Uttarakhand High Court
State Of Uttarakhand And Another vs Ms Hill Ways Engineering Company on 4 May, 2016
Equivalent citations: AIR 2016 UTTARAKHAND 81
Author: Servesh Kumar Gupta
Bench: Servesh Kumar Gupta
IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL
Appeal from Order No. 426/2015
1. State of Uttarakhand,
through Principal Secretary, PWD, Dehradun
2. Executive Engineer, Provincial Division,
PWD, Haridwar ........Appellants
Versus
M/s Hill Ways Engineering Company,
24 Aadarsh Gram, Dehradun Road, Rishikesh
Through Mohan Lal Sharma, partner. ....Respondent
Judgement reserved on : 2.5.2016
Judgement delivered on : 4.5.2016
Mr. I.P. Kohli, Standing Counsel, for the State/appellants.
Mr. A.K. Sharma, Advocate, for the respondent.
Hon'ble Servesh Kumar Gupta, J.
Challenge herein is to the judgment and order dated 18.3.2015, rendered by the District Judge, Haridwar in Miscellaneous Case No. 39/14 (computer generated no. 47/2014), whereby the learned Judge has rejected the application moved by the State under Section 34 of the Arbitration Act. Thus, the award dated 25.7.2013 has been affirmed.
The brief facts, giving rise to present appeal, are that the respondent/claimant M/s Hill Ways Engineering Company was granted a contract to construct the Steel Girder Bridge near Dam Kothi, Mayapur Barrage on Ganga Canal at Haridwar immediately before the Kumbh Mela, 2010. Such contract was entered into between the company and the State, represented by the Superintending Engineer IX Circle, PWD, Dehradun, on 21.2.2009. The estimated value of the work was Rs. 4,17,37,861.20, whereagainst the tender cost of the respondent was Rs. 4,15,51,250.00. Being the lowest bidder, it was accepted by the State. The work had to be completed initially within nine months i.e. uptill 20.11.2009, but the period of 2 completion of such work was extended up to 17.1.2010 and it was accomplished within the time stipulated, as indicated above. Although time-to-time payments were made to the contractor during the period the work remained in progress, but when the bridge was handed over to the State/PWD after its completion, the amount of Rs. 39,81,689.00 was not paid to the contractor by the engineers of the PWD. The contractor made the repeated requests orally as well as in writing through the registered post, but he was made to run from the pillar to the post in order to get the balance amount. However, for the reasons best known to the Executive/Superintending/Chief Engineer of the PWD, they withheld such amount and did not pay to the contractor. Days, months and years passed while making such requests, but all went in vain. So, he moved to this Court. The Hon'ble Chief Justice appointed Justice K.D. Shahi, a retired Judge of the Allahabad High Court, as the sole Arbitrator to settle the controversy between the parties and render an award in the matter. Accordingly, the learned Arbitrator gave his award granting the amount to the contractor against his demands as under:
A. Balance of payment Rs. 39,81,689
B. Interest from 18.01.2010 to Rs. 24,22,394
03.06.2013
C. Loss of profit Rs. 28,92,000
D. Future interest from To be calculated
04.06.2013 till date of actual
payment
E. Expenses of notice, High Rs. 3,00,000
Court, etc.
F. Expenses of present Rs. 2,50,000
proceedings
G. Claim for pain and suffering Not allowed
H. Loss of business Note allowed
I. Other costs Note allowed
J. Price of stamps Entitled which presently
will be paid by the
claimant
3
Granting of such award was challenged by way of filing the objections under Section 34 of the Arbitration Act. The learned District Judge rejected these objections vide an elaborate and speaking judgment, which is impugned in this appeal.
It is a trite that even the scope of Section 34 of the Act, which is available for the District Judge for setting aside the arbitral award, is limited one, as has been envisaged under sub-section (2) to Section 34 and the language of such provision has been reproduced in the impugned judgment. I would not like to unnecessarily burden my judgment by reproducing this provision again.
All I find is that the learned Standing Counsel of the State could not point out any ground, which could have been sufficient to set aside the award made by the arbitral tribunal, as has been contemplated under the provisions of Section 34(2) of the Act. Although the award could be set aside by this Court under Section 37 of the Act, but the grounds should be the same as have been enumerated in Section 34(2) of the Act.
Learned State Counsel has primarily confined his arguments that once the interest of 18 per cent per annum has been granted by the arbitral tribunal ever since the date of completion of the work w.e.f. 18.1.2010 to 3.6.2013, then there was no occasion for the tribunal to grant the amount under the name of "Loss of profit". Here, I would like to reiterate the view of learned Arbitrator made on this point and the same is as under:
"Interest to the claim is paid because if he has borrowed the capital from the market or bank, he must be paying high interest. To the contrary, had this amount 4 been paid to the claimant, he would have converted this amount into his capital and would have invested in future works and would have earned profit on this. In other words, because of non-payment, the respondents have committed breach of the terms of agreement for which the claimant is entitled to damages or compensation or profit with whatsoever name it may be called."
