Madhya Pradesh High Court
Union Of India vs M/S.Banco Construction on 9 January, 2018
1 Misc.Appeal 460/02
HIGH COURT OF MADHYA PRADESH
BENCH AT GWALIOR.
***
SINGLE BENCH
PRESENT
SHEEL NAGU,J.
*** (MISC. APPEAL NO. 460/02) UNION OF INDIA Vs. M/S BANCO CONSTRUCTION
-------------------------------------------------------------------
Shri Vivek Khedkar, Assistant Solicitor General for appellant- Union of India.
Shri Arvind Dudawat, Advocate for the respondent.
Order (Passed on 9 Day of January, 2018) th SHEEL NAGU, J. -
1. The instant Misc. Appeal filed u/S. 37 of the Arbitration and Conciliation Act, 1996 (1996 for the brevity) assails the order dated 10/5/2002 passed in Civil Misc. Case No. 19/00 by the 6 th Additional District Judge, Gwalior (M.P.) refusing to set aside the arbitral Award dated 31/7/2000 passed by the sole arbitrator (Shri G.S.Mehta CSW) allowing certain claims of the respondent- contractor in respect of the works contract of construction of "married accommodation for JCOs/HAVs/ORs for "X" and "Y" Bde and armed Regt. at Gwalior" which commenced on 9/12/1988 and was to terminate by 8/8/1990.
2. The said work was completed by 31/10/1999 (extended agreed date) and the final bill was paid on 4/3/1995. As per Clause 66 of the Agreement, period of 6 months was agreed to between the parties for making of payment for the work done. Thus, since the final bill was cleared much later than 6 months, 2 Misc.Appeal 460/02 an application was moved for appointment of Arbitrator in 1998 which led to Arbitrator being appointed on 22/7/1998 for conduction of arbitral proceedings leading to rendering of the award on 31/7/2000 allowing certain claims of the contractor- respondent including grant of interest w.e.f. 1/7/1992 (6 months after expiry of completion of the work deeming it to be the date on which the cause of action arose).
2.1 Learned counsel for the appellant-Union of India (for brevity UOI) did not succeed before the court leading to dismissal of the petition u/S. 34 of the 1996 Act by the impugned order which considered all the points raised by the UOI and found that the decision rendered by the Arbitrator on the various aspects of the dispute did not in any manner demonstrates a cause which may fall within any of the rigors of Sec. 34(2) of the 1996 Act dealing with statutory grounds on which an Award can be set aside by the court constituted u/S. 3 (1)(e) of 1996 Act.
3. Learned counsel for the rival parties are heard.
4. Learned counsel for the UOI has relied upon the decisions of the Apex Court in Kranti Associates Private Limited and another Vs. Masood Ahmed Khan & others 2010(9) SCC 496 (paras 14 & 15), Navnirman Development Consultants (India) Private Limited Vs. Divisional Commissioner and President District Sports Complex Executive Committee, Pune 2017 (8) SCC 603 (paras 12 &
13) and Fiza Developers & Inter-Trade (P) Ltd. Vs. Amci (I) (P) Ltd. 2009 (17) SCC 796 (paras 7, 21 22, 29, 30, 31 and 32) to contend that the award in question is not a speaking award containing bare necessary reasons to support conclusion arrived at by the Arbitrator while adjudicating upon the dispute in question.
4.1 It is further submitted that the claim No. 27 put up by the 3 Misc.Appeal 460/02 UOI regarding interest has not at all been adjudicated upon. It is further submitted that the Claim No.6 has been decided in favour of the contractor despite the Arbitrator rejecting the contentions of the contractor raised in respect of this claim. It is further submitted that the issue of escalation of price deserved to be dealt with as per the Agreement which was not done.
5. The contention of the appellant-UOI in regard to claim No.6 is untenable by mere perusal of para 4.6.0 of the Award which deals with Claim No.6 relating to "escalation on material, fuel and labour not paid correctly and including revised amount of claim of Rs. 2,36,816.49". It is seen that under the said Claim No.6 there were five different heads on which the said claim was founded. The first head relates to copy of price indices, Economic Adviser letter dated October, 1998 available as on date of tendering as shown in Ex.R-11. The claim under this head was turned down by the Arbitrator. The next head was based on the submission of the contractor that as per departmental instructions escalation amounts for those quarters which were working out as minus in spite of indices having gone up had to be ignored. In this regard, the contention of the contractor was accepted as UOI failed to give any valid defence and the Arbitrator found the claim under this head to be in line with the departmental instructions. The third head related to submission of the contractor that price indices had gone up but the escalation calculation was in minus due to over utilization of Scheduled "B" Stores which was found to be partly correct and accordingly partly allowed. The fourth head was that while calculating material escalation the UOI deducted amount of material for star rates but when they reduced the finally approved star rates, the UOI when calculated the final adjustments at the final bill stage should have been considered only those reduced costs for star rate materials. This claim was 4 Misc.Appeal 460/02 found to be correct as UOI did not give any valid counter claim to the same but since certain claims have been awarded under this head earlier, the claim under this head was only partly allowed in favour of the contractor. The fifth and the last head under Claim No.6 was for working out labour escalation and explained definition of Vg1 to which it was pleaded that for working out labour escalation actual cost of star rates should be excluded and not the element of CP. The claim under this head was also partly allowed. Finally after dealing with all the heads under Claim No.6 an amount of Rs. 2,08,000/- was found to be contractually due as just and fair in favour of the contractor.
