Jammu & Kashmir High Court
Smt. Manjit Johl vs Dewan Modern Breweries Ltd. on 1 March, 1994
Equivalent citations: AIR 1994 JAMMU AND KASHMIR 56
Author: Chief Justice
Bench: Chief Justice
JUDGMENT T.S. Thakur, J.
1. This appeal under Section 39 of the Arbitration Act is directed against the judgment and order of a single Judge of this Court dated 8-4-1989, whereby the appellant's application for setting aside of the Award made by the Arbitrator has been dismissed and the award made a rule of the Court after partial modification.
2. The brief facts in the back-ground may be stated thus:
3. The parties entered into two agreements dated 18-4-1977 and 22-5-1978, which inter alia envisaged the settlement of all disputes arising between them by way of arbitration. Certain disputes having arisen, a reference appears to have been made to Shri G.C. Dewan, the Chairman of the respondent-Company in terms of the aforesaid agreements. In the said reference, the respondent-Company claimed a sum of Rs. 79,963.24 paise on account of the price of the goods supplied to the appellant from time to time, besides, a sum of Rs. 336.73 paise on account of Sales Tax and Rs. 27,118.12 paise on account of interest on the outstanding amount calculated up to 31st of August, 1979.
4. The Arbitrator Shri Dewan entered upon the reference and made an award in favour of the respondent for a total sum of Rs. 1,07,418.09 paise with interest at the rate of 24 per cent per annum till its realisation. This award was successfully challenged by the appellant and was set aside by judgment and order dated 26-3-1987 of a single Judge of this Court. By the same order, the nominated Arbitator was removed and in his place Shri T.N. Bhat, the then District and Sessions Judge, Jammu appointed as the new Arbitrator with the direction that he shall adjudicate upon the disputes between the parties and submit his award within the statutory period of four months. The counsel for the appellant was directed to cause the apperance of the appellant before the Arbitrator on the 17th of April, 1987. The appellant, however, did not appear before the newly appointed Arbitrator with the result that he set her ex parte. It was at this stage that the appellant moved an application being C.M.P. No. 442 of 1987 in this Court praying for modification of the order dated 26th of March, 1987. This application was, however, dismissed by the learned single Judge on 28-8-1987 with liberty given to the appellant to appear before the Arbitrator on 5-10-1987 and also to make an application for setting aside ex parte proceedings initiated by the Arbitrator. Significantly the counsel for the respondent had expressed his no objection to the setting aside of the ex parte proceedings by the Arbitrator, in case the appellant appeared before him and made a prayer to that effect.
5. The appellant did not appear before the Arbirator despite the opportunity given to her nor did she make any application for setting aside the ex parte proceedings. It was in this back-ground that the Arbitrator after recording ex parte evidence and taking into consideration the material produced by the Claimant-respondent herein made an award in favour of the respondent on 31st of December, 1987, by which he awarded in favour of the respondent, besides the principal amount claimed, a sum of Rupees 1,74,318.12 paise on account of interest at the rate of 24 per cent per annum from the date of the despatch of goods till 30th of April, 1987, a sum of Rs. 336.00 paise on account of Sales Tax and an amount of Rs. 6,000/- on account of cost of litigation. The award so made when filed in this Court, objections to the same were filed by the appellant alleging misconduct against the Arbitrator. On the basis of the objections and the respondent's reply to the same, the following two issues were framed by the learned single Judge:-
(1) Whether the arbitrator has misconducted himself in the proceedings or the award is otherwise invalid justifying its quashing? OPR (2) Relief? OP Parties.
6. After giving the parties an opportunity of producing evidence by way of affidavits, the learned single Judge modified the award to the extent of disallowing interest pendente lite and future and made the award so modified a rule of the Court. It is against the aforesaid judgment and order declining to set aside the award in toto that the present appeal has been filed in this Court.
