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2009 DIGILAW 172 (GAU)

Assam State Electricity Board v. R. N. Dutta

2009-03-09

BROJENDRA PRASAD KATAKEY

body2009
JUDGMENT B.P. Katakey, J. 1. This appeal Under Section 37 of the Arbitration and Conciliation Act, 1996 (in short, 1996 Act) is directed against the judgment dated 17-10-2007 passed by the learned District Judge at Guwahati in Misc. (Arb.) Case No. 6 of 2005 rejecting the application filed Under Section 34 of the 1996 Act praying for setting aside the arbitral award passed by the Industrial Facilitation Council (in short, IFC) acting as an arbitrator in respect of the matter referred to it under Sub-section (1) of Section 6 of the Interest on Delayed Payments to Small Scale and Ancillary Industrial undertakings Act, 1993 (in short, 1993 Act). 2. Pursuant to an order dated 9-3-1998 for supply of 400 Nos. of pilfer-proof steel meter boxes of particular specification, the respondent supplied the materials to the appellant on 14-5-1999, whereafter a bill for Rs. 7 lakh was raised on 2-6-1999. The appellant on 10-1-2000 paid the billed amount to the respondent. The respondent thereafter on 14-1-2000 addressed a communication to the Superintending Engineer of the appellant Board claiming interest on delayed payment under the provisions of 1993 Act, followed by a further communication dated 22-1-2000 in that regard. By another communication dated 18-2-2000, the respondent also informed the Chief Engineer of the appellant Board about the prime lending rate (PLR) of the State Bank of India since 1-3-1999 enclosing therewith the communication issued by the Deputy General Manager of the said bank dated 17-2-2000. Having failed to receive any reply, the respondent again on 3-4-2000 wrote to the Superintending Engineer of the appellant Board claiming interest and requested him to make the payment of the interest under the provisions of the 1993 Act by 10-4-2000 and intimating the said authority that in the event of failure to make such payment, reference to the IFC Under Section 6(2)of the 1993 Act would be made. The matter was thus referred to the IFC in terms of the provisions contained in Sub-section (2) of Section 6 of the 1993 Act on the basis of the application filed by the respondent claiming compound interest with monthly rest at 18% per annum from 13-6-1999 to 10-1-2000 and at the same rate from 10-1-2000 to the date of payment including cost. The IFC which acts as an arbitrator initially in its meeting held on 3-2-2003 dropped the proceeding, which has been challenged by the respondent in WP (C) No. 5980/2003 before this Court. A single bench of this Court vide judgment and order dated 26-3-2004 set aside the said proceeding of the IFC on the ground of violation of the principles of natural justice and directing it to take a fresh decision on the matter within a period of three months from the date of furnishing the certified copy 'of the order. The IFC thereafter held its proceeding on 3-12-2004 and upon hearing the parties passed the award directing payment of Rs. 75,239.02 being the interest payable under the provisions of 1993 Act with effect from 14-6-1999 i.e. the date of expiry of one month from the date of supply of materials till 9-1-2000 i.e. one day prior to making the payment and also to pay pre-award and pendente lite interest. The appellant has challenged the said award by filing an application Under Section 34 of the 1996 Act before the learned District Judge praying for setting aside the same, which having been rejected, the present appeal has been filed. 3. I have heard Mr. B. D. Das, learned Counsel for the appellant as well as Mr. Dutta, respondent in person. 4. Challenging the order passed by the learned District Judge, Mr. Das, learned Counsel for the appellant, has submitted that the respondent having accepted the principal amount under the bill on 10-1-2000 without any reservation, the subsequent claim of the respondent for interest on delayed payment under the provisions of the 1993 Act is not maintainable. Referring to the provisions contained in Sections 3 and 4 of the 1993 Act as well as the definition of "appointed day" in Section2(b) of the said Act, it has further been submitted by Mr. Referring to the provisions contained in Sections 3 and 4 of the 1993 Act as well as the definition of "appointed day" in Section2(b) of the said Act, it has further been submitted by Mr. Das that even assuming that the respondent can raise the claim for delayed payment after receiving the principal amount without any reservation, he at the best would be entitled to such interest from 14-6-1999 i.e. the day when the period of 30 days from the date of supply expired, till 10-1-2000 i.e. the date when the principal amount has been paid, but the IFC passed the award not only for the period from 14-6-1999 to 9-1-2000 but also from 10-1-2000 till the date of the award, which the Arbitrator has no power and jurisdiction. According to learned Counsel, the District Judge, therefore, ought to have allowed the application filed Under Section 34 of the 1996 Act and set aside the award passed by the IFC. 5. Mr. Dutta, respondent in person, on the other hand, has submitted that the scope of interference of the arbitral award by the Court Under Section 34 of the 1996 Act is very limited, subject to fulfillment of the conditions stipulated therein. In the instant case, none of the conditions stipulated in Section 34 of the said Act having existed, the learned District Judge has rightly rejected the application filed by the appellant, refusing to interfere with the award passed by the IFC, submits the respondent, in person. It has further been submitted that the Court in exercise of power Under Section 34 of the 1996 Act also cannot interfere with the award on the ground that the decision of the Arbitrator is erroneous, if the award is otherwise proper. Relating to the contention of the appellant that once the principal amount is accepted, no further claim for interest on delayed payment can be raised under the provisions of 1993 Act, the respondent has submitted that the Full Bench of this Court in Assam State