Madras High Court
Neyveli Lignite Corporation Limited vs N.V. Bashyam Reddy & Co on 9 August, 2006
Author: V. Dhanapalan
Bench: V. Dhanapalan
IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 09.08.2006 Coram: The Honourable Mr. Justice V. DHANAPALAN C.M.A. (NPD-S) No.67 of 1998, C.M.P. No.479 of 1998 & Cross Objection No.35 of 1998 Neyveli Lignite Corporation Limited represented by its Company Secretary Neyveli - 607 801 .. Appellant Vs. 1. N.V. Bashyam Reddy & Co. represented by its Managing Director 42 Bashyam Reddy Street Cuddalore - 607 001 2. G.M. Chinnasamy .. Respondents Civil Miscellaneous Appeal filed against the decree and judgment made in Ar.O.P. No.824 of 1996 dated 18.06.1997 by the learned Sub-Judge, Vridhachalam. For appellant Mr. N.A.K. Sarma For respondents Mr. M. Krishnappan - - - - J U D G M E N T
This Civil Miscellaneous Appeal has been filed by Neyveli Lignite Corporation challenging the judgment and decree of the learned Sub-Judge, Vridhachalam made in Arbitration O.P. No.824 of 1996 dated 18.06.1997 filed under Section 33 of the Arbitration Act (hereinafter referred to as "the Act") read with Section 30 of the Act confirming the Award dated 10.11.1992 passed by the Arbitrator, the second respondent herein.
2. For the sake of brevity, the parties are referred to as they were arrayed in the Arbitration O.P. before the learned Sub-Judge.
3. According to the petitioner Company, it is a public sector enterprise and its activities are mining of lignite, generation of electricity and various other by-products. There was a need for construction of an air-strip at Neyveli Township and an advertisement was issued by the petitioner in the newspapers on 16.07.1986 calling for tenders from the general public. The said advertisement carried all the details and terms and conditions of the tender specifying very clearly that only those who fulfil all the conditions as stipulated in the tender advertisement need only apply. There were 12 applications for the said job and as the first respondent was found suitable, the petitioner handed over 40% of the work to the first respondent on 04.10.1986 and balance of 10% work on 15.11.1986. The total value of the work allotted to the first respondent was Rs.19,94,850/-. As per the terms and conditions of the contract, all the works assigned to the first respondent should be completed to the fullest satisfaction of the petitioner within four months from the date of signing the contract. Therefore, the first respondent was asked to begin the work at the earliest as early as on 04.10.1986 itself. It was reiterated again on 15.01.1986 by the letter sent by the petitioner to the first respondent.
4. As per the contract signed by the first respondent, the work allotted to him should be completed within four months from 04.10.1986. As the job allotted to the first respondent was a responsible one, it should be done with care and proper planning and it is his duty to study the market and obtain the equipments and materials needed in time and if there would be any delay in procuring the required materials and equipments, it would delay the completion of the job contract in time. It was also informed to the first respondent that he could obtain a loan against 75% of the value of the procured equipments. In spite of repeated reminders, the job was not started till the second week of January 1987. Instead, the first respondent started the preliminary works of procuring the necessary materials only by third week of January 1987.
5. In order to avoid any delay, the petitioner had recommended Bharat Petroleum Limited to supply the required tar for the job immediately to the first respondent. In spite of all these efforts, the first respondent finished the job only on 11.04.1987. Even then, the job was not completed fully. But, it was done on a later date on 09.05.1987. It is the case of the petitioner Company that it has to claim the loss due to the delay in completion of the job by the first respondent but it did not do so. There was no claim by the first respondent for any additional amount other than the contract amount till 09.05.1987. But, only on 22.11.1987, the petitioner had received a letter from the first respondent claiming that the latter over-spent to complete the job and therefore, he should be given an amount of Rs.6,08,115/- and this claim was not accepted by the petitioner and there was no word from the first respondent regarding this problem till June 1989.