7. We have heard the learned counsel for the parties and perused the record.
8. Mr. S.P. Gupta, appearing for the appellant has argued that the award made by the Arbitrator ought to have been set aside, as the same was ex parte and had been made without affording a reasonable opportunity of being heard to the appellant. He has contended that the appellant was prevented by reasons beyond her control from appearing before the Arbitrator. He has relied upon the affidavits filed before the learned single Judge in order to show that the non-appearance of the appellant before the Arbitrator was on account of the disturbed conditions in the State of Punjab and that she was prevented from prosecuting her case before the Arbitrator by reasons of the same.
9. We have carefully considered the submission, but regret our inability to agree with the same. We do not find any cogent material or evidence on record to hold that the conditions in Punjab were disturbed to an extent where the appellant could be said to have been prevented from either attending the proceedings herself or atleast instructing her counsel at Jammu to diligently prosecute the case. In our opinion, the learned single Judge was perfectly justified in holding that the non-appearance of the appellant before the Arbitrator to prosecute her defence was not by reason of the so called disturbed conditions in Punjab. The fact that the appellant had the services of a senior counsel available to her whom she had instructed to file an application in this Court seeking modification of its order dated 26-3-1987 clearly shows that despite the disturbed conditions, the appellant had been able to establish contact with her counsel at Jammu. After the dismissal of the said application, the appellant ought to have realised that in case she did not appear before the arbitrator, the ex parte proceedings would culminate in an award against her. The fact that the appellant did not make any application for setting aside the ex parte proceedings nor even instructed her counsel to appear in the same clearly shows that her non-appearance was deliberate.
10. We also do not find any force in the submissions of Mr. Gupta that the appellant being a lady was entitled to a more lenient view or a greater indulgence. The appellant is a working women engaged in the trade of selling beer and other beverages. We, therefore, see no reason why an extravagantly liberal view should be taken in her case, if the same would not be justified for a male placed in her situation. This is particularly so when it was not necessary for the appellant to personally appear before the Arbitrator. It was sufficient in case she had made adequate arrangements for defending the proceedings. She did not, however, do so, thereby exposing herself to the risk of suffering an award against her. The first ground of attack raised by Mr. Gupta, therefore, fails.
11. Mr. Gupta has next contended that the statutory period for making of the award having expired, the extension in the said period could not have been granted by this Court without issuing a notice to the appellant to oppose the same. He has argued that this Court was under a legal obligation to have issued a notice to both the parties before extending the time for the making of the award.
12. We are unable to accept even this submission. The request for extension of the time had been made not by the respondent, but by the Arbitrator himself. The power to extend time for making the award could in our opinion have been exercised by this Court without issuing a formal notice to the parties. Indeed, if a party to the proceedings does not want the same to continue for any reason, it is entitled notwithstanding an order extending time to apply either for the supersession of the arbitration or the removal of the Arbitrator, by filing a proper petition to that effect. The extension of time by this Court for making of the award did not in any manner take away the right of the appellant to seek either the supersession of the arbitration or removal of the Arbitrator. That being so, the extension granted by this Court for making the award cannot be said to have taken away any vested legal right of the appellant nor does the same in any manner invalidate the award, so as to warrant any interference with the same.
13. Mr. Gupta has then canvassed that the Arbitrator was not competent to award interest, pre-reference, pendente lite or future. He has further submitted that the learned single Judge having disallowed interest pendente lite and future, committed a mistake in maintaining the award, in so far as the interest amount of Rs. 1,74,318.12 paise calculate up to 30-4-1987 was concerned. According to Mr. Gupta, the above amount mainly pertained to the period during which the proceedings had remained pending before the arbitrators, and, therefore, ought to have been disallowed specifically by the single Judge, after having disallowed, interest pendente lite. Mr. Gupta maintained that the Judgment impugned was to the above extent self-contradictory, and hence liable to be set aside.
14. The question whether or not an arbitrator is competent to award pre-reference pendente lite and future interest has been the subject-matter of a string of Judgments of the Apex Court beginning with Seth Thawardas Pherumal v. Union of India, AIR 1955 SC 468.
