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IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN


AT JODHPUR
(1)

S.B. Civil Writ Petition No.2016/2014


Union of India & Ors.
V/s.
M/s. Shri Ganesh Government Contractors & Rural Works & Anr.
&
(2)

S.B. Civil Writ Petition No.2284/2014


Union of India & Ors.
V/s.
M/s. Shri Ganesh Government Contractors & Rural Works & Anr.
Date of Order

:::
PRESENT

10.11.2014

HON'BLE MR. JUSTICE P.K. LOHRA


Mr. Jagdish Vyas, for the petitioners.
Mr. Shyam Ladrecha, for the respondents.
Reportable
Both these writ petitions are founded on identical facts and the
question of law involved therein is common, therefore, these petitions are
disposed of by this common order.

Facts in brevity, as projected in S.B. Civil Writ Petition


No.2016/2014, are narrated in chronological order as under:-

At the threshold, a contract for work of handling of goods/parcels


transshipment was awarded to the first respondent for a period of three
years commencing from 14th October, 1984 and pursuant thereto an
agreement was signed between the petitioners and the first respondent on
17th October, 1984 containing arbitration clause. Subsequently, another
contract of same nature was awarded to the first respondent for a period of

three years commencing from 16th May, 1990 and an agreement between
the parties was executed for the same on 15th May, 1990 having arbitration
clause. On completion of both the contracts, a dispute cropped up between
the rival parties regarding payments, and therefore, first respondent for
redressal of his grievances invoked arbitration clause and initiated the
proceedings for appointment of arbitrator for both the contracts.

By

judicial intervention, subject-matter of dispute in both the contracts were


referred to an arbitrator and Shri Lal Singh Ujjawal, retired Divisional
Manager, North-Western Railway, Jodhpur was appointed as sole arbitrator.
The arbitrator passed separate awards for both the contracts of even date i.e.
1st March, 2003.

Being aggrieved by the arbitral awards, petitioners laid separate


petitions under Section 34 of the Arbitration and Conciliation Act, 1996
(for short, hereinafter referred to as 'the Act of 1996') before the learned
District Judge, Bikaner raising certain objections against the awards. Along
with the petitions under Section 34 of the Act of 1996, petitioners also filed
separate applications under Section 5 of the Limitation Act for condonation
of delay. The learned District Judge, Bikaner, while relying on a decision
of Hon'ble Apex Court, rejected both the petitions under Section 34 of the
Act of 1996 by holding that in these proceedings, provisions of Section 5 of
the Limitation Act are not applicable. Thus, both the petitions were thrown
away solely on the ground of limitation.

Feeling dismayed with the order of the learned District Judge,


Bikaner, petitioners preferred two separate appeals before this Court under
Section 37 of the Act of 1996 and this Court was pleased to decide both

these appeals by a common order dated 16th February, 2005. The Court
held that petitions under Section 34 of the Act of 1996 are not time barred,
and therefore, while allowing the appeals, matter was remanded back to the
learned District Judge for deciding objections of the petitioners afresh on
merits. The operative portion of the order reads as under:The net result is that the impugned order cannot
be sustained. The appeal is therefor allowed, the
impugned order is set aside, and the matter is sent back
to the learned trial Court, with a direction to decide the
objections on merits, in accordance with the law, and
most expeditiously.
The parties are directed to appear before the
learned trial Court on 11th March 2004, as prayed.

After remand, the petitions under Section 34 of the Act of 1996 filed
on behalf of the petitioners were considered de-novo on merits by the
learned Additional District Judge No.2, Bikaner (for short, 'learned trial
Court'). The learned trial Court after examining the objections on merits
found that there is no substance in the objections and consequently by order
dated 14th May, 2009 dismissed the petitions of the petitioners under
Section 34 of the Act of 1996. It is apparent from the pleadings that after
rejection of the petitions submitted by the petitioners under Section 34 of
the Act of 1996, no endeavour was made at their behest to challenge the
order of the learned trial Court, and therefore, by efflux of time order
attained finality.

According to version of the petitioners, after expiry of period of


limitation from the date of order dated 14th May, 2009, within reasonable
period, the requisite amount was paid to the contractor with interest in

terms of arbitral awards. The requisite amount was paid in the month of
December, 2009.