6. As the money due to the first respondent as per the actual contract was to be distributed, the first respondent was informed to be present at the petitioner's office on 13.04.1989. After receiving the letter,the first respondent, on 09.06.1989, informed the petitioner for the first time that an Arbitrator should be appointed to look into the problem over the claim of additional amount. After going through the statement of accounts sent by the first respondent and after deciding to consider the expenses incurred towards transport of water and earth and other expenses connected with them, the petitioner asked the first respondent to come to its offices to discuss the same vide letter dated 01.02.1990. But, the first respondent did not come on that date and the meting was postponed to 03.04.1991 and on that date, it was informed to the first respondent during the discussions that an amount of Rs.61,663.60 paid to Bharat Petroleum Limited for transporting tar from Mumbai to Chennai, could not be given. Thereafter, the first respondent, in his letter dated 16.04.1991, wanted the petitioner to pay a sum of Rs.5,46,451.40.
7. Since the problem prolonged and the first respondent did not sign the bill as per the actual contract, on 20.11.1991 and 02.01.1992, letters were sent to the first respondent asking him to come to the petitioner's office. But, he did not turn up to receive the money due to him. On 06.02.1992, the first respondent sent a lawyer's notice asking for an Arbitrator to be appointed. Though the request by the first respondent was not justified, the petitioner, in a magnanimous gesture, consented to appoint an Arbitrator and accordingly, the second respondent was appointed as Arbitrator to look into the problem and arbitrate. In terms and conditions of the Contract, Section 78 gives the right to the petitioner to appoint an arbitrator. As the second respondent was serving as Chief Engineer in the petitioner Corporation, to undertake the job of the Arbitrator, he retired from his post on 30.06.1992 and after consent of both the parties, he started the enquiry.
8. On the other hand, it is the case of the first respondent that he made a claim by letter dated 03.04.1987 which was received by the petitioner on 22.11.1987 demanding for a sum of Rs.6,08,115/- which the petitioner did not agree to pay. The first respondent made a request to the petitioner to settle the claim or to refer the dispute for Arbitration vide letter dated 19.06.1989 and again, in his letter dated 16.04.1991, followed by a lawyer notice dated 06.02.1992, calling upon the petitioner to settle the claim or to refer the dispute for Arbitration. As the first respondent had not received the final payment and the petitioner had refused to pay except for two items of work, it is the contention of the first respondent that the date of claim in his letter dated 19.06.1989 asking for Arbitration is well within three years from the date of accrual of claim and also from the date of refusal i.e. 22.08.1989 to pay the claim by the petitioner.
9. According to the first respondent, as per the time schedule of the agreement, the entire work should be completed within four months from the date of the order to commence the work or from the date of handing over of the site whichever is earlier, maintaining uniform rate of progress. The first Letter of Intent (LOI) dated 04.10.1986 was issued to him for a value of Rs.16,95,880/- for 40% of the work. In the said letter, a direction to the first respondent was given that he should contact C.E./Civil/M.I. & I.U. and arrange to commence the work immediately. The modified LOI dated 15.11.1986 was issued to the contractor for Rs.19,94,850/- for 50% of the work. As per the terms of time schedule of the contract, the work should have been commenced immediately after 04.10.1986. It is the further case of the first respondent that no work of any significance was done between 04.10.1986 and 27.01.1987, the date on which revised working layout drawing was handed over to him. The petitioner has not filed any original approved layout drawing to prove that there was an approved working drawing for commencing the work immediately.
10. From the point of view of the first respondent, since the working period from 27.01.1987 to 27.03.1987 was very short and the security of the Prime Minister, being supreme and absolute, pressure was mounted him without any other option on the part of the petitioner to rise up to the occasion and therefore, in order to complete the work, he made the claim of Rs.6,08,115/-.
11. As a matter of fact, it is to be found out whether the additional amount asked by the first respondent is payable or not. It is common and usual that disputes do arise in these kind of contracts and if the disputes are taken to the court, there would be a delay and that is the reason for the appointment of an Arbitrator and having the benefits of both the parties in mind. Based on this, the first respondent requested that an Arbitrator should be appointed. The petitioner too, without any prejudice agreed to this request and appointed the Chief Engineer of its own Corporation as Arbitrator. During Arbitration proceedings, the first respondent had insisted for production of approved original layout and the drawing produced by the petitioner is annexed with the petitioner's documents. Therefore, it is the specific case of the first respondent that the site was handed over in real terms only on 27.01.1987 and four months' time should be calculated only from that date and thus, the scheduled date of completion should be reckoned as 26.05.1987. Accordingly, the Arbitrator has proceeded and passed an award holding that the first respondent is entitled to be compensated for the extra expenditure incurred in the purchase of bitumen in packed form and for the extra labour engaged for the works done during emergent circumstances and interest for the same and thus, awarded a total compensation of Rs.7,80,193.75 together with interest @ 12% per annum against which the petitioner has preferred the Arbitration O.P. before the Sub-Court, Vridhachalam.
