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2016 DIGILAW 530 (ORI)

UNION OF INDIA v. MD. JOBER ALI

2016-07-16

S.K.MISHRA

body2016
JUDGMENT : S.K. Mishra, J. - This is an appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the "Act" for brevity) preferred by the Union of India (hereinafter referred to as to the "UOI" for brevity) assailing the judgment passed by learned District Judge, Khurda at Bhubaneswar, in ARBP No.36/2009, dismissing the petition filed by the UOI under Section 34 of the Act as per the judgment dated 22.12.2011. 2. The facts leading to filing of this appeal may be succinctly stated as follows :- Pursuant to the invitation of tender by the UOI and submission of the offer by claimant-respondent, the work of construction of Regional Training Centre, C.I.S.F., Mundali, Cuttack (Odisha) S.H.: site Development and Bulk Services (Civil & Electrical) SW: Construction of one lakh litre capacity 20 Mt staging height R.C.C. overhead tank and one lakh litre capacity R.C.C. underground sump was awarded on 5.1.2001 for Rs.22,65,646 with a stipulated date of start of the works on 15.1.2001 and the stipulated date of completion as 14.10.2001, the time of completion being nine months. Within the scope of work the construction of one overhead tank and one underground sump, both of one lakh litre capacity each, were included. It is further borne out from the record that the work could not be completed within the stipulated period and after expiry of the stipulated date of completion on 14.10.2001, the contract was allowed to be continued without fixing any further date of completion. The contract thereafter was rescinded on 8.4.2004 under Clause-3 of the contract with the aim of completing the balance work by other agencies at the risk and cost of the claimant(respondent in this case). At time of rescission the underground sump was almost complete and the overhead tank was constructed upto first and second bracings. The entire work was got completed through other agencies on or about 2.11.2005, i.e. nearly nineteen months after the rescission. Though the work of the claimant-respondent was rescinded on 8.4.2004 and the balance work was also got completed on 3.11.2005, yet neither the accounts of the claimant-respondent were finalized nor the final bill of the work done by the claimant-respondent was passed. The claimant respondent invoked the Arbitration clause on 8.6.2004 and the disputes were referred to the Arbitrator on 16.7.2004 for arbitration by the sole Arbitrator. The claimant respondent invoked the Arbitration clause on 8.6.2004 and the disputes were referred to the Arbitrator on 16.7.2004 for arbitration by the sole Arbitrator. Additionally, it is noted that as per the terms and conditions of the contract, the appellant (UOI) was to issue 30.98 MT of the steel at the recovery rate of Rs.18,110 per MT from the their Bhubaneswar Stores. The appellant, accordingly, issued about 18,110 per MT from their Bhubaneswar Stores, but they did not have the balance quantity of the various required diameters as per specifications. The UOI, i.e the appellant, at the same time were having a huge quantity of about 50 MT of surplus steel lying at Koraput for a very long time, which were to be brought to Bhubaneswar. Accordingly, they directed the claimant-respondent to transfer the same (entire quantity) to the site of work, for which a separate work order for the transportation was issued to the claimant-respondent(contractor). Accordingly, the surplus steel lying at Koraput was transported to the site of the work and the payment of the transportation was made to the claimant-respondent separately and the same was issued to the claimant-respondent separately. It is further noted that though the total requirement of steel for the entire work was 30.98 MT, out of which 18 MT was already issued from Bhubaneswar Stores and the only balance quantity of about 13 MT was required to be issued, yet the appellant-UOI in order to avoid the maintaining of their own stores, issued and order to transport the entire surplus quantity lying at Koraput to the site. As such, against the total requirement of 30.98 MT of steel, the respondent issued about 68.8 MT of the steel to the claimant-respondent. As a result thereof, at the time of rescission, huge quantity of steel rods remained unused lying at the site of the work along with the other materials and T and P of the claimant-respondent(contractor). It is further borne out from the record that though such huge quantity was lying at the site of the work, yet the appellant did not enter the same in to their account and on the contrary proposed penal recovery for 50.96 MT amounting to Rs.18,45,771/- in the final bill prepared and submitted to the Arbitrator on 26.8.2006. It is further borne out from the record that though such huge quantity was lying at the site of the work, yet the appellant did not enter the same in to their account and on the contrary proposed penal recovery for 50.96 MT amounting to Rs.18,45,771/- in the final bill prepared and submitted to the Arbitrator on 26.8.2006. The appellant's argument against the steel lying at the site were that the same was issued to the claimant-respondent (contractor) and that they failed to return the balance steel and