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2006 DIGILAW 989 (DEL)

THERMOSPARES INDIA v. B. H. E. L.

2006-05-26

SANJAY KISHAN KAUL

body2006
SANJAY KISHAN KAUL, J. ( 1 ) THE respondent BHEL invited tenders for erection, testing and commissioning of pressure parts of B oiler Units I and II at Panipat Thermal Power Project, panipat in 1976. The petitioner submitted its ten der, which was tintent was issued by t he respondent. The respondent issued the work order No. 60049 dated 3. 11. 1976 to the petitioner for unit I for a total value of Rs. 12,34,200/- and during the execution of the said work - 10. 5. 1977 also awarded pressure parts work of Unit II ttioner as per the work order dated 10. 5. 1977. ( 2 ) THE respondent further invited tenders for erection of external pipelines and auxiliaries of Units I and II and the tender of the petitioner was found to be the lowest, which was accepted and the letter of intent issued on 13. 6. 1977. The work order No. 60060 dated 17/22. 08. 1977 was placed on the petitioner for a total value of Rs. 12,37,440/ -. ( 3 ) THE work was completed and according to the respondent all the payment due to the petitioner was made. The communications between the parties, however, show that the petitioner raised certain claims and in view of the disputes filed petitions under Section 20 of the Arbitration Act, 1940 (hereinafter referred to as the said Act) in this Court, which was registered as Suit No. 305a/1985 and 304a/1985. The petitions related to work order No. 60060 and 60049 respectively. The petitions were disposed of only on 8. 1. 1994 referring their disputes to arbitration in terms of the Arbitration Clause between the parties, the disputes being as set out in para 12 of the petitions. ( 4 ) THE General Manager of the respondent vide letter dated 24. 7. 1998 appointed shri Ashok Kumar, as the Sole Arbitrator. It may be noticed that Shri Ashok kumar is an Engineer by qualification and a retired AGM of the respondent. The arbitrator made and published his awarded dated 27. 7. 2000. The respondent aggrieved by the same has filed the objections under Sections 30 and 33 of the said Act. ( 5 ) LEARNED counsel for the respondent has advanced the submissions at length taking this Court through the various documents and pleadings. The arbitrator made and published his awarded dated 27. 7. 2000. The respondent aggrieved by the same has filed the objections under Sections 30 and 33 of the said Act. ( 5 ) LEARNED counsel for the respondent has advanced the submissions at length taking this Court through the various documents and pleadings. Learned counsel did initially seek to contend that there was no proper appreciation of the evidence by the Arbitrator but learned counsel was put to notice that in view of a catena of judgements of the Apex Court that would not be the scope of scrutiny by the Court in the present proceedings. As far as the claims are based on appreciation of evidence, the same cannot be rescrutinised by this Court as that would amount to this Court sitting as a Court of appeal, which is not permissible. It is not for this Court to interfere with an award merely on the basis that the Court would come to a different conclusion on the material available before the Arbitrator. The legal position in this behalf has been elucidated in Food Corporation of India v. Joginderpal Mohinderpal and Anr. , (1989) 2 SCC 347 and by the Division Bench of this Court in DDA v. Bhagat constructon Co. Pvt. Ltd. , 2004 (3) Arb. LR 481. It has been held that in the absence of the award being absurd, reasonableness is not a matter to be considered by the Court, as appraisement of evidence by an Arbitrator is not ordinarily a matter for the Court. In fact in M/s Sudarsan Trading Co. v. Govt of Kerala, AIR 1989 SC 890 , it has been held that the interpretation of a contract is a matter for the Arbitrator and the Court is not to substitute its own decision for that of an Arbitrator. So long as the view taken by the arbitrator is plausible, though perhaps not the the only correct view, the award cannot be examined by the Court. In both Arosan Enterprices Ltd v. Union of india and Anr; 1999 (3) Arbitration Law Reporter 310 and State of UP v. Allied constructions, (2003) 7 SCC 396 , it has been reiterated that Section 30 of the said Act is restrictive in its operation and unless one of the conditions specified therein is satisfied an award cannot be set aside. The Arbitrator is a judge chosen by the parties and his decision is final. Thus, error apparent on the face of the record would not imply closer scrutiny on merits of the documents and material on record. ( 6 ) IF the aforesaid tests are applied to the objections filed by the petitioner a number of them would fall by the wayside. ( 7 ) LEARNED counsel for the petitioner, despite this legal position, sought to canvass that there are claims where there is total absence of evidence and thus at least to that extent the scrutiny of the Court is not precluded. Further, it was contended that the award was in violation of the specific clauses of the contract and since the Arbitrator was a creature of the Contract, the Arbitrator was bound to follow the terms as set out in the Contract. Some of the claims made by the petitioner were stated to have been given up even prior to the commencement of the Arbitration proceedings. The basic sub-stratum of the submissions of the learned counsel for the respondent rested on the plea that the petitioner had given No Claim Certificates as far back as 1979/1980 and once all the matters regarding financial implications stood settled, it was not open to the Arbitrator to have awarded the amount. The petitioner not having challenged the No Claim Certificate, the respondent contended that a plea of payment beyond the No Claim Certificate was not admissible. ( 8 ) IN order to appreciate the aforesaid plea of the respondent, the stand of the petitioner in this behalf has to be kept in mind, which is that the dispute is not really so much in respect of the work originally envisaged under the contract but in respect of the variation arising from the direction of the respondent for TIG welding joints and extra joints. It was, thus, the contention that the Arbitrator has considered this aspect and awarded amounts on that account since the No Claim Certificate could not be construed as settlement of the said two claims. It was, thus, the contention that the Arbitrator has considered this aspect and awarded amounts on that account since the No Claim Certificate could not be construed as settlement of the said two claims. The signatures on the No Claim Certificate have not been denied by the petitioner but the additional plea is that the No Claim certificate form a part of the documents for payment in a pre-format form and the petitioner would not have been entitled to even the undisputed amounts, if that Certificate had not been signed. The submission thus is that what is called a No Claim Certificate in the present case has to be distinguished from a certificate issued by a party post negotiations of the respective claims of the parties where one party agrees to accept the same in full and final satisfaction of all the claims. ( 9 ) LEARNED counsel for the petitioner drew the attention of this Court to the No claim Certificates. In respect of the Contract No. 60049, the No Claim certificate is dated 24. 