GOVERNMENT OF KARNATAKA v. A. PRABHAKAR REDDY — 1998 DIGILAW 754 (KAR)

ASHOK BHAN, J. ( 1 ) THIS appeal is directed against the order passed by the civil judge, yadgir in a. c. No. 2 of 1990, dated 6-6-1991 in confirming the award of the arbitrator dated 29th december, 1989 and making it a Rule of the court. ( 2 ) STATE of Karnataka (hereinafter referred to as 'the appellant') floated tenders for the construction of cross regulator-cum-escape regulator structure at k. m. 13. 705 of shahapur branch canal. The work was entrusted to the respondent on local competitive bidding tender basis as per the agreement dated 14/1984-85, dated 5-11-1984 by the executive engineer, id, ukp, sbc, division No. V, bheemarayanagudi, shahapur taluka, gulbarga district. The cost of the work as per the quoted rates of the respondent is Rs. 43,86,530/ -. Mark out was given on 8-11-1984. The stipulated period for completing the work was 10 months. The due date of completion was 7-9-1985. ( 3 ) THE work consisted of a combined structure of cross regulatorcum-escape regulator at k. m. 13. 705 of shahapur branch canal and it involved excavation for foundation in different strata, cement concreting for piers and abutments, rcc deck slab, reinforcement for rcc work and supplying and erection of radial and vertical gates after submitting designs and drawings and getting them approved by the department. During the course of execution of work certain disputes arose between the parties. On representation made by the parties, the dispute was referred to the sole statutory arbitrator as provided under the agreement for adjudicating the dispute between the two parties. Reference was entered upon by the sole arbitrator on 24-4-1989 and as per the notice issued by him on the same day, respondent filed his statement of claims on 11-5-1989 before the arbitrator and subsequently the appellant filed the counter-statement on 22-6-1989. The respondent thereupon filed the rejoinder to the counter-statement on 24-7-1989. ( 4 ) BOTH the parties presented their case on relevant records. Arguments and counter-arguments were put forth before the arbitrator during the course of hearing. After affording full opportunity to the parties to present their points of view on the disputes and having heard the parties, the arbitrator gave his award on 29th december, 1989. ( 5 ) RESPONDENT had put in 5 items of claim, (I) he claimed rate for rcc m-100 (new item) in lieu of ccm-100 at Rs. 300/- per cu. After affording full opportunity to the parties to present their points of view on the disputes and having heard the parties, the arbitrator gave his award on 29th december, 1989. ( 5 ) RESPONDENT had put in 5 items of claim, (I) he claimed rate for rcc m-100 (new item) in lieu of ccm-100 at Rs. 300/- per cu. m. extra over and above the quoted rate for item No. 3, schedule-b for the entire quantity executed, (II) equitable rates for radial and vertical gates at Rs. 63,977/- per metric tonne and Rs. 53,416/- per metric tonne respectively, (III)COMPENSATION for the loss of overheads in the extended period at Rs. 98,360/- per month from 7-9-1985 till completion, (IV) interest at 24% on all the amounts claimed from the dates they became payable to the date of reference, (V) pendente lite interest at 24% p. a. from the date of reference to the date of payment or date of decree, whichever is earlier. Claim for costs of arbitration were also made. Arbitrator gave his award respecting each of the items respectively as under: (i) respondents claim on item No. 1 was partially accepted. A rate of Rs. 240/- per cu. m. extra over and above the quoted rate for the entire quantity of work executed was granted under item No. 3, schedule b of the agreement, (ii) respondent's claim was partially accepted at the rate of Rs. 58,600 per tonne for radial gates and a rate of Rs. 51,750/- per tonne for vertical gates and all the hoisting arrangements like motor, gear box, rope etc. , were to be weighed and paid for the above said unit rates, (iii) respondent's claim was partially accepted and the compensation was awarded for the loss of overheads during the extended period at Rs. 43,860/- per month from October 1985 to April 1989 both months inclusive, (iv) interest at the rate of 18% per annum on the amount awarded under claim No. 1 from 6-10-1985 to the date of reference 24-4-1989. (v) pendente lite interest was denied. Future claim on interest from the date of award to the date of payment or the date of decree whichever is earlier at 18% per annum on all the amounts awarded except amount awarded in claim No. 4. Parties were left to bear their own costs of the arbitration proceedings. (v) pendente lite interest was denied. Future claim on interest from the date of award to the date of payment or the date of decree whichever is earlier at 18% per annum on all the amounts awarded except amount awarded in claim No. 4. Parties were left to bear their own costs of the arbitration proceedings. Cost of stamp paper was to be borne by the respondent. ( 6 ) ARBITRATOR filed the award passed and declared by him in respect of the points of dispute arising out and in connection with the contract agreement in the court of civil judge, yadgir, for making it the Rule of the court. Arbitrator along with his award submitted documents and connected papers to the court. Respondent requested the arbitrator to file the award before the court to make it the Rule of the court; appellant filed an application requesting the court to set aside the award. As per the objections regarding claim No. 1 was that the arbitrator misconducted himself in applying engineering skill technical which