12. The leaned Sub-Judge, after analysing all the material evidence before him and on going through the various claims made and upon perusing the documents filed in support of both the sides and on due consideration of all the issues in accordance with the terms and conditions of the agreement under the Arbitration Clause, passed an award holding that the first respondent is entitled to the award and dismissed the Arbitration O.P. filed by the petitioner and confirmed the award of the Arbitrator with costs and also held that interest awarded by the Arbitrator is reasonable and valid. Aggrieved by this order of the learned Sub-Judge, the present appeal has been preferred by the petitioner.
13. Heard Mr. N.A.K. Sarma, learned counsel for the petitioner Company and Mr. M. Krishnappan, learned counsel appearing for the respondents.
14. The learned counsel for the appellant, in his submissions, has contended that the learned Sub-Judge:
a. has erred in dismissing the petition instead of setting aside the award passed by the Arbitrator, b. failed to appreciate the legal implications in regard to the legal misconduct of the Arbitrator as defined under Section 33 of the Arbitration Act, c. has not properly appreciated the dispute between the parties which resulted in Arbitration and has wrongly stated the facts of the case while arriving at the conclusion and therefore, the judgment is vitiated by material irregularity, d. has not gone into the Special Condition No.16 which states that the rates quoted shall be firm for the duration of the contract and nothing extra shall be payable on any account and therefore, the claim made by the first respondent is in contravention of the agreed terms of the contract.
e. has erred in holding that the petitioner is questioning the arbitrability only because the Arbitrator awarded extra-claim to the first respondent overlooking the fact that even at the time of appointing the Arbitrator, the petitioner has raised the question and from the inception of the proceedings continuously maintaining its objection.
f. ought to have held the Exs.C 24 and 30 inadmissible as they were self-serving, concocted and created by the first respondent for the purpose of the case and the time duration taken by it is well within the period of limitation of the contract.
g. has overlooked the documents filed in support of the petitioner in Exs.A.1 and D.1 and other exhibits.
h. has exercised his powers arbitrarily and the his finding that the first respondent had exerted pressure on the first respondent which resulted in the first respondent's completing the work by crashing the time schedule and incurring additional extra expenditure is perverse.
15. It is further contended by the counsel for the petitioner that:
a. there is no dispute between the parties as the claim of the first respondent is totally outside the purview of the terms and conditions stipulated in the contract, b. the Arbitrator was appointed without prejudice to the claim with regard to the dispute relating to arbitrability of a claim and the decision of the Arbitrator is capable of being challenged under Section 33 of the Act, c. the findings of the learned Sub-Judge that the petitioner had confidence in the second respondent Arbitrator who is none other than its own Chief Engineer is erroneous and the petitioner fully participated in the arbitration proceedings and filed the documents in the course of proceedings, d. it has not been noted by the learned Sub-Judge that the petitioner is attacking the award upon the existence of erroneous legal propositions and non-consideration of the exhibits filed in support of its objections, e. the learned Sub-Judge has failed to note that the Arbitrator has imported his own personal knowledge without any proof regarding the quantity supplied, the rates, urgency of the work, etc. which is a misconduct, f. the second respondent ought to have found that the visit of the Prime Minister had nothing to do with the completion of the contract by the first respondent, g. extra amount claimed towards materials and labour is beyond the scope of the first respondent which is arbitrary and unjust, h. the court-below failed to see whether the award of the second respondent is contrary to law based on inadmissible documents not corroborated by any evidence without considering the vital and material documents and construing the contract in its proper perspective which is an error apparent on the face of the award and i. the learned Sub-Judge has failed to examine the award on the basis of legal misconduct and the proposition of law laid down by the various Courts relied upon by the petitioner and failed to interfere with the award passed by the arbitrator and also the interest awarded by the Arbitrator is inadmissible.
