Madras High Court
The Deputy General Manager/General vs Strong Engineering Contractors on 29 June, 2018
Author: Abdul Quddhose
Bench: Abdul Quddhose
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED 29.06.2018 CORAM THE HONOURABLE MR. JUSTICE ABDUL QUDDHOSE O.P.No.397 of 2018 1.The Deputy General Manager/General, Southern Railway, Park Town, Chennai - 600 003. 2.The Chief Administrative Officer (Construction), Southern Railway, Egmore, Chennai - 600 008. .. Petitioners Vs Strong Engineering Contractors, Through its Managing partner, Er.Y.Abdul Hameed, No.6, Red Star Building, Thillai Nagar Main Road, Tiruchirapalli 620 018. ..Respondent Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 praying to set aside the Arbitral Award dated 28.09.2017 passed by the learned Arbitrator in disputes arising out of the Agreement No.27/Dy.CE./CN/MAS/09 dated 23.10.2009 insofar as the Award of pendentelite interest at 10% for a sum of Rs.20,57,829/- from 12.09.2013 till the date of payment is concerned. For Petitioners : Mr.P.T.Ramkumar For Respondent : No appearance ORDER
The instant petition has been filed by the petitioners/Railways challenging the Arbitral Award dated 28.09.2017 passed against them. The Arbitral Awad has been passed against the petitioner for a sum of Rs.20,57,829/- together with interest at 10% from 12.09.2013 till the date of Award.
2. The service was effected on the respondent through substituted service. The respondent has not entered appearance either in person or through counsel. The name of the respondent has also been printed in the cause list today.
3. The petitioners have challenged the Award primarily on the ground that under the contract entered into with the respondent, the petitioners are not liable to pay any interest in respect of any sum payable under the contract.
4. According to the petitioner, the Arbitral Tribunal erred in awarding interest for the period from 12.09.2013 till the date of the Award. The Arbitral Tribunal failed to take note of the fact that under the contract between the parties, clauses 16(3) and 64(5) of the General Conditions of Contract, which forms part of the agreement, clearly stipulates that no interest is payable in respect of any sums due under the contract. In view of the same, according to the petitioner, the claim for interest was not sustainable and consequently, the Award passed by the Arbitrator on interest i.e., pendente lite interest is against the terms of contract. According to the petitioner, clauses 16(3) and 64(5) of the General Conditions of Contract was not considered by the Arbitrator in accordance with settled principles of law.
5. Learned counsel for the petitioner drew the attention of this Court to clauses 16(3) and 64(5) of the General Conditions of Contract which reads as follows;
' 16).....
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(3) No interest will be payable upon the Earnest Money and Security Deposit or amounts payable to the Contractor under the Contract, but Government Securities deposited in terms of sub-clause (1) of this clause will be payable with interest accrued thereon.' 64(5). Where the Arbitral Award is for the payment of the money, no Interest shall be payable on whole or any part of the money for any period till the date on which theAward is made."
would make it abundantly clear, in view of conspicuous absence of a similar clause in predecessor GCC in force, when the Agreement was entered into by inference that the power of Arbitral Tribunal was not curtailed, does not assist the claim of the 1st Respondent to Interest, pre-reference and pendente lite, in view of the principle as to bar to award Interest laid down by the Hon'ble Supreme Court in the line of decisions referred to hereinbefore and in the presence of prohibition contained Clause 16(2)(old) & 16(3) (modified) of GCC which are similar and identical."
6. Under the respective clauses, it is clear that the contract does not stipulate payment of pendente lite interest for the sums due and payable under the Contract.
7. Mr.P.T.Ramkumar , the learned counsel for the petitioner drew the attention of this court to a decision of this Court dated 2.2.2018 in the case of Deputy Chief Engineer (Construction), Southern Railway, Podanur Vs. Vishal Constructions, represented by its Proprietor B.Vijayakumar and another reproted in 2018(3) CTC 285 following various decisions of Supreme Court as well as our High Court held that when the Contract specifically bars payment of interest, no interest is payable for any sum of money due and payable under the Contract.
8. Following the Supreme Court decisions and our High Court decision, the learned Single Judge, in the judgment cited supra, allowed the section 34 application. The case on hand is similar to the decisions cited supra reported in 2018 (3) CTC 285. Since the Arbitrator has gone beyond the scope of the contract by awarding pendente lite interest, the Award will have to be set aside. Learned counsel for the petitioner submits that subsequent to passing of the Arbitral Award which is under challenge before this Court, the petitioner has already paid a sum of Rs.20,57,829/- to the respondent as directed by the Arbitrator and the petitioner is aggrieved only with award of the Arbitrator in respect of pendente lite interest at the rate of 10% per annum.
9. The award of post award interest cannot be interfered with by this Court under section 34 of the Arbitration and Conciliation Act . Under the Award passed, interest at the rate of 10% per annum was directed to be paid by the petitioner to respondent within a period of 30 days from the date of its publication, otherwise, an interest at the rate of 10% per annum is payable for the whole awarded amount.
ABDUL QUDDHOSE, J.
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10. Therefore, for the reasons stated above, the Award passed insofar as pre award and pendente lite period alone is set aside and O.P.No.397 of 2018 stands partly allowed. Insofar as payment of Rs.20,57,829/- together with interest at 10% from the date of Award till date of realisation, the Arbitration award remains undisturbed. But if the petitioners have paid the principal sum of Rs.20,57,829/- as represented by the learned counsel for the petitioners, post award interest on the sum of Rs.20,57,829/- alone is payable by the petitioners. This Original Petition shall stand disposed of accordingly. No costs.
29.06.2018
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O.P.NO.397 of 2018