15. The controversy, however, was finally put at rest by their Lordships of the Supreme Court in Secretary, Irrigation Department, Govt. of Orissa v. G.C. Roy, AIR 1992 SC 732, where a Constitution Bench of the Supreme Court took the view that an Arbitrator is empowered to award pendente lite interest in case the agreement between the parties does not prohibit the grant of the same. After a review of the entire case law on the subject including the Judgment in Seth Thawardas Pherumal v. Union of India (AIR 1955 SC 468) (supra), their Lordships observed thus (at page 749):
"Having regard to the above considerations, we think that the following is the correct principle which should be followed in this behalf:
Where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (along with the claim for principal amount or independently) is referred to the arbitrator, he shall have the power to award interest pendente lite. This is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and therefore when the parties refer all their disputes -- or refer the dispute as to interest as such -- to the arbitrator, he shall have the power to award interest. This does not mean that in every case the arbitrator should necessarily award interest pendente lite. It is a matter within the discretion to be exercised in the light of all the facts and circumstances of the case, keeping the ends of justice in view."
16. In view of the above authoritative pronouncement of their Lordsips, the question is no longer res integra. Respectfully following the ratio of the above judgment, we hold that the Arbitrator did have the jurisdiction to award interest pendente lite in the instant case particularly when the agreements executed between the parties did not prohibit the award of such interest.
17. The second limb of Mr. Gupta's submission regarding the question of interest pertains to the jurisdiction of the Arbitrator to award interest prior to the making of the reference. The argument was that since the Interest Act does not apply to the State of Jammu and Kashmir, the Arbitartor had no jursidiction to award interest for the period anterior to the reference. We find no merit in this submission of Mr. Gupta either. The entitlement of a party to claim interest depends upon either the availability of a statutory provision like the Interest Act or the existence of an agreement to pay the same or the existence of a trade usage. Interest prior to the reference cannot be said to be payable only if the Interest Act is applicable, it can be claimed even in a case where no statutory provision like the Interest Act is applicable, but the parties have entered into an agreement, which envisages the making of such payment. It may also be payable where the party claiming interest proves the existence of a trade usage of paying interest on the outstanding amounts.
18. In the instant case even when the provision of the Interest Act do not apply, the admitted case of the parties is that the agreements executed by them out of which the disputes and the reference to the arbitration has arisen do provide for payment of interest. The existence of such a contractual stipulation was in our opinion enough to entitle the respondent to the payment of interest, no matter the Interest Act did not apply to the State of Jammu and Kashmir. Reliance by Mr. Gupta upon Executive Engineer, Irrigation, Galimala v. Abnaduta Jena, AIR 1988 SC 1520 is in our opinion misplaced. The said judgment dealt with the question of grant of interest by an Arbitrator prereference and pendente lite. As regards the pendente lite interest, the view taken was that the Arbitrator not being a Civil Court within the meaning of Section 34 of the Code of Civil Procedure, was not competent to award interest pendente lite. This view, however, did not find favour with the Constitution Bench of the Supreme Court of India in Secretary, Irrigation Department, Govt. of Orissa v. G.C. Roy, AIR 1992 SC 732. Their Lordships have specifically overruled Abanduta Jena's case (AIR 1988 SC 1520) (supra) in so far as the same held that the Arbitrator could not award interest pendente lite.
19. In regard, however, to the second issue, namely, the power of the Arbitrator to award interest for pre-reference period, their Lordships held thus (AIR 1988 SC 1520 at p 1529):
"In the remaining cases which arose before the commencement of the Interest Act, 1978, the respondents are not entitled to claim interest either before the commencement of the proceedings or during the pendency of the arbitration. They are not entitled to claim interest for the period prior to the commencement of the arbitration proceedings for the reason that the Interest Act, 1839 does not apply to their cases and there is no agreement to pay interest or any usage of trade having the force of law or any other provision of law under which the claimants were entitled to recover interest. They are not entitled to claim pendente lite interest as the arbitrator is not a Court nor were the reference to arbitration made in suits. One of the submissions made on behalf of the respondents was that in every case, all disputes were referred to arbitration and the jurisdiction of the arbitrator to award interest under certain circumstances was undeniable. The award not being a speaking award, it was not permissible to speculate on the reasons for the award of interest and the Court was not entitled to go behind the award and disallow the interest. It is difficult to agree with this submission. The arbitrator is bound to make his award in accordance with law. If the arbitrator could not possibly have award interest on any permissible ground because such ground did not exist, it would be open to the Court to set aside the award relating to the award of interest on the ground of an error apparent on the record. On the other hand, if there was the slightest possibility of the entitlement claimant to interest on one or other of the legally permissible grounds, it may riot be open to the Court to go behind the award and decide whether the award of interest was justifiable."