hence penal recovery under Clause 42 was justified, even though the same was lying at the site and after the rescission was obviously in the custody of the appellant. The claimant-respondent's objections were that such huge quantity was not required and the same was thrust on them by the appellant and after the rescission of the contract, all the materials lying at site whether belonging to the Contractor or the department were in the custody of the department. As such the question of penal recovery for the very materials lying at the site under the custody of the appellant does not arise. Subsequently, under the directions of the Arbitrator, the mater was reconciled and it was decided that the appellant would remove the steel lying at the site of the work, account and adjust the same in the bill. It was also agreed that the claimant-respondent would remove their materials and the T & P like mixer and vibrators etc. lying at the site. Accordingly, this process was completed during June, 2007. This fact has been recorded in the minutes of the 7th hearing held on 24.7.2007, the steel lying at site and removed by the appellant was found to be 9.86 MT and Mild Steel and 24.52 MT of Tor Steel, totalling 34.38 MT on the basis of the scale weight i.e. weighted in Trucks. However, as per report date 8.10.2007 enclosed with the final bill submitted on 10.10.2007, the quantity is 33.574 MT. Accordingly, the appellant in the final bill has reduced the penal recovery of steel from 50.96 MT to 16.58 MT. It is clarified by the appellant that though surplus steel was available at the site after the rescission, yet to the new agency, they had issued the steel from the new consignment arranged independently, because of pendency of the litigation. Accordingly, the appellant in the final bill has reduced the penal recovery of steel from 50.96 MT to 16.58 MT. It is clarified by the appellant that though surplus steel was available at the site after the rescission, yet to the new agency, they had issued the steel from the new consignment arranged independently, because of pendency of the litigation. Though the stipulated date for completion of the contract was 14.10.2001, the appellant has rescinded the contract on 8.4.2004, i.e. after the stipulated date. It is further borne out from the record that both parties were blaming each other for the delay. 3. Admittedly, in course of arbitral proceeding, no oral evidences were led by examining witnesses. Only documents were placed and submissions were made. The sole Arbitrator having considered each claim item decided the mater and awarded that the appellant shall pay a sum of Rs.22,33,380/- plus interest amount of Rs.10,94,356/- totalling Rs.33,27,736/- along with a cost of Rs.1,50,000/- within a period of three months. The appellant will also pay a further interest on the total amount of Rs.34,77,736/- from 8.2.2009 @ 12% per annum till the date of actual payment. 4. Aggrieved by the arbitral award, the UOI preferred an Arbitration Petition being ARBP No.36/2009 under Section 34 of the Act before the learned District Judge, Khurda at Bhubaneswar. As per judgment dated 22.12.2011 the learned District Judge, Khurda has come to the conclusion that this is not a case where the arbitral award suffers from illegality of going against public policy of India. The learned District Judge also held that there is no restriction in awarding interest to the claimant-contractor and hence dismissed the petition. Such judgment of the learned District Judge, Khurdha has been challenged in this appeal. 5. The learned Asst. Solicitor General arguing on behalf of the UOI assailed the impugned judgment and the award confirmed by it that the award in question is hit by the principles of "Case of No Evidence" as the respondent has not adduced any oral evidence to substantiate the case and on the other hand the arbitrator through have reached some conclusion yet they are bereft of any particulars and most importantly not based on any documentary evidence. The next contention raised by the learned counsel for the UOI is that the award in question is against public policy of India and non-consideration of the pleadings of the department by the Arbitrator is akin to ignoring the due process and allowing them item with regard to steel in contravention with Clause-42 is beyond jurisdiction. Thirdly, it was argument by the learned counsel for the UOI that there is no clause regarding awarding of interest in favour of any of the parties in the contract entered into between the parties and, therefore, awarding of interest in favour of the contractor-respondent is beyond jurisdiction. Alternatively, he argues that the rate of interest awarded in this case is unusually high and it should have been a lesser rate. 6. Learned counsel for the respondent, on the other hand, supports the finding recorded by the learned District Judge and the reasonings given by the Sole Arbitrator. He, in course of his argument, submits that the arbitral award has been prepared by the technical person. He is not conversant with the legal language and intricate provisions of law and, therefore, there may be certain errors where this Court may come to a different conclusion, but this Court is not supposed to sit as a court of appeal over the award and decide the same as if it is hearing in appeal against the arbitral award. 