Calcutta High Court
Soorajmull Nagarmull vs Jute Corporation Of India Ltd. on 30 July, 2001
Equivalent citations: AIR 2001 CALCUTTA 227, (2002) 1 ARBILR 193 (2002) CAL WN 878, (2002) CAL WN 878
Author: Asok Kumar Ganguly
Bench: Asok Kumar Ganguly, Pranab Kumar Chattopadhyay
JUDGMENT Asok Kumar Ganguly, J.
1. This appeal has been filed by M/s. Soorajmull Nagarmull, a registered partnership firm (hereinafter referred to as SN) challenging the judgment and order dated 16th July, 1991 by which a learned single Judge upheld an award dated 16th August, 1989.
2. The material facts of the case are noted below :
Six contracts were entered into by and between SN and Jute Corporation of India (JCI) for sale of jute by JCI to SN. Disputes and differences arose out of the transactions covered by those six contracts. The contracts are of diverse dates.
3. However, one thing may be noted that the award which has been passed in this case is for a total amount of Rs. 73,18,668.02 p. only. Out of the said amount, Rs. 88,962.63 p. was awarded for the balance of unpaid price of jute supplied and delivered by JCI to SN. A total amount of Rs. 72,29,705.39 p. had been awarded towards the interest payable by JCI to its bank up to 30th June, 1989 for loans and advances obtained by JCI from the banks for payment of price of jute supplied and delivered by JCI to SN. The claim for penal interest by JCI has been disallowed by the arbitrator.
4. On the total amount awarded namely Rs. 73,15,668.02 p. interest has been granted @ 10% per annum from 2nd July, 1989 till decree is passed and thereafter at such rate, the decree may direct and an amount of Rs. 5,780/- was allowed by way of costs.
5. From the nature of the award, it is clear that a very substantial portion had been awarded by way of interest.
6. Out of six contracts, which have all been disclosed before this Court, it has been alleged that there is no provision for payment of interest in at least two of them namely, the contract dated 29th June, 1973 and the contract dated 22nd April, 1976. Insofar as other four contracts are concerned, the clause for payment of interest is not identical. In respect of the contract dated 10th June, 1973, the clause relating to payment of interest is set out below :
The Company shall make payment to the Jute Corporation immediately on presentation of Invoice by cheque drawn in favour of the Jute Corporation for the 70% of the value of goods and the balance 30% shall be paid by the Company after the settlement of weight and quality claims. For delayed payment beyond 10 days from presentation of Invoice the Jute Corporation shall reserve the right to charge interest at the rent of twelve and a half per cent (12 1/2%) per annum."
7. In respect of contract dated 1st December, 1973 clause relating to payment of interest is provided in Clauses 11(a) and 11(b) and are as follows :
"Interest 11(a). If payment is not made within the said period of thirty days then the Company will be liable to pay interest on the amount of the Bills as follows :
i) For thirty days beyond the said period of thirty days -- Interest at such rate as the Corporation may have to pay the parties from whom the Corporation borrows the amount.
ii) After sixty days and up to ninety days -- Interest @ 2% over and above the rate mentioned in Clause 11(a)(i) hereof.
iii) In the event of any delay in payment beyond ninety days, the matter shall be referred to the J.C. for decision on such penal action as it may deem fit and such decisions will be binding on the Company.
11(b). Notwithstanding anything contained in Sub-clauses (ii) and (iii) of Clause 11(a) above, the Corporation shall have the right and be at liberty to take such steps as it may think fit for the recovery of the amount of the dues payable by the Company to the Corporation."
8. In respect of the contract dated 27-1-1976, the clause relating to payment of interest Is set out below :
"Interest 10(a). If payment is not made within the said period of thirty days as mentioned in Clause 9 above then the Company will be liable to pay interest on the amount of the bills as follows :--
(i) For thirty days beyond the said period of thirty days -- interest at such rates as the Corporation may have to pay to its Bankers on such outstanding.
(ii) After sixty days -- Interest @ 2% over and above the rate mentioned in Clause 10(a)(i) hereof.
10(b). Notwithstanding anything contained in Sub-clause (ii) of Clause 10(a) above, the Corporation shall have the right and be at liberty to take such steps as it may think fit for the recovery of the amount of the dues payable by the Company to the Corporation."
9. In respect of the other contract dated 27-1-1976, the clause for payment of interest as follows :
"Interest
10.1 If payment is not made within the said period of thirty days as mentioned in Clauses 9.1 and 9.2 above, but is made within the next ninety days from the date of submission of the bills, then the Company will be liable to pay interest on the amount of the bills at such rates as the Corporation may have to pay to its Bankers on such outstandings.
10.2 In all cases where payment is made after one hundred and twenty days from the date of presentation of the bills interest at the rate of two per cent over and above such rates, as the Corporation have to pay to its Bankers on such outstanding, will be charged. The additional interest of two per cent thus realized will be distributed to the Companies from whom payments are received within ninety days from the date of presentation of the bills on an agreed basis in consultation with J.O.C., after retaining 10% of the amount with the Corporation.
