Delhi High Court
Uttam Singh Duggal & Co. vs Union Of India And Ors. on 13 May, 1988
Equivalent citations: 1988(2)ARBLR225(DELHI), 35(1988)DLT372
JUDGMENT Chandhry, J.
(1) M/S Uttam Singh Duggal & Co. Pvt, Ltd. (hereinafter called the claimant) was awarded the work of construction of Delhi High Court building at Sher Shah Road, New Delhi by the respondent vide agreement No. 2/RE-DADXII/71-72. The work was to be commenced from 12 6.1971 and had to be completed by 11.1.1973. However, the work was actually completed on 17.1.1976.
(2) Certain disputes arose between the parties out of the execution of the above said work. Initially Shri M.S. Narang was appointed as the sole arbitrator in terms of the arbitration clause contained in the agreement. He resigned on 30.6.1980. Thereafter Shri Krishnamurthy and then Shri Ch. Prabhakar Rao was appointed as the sole arbitrator. The claimant was not satisfied with the appointment of Ch. Prabhakar Rao. He moved an application for the removal of Ch. Prabhakar Rao as Arbitrator in the High Court of Delhi, being 0.M.P. No. 71/1983. The petition was allowed. By order dated 10.4.1985 Ch. Prabhakar Rao was removed from the arbitrator ship and in his place Shri J.P. Singhal was appointed as the sole arbitrator. The learned arbitrator entered upon the reference. The claimant submitted 15 claims before the learned arbitrator. The respondent denied and repudiated all those claims. After hearing the counsel for the parties the learned arbitrator made and published his award on 28.2.1986.
(3) Against claim No. I the claimant had claimed a sum of Rs. 10,54,253.00 on account of damages arising out of breach of contract caused due to abnormal delays in supply of working drawings, details, structural designs, specifications etc. delays in supply of cement and steel and other miscellaneous causes resulting in prolongation of the completion period from 19 months to 62 months. This claim was allowed by the Arbitrator to the extent of Rs. 3.27,630.00 (4) Against claim No. 2 the claimant had claimed a sum of Rs. 99.430.00 on account of wrongful reeducation in the agreed rate in respect of re-classification in of soil from 9,00/cu.m. tors,4.54/cu,m. This claim was allowed to the extent of Rs. 99.430.00 .
(5) Against claim No. 3 the claimant had claimed a sum of Rs. 8.832.00 on account of underpayment of work in saturated soil. This claim was held to be not justified.
(6) Claim No. 4 was for a sum of Rs. 34.622.00 for keeping the centering and shuttering unutilised for a longer period than the normal one due to late decisions in design, late supply of working drawings & delay in supply of cement and steel. This claim was rejected.
(7) Claim No. 5 was for a sum of Rs. l,77,718.00 on account of unauthorised curtailment of marble work beyond 20% permissible limit. This claim too was rejected.
(8) Claim No. 6 was for a sumofRs.2,505.00 for expenses incurred on cartage of 167 M.T. of steel on behalf of the department from Rathi Rolling Mill, Shahdara to the site of work. This claim was allowed to the extent of Rs. 162.00 .
(9) Claim No. 7 was for a sum of Rs. 1.16,823.00 on account of extra item in the provision of special type of centering in respect of cantilevered verandahs at a height of 30 ft. from ground level and keeping the shuttering unutilised for a period of over / months due to delay on the part of the department. This claim was allowed to the extent of Rs. 21,132.00 .
(10) Claim No. 8 was withdrawn by the claimant during the course of hearing held on 18.11.1985.
(11) Claim No. 9 was for a sum of Rs.'39,218.00 for losses due to high cost borne in the provision of Kola Stone slabs in floors and walls due to prolongation of the contract period. This claim was rejected.
(12) Id claim No. 10 the contractor claimed a sum of Rs.6150.00 on account of idle labour charges due to delays in finalisation of colour scheme for Block 'A', 'B' and 'C'. This claim was rejected.
(13) Claim No. Ii was for a sum of Rs. 31.268.00 on account of losses due to high cost borne in implementation of the colour scheme finalised at a very late stage. This claim was also rejected.
(14) Claim No. 12 was for a sum of Rs. 2,54,087.00 on account of refund in part of rebates and reduction offered at the time of tendering. This claim too was rejected.
