by a court are contained in the Interest Act, 1839 and the Code of Civil Procedure in the interest Act, 1839, award of interest is provided upto the date of institution of the proceeding. But this power was not available to the Arbitrator. Provision of Sec. 34 of the Code of Civil Procedure also does not apply to Arbitration as Arbitrators are not courts within the meaning thereof. It is under the interest Act, 1978 wherein the expression court was defined to include an Arbitrator. Under the interest Act, 1839, it was not defined. But this power was not available to the Arbitrator. Provision of Sec. 34 of the Code of Civil Procedure also does not apply to Arbitration as Arbitrators are not courts within the meaning thereof. It is under the interest Act, 1978 wherein the expression court was defined to include an Arbitrator. Under the interest Act, 1839, it was not defined. The result is that in a case arising after the commencement of the Interest Act, 1978 (which came into force with effect from 19.8.1981) the Arbitrator has the same power as the Court, to award interest upto the date of institution of the proceeding. In the instant case, the Arbitration proceeding commenced some time in the year 1982 i.e. after the commencement of interest Act, 1978. 20. In Gujarat W.S. and S.B. V/s. Unit Erectors (Gujarat) (Pvt) Ltd. A.I.R. 1989 SC 1973 it was held that interest for the period prior to initiation of the proceeding can be granted in cases in which arbitrations were made after the commencement of the Interest Act, 1978 . 21. In this view of the matter in my opinion, the Arbitrator had the jurisdiction to grant interest for the pre-reference period only with effect from 19.8.1981, on which date the Interest Act, 1978 came into force. 22. Further, since the Arbitrator awarded interest @ 15% per annum on the consideration that the same was lower than the minimum rate of interest as prevalent for Bank advances and, therefore, it requires no interference and the said rate of interest is justified. 23. In the result, the judgment and decree under appeal is confirmed with the modification that instead of 31.8.1977, the respondent No. 1 shall be entitled to get interest @ 15% per annum from 19.8.1981 till the date of payment. 24. This appeal is disposed of accordingly. In the facts and circumstances of the case, there will be no order as to costs.