9. 1979. It is in a printed format giving the total work carried out, total payments made and the balance payment to be made. It also contains a printed certification to the effect that the Contractor has no further claim under the Agreement/work order. It may, however, be noticed that at the end of the said certification, the Contractor/petitioner has added the words except as otherwise . It is also really not in dispute that the said document formed a part of the set of documents to be signed by the Contractor for release of payment. There is also another certificate styled as certificate to be furnished by the Contractor? in the printed format stating that the work done and the payment for the labour or material supplied had been made in full and final satisfaction of all the claims of the Contractor. ( 10 ) LEARNED counsel for the respondent also drew the attention of this Court to a letter dated 24. 1. 1983 of the petitioner stating that all the bills of the petitioner had been cleared and settled except for an amount of Rs. 12,000/- left to be paid against the final bill. The refund of Rs. 3,611. 86/- deducted towards security against labour was sought in addition to the same vide the said letter. 1. 1983 of the petitioner stating that all the bills of the petitioner had been cleared and settled except for an amount of Rs. 12,000/- left to be paid against the final bill. The refund of Rs. 3,611. 86/- deducted towards security against labour was sought in addition to the same vide the said letter. The letter also stipulates that the petitioner was withdrawing the earlier letter dated 23. 8. 1982. This was followed up by another letter dated 8. 2. 1983 withdrawing the earlier letter dated 18. 1. 1983 and stating that there was no claim on account of interest. A request was also made in view thereof to clear the final bill. The letter dated 18. 1. 1983 is available whereby interest had been claimed on account of delay in payment. ( 11 ) LEARNED counsel for the respondent referred to the admission/denial of document carried out in the Arbitration proceedings to point out that insofar as the No Claim Certificates dated 24. 9. 1979 and 5. 4. 1980 are concerned, the signatures of Shri Y. K. Jain on behalf of the petitioner were not disputed but it was stated that the certificate pertained only to the running bills and had no relevance to the extra work of TIG welding. Similarly the letter dated 24. 1. 1983 referred to above was also not disputed but the endorsement stated that the same pertained to the clearance of running bills for the work originally allotted. Learned counsel submitted that even the so called extra work had been completed by the relevant date and admittedly there was no separate work order given. It was thus submitted that the No Claim Certificates amounted to a final settlement of all the claims of the petitioner. ( 12 ) LEARNED counsel for the respondent submitted that the plea of the petitioner about these No Claim Certificates has been referred to in the Award but the arbitrator came to the conclusion that the same were required to be signed by the petitioner before receiving any payment and thus the No Claim Certificates are obtained without free consent as the payments lying with the respondent would not have been released without signing the No Claim Certificate. Learned counsel contended that the statement of claim filed by the petitioner was cryptic and there was no such plea raised about the absence of any free consent or any duress on the part of the respondent. Not only that, even prior to the institution of the petition the petitioner had not raised the issue about any such absence of free consent or duress till the filing of the petitions under section 20 of the said Act. ( 13 ) LEARNED counsel for the respondent relied upon the judgement of the Apex court in Nathani Steels Ltd. Vs. Associated Constructions 1995 Supp (3) Supreme court Cases 324. It was held that once there is a full and final settlement in respect of any particular dispute or difference in relation to a matter covered under the Arbitration Clause then such a dispute or difference does not remain as an Arbitrable dispute and the Arbitration Clause cannot be invoked. The plea that the settlement recorded was under a mistake was repelled as the same would amount to the sanctity of the Contract being lost as settlement was also a contract. Thus one party would obtain benefit under the settlement and would then question the same on a ground of mistake without having the settlement set aside. The pre-requisite, however is that there should be an amicable settlement by and between the parties and a full and final payment as per the settlement. The same principle has been reiterated in Union of India Vs. Popular Builders, Calcutta (2000) 8 SCC 1 . Learned counsel for the respondent referred to the 9th proceedings held before the Arbitrator on 4. 9. 1999, which recorded the contentions of the parties. The contention of the petitioner recorded therein is that the claim under Contract 60049 had arisen as a consequence of change of welding specifications from Arc welding to TIG welding during the course of execution of work for which the additional expenses had to be incurred. Ad hoc payments were made for this amounting to Rs. 93,578. 90, however, later on the respondent arbitraly sanctioned an amount of Rs. 61,517. 28 on 26. 4. 1979 for each unit of additional work and instead of making further payment deducted from the running bills cost of argan gas supplied by the respondent. The deduction made for argan gas was Rs. 1,23,967. 93,578. 90, however, later on the respondent arbitraly sanctioned an amount of Rs. 61,517. 28 on 26. 4. 1979 for each unit of additional work and instead of making further payment deducted from the running bills cost of argan gas supplied by the respondent. The deduction made for argan gas was Rs. 1,23,967. 74, which was more than the total amount of Rs. 1,23,034. 