5.1 From the above it is evident that all the ingredients of Claim No.6 were judiciously decided by the Arbitrator by giving specific reasons for allowing/disallowing the same. Thus, the contention of the learned counsel for the appellant-UOI that despite denying claim in regard to Claim No.6 the contractor's claim should have been rejected has no merit. That apart, the escalation issue also in terms of the contents of the Award from para 4.6.1 till 4.6.8 was considered in judicious manner in terms of the Agreement. 5.2 A bare perusal of the Award clearly shows that all the 28 claims put up by the contractor and counter claim put up by the UOI were duly considered by recording reasons in accepting or declining each one of them and therefore it cannot be said that the Award is non-speaking. Consequently, the reliance placed on the decisions of the Apex Court as mentioned above is of no avail to the appellant.
6. That brings this court to the issue of interest raised by the contractor under Claim No.26. Perusal of para 4.26.1 which relates to Claim No.26 discloses that 15% simple interest per annum has been awarded w.e.f. 1/7/1992 (from the date of accrual of the cause of action based upon the fact that the 5 Misc.Appeal 460/02 payment shall be made within 6 months of completion of contract and the contract stood admittedly completed on 31/10/99). The future interest has also been allowed to the extent that in case of failure of UOI to pay the sum (the principal amount plus interest @ 15% p.a. w.e.f. 1/7/1992) within 120 days of the award, future interest @ 15% would become due.
6.1 Learned counsel for the UOI has raised an objection regarding award of interest from the date of accrual of cause of action and contends that interest should have been awarded from the date of making of the award i.e., 31/7/2000. 6.2 The aforesaid objection of the interest having been awarded from the date of accrual of cause of action is heard to be rejected at the very outset in view of the clear stipulation u/S. 31 (7) of the 1996 Act which reads thus:-
"31. Form and contents of arbitral award.
1. xxxx xxxx xxxx xxxx
2. xxxx xxxx xxxx xxxx
3. xxxx xxxx xxxx xxxx
4. xxxx xxxx xxxx xxxx
5. xxxx xxxx xxxx xxxx
6. xxxx xxxx xxxx xxxx 7 (a). Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made.
[(b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of eighteen per centum per annum from the date of the award to the date of payment.6 Misc.Appeal 460/02
Explanation- The expression "current rate of interest" shall have the same meaning as assinged to it under clause (b) of Section 2 of the Interest Act 1978 (14 of 1978)]"
6.3 The said provision of Sec. 31(7) has received consideration at the hands of a three judge bench of the Apex Court in the case of Hyder Consulting (UK) Limited Vs. Governor, State of Orissa through Chief Engineer reported in 2015(2) SCC 189 wherein by majority of 2:1 the concept of principal sum and interest over the same has been explained in detail though from a different context. Relevant portion of this judgment need not be reproduced as the statutory provision of Sec. 31(7) is explicit which needs no explanation by way of interpretation or judicial precedents.
6.4 A bare perusal of the above provision especially sub-clause (7) (a) of Sec. 31 makes it clear that unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made, interest at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made.
7. Thus, it is clear that the learned Arbitrator was well within it's authority to calculate and award interest from the date of arising of cause of action which was based on the stipulation in the Agreement that the payment of work done shall be paid within 6 (six) months from the completion of the work. The work in the present case was admittedly completed on 31/10/1999 and therefore the payment for the final bill put up by the contractor ought to have been made by the UOI and it's functionaries latest by 30/6/1992. Not having done so and the final bill having been paid by the UOI late, the cause of action for claiming interest over 7 Misc.Appeal 460/02 the sum due arose in favour of the contractor-respondent from 1/7/1992 and therefore the Arbitrator has rightly awarded the interest from the date of accrual of cause of action.
8. In view of the above, the court u/S. 34 of the 1996 Act has rightly found that none of the statutory grounds available u/S. 34(2) are made out in the present case and therefore has rightly refused to set aside the arbitral award in question. The impugned order of the court cannot be found fault with.
9. Accordingly, the appeal fails and is dismissed.
No cost.
(Sheel Nagu) Judge 9/1/2018 (Bu) DHANANJAYA BUCHAKE 2018.01.09 17:40:50 +05'30'