Cochin Development Authority Vs. Leelamma Valson
& Ors  Insc 64 (6 February 2002)
Babu & Ruma Pal Ruma Pal, J
agreement was entered into between the appellant and the respondent by which
the respondents undertook the construction of residential flats. The agreement
contained an arbitration clause. After the completion of the work, disputes
arose between the parties. The disputes were referred to a panel of three
arbitrators under the provisions of the Arbitration Act, 1940 ( referred to as
the Act) . By an award made on 31st December 1987 the arbitrators directed the appellant to pay the respondents various
amounts towards the several heads of claim put forward by the respondents. The
arbitrators also awarded interest in respect of certain of the respondents'
claims. As the dispute in this appeal centers around the right of the
respondent to claim interest, the relevant portion of the award in this context
is extracted (wherein the appellant herein is referred to as 'the respondent'
and the respondent herein as 'the claimant'):
to pay claimant interest @ 9% from 29.5.80.
to pay claimant interest at 10% from 1.2.1985 on claims III to IX and on Claim
XII only" The award was filed in the local Court which issued notice under
Section 14 (1) of the Act, to the appellant. The appellant filed an application
challenging the award on several grounds, one of the grounds being that the
award of interest pendente lite was illegal. The respondents also filed an
application in which the first prayer was to pass a decree in terms of the
award. The second prayer was to:
interest at 18% per annum on the amounts due under the decree to be so passed
from the date of decree till date of payment or realization, in accordance with
Section 29 of the Arbitration Act." Both the applications were heard and
disposed of by a common judgment on 26th March 1990 by which the appellant's
application was dismissed and the respondents' application was allowed and a
decree in terms of the award was granted.
after this an application was made under Section 114 of the Code of Civil
Procedure by the respondents before the Court praying for review of the order
dated 26th March 1990 . According to the respondents'
application, by an "accidental slip, omission or oversight" the Court
while allowing the respondents' application "had not dealt with and passed
any order on Prayer No.2 therein for the grant of future interest at 18% per
annum on the amounts due under the decree from the date of decree till date of
payment or realisation". It was further stated that unless the Court
reviewed the order dated 26th
March, 1990 and
allowed the prayer for future interest to the respondents on the amounts due
under the decree from the date of decree till the date of payment or realisation,
serious prejudice and hardship would be caused to the respondents.
application was dismissed by the Court on 29th October 1990. It was held on a construction of
the order dated 26th
March 1990 that it was
not a case of any "omission or slip" but that the Court had chosen
not to grant any interest to the respondents on the decretal amount. The
respondents did not challenge this order nor did they prefer any appeal from
the decree or order dated 26th March 1990.
on 10th December 1990, the appellant preferred an appeal
from the order dated 26th
March 1990 before the
High Court. The appeal was allowed to the extent that the award of interest pendente
lite was set aside, but the High Court refused to set aside the award on
the High Court confirmed the decree of the Court below with the modification
that the interest granted for the period covering the pendency of the
arbitration was deleted. The respondents did not challenge the conclusion of
the High Court that the arbitrators could not have awarded pendente lite
interest. The appellant sought to challenge the refusal of the High Court to
set aside the award on merits before this Court by way of a special leave
petition. The special leave petition was rejected. The appellant has since paid
the decretal amount to the respondents.
execution of the decree, the respondents claimed interest on the decretal
amount. The Executing Court held that that the question whether the respondents
were entitled to interest on the decree had been resolved finally by the order
dated 29th October 1990 which had made it clear that no future interest was
payable on the decree. According to the Executing Court, the decretal debt had been fully satisfied by the
appellant. The execution petition was consequently dismissed.
respondents challenged the order of the Executing Court in revision. The High Court construed the decree and came
to the conclusion that the respondents were entitled to claim interest on the decretal
amount. The reasoning was that arbitrators had awarded interest until payment
and that the decree had been passed in terms of the award and therefore the
appellants were entitled to claim interest on the decree.
reasoning of the High Court is faultless as a pure proposition of law and in
keeping with the decision of this 469 where it was held that:
the court does not modify the award with regard to grant of interest from the
date of the award up to the date of payment, the effect would be as if the
court itself has granted interest from the date of the decree till the payment
at the rate which was determined by the arbitrator. The future interest would
be regarded as having been ordered to be paid under Section 29 of the Arbitration
Act when the court does not modify the award in this respect." But in the
facts of this case, the decision was erroneous.
case before us the parties, and certainly the respondents, had understood and
proceeded on the basis that the arbitrators had awarded interest only upto the
date of the decree. The respondents' application under Section 114 of the Code
of Civil Procedure makes that abundantly clear.
submission of the learned counsel for the respondents that the application was
in substance not under Section 114 but under Section 152 of the Code for
correcting a clerical error is unacceptable. The language in the body of the
application and the prayer made by the respondents was to consider the grant of
future interest on the ground that the prayer had been overlooked while passing
the decree in terms of the award.
learned counsel for respondents then contended that the application filed by
the respondents whether under Section 114 or 152 CPC had not been accepted but
on the other hand dismissed on the basis that none of the grounds urged fell
within the range of either of the said provisions.
elaborated that an order dismissing an application as not maintainable will not
have any effect upon the decree as originally passed in terms of the award.
argument may have had some substance had the scope of the decree not been put
in issue between parties by the respondents themselves. The Court before which
the application was made could have said that the grant of interest was
implicit in the order dated 26th March 1990
and that by affirming the award, future interest had been granted.
not say so. It said categorically that the prayer for future interest or
interest on the decree had been considered and had been refused by the Court.
When the High Court affirmed the decree in 1991, the decree had already been
interpreted - an interpretation which was not questioned. In the light of B.N. Agarwalla's
case (supra) the correctness of the decision may be doubtful. But the
respondents accepted this interpretation of the decree. They could have
challenged the interpretation but they did not. They also chose not to prefer
an appeal from the decree itself. Not having adopted either course, the
interpretation of the decree by the order dated 29th March 1990 was final inter partes.
Port Trust and Others V. Unique Builders 2001 (2) SCC 680 relied on by the
respondents has no application. In that case this Court was disposing of an
appeal from an order passing a decree in terms of the award and itself granted
future interest from the date of the decree till payment. Here the impugned
order was passed in execution proceedings after the scope and import of the
decree stood concluded.
High Court erred in ignoring the order dated 29th October 1990 and its effect on the rights of the parties. The issue of
future interest had been raised and decided once and the respondents were
barred by res judicata from reopening it.
the above mentioned reasons, the appeal is allowed and the decision of the High
Court is set aside. There will however be no order as to costs.