UNION OF INDIA Vs. M/S. AMBICA CONSTRUCTION

JUDGEMENT

(1.) The issue involved in the reference is in regard to the power of the Arbitrator to award pendente lite interest when contract contains bar for grant of interest in a case covered by the Arbitration Act, 1940 (hereinafter referred to as "the Act"). A Division Bench of this Court had doubted the correctness of the decisions in Board of Trustees for the Port of Calcutta v. Engineers-De-Space-Age, 1996 1 SCC 516; and Madnani Construction Corporation (P) Ltd. v. Union of India and Others, 2010 1 SCC 549. In view of the decision of the Constitution Bench judgment in Secretary, Irrigation Department, Government of Orissa & Ors. v. G. C. Roy, 1992 1 SCC 508 and Executive Engineer, Dhenkanal Minor Irrigation Division, Orissa & Ors. v. N.C. Budharaj (D) by L.Rs. & Ors., 2001 2 SCC 721 which held that the Arbitrator had the jurisdiction and authority to award interest for pre-reference period, pendente lite and future period if there was no express bar in the contract regarding award of interest. A doubt was expressed about the correctness of the decision in Engineers-De- Space Age in Sayeed Ahmed & Co. v. State of U.P. & Ors., 2009 12 SCC 26 and Sree Kamatchi Amman Constructions v. Divisional Railway Manager (Works), Palghat & Ors., 2010 8 SCC 767. Hence the matter had been referred to a larger Bench for decision.

(2.) The case has a chequered history. The tender of M/s. Ambica Construction for fabrication of tie bars from M.S. Flats in CST-9 sleepers was accepted on 8.9.1989. Final agreement was executed on 30.11.1989. The work was completed on 21.11.1990. With respect to payments, certain differences and disputes arose between the parties. Thus M/s. Ambica Construction prayed for appointment of an Arbitrator. On 5.3.1991 as the petitioner M/s. Ambica Construction was in serious financial difficulties, it accepted the amount in full and final settlement. Later on, the Union of India informed the petitioner on 11.3.1991 that the matter was under consideration. However the Arbitrator was not appointed. An application under section 20 of the Act was filed before the High Court of Calcutta for referring the case to arbitration. On 2.6.1992 the High Court directed to file the arbitration agreement in the court and appointed two Arbitrators in terms of the arbitration clause. Said Arbitrators failed to publish the award and as such an application was filed for revocation of the authority of joint Arbitrators and another sole Arbitrator was appointed. The sole Arbitrator ultimately published the award on 30.12.1997. On an application filed by the Union of India, the High Court vide order dated 9.4.1998 remitted the award to the Arbitrator to give an item-wise break-up. On 12.5.1998 the sole Arbitrator published the item-wise award. Again the Union of India questioned the same before the High Court. The award was set aside on the ground that the Arbitrator had not given an intelligible award in terms of clause 64(3)(a)(iii) of the agreement and had not taken into effect the supplementary agreement dated 5.3.1991. The appeal preferred by the petitioner was dismissed by the Division Bench of the High Court on 15.10.2004 against which an SLP was filed in which leave was granted and ultimately C.A. No.6621/2005 was allowed and case was remitted vide order dated 7.11.2005 passed by this Court to the Arbitrator for assigning reasons and to pass fresh award. Thereafter, Arbitrator passed a fresh award on 11.2.2006. Again an application was filed by the Union of India under sections 30 and 33 of the Act. The Single Judge dismissed the application vide order dated 26.6.2007. Union of India filed an application for recall. The order dated 26.6.2007 was recalled. Vide order dated 22.8.2007 learned Single Judge set aside the award with regard to interest for pre-reference period and directed that interest would be allowed on the principal sum of Rs.9,82,660/- at the rate of 10% per annum from 1.9.1992 the date from which the original Arbitrator entered upon the reference. An appeal was preferred before the Division Bench and the same had been partly allowed with regard to claim Nos.6 and 7. Aggrieved thereby, M/s. Ambica Construction had preferred S.L.P. [C] No.17219/2009 in this Court and Union of India has also assailed the judgment and order of the High Court in S.L.P. [C] No.11114/2009.

(3.) The only question for consideration is whether an Arbitrator has the power to award pendente lite interest in case contract bars the same in a case covered by Act and decisions of this Court in Engineers De-Space Age and Madnani Construction Corporation (P) Ltd. have been correctly decided.