STATE OF HARYANA Vs. AJIT CONSTRUCTION COMPANY, KARNAL

JUDGEMENT

(1.) Aggrieved by the order passed by the Additional District Judge, Karnal, dismissing the objections of the appellants- State under Section 34 of the Arbitration and Conciliation Act, 1996 (for short 'the Act'), seeking to set aside the award dated 31.01.2006, passed by the arbitrator in agreement No. 26 of 1999-2000, the appellants-State has filed this appeal. Brief facts, relevant for adjudication of the present appeal, are that respondent No. 1 had been allotted work of supply of mixed material pursuant to agreement No. 26 of 1999-2000 of 45 lacs. Respondent No. 1, was further directed to execute the enhanced scope of work for Rs. 6,39,953/-, on account of complaints regarding quantity and quality of material supplied to the site of work. The estimate of work was not sanctioned and no enhancement was approved resulting in the reference to the Arbitrator. The arbitration proceedings were finalized and award was announced on 31.01.2006. The arbitrator, inter alia, had allowed pendent elite interest @ 18 per cent per annum on the pending amount of the Bill. Out of 7 claims raised by respondent No. 1, the arbitrator awarded two claims and the two counter claims made by the appellants objector were rejected.

(2.) In an objection petition under Section 34 of the Act, it was argued that the arbitrator has misused his powers and discretion in allowing the pendent elite interest as per provisions of Section 31.7 (a & b) of the Act, and had acted against the public policy. The enhancement of the work from Rs. 45 lacs to Rs. 6,39,953/- without any agreement without depositing the earnest money was beyond the scope of arbitrator's jurisdiction. The arbitrator dealt with a dispute which was neither contemplated nor fell within the terms of the submissions to the arbitrator and that the arbitrator acted beyond clause 25A of the original agreement violating Section 34 (ii) & (iv) of the Act, the Additional District Judge, dismissed the objections filed by the appellants.

(3.) The State Government has challenged the award of the arbitrator contending that the claims of the appellants and the objections of the appellants should have been allowed. Besides this, it has been contended that it was not within the competence of the arbitrator to award interest pendent elite @ 18 per cent per annum.