10.3. In the event of failure in realizing payment, despite the invocation of Clause 10.2 above, the Corporation shall have the right and be at liberty to take such steps as it may think fit for the recovery of the amount of the dues payable by the Company to the Corporation."
10. The learned Counsel for the appellant has urged that the basis for payment of interest in those four contracts are different and if they are properly analysed it can be summarized as follows :
"i) 12 1/2% per annum in contract dated 10th June, 1973;
ii) rate at which JCL might have to pay its borrowers subject to the final decision of JCI;
iii) rate at which the JCI might have to pay its bankers:
(b) The rate has to be applied on the outstanding of the balance price. In other words, there was no provision for compounding interest and thereby charging interest on interest."
11. It is common ground that JCI in respect of all those six contracts separately filed six petitions under Section 20 of Arbitration Act, 1940, (hereinafter referred to as said Act) for reference of disputes and differences between JCI and SN under those contracts. It is also admitted that out of those six petitions, four were filed in High Court and two were filed in City Civil Court. The petitions filed in City Civil Court were transferred to the High Court.
12. The learned Counsel further submitted that on the basis of those petitions, a learned Judge of this Court by an order dated 16th February, 1981 referred all those six applications to arbitration on the basis of the following order :
"BEFORE THE HQN'BLE MR. JUSTICE B. C. BASAK The 16th day of February. 1981.
Mr. P. K. Chatterjee appears with Mr. Ukil for the petitioner and submits Mr. Bhaskar Gupta, appears for the Respondents and submits.
THE COURT : This is an application Under Section 20 of the Arbitration Act. The parties have no objection to a suitable order if passed in the manner specified below.
There will be an order directing the filing of the Arbitration Agreement and let all disputes and differences referred to in the petition be referred for adjudication to Mr. Justice B. C. Mltra. Ex-Judge of this Hon'ble Court who is hereby appointer Arbitrator at a remuneration of 40 CMS. for each sitting of two hours to be shared equally by the parties.
The parties are agreed that let the six matters be consolidated and one order of reference be passed and one Award be made in respect of this six matters.
All parties concerned, including the Arbitrator to act on a signed copy of the Minutes of this order on the usual undertaking."
13. Therefore, the disputes and differences referred to in the petitions under Section 20 of the said Act were referred to arbitration.
14. The learned Counsel for the appellant has submitted that the applications filed by JCI and on the basis whereof the matter has been referred to arbitration, do not contain any prayer for payment of interest. This Court has been taken through all those Section 20 application.
15. The first application under Section 20, being numbered as Special Suit No. 28/ 1980, contains a prayer for referring to arbitration disputes and differences regarding the claim of JCI for an amount of Rs. 1,94,039.96 p. in terms of the arbitration clause contained in the contract, there is no prayer for payment of interest and this petition was in respect of contract dated 29th June, 1973 and the contract does not contain any provision for payment of interest. The next Section 20 application, being numbered as Special Suit No. 40/1980, is in respect of contract dated 22nd April, 1976 and it does not contain any provision for payment of interest. In this application also the disputes and differences arose out of a claim of JCI for Rs. 1,94,089.98 p. under the said contract. This petition does not contain any prayer for payment of interest. The third Section 20 application (Special Suit No. 41/ 1980) also contains a prayer for referring disputes and differences between the parties with regard to the claim of JCI for an amount of Rs. 1,94,039.96 p. in respect of an agreement dated 27th January, 1976. This agreement contains a clause for payment of interest but in the Section 20 application there is no prayer for interest.
16. The next Section 20 application (Special Suit No. 42/1980) also contains a prayer for referring to arbitration disputes and differences arising out of the claim of Rs. 1,94,039.96 p. of JCI under contract dated 1st December, 1973. This contract contains a clause for payment of interest but in the Section 20 application, there is no prayer for interest.
17. The next Section 20 application was numbered as Miscellaneous Case No. 497/ 1981 (filed initially in City Civil Court). The same contains a prayer for referring the disputes and differences arising out of a claim of Rs. 46,725.25 p. under the contract dated 27th January, 1976. The said contract contains a clause for payment of interest but the said Section 20 application has no prayer for payment of interest.
18. The next Section 20 application was numbered as Miscellaneous Case No. 498/ 1980 (filed in City Civil Court). The said petition contains a prayer for referring disputes and differences between the parties with regard to the claim of JCI for Rs. 36,681.39p. under contract dated 10th June, 1973 which contains a clause for interest but the Section 20 application does not contain any prayer for interest.
19. It is also admitted that the claim arising out of all the six applications put together, including principle and interest, would come together to about Rs.
13,76,387.54 p. and out of which the unpaid price of jute in respect of all those six contracts is Rs. 1,68,278.28 p.
20. According to the learned Counsel for the appellant an award of Rs. 73,18,668.20 p. out of a total claim of Rs. 13,76,387.54p. is ex facie beyond the reference and is perverse.