20. It is, therefore, apparent that in a case where an agreement to pay interest existed like the present, the power of the Arbitrator to award interest for pre-reference period was undeniable. It is also apparent that once there was the slightest possibility of the claimant being entitled to interest on one of the other ground including the existence of a trade usage, the Court dealing with the award was not entitled to go behind the award and examine whether or not the interest had been justifiably awarded.
21. Both the limbs of Mr. Gupta's argument in so far as the award of interest pendente lite and pre-reference accordingly fail.
22. That brings us to the question as to what is the effect of learned single Judge disallowing interest pendente lite. It is apparent that the view taken by the learned single Judge proceeded on the basis of the legal position started in Jena's case (AIR 1988 SC 1520) holding that pendente lite and future interest was beyond the powers of the Arbitrator. That view no longer holds good. The legal position as it obtains today is that the abritrator is empowered to award interest for all the three periods, namely, pre-reference, pendente lite and future.
23. We cannot, however, disturb that part of the judgment, as no appeal, has been filed by the respondent against the same. All the same there is no denying the fact that the single Judge while disallowing interest pendente lite has maintained the award granting such interest up to 30th of April, 1987. The result was that a part of the substantive relief allowed to the respondent was different from the finding returned by the learned single Judge. The question that, therefore, confronts us is whether we should in the face of the said conflict uphold the finding or the relief that has been allowed to the respondent, particularly when the finding proceeded on an erroneous appreciation of the legal position and the relief substantively granted is sustain-able on the basis of the law now laid down by the apex court. Mr. Gupta argued that since no appeal has been preferred by the respondent against the view taken by the learned single Judge, the same has attained finality. Consequently any relief granted to the respondent contrary to the said view ought to be set aside.
24. It is true that no appeal has been filed by the respondent against the modification ordered by the learned single Judge in so far as the refusal of interest pendente lite and future was concerned. That will in our opinion at the most disentitle the respondent from claiming interest pendente lite or future beyond what stands quantified and awarded to the respondent. The arbitrator had quantified an amount of Rs. 1,74,318.12 paise on account of interest up to 30-4-1987. This amount partly represents interest for the prereference period, and partly for the period during which the arbitration proceedings remained pending. The learned single Judge, has not upset this part of the award, and we see no reason to do so either, for we are of the opinion, that in view of the legal position now prevailing there is no illegality in the award of the said amount. On the contrary the respondent may have been entitled to interest pendente lite for the entire period, besides future interest, which the learned single Judge had disallowed but which we cannot restore in the present appeal, as neither any appeal nor cross objections have been filed by the respondent against that part of the judgment impugned. We, therefore, prefer to uphold the award of the interest amounting to Rs. 1,74,318.12 paise and ignore the finding of the single Judge, as we find that the finding is no longer sustainable, and there is no illegality in the award of the above amount to the respondent, so as to warrant its deletion.
25. Mr. Gupta had finally made a feeble attempt to challenge the award in so far as the same allowed a sum of Rs. 6,000/- towards the cost of litigation. We find no fault with the award even on this count. The power to award costs is an implied condition of the arbitration agreement in terms of Schedule I to the Arbitration Act. The Arbitrator was, therefore, competent to award costs, which he has quantified at Rs. 6,000/-. We do not find any illegality either in the award of the costs or the amount so awarded.
26. In the result, we do not find any ground to interfere with the judgment of the learned single Judge. We accordingly dismiss the appeal, but in the circumstances of the case leave the parties to bear their own costs. C.M.P. No. 254 of 1989 shall also stand dismissed and stay granted on 31-7-1989 shall stand vacated.