(15) Claim No. 13 was for a sum of Rs. 17.900.00 on account of refund of expenses incurred on testing of materials required by the department and the testing fees charges thereof. This claim was allowed to the extent of Rs. 12,315.00 .
(16) Claim No. 14 for a sum of Rs. 25,000.00 was raised by the contractor for losses suffered and making good damages by other working agencies. This claim was rejected, (17) Claim No. 15 was a sum of Rs. 10.990.00 on account of wrongful recoveries effected from the final bill. This claim was allowed to the extent of Rs. 10.990.00 .
(18) The Arbitrator himself filed the award as well as the arbitration proceedings in this court. Notice of filing of the award was given to the claimant as well as to the respondent. The claimant has accepted the award. However, the respondents have not accepted the award and it has been assailed by the respondents by filing objections under Sections 30 and 33 of the Arbitration Act. The award has been challenged on the following grounds :-It is stated that the award of the Arbitrator awarding a sum of Rs. 3,27,630.00 under claim No, I on account of damages is perverse and is based on no evidence at all. It is also against the principles enunciated in Section 73 of the Contract Act. The damages have been awarded without proof of any damages suffered by the claimant and without proof of any quantum of damages. It has been stated that the claimant had filed separate claim for damages on account of delay in supply of drawings, site. cement etc. and those claims which were the subject matter of claims No, 4,9 & 11 were rejected by the Arbitrator. How could the petitioner be awarded general damages without any proof? The claimant sought extension of time without any reservation to claim damages. The extension was granted as per terms of the agreement and the petitioner was entitled to extension of time only and could not be awarded damages. The Arbitrator failed to appreciate that the claimant himself had given undertaking that extension should be granted and he would not claim any damages. It has been further stated that the Arbitrator could not award damages on the basis of cost indices of building works in Delhi as circulated and adopted by Central Public Works Department from time to time in the absence of proof of damages suffered by the petitioner. It is also stated that the cost indices of buildings issued by the C.P W.D. is mainly on the basis of increase in cement, steel, and wages of the labour coupled with other small incidental charges and the same could not form basis for awarding damages, as the claimant was supplied cement and steel in the extended period. The arbitrator failed to appreciate that the rise in cost, if at all it is there, has to be calculated after deducting the percentage of rise in cement, steel and wages from 22.5^ i.e. the index given in cost indices of C.P.W.D. Learned Arbitrator erred in awarding Rs. 99,430.00 under claim No. 2 on account of wrongful deduction in agreed rates, in respect of reclassification of soil from Rs. 9.00/Cu.m. to Rs.4.54/Cu.m. The award is based on no evdience. The learned arbitrator wrongly awarded Rs. 21.132.00 under claim No. 7 on account of extra items. The Arbitrator misconducted himself and the proceedings by awarding interest which was never referred to the Arbitrator. The time was not the essence of the contract. The respondents did not commit any breach, therefore, the claimant was not entitled to any damages.
(19) The objections are being contested on behalf of the claimant. It is stated that the work was inordinately delayed and its smooth and timely execution prevented by the respondents due to various acts and omissions on their part in breach of their contractual obligations. The delay of 42 months, beyond the stipulated date of completion had been admitted by the competent authority of the respondents as contained in the document Ex. R-31 dated 12.9.1977. It has been denied that the award for a sum of Rs. 327630.00 underclaimNo.1is perverse and/or based on no evidence. It has been further denied that the Arbitrator should not have allowed the claim No. 1 of the claimant on the grounds that he had rejected claims No.4.9, & 11 of the claimant. Claims N-4,9, & 11 were independent claims. It has been further denied that by letter Ex. R-30 the claimant had given an under-taking that if extension was granted they would not claim any images and that the claimants had done so because the claimant was only entitled to the extension of time. The letter Ex. R-30 dated 2.8.1977 is alleged to have been obtained from the claimant under pressure by the Executive Engineer of the respondents. The final bill of the claimant was not being finalised. The claimant was left with no other alternative but to write the said letter to the Executive Engineer. The letter was obviously without any consideration and therefore, non est. In any event by the said letter the claimant merely offered not claim compensation for expenses incurred on site establishment alone on account of prolongation of the contract works. It is further stated that as per the price indices for building contract circulated by the C PW.D. of the Government of India, increase in the cost of building was an average of 33.8% during the relevant period and was borne out from the data filed before the learned Arbitrator which was Appendix 'A' to the petitioner's letter dated 26.9.1985. It is further stated that from the All India Consumers Price Indices published by the Government of India, All India average increase in prices during the relevant period was 37.56% The prices in Delhi, during the period 1971-76, have been more than the all India prices by about 10% and thus average increase in prices during the relevant period for Delhi would be about 47% The loss suffered by the claimant was further evident from the summary of profit and loss account of the subject works being appendix 'F' to the claimant's statement filed before the Arbitrator. The Arbitrator after taking into consideration all documentary evidence come to the conclusion that the claimant was entitled to the sum awarded. The Arbitrator rightly awarded Rs.96, 430.00 against claim No.2 after going through the entire material placed before him. There is no error apparent on the face of the award nor is the award otherwise liable to be set aside.