21. Before the arbitrator, the JCI filed its claims for a sum of Rs. 18,05,548/-. The claim became so, after it added Rs. 4,29,160.64 p. on account of further interest from 12th April, 1980 till 12th June, 1981. It has been alleged by the counsel for the appellant that the claim for interest in the statement of claim is different from the basis on which interest was claimed in Section 20 application. The learned Counsel has submitted that from its petition of claim it would appear that it has been claiming compound interest. The particular paragraph on which reliance was placed by the learned Counsel for the appellant is Paragraph 7 of the petition of claim filed before the arbitrator. The said paragraph is set out below :
"That the claimant states and contends that the liability of the said respondent firm to reimburse all moneys paid or spent or payable by the claimant on account of the purchase/import of Raw jute supplied to the respondent firm by the claimant was and is in addition to, separate from and independent of the stipulation to pay interest (including compound interest) on the unpaid price as contained in the said contracts."
22. SN filed its counter-statement disputing the claim by JCI. Admittedly, there were 156 sittings before the arbitrator. Particular reference has been made to the minutes of the proceeding before the arbitrator, namely the 154th meeting held on 3rd July, 1989, about a month before the date of delivery of the award and the learned counsel pointed out that in the said meeting a chart was handed over to the arbitrator by the learned Counsel for the JCI. The said chart has been disclosed before this Court with the application for setting aside the award filed by SN. It has been stated by the learned Counsel that no witness was called to prove the content of the chart and the same cannot be treated as evidence by the arbitrator.
23. On the other hand learned Counsel appearing for the JCI submitted that the JCI's case is based on two fold claims (a) the balance price of the goods sold and delivered and (b) the amount of interest which is the cost of finance obtained from the bank for purchasing the jute either by way of import or by way of internal procurement for supply to SN, The further case of JCI is that SN delayed in payment of price of the jute and as a result of which charges/interest payable to the bank by JCI for obtaining money for procuring the jute went up. So the claim of JCI is that SN must not only pay the balance price of the Jute supplied but they must also pay the charges/interest payable by JCI to its bankers for default by SN in paying the price. The learned Counsel further submitted that the award is a non-speaking one and in respect of a non-speaking (award it) is not open to the Court to examine the mental process of the arbitrator. In the instant case, while giving the award, the arbitrator has acted within its Jurisdiction by granting the interest and, therefore, there is no error on the face of the award. The learned Counsel also submitted that when the pleadings are there, an absence of prayer in Section 20 application will not deprive the party concerned of a relief, which it is entitled to get under the law. The learned Counsel also raised various other points and cited various other decisions, which the Court will consider later.
24. The first question, which has been debated in this case, is whether the award Is a speaking one or not. The learned Counsel for the appellant has sought to urge that while giving the award the learned Arbitrator has given the basis on which he has awarded interest. Thus, the furnishing of the basis for which relief is granted, according to the learned Counsel, amounts to giving of reasons for the award. Therefore, this is a speaking award.
25. The learned Counsel for the respondent, however, submitted to the contrary and urged that in the instant case, the learned Arbitrator has merely given his conclusion In the award but has not given reasons for the conclusion and the learned Arbitrator is not required to do so. So it cannot be called a speaking award. In support of the said contention, the learned counsel for the respondent cited two decisions.
26. The first of those decisions is in the case of Hindusthan Steelworks Corporation Ltd. v. C. Rajasekhar Rao , in that case, the learned Judges of the Hon'ble Supreme Court while dealing with the scope of interference with an award held that in case of a speaking award, the Court may look for the reasoning in the award. But where no reasons are given by the learned Arbitrator, it is not open to the Court to probe the mental process and speculate what prompted the learned Arbitrator to arrive at this conclusion. Stating this broad proposition, the learned Judges held that the award in Hindusthan Steel Works (supra) was not a speaking award inasmuch as in the award there was narration of facts and the pleadings were stated, but the award does not speak of the mind of the arbitrator. In this case also same thing has happened. So this Court is unable to uphold the contention of the learned counsel of the appellant that the award is a speaking award or a quasi-speaking award. Either an award is a speaking one or it is not. Therefore, going by the accepted norm in Arbitration Law, this Court is of the opinion that the award is not a speaking award.
27. The next decision on which reliance was placed by the learned Counsel for the respondents was in the case of Jagodia (Overseas) Pvt. Ltd. v. Industrial Development Corporation of Orissa Ltd., . In Paragraph 8, page 110 of the report, the learned judges explained what is meant by a speaking award.
28. Going by those parameters, this Court is of the view that the award is not a speaking one and the contention of the learned counsel for the appellant cannot be accepted. The learned Counsel for the appellant has also urged that even in a non-speaking award, the Court is entitled to see whether the learned Arbitrator has proceeded beyond the reference in making the award. According to the learned Counsel, this position is well settled and in support thereof the learned Counsel has referred to a number of decisions which the Court proposes to consider.