56 paid for the additional work, though the petitioner had incurred huge expenses on labour, argan gas, etc. and over heads due to these changes in specifications. The payment to TIG welders was stated to be much higher than other welders. The No Claim Certificate issued by the petitioner for running bills was submitted as not relevant for the extra work and the same were given under duress as the bank guarantee and other payments were not being released. Learned counsel for the respondent, however, submitted that this plea sought to be orally advanced on behalf of the petitioner did not form a part of the statement of claim nor was any correspondence placed on record to substantiate this stand of the petitioner from the date of the final bill till the invocation of the Arbitration. ( 14 ) LEARNED counsel for the respondent contended that the position on the issue of the No Claim Certificate was similar even in respect of the other Contract no. 60060. Learned counsel referred to the final bill dated 21. 10. 1981 which contains the memorandum of payments. The total value of work done is stated at rs. 14,88,228. 24 while the total value as per the original contract was rs. 12,37,440/ -. It was thus contended that the final bill included the extra work. This bill also contains the endorsement that there is no further claim under the Agreement/work order. As in the case of other contract, an endorsement was made except as per Annexure I attached but the same was scored out and countersigned by the Contractor. The total amount recoverable is shown in Minus (-) being Rs. (-)3,611. 86, thus amount was actually recoverable from the petitioner. Insofar as the security deposit was concerned the endorsement states that the security deposit would be released after April 1981 being one year from the completion of the work. ( 15 ) LEARNED counsel drew the attention of this Court to the letter dated 12. 6. (-)3,611. 86, thus amount was actually recoverable from the petitioner. Insofar as the security deposit was concerned the endorsement states that the security deposit would be released after April 1981 being one year from the completion of the work. ( 15 ) LEARNED counsel drew the attention of this Court to the letter dated 12. 6. 1984 of the petitioner in respect of the final bill against the second work order seeking payment of Rs. 5,000/- withheld to complete the balance work during shut down. On the said letter the respondent issued a certificate that no work was being carried out by the petitioner during the shut down period and thus the withheld money of Rs. 5,000/- be released to the petitioner. The further endorsement is that this being the final payment all formalities be completed. Learned counsel thus submitted that as per the own case of the petitioner in 1984 only a sum of Rs. 5,000/- was payable. It is in view thereof that when the arbitration Clause was invoked the respondent in its letter dated 3. 1. 1985 had stated that only a sum of Rs. 5,000/- was withheld against the work order and more than three years had passed since the final measurements were settled, the net recovery to be made was Rs. 3,611. 86 and thus the balance amount payable out of Rs. 5,000/- was Rs. 1,305. 14 after recovering income tax of Rs. 83/- and for this amount advance stamp receipt was sought from the petitioner. It was submitted that since advance receipt was never submitted the payment could not be made. ( 16 ) LEARNED counsel for the petitioner seriously disputed this concept of final settlement specially conscious of the fact that the same would be fatal to practically all the claims made by the petitioner. ( 17 ) LEARNED counsel for the petitioner emphasised that the so called settlements and certificates were ?dotted lines? settlements and the bills of the petitioner would not have been paid but for signing the same. In respect of the Contract no. 60049 even the words ?except as otherwise? had been endorsed. In any case the aspect of TIG welding joints and extra joints was contended to be separate and in this behalf learned counsel referred to the minutes of the meeting held on 25. 4. 1979. In respect of the Contract no. 60049 even the words ?except as otherwise? had been endorsed. In any case the aspect of TIG welding joints and extra joints was contended to be separate and in this behalf learned counsel referred to the minutes of the meeting held on 25. 4. 1979. The relevant extract of the said minutes are as under:"after discussions, it was settled that (a) the claim on extra tig welder joints (Bill No. 30/bhel/ptp/78-79 against work order No. 529/va/103/60049 and Bill No. 26/bhel/ptp/78-79 against work order No. 07/ppn/60049 dated 10. 5. 1977, belonging to Jan. 10, 79 and 10. 1. 78 respectively) will be settled on the same terms and conditions as were settled for M/s. Northern India Erectors, Badarpur, and adjustment made for the advances already paid to them on this account. (b) The extra claims regarding the extra joints for piping namely, Bill no. TSI/epi/179 dated 26. 3. 79 for Rs. 2,63,600 and TSI/epi/180 dated 26. 3. 79 for rs. 2,64,200 were settled to Rs. 77,315. 60 (Rupees seventy seven thousand three hundred fifteen and paise sixty only) as per the annexure attached. An amount of Rs. 65,000/- will be released to effect immediate labour payment and the balance set off against the dues of M/s. Thermospares to BHEL. " ( 18 ) LEARNED counsel submitted that the reading of the aforesaid would show that the claim for TIG welding was to be settled on the same conditions as M/s. Northern India Erectors and in respect of the extra joints for piping were to be settled as per para 3 (b) referred to above. ( 19 ) LEARNED counsel submitted that the respondent made even part payments on 22. 9. 1983 and 17. 12. 1984 and thus full and final satisfaction would not have been accorded as there would have been no reason to make these part payments. ( 20 ) LEARNED counsel for the petitioner referred to some of the communications to throw light on how the issue of extra work was understood by the parties as also in respect of the No Due Certificate. In this behalf learned counsel referred to the letter dated 2. 5. 1980 of the respondent referring to the fact that the work order was closed after ?obtaining? No Due Certificate. In this behalf learned counsel referred to the letter dated 2. 5. 1980 of the respondent referring to the fact that the work order was closed after ?obtaining? No Due Certificate. Learned counsel thus emphasised the fact that the No Due Certificate was obtained by the respondent from the petitioner. In reply to the same the petitioner addressed a communication dated 22. 5. 1980 to state that the actual cost does not include over head charges and requested for refund of all excesses and illegal recoveries made. It was further stated that the No Due Certificate did not mean that the petitioner cannot challenge illegal recoveries and legal claims. ( 21 ) THE bills for TIG welding dated 10. 