16. Per contra, Mr. M. Krishnappan, learned counsel appearing for the respondents has contended that the award of the Arbitrator as well as the order of the learned Sub-Judge is in conformity with the rule of law and the proposition in the matter before this Court. He has brought to the notice of this Court about the factual position and the circumstances which led to the passing of the award by the second respondent. On 10.11.1992, the award was passed by the Arbitrator and communicated to the first respondent and he sent a letter to the petitioner on 26.11.1992 to pay the award amount. Even though, it was received by the petitioner on 27.11.1992, the award amount was not settled and therefore, the first respondent filed Arbitration O.S. No.519 of 1992 on 18.12.1992 under Section 14 of the Arbitration Act seeking direction to the second respondent to file the order in Court. Hence, the second respondent filed his order in court on 10.12.1992 which was received by the Court on 14.12.1992 and a notice was sent by the Arbitrator to the petitioner and to the first respondent intimating the factum of filing of award in court and the said notice was received by the petitioner and the first respondent on 15.12.1992. As such, on 15.12.1992, the petitioner was aware of the filing of the award. The suit was posted on 20.01.1993 on which date, the Arbitrator also appeared in Court and informed about the filing of award in Court and the petitioner too entered appearance. Therefore, the Arbitration O.P. filed beyond the prescribed time is barred by limitation and is liable to be dismissed and hence, under Section 17 of the Arbitration Act, the first respondent should be awarded the amount due to him.
17. The learned counsel for the respondents has further contended that:
a. it is not correct to say that the cause of action for the petitioner arose only on 08.07.1993 because the award of the Arbitrator was filed in the Court only on 10.12.1992 and it was received by the petitioner on 15.12.1992. The petitioner had the knowledge of filing of the award on 20.01.1993 itself when he entered appearance in Court through his counsel. So, it cannot be said that the cause of action arose only on 08.07.1993, b. since the petitioner is aware of the filing of Arbitration order in the court on 15.12.1992 itself, 30 days period should be calculated from that date only and hence, the petition is liable to be dismissed as time-barred, c. the time schedule to complete the work is not stipulated in the contract as alleged by the petitioner but only in the tender advertisement. But, Clause 41 of the General Conditions of the contract shows that the contractor shall commence the work on site within the period named in the contract. As per Clause 12 of Special Conditions of the Contract, the contractor shall commence the work immediately after the site is handed over. The layout itself was approved only on 27.01.1987 and the site was handed over only on that date. Therefore, the first respondent has to complete the work within four months from the date of handing over of the site, d. since there was an announcement of Prime Minister's visit to Neyveli on 27.03.1987 and therefore, the first respondent has incurred extra expenditure to complete the work within 58 days and the airstrip was handed over well before the visit of the Prime Minister and the Prime Minister also got down in the airstrip on 27.03.1987 and the contention of the petitioner that the work was not done within the stipulated period is not correct, e. having got the work done by expediting the same due to Prime Minister's visit even prior to the prescribed date, the petitioner is estopped from contending otherwise, f. though there was a claim by the petitioner that this respondent was informed to commence the work on 14.10.1986 but since the site was handed over only on 27.01.1987 on the approval of the layout, the first respondent commenced the work and finished the same within 58 days time considering the visit of the Prime Minister to that place. As a matter of fact, certain extra payments have been admitted by the petitioner in respect of some claim and in respect of remaining claim, negotiations were going on by personal representations and the final bill was ready without considering the extra claim. For all these reasons, the extra claim made by the first respondent has to be accepted. But, it was not considered by the petitioner and therefore, the first respondent had asked to appoint an Arbitrator and accordingly, the same was agreed to by the petitioner and the Arbitrator was appointed and the award has been passed which has been rightly confirmed by the learned Sub-Judge.
18. Before proceeding to consider the appeal, it would be useful to refer to Clause 78 and 51(2) of the Conditions of Contract and Special Condition No.16 of the Agreement which are extracted as under:
Clause 78 If any question, differences or objection whatsoever shall arise in any way connected with or arising out of this instrument or the meaning or operation of any part thereof or the rights, duties or liabilities of either party, than save in so far as the decision of any such matter is herein before provided for and has been so decided, every such matter including whether its decision has been otherwise provided for and or whether it has been finally decided accordingly, or whether the contract should be terminated or has been rightly terminated and as regards the rights and obligations of the parties as the result of such termination shall be referred for arbitration to the Chief Engineer of the Corporation within a period of six months from the date of making final payment to the contractor or where the contractor is not willing to receive payment, from the date a registered notice is sent to him that his final bill is ready for payment and his decision shall be final and binding and where the matter involves a claim for or the payment or recovery or deduction of money, only the amount, if any, awarded in such arbitration shall be recoverable in respect of the matter so referred.