29. The first decision on this aspect was in the case of the Executive Engineer (Irrigation), Balimela v. Abhaduta Jena . The learned Counsel referred to para 20 of the said judgment. In para 20, the learned Judges have recorded the contentions before the Court that the award not being a speaking one, it was not permissible to speculate on the reasons for the award of interest and the Court is not entitled to go behind the award to disallow the interest. The learned Counsel submitted that this is also the contention of this case. But the learned Counsel pointed out that the Supreme Court did not accept this contention by observing " It is difficult to agree with this submission" (see page 435) (of SCC) : (at p. 1529 of AIR). The learned Counsel further pointed out that the Supreme Court made it clear that the Arbitrator is bond to give his award in accordance with law and the Supreme Court further pointed out that the Arbitrator could not possibly have awarded interest on any ground if such a ground does not exist. If he does, it would be open to the Court to set aside the award relating to Interest on the ground of an error apparent on the face of the record.
30. Relying on these observations, the learned Counsel submitted that even in the case of a non-speaking award, the Court is entitled to make this limited scrutiny namely to see whether in making the award, the Arbitrator has followed the law and the learned Counsel urged that the learned Arbitrator in this case has admittedly awarded pendente lite interest which he cannot do having regard to law which was prevailing at the time when the award was made.
31. The next decision on which reliance was placed is in the case of State of Jammu and Kashmir v. Dev Dutt Pandit . The learned Counsel placed reliance on paragraph (18) of the said judgment. In the said paragraph (18) the learned Judges have accepted that the Court has certain limitations in examining a non-speaking award but the Court has held that that is "no complete bar in examining if the award is in terms of the reference or the terms of the contract". (page 3202 of the report).
32. The learned Counsel relied on certain other judgments in order to contend that an Arbitrator cannot enlarge the scope of reference. In support of the said contention, the learned Counsel relied on a decision of the Supreme Court in the case of Orissa Mining Corporation Ltd. v. P. V. Rowlley, . Reliance was placed on para (11) of the judgment. In para (11) of the said judgment, the learned Judges made it clear that when an agreement is filed in court and an order of reference is made, then "the claim as a result of the order of reference is limited to a particular relief and the arbitrator cannot enlarge the scope of reference and entertain fresh claims without a further order of reference from Court" . (page 2017 of the report) (Underlined for emphasis)
33. The learned Counsel submitted that in the facts of this case those observations are directly attracted Inasmuch as in the instant case the order of reference specifies the scope of arbitration by directing the filing of the arbitration agreement in court and further directing that the disputes and differences referred to in the petition shall be referred to the arbitration and it was also agreed by the parties that all the six matters were consolidated in one order of reference and there should be one award in respect of all those petitions under Section 20. The learned Counsel submitted that admittedly the learned Arbitrator in giving the award has far exceeded the claims which were the subject-matter of those petitions which constituted the basis of the order of references.
34. In support of the aforesaid contentions the learned Counsel also cited another decision in the case of C.M.D.A. v. Prasun Roy reported in 1987) 1 Cal LJ 207. The learned single Judge reiterated the aforesaid principles laid down in the case of Orissa Mining (supra) and held in paragraph (3) of the judgment that the arbitrator does not have the right to enlarge the scope of reference and by doing so, the arbitrator has proceeded without jurisdiction.
35. The judgment in Prasun Roy (supra), however has been overruled by Supreme Court on another point, see .
36. The learned Counsel has assailed the award on some other grounds also. His main submission has been that the arbitrator has no jurisdiction to grant pendente lite interest. In support of this submission the learned Counsel has relied on three decisions of the Supreme Court. The first decision in that series is in the case of Executive Engineer (Irrigation), Balimela v. Abhaduta Jene, , the second one is in the case of Secretary, Irrigation Department, Government of Orissa v. G. C. Roy, and the third one was a Constitution Bench decision in the case of the Executive Engineer, Dhenkanal Mining Irrigation Division, Orissa v. N. C. Budharaj (deceased) Lrs. reported in (2001) 2 SCC 721 which is also .
37. The learned Counsel also submitted that the general statutory provisions in regard to award of interest are contained either in the Interest Act or the Code of Civil Procedure.
38. The learned Counsel for the appellant urged that in the instant case the provisions of the Interest Act, 1978 (henceforth called I.A., 78) cannot be attracted.
39. Before referring to those decisions, the Court proposes to examine this submission of the learned Counsel. This submission was sought to be developed by referring to Section 6(2) of I.A., 78. The said Sub-section (2) is set out below :
"(2). The provisions of this Act shall not apply to any suit or other legal proceedings pending at the commencement of this Act and the provisions of the corresponding law applicable immediately before such commencement shall, notwithstanding the repeal of such law of Sub-section (1), continue to apply to such suit or other legal proceeding."
40. The learned Counsel submitted that the provisions of I.A., 78, though enacted in 1978, came into force on the basis of a notification in the Official Gazette on 19-8-81.
But prior thereto in the instant case the order of reference was made by the learned Court on 16-2-81 and on the basis of the said order of reference, the learned Arbitrator entered upon reference on 11-3-81 and the statement of claim was filed on 12-6-1981. The learned Counsel submitted this arbitration proceeding was a proceeding pending on the date of commencement of the Act and in view of the provisions of Section 6(2), the corresponding law, that is Interest Act, 1839 (hereinafter called LA., 39) will apply notwithstanding its repeal under Section 6(1) of LA., 78.