The respondent-contractor feeling dis-satisfied with the action of the


petitioners in making compliance of the arbitral award initiated execution
proceedings in the year 2010 for claiming interest on the total amount
awarded by the arbitrator @12% from the date of the award. The prayer
made in the execution petition on behalf of the respondent-contractor was
resisted by the petitioners and a reply was submitted, wherein it is averred
that the requisite amount in terms of arbitral award with interest has been
paid to the petitioner and as such it is not entitled for interest @12% on the
aforesaid amount from the date of award. The learned District Judge,
Bikaner (for short, 'learned executing Court') after hearing the rival parties
passed the impugned order dated 9th November, 2013, whereby the
petitioners are directed to pay interest to the respondent-contractor @12%
from the date of award on the entire claim for which respondent was
declared entitled by the arbitrator. The order of learned executing Court is
under challenge in the writ petition.

Learned counsel for the petitioners, Mr. Jagdish Vyas, has


vehemently argued that order impugned is dehors the arbitral award
inasmuch as for certain claims, the arbitrator has not awarded any interest to
the respondent, yet the learned executing Court has allowed interest @12%,
which is an error apparent on the face of record, and therefore, impugned
order cannot be sustained. Mr. Vyas, learned counsel for the petitioners,
would contend that an arbitral award on attaining finality is executable as a
decree of a civil court, and therefore, the powers of the executing Court, in

this regard, are akin to a civil Court to grant relief to the decree-holder in
terms of the decree and not beyond the same. Elaborating his submissions,
in this behalf, learned counsel has submitted that the learned executing
Court has exceeded its jurisdiction by allowing interest @12% to the
respondent, which was beyond the scope of the award itself and as such the
award impugned merits annulment in exercise of certiorari jurisdiction of
this Court.

Learned counsel for the petitioners has submitted that the

objections laid by the petitioners under Section 34 of the Act of 1996 were
rejected on 14th May, 2009 and thereafter within a reasonable period
cheques of the requisite amount were deposited in the Court on 25th
September, 2009, and therefore, interest claimed by the respondentcontractor was not at all admissible in terms of Section 36 of the Act of
1996, which is a very vital issue, which was not considered by the learned
Court below, while passing the impugned order. Lastly, learned counsel
has urged that in terms of Section 31(7)(a) of the Act of 1996 interest which
was disallowed on certain claims to the respondent-contractor by the
arbitral Tribunal was not at all admissible and yet the learned Court below
has allowed the same contrary to the mandate of law, which is serious
jurisdictional error warranting interference by this Court in exercise of
supervisory jurisdiction of this Court enshrined under Article 227 of the
Constitution.

Learned counsel for the petitioners in support of his contentions has


placed reliance on a decision of Hon'ble Supreme Court in case of State of
Haryana & Ors. V/s. M/s. S.L. Arora & Company [AIR 2010 SC 1511],
while laying stress on paras 18.2 and 18.4 of the verdict. The Court in para
18 has held as under:-

18. As there is some confusion as to what section 31(7)


authorizes and what it does not authorize, we will
attempt to set out the legal position regarding award of
interest by the arbitral tribunals, as emerging from
section 31(7) of the Act.
18.1. The provision for interest in the Act is contained
in section 31 dealing with the form and contents of
arbitral award. It employs two significant expressions
"where the arbitral award is for payment of money"
and "the arbitral tribunal may include in the sum for
which the award is made, interest..... on the whole or
any part of the money". The legislature has thus made
it clear that award of interest under sub-section (7) of
section 31 (and award of costs under sub-section (8) of
Section 31 of the Act) are ancillary matters to be
provided for by the award, when the arbitral tribunal
decides the substantive disputes between the parties.
The words `sum for which the award is made' and `a
sum directed to be paid by an arbitral award'
contextually refer to award on the substantive claims
and not ancillary or consequential directions relating to
interest and costs.
18.2. The authority of the arbitral tribunals to award
interest under section 31(7)(a) is subject to the contract
between the parties and the contract will prevail over
the provisions of section 31(7)(a) of the Act. Where the
contract between the parties contains a provision
relating to, or regulating or prohibiting interest, the
entitlement of a party to the contract to interest for the
period between the date on which the cause of action
arose and the date on which the award is made, will be
governed by the provisions of the contract, and the
arbitral tribunal will have to grant or refuse interest,
strictly in accordance with the contract. The arbitral
tribunals cannot ignore the contract between the
parties, while dealing with or awarding pre-award
interest. Where the contract does not prohibit award of
interest, and where the arbitral award is for payment of
money, the arbitral tribunal can award interest in
accordance with Section 31(7) (a) of the Act, subject to
any term regarding interest in the contract.
18.3. If the contract provides for compounding of
interest, or provides for payment of interest upon
interest, or provides for interest payable on the
principal upto any specified stage/s being treated as
part of principal for the purpose of charging of interest
during any subsequent period, the arbitral tribunal will
have to give effect to it. But when the award is
challenged under Section 34 of the Act, if the court

