Central Warehousing Corporation Kochi v. Varghese K. Pulayath
2013-03-19
A.HARIPRASAD, K.HEMA
body2013
DigiLaw.ai
Judgment :- Hariprasad, J. 1. This appeal, filed under Sec.39 of the Arbitration Act, 1940 (in short, "the Act"), is against the order passed by the learned Subordinate Judge refusing to set aside an award by invoking power under Sec.30 of the Act. 2. Admitted facts, briefly stated, are the following: The predecessor-in-interest of the respondents was a contractor. He submitted a tender to the appellants for construction of 20,000 MTC godowns with ancillary buildings, road, electric installation, internal and external services at Central Ware House, Thrissur. Estimated cost of civil works was Rs. 30,75,144.14. The tendered amount was Rs.72,41,968.75, being 127% above the estimated cost. Tender for electrical works was for Rs. 1,46,028.80, being 79% above the estimated cost of Rs. 1,15,362.75. Appellants awarded the contract to the predecessor-in-interest of the respondents. An agreement was executed in this respect on 18.03.1984. Date of commencement of work was fixed on 04.11.1984 and that of completion was on 03.09.1985. Thereafter the work commenced and proceeded to a considerable extent. However, the work could not be completed as scheduled and either side accused the other for the default. Disputes between the parties resulted in the rescission of the contract by the appellants on 13.08.1988. The predecessor-in-interest of the respondents invoked Clause 25 of the contract agreement and referred the dispute/claim to the Managing Director, CWD, New Delhi. Managing Director of the appellants scrutinized the claims (disputes) and found that they fell within "excepted matters" and therefore no Arbitrator was appointed. Hence the contractor (predecessor-in-interest of respondents) filed Arbitration O.S. No.772 of 1989 before the court of Subordinate Judge, Thrissur. The suit was filed under Sec.20 of the Act. Prayer in the suit, inter alia, was to appoint a sole Arbitrator to adjudicate upon the disputes between the parties regarding the issues mentioned in the plaint. 3. Appellants filed a written statement refuting the allegations in the plaint. Appellants prayed for dismissal of the suit. Learned Subordinate Judge appointed an Arbitrator by judgment dated 11.07.1996. That judgment was challenged in revision before this Court in C.R.P. No.2003 of 1996. Two questions raised before this Court in the said revision were considered and decided. First question was whether a revision was maintainable against the order passed by the lower court referring the disputes to arbitration in a suit filed under Sec.20 of the Act? This Court found that the revision was maintainable.
Two questions raised before this Court in the said revision were considered and decided. First question was whether a revision was maintainable against the order passed by the lower court referring the disputes to arbitration in a suit filed under Sec.20 of the Act? This Court found that the revision was maintainable. Second question was relating to the legality and propriety of reference of certain clauses for arbitration. This Court considered that question also and found that since the persona designata enjoined under the contract had either refused to exercise or abdicated his authority to appoint an Arbitrator as provided in the contract, the court has jurisdiction to appoint an Arbitrator to adjudicate the issues involved. It was also found that the question whether some of the issues were arbitrable or not had to be decided by the Arbitrator appointed in the case. It is seen from the records that the order passed in C.R.P.No.2003 of 1996 by this Court has attained finality. Thereafter, the arbitration was conducted with due notice to both sides. Both sides produced evidence before the Arbitrator to establish their contentions. Both sides were heard by the Arbitrator. When the matter was pending before the Arbitrator, the original contractor (predecessor-in-interest of the respondents) died. Respondents were impleaded as additional claimants An award was made by the Arbitrator and after giving notice in writing to both sides, she filed it before the court under the provisions of the Act. After passing the award, Arbitrator discovered clerical and typographical errors in the award. Therefore, the Arbitrator invoking power under Sec.13(d) of the Act made necessary corrections in the original award. 4. Dissatisfied with the award, appellants filed Arbitration O.P.No.27 of 2001 before the Subordinate Judge's Court, Thrissur under Sec.30 of the Act. It was prayed therein to set aside the award on certain grounds. Respondents filed counter affidavit in the proceedings refuting the allegations raised by the appellants against the award. Respondents filed I.A.No.926 of 2000 in Arbitration O.S.No.772 of 1989 to obtain a judgment on the award. After hearing both sides, the learned Subordinate Judge dismissed the petition filed by the appellants and passed a decree in the suit. That order in the Arbitration O.P. is challenged in this appeal. 5. Now we shall consider contentious facts. From the pleadings, it can be seen that the predominant disputes are regarding the following matters.