1. 1979 and 11. 10. 1980 were submitted by the petitioner at the extra rate of Rs. 300/- per metric tonne. ( 22 ) I have considered it appropriate to examine this issue with detailed reference to the factual matrix and documents on record which in normal circumstances would not be so required. It has been necessitated in the present case on account of the fact that the very sub-stratum of the claims of the petitioner suggest the absence of any final settlement. This issue has been raised even before the Arbitrator as a preliminary issue. After a full and final settlement has been arrived at, it cannot be said that the Arbitrator would still go into this issue and determine the respective claims. The Court does not sit in appeal over an award nor does it like to interfere with an award specially when it has been made by an expert. The Arbitrator in the present case is undoubtedly technically qualified to go into the disputes. This principle has been set out in Jagdish Chander Vs. Hindustan Vegetable Oils corporation and Anr. AIR 1990 Delhi 204. However in view of the judgement in nathani Steels Ltd. Case (Supra) and as followed in Union of India Vs. Popular builders, Calcutta case (Supra) this aspect certainly is required to be examined and would fall within the purview of scrutiny by the Court under Section 30 of the said Act. AIR 1990 Delhi 204. However in view of the judgement in nathani Steels Ltd. Case (Supra) and as followed in Union of India Vs. Popular builders, Calcutta case (Supra) this aspect certainly is required to be examined and would fall within the purview of scrutiny by the Court under Section 30 of the said Act. ( 23 ) THE Arbitrator did take cognizance of this plea but on examination of the pleadings and submissions has found that the certificate was prepared and was required to be signed along with the bill and was thus without the free consent as the payment lying with the respondent would not have been released to the petitioner. Such a plea can be examined by an Arbitrator but the sub-stratum of the same must be laid. A perusal of the statement of claim filed by the petitioner shows that it is cryptic and no such plea has been set out. The petitioner had filed a petition under Section 20 of the said Act and the disputes forming subject matter of these objections were referred to arbitration. However, the claims of the petitioner have to be tested on this touchstone, as the reason for rejection of the plea of the respondent of a final settlement has been found by the Arbitrator to be the absence of free consent on the part of the petitioner. This is a specific plea, which was required to be raised and has not been so raised. ( 24 ) EVEN if it be assumed that the fact that such a certificate was required to be issued at the stage of finalisation of the bills would imply there is some inherent duress as the petitioner would not have recovered the amounts in the absence of the said certificate, the conduct of the petitioner soon thereafter would be important. In case of such absence of consent or duress the least that is expected is that the petitioner would address the issue to the respondent at least on receipt of the balance payment. There has been absence of any such communications despite a period of more than three years having passed prior to the filing of the petitions under Section 20 of the said Act. In fact, the communications addressed by the petitioner on 8. 2. 1983 and 18. 1. There has been absence of any such communications despite a period of more than three years having passed prior to the filing of the petitions under Section 20 of the said Act. In fact, the communications addressed by the petitioner on 8. 2. 1983 and 18. 1. 1983 in respect of contract No. 60049 seem to suggest that the petitioner had accepted that only the amount set out therein were recoverable from the respondent. The minutes of the meeting held on 25. 4. 1979 relied upon by the petitioner itself would show that both parties were conscious of the issue arising from the claim of the petitioner for TIG welding and for extra joints. The respondent vide its letter dated 20. 10. 1980 had relied upon the said minutes and had taken a categorical stand that no further payments were outstanding in that behalf and the bills raised by the petitioner were returned in original. ( 51 ) LEARNED counsel for the petitioner, on the other hand, contended that the award of such interest was within the domain of the Arbitrator. ( 52 ) LEARNED counsel for the respondent referred to the judgement of this Court in dsa Engineers (Bombay) Vs. Housing and Urban Development Corporation (HUDCO) 2004 (2) Arb. LR 33 (Delhi), where it was observed in para 14 as under:-"the next objection i. e. raised is against Claim No. 5, which is a claim for payment of interest. The petitioner claimed interest on the awarded amount at a rate of 24% p. a. The Arbitral Tribunal has awarded pendente lite interest at the rate of 15% p. a. On the amount awarded as against all the claims except claim No. 2 (f) and future interest at the rate of 15% p. a. Payable till the date of decree of payment whichever is earlier. The contention of the counsel for the respondent/objector is that the aforesaid Award is hit by the provisions of clause 20, which according to the counsel is prohibitory clause for payment of interest. The said clause provides as follows: clause 20. 1 - No interest shall be payable on any money due to the contractor against earnest money, security deposit, interim or final bills or any other payments due under this contract. The said clause provides as follows: clause 20. 1 - No interest shall be payable on any money due to the contractor against earnest money, security deposit, interim or final bills or any other payments due under this contract. The aforesaid plea was made a part of the objection petition being ground-F thereof and sought to be supported by a decision of the Supreme Court in Secretary, Irrigation Department, Government of Orissa and Others Vs. G. C. Roy reported in (1991) Suppl. 3 SCR 417 = 1992 (1) Arb. LR 145 (SC) and in State of Orissa Vs. B. N. Agarwalla reported in JT 1997 (2) SC 51 = 1997 (1) Arb. LR 612 (SC ). In the case of G. C, Roy (Supra), the Supreme Court has held that where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute along with claim for principal amount or independently is referred to the Arbitrator, he shall have power to Award interest pendente lite. In B. N. Agarwalla s case (Supra), the Supreme Court has held that there can be no doubt that if the terms of the contract expressely stipulate that no interest would be payble then, notwithstanding the provisions of the Interest Act, 1978 an Arbitrator would not get the jurisdiction to Award interest. In the present case, I have extracted the provisions of Clause 20. 