41. The learned Counsel submitted, and in our view rightly, that in this case the date on which the arbitrator enters upon reference should be taken as the date of commencement of arbitration proceeding. We find similar views have been expressed by Supreme Court in Gujarat Water Supply and Sewage Board v. Unique Erections etc. . See the observations at para 15, page 542 (of SCC) : (at p. 978 of AIR) of the report. This argument by the learned Counsel appears to be rather sound and is based on a proper interpretation of Section 6(2) of the I.A., 78. Since the date of commencement of arbitration proceeding is not disputed, this Court holds that I.A., 78 will not be attracted to the facts of this case.
42. The learned Counsel for the appellant further urged that the law as laid down in the case of Jena, (supra) must govern the question of grant of interest in the instant case. According to the learned Counsel in the case of Jena (supra) it was held that even in case where the I.A., 78 applied interest for the period prior to reference to arbitration proceeding may be payable but pendente lite interest is not payable. According to the learned Counsel this was the statement of law by the Supreme Court on 22-9-1987, the date on which judgment in Jena (supra) was rendered. The decision in Jena (supra) was overturned by the Hon'ble Supreme Court subsequently in the case of Secretary, . In para (2) of the judgment in G. C. Roy (supra) the Hon'ble Supreme Court pointed out how the said appeals came before the Constitution Bench. In para (8) of the said judgment, the learned Judges considered that generally in respect of three different periods the question of award of interest arises in an arbitration. Those periods are (i) period commencing from the date of the dispute till the date the Arbitrator enters upon reference which is known as the prereference period; (ii) the period between the Arbitration's entering upon reference till the date of making of the award which is propularly known as the pendente lite period and, (iii) the period from the date of making the award till the award is made a rule of Court or till realization whichever is earler. This is popularly known as post-award period. The learned Counsel urged that in G.C. Roy (supra), the Court noted that in Jena's case (supra) the question relating to the power of the Arbitrator to grant interest for the pre-reference period and the pendente lite period came up for consideration and the authority of the arbitrator to grant pendente lite interest was considered in detail and the Hon'ble Supreme Court held that neither the I.A., 1839 nor the I.A., 1978 confers power on the Arbitrator to grant pendente lite interest and the Supreme Court in G. C. Roy (supra) also noted that the learned Judges in Jena (supra) held that Section 34 of the Code of Civil Procedure does not apply to an arbitration inasmuch an arbitrator is not a court within the menaing of that Section.
43. The learned Counsel pointed out that after considering various decisions, the learned Judges in G. C. Roy (supra) laid down the principles in paragraphs 43 and 44 and in paragraph 45 the learned Judges held that the decision in Jena's case (supra) in so far as it runs counter to the proposition laid down in paragraphs 43 and 44 of G. C. Roy's case (supra), did not lay down the correct law. Even after saying so, the learned Judges in paragraph 46 in G. C. Roy's case (supra) held as follows :
"Even though we have held that the decision in Jena's case does not lay down good law, we would like to direct that our decision shall only be prospective in operation, which means that this decision shall not entitle any party nor shall it empower any court to reopen proceedings which have already become final. In other words, the law declared herein shall apply only to pending proceedings."
44. Relying on those observations, the learned Counsel contended that in the instant case the impugned award was given by the learned Arbitrator on 16-8-89 on that date in view of the law laid down in Jena's case (supra), the Arbitrator had no jurisdiction to grant pendente lite interest.
45. The learned Counsel also submitted that the position did not change even after the subsequent Constitution Bench decision of the Supreme Court in the case of Dhenkanal (supra). In support of the said submission the learned Counsel referred to paragraph 9 (of SCC) (para 31 of AIR) of the Dhenkanal's case (supra) which is as follows :
"9 While overruling Jena's case on the above principles, this Court applied the principle of prospetive overruling making it clear that their decision shall not entitle any party nor shall it empower any court to reopen proceedings which have already become final and that the law declared shall apply only to pending proceedings."
46. The learned Counsel further submits that para 26 of the judgment in the case of Dhenkanal (supra) re-affirms that the decision in Jena's case (supra) which has taken the contrary view stands overruled prospectively and this has been explained by the Supreme Court by saying which means that this decision shall not entitle any party nor shall it empower any court to re-open proceeding which have already become final and only apply to any pending proceedings' (para 26 page 745 (of SCC) : (para 48, at p. 648 of AIR) of the report).
47. Relying on those principles, Mr. Pal, the learned Counsel for the appellant urged that the principles of law as laid down in G. C. Roy's case (supra) cannot be applied to the impugned award inasmuch as the impugned award was given by the learned Arbitrator on 16-8-1989 whereas the judgment in G. C. Roy's case (supra) was delivered on 12-1-1991.
48. The learned Counsel also submitted that in the instant case that it is a contract for sale of goods and as such the provisions of the Sale of Goods Act will apply. According to the learned Counsel Section 61(2) of the Sale of Goods Act will govern the field. Section 61(2) of the said Act is set out below :
"61(2) In the absence of a contract to the" contrary, the Court may award interest at such rate as it thinks fit on the amount of the price--
(a) to the seller in a suit by him for the amount of the price -- from the date of the tender of the goods or from the date on which the price was payable;
(b) to the buyer in a suit by him for the refund of the price in a case of a breach of the contract on the part of the seller-from the date on which the payment was made."