After hearing both sides, the learned Subordinate Judge dismissed the petition filed by the appellants and passed a decree in the suit. That order in the Arbitration O.P. is challenged in this appeal. 5. Now we shall consider contentious facts. From the pleadings, it can be seen that the predominant disputes are regarding the following matters. Appellants contended that the learned Subordinate Judge and the Arbitrator ought to have first decided whether the entire issues referred to the Arbitrator were arbitrable or not. This contention was raised by the appellants on the basis that Clauses 2, 3, 5, 8A, 10A, 10C and 12 of the contract were excepted matters clauses and therefore, not arbitrable. Respondents contended that those clauses in the contract would not come under the category of "excepted matters" and the Arbitrator rightly considered those matters. Another contention raised for setting aside the award is that the Arbitrator without any justification awarded exorbitant amounts and that fact was not taken note of by the learned Subordinate Judge. It was a grave error on the part of the court below to blindly accept the award. Appellants also contended that the Arbitrator committed a serious misconduct by omitting certain points, which arose for consideration. Many amounts awarded by the Arbitrator to the respondents were not legally payable to them. Award of interest is also not in accordance with law. On these contentions, the appellants challenged the award before the lower court and claimed setting the same aside. Respondents supported the award. They filed cross objection in this appeal, aggrieved by the fact that the decree passed by the lower court is not in consonance with the award. Respondents, therefore, requested to amend the decree suitably to make it agreeable with the award. 6. Heard the learned Senior Counsel for the appellants and the learned counsel for the respondents elaborately. Perused the impugned award and the documents available in the records. 7. Points arising for determination in the appeal on the basis of the pleadings and arguments can be summarized as follows: I. Whether the Arbitrator erred in law by considering "excepted matters" contained in the contract? II. Whether the Arbitrator was legally right in granting interest for the amounts awarded? III. Whether the court below legally went wrong in disallowing the claim of the appellants to set aside the award? IV.
II. Whether the Arbitrator was legally right in granting interest for the amounts awarded? III. Whether the court below legally went wrong in disallowing the claim of the appellants to set aside the award? IV. Whether the plea raised by the respondents to amend the decree passed by the lower court is legally allowable? Point No.I. 8. Serious challenge against the award in the appeal memorandum is regarding the alleged misconduct on the part of the Arbitrator in deciding the matters beyond the scope of reference. Stated precisely, the challenge is that matters excepted from arbitration were dealt with by the Arbitrator. Appellants submitted that this resulted not only in illegality, but also in serious prejudice to them. 9. It is settled law that when the award is the result of a valid reference on the basis of a valid arbitration agreement, the award of the Arbitrator is binding upon the parties. It is not essential for the validity of such award that the parties must agree to such decision made by the Arbitrator. In Parkash Chand Khurana etc. v. Harnam Singh and others ( AIR 1973 SC 2065 ) the Supreme Court considered whether a decree passed under an arbitration award can be equated to a consent decree. Differences between the two have been lucidly explained as under: ".............. We, therefore, see no warrant for the view that the award decree should be treated as a consent decree. The award of the arbitrator did not get its efficacy by reason of the fact that the parties agreed to it. The award was valid on its own, independently of the decision of the parties not to object to it. On the other hand, the validity of a compromise decree flows from the consent of the parties. .............." It is equally settled that the Arbitrator is the sole Judge of the quality and quantity of evidence. The court cannot sit in appeal on the award passed by the Arbitrator. Learned counsel for the respondents placed reliance on a decision rendered by the Supreme Court in Municipal Corporation of Delhi v. M/s. Jagan Nath Ashok Kumar and another ( AIR 1987 SC 2316 ). The proposition of law laid therein is the following: "...........
The court cannot sit in appeal on the award passed by the Arbitrator. Learned counsel for the respondents placed reliance on a decision rendered by the Supreme Court in Municipal Corporation of Delhi v. M/s. Jagan Nath Ashok Kumar and another ( AIR 1987 SC 2316 ). The proposition of law laid therein is the following: "........... The Arbitrator in our opinion is the sole Judge of the quality as well as quantity of evidence and it will not be for this Court to take upon itself the task of being a Judge of the evidence before the Arbitrator. It may be possible that on the same evidence the Court might have arrived at a different conclusion than the one arrived at by the Arbitrator but that by itself is no ground in our view for setting aside the award of an Arbitrator. " In another decision rendered by the Supreme Court in Indian Oil Corporation Ltd. v. Indian Carbon Ltd. ( AIR 1988 SC 1340 ), the statement of law made is thus: "............... When the arbitration clause required the Arbitrator to give a reasoned (award) and the Arbitrator does give his reasons in the award, the sufficiency of the reasons depends upon the facts of the particular case. He is not bound to give detailed reasons. The Court does not sit in appeal over the award and review the reasons. The Court can set aside the award only if it is apparent from the award that there is no evidence to support the conclusions or if the award is based upon any legal proposition which is erroneous." Learned counsel for the respondents cited the decision of the Supreme Court reported in Maharashtra State Electricity Board v. Sterilite Industries (India) and another ( (2001) 8 SCC 482 ) to contend that the Arbitrator's award, both on facts and law, is final; that there is no appeal from his verdict; that the court cannot review his award and correct any mistake in his adjudication, unless the objection to the legality of the award is apparent on the face of it. In paragraphs 9 to 12 of the decision, these principles are restated by the Supreme Court.
