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2014 DIGILAW 94 (MAN)

Union of India v. Nongthombam Rajendra Singh

2014-08-04

LAXMI KANTA MOHAPATRA

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JUDGMENT Laxmi Kanta Mohapatra; CJ. 1. All the three Appeals arise out of two Arbitration proceedings between the same parties under two different agreements. Since the issue in both the Arbitration proceedings is one and the appeals can be disposed of by answering the said issue, on the request of the learned counsel appearing for the parties, all the three Appeals were taken up for hearing and are disposed of in this common judgment. 2. The claimant-respondent in all the three Appeals was entrusted for execution of certain works by the Appellants under agreement No. 24/EE/MCD/86-87. The respondent was entrusted with the work of construction of internal roads, culverts and drainage in Regional Tasar Research Station at Imphal. Dispute arose between the parties and the respondent in invoking the Arbitration clause contained in the agreement filed Original (Arbitration) Suit No. 5 of 1993 in the Court of Civil Judge (Sr. Divn.) No. I, Manipur East for appointment of an Arbitrator. In the said case, an Arbitrator was appointed and Arbitration Case No. C-16 of 1998 was registered before the Arbitrator. The Arbitrator passed an award on 21st December, 1998 directing the present appellants to pay an amount of Rs. 2,29,580.05 (Rupees two lakhs twenty nine thousand and five paise) only with 30% compound interest per year w.e.f. 27.04.1987 from the date of award and special damage of Rs. 12,000/- (Rupees twelve thousand) only per month w.e.f. 27.4.1987 till realisation of the award amount. The said award passed by the Arbitrator was made Rule of the Court by the learned Civil Judge (Sr. Divn.) No. I, Manipur East on 29th December, 2006 and a decree was drawn up. The said judgment and decree are the subject matter of challenge in RFA No. 8 of 2007. 3. Under agreement No. 18/SE/EE/MCD of 1980-81, the respondent was entrusted with the work of construction of residential and non-residential buildings for 4th Assam Rifles. Dispute arose between the parties and the respondent approached the learned Civil Judge (Sr. Divn.) No. I, Manipur East in Original (Arbitration) Suit No. 1 of 1995 for appointment of an Arbitrator u/s. 20 of the Indian Arbitration Act, 1940. An Arbitrator was appointed and before the Arbitrator, the dispute was registered as Arbitration Case No. C-17 of 1998. The sole Arbitrator passed an award on 17th July, 2013 directing the appellants to pay an amount of Rs. An Arbitrator was appointed and before the Arbitrator, the dispute was registered as Arbitration Case No. C-17 of 1998. The sole Arbitrator passed an award on 17th July, 2013 directing the appellants to pay an amount of Rs. 9,93,173.03 with compound interest at the rate of 15% per year w.e.f. 18.09.1981 and special damage at the rate of Rs. 3,000/- per month w.e.f. 18.09.1981 till realisation of the award amount. The said award was challenged by the Appellants before the Civil Judge (Sr. Divn.) No. I, Manipur East and an application was also filed by the Respondent to make the award Rule of the Court. Learned Civil Judge by Judgment and Order dated 16.3.2005 made the award Rule of the Court and passed the decree. The application filed by the Appellants for setting aside the award was registered as J.M. (Arbitration) Case No. 8 of 2004. By order dated 16.03.2005, learned Civil Judge rejected the said application. The judgment and decree dated 16.03.2005 passed by the learned Civil Judge making the award a Rule of the Court are the subject matter of challenge in RFA No. 10 of 2005, whereas the order passed by the learned Civil Judge dated 16.03.2005 in J.M. (Arbitration) Case No. 8 of 2004 rejecting the petition filed by the appellants for setting aside the award is the subject matter of challenge in MFA No. 3 of 2006. 4. Challenging the award in both the cases, only one point has been raised with regard to interest awarded by the Arbitrator and made a Rule of the Court by learned Civil Judge. It was contended on behalf of the appellants that the Arbitrator has no jurisdiction to award compound interest at the rate of either 15% or 30% per year. Reliance was placed on a decision of the Apex Court in the case of Rajasthan SRTC-Vs-Indag Rubber Ltd. reported in : 2006 (VII) SCC 700. Referring to the above decision, it was contended by the learned counsel appearing for the appellants that in the said case interest had been awarded at the rate of 12% per year from the date of award which was reduced to 6% per year by the Supreme Court. Learned Sr. Counsel, Mr. Referring to the above decision, it was contended by the learned counsel appearing for the appellants that in the said case interest had been awarded at the rate of 12% per year from the date of award which was reduced to 6% per year by the Supreme Court. Learned Sr. Counsel, Mr. Ibotombi, also relied upon another decision of the Supreme Court in the case of Kishorilal-vs-Sales Officer, District Land Development Bank and others reported in : 2006 (VII) SCC 496, though the said case does not relate to an arbitration proceeding, it was contended by the learned sr. counsel appearing for the appellants that interest was granted at the rate of 6% per year. 5. Mr. Mohendro, learned counsel appearing for the claimant-respondent relied on several Supreme Court's decisions to substantiate his submission that interest at the rate of even 20% can be granted by the Arbitrator. Relying on a decision of the Supreme Court in the case of Ravindra and Associates-vs-Union of India reported in : (2010) 1 SCC 80 , it was contended that interest at the rate of 18% granted by the Arbitrator was reduced to 12% per annum. Referring to 3 other decisions of the Apex Court in the cases of Sree Kamatchi Amman Constructions-vs-Divisional Railway Manager (Works), Palghat & ors reported in : (2010) 8 SCC 767 , Union of India and others-vs-Neelam Engineering and Construction Company reported in : (2010) 3 SCC 642 , State of Haryana & ors-vs-S.L. Arora and Company reported in : (2010) 3 SCC 690 , it was further contended that in all the above three cases, Apex Court granted interest at the rate of 18% per annum. As stated earlier, in both the arbitration proceedings, Arbitrator has granted compound interest at the rate of 30% in one case and 15% in another case per year. In none of the Supreme Court decisions cited above, compound interest has been awarded and the same has been upheld by the Court. I am of the view that award in compound interest either at the rate of 15% or 30% per annum is not sustainable unless provided in the agreement. In none of the Supreme Court decisions cited above, compound interest has been awarded and the same has been upheld by the Court. I am of the view that award in compound interest either at the rate of 15% or 30% per annum is not sustainable unless provided in the agreement. However, considering the facts and circumstances of the case and number of years passed in the mean time, I allow RFA No. 8 of 2007 and RFA No. 10 of 2005 only to the extent that respondent shall be entitled to interest at the rate of 18% simple interest on the award amount from the date of award till payment. The principal award amount and damages granted having not been challenged in course of argument, the same need not be interfered with. With the above modification in the respective judgment/order/decree passed by the learned Civil Judge impugned in the three appeals, R.F.A. No. 10 of 2005 and R.F.A. No. 8 of 2007 are partly allowed and R.F.A. No. 3 of 2005 is dismissed. 6. With the above observation and direction, these appeals are disposed of.