If the matter is not referred to arbitration within the specified period, all the rights and claims under the contract shall be deemed to have been forfeited and absolutely barred.
The venue of arbitration proceedings shall be the Administrative Offices of the Neyveli Lignite Corporation Limited P.O., Neyveli - 1."
Clause 51(2) - Order for variations to be in writing No such variation shall be made by the contractor without an order in writing of the Engineer. Provided that no order in writing shall be required for increase or decrease in the quantity of any work where such increase or decrease is not the result of an order given under this Clause but is the result of the quantities exceeding or being less than those stated in the Tender Schedule. Provided also that if for any reason the Engineer shall consider it desirable to give any such order verbally, the Contractor shall comply with such order and any confirmation in writing of such verbal order given by the Engineer whether before or after the carrying out of the order shall be deemed to be an order in writing within the meaning of the Clause.
Special Condition No.16 The rates quoted shall be firm for the duration of the contract and nothing extra shall be payable on any account.
19. Further, it is also useful to refer to five claims made by the first respondent which are as under:
Claim for Amount (Rs.) Laterite, BGM, Gravel, etc. 1,98,600.00 Inter-carting of materials 20,125.00 Procurement of bitumen 80,767.40 Conveyance of water 60,330.00 Wages to labour 1,50,000.00 Conveyance of earth by trucks 36,720.00 Interest @ 12% p.a. from 25.03.1987 on the amount payable as per claims.
20. A reading of Clauses 51(2) and 78 and of the Conditions of Contract and Special Condition No.16 of the Agreement extracted supra would give rise to the following points for consideration.
a. whether the claim made before the Arbitrator is an arbitrable one or not? and b. whether there is any legal misconduct committed by the sole Arbitrator in passing the arbitration award?
21. It is seen from the findings of the learned Sub-Judge that since the work allotted to the first respondent had to be done in a hurry due to the visit of the Prime Minister and because of that, an additional expenditure was incurred by the first respondent which was not considered by the petitioner barring a few heads. It is not in dispute that the petitioner had a programme of the visit of the Prime Minister for which an airstrip had to be kept ready on 27.03.1987 and therefore, the contract had to be completed before that date and it is very important that security codes have to be abided by while VIPs like the Prime Minister make a visit. In such a case, it is necessary that the airstrip should be safe to land. There is no doubt that only after testing the same, the plane would have been permitted to land. Hence, the Arbitrator as well as the learned Sub-Judge has come to the conclusion that the air-strip works were completed in good condition by the time the Prime Minister landed there. Thus, it is clear that the air-strip works were completed by 27.03.1987.
22. It is further seen that the petitioner has appointed the Chief Engineer who was employed in its Corporation as the Arbitrator and moreover, when the enquiry commenced, the petitioner had participated and presented the documents. Even after appointing the Arbitrator, the petitioner has not agitated that the dispute is not an arbitrable one and its argument before the learned Sub-Judge that the dispute is not an arbitrable one just because the order of the Arbitrator is not in its favour is not acceptable now. As per the rules and conditions of contract, if this kind of a dispute arises, it can be referred to the Arbitrator and accordingly, the Arbitrator and the learned Sub-Judge have come to the conclusion that the issue in dispute is an arbitrable one.
23. Further, a reading of Clause 78 of the Contract of Agreement goes to show that if any question, differences or objection whatsoever shall arise in any way connected with or arising out of this instrument or the meaning of operation of any part thereof or the rights, duties or liabilities or either party, may be referred to Arbitration to the Chief Engineer of the Corporation within six months from the date of making final payment to the contractor or where the contractor is not willing to receive the payment from the date a registered notice is sent to him. In the instant case, the liability of either party is in question and the petitioner had to make final payment and also the first respondent had not come forward to receive the payment. Therefore, this issue of liability of the parties referred to the Arbitrator by both the parties cannot be found fault with irrespective of whether the award is in favour of the petitioner or otherwise. It is a settled principle that when the parties chose their Arbitrator to judge any dispute between them, they cannot, when the award is given on the face of it, object to the decision either by law or on facts.