finds that the interest awarded is in conflict with, or


violating the public policy of India, it may set aside
that part of the award.
18.4. Where an arbitral tribunal awards interest under
section 31(7)(a) of the Act, it is given discretion in
three areas to do justice between the parties. First is in
regard to rate of interest. The Tribunal can award
interest at such rate as it deems reasonable. The second
is with reference to the amount on which the interest is
to be awarded. Interest may be awarded on the whole
or any part of the amount awarded. The third is with
reference to the period for which the interest is to be
awarded. Interest may be awarded for the whole or any
part of the period between the date on which cause of
action arose and the date on which the award is made.
18.5. The Act does away with the distinction and
differentiation among the four interest bearing periods,
that is, pre-reference period, pendente lite period, postaward period and post-decree period. Though a
dividing line has been maintained between pre-award
and post-award periods, the interest bearing period can
now be a single continuous period the outer limits
being the date on which the cause of action arose and
the date of payment, subject however to the discretion
of the arbitral tribunal to restrict the interest to such
period as it deems fit.
18.6. Clause (b) of Section 31(7) is intended to ensure
prompt payment by the award-debtor once the award is
made. The said clause provides that the "sum directed
to be paid by an arbitral award" shall carry interest at
the rate of 18% per annum from the date of award to
the date of payment if the award does not provide
otherwise in regard to the interest from the date of the
award. This makes it clear that if the award grants
interest at a specified rate up to the date of payment, or
specifies the rate of interest payable from the date of
award till date of payment, or if the award specifically
refused interest, clause (b) of Section 31 will not come
into play. But if the award is silent in regard to the
interest from the date of award, or does not specify the
rate of interest from the date of award, then the party in
whose favour an award for money has been made, will
be entitled to interest at 18% per annum from the date
of award. He may claim the said amount in execution
even though there is no reference to any post award
interest in the award. Even if the pre-award interest is
at much lower rate, if the award is silent in regard to

post- award interest, the claimant will be entitled to


post-award interest at the higher rate of 18% per
annum. The higher rate of interest is provided in clause
(b) with the deliberate intent of discouraging awarddebtors from adopting dilatory tactics and to persuade
them to comply with the award.

On the other hand, learned counsel for the respondent-contractor has


urged that the impugned order passed by the learned executing Court is in
consonance and conformity with the provisions of Section 31(7)(b) of the
Act of 1996, and therefore, no interference with the same is called for in
exercise of certiorari jurisdiction of this Court.

Learned counsel, Mr.

Ladrecha, has submitted that even if for certain claims, the arbitral Tribunal
has not awarded interest, the respondent is entitled for interest post arbitral
award by virtue of clause (b) of Section Section 31(7) of the Act of 1996
and the learned executing Court has passed the impugned order by relying
on the said clause, which is a just decision warranting no interference in
exercise of supervisory jurisdiction of this Court.

Elaborating his

submissions, in this behalf, Mr. Ladrecha would contend that interest


envisaged under Section 31(7)(a) of the Act of 1996 refers to interest on the
amount awarded anterior to the arbitral award, whereas clause (b) of
Section 31(7) deals with interest on the amount awarded by the arbitral
Tribunal posterior to the award and for which grant of interest on the entire
award @18% per annum is mandated and by the impugned order the
learned executing Court has awarded interest @12% only, which cannot be
faulted so as to make subject matter of judicial scrutiny.

