UNION OF INDIA (UOI) Vs. P. KRISHNAN

JUDGEMENT

(1.) UNION of India, represented by the Divisional Railway Manager (Works), Southern Railway, Palakkad has come up with this appeal being aggrieved by the order passed by the Subordinate Judge, Palakkad dated 27 -11 -1998. There was considerable delay in filing the appeal, but after hearing the parties the delay had been condoned. But, it does not mean that the claims and contentions, which had been raised in the appeal, should be automatically accepted.

(2.) THE respondent is an Engineering Contractor and after entering into an agreement in 1993, specified works had been carried out by him. In respect of certain matters, however, the issue was left for decision of an Arbitrator, and it is not disputed that an award has ultimately come to be passed, whereby the contractor was to be paid some amounts as claimed by him. However, the Railway administration had filed O.P. (Arbitration) No. 6 of 1997 under the Arbitration Act, challenging the award on various grounds. Reading of the present order would indicate that the Railway Administration had confined their attack about the issue of jurisdiction of the Arbitrator in the matter of awarding interest during the pre -reference period as well as the rate of interest. The Arbitrator had awarded interest from the date of completion of work till the date of payment, of course at different rates.

(3.) TAKING notice of the contentions that had been raised by the parties, the learned Subordinate Judge had looked into the matter in some detail. Our attention had been invited to the decision of the Supreme Court in Executive Engineer, Irrigation, Galimala v. Abnaduta Jena . In the said decision, the Supreme Court, which is a decision of three Judges Bench, considering the question of competence of the arbitrator on reference made without intervention of the court came to the conclusion that in cases, which arose prior to the commencement of the Interest Act 1978, the Arbitrator did not have power to grant interest either pendente lite or for the period prior to the reference. Reliance has been placed by the appellant on the above decision as also the general conditions of the contract, which according to them do not provide for payment of interest. It is highlighted that no interest is payable for the amount due to the contractor under the contract and such payment is prohibited by a Circular, which was in force, as regards the works. However, the lower court found that it was a case where the Arbitrator had granted interest in respect of the cost of materials used by the contractor for the works and in the absence of any specific contract, equity also favours payment of interest. The court had found that the issue had received adequate attention of the Arbitrator and since he had not misconducted himself, the award was fair and was not liable to be varied. The lower court also relied on the decision of the Supreme Court in Secretary, Irrigation Department, Govt.of India v. : [1991]3SCR417 .