(20) On the pleadings of the parties the following issues were framed:- I, the award is liable to be set aside on any of the objections of the Objector ? 2. Relief.
Counsel for the parties agreed that no oral evidence was to be recorded. The parties have filed affidavits by way of evidence in support of their respective contentions.
(21) I have heard the learned counsel for the parties, perused the record and have given my thoughtful consideration to the matter involved. Issue No. 1:
(22) Under claim No. I the claimants had claimed a sum of Rs. 10,54,25 3.00 on account of damages arising out of breach of contract caused due to abnormal delays in supply of workings, drawings, detail structurals, designs, specifications etc. delay in supply of cement and steel and other miscellaneous causes resulting in prolongation of the completion period from 19 months to 62 months.
(23) The case of the claimant was that the work was inordinately delayed and its smooth and timely execution prevented by the respondent due to various acts of omissions on their part in breach of their contractual obligation. The claimant notified to the respondents regularly from time to time of the acts of omission and commission, committed by the respondents, which inordinately delayed the completion of the work, causing loss and damage to the claimant company of account of extra expenditure incurred during the period of prolongation of the contract, on account of its machinery, equipment and other materials. The claimant by various notices notified the respondents that as the work could not be completed within the stipulated period, because of the acts and omissions, on the part of the respondents, the claimant would suffer escalation due to over all increase in prices by 30% on the balance of work. This escalation was claimed by letter dated 21.5.1973 (Ex. C-67) followed by notice of 3.8.1973 (Ex.C-68). In these premises the claimants claimed compensation @ 30% in respect of the work executed after the stipulated period of completion. The claim of Rs. 10,54,253.00 was raised on the basis of the total amount of the work done i e. Rs. 89,13,087.00 less work done up to 11.1.1973 i.e. Rs. 52.66,070.00 and also deducting Rs. 1,32,841.00 the balance being Rs. 35,14,177.00 and 30% on that amount came to be Rs. 10,54, 253.00.
(24) The first objection of the respondents is that the amount of Rs. 3,27,630.00 awarded against claim No. I is without proving the actual damages suffered by the claimant, if any, and without any evidence on the record on this aspect. On the other hand the contention of the claimant is that during the relevant period the petitioner had to suffer escalation i.e. added cost, on the required inputs, in constructing the building in question, and therefore, resulting in losses. The additional cost had to be incurred due to prolongation of the contract, by the acts and omissions of the respondents, and therefore, the petitioner had to be compensated for the loss. In support of the legal submissions the claimant has placed reliance on a decision of the Supreme Court in Hyderabad Municipal Corporation v. M. Krishnaswamy Mudaliar ; . In this case Hyderabad Municipal Corporation entrusted to a contractor for carrying out drainage work for Csir Laboratory at Uppal by an agreement which provided that the work was to be completed within one year. At the instance of the department, due to financial difficulties, the contractor was requested to spread over the work for 2 years more. But the contractor was agreeable to spread over the work for 2 years as suggested on the condition that the extra payment would have to be made to him, in view of the increased rates of either material or wages. The Government did not intimate to the contractor that no extra payment on account of increased rates would be made or that he will have to complete the work on the basis of original rates. The contractor actually completed the work during the spread over period and thereafter submitted his final bill claiming 20% extra, over and above the rates originally agreed between the parties. The government repudiated the claim. After considering the correspondence exchanged between the parties and the other material on the record the High Court took the view that the government was liable to make extra payment for the work done as there was no dispute that the rates of material etc. had increased during the extended period of 2 years and the contractor was entitled to such extra payment. The Supreme Court upheld the view of the High Court and held that both in equity and in law the contractor was entitled to receive extra payment and the High Court was right in deciding the question in contractor's favor.