7. Learned counsel for the respondent submits that it is within the jurisdiction of the Arbitrator to award interest in favour of any of the successful parties if he feels that injustice has been done to the party and the contract could not be executed because of the lackadaisical attitude of the department. 8. An arbitral award can be set aside by the learned District Judge under Section 34 of the Act. Sub-clause (1) (e)-(i) of Section 2 of the Act provides that in the case of an arbitration other than international commercial arbitration, the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction having jurisdiction to decide the questions forming the subject matter of the arbitration if the same had been the subject-matter of a suit, but does not include any Civil Court of a grade inferior to such principal Civil Court, or any Court of Small Causes. It is the definition of Court within the meaning as provided in the Act. Sub-clause (e)-(ii) of the Act is not relevant for the purpose of this case. 9. Sub-section (2) of Section 2 of the Orissa Civil Court's Act, 1984 provides that the court of the District shall be the principal court of original civil jurisdiction in the district. In the expression it is provided that for the purpose of this section the expression District Judge shall not include the Addl. District Judge. So a petition under Section 34 of the Act does lie to the court of learned District Judge, but the scope of such challenge of any arbitral award is limited to the provision of section 34 of the Act appearing in Chapter-VII of the Act. It is appropriate to take note of the exact words used by the Parliament. The said section reads as follows: "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) of sub-section (3). It is appropriate to take note of the exact words used by the Parliament. The said section reads as follows: "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) of sub-section (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 even 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 capable 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 1.- For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,- (i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice. Explanation 2.- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.] [(2-A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award. Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by re-appreciation of evidence.] (3) xxx (4) xxx (5) xxx (6) xxx." 10. At this Stage, it is clear that the appellant's main thrust in challenging the arbitral award that is in conflict with the public policy of India. Explanation 1 of sub-section (2) of Section 34 of the "Act clarified that an award is in conflict with the public policy of India, only if,- (i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice. 11. Sub-section (2-A) provides that An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award. Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by re-appreciation of evidence. 12. In this case the major thrust that has been given by the appellant is that neither any oral evidences led nor any documentary evidences properly supplied to the Arbitrator. As the first contention is concerned, there is no dispute that none of the parties led any oral evidence before the sole Arbitrator. However, the documents are concerned, many documents have been laid before the sole Arbitrator on the basis of which he has come to the conclusion. The contention of the learned Asst. Solicitor General is that no evidence was led (oral evidence) and arbitral award suffers from illegality against public policy. 13. However, it is seen that Chapter-V of the Act provides for conduct of arbitral proceedings. The contention of the learned Asst. Solicitor General is that no evidence was led (oral evidence) and arbitral award suffers from illegality against public policy. 13. However, it is seen that Chapter-V of the Act provides for conduct of arbitral proceedings. Section 18 of the Act provides that the parties shall be treated with equality and each party shall be given a full opportunity to present his case. Section 19 of the Act provides for determination of rules of procedure. Sub-section (1) of Section 19 of the Act provides that the arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908 or the Indian Evidence Act, 1872. Sub-section (2) of Section 19 of the Act provides that subject to that Part, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings. Sub-section (3) of Section 19 of the Act provides that failing any agreement referred to in sub-section (2), the arbitral tribunal may, subject to this Part, conduct the proceedings in the manner it considers appropriate. Sub-section (4) of Section 19 of the Act provides that the power of the arbitral tribunal under sub-section(3) includes the power to determine the admissibility, relevance, materiality and weight of any evidence. Section 20 of the Act provides for place of arbitration. Section 21 of the Act provides for commencement of arbitral proceeding. Section 22 of the Act provides for language to be used in the arbitral proceeding. Section 23 of the Act provides for statement of claim and