In paragraphs 9 to 12 of the decision, these principles are restated by the Supreme Court. Again the Supreme Court in P.R.Shah, Shares and Stock Brokers Private Limited v. B.H.H. Securities Private Limited and others ( (2012) 1 SCC 594 ) held that a court does not sit in appeal over an award of an Arbitral Tribunal by reassessing or re-appreciating the evidence. In the light of the above principles, we shall examine the contentions raised by the disputants. 10. Learned Senior Counsel for the appellants submitted that Clauses, 2, 3, 5, 8A, 10C and 12 in the contract are excluded matter clauses. It is submitted that the Arbitrator, beyond the scope of reference to arbitration, decided issues therein resulting in illegality. It may be apposite to understand the scope of the law relating to "excepted matters" before dwelling on facts. 11. The Supreme Court in Food Corporation of India v. Sreekanth Transport ( (1999) 4 SCC 491 ) in paragraph 3 described the term "excepted matters" in the following words: ""Excepted matters" obviously, as the parties agreed, do not require any further adjudication since the agreement itself provides a named adjudicator - concurrence to the same obviously is presumed by reason of the unequivocal acceptance of the terms of the contract by the parties and this is where the courts have been found out lacking in their jurisdiction to entertain an application for reference to arbitration as regards the disputes arising therefrom and it has been the consistent view that in the event of the claims arising within the ambit of excepted matters, the question of assumption of jurisdiction of any arbitrator either with or without the intervention of the court would not arise. The parties themselves have decided to have the same adjudicated by a particular officer in regard to these matters; what these exceptions are however are questions of fact and usually mentioned in the contract documents and form part of the agreement and as such there is no ambiguity in the matter of adjudication of these specialised matters and being termed in the agreement as the excepted matters." 12. Coming to the facts of this case, following aspects are relevant for our purpose. In the contract agreement between the parties, a Chapter is provided indicating the conditions of the contract.
Coming to the facts of this case, following aspects are relevant for our purpose. In the contract agreement between the parties, a Chapter is provided indicating the conditions of the contract. Clause 25 therein, after the correction made on mutual agreement, reads as follows: "Clause 25.- Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions herein before mentioned and as to quality of workmanship and materials used on the work or as to any other question, claim, right matter or thing whatsoever, in any way raising out of or relating to the contract, designs, drawings, specifications, estimates, instruction orders or these conditions or otherwise concerning the work, or the execution or failure to execute the same whether arising during the progress of the work or after the completion or abandonment thereof shall referred to the sole arbitration of the person appointed by the Managing Director, Central Warehousing Corporation at the time of dispute or if there be no Managing Director, Central Warehousing Corporation, by the administrative head of the said Central Warehousing Corporation at the time of such appointment. There will be no objection to any such appointment that the arbitrator so appointed is a Corporation employee, that he had to deal with the matter to which the contract relates and that in course of his duties as corporation employee he had expressed views on all or any of the matters in dispute or difference. The arbitration to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason, such Managing Director or administrative head as aforesaid at the time of such transfer, vacating office or inability to act, shall appoint another person to act as arbitrator in accordance with the terms of the contract. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is also a term of this contract that no person other than a person appointed by such Managing Director or administrative head of the Central Warehousing Corporation as aforesaid should act as arbitrator and if for any reason, that is not possible, the matter is not to be referred to arbitration at all. The arbitrator shall give reasons for the award.
The arbitrator shall give reasons for the award. Subject as aforesaid the provisions of the Arbitration Act, 1940, or any statutory modification for enactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitration proceeding under this clause. It is also a term of the contract that the party invoking arbitration shall specify the dispute or disputes to be referred to arbitration under this clause together with the amount or amounts claimed in respect of each such dispute. It is also a term of the contract that if the contractor(s) does/do not make any demand for arbitration in respect of any claim(s) in writing within 90 days of receiving the limitation from the Corporation that the bill is ready for payment, the claim of the contractor(s) will be deemed to have been waived and absolutely barred and the Corporation shall be discharged and released of all liabilities under the contract in respect of these claims. The arbitrator(s) may from time to time with consent of the parties enlarge the time for making and publishing the award." 13. It is the grievance of the respondents that the appellants refused to take steps to resolve the dispute through arbitration and therefore, they were compelled to approach the court for appointing an Arbitrator. However, the appointment of the Arbitrator and passing of the award are matters already concluded. Learned Senior Counsel for the appellants drew attention of this Court to the clauses mentioned above, which are said to be excepted matter clauses. Clause 2 of the contract agreement deals with the compensation for delay. It stipulates that the time allowed for carrying out work as entered in the tender should be strictly observed by the contractor. It further says that the contractor shall pay compensation to the appellants and the quantum of which will be decided by the Manager Engineering whose decision in writing shall be treated as final. Clause 3 is intended to check the contractor causing delay or employing inferior workmanship for the execution of the contract. There also, the Engineer-in-Charge had been given the power to take a decision in respect of the matters enumerated therein. Clause 5 in the contract is pertaining to the extension of time for completion of work on certain grounds. The Engineer-in-Charge of the appellants was given power to take decisions in such matters.
