UNION OF INDIA Vs. JAIN ASSOCIATES

JUDGEMENT

(1.) Special leave granted.

(2.) The respondent had entered into a contract on 7-1-1983 to construct 13 units of Type-V Quarters at the estimated cost of Rs 27,34,000. He was to complete the construction and hand over possession on 13-8-1984. Despite extension of the time on 7 occasions, finally up to 30-6-1988, the construction was not completed resulting in termination of the contract. As up to 34th bill the appellant paid to the respondent a sum of Rs 24,34,100.91 ps. towards the executed work. The contractor laid proceedings under Section 20 of the Arbitration Act, 1940 (for short 'the Act') for reference to arbitrate the disputes. The joint arbitrators appointed thereon entered upon reference on 10-4-1989 and nominated Mr A. Biswas, the second respondent as an umpire. Since the joint arbitrators could not make and publish the award within the time, the umpire was called upon to enter upon the reference. Accordingly on 25-4-1990 the umpire had entered upon the reference and made an interim award on 26-7-1990 for a sum of Rs 6,02,000. The contractor laid his claim for a sum of Rs 37,37,885. The appellant laid counter-claim for Rs 9,49,701.50 ps. On 3-9-1990 the appellant requested the umpire to consider the counter- claim. On 4-9-1990, the umpire refused to consider the counter-claim on the ground of belated counter-claim. On request the time to make and publish the award was extended up to 31-1-1991. The umpire held finally sitting on 19-12- 1990 (it is disputed across the bar by the contractor) and he made the award on 24-12-1990 for a sum of Rs 24,18,320 in favour of the contractor. The umpire also awarded interest at 18% up to 10-4-1989 and post-award interest. He did not grant any pendente lite interest. The appellant challenged the award on diverse grounds under Sections 30 and 33 of the Act. Ultimately the Division Bench of the Calcutta High Court in Appeal No. 453 of 1991 dated 16-9-1992 confirmed the award for a sum of Rs 20,07,320 and awarded pendente lite interest. On a review, it was held by an order dated 4-2-1993 that the Bench committed mistake in thinking that the umpire granted pendente lite interest and is a mistake of fact and law but had confirmed the pendente lite interest on its power. Thus these two appeals, with a delay of 137 days in filing the appeal against original judgment. The delay is condoned.

(3.) The learned Solicitor General contended that the Division Bench having held that the umpire committed illegality in awarding damages twice over on claims 11 and 12, though the contractor was entitled to damages only in respect of one claim, committed manifest error of law in upholding the entire award. The fact that the umpire had committed illegality in awarding damages twice over would indicate his non-application of judicious mind to the claims in an objective manner. In a non-speaking award it is difficult to decide how he adjudged the claims. Thereby he committed misconduct which entails the setting aside of the award as a whole and the doctrine of severability becomes inapplicable to the facts of this case. His next contention was that under clause 62 of the general conditions, certain matters were to be finally determined by the Railways and the arbitrator lacked jurisdiction to decide these claims and thereby the award gets vitiated by manifest illegality on its face. There was sufficient time for the arbitrator, even after the extended time to make the award in respect of the counter-claim. But was not done, which would also prove the non-application of judicious mind in an objective and dispassionate manner and thereby the award gets vitiated by misconduct committed by the umpire. The 3rd contention is that the court lacked power to award pendente lite interest by operation of Section 29 of the Act. Shri Soli Sorabjee, the learned Senior Counsel for the respondent-contractor contended inter alia that though the award is a non-speaking award since the umpire granted each claim separately, the claims on items 11 and 12 are severable from the rest of the award. The High Court upheld the highest of the two claims granted by the umpire. The claim for loss of profits on item 11 and for damages on item 12 are distinct and separate concepts. The umpire, therefore, was justified to grant separate amounts on each of the claims which would show active consideration and application of the mind. Hence it is Dot a misconduct. Even otherwise they are severable from the rest of the award, which could be sustained. The grant of pendente lite interest by arbitrator was not a settled principle till the Constitution Bench decision of this Court in Secretary, Irrigation Department v. G. C. Roy, 1991(1) SCC 508 was rendered. Earlier Division Bench of this Court in Executive Engineer (Irrigation) v. Abhaduta Jena, 1988(1) SCR 253 where it was held that arbitrator had no power to award interest pendente lite, was overruled. In this twilight zone of law, the arbitrator did not award interest pendente lite. In view of the Constitution Bench judgment in G. C. Roy case, the grant of pendente lite interest by the court is legal. Even otherwise if this Court finds that the High Court committed illegality in granting interest pendente lite the matter requires remittance to the umpire, for fresh decision in this behalf. Similarly on the counter-claim, it was contended, that no counter-claim in fact was laid, although belatedly a counter-statement was made, as found by the umpire. This point was not argued before the Single Judge nor seriously disputed before the Division Bench. Even otherwise, this dispute also could be remitted to the umpire for reconsideration.