49. The learned Counsel submitted that in the instant case in view of the provisions of Section 61(2) of the said Act, there is no question of equitable jurisdiction coming into play in the matter of grant of interest, inasmuch as Section 61(2) exhausts the situation in which interest can be paid by the Court in case of sale of goods. Since the area is covered by legislative enactment, there is no scope of equitable consideration for grant of interest. The learned Counsel further urges that Section 61(2) of the said Act will have no application for grant of pendente lite interest as that is covered by Section 34 of the Code of Civil Procedure in a suit. Since in the instant case Section 34 is not applicabe to this arbitration proceeding which commenced prior to the commencement of I.A., 1978, I.A. 1893 will apply. In view of the provisions of I.A., 1893 under which the Arbitrator is not a court, the Arbitrator cannot grant pendente lite interest.
50. The learned Counsel for the respondent has, however, tried to controvert the aforesaid submission made by the learned Counsel for the appellant by urging that interest in this can be granted by the learned Arbitrator on equitable principles. The learned Counsel further submitted that the arbitration proceeding cannot be said to have come to an end in view of the fact that the award has not yet become a rule of court as a result of the present proceedings which have been initiated for setting aside the award and no decree has been passed on the award. Therefore, the arbitration proceeding, according to the learned Counsel, must be said to be a pending proceeding. Since it is a pending proceeding, the subsequent declaration of law in the case of the G. C. Roy (supra) and in the case of Dhenkanal (supra) will be attracted.
51. These being the rival contentions for the parties, this Court on a careful consideration of those contentions is unable to uphold the contentions advanced by the learned Counsel for the appellant for the reasons which are indicated hereinafter.
52. It is an admitted position that out of six contracts between the parties in respect of which disputes and differences arose and were referred to arbitration, in four of them there is clear clause for payment of interest. In respect of the two other remaining contracts, there is no prohibition against grant of interest. It is also an admitted case that those six agreements led to filing of six applications under Section 20 of the Arbitration Act and from the order of reference it is clear that the learned Arbitrator was to pass a composite award in respect of all the six applications under Section 20 and there was only one order of reference. These have been ordered by the Court on the consent of parties.
53. Now the learned Arbitrator has passed one composite non-speaking award in which there is a principal sum awarded along with an award of interest. In the background of these facts it is difficult for this Court to interfere with the award of interest inasmuch as before the decision in the case of Jena (supra), a three-Judge Bench of the Supreme Court in the case of Ashok Construction Company v. Union of India, , laid down the law which is contrary to the submission advanced by the learned Counsel for the appellant. In paragraph 6 of the said judgment in the case of Ashok Construction (supra) the learned Judges of the Supreme Court quoted the arbitration clause and thereafter remarked that the arbitration clause did not exclude the jurisdiction of the learned Arbitrator to enter -tain a claim of interest on the amount due under the contract. In that view of the matter the learned Judges of the Supreme Court held that the award of the learned Arbitrator granting interest is not invalid. In the facts of the present case there is some similarity with the facts in the case of Ashok Construction (supra) inasmuch as in that case also there was request for apppoint-ment of arbitrator and an arbitrator was appointed but the arbitrator died and could not give the award. Thereafter on an application another arbitrator was appointed under Section 8 of the Arbitration Act. Before the Court, the award was challenged. One of the contention was that the claim for interest which was awarded by the Arbitrator invalidated the award. But the said contention was rejected by the Supreme Court as pointed out above.
54. It may be noted that the said judgment in the case of Ashok Construction (supra) was considered by the Constitution Bench of the Supreme Court in case of G. C. Roy (supra) in paragraph 28 in detail and after considering the said decision in detail in paragraph 28, the learned Judges of the Constitution Bench of the Supreme Court in G. C. Roy (supra) in paragrap 29 held as follows :
"The principle of this judgment is that since the arbitration agreement did not exclude the jurisdiction of the arbitrator to entertain claim for interest he was competent to award interest on the amount due under the contract. Though no decisions are cited in support of this proposition, it is in accord with the principles laid down in Edwards (1851 (138) ER 603) as understood in 'Chandris's case (1951 (1) KB 240)."
55. The learned Judges of the Supreme Court held that the principles decided in Ashok Construction's case (supra) is in accord with the principles laid down in two English decisions, namely, in the case of Edwards v. Great Western Railway Co. reported in (1851) 138 ER 603 and also in the case of Chandris v. Isbrandsten Mollar Co. reported in (1951) 1 QB 240. Subsequently, in another Constitution Bench judgment of the Supreme Court in the case of Dhenkanal's case (supra), it has been noted in paragraph 18 that the decision in the case of Ashok Construction (supra) was quoted with approval in G. C. Roy's case (supra). So the principle of law laid down in the case of Ashok Construction (supra) has been repeatedly affirmed by the Apex Court.