There also, the Engineer-in-Charge had been given the power to take a decision in respect of the matters enumerated therein. Clause 5 in the contract is pertaining to the extension of time for completion of work on certain grounds. The Engineer-in-Charge of the appellants was given power to take decisions in such matters. Clause 8A deals with the right of the contractor to file objections to the measurements recorded by the appellants. There also, the decision will be taken by the Engineer-in-Charge and the contractor will have no right to dispute the same. Clause 10C is relating to escalation of price of materials and/or wages of labourers. The Manager Engineering is the named authority to take decision in the matter and his decision shall be final and binding on the contractor. Clause 12 is relating to alteration in specifications and designs. This clause has been corrected by mutual agreement of the parties by a correction slip and it empowers the Engineer-in-Charge to take final decision in respect of the matters stated therein. 14. Learned Senior Counsel for the appellants vehementally argued that the Arbitrator, without considering the scope and effect of the above said clauses, decided matters, which were actually not submitted to arbitration. 15. Learned counsel for the respondents contended that these Clauses legally cannot be treated as "excepted matters" clauses. According to him, all these matters were submitted to arbitration. It is the submission of the respondents that the appellants did not raise the issue of excepted matters at any material point of time. Attention of this Court was drawn to the claim statement filed by the respondents, counter statement filed by the appellants and the replication filed by the respondents before the Arbitrator. Learned counsel for the respondents argued that the Arbitrator took cognizance of the entire disputes and she was competent to do so. 16. Learned counsel for the respondents further submitted that mere existence of certain clauses in the contract providing that the decision of a designated authority on a particular matter shall be final and binding would not ipso facto bring such matters within the mischief of "excepted matters" and/or bar the claimants from raising claims in this regard. It is the specific contention of the respondents that the existence of such decision on those aspects is the primary and necessary pre-requisite for invoking excepted matters clauses.
It is the specific contention of the respondents that the existence of such decision on those aspects is the primary and necessary pre-requisite for invoking excepted matters clauses. Case of the respondents is that the authority, said to be designated by the said clauses, had not taken any decision pertaining to those matters. It is also the contention of the respondents that such decisions, to be taken by the named authority, should be considered decisions, after giving reasonable opportunity to the claimant to put forth his case. To constitute an "excepted matter", the competent authority should act justly and fairly. The decision in such matters should be taken after giving notice to the affected claimant and after giving reasonable opportunity of being heard. According to the respondents, none of these matters did happen in this case. 17. Attention of this Court was drawn to the award passed by the Arbitrator. Contentions raised by both parties had been elaborately considered by the Arbitrator on the basis of the detailed statements of facts, claim statement and counter claim statement along with documents produced by both sides. It is seen that Exts.C1 to C85 were considered on the side of the claimants(respondents herein). Exts.R1 to R45 were produced by the respondents(appellants herein). On a perusal of the award, it is evident that the Arbitrator had considered the arbitrability of the issues raised and referred to arbitration by the court. It is submitted by the learned counsel for the respondents that though certain clauses relied on by the appellants show the authority of a named officer to take appropriate decision thereon, that right was not properly exercised. Therefore, there was no impediment for the Arbitrator to consider the so-called "excepted matters". 18. To buttress this proposition, reliance is placed on Bharat Sanchar Nigam Ltd. and another v. Motorola India Pvt. Ltd. ( AIR 2009 SC 357 ). One of the pivotal questions raised therein was whether the levy of liquidated damages under clause 16.2 of the tender document is an "excepted matter" in terms of clause 20.1 of the contract, so that the same could not have been referred to arbitration. Clause 16.2 deals with, inter alia, assessment of quantum of liquidated damages. It is stated therein that the quantum of liquidated damages assessed and levied by the purchaser shall be final and not challengeable by the supplier.