24. The next point raised by the petitioner is that the Arbitrator has committed legal misconduct and the view of the learned Sub-Judge on that point is not correct. Arbitration, as a mode for settlement of dispute between the parties, has a tradition in India. It is an obligation of a social purpose and the Courts are full of litigations which are pending for a long time. Therefore, it should always be the endeavour of those who are interested in the administration of justice to help settlement by Arbitration if possible. It is the function of courts of law to monitor that the Arbitrators act within the norms of justice in a reasonable, fair and adjudicative manner. Once the parties to the contract have agreed to appoint an Arbitrator and the award is passed based on the oral and documentary evidence let in before the Arbitrator and the award is fair, the Courts should as far as possible, give effect to the award and make the parties adhere to the decision of the Arbitrator who is none other than their choice to adjudicate and settle the dispute. In the above perspective, one should view the scope and limit the correction by the Court of an award made by the Arbitrator which is a quasi-judicial proceedings after affording a fair and reasonable opportunity and following principles of natural justice and if some of the rules and regulations have been ignored by the Arbitrator, the petitioner could have legally changed the Arbitrator by taking further action. When the petitioner has not done so at the time of conduct of the arbitral proceedings itself, it is not fair on the part of the petitioner to say that the Arbitrator has committed legal misconduct after the award is passed in favour of the first respondent.
25. Though the learned counsel for the petitioner has argued exhaustively on the point of legal misconduct by the Arbitrator, what are all the acts of legal misconduct have not been specifically pointed out and it is also be seen whether this Court can interfere with the findings of the Sub-Judge, who, in turn, has confirmed the arbitration award and justified the conduct of the Arbitrator. We should make the law of Arbitration make simple, less technical and more responsible to the realities of the situation but must be responsive to the fairplay and justice and make the Arbitrator adhere such process and norms within the parameters of the rule of law which will create confidence among the parties not only by doing justice between the parties but by creating a sense that justice appears to have been done to them.
26. It is also the general principle that if an error has been committed by the Arbitrator, such an error is not an error which is amenable to correction even in a reasoned award under the law in order to be set aside and when there is a wrong proposition of law laid down in the Arbitration award, the jurisdiction of this Court as well as the learned Sub-Judge is limited as the award of the Arbitrator was passed after a careful scrutiny of the material documents presented before him and on examination of the parties concerned with Arbitration proceedings.
27. Further, in the proceedings dated 22.08.1989, the petitioner has written to the first respondent that except for the claim in respect of water and earth conveyance which are under consideration, other items are not possible of compliance. Therefore, having accepted certain items of claim, the remaining claims are matter of dispute which are covered by Clause 78 of the Conditions of Contract and in that view, the learned Sub-Judge has proceeded to hold that the petitioner has agreed for certain items of the claim and rejected the other claims as the parties have agreed to appoint the Arbitrator. If the petitioner had felt that Arbitration was not necessary, he could have very well rejected the claim by the first respondent to appoint an Arbitrator. Moreover, the Arbitrator was appointed by the petitioner itself with the concurrence of the first respondent and the award of the Arbitrator is found to be correct since the petitioner Corporation has not shown any proof that the exhibits have been presented violating the rules and terms and conditions. Hence, the Sub-Judge has rejected the contention of the petitioner who has filed the Arbitration O.P. and in such a view of the matter, the second contention raised by the petitioner that the Arbitrator has committed legal misconduct cannot be sustained in view of the above findings. On that ground also, the appeal is devoid of merits.
28. Now, let me proceed to consider some of the rulings of the Supreme Court and other High Courts which are extracted as follows:
a. AIR 1986 Calcutta 370 in the case of Sree Sree Ma Engineering & Co. Vs. State of West Bengal & Another para 21 We are of the view that such notice of filing of the award must emanate from Court. The provisions contained in sub-section (2) of Section 14 of the Arbitration Act are clear on the point. We are also of opinion that the notice of filing of the award referred to in Article 119(b) of the Limitation Act should be a notice contemplated under Section 14(2) of the Arbitration Act, 1940 and not a notice from any other source.