1 which categorically prohibits payment of interest on any amount due to the contractor against earnest money, security deposit, interim or final bills or any other payments due under the contract. Therefore, the said clause prohibits payment of interest on any amount which is found due and payable under the aforesaid contract. Whatever interest is levied by the learned tribunal is the amount which according to it was due and payable to the contractor. Therefore, on the aforesaid sum found due and payable, no interest could have been awarded by the Arbitral Tribunal in view of Clause 20. 1 and in the light of ratio of the aforesaid decisions of the Supreme Court. There exists between the parties an agreement which prohibits grant of interest. Therefore, on the aforesaid sum found due and payable, no interest could have been awarded by the Arbitral Tribunal in view of Clause 20. 1 and in the light of ratio of the aforesaid decisions of the Supreme Court. There exists between the parties an agreement which prohibits grant of interest. The Supreme Court has also clearly held that if the terms of the contract expressly stipulate that no interest would be payable, then the Arbitrator would not get the jurisdiction or right to award interest even notwithstanding the provisions of the Interest Act. Power to grant interest by the Arbitrator emanates from the statutory provisions but the same is always subject to the agreement between the parties as laid down by the Supreme Court in the aforesaid decisions. In that view of the matter the award passed by the learned tribunal awarding interest at the aforesaid rate to the petitioner is found to be in violation of the agreed terms and conditions. The aforesaid prohibitory clause applies in full force and, therefore, in view of the ratio of the aforesaid decisions of the Supreme Court the Award in respect of the aforesaid claim towards payment of interest also stands set aside. " ( 53 ) LEARNED counsel also referred to the judgement of the learned single Judge of this Court in M/s. Beebcon Engineers Pvt. Ltd. Vs. Bharat Heavy Electricals Ltd. 2006 (1) Arb. LR 194 (Delhi), which followed the judgement in DSA Engineers (Bombay) Vs. Housing and Urban Development Corporation (HUDCO) case (Supra ). ( 54 ) LEARNED counsel lastly referred to the Constitution Bench judgement of the supreme Court in Secretary, Irrigation Department, Government of Orissa and others Vs. G. C. Roy (1992) 1 SCC 508 where the ratio has been set down in para 43 and 44, which are as under:"the question still remains whether arbitrator has the power to award interest pendente lite, and if so on what principle. We must reiterate that we are dealing with the situation where the agreement does not provide for grant of such interest nor does it prohibit such grant. In other words, we are dealing with a case where the agreement is silent as to award of interest. We must reiterate that we are dealing with the situation where the agreement does not provide for grant of such interest nor does it prohibit such grant. In other words, we are dealing with a case where the agreement is silent as to award of interest. On a conspectus of aforementioned decisions, the following principles emerge: (i)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. This is the principle of Section 34, Civil Procedure Code and there is no reason or principle to hold otherwise in the case of arbitrator. (ii)An arbitrator is an alternative form (sic forum) for resolution of disputes arising between the parties. If so, he must have the power to decide all the disputes or differences arising between the parties. If the arbitrator has no power to award interest pendente lite, the party claiming it would have to approach the court for that purpose, even though he may have obtained satisfaction in respect of other claims from the arbitrator. This would lead to multiplicity of proceedings. (iii)An arbitrator is the creature of an agreement. It is open to the parties to confer upon him such power and prescribe such procedure for him to follow, as they think fit, so long as they are not opposed to law. (The proviso to Section 41 and Section 3 of Arbitration Act illustrate this point ). All the same, the agreement must be in conformity with law. The arbitrator must also act and make his award in accordance with the general law of the land and the agreement. (iv)Over the years, the English and Indian courts have acted on the assumption that where the agreement does not prohibit and a party to the reference makes a claim for interest, the arbitrator must have the power to award interest pendente lite. Thawardas has not been followed in the later decisions of this court. It has been explained and distinguished on the basis that in that case there was no claim for interest but only a claim for unliquidated damages. Thawardas has not been followed in the later decisions of this court. It has been explained and distinguished on the basis that in that case there was no claim for interest but only a claim for unliquidated damages. It has been said repeatedly that observations in the said judgement were not intended to lay down any such absolute or universal rule as they appear to, on first impression. Until Jena case almost all the courts in the country had upheld the power of the arbitrator to award interest pendente lite. Continuity and certainty is a highly desirable feature of law. (v)Interest pendente lite is not a matter of substantive law, like interest for the period anterior to reference (pre-reference period ). For doing complete justice between the parties, such power has always been inferred. ""having regard to the above consideration, we think that the following is the correct principle which should be followed in this behalf: where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (along with the claim for principal amount or independently) is referred to the arbitrator, he shall have the power to award interest pendente lite. This is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and therefore when the parties refer all their disputes - or refer the disputes as to interest as such ? to the arbitrator, he shall have the power to award interest. This does not mean that in every case the arbitrator should necessarily award interest pendente lite. It is a matter within his discretion to be exercised in the light of all the facts and circumstances of the case, keeping the ends of justice in view. " ( 55 ) LEARNED counsel thus contended that a perusal of the aforesaid judgements show that the Supreme Court was dealing with the situation where the agreement does not provide for grant of interest nor does it prohibits grant of interest and thus the agreement is silent about the award of interest. ( 56 ) LEARNED counsel for the petitioner, on the other hand, referred to the judgement of the Apex Court in State of UP Vs. Harish Chandra and Co. ( 56 ) LEARNED counsel for the petitioner, on the other hand, referred to the judgement of the Apex Court in State of UP Vs. Harish Chandra and Co. (1999) 1 scc 63 where it was observed that the claim for damages or claim for payment of work done and which was not paid for would not obviously cover any money which was said to be lying with the Government. ( 57 ) LEARNED counsel also referred to the judgement of the Apex Court in The Board of Trustees for the Port of Calcutta Vs. Engineers-De-Space-Age 1995 ALR (Suppl) 733. The decision is by a Bench of three Judges. The decision was occasioned by a reference made by a Bench of two learned Judges by the following order:"this appeal came up before a bench of two learned Judges on 7. 