Clause 16.2 deals with, inter alia, assessment of quantum of liquidated damages. It is stated therein that the quantum of liquidated damages assessed and levied by the purchaser shall be final and not challengeable by the supplier. Clause 20.1 dealt with the matters excepted from arbitration. Supreme Court after considering the various aspects found that the question to be decided in that case was whether the liability of the respondent to pay liquidated damages and the entitlement of the appellants to collect the same from the respondent is an excepted matter for the purpose of Clause 20.1 of the general conditions of contract. After analyzing the terms of contract and other materials, it was held as follows: "Clause 16.2 cannot be treated as an excepted matter because of the fact that it does not provide for any adjudicatory process for decision on a question, dispute or difference, which is the condition precedent to lead to the stage of quantification of damages." It was further held in paragraph 13 thus: ".......... The true essence of any arbitration agreement is to arbitrate the matters in a cordial way in respect of issues where there is a dispute between the parties. To construe such limited words in clause 16.2 as being so all encompassing would destroy the very foundation of the bargain between the parties. ................" Placing reliance on the decision in State of Karnataka v. Shree Rameshwara Rice Mills ( (1987) 2 SCC 160 ), the Supreme Court further observed Bharat Sanchar Nigam Ltd. And another v. Motorola India Pvt. Ltd. (supra) that even if the clauses empowered the officer to decide upon the question of breach as well as assess the quantum of damages, an adjudication by the officer regarding the breach of contract cannot be sustained under law, because a party to the agreement cannot be an arbiter in his own cause. 19. Learned counsel for the respondents submitted that Supreme Court again in J.G. Engineers Private Limited v. Union of India and another ( (2011) 5 SCC 758 ) considered the scope and effect of excepted matters and held the following in paragraph 19: "In fact the question whether the other party committed breach cannot be decided by the party alleging breach. A contract cannot provide that one party will be the arbiter to decide whether he committed breach or the other party committed breach.
A contract cannot provide that one party will be the arbiter to decide whether he committed breach or the other party committed breach. That question can only be decided by only an adjudicatory forum, that is, a court or an Arbitral Tribunal". 20. Law relating to "excepted matter" clauses in the contract, therefore, can be summarized in the following terms. The "excepted matter" clauses in a contract do not require adjudication as the parties have already agreed to resolve the dispute through a named adjudicator. To constitute a clause in a contract as "excepted matter", it must provide for an adjudicatory process. It must be remembered that the true essence of any arbitration agreement is to arbitrate the matters in the event of disputes/differences. So, a clause in a contract shall not be readily inferred as an "excepted matter" to destroy the very foundation of the bargain. The named adjudicator should have taken a decision in the matter after complying with the legal requirements and principles of natural justice. 21. Respondents contended that the clauses relied on by the appellants do not constitute excepted matters. It is also contended that even after filing rejoinder by the claimants before the Arbitrator, the aspect of non-arbitrability or question of excepted matters was not raised by the appellants before the Arbitrator. No separate application was filed by the appellants before the Arbitrator requesting for a decision on the question whether the said Clauses were amenable for arbitration or not. Hence, at this point of time, they cannot be heard to raise such a plea, contended the respondents. 22. It is seen from the materials available in the records that the question of nonarbitrability of certain clauses was raised for the first time in this appeal. However, it will be just and proper to consider whether the appellants are entitled to raise such a plea at least at this distance of time. 23. On a careful perusal of the impugned award, it can be seen that the Arbitrator has considered the claims and counter claims raised by the parties elaborately. It is seen that eight claims were raised for consideration. It is evident that the appellants did not raise any objection regarding the non-arbitrability of these eight claims before the Arbitrator. Claim No.1 is pertaining to the payment of balance amount as per the final bill (Ext.R2). Arbitrator awarded Rs.
It is seen that eight claims were raised for consideration. It is evident that the appellants did not raise any objection regarding the non-arbitrability of these eight claims before the Arbitrator. Claim No.1 is pertaining to the payment of balance amount as per the final bill (Ext.R2). Arbitrator awarded Rs. 21,057/-to the respondents finding that the recovery to the tune of Rs. 21,057/-recommended by the Works Account Section (WA Section) was not proper. This factual finding cannot be challenged in this proceedings. 24. Claim No.2 is pertaining to the compensation due for increase in labour charges, cost of steel items, etc. The relevant clause in the agreement is Clause 10C. Arbitrator considered the material documents produced by both sides and came to the conclusion that the respondents/claimants are entitled to get an amount of Rs. 13,62,175/-from the appellants. Specific reasons have been stated for the conclusion. There was no evidence produced to find that as provided in Clause 10C of the contract agreement, the Manager Engineering or the Engineer-in-Charge had adjudicated this matter properly. Principles emanating from binding precedents regarding excepted matters when applied to this case, it can be seen that there is no reason to hold that the authorised officer had taken a proper decision in compliance with the legal requirements. Therefore, this clause did not fall under the excepted matters. 25. Claim No.3 is regarding the refund of amounts alleged to be withheld by the appellants from the respondents' bills on the plea of extension of time. Arbitrator, after considering the matter, found that Rs. 56,000/-was actually recovered from the bills of the respondents as seen from Ext.R2, bills. That was ordered to be refunded. There is a finding by the Arbitrator that it was the appellants who committed the breach of contract resulting in non-completion of the work and they did not grant extension beyond 31.05.1986. Learned counsel for the respondents relied on the decision rendered by the Supreme Court in J.G. Engineers Private Limited v. Union of India and another (supra) to contend that as to who committed the breach of contract resulting in non-completion of the work is a matter which can be decided only by an Arbitrator lawfully appointed and it is not for the appellants to decide. So, there is no legal infirmity in the decision of the Arbitrator. 26.