defence. Section 24 of the Act provides for hearings and written proceedings. Sub-section (1) of the Section 24 of the Act provides that unless otherwise agreed by the parties, the arbitral tribunal shall decide whether to hold oral hearings for the presentation of evidence or for oral argument, or whether the proceedings shall be conducted on the basis of documents and other materials. It is further provided that the arbitral tribunal shall hold oral hearings, at an appropriate stage of the proceedings, on a request by a party, unless the parties have agreed that no oral hearing shall be held. It is further provided that the arbitral tribunal shall hold oral hearings, at an appropriate stage of the proceedings, on a request by a party, unless the parties have agreed that no oral hearing shall be held. The said section further provides that the arbitral tribunal shall, as far as possible, hold oral hearings for the presentation of evidence or for oral argument on day-to-day basis, and not grant any adjournments unless sufficient cause is made out, and may impose costs including exemplary costs on the party seeking adjournment without any sufficient cause. Sub-section (2) of Section 24 of the Act provides the parties shall be given sufficient advance notice of any hearing and of any meeting of the arbitral tribunal for the purpose of inspection of documents, goods or other property. Sub-section (3) of Section 24 of the Act provides that all statements, documents or other information supplied to, or applications made to the arbitral tribunal by one party shall be communicated to the other party, and any expert report or evidentiary document on which the arbitral tribunal may rely in making its decision shall be communicated to the parties. Section 25 of the Act provides for default of a party. Section 26 of the Act provides for appointment expert by arbitral tribunal. Section 27 of the Act provides for Court assistance in taking evidence. 14. So from a careful examination of the provision of Chapter-V, it is clear that unless otherwise agreed by the parties, the arbitral tribunal shall decide whether to hold oral hearing for the presentation of evidence or for oral arguments, or whether the proceeding shall be conducted on the basis of documents and other materials. Moreover, on the top of it, the provisions of Code of Civil Procedure, 1908 and Indian Evidence Act, 1872 are not applicable to the arbitral proceedings. Hence, as the parties agreed that they shall not adduce oral evidence before the sole Arbitrator, no illegality has been committed and as most of the facts are admitted in this case, the Arbitrator did not commit any error on record or exceeded his jurisdiction basing his findings on documentary evidence. So the contention raised by the learned Asst. Solicitor General that this is a case of no evidence of the award should be set aside is not acceptable. 15. So the contention raised by the learned Asst. Solicitor General that this is a case of no evidence of the award should be set aside is not acceptable. 15. The second contention that the arbitral award suffers from award is against the public policy of India, it has been held by this Court in the case of Hyder Consulting Ltd. v. The Governor for the State of Orissa; 2006 (Supp.-I) OLR 961 that an award can be set aside if it is against the public policy of India, that is to say, if it is contrary to (a) fundamental policy of Indian law, or (b) the interest of India or (c) justice or morality, or (d) if it is patently illegal. 16. Similarly reliance has been placed on the reported case of M/s. Samantaray Construction Pvt. Ltd. & another v. State of Orissa; 2006 (Supp.-II) OLR 440, for advancing the argument that the concept of public, error apparent on the face of the record, error of law and fact constituting misconduct of the Arbitrator and total perversity are the only reasons on the basis of which an arbitral award case be set aside. 17. Applying this principle as borne out from Section 34 of the Act and the aforesaid two cases, this Court, after careful examination, finds that the arbitral proceeding and the award were not against the fundamental policy of Indian law. The learned Asst. Solicitor General failed to point out which Act of Indian Law has been flouted by the Arbitrator. It is not the case that the arbitral award is against the interest of India as the arbitral tribunal has categorically found that the delay has been caused because of the latches of the department in supplying steel rods etc. and there has been an inordinate delay in rescission of the contract awarded in favour of the respondent. The award can not also be stated to be against basic notion of morality or justice. This Court comes to the conclusion that the award passed by the Sole Arbitrator, which has not been interfered by the learned District Judge is not in conflict with the public policy of India. Admittedly, there is no violation of Section 75 or Section 81 of the Act. This Court comes to the conclusion that the award passed by the Sole Arbitrator, which has not been interfered by the learned District Judge is not in conflict with the public policy of India. Admittedly, there is no violation of Section 75 or Section 81 of the Act. Furthermore, the proviso to sub-Section (2-A) of Section 34 of the Act laid down that an award shall not be set aside merely on the ground of an erroneous application of the law or by re-appreciation of evidence. 