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2014 DIGILAW 1 (HP)

Y. S. PARMAR UNIVERSITY v. PAWAN KUMAR BANSAL

2014-01-01

SANJAY KAROL

body2014
JUDGEMENT SANJAY KAROL, J. 1. IN this petition, filed under the provisions of Section 115 of the Code of Civil Procedure, appellants - petitioners have assailed the order dated 17.4.2013, passed in CMA No.7 -A/10 of 2011, titled as Pawan Kumar versus Dr. Y.S. Parmar University and another, by Civil Judge (Senior Division), Solan. 2. IN terms of impugned order, application filed by the contractor -Shri Pawan Kumar (respondent herein), under the provisions of Order 21 Rule 11 of Code of Civil Procedure, 1908, stands allowed. The challenge is on the ground that the Court below erred in correctly applying the provisions of Section 34 and 36 of Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act). Whether reporters of the local papers may be allowed to see the judgment? 3. FACTS are not much in dispute. Respondent - claimant was awarded contract by the petitioners. Certain disputes having arisen inter se the parties, matter was referred to arbitration. On 26.5.1999, the Arbitrator -cum - Superintending Engineer (Arbitration), H.P.P.W.D., Solan, passed an award, awarding the following sums: - Sr. Description of claim Amount Amount Remarks No. demanded awarded 1 2 3 4 5 1. Balance payment 98294 Nil recorded in measurement book but not released in the 18th and final bill. 2. Reimbursement of 7,00,477 Rs.53550/ - losses suffered due to breach of the contract resulting in abnormal prolongation of the contract period. 3. Payment not made for Rs.8400/ - Rs.4200/ - item of providing and fixing of MS stay and handles. 4. Extrapayment for Rs.19315/ - Nil providing exposed brick work in super -structure above plinth level and upto floor five level. 5. Extra payment of Rs.10349/ - Rs.10349/ - rendering smooth exposed surface in beams and columns in R.C.C. work. 6. Extra item of welding Rs.23160/ - Nil. work in fixing glazing lugs, MS bars and MS plate. 7. Incorrect rates applied Rs.12702/ - Nil for fixing 30mm thick flush door shutters in cup board. 8. Balance payment of Rs.21911/ - Nil steel shuttering extra rate not released. 9. On account of Rs.10807/ - Nil. difference in marble chips flooring item. 10. Reimbursement of Rs.7,74,732/ - Rs.457397/ - escalation in prices of material and labour rates. 11. Delay in payment of Rs.5850/ - Nil final bill. 12. Recovery of sales tax Rs.5227/ - Nil recovered in final bill levied on works contract by HP Govt. 13. 9. On account of Rs.10807/ - Nil. difference in marble chips flooring item. 10. Reimbursement of Rs.7,74,732/ - Rs.457397/ - escalation in prices of material and labour rates. 11. Delay in payment of Rs.5850/ - Nil final bill. 12. Recovery of sales tax Rs.5227/ - Nil recovered in final bill levied on works contract by HP Govt. 13. Excess recovery of Rs.2500 Nil Electricity and water bills. 14. Excess recovery. Rs.787/ - Nil 15. Interest of all claims. @ 24% per @ 12% per annum annum simple interest on Rs.525496/ - for two years till date of award. 16. Cost of sand used in Rs.11738/ - Nil filling in plinth payment not made. 17. Cost of reference to Rs.30,000/ - Nil. Arbitration. Total: - Rs.525496/ - + interest as awarded against claim No.15. 4. SIGNIFICANTLY for post award interest Arbitrator remained silent. Within the statutory period, petitioners filed objections to the award under the provisions of Section 34 of the Act. Vide judgment dated 4.4.2002, this Court in OMP(M) No.23 of 1999, titled as Dr. Y.S. Parmar University and another versus Pawan Kumar, partly set aside and modified the award, holding that claimant was not entitled to a sum of Rs.4,57,397/ - and was entitled only for a sum of Rs.68,099/ - (Rs.5,25,496/ - - Rs.4,57,397/ - = Rs.68,099/ -). Even this Court did not modify the award with regard to interest so awarded by the Arbitrator. The judgment is silent with regard to future interest. 5. THE Court below, in my considered view, has erred in making the following observations: "9. Though the Arbitrator has allowed interest @ 12% per annum from the date of award after two year i.e. up to 26.5.2001 and since the award is silent after two years of the interest i.e. from 26.5.2001 onwards, the petitioner is entitled for future interest @18% per annum from the date of award i.e. 26.5.1999 till the entire payment is made by the respondents." 6. THE application stands allowed in the following terms; "11. THE application stands allowed in the following terms; "11. In the case in hand as the award amount is Rs.68099/, the petitioner is entitled for future interest @ 18% per annum from the date of award i.e. from 26.5.1999 besides the 12% interest for two years on the aforesaid amount of Rs.68099/ - upto the date of award which come to Rs.16,344/ - by further holding that the petitioner is not entitled for future interest on the interest amount of Rs.16,344/ -. In these manners, the petitioners are held entitled for the following amount: - (i) Principal amount = Rs.68099/ - (ii) Interest for 2 years @ 12% Rs.16,344/ - p.a. upto the date of Award (iii) Future interest @ 18% p.a. Rs.1,69,566/ - u/s 31(7)(b) of Arbitration and Conciliation Act on principal amount of Rs.68099/ - upto 26.3.2013 from the date of award i.e. 26.5.1999 (iv) Total Rs.2,54,009/ - (v) Amount paid by respondent to Rs.82,670/ - the petitioner on 15.5.2002 (vi) Balance amount Rs.1,71,339.51/ -" Interest of 12% per annum, was to be paid for a period of two years, prior to the date of passing of the award. The award was announced on 26.5.1999 and claimant was entitled to interest, so awarded by the Arbitrator, only for the period of two years preceding thereto. With regard to future interest, in my considered view, the Court below rightly held that claimants were entitled to interest at the rate of 18% from the date of passing of award till the date of payment/realization. 