So, there is no legal infirmity in the decision of the Arbitrator. 26. From the award, it is evident that claims 4, 5 and 8 raised by the respondents were rejected by the Arbitrator. The respondents have not challenged this rejection. Claim No.6 was allowed by the Arbitrator to the extent of Rs. 8,94,472/-against the total claim of Rs. 18,20,000/-. Reasons have been stated by the Arbitrator succinctly for granting the amount. This claim had been split up into sub-claims and considered elaborately. As mentioned earlier, this Court cannot sit in appeal on these findings. In this matter also, officer authorised by the contract had not taken any decision on merit complying with the legal requirements. Therefore, the contention of the appellants that this claim was also beyond the scope of arbitration is unsustainable. 27. From the above discussion, it is evident that the Arbitrator has considered the matters from the correct perspective. Specific reasons have been given for either allowing or disallowing each claim. Contention of the appellants that the Arbitrator exceeded her jurisdiction by deciding the matters not amenable for arbitration is totally unacceptable. Hence this point is decided against the appellants. Point No.II. 28. Learned Senior Counsel for the appellants contended that the Arbitrator committed a grave error in granting interest for the amounts awarded. According to the appellants, the Arbitrator was not empowered to award interest. Therefore, the award is liable to be set aside on this count also. 29. Learned counsel for the respondents submitted that the appellants failed to raise any ground in this appeal challenging the award of interest. It is true that the grounds in the appeal memorandum do not show any challenge against the Arbitrator's award of interest. I.A.No.2056 of 2012 is filed by the appellants invoking Order XLI, Rule 2 and Order VI, Rule 17 and Section 151 of the Code of Civil Procedure (in short, "the CPC") for adding additional grounds. The appeal was presented on 22.07.2009. I.A.No.2056 of 2012 was filed on 14.08.2012. In this application the appellants disputed the correctness of awarding interest, inter alia, other grounds. Respondents filed a counter affidavit stoutly opposing the amendment application. It is contended that the provisions relied on by the appellants for seeking amendment are not applicable in this case. The proposed amendment is hopelessly barred by limitation.
I.A.No.2056 of 2012 was filed on 14.08.2012. In this application the appellants disputed the correctness of awarding interest, inter alia, other grounds. Respondents filed a counter affidavit stoutly opposing the amendment application. It is contended that the provisions relied on by the appellants for seeking amendment are not applicable in this case. The proposed amendment is hopelessly barred by limitation. Further, no court fee was paid for the challenge regarding interest portion of the award. According to the calculation made by the respondents, interest at the rate of 18% per annum was granted from 31.10.1988 for certain amounts and from 30.11.1999, for remain amounts awarded. It is also contended that the appellants have paid court fee only to a tune of Rs. 43,876/-under Article 4(ii) of the Schedule II of the Kerala Court Fees and Suits Valuation Act. The court fee payable would be `1,05,758/-, had the quantum of interest been reckoned for the purpose of valuation and court fee? The contentions raised by the respondents in this respect are legally acceptable. The challenge against award of interest is made at a very belated stage and that too, without paying proper court fee. Therefore, the appellants cannot be allowed to rake up this contention against award. Hence the application for amendment is unsustainable in law. It is therefore dismissed. 30. Admittedly this is a case which was referred to arbitration after commencement of the Interest Act, 1978. Under the Interest Act, 1839 (old Act) the Arbitrator could not have awarded interest in respect of reference. Decision of the Constitution Bench of the Supreme court in Secretary, Government of Orissa, Irrigation Department and others v. G.C. Roy ( AIR 1992 SC 732 ) clarified the position regarding Arbitrator's legal right to award interest. By that decision, controversy prevailed in this field was cleared. The Constitution Bench of the Supreme Court 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 the claim for principal amount or independently) is referred to the arbitration, he shall have the power to award interest pendent lite.