In the same fashion, Section 73 of the Indian Contract Act also deals with the subject as under:
"73. Compensation for loss or damage caused by breach of contract.--When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.
Such compensation is not given for any remote and indirect loss or damage sustained by reason of the breach.
Compensation for failure to
discharge obligation resembling those
created by contract.--When an obligation resembling those created by the contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation 5 from the party in default, as if such person had contracted to discharge it and had broken his contract.
Explanation.--In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken into account."
All that can be said is that the grant of interest @ 18 per cent per annum or at some lesser rate is quite distinct than the loss of profit, which the contractor has suffered on account of non-payment of his due amount at the time when he must have been paid the same. Had the other party to the contract (State/engineers herein) made the payments in time to the contractor, which were due to him, then he would certainly been in position to invest the same in his business, whatsoever, and earn further profits. The contractor lost this opportunity on account of the failure of the appellants to perform their part of contract. Granting of interest is a distinct factor for the reason that when a contractor undertakes a construction work, he is bound to borrow the money from the bank or some other lending institution at a very high rate of interest. He is required to return this amount along with the interest accrued on it to his financer. And the prevailing rate of interest for getting the finance for business purposes, in a general perception, is not less than around 15 per cent per annum, which even the banks charge. That is why, the Legislature, in its wisdom, has introduced Section 31 in the Arbitration and Conciliation Act, 1996. Sub-section (7) of Section 31 provides as under:
6"(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.
Earlier, there was cleavage of opinion regarding the interest pendente lite. The question was, therefore, referred to the larger Bench of the Hon'ble Apex Court in Irrigation Deptt., Govt. of Orissa v. G.C. Roy, (1992) 1 SCC
508. The Hon'ble Supreme Court considered several cases and laid down the following principles:
"The question still 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 use of money to which he is legitimately entitled has a 7 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, C.P.C., and there is no reason or principle to hold otherwise in the case of arbitrator.
(ii) An arbitrator is an alternative form 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) .......
(iv) ........
(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."
In the light of the aforementioned provisions of law and the principles laid down by the Hon'ble Apex Court, I have no hesitation to hold that although the Act contemplates regarding granting of interest @ 18 per cent per annum from the date of award to the date of payment, however, looking to the entire facts and scenario of the 8 controversy as also the myriad letters exchanged by either sides, I feel that granting of interest @ 15 per cent per annum would meet the ends of justice. Therefore, I direct to pay interest @ 15 per cent per annum on the entire balance amount, which was Rs. 39,81,689/-, not from the date of award but, with effect from the date of completion of the work i.e. 18.1.2010 till making of the actual payment. This rate of interest shall also be leviable on the amount granted by the arbitral tribunal for loss of profit.
Learned Standing Counsel for the appellants has also agitated grant of rupees three lakhs towards the expenses of notices and the litigation, which the contractor was constrained to make for knocking the door of the High Court for appointment of the Arbitrator. I think that this amount is somewhat on the higher side. Therefore, I reduce this amount from rupees three lakhs to rupees two lakhs.
Likewise, I also find some force in the objection raised by the learned Standing Counsel for the State on the grant of rupees two lakhs fifty thousand to the contractor as expenses of present proceedings. I feel that rupees one lakh fifty thousand on this score would meet the ends of justice. I reduce it accordingly.
The cost incurred in purchasing the requisite stamp papers, used by the Arbitrator for writing the award, shall also be borne by the State, and not by the contractor because he was forced to approach the High Court for appointment of the Arbitrator as the concerned authorities turned deaf ear to his repeated requests made regarding either to make the payment or appoint the Arbitrator to settle the controversy. Therefore, the appellants shall also pay the value of such stamp papers. This amount shall also attract interest @ 15 per cent per annum w.e.f. 25.7.2013, i.e. the date of passing the award.
9In view of what has been set forth above, I feel that there is no force in this appeal. Accordingly, with some modifications indicated above, I dismiss the appeal.
The money deposited by the appellants with the Registry shall be released forthwith in favour of the respondent along with the interest, which it earned in between. Appellants shall pay the remaining up-to-date amount, as directed, within next six weeks. Otherwise, the respondent shall be at liberty to initiate the execution proceedings for recovery of such amount.
Let the lower court record be sent back.
(Servesh Kumar Gupta, J.) Prabodh