(25) The other authority relied upon by the claimant is M/s. Salwan Construction Co. v. Union of India (AIR 1977 (2) Delhi 748). In this case also the contractor was awarded damages on account of general increase in prices by the Arbitrator. The award was assailed inter alia on the ground that it was not open to the Arbitrator to award general increase in prices and that at best the Arbitrator could award the damages if the builders were able to prove them to his satisfaction. The contention was repelled. It was held that the normal rule for computing damages for breach of contract is the difference between the contract price and the market price of goods at the lime when the contract is broken. The builder's claim was that the Government was in breach of the contract. They were entitled to stop the work. Instead they went on with the work and did not treat it as a repudiation of the contract. The measure of damages is the loss of profit arising out of the reduced profitability or added expenses of the work carried out and completed by the builder. Where the contractor treats the breach as partial and continues the work, the most usual circumstances which give rise to claims are delays in giving the contractor possession of the site or in the supply of drawings, or suspension of the work caused by some act or omission of the employer and a consequent increase of expenses in the performance of the works ; and the contractor may be able to recover damages for delay caused by the employer, notwithstanding that an extension of time for completion has been granted in respect of such delay. In interpreting the term 'escalation' it was held that the term 'escalation' means an increase in the price of an article. If as between the price of a product and the cost of material there is unjust discrepancy, an escalation clause in the contract tries to bring about the adjustment of prices proportionally e.g. by giving a rise in the price of wages. The escalator is an index. It can be a convenient measure of damages. The contract does not provide for escalation in case of a breach of contract. The escalator can be adopted by the court as a true measure of damages if it is available at hand It will show the prices prevailing at a particular time. The difference between the price at which a particular work was to be done at the time of the making of the contract and the price at which it could be done at the time of the breach would then be known. Compensation is given for loss suffered owing to a breach of contract. The principle is that the injured party should be put as nearly as possible in the same position, so far as money can do it, as if be had not been injured. The test by which the amount of damages is ascertained is called the measure of damages.
(26) The Arbitrator while deciding the claim No. I rendered the following reasons:- Over the clear site, giving water supply connections, supplying structural drawings, giving decision about windows and color painting scheme for 'A' and 'B' blocks and issuing building materials i e. cement and steel to the claimant Delay on account of some of these factors and some other factors has also been admitted by the respondent in Exhibit R-29 attached to the Counter Statement of facts. Claimant was, therefore, justified in asking the respondent for compensation on account of the damages and extra cost occasioned to the claimant due to prolongation of the work beyond the stipulated date of completion vide his letters dated 21.5.73 (exhibit C/67) and dated 3.8.73 (exhibit C/68). In this connection, the arguments of the Respondent that the Claimant in his letter dated 2.8.77 (exhibit R/30) has given an under-taking not to claim any damages, is not correct as the undertaking is only for not claiming damages on account of expenses for site establishment for the extended period of execution of work. As per the final bill prepared by the respondent, the total amount of the work executed came to Rs. 86,59,000.00 out of which the work amounting to Rs. 54,56,966.00 was paid in the 18th Bill on 31.1.73, which could be taken to be the work done up to the stipulated date of completion. Thus, beyond the stipulated contract period, work executed amounted to Rs. 32,02,034.00 . After adding the amount of Rs. 21,132'- against claim No. 7 and Rs 13,650.00 against claim No. 14 (towards recovery of terrazzo tiles) for the items of the work done after the stipulated date of completion, the value of the work executed after the stipulated contract period would work out to Rs. 32.816.00 . The items of cement and steel reinforcement bars in the extended period, continued to be issued at the rates provided in the agreement and there could be no effect in increase of cost of the work on account of these materials. Considering the value of these materials to be about 30% of the work, the value of the work after excluding the cost of these materials works out to Rs. 22,65,771.00 . On the basis of the cost indices of building works in Delhi as circulated and adopted by the Central Public Witness .D. from time to time and a copy of the indices furnished by the claimant with his letter dated 26.9.1985, the cost of construction during the stipulated period of construction for building works increased to the tune of 22.5%. Considering the cost of site establishment to be of the order of 3% of the cost of work, the increase on account of site establishment would come to 0.675% and the net increase in the cost of work would come to 21.825% for which the claimant is considered to be entitled for the balance work (excluding cost of departmental materials) that remained to be executed on the stipulated date of completion. Accordingly, on the amount of Rs. 22,65,771.00 , the increase in cost works out to Rs. 4,94,504.52 P. After adjusting Rs. 1,66,874.22 already paid to the claimant under clause 10(0 for the labour increase, the claimant is entitled to be compensated to the extent of Rs. 3,27,630.00 ."