56. Thus the accepted legal position prevailing at time of decision in Jena's case (supra), is that an arbitrator could grant pendente lite interest where the agreement contains a clause for payment of interest and also in case where the agreement does not contain any prohibition against such grant of interest. This has nothing to do with the question whether I.A., 1978 or I.A., 1839 is governing the field. Even Jena's case (supra) the Supreme Court held that "If the agreement between the parties entitles the arbitrator to award interest, no further question arises and the arbitrator may award interest" (paragraph 4 at page 425 (of SCC) : (at p. 1523 of AIR) of the judgment). This may also point out that the decision in Ashok Construction's case (supra) was not doubted even in Jena (supra). On the other hand, it was also noted by the Supreme Court in para 13 of the Jena's case (supra) where the court after considering the decision in Ashok Construction's case (supra) held as follows :
"Considering the question of award of interest by way of damages, the Court referred to arbitration agreement and on its intepretation held that the terms of the agreement did not exclude the Jurisdiction of the arbitrator to entertain a claim for interest."
57. Therefore, the Supreme Court in Jena's case (supra) accepted the principles laid down in Ashok Construction's case (supra). In that view of the matter this Court holds that since in the instant case out of six agreements in four of them there are specific provisions for grant of interest and the other two agreements did not exclude the jurisdiction of the arbitrator to grant interest, the Arbitrator by granting pendente lite interest has not committed any error which is apparent on the face of the award.
58. Apart from that, this Court is also of the view that in the instant case the principles laid down in G. C. Roy's case (supra) and in the case of Dhenkanal (supra) are also attracted for the following reasons.
In the case of G. C. Roy (supra) the Supreme Court held--
(i) Jena did not laid down good law,
(ii) Decision in the case of G. C. Roy is perspective in operation and there by this will not entitle any party nor will empower any court to re-open proceedings which have already become final.
(Underlined for emphasis)
59. Here no proceeding is being reopened nor the arbitration proceedings have become final. Admittedly after the award was published there has not been any decree in terms of the award. Nor the award has been satisfied. On the other hand, an application for setting aside the award has been filed by the appellant which was dismissed by the learned single Judge and against that judgment this appeal has been filed. Therefore, the arbitration proceeding is a pending proceeding and very much alive. Today the Court can set aside the award or it can affirm it or modify it. No finality has been attached to the award as yet.
60. In terms of para 46 of G. C. Roy's case (supra) the arbitration proceeding in this case is a pending proceeding. It is pending certainly for the purpose of adjudicating the correctness or legality of the award as given by the arbitrator. Therefore, nothing is sought to be reopened in this case.
61. In para 43 of the judgment in the case of G. C. Roy (supra) the Court was dealing with a situation which is also present at least in respect of two agreements in the present case, namely, where the agreement is silent as to award of interest.
62. In respect of agreement where there is a provision for award of interest there is no difficulty. This is held even in Jena's case (supra) as pointed out before. In respect of agreement where it is silent about award of interest which is the position in two of the six agreements in this case, the following principles have been laid down in G. C. Roy's case (supra) :
"43. The question will remains whether arbitrator has the power to award interest pendente lite, and if so on what principle. We must reiterate that we are dealing with the situation where the agreement does not provide for grant of such interest nor does it prohibit such grant. In other words, we are dealing with a case where the agreement is silent as to award of interest. On a conspectus of aforementioned decisions, the following principles emerge :
(i) A person deprived of the case of money to which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name. It may be called interest, compensation or damages. This basic consideration is as valid for the period the dispute is pending before the arbitrator as it is for the period prior to the arbitrator entering upon the reference. This is the principle of Section 34, Civil Procedure Code and there is no reason or principle to hold otherwise in the case of arbitrator.
(ii) An arbitrator is an alternative form (sic forum) for resolution of disputes arising between the parties. If so, he must have the power to decide all the disputes or differences arising between the parties. If the arbitrator has no power to award interest pendente lite, the party claiming it would have to approach the court for that purpose, even though he may have obtained satisfaction in respect of other claims from the arbitrator. This would lead to multiplicity of proceedings.
(iii) An arbitrator is the creature of an agreement. It is open to the parties to confer upon him such powers and prescribe such procedure for him to follow, as they think fit, so long as they are not opposed to law. (The proviso to Section 41 and Section 3 of the Arbitration Act illustrate this point.) All the same, the agreement must be in conformity with law. The arbitrator must also act and make his award in accordance with the general law of the land and the agreement.
(iv) Over the years, the English and Indian Courts have acted on the assumption that where the agreement does not prohibit and a party to the reference makes a claim for interest, the arbitrator must have the power to award interest pendente lite. Thawardas has not been followed in the later decisions of this Court. It has been explained and distinguished on the basis that in that case there was no claim for interest but only a claim for unliquidated damages. It has been said repeatedly that observations in the said judgment were not intended to lay down any such absolute or universal rule as they appear to, on first Impression. Until Jena case almost all the courts in the country had upheld the power of the arbitrator to award interest pendente lite. Continuity and certainty is a highly desirable feature of Jaw.
(v) Interest pendente lite is not a matter of substantive law, like interest for the period anterior to reference (pre-reference period). For doing complete justice between the parties, such power has always been inferred."