11. 1994 when it passed the following order:- the question for decision in the present case relates to the award of interest pendente lite by the Arbitrator. The effect of the decision in secretary, Irrigation Department, Govt. of Orissa and Ors. Vs. G. C. Roy etc. ( 1992 (1) SCC 508 ) is stated to be pending before a three Judges Bench on a reference being made to this effect. Accordingly, Special Leave is granted in the present matter. " ( 58 ) THE relevant clause which was the subject matter of adjudication was Clause 13 (g), reads as under:"the short question which arises for consideration in this case and which was canvassed before us by Mr. Salve the learned senior counsel for the appellant was the Arbitrator had awarded interest pendente lite notwithstanding the prohibition contained in the contract against the payment of interest on delayed payments. Clause 13 (g) of the contract was relied upon in this behalf and that clause reads as under:- no claim for interest will be entertained by the Commissioners with respect to any money or balance which may be in their hands owing to any dispute between themselves and the Contractor or with respect to any delay on the part of the Commissioners in making interim or final payment or otherwise. " ( 59 ) THE Supreme Court thereafter proceeded to consider the effect of the constitution Bench in Secretary, Irrigation Department, Government of Orissa and Others Vs. G. C. Roy case (Supra ). " ( 59 ) THE Supreme Court thereafter proceeded to consider the effect of the constitution Bench in Secretary, Irrigation Department, Government of Orissa and Others Vs. G. C. Roy case (Supra ). The Supreme Court observed in para 7 of the judgement that they were not dealing with the case in regard to the award of the interest prior to period of reference and observed as under:-"generally, the question of award of interest by the arbitrator may arise in respect of three different periods, namely: i) for the period commmencing form the date of dispute till the date the arbitrator enters upon the reference; ii) for the period commencing from the date of the arbitrator s entering upon reference till the date of making the award; and iii) for the period commencing from the date of making of the award till the date the award is made the rule of the court or till the date of realisation, whichever is earlier. In the appeals before us we are concerned only with the second of the three aforementioned periods. In Executive Engineer (Irrigation) Balimela v. Abhaduta Jena (1988) 2 SCC 721, two questions arose for consideration of the court, namely i) the power of the arbitrator to award interest for the period prior to his entering upon reference, and; ii) the powers of the arbitrator to award interest for the period the dispute remained pending before him pendente lite. Since, the Court dealt with the second question in detail and held that the arbitrator had no jurisdiction or authority to award interest pendente lite, we think it necessary to consider the reasons for the decision. Justice chinnappa Reddy, J. speaking for the bench held that neither the Interest Act, 1839 nor the Interest Act, 1978 conferred power on the arbitrator for awarding interest pendente lite. The learned Judge observed that Section 34 of the Civil procedure Code which provides for the same did not apply to arbitrator inasmuch as an arbitrator is not a court within the meaning of the said provision. Consequently the arbitrator could not award interest pendente lite. ""for this proposition, the learned Judge relied upon the decision in seth Thawardas Pherumal v. Unionof India, (1955) 2 SCR 48. Consequently the arbitrator could not award interest pendente lite. ""for this proposition, the learned Judge relied upon the decision in seth Thawardas Pherumal v. Unionof India, (1955) 2 SCR 48. The learned Judge pointed out that in Thawardas question of payment of interest was not the subject matter of reference to the arbitrator though the interest awarded by the arbitrator related to the period prior to the reference to arbitration as well as the period during the pendency of the arbitration. The learned Judge also noticed that the observations of Bose, J in Thawardas have given rise to considerable difficulty in later cases whrein they have been explained as having been never intended to lay down any such broad and unqualified proposition as they appear to lay down on first impression. The learned Judge then referred to various decisions including the decisions in Nachiappa Chettiar v. Subramaniam chettiar (1960) 2 SCR 209 , Satinder Singh v. Amrao Singh (1961) 3 SCR 676 , Firm madanlal Roshanlal Mahajan v. Hukumchand Mills Ltd (1967) 1 SCR 105 , Union of india v. Bungo Steel Furniture Pvt. Ltd (1967) 1 SCR 324 , Ashok Construciton Co. v. Union of India (1971) 3 SCC 66 and State of MP v. Saith and Skelton (P) Ltd (1972) 1 SCC 702 wherein the power of the arbitrator to award interest was upheld and explained them on the basis that all those were cases in which the reference to arbitration was made by the court, of all the disputes in the suit . It would be appropriate to reproduce the observations insofar as they are relevant : the question of award of interest by an arbitrator was considered in the remaining cases to which we have referred earlier. Nachiappa Chettiar v. Subramaniam Chettiar, Satinder Singh v. Amrao Singh, Firm Madanlal Roshanlal mahajan v. Hukumchand Mills Ltd, Union of India v. Bungo Steel Furniture Pvt. Ltd, Ashok Construciton Co. v. Union of India and State of MP v. Saith and skelton (P) Ltd were all cases in which the reference to arbitrator was made by the court, of all the disputes in the suit. It was held that the arbitrator must be assumed in these circumstances to have the same power to award interest as the court. v. Union of India and State of MP v. Saith and skelton (P) Ltd were all cases in which the reference to arbitrator was made by the court, of all the disputes in the suit. It was held that the arbitrator must be assumed in these circumstances to have the same power to award interest as the court. It was on that basis that the award of pendente lite interest was made on the principle of Section 34, Civil Procedure Code, in Nachiappa Chettiar v. Subramaniam Chettiar, Firm Madanlal Roshanlal Mahajan v. Hukumchand Mills ltd, Union of India v. Bungo Steel Furniture Pvt. Ltd and State of MP v. Saith and Skelton. " ( 60 ) IT may be noticed that in the present case the interest awarded by the arbitrator is both with regard to the period of prior to reference and post reference. ( 61 ) THE recent judgement of this Court by the learned single Judge in FAO no. 289/2003 titled Union of India Vs. R. C. Singhal and Ors. decided on 21. 