Electricity Board and Ors. v. Shanti Conductors (P) Ltd. and Anr. Relating to the contention of the appellant that once the principal amount is accepted, no further claim for interest on delayed payment can be raised under the provisions of 1993 Act, the respondent has submitted that the Full Bench of this Court in Assam State Electricity Board and Ors. v. Shanti Conductors (P) Ltd. and Anr. 2002 (1) GLT 547 has answered the said issue by holding that since the Act creates a statutory liability to pay interest on delayed payment, such liability cannot be waived by the buyer, however the supplier can waive its right to recover the interest and such waiver by the supplier will have to be proved by the buyer so as to avoid payment of interest on delayed payment under the said Act. In the instant case, according to the respondent, there being no proof that the respondent waived his right to claim interest under the 1993 Act and on the other hand, he persistently having claimed interest, the appellant is bound to pay the interest under the provisions of the Act, for delayed payment. 6. The respondent further contends that since the issue before the IFC was relating to interest on the said amount payable for the pre-reference period as well as pendente lite interest, the Arbitrator assumed the jurisdiction for awarding such interest, that apart, Sub-section (7) of Section 31 of the 1996 Act empowers the Arbitrator to award interest, both for the pre-reference and pendente lite and also for post award period. The respondent, therefore, submits that no illegality has been committed by the Arbitrator in passing the award and also by the learned District Judge in dismissing the application filed by the appellant Under Section 34 of the 1996 Act. 7. I have considered the submissions of the learned Counsel for the parties and also perused the materials available on record. There is no dispute to the facts relating to the issuance of supply order, date of making such supply, date of raising the bills as well as the date of making payment of the principal amount in terms of the bills raised. 8. There is no dispute to the facts relating to the issuance of supply order, date of making such supply, date of raising the bills as well as the date of making payment of the principal amount in terms of the bills raised. 8. Section 5 of the 1993 Act provides that notwithstanding anything contained in any agreement between a supplier and a buyer or in any law for the time being in force, the buyer shall be liable to pay compound interest (with monthly rest) at the rate stipulated in Section 4 of the said Act, on the amount due to the supplier. Section 3 of the Act cast a liability on the buyer to make payment to the supplier for supply of any goods or for rendering any service on or before the date agreed upon between them in writing or where there is no agreement in that behalf before the appointed day. Proviso to the said Section stipulates that in case no period is agreed upon between them in writing, it shall not exceed 120 days from the date of acceptance or the date of deemed acceptance. Section2(b) defines "appointed day" as the date following immediately after the expiry of the period of 30 days from the date of acceptance or the date of deemed acceptance of any goods or any services by a buyer from a supplier. Explanations (i) of Section 2(b) defines the "day of acceptance" as the date of the actual delivery of goods or the rendering of service; or where any objection is made in writing by the buyer regarding acceptance of goods or services within 30 days from the day of the delivery of goods, or the rendering of services, the day on which such objection is removed by the supplier. Explanation (ii) to the said provision defines the "day of deemed acceptance" as, where no objection is made in writing by the buyer regarding acceptance of goods or services within 30 days from the day of the delivery of the goods or the rendering of service, the day of the actual delivery of goods or the rendering of service. Section 4 provides the rate at which the interest is payable. Section 4 provides the rate at which the interest is payable. It provides that the buyer is liable to pay interest to the supplier on the amount, if not paid within the time allowed Under Section 3, at 11/2 time of PLR charged by the State Bank of India, from the appointed day or, as the case may be, from the date immediately following the date agreed upon. PLR means the prime lending rate of the State Bank of India which is available to the best borrower of the bank. Section 6(1) provides the method of recovery of the amount due under the Act, which can be either by filing a suit or by other proceeding under any law for the time being in force. Sub-section (2) of Section 6 provides that notwithstanding anything contained in Sub-section (1), any party to a dispute may make a reference to the IFC for acting as an arbitrator or conciliator in respect of the matters referred to in sub-section(1) and the provisions of the 1996 Act shall apply to such dispute as if the arbitration or conciliation were pursuant to an arbitration agreement referred to in Sub-section (1) of Section 7 of the 1996 Act. By virtue of the said provision in case of an award passed by the IFC the provisions of the 1996 Act are made applicable. 