Madras High Court
The Chief Engineer (Construction) vs Shri K.Dhanasekar on 26 February, 2018
Author: M.M.Sundresh
Bench: M.M.Sundresh
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 26.02.2018
CORAM
THE HONOURABLE MR.JUSTICE M.M.SUNDRESH
O.P.No.227 of 2013
The Chief Engineer (Construction),
Southern Railway,
Egmore, Chennai-600 008. ... Petitioner
Vs.
1.Shri K.Dhanasekar
2.Shri S.Gunasekaran,
Deputy Chief Accounts Officer/Traffic,
Souther Railway, Park Town,
Chennai-600 003.
(presently FA & CAO/Workshop Project,
East Central Railway, Patna)
(Presiding Arbitrator)
3.Shri K.Rajakumar,
Senior Divisional Engineer (Metro),
Divisional Railway Manager's Office,
Chennai Division, Souther Railway,
Park Town, Chennai-600 003.
(presently Secretary to
Principal Chief Engineer,
Southern Railway, Chennai-600 003)
(Arbitrator)
4.Shri R.Rajamani, Chief Commissioner of
Railway Safety (Retired),
Flat No.3, Ram Priya, AE 172,
11th Main Road, Anna Nagar,
Chennai-600 040. (Arbitrator) ... Respondents
Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside the award of the respondents 2 to 4 dated 12.03.2009 made in relation to disputes arising out of Agreement No.Dy.CE/CN/CLT/4/HQ/MS/2005 in so far as the Award for payment of interest under Claim No.6 is concerned.
For Petitioner : Mr.P.T.Ramkumar
For Respondents : M/s.Aruna Devi
for Mr.P.Subba Reddy
O R D E R
The first respondent, being a claimant, entered into a contract for construction with the petitioner. As dispute arose inter se parties, the first respondent invoked the Arbitration Clause. After giving sufficient opportunities to the parties, the Tribunal passed an award in respect of claims 1 to 4 and 6. While satisfying other claims, the present petition has been filed against Claim No.6 alone, by which, the petitioner was directed to pay interest at 12% per annum pre-arbitration proceedings and interest pendente lite-during the interregnum.
2.The Tribunal passed the award with reference to Claim No.6, by awarding 12% interest per annum as against the claim of 18% per annum on the finding that, in as much as the petitioner withheld security deposit and the amount being legitimately entitled to be repaid to the first respondent, which would warrant the payment of interest. It is, this part of the award qua Claim No.6, the present petition has been filed.
3.Learned counsel appearing for the petitioner would submit that there is no question of payment of interest for the pre-arbitration period during its currency, in view of Clauses 16.2 and 64.5 of the General Conditions of Contract (GCC for brevity). This aspect has already been considered by this Court in the case of Deputy Chief Engineer (Construction) and others vs. M/s.Vishal Constructions and others in O.P.Nos.188 of 2010 and 289 of 2014 dated 02.02.2018.
4.Learned counsel appearing for the first respondent would submit that, as the Tribunal has given cogent reason, the same is not required to be interfered with.
5.As rightly submitted by the learned counsel appearing for the petitioner, the issue is no longer res integra. After taking note of the decision of the Hon'ble Apex Court in Sri Chittaranjan Maity Vs. Union of India (2017 (12) SCALE 216), and in the light of Clauses 16.2 and 64.5 of the GCC, which formed part of the contract being binding on the parties, this Court has already held that it is neither open to the claimant to make a claim, nor such a jurisdiction is available to the arbitral tribunal. The following paragraphs will be apposite:
16. Admittedly, the GCC, governing the contract between the parties, contains a clause which bars the payment of interest, which is as under:
16(2) No interest will be payable upon the earnest money or the security deposit or amounts payable to the contractor under the contract, but government securities deposit in terms of sub-clause (1) of this clause will be repayable (with) interest accrued thereon.
17. Relying on a decision of this Court in M/s. Ambica Construction vs. Union of India (2017) SCC OnLine SC 678, (C.A.No.410 of 2008, disposed of on 26.04.2017) learned senior counsel for the appellant submits that mere bar to award interest on the amounts payable under the contract would not be sufficient to deny payment on pendente lite interest. Therefore, the Arbitrator was justified in awarding the pendente lite interest. However, it is not clear from M/s. Ambica Construction (supra) as to whether it was decided under The Arbitration Act, 1940 (for short the 1940 Act) or under the 1996 Act. It has relied on a judgment of Constitution Bench in Secretary, Irrigation Department, Government of Orissa and Others. vs. G.C. Roy (1992) 1 SCC 508. This judgment was with reference to the 1940 Act. In the 1940 Act, there was no provision which prohibited the Arbitrator from awarding interest for the pre-reference, pendente lite or post award period, whereas the 1996 Act contains a specific provision which says that if the agreement prohibits award of interest for the pre-award period, the Arbitrator cannot award interest for the said period. Therefore, the decision in M/s. Ambica Construction (supra) cannot be made applicable to the instant case.
21. In Union of India vs. Bright Power Projects (India) Private Limited (2015) 9 SCC 695, a three-Judge Bench of this Court, after referring to the provisions of Section 31(7)(a) of the 1996 Act, held that when the terms of the agreement had prohibited award of interest, the Arbitrator could not award interest for the pendente lite period. It has been held thus:
10. Thus, it had been specifically understood between the parties that no interest was to be paid on the earnest money, security deposit and the amount payable to the contractor under the contract. So far as payment of interest on government securities, which had been deposited by the respondent contractor with the appellant is concerned, it was specifically stated that the said amount was to be returned to the contractor along with interest accrued thereon, but so far as payment of interest on the amount payable to the contractor under the contract was concerned, there was a specific term that no interest was to be paid thereon.
11. When parties to the contract had agreed to the fact that interest would not be awarded on the amount payable to the contractor under the contract, in our opinion, they were bound by their understanding. Having once agreed that the contractor would not claim any interest on the amount to be paid under the contract, he could not have claimed interest either before a civil court or before an Arbitral Tribunal. Therefore, it is clear that the appellant is not entitled for any interest on the amount awarded by the Arbitral Tribunal.
6.In view of the same, this Court is of the view that the present award in respect of Claim No.6 required to be interfered with, since the same has been passed in ignorance of relevance of the provisions, which have not been taken note of.
With the above observations, this Original Petition stands allowed. No costs.
26.02.2018 abr Index : Yes/No Speaking/Non Speaking Order M.M.SUNDRESH, J.
abr O.P.No.227 of 2013 26.02.2018