7. IT is not in dispute that an amount of Rs.84,443/ -, being the principal amount, including interest so awarded by the Arbitrator, was paid to the claimant on 15.5.2002. The only question for consideration is as to whether on this amount, claimant is entitled to interest @ 18% from 26.05.1999 upto 15.05.2002 or not. 8. RELEVANT provisions of the Act are reproduced as under: "31(7)(a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum of which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any of the period between the date on which the cause of action arose and the date on which the award is made. (b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of eighteen per centum per annum from the date of the award to the date of payment." (Emphasis supplied) "34. Application for setting aside arbitral award. - (1) Recourse to a court against an arbitral award may be made only by an application for setting aside such award in accordance with sub -section (2) and subsection (3). (2) An arbitral award may be set aside by the court only if - (a) The party making the application furnishes proof that - (i) A party was under some incapacity, or (ii) The arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) The party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) The arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (v) The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or (b) The court finds that - (i) The subject -matter of the dispute is not rtcapable of settlement by arbitration under the law for the time being in force, or (ii) The arbitral award is in conflict with the public policy of India. Explanation. - Without prejudice to the generality of sub -clause (ii), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81. Explanation. - Without prejudice to the generality of sub -clause (ii), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81. (3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal: Provided that if the court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter. (4) On receipt of an application under sub -section (1), the court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award." "35. Finality of arbitral awards. Subject to this Part an arbitral award shall be final and binding on the parties and persons, claiming under them respectively." (Emphasis supplied) "36. Enforcement. Where the time for making an application to set aside the arbitral award under section 34 has expired, or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of the court." (Emphasis supplied) Sections 34 and 35 of the Act give a right to an aggrieved party to have the award set aside. Section 2(c) of the Act defines the "arbitral award" to include an interim award. Section 31 of the Act provides the manner in which arbitral award is required to be passed. Section 34 provides remedy to a person to assail the award but on certain specified grounds. Most importantly Section 35 attaches finality to the award. Section 2(c) of the Act defines the "arbitral award" to include an interim award. Section 31 of the Act provides the manner in which arbitral award is required to be passed. Section 34 provides remedy to a person to assail the award but on certain specified grounds. Most importantly Section 35 attaches finality to the award. It is, however, subject to other provisions of Part -1, with which we are concerned. Section 36 only stipulates that after expiry of the statutory period for filing such objections or rejection thereof, the award can be enforced under the Code of Civil Procedure, in the same manner as if it were a decree of the Civil Court. 9. LANGUAGE of Section 31(7) is absolutely clear. The sum determined in the award "shall", unless the award otherwise directs, carry interest at the rate of 18% per annum from the date of the award till the date of payment. It specifically does not exclude the period or the time for which proceedings are pending under Section 34 of the Act. A person may or may not resort to the remedy provided under Section 34. He may even file frivolous petitions just to delay payment. The legislature, in its wisdom, considering the nature of disputes being more commercial in nature, mandated payment of interest. The award does not become "in operational" but only "unenforceable". 10. IN fact this issue is no longer res integra and stands settled by the apex Court in Himachal Pradesh Housing and Urban Development Authority and another versus Ranjit Singh Rana, (2012) 4 SCC 505 ; State of Haryana and others versus S.L. Arora and Company, (2010) 3 SCC 690 ; and S. Kumar Versus Delhi Development Authority, (2003) 1 Arbl.R 665 . Hence, in my considered view, claimant shall be entitled to interest on the amount of Rs.84,443/ - at the rate of 18% per annum, with effect from 26.5.1999 to 15.5.2002. The Court below erred in awarding the same from the date of award till 26.3.2013. 11. MS Ranjana Parmar, learned counsel for the petitioners, in support of her contention, referred to and relied upon the decisions of the apex Court in Narayan Prasad Lohia versus Nikunj Kumar Lohia, AIR 2009 SC 1531 { (2009) 17 SCC 359 }; and M/s B.L. Gupta Construction Ltd. versus M/s Bharat Co -op Group Hsg. Sty. 11. MS Ranjana Parmar, learned counsel for the petitioners, in support of her contention, referred to and relied upon the decisions of the apex Court in Narayan Prasad Lohia versus Nikunj Kumar Lohia, AIR 2009 SC 1531 { (2009) 17 SCC 359 }; and M/s B.L. Gupta Construction Ltd. versus M/s Bharat Co -op Group Hsg. Sty. Ltd., AIR 2008 SC 1517 { (2008) 11 SCC 209 }. The decisions, in my considered view, are totally inapplicable to the facts of the present case. 12. IN Narayan Prasad Lohia, (supra), the Court was not dealing with the provisions under the Act, but the old Arbitration Act, 1940, wherein there was no such like provisions of Section 31(7) of the Act. In M/s B.L. Gupta Construction Ltd. (supra), the Court was not even dealing with the issue of award of interest. 13. HENCE for all the aforesaid reasons, impugned order dated 17.4.2013, passed by Civil Judge (Senior Davison), Solan, in CMA No.7 -A/10 of 2011, titled as Pawan Kumar versus Dr. Y.S. Parmar University and another, is modified, holding that on a sum of Rs.84,443/ -, now claimant is entitled to interest at the rate of 18% per annum with effect from 26.5.1999 upto 15.5.2002, being the only remaining amount due and payable. Petition stands disposed of accordingly, so also pending application(s), if any.