3. 2006 has also been brought to the notice of this Court which has analysed the same issue of payment of interest in case of such clauses in the conditions of the contract. Clause 16. 2, which was considered in the said judgement is as under:"clause 16. 2 interest on amounts no interest will be payable upon the earnest money or the security deposited or amount payable to the contractor under the contract, but Government securities, deposited in terms of Clause 1 of this Clause will be repayable with interest accrued thereon. " ( 62 ) SANJIV Khanna, J has considered a number of both reported and unreported judgements on the issue of interest payable in such a situation. The judgement in Executive Engineer Vs. N. C. Budhiraja (deceased) (2001) 2 SCC 721 was considered where it was held that the Arbitrator has jurisdiction to grant interest on the sums found due and payable for pre-reference period but that would be subject to in the absence of any stipulation or prohibition of contract to grant any such interest. The learned Judge took note of the fact that the principle of law is well settled that an Arbitrator cannot ignore or disregard an express provision of contract and is bound by the terms and conditions of the contract. The learned Judge took note of the fact that the principle of law is well settled that an Arbitrator cannot ignore or disregard an express provision of contract and is bound by the terms and conditions of the contract. Similarly the question whether the Arbitrator can award interest is no longer res integra and the power extends to awarding of interest for pre- reference period interest, from the period after entering upon reference till the award namely pendente lite interest and interest from the date of award till the date of decree and from the date of decree till the date of payment. The judgement is dealing with the pendente lite and future interest. It was held that interest is a compensation paid by a party retaining or detaining the money belonging to another for use and forbearance and commonly expressed as annual percentage of outstanding principal. It is a charge that is paid for use of money. ( 63 ) THE learned Judge came to the conclusion that the clause 16. 2 does not prohibit or prevent an Arbitrator from granting interest for a period after an arbitration Clause is invoked till payment. The clause does not specifically put any restriction on the Arbitrator to grant interest and the Division Bench of the Andhra Pradesh High Court in Union of India represented by General manager, South Central Railway Vs. G. G. Satyanarayana and Ors. 2003 (2) Arb. LR 391 has held that the clause is not applicable and does not impose any restriction on the Arbitrator. The clause was held to restrict only the departmental officers not to allow interest because of late payment but did not impose any restriction on the power of the Arbitrator. Such a clause was held not to bind the Arbitrator. In fact the Division Bench of the Andhra Pradesh high Court followed the earlier judgement of the same Court in N. G. Gunani Vs. Union of India 1996 (Suppl) Arb. LR 566 (AP ). A Division Bench of the Gujarat high Court in Union of India Vs. K. K. Dhruva and Anr. 2002 (3) Arb. LR 272 has also taken a similar view. ( 64 ) SANJIV Khanna, J has also considered the judgement of the Apex Court in Board of Trustees for the Port of Calcutta Vs. LR 566 (AP ). A Division Bench of the Gujarat high Court in Union of India Vs. K. K. Dhruva and Anr. 2002 (3) Arb. LR 272 has also taken a similar view. ( 64 ) SANJIV Khanna, J has also considered the judgement of the Apex Court in Board of Trustees for the Port of Calcutta Vs. Engineers-De-Space-Age case (Supra), which in turn has considered the judgement of the Constitution Bench in G. C. Roy case (Supra ). The Supreme Court has held that any clause which restricts grant or award of interest should be strictly construed as it goes against equity to deny a person compensation for delay in payment of money due and payable to him. Two aspects were emphasised by the Supreme Court. First that the clause restricted and prohibited the Commissioner from awarding the interest and not the Arbitrator for the period after commencement of Arbitration proceedings and second it was within the jurisdiction of the Arbitrator to decide and interpret the relevant clause and thus once the Arbitrator decides that they have power to award pendente lite interest under the contract it cannot be said that the arbitrator misconducted by ignoring or disregarding an express provision of the contract or of wandering outside the contract. ( 65 ) ONE further decision considered by Sanjiv Khanna, J was of the Supreme Court in State of UP Vs. Harish Chandra and Co. case (Supra ). The learned Judge referred to Clause 1. 9, which is as under:"1. 