Research › Search › Judgment

Rajasthan High Court · body

2005 DIGILAW 3087 (RAJ)

Parasmal Parakh v. State of Rajasthan

2005-11-22

VINEET KOTHARI

body2005
Judgment Vineet Kothari, J.-These two cases arise out of the order passed by the learned District Judge, Sri Ganganagar on 14.02.2003 deciding the Civil Misc. Case No. 8/2000 “M/s Parasmal Parakh vs. State of Rajasthan through Chief Engineer, IGNP & Ors.” and another Civil Misc. Case No. 9/2000 “State of Rajasthan vs. M/s Parasmal Parakh & Ors.” 2. The petitioner-Contractor undertook a contract with IGNP, a department of State of Rajasthan and on account of non-supply of water at the disputed site, the work in question could not be completed by the said Contractor and on account of dispute arising as a result of the same, the matter was referred to the Arbitrator as per Clause 23 of the contract between the parties. The Arbitrator passed an award in favour of Contractor on 08.07.2000 awarding a sum of Rs. 1,04,553/-exclusive of interest for the incomplete work done by the Contractor. 3. The State filed an application under Section 30 of the Arbitration Act, 1940 (for short “the Act of 1940” hereinafter) for setting aside of the said award whereas, the Contractor filed the application before the Court under Sections 15 and 16 of the Act of 1940 for modification of the award. 4. The Court below by the impugned order dated 14.03.2000 while rejecting the application under Section 30 of the Act of the State, against which the State has filed a connected Civil Misc. Appeal No. 920/2004, partially allowed the application of the Contractor for modification to the extent that it allowed interest @ 15% per annum from 18.08.1993, the date from which the arbitration proceedings were commenced till the date of passing of the award dated 08.07.2000 and from 08.07.2000 till 14.02.2003 @ 15% per annum and @ 9% per annum from the date of decree dated 14.02.2003 till the date of payment. However, no interest for the pre-reference period was allowed by the Court below. The Court below also did not make any direction for refund of security deposit in favour of the Contractor saying that it was beyond the scope of Sections 15 and 16 of the Act. Therefore, neither modification nor remitting back of this issue was permitted. The third issue on which the Contractor claimed a sum of Rs. The Court below also did not make any direction for refund of security deposit in favour of the Contractor saying that it was beyond the scope of Sections 15 and 16 of the Act. Therefore, neither modification nor remitting back of this issue was permitted. The third issue on which the Contractor claimed a sum of Rs. 1,40,000/-was about loss of expected profit, which the Contractor would have earned had there been no breach of contract on the part of the respondent- Irrigation Department. 5. I have heard learned Counsels and perused the record. 6. As far as the appeal filed by the State against the rejection of application under Section 30 of the Act is concerned, no ground is made out for interfering with the finding of the Court below rejecting the application under Section 30 of the Act as, the Arbitrator cannot be said to have mis-conducted in any manner in giving the said award nor the said award can be said to have been improperly procured or invalid in any other manner. Therefore, the Appeal No. 920/2004 filed by the State has no merit and deserves to be rejected and the same is accordingly dismissed. 7. As far as revision petition filed by the Contractor is concerned on the issue of interest, learned Counsel for the petitioner Mr. Vikas Balia has cited before me the following Judgment s. 8. In Executive Engineer, Dhenkanal Minor Irrigation Division, Orissa, etc. vs. N.C. Budharaj (Dead) by L.Rs. etc., reported in AIR 2001 SC p. 626, wherein dealing with a case arising under the Act of 1940, the Court by majority held that it is beyond comprehension as to why and for what reason and with what justification the arbitrator should be denied only the power to award interest for the pre-reference period when such interest become payable and has to be awarded as an accessory or incidental to the sum awarded as due and payable, taking into account the deprivation of the use of such sum to the person lawfully entitled to the same. 9. 9. Again the Honble Supreme Court in T.P. George vs. State of Kerala & Anr., reported in AIR 2001 SC 816 , while dealing with a case arising under Arbitration and Conciliation Act, 1996, to the same effect held that the Arbitrator can award interest for the pre-reference period also and thus, the Court held that the interest can be awarded in all the four stages of the arbitration proceedings viz. (1) from the stage of accrual of cause of action till filing of the arbitration proceedings, (2) during pendency of the proceedings before arbitrator, (3) future interest arising between date of award and date of the decree and (4) interest arising from date of decree till realisation of award. 10. The power of Court to grant interest from the date of decree is not in doubt. This well settled position of law was again reiterated by the Honble Supreme Court recently again in a case arising under Arbitration Act, 1940 in B.L. Gupta Construction (P) Ltd. vs. Bharat Co-operative Group Housing Society Ltd., reported in 2004 (1) SCC 110 . 