63. After laying down the aforesaid principles "the Hon'ble Supreme Court in para 44 of G. C. Roy's case (supra) laid down that in a case where agreement between the parties does not prohibit the grant of interest and a party claims interest and the dispute is referred to the arbitration, the position (sic). The Apex Court laid down that in such a situation the arbitrator shall have "the power to award interest pendente lite ". The rational of this judgment is explained in the following words by the Hon'ble Supreme Court :
"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 his discretion to be exercised in the light of all the facts and circumstances of the case, keeping the ends of justice in view."
64. Of course, law laid down in G, C. Roy (supra) will not empower reopening of any proceedings which have become final and law will only apply to pending proceedings.
65. Any reopening of proceedings will presuppose finality of such proceeding. A thing cannot be said to have become final when statutory proceedings for setting the same are pending.
66. In the instant case, proceedings for setting aside the award are pending in appeal. Therefore, this must treated as a pending proceeding and being a pending proceeding, the law has declared by Supreme Court in G. C. Roy's case (supra) must apply in this case also.
67. As to what is meant by a pending proceeding has been repeatedly made clear by the Apex Court. As far back as in 1957, a Constitution Bench of Supreme Court in the case of Asgarali Nazarali Singaporewalla v. State of Bombay, , held that legal proceeding is pending as soon as commenced and until it is concluded i.e. so long as the Court having original cognizance of the action can make an order on the matters in issue. In saying so the learned Judges have referred the Stroud's Judicial Dictionary in which the observation of Lord Jessel the Master of the Rolls, have also been set out. Those observations are also reproduced below:
"What is the meaning of the word "pending "? In my opinion, it includes every insolvency in which any proceedings can by any possibility be taken. That I think is the meaning of the word "pending".....
A cause is said to be pending in a Court of justice when any proceeding can be taken in it. That is the test."
68. Decades thereafter in another judgment of the Supreme Court, in the case of Lt. Col. S. K. Kashyap v. State of Rajasthan, , the learned Judges reiterated the same observations in para 25 of the judgment. The learned Judges in Kashyap (supra) expressly approved the Constitution Bench decision in the case of Asgarali (supra).
69. In the instant case, no decree has been passed in terms of the award, since the setting aside proceeding has not yet been disposed of. Therefore, this proceeding is pending and the law laid down in G. C. Roy's case (supra) will be applicable.
70. The same principles have been reiterated in Dhenkanal's case (supra) where the principles laid down in paragraph 43 of G. C. Roy's case (supra) have been approved.
71. In this connection, the order of reference which was answered in Dhankanal (supra) is relevant and it sums up the question, which is also debated here. The said order of defence is as follows:
"The question that needs to be considered is :
In the absence of any prohibition to claim or grant interest under the arbitration agreement whether the arbitrator has no jurisdiction to award interest for the pre-refer-ence period under the general law or on equitable principles although such claim may not strictly fall within the provisions of the Interest Act, 1839?"
72. In para 26 of Dhankanal's case (of SCC) : (Para 48 of AIR) (supra), the Court answered the reference as follows :
"We answer the reference by holding that the arbitrator appointed with or without the intervention of the Court, has jurisdiction to award interest, on the sums found due and payable, for the pre-reference period, in the absence of any specific stipulation or prohibition in the contract to claim or grant any such interest. The decision in Jena case taking a contra view does not lay down the correct position and stands overruled, prospectively, which means that this decision shall not entitle any party nor shall it empower any Court to reopen proceedings which have already become final, and apply only to any pending proceedings."
73. On the other point urged by the learned Counsel for the appellant that the arbitrator has proceeded beyond the terms of reference, this Court also finds that the arbitrator has not proceeded beyond the reference. By passing the award, he has not accepted any new heads of claim which are not to be found in Section 20 applications on the basis of which the reference was made. The amount of award has gone up just because the matter was kept pending before the arbitrator. The difference between the amount mentioned in Section 20 application and the claim petition and the ultimate amount awarded is obviously because of accumulation of pendente lite interest. There is nothing to show from the face of the award that the arbitrator has granted compound interest or interest upon the interest. An award does not become bad just because the amount awarded is high (see State of Orissa v. Dandasi Sahu, . In fact there is nothing on record disputing the claim on merit. No error of jurisdiction has been committed by the arbitrator.
74. The learned Counsel for the appellant has tried to establish a case of perversity in the award by referring to certain minutes before the arbitrator.
75. This Court is afraid that while hearing an appeal on a setting aside proceeding of a non-speaking award, the Court cannot and is not to take into consideration the minute before the Arbitrator in order to find out perversity in the award. It is not an appeal on facts. Apart from that, no positive case of perversity against the learned arbitrator has been made out and the same cannot be argued by way of a side wind, as it were.
76. In view of the aforesaid reasons, the appeal fails and is dismissed. The award is upheld. The judgment of the learned single Bench is affirmed, may be on some different reasons and the interim order granted by the appeal Court is vacated.
77. There will be no order as to costs.
Pranab Kumar Chattopadhyay, J.
78. I agree.