George Vs. State of Kerala & Anr  Insc 68 (6 February 2001)
Babu & S.N. Variava. S. N. Variava, J.
Appeal is against a Judgment dated 15th February, 1989 wherein the appeal filed by the
Respondent was partly allowed.
stated the facts are as follows: The Appellant was awarded a contract for
construction of a Main Canal Driving Tunnel of the Kallada Irrigation Project.
The work was to be completed by 4th March, 1983. A Supplemental Agreement dated 20th October, 1983 extending the period of completion was entered into. As
disputes arose between the parties the same were referred to a sole Arbitrator,
who gave a reasoned Award dated 12th August, 1985.
Respondent filed objections to the Award, which were rejected by a judgment
dated 31st March, 1986 and the Award was made a rule of
Appeal, before the High Court, challenge was restricted to Award of claims
under Items 12(i), 12(j), 12(k) and award of interest from date of Award. The
Appeal filed by the Respondent was partly allowed by the impugned Judgment
dated 15th February,
1989. By this Judgment
the Award of claims under items 12(i) and 12(k) were set aside.
of claim under item 12(j) was upheld. Further the award of interest was also
set aside. The only ground on which the claims under Item 12(i) and 12(k) have
been set aside are that the Arbitrator could not overlook the terms of the
contract or agreement. It is held that the Arbitrator could not have awarded
these claims as they were contrary to the Supplemental Agreement dated 20th October, 1983.
Ray, pointed out that claim 12 (i) was for loss in connection with the price
escalation and that it was under clause 32 of the original agreement. He
pointed out that claim 12(k) was for revision of rates. He submitted that under
the original contract the time for completion was fixed as 4th March, 1983. He submitted that due to fault of
the Respondents the work could not be completed by that time. He submitted that
the Appellant was forced to execute the Supplemental Agreement in a form as
dictated by the Respondent as otherwise the Respondents were not clearing the
pending bills of the Appellant. He drew attention of this Court to a letter
dated 6th October, 1983, addressed by the Appellant to the
Superintending Engineer wherein the Appellant, before execution of the
Supplemental Agreement, has recorded that he was protesting execution of the
Supplemental Agreement and that he would be executing the Supplemental
Agreement without prejudice to his claims.
submitted that even before writing of this letter the Appellant had already, by
a letter dated 5th
October 1983, made his
claims. He pointed out that after the Supplemental Agreement dated 20th October, 1983 was executed the Appellant
addressed another letter dated 24th November, 1983 to the Chief Engineer, stating that the Supplemental Agreement was got
executed under coercion and undue influence and that the same was executed
without prejudice to his claims.
Ray submitted that one of the questions before the Arbitrator was whether this
Supplemental Agreement was binding on the Appellant and/or whether he had been
forced to sign the Agreement and/or whether the Appellant was entitled to
maintain his claims in view of the Supplemental Agreement. He pointed out that
after hearing parties and considering the submissions of the Respondents the
Arbitrator had by a reasoned Award sanctioned the claims. He pointed out that
in the Award the Arbitrator had held that the delay was not due to the fault of
the Appellant and that the Supplemental Agreement was got executed from the
Appellant. He pointed out that the Arbitrator had held that the Supplemental
Agreement was without prejudice to the claims which had already been made.
Arbitrator held that the Supplemental Agreement did not debar the Appellant
from making or maintaining his claims.
Ray submitted that this was a possible view of the matter. He submitted that
the Court should be slow to interfere merely because another view was possible.
Prakash supported the impugned judgment on the ground that once the Appellant
executed the Supplemental Agreement he could not make any claims. He submitted
that the Supplemental Agreement provided that such claims could not be made. He
submitted that the Supplemental Agreement was binding on the Appellant. He
submitted that the High Court was right in holding that the Arbitrator had misconducted
himself by awarding contrary to the Supplemental Agreement.
have considered the rival submissions. It is to be seen that the question,
whether the Supplemental Agreement dated 20th October, 1983 debarred the Appellant from
pursuing his claims, was before the Arbitrator. Such a question having been
referred to the Arbitrator the view of the Arbitrator would be binding if it is
one which is possible. The Arbitrator has taken note of the Appellant letters
dated 6th October, 1983 and 24th November, 1983 and come to a conclusion that
the Supplemental Agreement had been got executed and that the same was executed
without prejudice to the claims which had already been made. This is a possible
have seen the impugned judgment delivered by the High Court. The High Court has
not at all considered the letter dated 6th October, 1983 and 24th November,
1983 nor dealt with the question as to whether or not the Supplemental
Agreement was got executed. The High Court has not even considered the effect
of the Supplemental Agreement having been executed without prejudice to the
claims which had already been made. Even if the High Court had considered these
aspects it could not have substituted its views for those of the Arbitrator as
it could not be said that the view taken by the Arbitrator is unreasonable or
one which cannot be arrived at by a reasonable person. In this view of the
matter the impugned Judgment cannot be sustained and is set aside in respect of
claims under items 12(i) and (k).
next question is whether the High Court was right in setting aside the award of
the interest from the date of the Award. This Court has held in the case of Jagdish
Rao and Brothers vs. Union of India reported in 1999 (1) Arb. LR 696, that the
award of interest ought to be granted in all cases when there is a decree of
money unless there are strong reasons to decline the same. In the case of M/s. Jagdish
Rai & Brothers vs. Union of India, reported in JT 1999 (2) S.C. 268, this
Court has held that there are four stages of grant of interest, viz. (1) from
the stage of accrual of cause of action till filling of the arbitration
proceedings, (2) during pendency of the proceedings before arbitrator, (3)
future interest arising between date of award and date of the decree and (4)
interest arising from date of decree till realisation of award. The power of
Court to grant interest from date of decree is not in doubt.
case of Hindustan Construction Co. Ltd. v. State of Jammu and Kashmir reported
in AIR 1992 S.C. 2192 this Court has held that the Arbitrator is competent to
award interest from the date of the Award. This Court has held in the case of
Secretary Irrigation Department, Government of Orissa and ors. vs. G.C. Roy reported in 1992 (1) S.C.C. 508, that the Arbitrator
has power to grant interest pendente lite. Recently in the case of Executive
Engineer, Dhenkanal Minor Irrigation Division, Orissa, etc. etc. v. N.C.
Budharaj (Dead) by LRs. etc. etc. reported in JT 2001 (1) S.C. 486, this Court
has held that Arbitrator can award interest for the pre-reference period. Thus
as per law laid down by this Court interest can be awarded at all four stages.
The reasoning given by the High Court that interest cannot be awarded by the
Arbitrator is thus fallacious and cannot be sustained. In our view the direction
to pay interest from date of Award cannot be faulted. The impugned judgment to
the extent that it disallows the interest from the date of the Award is set
the impugned judgment to the extent that it upholds the Award under item 12(j)
is upheld. The Appeal stands disposed of accordingly. There shall be no order
as to costs.