(27) I have perused the reasons given by the learned Arbitrator. I do not find any error apparent on the face of the award The Arbitrator found that there were hold-ups and delays on the part of the department. It amounted to breach of contract on the part of the department. This is a finding of fact which is based on evidence and is final. In view of the principles enunciated in the authorities cited above the claimant is entitled to compensation for the loss suffered owing to breach of contract. The arbitrator has awarded the amount on the basis of cost indices of the building works in Delhi as circulated and adopted by the Central Public Works Department from time to time. The indices show the prices prevailing at a particular time. The difference between the prices at which a particular work was to be done at the time of making of the contract and the prices on which it could be done at the time of breach, could be found out. I do not find any legal flaw in the method adopted by the learned Arbitrator. The Arbitrator had done the calculations and has calculated the amount. His findings on these calculations arc final. Even otherwise I do not find any fault with these calculations. He has given valid reasons for arriving at these figures.
(28) Under the law the Arbitrator is made the final arbiter of the disputes between the parties. The award is not open to challenge on the ground that the Arbitrator has reached a wrong conclusion or has failed to appreciate facts. In this connection reference may be made to M/s. Hindustan Tea Co. v. M/s. K. Shashikant & Co., wherein it was ruled :- "THE award is reasoned one. The objections which have been raised against the Award are such that they cannot indeed be taken into consideration within the limited ambit of challenge admissible under the scheme of the Arbitration Act. Under the law, the Arbitrator is made the final arbiter of the dispute between the parties. The award is not open to challenge on the ground that the Arbitrator has reached a wrong conclusion or has failed to appreciate facts. Strong reliance was placed by the appellant's learned counsel on an old Madras decision in Yogambal Boyee Ammani Ammal v. Naina Pillai Markayar ; (1909) 2nd 33 Mad. 15. In our view, on the facts of this case challenge to the award is not permissible by taking the stand that the Arbitrator acted contrary to the provisions of Section 70 of the Contract Act. In these premises the objection filed to the Award has to be rejected. We direct the award to be made a rule of the Court. The parties shall bear their own costs throughout."
(29) The other contention of the respondents is that the claims No. 4,9 & Ii were rejected by the Arbitrator for want of actual proof of damages and evidence, and claim No. I should have also been rejected on that ground The claim No. 4 was an independent claim, which was rejected by the Arbitrator on the ground that there was no sufficient evidence to show any damages suffered by the claimant on account of idle shuttering. Claim No. 9 was rejected on the ground that increase in cost of Kota flooring on account of increase in the rate of Kota Stone and labour due to prolongation of the work was covered under claim No. I and a separate claim on that account was not justified. Claim No I I was also rejected on the ground that any increase in the cost of execution of those items due to prolongation of the work was already covered by claim No. 1. Thus the contention of the respondents that the amount was wrongly awarded by the Arbitrator under claim No. I has no force.
