Madhya Pradesh High Court
Union Of India (Uoi), South Eastern ... vs K.S. Kalra on 11 January, 1991
Equivalent citations: AIR 1992 MADHYA PRADESH 47, (1992) JAB LJ 296
JUDGMENT
B.C. Varma, Ag. C.J.
1. In This appeal under Section 39 of the Arbitration Act against the judgment making the award of the arbitrator the rule of the Court and consequent decree, the only question agitated relates to the award of interest on the principal amount found due to the respondent.
2. On 13th August, 1986, the Civil Court in a pending suit between the parties, appointed Shri V. Balasubramanyam, Additional Divisional Railway Manager (Technical), South-Eastern Railway, Bilaspur the sole arbitrator. Claims were laid before the arbitrator who by its award held the respondent entitled to Rs. 1,19,926/ - in full and final settlement of the various claims in suit. In addition, a sum of Rs. 1,60,749/- has been awarded towards the full and final settlement of claim of interest up to the date of the making of the award. Some small amounts were also awarded towards the incidental expenses and other clerkage charges. Then, while concluding, the arbitrator awarded simple interest at Rs. 12/ - per cent per annum on a sum of Rs. 2,80,675/- (i.e., the total sum awarded) from the date of award till payment.
3. When the award was filed in the Court, the appellant objected to the award of Rs. 1,60,749/- as interest alleging it to be arbitrary and outside the scope of reference. Award of future interest was also objected to. The respondent inter alia pleaded that the objections raised by the appellant were barred by limitation. This objection as to the limitation found favour with the Court and the objections were, therefore, dismissed as barred by limitation. After rejecting the objections, the Court, vide the impugned judgment, upheld the award of Rupees 2,80,675/- together with future interest thereon at the rate of Rs. 12/- per cent per annum.
4. The finding that the objections were barred by limitation cannot be assailed. The award was filed in Court on 7-3-1987 and the parties took notice of the award on 16-6-1987. The objections to the award were filed by the appellant on 3-8-1987, i.e., admittedly beyond the period of thirty days. No application was made to condone the delay, even if such application can be held to be tenable. The objection to set aside the award has, therefore, been rightly held barred by limitation.
5. Shri Anoop Choudhary, learned counsel for the appellant-Union of India, however, submitted that even if the objections taken by the appellant to the award made by the arbitrator are held barred by limitation, the Court ought to have considered that the arbitrator had no jurisdiction to award interest and in no case could interest pendente lite be awarded by the arbitrator, and, therefore, should have set aside at least the part of the award directing payment of interest. This argument appears to be based upon the effect of and consequences flowing from the terms of Section 17 of the Arbitration Act. Section 17 of the Act provides that if the Court sees no cause to set aside the award, it shall, after the time for making an application to set aside the award has expired or when an application to set aside the award is refused, proceed to pronounce judgment according to the award. A Division Bench of the Kerala High Court, in P. Mulji and Sons v. K.P. Exporting Co. AIR 1976 Ker 3, considered the effect of Section 17 of the Arbitration Act and observed that the requirement is that the Court has to be satisfied that there is no ground to set aside the award and if so satisfied, to pass a decree. An order to set aside an award need not necessarily be on an application by a party. But such an order can as well be contained in the order passed under Section 17. Such suo motu power of the Court to invalidate the award, however, can be exercised only if there is any patent illegality or voidness or the award directs a party to do an act which is prohibited by law. If such illegality is not patent but requires an enquiry to find that out, the Court may not be justified in exercising its suo motu jurisdiction. (See also minority judgment in Sahu v. Ishar Singh Kripal Singh AIR 1956 Cal 321 (FB) : and Hastimal Dalchand v. Hiralal Motichand AIR 1954 Bom 243. These two latter cases were considered by the Supreme Court in Madan Lal v. Sunder Lal AIR 1967 SC 1233. The Supreme Court observed that it was not necessary to resolve the conflict between the two divergent opinions expressed in the Calcutta Full Bench decision. The Court, however, observed that even, according to the minority view in the Calcutta case, it is only where the grounds are not those which fall under Section 30, the award may be set aside on an objection made beyond the period of limitation, even though no application has been made for setting aside the award within period of limitation. This will necessarily mean that if an objection raised beyond the prescribed period of limitation is such which is covered by the grounds under Section 30 of the Act, the objection cannot be considered suo motu and after the expiry of period of limitation. A Division Bench of Kerala High Court, in P. Mulji and Sons' case (supra), has referred to this aforesaid Supreme Court decision, in Madanlal's case and also the decision of the Bombay High Court in Hastimal Dalchand's case (supra). The Patna High Court, in Deep Narain Singh v. Dhaneshwari AIR 1960 Pat 201, also appears to be subscribing to this view. We have, therefore, no hesitation in following the Kerala view and we hold that even if the objection under Section 30 of the Arbitration Act has not been filed within the period of limitation, the Court can set aside suo motu the award on ground which is covered under Section 30 of the Act and which can be found out without any enquiry or if the award is void or directs a party to do an act which is prohibited by law.
6. The question then is whether the award of interest by the arbitrator is void or patently illegal, beyond jurisdiction and is a ground not covered by Section 30 of the Act. In our opinion, interest prior to the commencement of the arbitration proceedings could well have been allowed. Under the Interest Act, 1978 (Act No. 14 of 1978), the term "Court" includes an arbitrator and "debt" means any liability for an ascertained sum of money and includes a debt payable in kind, but does not include a judgment debt. The parties did not contest at any stage including the present proceedings in this Court that Interest Act was applicable to the claim in question. Accordingly, in view of Section 3 of the Interest Act, interest could well be allowed on the ascertained sum of money claimed by the respondent from the date it became due up to the date of the institution of the proceedings before the arbitrator at the current rate of interest. This view finds support from the decision of the Supreme Court in Executive Engineer, Irrigation, Galimala v. Abnaduta Jena AIR 1988 SC 1520. The view taken by the Supreme Court is that in case to which the Interest Act, 1978 applies, interest can well be awarded by the arbitrator for a period anterior to the proceedings and to that extent the award of the arbitrator is not open to question. In the present case, for the similar reason, the award of interest prior to the initiation of the proceedings, before the arbitrator cannot be questioned. All the same, there appears to be no provision of law nor was one pointed out to the Court which could permit interest to be awarded on the amount adjudicated as due by the arbitrator on account of interest prior to the initiation of the proceedings before him. Similarly, although the arbitrator is a 'Court' within the meaning of Interest Act, 1978, yet, no provision under that Act permits the arbitrator the award interest pendente lite. The arbitrator cannot be said to be a 'Court' for the purpose of Section 34 of the Civil Procedure Code. The reference to the arbitrator in the instant case was also not made in the course of a suit. (See : Executive Engineer, Irrigation, Galimala v. Abnaduta Jena(supra)). In our opinion, therefore, the arbitrator, in the instant case, was not possessed of necessary jurisdiction to award interest pendente lite or interest on the amount of interest itself accrued due prior to the institution of the proceedings before him. We are also of the opinion that the award to this extent can well be modified and ought to have been modified by the lower Court suo motu and even in absence of any objection by the appellant in that regard or even on a finding that the objection taken was barred by limitation.
7. For the aforesaid reasons, the appeal succeeds and is partly allowed. While we uphold the judgment and decree passed by the Court affirming the award of the arbitrator, we direct that the award and the decree shall be modified by reducing the amount awarded as interest on sum of Rs. 1,60,749/- awarded on account of interest prior to the initiation of proceedings, as also the amount awarded and decreed towards interest pendente lite. Under these circumstances, the parties are directed to bear their own costs of this appeal.