18. Interpreting this provision the Hon'ble Supreme Court in the case of Swan Gold Mining Ltd. v. Hindustan Copper Ltd.; 2014(4) Arb. LR 1 (SC) has held that the arbitrator's decision is generally considered binding between the parties and, therefore, the power of the court to set aside the award would be exercised only in cases whether the court finds that the arbitral award is on the face of it erroneous or patently illegal or in contravention of the provisions of the Arbitration and Conciliation Act, 1996. The Hon'ble Supreme Court further held that when the parties have arrived at a concluded contract and acted on the basis of those terms and conditions of the contract then substituting new terms in the contract by the arbitrator or by the court would be erroneous or illegal. The Hon'ble Supreme Court further held that the arbitrator appointed by the parties is the final judge of the facts. The finding of facts recorded by him cannot be interfered with on the ground that the terms of the contract were not correctly interpreted by him. In the aforesaid case, the Hon'ble Supreme Court held that the interpretation of the contract is matter for the arbitrator, who is a judge chosen by the parties to determine and decide the dispute. The court is precluded from re-appreciating the evidence and to arrive at different conclusion by holding that the arbitral award is against the public policy. 19. Similarly in the case of Associate Builders v. Delhi Development Authority; 2014(4) Arb.LR 307 (SC), the Hon'ble Supreme Court has laid down that when a court is applying the "public policy" test to an arbitration award, it does not act as a court of appeal and consequently errors or fact cannot be corrected. 19. Similarly in the case of Associate Builders v. Delhi Development Authority; 2014(4) Arb.LR 307 (SC), the Hon'ble Supreme Court has laid down that when a court is applying the "public policy" test to an arbitration award, it does not act as a court of appeal and consequently errors or fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus, an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score. Once it is found that the arbitrator's approach is not arbitrary or capricious, then he is the last word on facts. The Hon'ble Supreme Court further held in the aforesaid case that an arbitral tribunal must decide in accordance with the terms of the contract, but if an arbitrator construes a terms of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground. Construction of the terms of a contract is primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could be said to be something that no fair minded or reasonable person could do. The Hon'ble Supreme Court further held that the expression "justice" when it comes to setting aside an award under the public policy ground can only mean that an award shocks the conscience of the court. 20. Applying these principles to the present, this Court finds that there is no reason to disturb the findings recorded by the sole Arbitrator, which has been refused to set aside by the learned District Judge. In other words, there are concurrent findings of facts. However, it appears to the court that awarding interest to contractor needs reconsideration. It is apparent from the record that the sole Arbitrator having considered each claim item decided the matter and awarded that the appellant shall pay a sum of Rs.22,33,380/- plus interest amount of Rs.10,94,356/- totalling Rs.33,27,736/- along with a cost of Rs.1,50,000/- within a period of three months. It is apparent from the record that the sole Arbitrator having considered each claim item decided the matter and awarded that the appellant shall pay a sum of Rs.22,33,380/- plus interest amount of Rs.10,94,356/- totalling Rs.33,27,736/- along with a cost of Rs.1,50,000/- within a period of three months. The appellant will also pay a further interest on the total amount of Rs.34,77,736/- from 8.2.2009 @ 12% per annum till the date of actual payment. 21. In course of hearing, learned counsel for the respondent submitted that awarding of interest is not illegal and in support of such contention raised at the bar he has relied upon certain reported cases of the Supreme Court. In the case of State of Rajasthan and another v. Ferro Concrete Construction Pvt. Ltd; 2009(3) Arb. LR 140 (SC); wherein at paragraphs 30, 31 and 32 of the Hon'ble Supreme Court has held that even if there is no provision in the contract for payment of interest on any of the amount payable to the contractor, in absence of an express bar, the arbitrator has the jurisdiction and authority to award interest vide decisions of the Constitution Bench in Secretary, Irrigation Department, Government of Orissa v. G.C. Roy, (1992) 1 SCC 508 , Executive Engineer, Dhenkanal Minor Irrigation Division v. N.C. Budharaj, (2001) 2 SCC 721 and subsequent decision in Bhagawati Oxygen Ltd. v. Hindustan Copper Ltd., (2005) 6 SCC 462 . In this case there is no express bar in the contract between the parties in regard to interest. Hence the arbitrator was well within his jurisdiction to award interest. In the aforesaid