amounts to procedural misconduct. In respect of claim No. 2, relating to equitable rate of radial and vertical gates and rate per metric tonne, the arbitrator misconducted himself by including even the motor, gear box, etc. , for determining the rates on the basis of weight. Regarding item No. 3, it was stated that the arbitrator failed to take into consideration various facts and factors which influenced the conclusion to be arrived at. That there is a clear misconduct attributable to the arbitrator who awarded 10% in the cost of work divided by stipulated period of contract for arriving at the expenditure incurred by the claimant. Regarding interest it was pointed out that interest could not be awarded as the contract agreement did not contemplate payment of interest. This amounted to misconduct. ( 7 ) CIVIL court after a detailed discussion held that the award passed by the arbitrator is well reasoned and no grounds for setting aside the same were made out. That the arbitrator had neither misconducted himself or the proceedings nor the award had been improperly procured or was invalid on any ground. ( 8 ) COUNSEL for the parties have been heard. ( 9 ) WITH the help of the counsel for the parties we have gone through the award of the arbitrator and the order passed by the civil court. ( 8 ) COUNSEL for the parties have been heard. ( 9 ) WITH the help of the counsel for the parties we have gone through the award of the arbitrator and the order passed by the civil court. From the perusal of the award we find that the same is duly documented and well reasoned and supported by relevant case laws. Arbitrator has taken pains to itemise each claim separately and record findings thereon separately duly supported by reasons. Civil judge has upheld the award and made the Rule of the court by observing that neither the misconduct of the arbitrator himself nor misconduct of proceedings by him has been proved. Future interest from the date of decree till payment was granted at the rate of 12% per annum. ( 10 ) THE dispute between the parties may be determined by courts through judicial process or alternative method of settlement of dispute through arbitration proceedings. Invariably it is seen in contracts for execution of works there is a clause for settlement of the dispute through statutory arbitration. Statutory arbitration are regulated by statutory Provisions. The alternative method of settlement of dispute through arbitration is speedy and convenient process which is being followed throughout the world. Proceedings before the arbitrator were regulated at the relevant time by the Provisions of Arbitration Act, 1940 (hereinafter referred to as 'the act' ). Powers of the arbitrator are specified therein. act provides for arbitration with or without the intervention of a court and also provides for making the award Rule of the court and also passing decree in terms of the award. Section 3 provides that every arbitration agreement, unless a different intention is expressed therein, shall be deemed to include the Provisions set out in the first schedule insofar as they are applicable to the reference. The court has been given power under Section 30 of the act to set aside the award if it suffers from apparent error of law or if it is otherwise invalid. Award made by the arbitrator is final and binding on the parties and the persons claiming through them respectively. ( 11 ) COURTS have limited jurisdiction to set aside the award. Award made by the arbitrator is final and binding on the parties and the persons claiming through them respectively. ( 11 ) COURTS have limited jurisdiction to set aside the award. Power to set aside the award are circumscribed by Section 30 of the act which provides that the award shall not be set aside, except on any one or more of the grounds namely:" (A) that an arbitrator or umpire has misconducted himself or the proceedings; (b) that an award has been made after the issue of an order by the court superseding the arbitration or after arbitration proceedings have become invalid under Section 35; (c) that an award has been improperly procured or is otherwise invalid". ( 12 ) APPELLANT's case before the civil court was that the arbitrator had misconducted him self and the proceedings which would fall under clause (a ). No objections to set aside the award under clauses (b) and (c) were put forth before the court below. ( 13 ) IT is well settled principle of law that in arbitration matter when the parties have chosen to refer their dispute to the arbitrator to be adjudged for adjudication of their dispute, they cannot, when the award is good on the face of the award object to the decision either upon law or on facts. The award can be set aside either on the ground of misconduct of the arbitrator or misconduct of the proceedings or that the award was made after the issue of an order by the court superseding the arbitration or after arbitration proceedings have become invalid under Section 35 or that the award had been improperly procured or otherwise invalid. The award of the arbitrator cannot be set aside unless it falls in any of the exceptions carved out under Section 30 of the act. The jurisdiction of the court for setting aside the award cannot be lightly exercised. In the instant case, the arbitrator has set out the claim items 1 to 5 of the claimant and passed a speaking award recording his findings on the basis of evidence produced by the parties. In the circumstances, unless it is shown that the arbitrator misconducted himself or the proceedings, challenge to the award of the arbitrator cannot be sustained. ( 14 ) GOVERNMENT Advocate did not address any