The Constitution Bench of the Supreme Court 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 the claim for principal amount or independently) is referred to the arbitration, he shall have the power to award interest pendent 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 referred all their disputes 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 pendent lite. It is a matter within the discretion of the Arbitrator to be exercised in the light of the facts and circumstances of the case, keeping the ends of justice in view. 31. In State of Orissa v. B.N. Agarwalla ( (1997) 2 SCC 469 ) three learned Judges of the Supreme Court considered the question again in the light of the principle enunciated in Secretary, Government of Orissa, Irrigation Department and others v. G.C.Roy (supra). The law stated in paragraph 18 is in the following terms: "In view of the aforesaid decisions there can now be no doubt with regard to the jurisdiction of the arbitrator to grant interest. The principles which can now be said to be well-settled are that the arbitrator has the jurisdiction to award pre- reference interest in cases which arose after the Interest Act, 1978 had become applicable. With regard to those cases pertaining to the period prior to the applicability of the Interest Act, 1978, in the absence of any substantive law, contract or usage, the arbitrator has no jurisdiction to award interest. For the period during which the arbitration proceedings were pending in view of the decision in G.C. Roy case and Hindustan Construction Ltd. case, the arbitrator has the power to award interest. The power of the arbitrator to award interest for the post-award period also exists and this aspect has been considered in the discussion relating to Civil Appeal No.9234 of 1994 in the later part of this judgment." 32.
The power of the arbitrator to award interest for the post-award period also exists and this aspect has been considered in the discussion relating to Civil Appeal No.9234 of 1994 in the later part of this judgment." 32. The Supreme Court in State of Rajasthan and another v. Ferro Concrete Construction Private Limited ( (2009) 12 SCC 1 ) considered the question of award ability of interest by the Arbitrator and held that where there is no express bar in the contract and where there is no provision for payment of interest, then the principles of Sec.3 of the Interest Act, 1978 will apply in regard to the pre-suit or pre-reference period and consequently, interest will be payable. In the said decision, the right of Arbitrator to grant interest pendent lite is also recognized. 33. Sec.29 of the Act deals with the power of the court to grant interest where the award is for payment of money. The court is empowered to grant interest in the decree from the date of decree at such rate as the court deems reasonable to be paid on the principal sum as adjudged by the award and confirmed by the decree. In this case, the Arbitrator has granted interest only till the date of decree. Therefore, there is no illegality either in the grant of interest or in the manner in which it is granted. This point is decided against the appellants. Point No.III. 34. From the discussions made above, it is evident that the Arbitrator has not committed any misconduct as alleged by the appellants. Contention of the appellants that the clauses mentioned above in the contract agreement were beyond the scope of arbitration is unsustainable. Arbitrator was legally justified in considering and granting interest at the rate specified in the award. We do not find any legal infirmity in the award. Consequently, we do not find any reason to hold that the Subordinate Judge erred in disallowing the claim of the appellants to set aside the award. We find that the award is perfectly justifiable in all respects and there is no reason to set it aside. Although we agree with the Subordinate Judge that the petition to set aside the award is not legally allowable, we do not approve the reasons stated by the court below for entering into that finding.
We find that the award is perfectly justifiable in all respects and there is no reason to set it aside. Although we agree with the Subordinate Judge that the petition to set aside the award is not legally allowable, we do not approve the reasons stated by the court below for entering into that finding. We have extensively considered the matter afresh to arrive at the above conclusion. This point is decided accordingly. Point No.IV. 35. One of the questions arising for consideration herein is whether the cross objection filed by the respondents in this matter is legally maintainable? Learned Senior Counsel for the appellants contended that the right to file cross objection is a substantive right and not a procedural one. Sec.41 of the Act deals with the procedure and powers of the court. Clause (a) of Sec.41 of the Act prescribes the procedure to be followed by the trial court and the appellate court. The procedure to be followed by both these courts is in accordance with the provisions of the CPC. Clause (b) of the said Section empowers the court to exercise the same power of making orders in respect of matters set out in Schedule II of the Act. Proviso to Sec.41 makes it clear that the general power under Clause (b) to pass interim order cannot be exercised so as to prejudice any power vested in the Arbitrator. 36. Learned Senior Counsel contended that since cross objection is nothing but an appeal, in fact a cross appeal, it has all the trappings of an appeal. Sec.41 of the Act merely prescribes that the procedure in the CPC would be applicable to appeals under Sec.39 of the Act . Since there is no right to file cross objection given under Sec.39 of the Act, it cannot be read into Sec.41 of the Act. To substantiate these contentions, reliance is placed on the decision in Superintending Engineer and others v. B. Subba Reddy ( (1999) 4 SCC 423 ). These contentions raised by the appellants are sustainable. Secs.17, 39 and 41 of the Act, if read conjointly, will show that the respondents cannot raise cross objection under the provisions of Order XLI, Rule 22 of the CPC. 37.