(30) The other objection of the respondents is that the learned Arbitrator erred in awarding Rs. 99,430.00 under claim No. 2 on account of wrongful deduction in agreed rate in respect of re-classification of soil from Rs. 9.00'cu.m. to Rs. 4.54/cu.m. The Arbitrator failed to appreciate that Rs. 9 00/cu.m. was never the rate agreed. The rate paid to the petitioner at one stage was Rs. 3.00.00 cu.m. and Rs. 4.50/cu m. The Arbitrator had given the following reasons in respect of claim No. 2 :- ''CONSIDERINGthe nature of the item of work that consisted of soil mixed with boulders and ruins of stone masonary. the rate could not be derived under Clause 12(ii) and Clause 12(iii) of the agreement as neither such item is directly available in the agreement. nor in Delhi Schedule of Rates applicable. Either the items of soil, rock, masonary etc. should have been separately recorded and paid under the respective item of agreement and Dsr, or the rate should have been assessed on market rates based on the actual observation of labour involved. In the 3rd running bill the full rate shown was Rs. 9.00 per cum. of excavation, although the actual rate paid was much less. Also, from the claimant's letter dated 12.12.72 (Exhibit C/78) and respondent's letter dated 4.11.1972 (Exhibit C/79) read together, it is apparent that there was also an understanding of deriving the rate based on actual observation of labour, and at one stages a rate of Rs. 9.00 per cum. was derived by Assistant Engineer of the respondent. In Exhibit C/79, respondent has stated to have rejected this rate on the pleas that the rate derived by the A.E. was for a portion where the percentage of stone was higher. No observation however, appear to have been made for the portions, if any, where boulder content was les. It is felt that the demand of claimant for market rate of Rs. 11.61 asked for vide letter dated 27.91971 could not be ignored. The claimant has submitted that up to 3rd bill a substantial quantity i.e. about 70%, of the excavation work had been done. As such. the argument of the respondent that the derivation of rate of Rs. 9.00 was not representative of the work done, is not well founded. Considering, the fact and surrounding circumstances, the Claimant is entitled to payment at the rate of Rs. 91- per cum. and claim is justified to the extent of Rs. 99.430.00 .,' (31) I have perused the reasons. This is all appreciation of facts. Even otherwise I do not find any legal error in the reasons given learned Arbitrator. Relying upon Hindustan Tea Co.'s case (supra) I have no hesitation in repelling the contention of the respondents.
(32) The next contention of the respondents is that the learned Arbitrator erred in awarding Rs. 21.132.00 under claim No. 7 for extra items in respect of cantilevered verandahs at a height of 30 feet from ground level. The learned Arbitrator failed to appreciate that cantilevered verandahs at a height of 30 ft. from ground level is not an extra item. The Arbitrator has given the following reasons in respect of this claim :- "ALTHOUGH condition No. 4 on page 147 of the agreement provided that rates are for all heights and depths, but normally the height of centering and shuttering is 10 to 12 ft. Although, Cpwd specifications 1967 applicable to this work is silent in this regard, the position has been amply clarified in para 5.2.9.2 of Cpwd Specifications 1977 which provides for separate measurements and payment where height of centering and shuttering exceeds 3.5 m. This is essentially on account of multi-stage centering and special arrangements required in such a case. In view of this. it is considered that for the verandah shuttering at a height of 30 ft., an extra rate of Rs. 18.00 per sqm. should be paid. Accordingly, for a quantity of 1174 Sqm., the claimant is entitled to payment of Rs. 21.132.00 . As regards the claim for keeping the shuttering unutilised, the same has been based on extra hire charges paid. The claimant could not however, substantiate the claim with sufficient evidence of the hire charges paid. This part of the claim is therefore, not considered to be justified."
(33) I have carefully gone through the reasons. The matter relates to appreciation of facts. It is not within my province to interfere in the reasons rendered on such questions of fact Under the law the Arbitrator is made the final arbiter of dispute between the parties. The award is not open to challenge on the ground that the Arbitrator has reached a wrong conclusion and has failed to appreciate facts.
(34) The next point urged by the learned counsel for the respondents is that the Arbitrator misconducted himself and the proceedings by awarding interest to the claimant which was never referred to him. On behalf of the petitioner it is contended that the petitioner claimed only pendente lite interest and the Arbitrator could award the same. Before the Arbitrator the petitioner claimed interest in Claim No. 15 of the statement of the claims, reading as under :- "THE claimant claims interest on the amounts that may be found due to them from the date of reference till the date of payment of the amount awarded @ 15% per annum, current market rate of interest being more than that."
