GENERAL MANAGER Vs. CH KOTAIAH

JUDGEMENT

(1.) This appeal is filed by the appellants-railways against the order and decree dated 18.10.2005 passed in O.P. No. 265 of 2002 by the I Additional Chief Judge, City Civil Court, Secunderabad, insofar as it relates to awarding of interest over the amounts awarded under Claim Nos. 1 and 2 by the 2nd respondent-Arbitrator. The appellants entrusted certain construction works to the 1st respondent-contractor under a contract in the year 1992. Subsequently, the contract could not be performed by the 1st respondent-contractor within the specified period and, therefore, a dispute arose between the appellants-railways and the 1st respondent-contractor. Thereafter, the 1st respondent-contractor made an application under Section 11 of the Arbitration and Conciliation Act, 1996 before this Court and this Court appointed the 2nd respondent herein as an Arbitrator for resolving the dispute. As many as seven claims were made by the 1st respondent-contractor before the 2nd respondent-Arbitrator. The 2nd respondent-Arbitrator while allowing claims 1, 2 and 6, rejected claims 3 to 5 and 7 and accordingly passed an award dated 28.08.2002 observing that the 1st respondent is entitled to recover a sum of Rs. 1,12,885/- (being the final bill) with interest at the rate of 18% per annum from 01.07.1997 till the date of payment and also a sum of Rs. 63,289/- (being the security deposit) with interest at 18% per annum from 01.07.1997 till the date of payment after deducting interest that might have accrued on the fixed deposit of Rs. 18,206/- made in the Central Bank of India, Vijayawada branch. Feeling aggrieved by the award inasmuch as it relates to awarding of interest over the amounts awarded under Claim Nos. 1 and 2, the appellants-railways filed O.P. No. 265 of 2002 before the I Additional Chief Judge, City Civil Court, Secunderabad. The learned Additional Chief Judge by impugned order dated 18.10.2005 dismissed the said O.P. Challenging the said order, the appellants-railways preferred this appeal.

(2.) Learned Counsel for the appellants-railways submits that awarding of interest on the payment of earnest money or security-deposit or amounts payable to the contractor under the contract is prohibited by virtue of Clause 16 (2) of the General Conditions of Contract.

(3.) Clause 16 (2) of the General Conditions of Contract reads as under: