BATLIBOI LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) The petitioner prays for setting aside of an Award dated 7th September, 2005 on the sole ground of the Arbitrator refusing to grant interest on the sum awarded on account of liquidated damages which had been imposed by the respondent in pursuance of a supply order placed by the respondent on the petitioner for supply, erection and commissioning of eleven horizontal machinery centres with accessories and fixtures for manufacturing of component Piston Extension. The petitioner filed its statement of claim before the learned sole Arbitrator for refund of the amount withheld on account of liquidated damages with interest at 18% thereon from the due date of payment till the date of realization. The Award dated 16th September, 2003 (the earlier Award) was challenged by the respondent and the petitioner also challenged that portion of the Award whereby interest was not granted for the amount awarded in favour of the petitioner. By a common order and judgment dated 13th April, 2005, the Arbitration Petition filed by the respondent was dismissed and A.P. No.6 of 2004 filed by the Petitioner was allowed in part and the Award was set aside only to the extent of the claim of interest being disallowed by the Arbitrator. The matter was remitted to the Arbitrator for determining the question as to whether the petitioner (the claimant before the Arbitrator) was entitled to interest. The portion of the order in relation to the payment of interest is set out below;

(2.) Pursuant to the direction, the Arbitrator proceeded to pass the Award dated 7th September, 2005, which is presently under challenge, and held that the petitioner is not entitled to any interest by reason of the fact that the petitioner did not incorporate any condition that it will claim interest for any unpaid amount.

(3.) Mr. Utpal Bose, learned Senior Counsel appearing for the petitioner relies on two decisions, namely, Secretary, Irrigation Department, Governor of Odisha Vs. G.C. Roy reported in AIR 1992 SC 732 and Hindustan Construction Company Limited Vs. State of Jammu and Kashmir reported in AIR 1992 SC 2192, on the point that where the agreement between the parties does not prohibit grant of interest, the Arbitrator shall have the power to award interest pendent lite as in such a case it must be presumed that interest was an implied term of agreement between the parties. Counsel submits that although these two decisions were under the Arbitration Act, 1940, Section 31(7)(a) of the Arbitration and Conciliation Act, 1996, makes it clear that unless the parties have expressed an intention to the contrary by way of the arbitration agreement or otherwise, the Arbitrator has the power to award interest at such rate as the Arbitrator deems reasonable for the whole or in part of the claim and from the pre-reference period till the date of the Award as well as from the date of the Award to the date of payment of the amount awarded.