The award of the arbitrator regarding interest reads as under :- "THE respondent do pay to the claimant a sum of Rs. 4.71.659.00 (Rupees four lakhs seventy one thousand six hundred and fifty nine only) plus simple interest of 10% per annum onRs.4,71,659.00 from 29.6.1978 to the date of payment or decree of the court whichever is earlier."
(35) I have considered the relevant contentions of the parties, In the latest judgment of the Supreme Court in Execution Engineers (Irrigation) v. Abha Dutta Jena & Ors. reported as . after considering various pronouncements of the Supreme Court, it is laid down that the arbitrator can award pendente lite interest, i.e. interest from the date of reference to the date of the award, if the reference to the arbitration is made by the Court.
(36) In this case the petitioner moved an application for removal of Shri Prabhakar Rao as an Arbitrator. The petition was allowed. By order dated 10th April, 1985 Shri Prabhakar Rao was removed and in his place Shri J.P. Singhal was appointed as the sole arbitrator. The order dated 10th April, 1985 is in the following terms :- "Present : Mr. S.L. Watel with Mr. R.K. Watel for the petitioner. Mr. M.M. Sudan for the respondent. Learned counsel for the parties have no objection if Mr. J.P. Singhal, Support Engineer, C.P.W.D be appointed as the sole arbitrator in place of Shri Prabhakar Rao to decide the dispute between the parties. Under these circumstances Shri Prabhakar Rao is hereby removed from the arbitrator ship and in his 'place Shri J.P. Singbal is appointed the sole arbitrator. The award be made within four months from today."
(37) In State of Madhya Pradesh v. M/s Sailh Skellon Pvt. Ltd. . a reference to arbitration had originally been made without the intervention of the court by the parties themselves. Thereafter a petition was filed for removal of the arbitrator With the consent of the parties, the appointment of the arbitrator was set aside by the Supreme Court and new arbitrator was appointed by the Supreme Court. The order of the Supreme Court was in the following terms :- "Special leave is granted. The appeal is allowed. The appointment of Shri R.C. Soni as the sole arbitrator is set aside by consent of the patties. Mr. V.S. Desai, Senior Advocate, is appointed arbitrator by consent of the parties to go into all the questions in this matter and make his award. The remuneration for the arbitrator would be Rs. 5,000.00 , which will be shared by both the parties equally. The arbitrator will make his award within three months from today. The parties will be at liberty to mention for extension of time for making the award"
(38) In Executive Engineer (Irrigation) v. Abha Dutta Jena & Ors. (Supra), the case of State of Madhya Pradesh (Supra) was considered and discussed. It was observed that the reference to arbitration in State of Madhya Pradesh's case was made by the Court.
(39) The facts of this case are quite identical with the facts of the case of State of Madhya Pradesh (Supra). So following the dictum of the Supreme Court in the case of Executive Engineers (irrigation) (supra), I have no hesitation in holding that the reference in this case to the arbitration was made through the Court As such the arbitrator had the power to award pendente list interest. In this connection reference is also made to another decision of the Supreme Court in Madan Lal Roshanlal Mahajan v. Hukumchand Mills Ltd., reported as , wherein it was held that the arbitrator could award pendente lite interest Regarding power of the arbitrator to award interest subsequent passing the award till payment, the law is settled by pronouncement of the Supreme Court, Union of India v. Bungo Steel Furniture Pvt. Ltd., , which lays down that though in terms. Section 34, Civil Procedure Code . does not apply to arbitration proceedings, principle of that section can be applied by arbitrator for awarding interest in cases where court in suit having jurisdiction of subject matter covered by Section 34 could grant decree for interest. The arbitrator had authority to grant interest from the date of award to date of decree.
(40) In view of the principles enunciated in the authority cited above, the contention of the counsel for the respondent has no force. In my opinion, the arbitrator has rightly allowed the pendente lite interest and interest from the date of the award till date of decree.
(41) For the the reasons discussed above I would dismiss the objections and make the award a rule of the Court. Decree be drawn in terms of the award. If the amount awarded to the petitioner is paid within two months from today, it shall not carry any future interest. However, in case of failure on the part of the respondent to pay the amount the petitioner will be entitled to interest @ 6% per annum on the sum of Rs. 4,71,6:9.00 from the date of the decree till payment. The petitioner is also entitled to costs of these proceedings.