In support of his contentions, Mr. Ladrecha has also placed reliance

on paras 16, 17 as well as 18.4 and 18.6 of the verdict of Hon'ble Supreme
Court in State of Haryana & Ors. (supra). Paras 16 and 17 read as under:16. Some Arbitral Tribunals have misconstrued clause
(b) of section 31(7) of the Act and assumed that the
said provision requires the rate of post-award interest
in all arbitral awards should be 18% per annum, and
that they do not have any discretion in regard to postaward interest. Some have misconstrued it further to
infer the rate of interest mentioned therein is an
indication that invariably the rate of interest in
arbitrations, either pre-award or post-award, should be
18% per annum. Both these assumptions are baseless
and erroneous. If that was the legislative intention,
there would have been no need for vesting discretion in
Arbitral Tribunals, in the matter of interest, under
section 31(7)(a). The principles relating to award of
interest, in general, are not different for courts and
arbitral tribunals, except to the extent indicated in
section 31(7) of the Act and CPC. A comparatively
high rate of post-award interest is provided in section
31(7)(b) of the Act, not because 18% is the normal rate
of interest to be awarded in arbitrations, but purely as a
deterrent to award-debtors from avoiding payment or
using delaying tactics. In fact a provision similar to
section 31(7)(b) of the Act, if provided in section 34 of
Code of Civil Procedure, will considerably reduce the
travails of plaintiffs in executing their decrees in civil
cases. Be that as it may.
17. The difference between clauses (a) and (b) of
section 31(7) of the Act may conveniently be noted at
this stage. They are:
(i) Clause (a) relates to pre-award period and clause (b)
relates to post- award period. The contract binds and
prevails in regard to interest during the pre-award
period. The contract has no application in regard to
interest during the post-award period.
(ii) Clause (a) gives discretion to the Arbitral Tribunal
in regard to the rate, the period, the quantum (principal
which is to be subjected to interest) when awarding
interest. But such discretion is always subject to the
contract between the parties. Clause (b) also gives
discretion to the Arbitral Tribunal to award interest for
the post-award period but that discretion is not subject
to any contract; and if that discretion is not exercised
by the arbitral Tribunal, then the statute steps in and
mandates payment of interest, at the specified rate of
18% per annum for the post- award period.

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(iii) While clause (a) gives the parties an option to


contract out of interest, no such option is available in
regard to the post-award period.
In a nutshell, in regard to pre-award period,
interest has to be awarded as specified in the contract
and in the absence of contract as per discretion of the
Arbitral Tribunal. On the other hand, in regard to the
post-award period, interest is payable as per the
discretion of the Arbitral Tribunal and in the absence
of exercise of such discretion, at a mandatory statutory
rate of 18% per annum.

Mr. Ladrecha has also placed reliance on a yet another decision of


Hon'ble Apex Court in case of Indian Hume Pipe Co. Ltd. V/s. State of
Rajasthan, reported in 2010 CDR 36 (SC). In this verdict, the Apex Court
has reiterated the principles laid down in case of State of Haryana (supra).
Mr. Ladrecha has contended that after passing of the arbitral award, the
protracted judicial proceedings at the behest of the petitioners has delayed
the payment of requisite amount for more than six years, therefore,
entitlement of the respondent for interest in terms of Section 31(7) of the
Act of 1996 is unquestionable and as such the interest awarded by the
learned executing Court cannot be categorized as infirm or without
jurisdiction.

Countering the argument of the learned counsel for the

petitioners that the learned executing Court has travelled beyond the terms
of the award, Mr. Ladrecha would contend that post arbitral award interest
is a right of the respondent contractor, which emanates from the mandatory
provision of law and same cannot be construed as beyond the scope of the
arbitral award.

I have heard learned counsel for the parties and perused the
impugned orders.

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In both these cases, the crucial question, which has cropped up for
determination, can be fragmented in two parts, namely, (i) powers of the
executing Court in determining the claim of future interest on the arbitral
award and (ii) admissibility of interest posterior to the arbitral award within
the four corners of Section 31(7) of the Act of 1996.