11. Thus, there seems to be no dispute on this position of law that pre-reference interest can also be awarded in favour of the Contractor. The learned Court below however, refused to award any interest and sought to distinguish the binding precedent of the Honble Supreme Court in T.P. Georges case (Supra), merely by observing that the said law was laid down under the Act of 1996 and therefore, the same could not be applied to the case in hand which arose under the Act of 1940. With due respect, this can hardly be a ground for denying the appropriate relief to the Contractor. There is no contradiction in the provision of two Acts in this regard. Moreover, two other Judgment s arising under the Act of 1940 itself lay down the same proposition. Therefore, the interest for pre-reference period on the same analogy deserves to be awarded in favour of the Contractor and therefore, the modification under Section 15 of the Act ought to have been allowed by the Court in the present case also. 12. Accordingly, it is apparent that the Contractor would be entitled to interest for the pre-reference period from the date of arising of the cause of action till the date of reference to the Arbitrator. 12. Accordingly, it is apparent that the Contractor would be entitled to interest for the pre-reference period from the date of arising of the cause of action till the date of reference to the Arbitrator. The Court below will compute this interest and pass necessary orders in terms of this Judgment . 13. As far as refund of security deposit is concerned, again there appears to be no justification on the part of learned Court below in not directing the refund of the said security deposit. Once, it was held while deciding the issue by the Arbitrator as well as the Court below, that the contract in question could not be completed by the Contractor on account of breach of contract by the respondent-Department due to non-supply of water, the respondent-Department could not detain the refund of security deposit which was taken from the Contractor. The respondent-Department is accordingly, directed to refund the said security deposit with interest to the Contractor. The said security deposit is said to be lying in the form of Fixed Deposit with same Bank and the same is with the respondent-Department. The same deserves to be encashed to be paid back to the Contractor with interest. The learned Court below will pass necessary directions in this regard to refund the security deposit with interest within a period of three months from today. If , the said security deposit is not in from of Fixed Deposit or maturity date of such Fixed Deposit has expired, the said amount of security deposit shall bear interest @ 9% per annum from the date of deposit till the date of refund and interest if any, paid by the Bank of Fixed Deposit, shall be adjusted against such 9% per annum interest. 14. The third issue raised by the learned Counsel for the petitioner is that the Court below ought to have computed some amount on the ground of loss of profit suffered by the Contractor. He has drawn the attention of the Court towards Issue No. 7 decided by the Arbitrator, wherein though, the Arbitrator held that “The claimant happens to be entitled to compensation from the respondent from losses sustained in consequences of non performance of reciprocal promises by the respondent contained in the contract agreement but claimant has not supported his claim by proper record of expenditure incurred in this regard. Hence, the claim of the petitioner/Contractor is not sustained.” 15. Learned Counsel for the petitioner has cited the Judgment of the Honble Supreme Court in M/s. A.T. Brij Paul Singh and Bros., vs. State of Gujarat, reported in AIR 1984 SC 1703 wherein, the Court held that “now if it is well established that the respondent was guilty of breach of contract inasmuch as the recission of contract by the respondent is held to be unjustified, and the plaintiff-contractor, had executed a part of the works contract, the contractor would be entitled to damages by way of loss of profit.” The Court however, held in the same Judgment in Para 9 that what must be the measure of profit and what proof should be tendered to sustain the claim are different matters. But, the claim under this head is certainly admissible. 16. Learned Counsel, therefore, submits that it was duty of the Court under these circumstances to estimate such loss of profit once the breach of contract on the part of respondent-Department was established and accepted by the Arbitrator as well as the Court. 17. However, I do not feel persuaded to direct the Court or Arbitrator to compute and award any compensation against the loss of profit at this stage in revisional jurisdiction particularly, when it has come on record that the Contractor failed to produce any material on record showing or establishing any loss of profit suffered on account of such non-performance of contract by the Department. 18. Learned Counsel for the petitioner has also raised point relating to non-award of certain amounts by the Arbitrator against some works done. It is too late in the day now to consider this aspect of the matter in revisional jurisdiction and it was for the Contractor to establish such claim before the Arbitrator only. 19. Accordingly, this revision petition filed by the Contractor is partly allowed and the learned Court below is directed to modify the award of the Arbitrator in respect of the interest for pre-reference period as indicated above and refund of security deposit with interest as indicated above. 20. The revision petition is accordingly partly allowed with no orders as to cost.