9 No claim for delayed payment due to dispute etc. No claim for interest or damages will be entertained by the Government with respect to any moneys or balances which may be lying with the Government owing to any dispute, difference; or misunderstanding between the Engineer-in-Charge in marking periodical or final payments or in any other respect whatsoever. " ( 66 ) THE Supreme Court rejected the contention that the Arbitrator was prohibited from granting interest on damages in view of the aforesaid clause. The words ?or in any other respect whatsoever? were held not to include the claim for damages or claim for payment for the work done and which was not paid for. Further it was for the Arbitrator to interpret the Clauses in respect of the entitlement to award interest. The words ?or in any other respect whatsoever? were held not to include the claim for damages or claim for payment for the work done and which was not paid for. Further it was for the Arbitrator to interpret the Clauses in respect of the entitlement to award interest. ( 67 ) ON consideration of the aforesaid judgements, I am in full agreement with the views expressed by Sanjiv Khanna, J in Union of India Vs. R. C. Singha and Ors. case (Supra ). In my considered view the effect of the judgement in Secretary, irrigation Department, Government of Orissa and Others Vs. G. C. Roy case (Supra) fully stands explained in cases like the present one by the judgement in board of Trustees for the Port of Calcutta Vs. Engineers-De-Space-Age case (Supra) and State of UP Vs. Harish Chandra and Co. case (Supra ). The two ratio which clearly emerge are that the restrictions of such clauses do not operate on the Arbitrator and it is for the Arbitrator to interpret such clauses. A constitution Bench of the Supreme Court in Secretary, Irrigation Department, government of Orissa and Others Vs. G. C. Roy case (Supra) thus fully explained the issue in as much as there are certain observations that the power to grant interest by the Arbitrator exists unless prohibited by the Contract. Such clauses have been held not to be a prohibition on the authority of the arbitrator to grant interest. A reference was also made to the provisions of section 34 of the Code of Civil Procedure, 1908, which empowers the Court to award interest. Arbitration being an alternative forum to the Courts where disputes are decided, there is no justification in law and equity to deny arbitrators the right to award interest. The right under Section 34 is discretionary right of the Court and is not dependent upon the terms agreed or contract between the parties. It is in view thereof that the learned single judge in Union of India Vs. R. C. Singhal and Ors. case (Supra) and observed ?in my opinion the said clause does not prohibit or prevent an Arbitrator from awarding interest for the period after the Arbitration Clause is invoked till payment. It is in view thereof that the learned single judge in Union of India Vs. R. C. Singhal and Ors. case (Supra) and observed ?in my opinion the said clause does not prohibit or prevent an Arbitrator from awarding interest for the period after the Arbitration Clause is invoked till payment. ( 68 ) THE aforesaid view would also find support from the fact that once a reference has been sought and if the matter is pending in the Court for considerable period of time a party who has to recover the amount should not be put at a disadvantage. The matter was pending in this Court from 1985 till the same was decided in 1994. Thereafter also time was taken by the respondent in appointing the Arbitrator and the Arbitrator entered upon reference as a consequence thereof only in 1998. The petitioner can hardly be blamed for the same. ( 69 ) IN DSA Engineers (Bombay) Vs. Housing and Urban Development Corporation (HUDCO) case (Supra) both the aforesaid judgements of the Apex Court which explain the law laid down by the Constitution Bench of the Supreme Court have not been brought to the notice of the learned single Judge. Similarly in M/s. Beebcon Engineers Pvt. Ltd. Vs. Bharat Heavy Electricals Ltd. case (Supra) only the judgement of DSA Engineers (Bombay) Vs. Housing and Urban Development corporation (HUDCO) case (Supra) was brought to his notice without bringing the two judgements of the Apex Court to notice which had explained the position. The Apex Court in State of Orissa Vs. B. N. Agarwalla JT 1997 (2) SC 51 only laid down the proposition that the judgement in G. C. Roy case (Supra) did not overrule its entirety the judgement in Executive Engineer Irrigation Galimala and Ors. Vs. Abaadutta Jena 1987 (2) SCALE 675 inasmuch as in respect of the award of interest for pre-reference period the Arbitrator has jurisdiction to award interest only in cases which arose after the Interest Act, 1978 came into force but not prior to that Act. It may be further added that in M/s. Beebcon engineers Pvt. Ltd. Vs. Bharat Heavy Electricals Ltd. case (Supra) a Division bench judgement of this Court in Bharat Heavy Electrical Ltd. Vs. Globe Hi Fabs ltd. 116 (2005) DLT 1 (DB) is noted but all that is stated that the judgement is stayed by the Apex Court. It may be further added that in M/s. Beebcon engineers Pvt. Ltd. Vs. Bharat Heavy Electricals Ltd. case (Supra) a Division bench judgement of this Court in Bharat Heavy Electrical Ltd. Vs. Globe Hi Fabs ltd. 116 (2005) DLT 1 (DB) is noted but all that is stated that the judgement is stayed by the Apex Court. The Division Bench has taken the view that after a party was at fault and money was withheld unreasonably it could not be said that the defaulting party was not liable to pay interest as a contract does not debar payment of interest on money illegally withheld after it became due. The award granting interest was thus held not to be without jurisdiction. A perusal of the judgement in Bharat Heavy Electrical Ltd. Vs. Globe Hi Fabs Ltd. case (Supra) shows that even before the Division Bench the judgements in Board of trustees for the Port of Calcutta Vs. Engineers-De-Space-Age case (Supra) and state of UP Vs. Harish Chandra and Co. case (Supra) were not brought to the notice of the Division Bench. ( 70 ) I am thus of the considered view that I am bound to follow the view taken by sanjiv Khanna, J since it is in consonance and a consequence of the view taken by the Apex Court in Board of Trustees for the Port of Calcutta Vs. Engineers- de-Space-Age case (Supra) and State of UP Vs. Harish Chandra and Co. case (Supra ). The views expressed in DSA Engineers (Bombay) Vs. Housing and Urban development Corporation (HUDCO) case (Supra) and M/s. Beebcon Engineers Pvt. Ltd. Vs. Bharat Heavy Electricals Ltd. case (Supra) would thus be per incurium as they are contrary to the views expressed by the Apex Court in Board of trustees for the Port of Calcutta Vs. Engineers-De-Space-Age case (Supra) and state of UP Vs. Harish Chandra and Co. case (Supra), which judgements were never brought to the notice of the learned single Judges, while hearing those two cases. ( 71 ) I am thus of the considered view that the Arbitrator was well within his right to grant interest. It may be noticed that this question is more of academic interest as the award is otherwise being set aside. ( 72 ) IN view of the aforesaid reasons, the award dated 27. 7. ( 71 ) I am thus of the considered view that the Arbitrator was well within his right to grant interest. It may be noticed that this question is more of academic interest as the award is otherwise being set aside. ( 72 ) IN view of the aforesaid reasons, the award dated 27. 7. 2000 of the Sole arbitrator, Shri Ashok Kumar cannot be sustained and is hereby set aside and the application filed by the respondent is allowed. .