With a view to examine the powers of the executing Court, it has


become imperative to dilate on pivotal issue namely question to be
determined by the Court executing decree under Section 47 of the Code of
Civil Procedure, 1908 (for short, 'CPC').

Section 47 CPC mandates that while executing a decree, an


executing Court cannot go beyond the terms of the decree.

Hon'ble

Supreme Court in case of C.F. Angadi V/s. Y.S. Hirannayya [(1972) 1


SCC 191] has held that a Court executing a decree cannot modify or vary
the terms of the decree. The Court in para 10 has held as under:10. A Court executing the decree shall execute it as
it stands. It cannot modify or vary the terms of the
decree. No execution can be taken to that general
principle. But the execution court has the right to
construe a decree in the light of the applicable
provisions of law and if in this case on a construction
of the decree in the light of the applicable provision of
law, it found that the deposit made by the respondent
on January 2, 1960, was according to law a deposit in
compliance with the terms of the decree, then the
execution Court was not varying the terms of the
decree but executing the decree as it stood after
considering the effect of the deposit in the light of the
relevant law.

In case of State of Punjab & Anr. V/s. Buta Singh [1995 Supp. (3)

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SCC 684], while reiterating the same principle, the Apex Court in para 3
has held as under:3.
It is obvious that the executing court had no
jurisdiction to direct the recovery of any amount which
was not granted by the decree under execution since the
decree was for a mere declaration. The order of the
executing court being without jurisdiction, it was the
duty of the High Court to have corrected that error of
jurisdiction. However, the High Court has failed to do
so.

In case of Rajasthan Financial Corporation V/s. Man Industrial


Corporation Ltd. [(2003) 7 SCC 522], while reiterating the principle that
executing Court cannot go beyond the decree, the Apex Court held in para
18 as under:18. We have considered the rival submissions.
There can be no dispute to the proposition that the
executing Court cannot go beyond the decree. There
can be no dispute that the executing Court must take
the decree according to its tenor. Also as has been set
out in Greater Cochin Development Authority case
when a decree is in terms of an award/document then
the terms of that document have to be looked at. In this
case the decree is in terms of the compromise deed.
The decree does not provide that the compromise deed
or any of its terms have been varied. To be
remembered, that the decree is passed under Order 23
Rule 3 Civil Procedure Code. Under this provision
normally the Court passes the decree in terms of the
compromise. Of course, the Court can make a change.
However, if the Court was making a change it would
have had to record why it was making the change and
what change it was making. It could not then provide
that the decree was in terms of the compromise. If the
Court was not passing the decree in terms of the
compromise then this opening portion of the decree
could not have been there. The subsequent portion is
mere classificatory in nature as to which of the options
was to be exercised. This does not govern or detract
from the main terms of the decree which is a decree in
terms of the compromise. Clauses 2 and 7 of the
compromise deed make it very clear that the appellants
were entitled to charge interest on half yearly basis. We
see no substance in the submission that the "half yearly

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rests" were to apply only if the rate of interest was to


be decided by the appellants. These words clearly
applied to both the options. In the classificatory portion
the words "on half yearly basis" have not been
mentioned because the portion is only clarifying how
interest was to be calculated. This portion thus does not
detract from the fact that the decree is in terms of the
compromise deed. Merely because some other minor
changes, which appear to be inadvertent changes, have
crept in do not also detract from the fact that the decree
is in terms of the compromise deed. We also do not
find any uncertainty in the decree.

In case of J & K Bank Ltd. & Ors. V/s. Jagdish C. Gupta [(2004)
10 SCC 568], three Judges Bench of Hon'ble Supreme Court, while dilating
on the powers of the executing Court under Section 47 CPC, reiterated the
same principle that executing Court cannot go beyond the decree and held
in para 2 as under:2.
The short question involved in the case is
whether the executing court could go beyond the
decree by directing that the respondent be promoted to
the post of Chief Manager. It is no more res integra
that the executing court has no jurisdiction to go
behind the decree. It is not disputed that the decree did
not contain any direction to promote the respondent to
the post of chief Manager. Under such circumstances,
we are of the view that the executing court as well as
the High Court fell in error in issuing directions in
execution case that the respondent be promoted to the
post of Chief Manager. The order under challenge,
therefore, deserves to be set aside.
We order
accordingly. The appeal is allowed. There shall be no
order as to costs.