case of State of Rajasthan and another v. Ferro Concrete Construction Pvt. Ltd. (supra), the Hon'ble Supreme Court further held that the legal position underwent a change after the enactment of Interest Act, 1978. Hence the arbitrator was well within his jurisdiction to award interest. In the aforesaid case of State of Rajasthan and another v. Ferro Concrete Construction Pvt. Ltd. (supra), the Hon'ble Supreme Court further held that the legal position underwent a change after the enactment of Interest Act, 1978. Sub-section (1) of Section 3 of the said Act provided that a court (as also an arbitrator) can in any proceedings for recovery of any debt or damages, if it thinks fit, allow interest to the person entitled to the debt or damages at a rate not exceeding the current rate of interest, for the whole or part of the following period, that is to say,- (a) if the proceedings relate to a debt payable by virtue of a written instrument at a certain time, then, from the date when the debt is payable to the date of institution of the proceedings; (b) if the proceedings do not relate to any such debt, then, from the date mentioned in this regard in a written notice given by the person entitled or the person making the claim to the person liable that interest will be claimed, to the date of institution of the proceedings. 22. As far as the present petitioner is concerned, there is no written agreement regarding payment of interest. Moreover, this is not a proceeding where a debt is to be payable. Clause (b) will be attracted in this case and though it is contended that the petitioner is entitled to interest from the date of raising of the dispute or referring the case to arbitration, learned counsel for the respondent failed to point out any pleadings regarding the date mentioned about the interest in a written notice by the person entitled to the person liable to pay interest. So in such a situation where interest is payable for the pre-reference period is a question remains to be decided. 23. In the case of State of Odisha and others v. Pratima Kanungo and others; 2015 (5) Arb. LR 93 (Orissa), this Court has held that Section 31(7) of the Arbitration and Conciliation Act, 1996 makes no reference to payment of compound interest or payment of interest upon interest. Nor does it require the interest which accrues till the date of the award, to be treated as part of the principal from the date of award for calculating the post-award interest. Nor does it require the interest which accrues till the date of the award, to be treated as part of the principal from the date of award for calculating the post-award interest. The use of words "where and insofar as an arbitral award is for the payment of money" and use of the words "the arbitral tribunal may include in the sum for which the award is made, interest .... on the whole or any part of the money" in clause (a) and use of the words "a sum directed to be paid by an arbitral award shall ..... carry interest," in clause (b) of sub-section (7) of Section 31 clearly indicates that the section contemplates award of only simple interest and not compound interest or interest upon interest. 24. Thus, in view of the aforesaid ratio decidendi in aforesaid cases, i.e. by the Hon'ble Supreme Court and High Court of Orissa, this Court is of the opinion that (1) no interest is to be awarded for any pre-reference period as it does not satisfy the requirement of law as discussed above and (2) no interest upon interest or compound interest can be awarded. 25. Granting interest on interests and on costs awarded are not in accordance with the public policy of India. Moreover, the amount of interest should be awarded keeping in view the current commercial rate of interest generally given by the Banks on fixed deposits. The award was passed on 8th November, 2008. In the year 2008, the interest on fixed deposit was 7% to 8% per annum. The said interest is also simple. So this Court is of the opinion that the operative portion of the order passed by the sole Arbitrator requires modification. As per the main award amount of Rs.22,33,380/- is concerned, this Court is not inclined to interfere with the same. It is also not inclined to interfere with the awarding of costs of Rs.1,50,000/-. However, the award of interest amount of Rs.10,94,356/- and the award of 12% interest per annum on the total interest accrued and the costs are set aside. The appellant is directed to pay Rs.22,33,380/- (rupees twenty two lakhs thirty three thousand and three hundred eighty) with simple interest @ 7.5% per annum from the date of reference of the dispute to arbitration i.e. from 16.7.2004 till the actual payment. The appellant is directed to pay Rs.22,33,380/- (rupees twenty two lakhs thirty three thousand and three hundred eighty) with simple interest @ 7.5% per annum from the date of reference of the dispute to arbitration i.e. from 16.7.2004 till the actual payment. The appellant shall also pay costs of Rs.1,50,000/- (rupees one lakh fifty thousand), but it is not required to pay any interest thereon. 26. With such modification of the operative portion of the order, the appeal stands partly allowed. 27. Keeping in view the facts of the case, there shall be no orders with regard to costs. Final Result : Allowed