arguments on claim item nos. 1 to 3. In the circumstances, unless it is shown that the arbitrator misconducted himself or the proceedings, challenge to the award of the arbitrator cannot be sustained. ( 14 ) GOVERNMENT Advocate did not address any arguments on claim item nos. 1 to 3. The only submission made by him is that the arbitrator has misconducted the proceedings in awarding interest for pre-reference period and the post-award period and according to him the respondent was not entitled to any interest for the prereference period or the postaward period on the analogy on which the arbitrator denied pendente lite interest. We do not find any substance in this submission. Arbitrator has denied pendente lite interest relying upon a judgment of the Supreme Court in Executive Engineer (irrigation), Balimela and others v Abhaduta Jena and others, which stands overruled and held to be no longer a good law by a Constitution bench of the Supreme Court in secretary, irrigation department, Government of Orissa and others v G. C. Roy. It has now been held that the arbitrator can award interest pendente lite having regard to the facts and circumstances of the case for doing complete Justice to the parties in a claim for interest made by the parties, provided the agreement does not contain anything to the contrary. ( 15 ) ABHADUTA jena's case, supra, did not deal with the point of grant of interest on pre-reference or post-award period. Tribunal denied the interest pendente lite but granted the interest for the pre-reference or post-award period. Respondent has not filed any cross-appeal or crossobjections claiming interest pendente lite. In the absence of cross-appeal or cross-objections, the award denying interest pendente lite is affirmed although the law as it stands today is otherwise. (16 ) FOR the pre-reference period the position has been clarified by a recent judgment of the Supreme Court in Sudhir Brothers v Delhi Development Authority, wherein it has been held that the arbitrator has the power and jurisdiction to award interest for the period between the making of reference to the arbitrator and entering upon the reference after coming into force of the interest Act, 1978. It has been held:"thus the law is now well settled that the arbitrator has the power and jurisdiction to grant pre-reference interest in references made after the coming into force of the interest Act, 1978. It has been held:"thus the law is now well settled that the arbitrator has the power and jurisdiction to grant pre-reference interest in references made after the coming into force of the interest Act, 1978. The division bench of the high court was thus clearly in error in holding that the arbitrator had no jurisdiction to award interest from 1-4-1984 till 8-2-1985 (pre-reference period) in the post-interest Act, 1978 era. So far as the grievance of the appellant pertaining to the disallowance of the claim of Rs. 23,685 under clauses 1, 3 and 4 is concerned, we do not find any error to have been committed by the high court. The above view of the division bench therefore, cannot be sustained". as the present case relates to a period subsequent to the period of coming into force the interest Act, 1978, the respondent shall be entitled to the interest for the pre-reference period. Award of the arbitrator for granting interest for pre-reference period is therefore has to be confirmed. ( 17 ) SIMILARLY for the post-award period the Supreme Court in B. V. Radhakrishna v Sponge iron India limited , has held that the arbitrator has the jurisdiction in the given facts and circumstances of the case, to award interest for the post-award period i. e. , from the date of making of the award to the date of payment or date of decree whichever is earlier. ( 18 ) A feable attempt was made by the government pleader to argue that interest at the rate of 18% awarded by the arbitrator is on the higher side. There is hardly any substance in this submission. Arbitrator after referring to the respective evidence led by the parties and relying upon the overdraft account statement and the private borrowal produced by the respondent which were duly verified by the ca, held that the respondent had borrowed money to keep the contract surviving in its performance. Keeping in view interest paid by the respondent on the borrowals, the rate of interest was determined at 18% per annum instead of 24% which was claimed by the respondent. Granting of interest at the rate of 18% per annum in the face of the evidence produced by the respondent is just and reasonable and it cannot be said that the arbitrator misconducted the proceedings by awarding the interest at the rate of 18% per annum. Granting of interest at the rate of 18% per annum in the face of the evidence produced by the respondent is just and reasonable and it cannot be said that the arbitrator misconducted the proceedings by awarding the interest at the rate of 18% per annum. ( 19 ) CIVIL court has reduced the rate of interest to 12% per annum from the date of making the award Rule of the court and passing of the decree which again is just and proper. In any case the respondent has not filed any cross-appeal/cross-objections claiming higher rate of interest. ( 20 ) COUNSEL for the appellant has failed to point out any circumstance to show either the personal misconduct of the arbitrator or the proceedings by him. The award made by the arbitrator is held to be fair and just in the given facts and circumstances of the case. The judgment and decree passed by the civil court in making the award a Rule of the court is therefore affirmed. Parties shall bear their own costs. --- *** --- .