Thus, the legal position remains no more res-integra that executing


Court cannot go beyond the terms of the decree. So far as the present case
is concerned, awarding interest post arbitral award for which the arbitrator
has not awarded interest on a particular claim, I am afraid, it is difficult to

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presume that the arbitrator has disallowed future interest. The recitals
contained in the arbitral awards, nowhere indicate that arbitrator has
declined future interest on the claim allowed to the respondent-contractor.
It is only interest pendente lite which is disallowed to the respondentcontractor in respect of some of the claims. Therefore, the intention of the
arbitrator was to disallow interest on the claim amount from the date of
accrual of cause of action up-till passing of the award and not for the future
interest. In such a situation the irresistible conclusion of this Court is that
plea canvassed by the learned counsel for the petitioners rhetorically that
executing Court has awarded future interest to the respondent-contractor
beyond the terms of the decree by transgressing its jurisdiction cannot be
sustained.

There remains no quarrel that Section 36 of the Act of 1996 clearly


envisages that after attaining finality an arbitral award shall be enforced
under CPC, in the same manner as if it were a decree of the Court. In the
instant case, both the arbitral awards attained finality on rejection of the
petitions under Section 34 of the Act of 1996 laid by the petitioners on 14th
May, 2009. The sole arbitrator in both the awards bifurcated claims of the
respondent-contractor in ten and six parts respectively. While passing the
award in both the cases, the arbitrator has awarded interest @8% per annum
for certain claims and pertaining to some of the claims, no interest was
allowed to the respondent-contractor.

Item-wise summary of both the

awards indicating amount claimed, amount awarded/amount not awarded


and the interest awarded in both the petitions are reproduced as under:-

15

S.B. Civil Writ Petition No.2016/2014

Item
No.

Item-wise award

Claim Amount Award Amount Interest


(Rs.)
(Rs.)

Claim on account of 3,05, 031.00


imposting
additional
fines for discriminative
special condition.

2,00,000.00

No
interest
allowed.

Claim on account of 7,70,384.00


wrongly deducted and
wrongly withheld due
payments from the bills
against Item BCM (8
Wheeled coal covered
wagons B.G.

3,85,000.00

8%
interest
allowed.

3.

Claim on account of
wrong
interpretation
and wrong application
on B.G., BOX 8
wheeler open coal
wagons.

1,42,309.00

NIL

No
interest
allowed.

4.

Claim on account of
services done about
clearance of yard and
goodshed at DEE (TY)
and DLT

5,00,000.00

NIL

No
interest
allowed.

5.

Claim for refund of


cost of Labour

46,406.00

31500.00

8%
interest
allowed.

6.

Claim
for
regular Bills.

unpaid

1,92,415.00

1,13,000.00

8%
interest
allowed.

7.

Refund for wrongful


and
unjustified
demurrage
charges
recovered.

3,50,956.00

2,20,000.00

No
interest
allowed.

8.

Claim for settlement of


rates for item No.8 of
the SOP

96,000.00

26000.00

8%
interest
allowed.

16

Item
No.

Item-wise award

Claim Amount Award Amount Interest


(Rs.)
(Rs.)

9.

Claim
for
wrong
forfeiture of security
deposit amount.

25,000.00

NIL

No
interest
allowed.

10.

Claim
for
compensatory damages
for breach of contract
under different head.

26,25,000.00

55,000.00

No
interest
allowed.

TOTAL

50,53,582.00

10,20,500.00

S.B. Civil Writ Petition No.2284/2014

Claim
No.

Particulars

Amount
Claimed

Amount
Awarded

Interest

The
Claim
on
account of wrongful
recovery
&
unjustified
withholding of dues.

1,53,534/-

1,21,000/-

8% interest
allowed.

2.

The claim on account


of non-settlement of
rates
and
remuneration
for
handling of full load
wagons
of
Iron
commodities for the
period 14.10.84 to
31.03.88.