9. In the case in hand, the matter in dispute relating to the payment of interest on delayed payment as well as interest thereon have been referred to the IFC as required under Sub-section (2) of Section 6 of the 1993 Act. The dispute relating to the following claims was before the IFC: (i) Compound interest with monthly rest @ 18% per annum on Rs. 7 lakh from 13-6-1999 to 10-1-2000 amounting to Rs. 76,086.15 paisa; (ii) interest @ 18% per annum from 10-1-2000 till the date of payment; and (iii) the cost 10. A Full Bench of this Court in Assam State Electricity Board (supra) has answered the issue as to whether a supplier can claim the interest on delayed payment under the provisions of 1993 Act after receiving the principal amount without any reservation, though such payment was made beyond the prescribed period, in affirmative. Since the said issue has already been decided, it is not required to be gone into again. Since the said issue has already been decided, it is not required to be gone into again. Learned Counsel for the appellant ASEB though has submitted before this Court that the said Full Bench decision of this Court has been challenged in Apex Court, but could not produce any order passed by the Apex Court staying operation of the said judgment passed by the Full Bench of this Court. Hence, this Court has no alternative but to follow the decision rendered by the Full Bench of this Court. Hence, the first contention of the learned Counsel for the appellant that the respondent having accepted the principal amount cannot maintain the claim for interest on delayed payment under the provisions of the 1993 Act stands rejected. Moreover, the appellant has failed to place any material on record to demonstrate that the respondent has waived his right to claim interest after receiving the principal amount, which was admittedly paid beyond the time allowed under the 1993 Act 11. It appears from the award passed by the IFC that 18% interest has been awarded from 14-6-1999 i.e. one day after the date expiring 30 days from the date of supply till 9-1-2000 towards the interest for making delayed payment under the provisions of 1993 Act. The record further reveals that the PLR of the State Bank of India with effect from 1-3-1999 was 12%. Under Section 4 of the 1993 Act, the buyer is liable to pay 11/2 time of PLR charged by the State Bank of India. Accordingly, the IFC has passed the award awarding 18% interest for the said period, which is 11/2 times of the proved PLR charged by the State Bank of India at the relevant point of time. 12. Under Section 4 of the 1993 Act, the buyer is liable to pay 11/2 time of PLR charged by the State Bank of India. Accordingly, the IFC has passed the award awarding 18% interest for the said period, which is 11/2 times of the proved PLR charged by the State Bank of India at the relevant point of time. 12. The contention of the appellant that the Arbitrator cannot pass the award for interest from 10-1-2000 i.e. the date when the principal amount is paid to the date of the award or future interest, under the provisions of 1993 Act, cannot also be accepted, as Section 6(2) of the said Act makes it clear that when a reference is made to the IFC for acting as an Arbitrator or Conciliator in respect of the matter referred to it, the provisions of the 1996 Act shall apply to such dispute as if the arbitration or conciliation were pursuant to an arbitration agreement referred to in Sub-section (1) of Section 7 of the 1996 Act. In the case in hand, one of the disputes referred to the IFC was the claim for interest for the pre-award period as well as pendente lite and also the post award period. Such a dispute being one of the disputes referred to the IFC. it has the power and jurisdiction to award interest for pre-award period as well as pendente lite. That apart, Clause (a) of Sub-section (7) of Section 31 of 1996 Act empowers an arbitral tribunal to award interest at such rate as it deems reasonable on the whole or any part of money, if the arbitral award is for payment of money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made, unless of course otherwise agreed upon by the parties. Clause (b) of the said sub-section provides that a sum directed to be paid by an arbitral award, shall, unless the award otherwise directs, carry interest @ 18% per annum from the date of the award to the date of payment. Clause (b) of the said sub-section provides that a sum directed to be paid by an arbitral award, shall, unless the award otherwise directs, carry interest @ 18% per annum from the date of the award to the date of payment. Nothing has Been placed on record by the appellant either before the IFC or even before this Court to demonstrate that there is an agreement between the parties against the claim of interest awardable under Clause (a) of Sub-section (7) of Section 31 of the said Act. 13. The award passed by IFC, can only be interfered with under Section 34 of the 1996 Act, subject to existence of any of the grounds stipulated in Sub-section (2) thereto. The Court can no doubt set aside the arbitral award if such award deals with a dispute not contemplated by or not falling within the terms of the submission of the arbitration or it contains decision on matters beyond the scope of the submission to arbitration. The Court can also interfere with an arbitral award if a party was under some incapacity or the arbitration agreement is not valid under the law or the party making the application was not given proper notice of appointment of arbitrator or of the arbitral proceeding or was otherwise unable to present his case or the composition of arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties. The arbitral award can also be interfered with by the Court in exercise of the powers conferred by Section 34 of the 1996 Act if the Court finds that the subject matter of the dispute is not capable of settlement by arbitration under the law for the time being in force or the arbitral award is in conflict with the public policy of India. The arbitral award is not to be interfered with lightly. As discussed above, none of the grounds on which an arbitral award can be interfered with by the Court Under Section 34 of the 1996 Act, is available in the instant case, so as to set aside the award passed by the IFC. 14. The arbitral award is not to be interfered with lightly. As discussed above, none of the grounds on which an arbitral award can be interfered with by the Court Under Section 34 of the 1996 Act, is available in the instant case, so as to set aside the award passed by the IFC. 14. In view of the aforesaid discussion, I am of the considered opinion that the appellant has failed to make out any ground for setting aside the award passed by the IFC by invoking the jurisdiction Under Section 34 of the 1996 Act and hence, the learned District Judge has rightly rejected the application filed by the appellant. 15. The appeal, therefore, is dismissed. No costs.