These contentions raised by the appellants are sustainable. Secs.17, 39 and 41 of the Act, if read conjointly, will show that the respondents cannot raise cross objection under the provisions of Order XLI, Rule 22 of the CPC. 37. In answer to this argument, learned counsel for the respondents submitted that the cross objection filed in this matter is not in terms with the provisions contained in Order XLI, Rule 22 of the CPC. According to the respondents, cross objection is raised under Sec.17 of the Act itself. Sec.17 of the Act reads as follows: "Judgment in terms of award.- Where the court sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award, the court shall, after the time for making an application to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow and no appeal shall lie from such decree except on the ground that it is in excess of, or not otherwise in accordance with, the award." (underline supplied) 38. It is profitable to excerpt Sec.391(vi) of the Act also as it enumerates appealable orders. It reads as follows: "Appealable orders.-(1) An appeal shall lie from the following orders passed under this Act (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order: An order- (i) xxxxxxxxxxxx; (ii) xxxxxxxxxxxx; (iii) xxxxxxxxxxxx; (iv) xxxxxxxxxxxx; (v) xxxxxxxxxxxx; (vi) setting aside or refusing to set aside an award: xxxxxxxxxxxxx." Appellants herein have approached this Court under Sec.39(1) (vi) of the Act. The decreetal portion of the judgment passed by the lower court is totally incongruous with the award of the Arbitrator. It is seen from the last portion of the judgment of the lower court that the petition under Section 30 of the Act filed by the appellants was dismissed and the suit was decreed accepting the award. However, the grant of amounts in the decree passed thereafter is totally against the terms of the award. It is the mandate of Sec.17 of the Act that the judgment, in case the award is confirmed, shall be in accordance to the award.
However, the grant of amounts in the decree passed thereafter is totally against the terms of the award. It is the mandate of Sec.17 of the Act that the judgment, in case the award is confirmed, shall be in accordance to the award. There cannot be any dispute to the statement that the decree shall be in terms of the judgment. Here, the terms of the judgment and decree are at variance with the award. Learned Subordinate Judge fell into serious error in mixing up the claims made by the respondents and the amounts actually awarded by the Arbitrator. Instead of decreeing the suit in terms of the award by adopting the amounts shown in the award, learned Subordinate Judge went wrong in granting amounts claimed by the respondents. It is the submission of the respondents that mistakes crept in the judgment and decree of the lower court came to their notice only when a certified copy of the same was obtained. Certainly this has caused prejudice to both sides. 39. Learned counsel for the respondents submitted that this Court has to invoke the jurisdiction vested in it under Sec.152 of the CPC in order to amend the judgment and decree for curing the clerical and arithmetical mistakes. It is also submitted that the parties will be put to great hardships, if the judgment and decree are allowed to remain in conflict with the award. 40. Sec.152 of the CPC deals with the power of the court to amend the judgments, decrees or orders to cure clerical or arithmetical mistakes. Mistakes can occur due to any accidental slip or omission. It gives power to the court to correct it at any time. This power can be invoked by the court either on its own motion or on the application of any of the parties. Sec.17 of the Act insists that the decree shall be in terms with the award. On a perusal of the judgment and decree passed by the Subordinate Court, it is evident that the mistake in the figures under various heads decreed by the court happened only due to inadvertence. This Court, therefore, invoking the powers under Sec.152 of the CPC in order to satisfy the requirement of Sec.17 of the Act, has to allow the objection raised by the respondents against the decree. This point is decided in favour of the respondents. 41.
This Court, therefore, invoking the powers under Sec.152 of the CPC in order to satisfy the requirement of Sec.17 of the Act, has to allow the objection raised by the respondents against the decree. This point is decided in favour of the respondents. 41. We find for the aforementioned reasons that the appeal is devoid of any merit. Plea for correcting the judgment and decree made by the respondents is found to be allowable. Hence the following order. In the result, i. The appeal is dismissed confirming the order of dismissal of Arbitration O.P.No.27 of 2001 by the court below. ii. The cross objection/petition for correction of the decree is allowed in the following terms: (a) Appellants/defendants shall pay Rs. 21,057/-(Rupees Twenty one thousand and fifty seven only) with 18% interest per annum from 31.10.1988 till 11.11.2008 to the respondents/plaintiffs as compensation under claim No.1 as awarded by the Arbitrator. (b) Appellants/defendants shall pay Rs. 13,62,175/-(Rupees Thirteen lakhs sixty two thousand one hundred and seventy five only) with 18% interest per annum from 31.10.1988 till 11.11.2008 to the respondents/plaintiffs as compensation under claim No.2 as awarded by the Arbitrator. (c) Appellants/defendants shall pay Rs. 56,000/-(Rupees Fifty six thousand only) with 18% interest per annum from 31.10.1988 till 11.11.2008 (date of lower court decree) to the respondents/plaintiffs as compensation under claim No.3 as awarded by the Arbitrator. (d) Appellants/defendants shall pay Rs. 8,94,472/-(Rupees Eight lakhs ninety four thousand four hundred and seventy two only) with 18% interest per annum from 31.10.1988 till 11.11.2008 to the respondents/plaintiffs as compensation under claim No.6 as awarded by the Arbitrator. (e) All the amounts awarded by the Arbitrator (principal amounts) mentioned above will carry 6% interest per annum from the date of decree till the date of payment. iii. Appellants shall pay costs incurred by the respondents in this appeal.