UNION OF INDIA Vs. SUCHITA STEELS INDIA

JUDGEMENT

(1.) This appeal has been filed impugning the order passed by the learned Single Judge upholding the award of the arbitrator who was the Executive Director, Civil Engineering (General) Railway Board. The Arbitrator in terms of the agreement between the parties was appointed by the appellant and was its employee. Ms. Geetanjali Mohan, learned counsel appearing for the appellant has restricted her argument only on the plea of grant of interest by the Arbitrator. The learned counsel has contended that in view of the Standard Conditions of Contract, particularly, conditions No. 2401 and 2403, the arbitrator did not have the jurisdiction to award any interest. As the basic dispute involves interpretation of Clauses 2401 and 2403 of the Standard Conditions of the Contract, the same are reproduced below: 401. "Whenever any claim or claims for payment of a sum of money arises out of or under the contract against the contractor, the purchaser shall be entitled to withhold and also have a lien to retain such sum or sums in whole or in part from the security, if any, deposited by the Contractor and for the purpose aforesaid, the purchaser shall be entitled to withhold the said cash security deposit or the security, if any, furnished as the case may be and also have a lien over the same pending finalization oradjudication of any such claim. In the event of the security being insufficient to cover the claimed amount or amounts or if nosecurity has been taken from the contractor, the purchaser shall be entitled to withhold and have lien to retain to the extent of such claimed amount or amounts referred to supra, from any sum or sums found payable or which at any time thereafter thereafter may become payable to the contractor under the same contract orany other contract with the purchaser or the Government pending finalization or adjudication of any such claim. It is an agreed term of the contract that the sum of money or moneys so withheld or retained under the lien referred to above by the purchaser will be kept withheld or retained as such by the purchaser till the claim arising out of or under the contract is determined by the Arbitrator (if the contract is governed by the arbitration clause) or by the competent court, as prescribed under Clause 2703hereinafter provided, as he case may be, and that the contractor will have no claim for interest or damages for whatsoever on any account in respect of such withholding or retention under the lien referred to supra and duly notified as such to the contractor." 2403 : Lien in respect of claims in other Contractor Any sum of money due and payable to the contractor (including the security deposit returnable to him) under the Contract may withhold or retain by way of lien by the purchaser or government against any claim of the purchaser or government in respect of payment of a sum of money arising out of or under any other contractmade by the contractor with the purchaser or the government. It is an agreed term of the contract that the sum of money so withheld or retained under this Clause by the purchaser or government will be kept withheld or retained as such by the purchaser or government till his claim arising out of in the same contract or any other contract is either mutually settled or determined by the arbitrator, if the contract is governed by the arbitration clause or by the competent court under Clause 2703 hereinafter provided, as the case may be and that the contractor shall have no claim for interest for damages whatsoever on this account or on any other ground in respect of any sum of money withheld or retained under this Clause and duly notified as such to the Contractor."

(2.) It has been contended before us by the learned counsel for the appellant that the impugned order suffers from the vice of non-application of mind. In paragraph V of the objections filed before the learned Single Judge specific objection was raised with regard to the grant of interest by the Arbitrator. Para V of the objections was to the following effect : "That it is also evident on the face of award that the learned Arbitrator has wrongly held that clauses 2401 and 2403 of Indian Railway Standard conditions of contract are not applicable in the case when these clauses are well applicable to the contract in reference by virtue of the terms and conditions of the contract. It is clearly mentioned in clause 2401 of IRS conditions of contract that "it is agreed terms of the contract that the sum of money or moneys so withheld or retained under the lien referred to above by the purchaser will be kept/withhold and retained as such by the purchaser till the claim arising out of or under the contract is determined by the Arbitrator or by the Competent Court as prescribed under the clause 2703 hereinafter provided as the case may be and that the contractor will have no claim for interest or damages whatsoever on any amount in respect of such withholding and retention under the lien."

(3.) On the basis of the aforesaid clauses of the Contract as well as the objection taken in the petition filed before the learned Single Judge, Ms. Geetanjali Mohan, learned counsel for the appellant has contended that the appellant is under no obligation to pay interest in terms of the award of the Arbitrator and that the impugned order of the learned Single Judge upholding the award is liable to be set aside. In support, reliance has been placed upon a judgment rendered by a Constitution Bench of the Apex Court, reported in JT 1991 (6) S.C. 349 titled SECRETARY, IRRIGATION DEPARTMENT, GOVERNMENT OF ORISSA & ORS., VS. G.C ROY .