STATE OF ORISSA Vs. SUDAYA CHANDRA BEHERA

JUDGEMENT

(1.) THIS appeal under Section 39(1)(vi) of the Arbitration Act, 1940 (hereinafter referred to as 'the Act') is directed against the order dated 15. 5. 1980 in M. J. C. No. 115 of 1980 and judgment dated 15. 5. 1980 in T. S. No. 124 of 1979 passed by the learned Subordinate Judge, Berhampur.

(2.) THE respondent is a contractor. The appellant had entrusted him with the execution of 'Construction of First Floor of Engineering School Staff Quarters at Berhampur' under agreement No. 3 -F -2 of 1967 -68. After disputes arose between the parties, on being moved by the respondent, the Chief Engineer, Roads and Buildings, Bhubaneswar, appointed the Superintending Engineer, National Highway, Circle No. 4 . as the Arbitrator to decide the disputes between the parties. After considering the statements, oral and documentary evidence adduced by the parties, and after hearing both the parties, the learned Arbitrator on 19. 11.1979 made an award of Rs. 66, 923. 56 in favour of the respondent. The learned Arbitrator further directed that unless payment was made to the respondent within thirty days from the date of the award, the respondent was entitled to interest at the rate of 6% per annum on the amount of the award from the date of expiry of the said period of thirty days. The appellant filed objection against the award which was registered as M. J. C. No. 115 of 1980 in T. S. No. 124 of 1979. By his order and judgment, dated 15. 5. 1980, the learned Subordinate Judge overruled the objection of the appellant, upheld the award and made it a rule of the Court.

(3.) AS regards interest, the learned Arbitrator has directed that the State shall pay to the respondent interest at the rate of 6% per annum on the amount of the award from the date of expiry of thirty days from the date of the award. It has been the consistent view of this Court that in the absence of a specific clause in the agreement prohibiting award on interest, the arbitrator has jurisdiction to award interest. In the present case, there is no clause in the agreement prohibiting award of interest by the arbitrator and therefore the objection that the learned Arbitrator did not have any jurisdiction to award interest must be overruled. In the schedule appended to the award, under item A 4, the learned Arbitrator has included as interest a sum of Rs. 25, 961. 52 in the amount of the award and the total amount of the award inclusive of interest under item A is Rs. 66,923.56. The learned Arbitrator and the learned lower Court have not borne in mind that interest on interest is not permissible under the law. Hence, while upholding the award for a sum of Rs. 66,923.56. I would modify the direction as to payment of interest to the extent that interest at the rate of 6% per annum shall be paid by the State to the respondent on the principal amount only, i.e., Rs.32,462.04, from the date of expiry of thirty days from the date of the award till actual payment.