M PARAMASIVAM Vs. FOOD CORPN

JUDGEMENT

(1.) THE appeal raises an important question relating to the effect of the three recent Supreme Court judgments in Excutive Engineer, Irrigation, Galitnala vs. Abaaduta Jena : State of Orissa vs. Construction India and Food Corporation of India vs. M/s S.D.M. Transport , regarding grant of interest by an Arbitrator under the Indian Arbitration Act 1940, both pjior to the commencement of the arbitration proceedings and during the pendency of the proceedings before him.

(2.) THE appellant-firm is a contractor and offered to purchase 2709 bags of damaged food-grains. We are concerned with the Cotract No. 2. THE appellant placed a tender on 12-4-1977 and the same was accepted by the Food Corporation of India (hereinafter called 'the Corporation') at Nellore. A dispute arose between tne parties regarding payment of storage charges and interest. As per the terms of the tender conditions, the dispute was referred to the arbitration of Sri Ch. Prabhakara Rao, Additional Legal Advisor to Government of India, Ministry of Law, Justice and Company Affairs, Madras. THE appellant and the respondent-Corporation filed their respective claim statements. THE reference to the arbitrator is dt. 15-10-1980 and the arbitrator entered on the reference on 1-11-1980 and passed an award on 19-6-1981, O.P. No. 71/81 has been filed by the Food Corporation for making the award a rule of court for a sum of Rs. 18,285-75 with interest at 18% P.A. from the date of award till payment. O.P. No. 61/ 1983 has been filed by the appellant-contractor to set aside the award and dismiss the claim. THE lower Court rejected the O.P. filed by the contractor and decreed the O.P. filed by the Food Corporation. C.R.P. is preferred against the decree in O.P. No. 71/81 while the C.M.A. is preferred against the Order O.P. No. 61/83.

(3.) IN this appeal we are concerned with the validity of the award in respect of the second tender in a sum of Rs. 18, 285-75ps. and the award of interest thereupon prior to the commencement of arbitration as well as during the pendency of the arbitration. IN the award dated 19-6-1981 passed by the arbitrator six points were framed for consideration and the fifth point related to the award of interest. On that point the learned arbitrator referred to the decision of the Supreme Court in Union of INdia vs. West Punjab Factories Limited, wherein it was held that in the absencs of any usage oi custom, express or implied or of any provision of law to justify the award of intetest, interest by way of damages could not be awarded. Thereafter the learned arbitrator observed that in the instant case interest was not claimed as a penalty but that the Corporation has made a demand in terms of its notice, Ex. A-14, dated 1-8-1979 demanding not only the sum of Rs. 18, 285-75 Ps. towards the storage charges for 2709 bags but that under the same notice the Corporation had claimed interest from the appellant. Ultimately he held that the award will be in a sum of Rs. 18, 285-75 Ps. in favour of the Corporation "with liberty to clim interest at the rate of 6% per annum from 22-2-1978 to 19-6-1981, the date of the award." It may be noted that 22-2-1978 is the date next after the day (viz., 21-2-1978 when the new contractor lifted the goods from the godown. It is this award that has been confirmed by the lower Court.