3,60,000/-

58,400/-

8% interest
allowed.

3.

The claim on account


of non-settlement of
rates
and
remuneration's
for
the
services
for
sweeping of Rly.
Yard, goods shed
area and disposal of
refuse.
For the
period 15.04.1986 to
31.03.1988.

3,52,500/-

1,92,000/-

8% interest
allowed.

4.

The claim on account


of
unjustified
recovery
of
demurrage charges
for the period Jan.,
1986 to March, 1988.

1,56,000/-

60,000/-

No interest
allowed.

17

Claim
No.

Particulars

Amount
Claimed

Amount
Awarded

Interest

5.

The claim on account


of
compensatory
damages for nonpayment
of
legitimate dues for
more than 12 years
and
breach
of
contract.

15,00,000/-

1,00,000/-

No interest
allowed.

6.

The claim for the


cost of litigation in
the Courts.

25,000/-

10,000/-

No interest
allowed.

Total

25,47,034/- 5,41,400/(Twentyfive (Five lakhs,


lakhs, fourty- Fourtyone
seven
thousand,
thousand,
four
thirtyfour
hundred
only)
only)

8% interest on
Rs.3,71,400/(Three Lakhs,
seventyone
thousand, four
hundred only)
Rs.1,70,000/(One lakh
seventy
thousand only)
to be paid
without
interest.

In S.B. Civil Writ Petition No.2016/2014, the arbitrator has not


allowed interest on the amount awarded to the respondent-contractor for
claim Nos.1, 7 and 10 and obviously there was no question of awarding
interest on claim Nos.3, 4 and 9, which were rejected by the sole arbitrator.
Vis-a-vis arbitral award in S.B. Civil Writ Petition No.2284/2014 arbitrator
allowed interest @8% on the amount awarded in relation to claim Nos.1 &
2 only and for the rest of the claims i.e. for claim Nos. 3 to 6 though
amount has been awarded, but no interest has been allowed to the
respondent-contractor. For the claims wherein though certain amount is
allowed by the arbitrator and interest is not allowed, it is obvious that the
respondent-contractor is not entitled for interest on the amount awarded
anterior to the arbitral award and such a claim of the contractor is per se

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beyond the scope of the arbitral award.

Adjudication of claim favourable to the respondent is clear


affirmation about its legitimacy, and therefore, retention of this amount by
the petitioners was unjust may be due to protracted judicial proceedings,
and therefore, by allowing interest to the respondent on the entire amount in
both the execution petitions from the date of award up-till payment is made,
the executing Court has not committed any jurisdictional error. In common
parlance, in a contract party responsible for breach of contract is obliged to
pay damages under Section 73 of the Indian Contract Act, 1872 to the
sufferer contracting party. Payment of interest in the form of damages in
case of breach of contract is also recognized by law Courts under Section
73 of the Contract Act.

The dispute now remains only with respect to the future interest or
interest post arbitral award, which is precisely allowed to the respondentcontractor by the executing Court in the impugned order to examine the
same within the four corners of the Act of 1996.

The legal position is no more res integra that in case of arbitral


award, provisions of Section 34 CPC as such are not applicable logically
for the reason that there is a separate and distinct provision for awarding of
interest in relation to arbitral award under Section 31(7) of the Act of 1996.
Moreover, Section 34 CPC refers to a Court which does not include arbitral
Tribunal. My this view if fully fortified from a decision of Hon'ble Apex
Court in case of Bhagwati Oxygen Ltd. V/s. Hindustan Copper Ltd.
[(2005) 6 SCC 462]. In this verdict, while dilating on true purport of word

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'Court' as envisaged under Section 34 CPC, the Court in para 37 held as


under:37. Now Section 34 of the Code of Civil Procedure
has no application to arbitration proceedings since the
arbitrator cannot be said to be a court within the
meaning of the Code. But an arbitrator has power and
jurisdiction to grant interest for all the three stages
provided the rate of interest is reasonable.

Well it is true that arbitral Tribunal is not a Court within the meaning
of Section 34 CPC, but the decision in

Bhagwati Oxygen Ltd. (supra)

duly recognizes the powers of the arbitrator to award interest, which


includes post arbitral award interest.

As per scheme of the Act of 1996, an arbitrator is competent to


award interest for the four stages. The Hon'ble Apex Court in case of T.P.
George V/s. State of Kerala & Anr. [(2001) 2 SCC 758], while relying on
its earlier decision duly recognized four stages of grant of interest while
emphasizing that award of interest ought to be granted in all cases when
there is a decree of money unless there are strong reasons to decline the
same. The Court in para 10 has held as under:10. The next question is whether the High Court
was right in setting aside the award of the interest from
the date of the award. This Court has held in the case
of Jagdish Rai and Bros. v. Union of India that the
award of interest ought to be granted in all cases when
there is a decree of money unless there are strong
reasons to decline the same. In the case of Jagdish Rai
& Bros. v. Union of India this Court has held that there
are four stages of grant of interest, viz., (1) from the
stage of accrual of cause of action till filing of the
arbitration proceedings, (2) during pendency of the
proceedings before the arbitrator, (3) furture interest
arising between date of award and date of the decree,
and (4) interest arising from date of decree till

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realisation of the award. The power of Court to grant


interest from date of decree is not in doubt. In the case
of Hindustan Construction Co. Ltd. v. State of J & K
this Court has held that the arbitrator is competent to
award interest from the date of the award. This Court
has held in the case of Secy., Irrigation Deptt., Govt. of
Orissa v. G.C. Roy that the arbitrator has power to
grant interest pendente lite. Recently in the case of
Executive Engineer, Dhekanal Minor Irrigation
Division v. N.C. Budharaj this Court has held that an
arbitrator can award interest for the pre-reference
period. Thus as per law laid down by this Court
interest can be awarded at all four stages. The
reasoning given by the High Court that interest cannot
be awarded by the arbitrator is thus fallacious and
cannot be sustained. In our view the direction to pay
interest from the date of award, cannot be faulted. The
impugned judgment to the extent that it disallows the
interest from the date of the award, is set aside.

It is trite that arbitral Tribunal is not akin to a Court within the


meaning of section 34 CPC, but then that itself cannot circumscribe the
powers of arbitrator to allow post award interest.

If the arbitral award is

silent for post award interest, the provisions contained under Section 31(7)
(b)can be invoked to award future interest by applying analogy under
Section 34 CPC. As a matter of fact, Section 31(7)(b) of the Act of 1996
mandates grant of future interest @18% per annum unless the award
otherwise directs. This view finds support from the decisions of Honble
Apex Court in State of Haryana & Ors. as well as Indian Hume Pipe Co.
Ltd. (supra). Section 31(7) of the Act of 1996 with emphasis on clause (b)
reads 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 for which the award is made interest, as such
rate it deems reasonable, on the whole or any part of
the money, for the whole or any part of the period
between the date on which the cause of action arose
and the date on which the award is made.

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31(7)(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.

Therefore, by allowing post award interest to the respondentcontractor for entire determined claim in both the awards, the learned
executing Court has not committed any manifest error of law warranting
interference in exercise of supervisory jurisdiction of this Court under
Article 227 of the Constitution.

In fact, the learned executing Court has

passed impugned orders in both the petitions while construing mandate of


law by granting interest at a moderate rate i.e. 12% per annum.

Supervisory jurisdiction of this Court enshrined under Article 227 of


the Constitution is not akin to appellate jurisdiction and as such it is to be
exercised with utmost care and circumspection. It is not permissible to
upset a decision of inferior Court/Tribunal, while exercising its jurisdiction
when two views are possible or even if decision is erroneous, because
concern of the Court is to examine decision making process and not the
decision itself.

Thus, viewed from any angle, I have not been able to find any error
much less an error apparent on the face of record in impugned orders, nor it
is a case whereby learned executing Court has transgressed its jurisdiction
while passing the impugned orders.

The impugned orders, in my

considered opinion, have not occasioned failure of justice or perpetrated


miscarriage of justice in any manner requiring interference.

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Resultantly, both the writ petitions are bereft of any merit and
accordingly same are dismissed.

Costs are made easy.


(P.K. LOHRA), J.
a.asopa/-

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