b. AIR 1996 SC 3421 in the case of Secretary to Government of Karnataka & Another Vs. V. Harishbabu-para 14 In view of the settled law and our discussion above, our answer to the question posed in the opening part of the judgment is that the period of limitation for filing objections seeking the setting aside of an arbitration award commences from the date of service of the notice issued by the Court upon the parties regarding the filing of the award under Section 14(2) of the Act. Such a notice need not be in writing but what is essential is that the notice or intimation or communication of the filing of the award must be issued by the Court to the parties and served upon the parties concerned. Date of service of a notice issued by the arbitrator under Section 14(1) of the Act or the date of obtaining an endorsement on the award by the arbitrator from the party concerned is irrelevant for determining the question of Limitation for filing objections under Article 119(b) of the Limitation Act, 1963. c. JT 2000 (Suppl.2) SC 260 in the case of Deo Narain Choudhary Vs. Shree Narain Choudhary para 16 There can be no dispute with the proposition of law that the notice need not be in writing and can be oral. However, all the authorities clearly lay down that the Notice must be some act of the Court. The proposition that a Notice must be by the Court is also confirmed by an authority of this Court in the case of Ch. Ramalinga Reddy Vs. Superintending Engineer reported in (1999) 9 SCC 610. In this case, it has been held that mere intimation by an Arbitrator is not sufficient and it is the Court which has to give notice. d. JT 2004 (5) SC 209 in the case of Bharat Coking Coal Ltd. Vs. L.K. Ahuja para 4 Article 119(b) of the Limitation Act has been enacted to fix a definite time limit within which the validity of the award can be challenged after the award is filed in the court. The said provision prescribes a period of limitation of 30 days for making an application after the required notice regarding filing of the award in the court is given to the parties. If there is no material to show that a notice of filing of the award has ever been given to the parties, any period of limitation as prescribed in Article 119(b) loses its significance. The law is clearly to the effect that mere knowledge of passing of an award is not enough. The period of limitation will commence as provided in Article 119(b) of the Limitation Act only upon notice as to filing of the award in the court has been given to the parties concerned. e. AIR 1996 SC 2965 in the case of Vs. G.S. Atwal & Company (Asansole) paras 6 and 7 To constitute an arbitration agreement, there must be an agreement that is to say the parties must be ad idem. Arbitrability of a claim depends upon the dispute between the parties and the reference to the arbitrator. On appointment, he enters upon that dispute for adjudication. The finding of the arbitrator on the arbitrability of the claim is not conclusive, as under Section 33 ultimately it is the Court that decidest he controversy. In U.P. Rajkiya Nirman Nigam Ltd. V. Indure Pvt. Ltd. and others decided on February 9, 1996, a three-Judge Bench of this Court (to which one of us, K. Ramaswamy, J. was a member) was to consider the question whether the arbitrator had jurisdiction to decide the arbitrability of the claim itself. In that context, the question arose: whether there was an arbitration agreement for reference to the arbitrator? It was held that the arbitrability of the controversy of the claim being a jurisdictional issue, the arbitrator cannot clothe himself with jurisdiction to conclusively decide, whether or not he had power to decide his own jurisdiction. Relying upon the passage in Russel on Arbitration (19th Edn.) at page 99, this Court had held that it can hardly be within the arbitrators jurisdiction to decide whether or not a condition precedent to his jurisdiction has been fulfilled. The arbitrator had no power to decide his own jurisdiction. The arbitrator is always entitled to inquire whether or not he has jurisdiction to decide the dispute. He can refuse to deal with the matter at all and leave the parties to go to the Court if he comes to the conclusion that he has no power to deal with the matter; or he can consider the matter and if he forms the view that the contract upon which the claimant is relying on and from which, if established, he alone has jurisdiction, he can proceed to decide the dispute accordingly. Whether or not the arbitrator has jurisdiction and whether the matter is referred to or is within the ambit of clause for reference of any difference or dispute which may arise between the parties, it is for the Court to decide it. The arbitrator by a wrong decision cannot enlarge the scope of the submission. It is for the Court to decide finally the arbitrability of the claim in dispute or any clause or a matter or a thing contained therein or the construction thereof. It was, therefore, held that arbitrators cannot clothe themselves with jurisdiction to decide conclusively the arbitrability of the dispute. It is for the Court under Section 33 or an appeal thereon to decide it finally. There is no estoppel to challenge the action and to seek a declaration under Section 33. It was further held that mere acceptance or acquiescence to the jurisdiction of the arbitrator for adjudication of the dispute as to the extent of the arbitration agreement or arbitrability of the dispute does not disentitle the appellant to have the remedy under Section 33 through the Court. The remedy under Section 33 is the only right royal way for deciding the controversy. In Law of Arbitration by Justice Bachawat (2nd (1987) Ed.) at page 90, it is stated that the jurisdiction of the arbitration is solely derived from the arbitration agreement. The arbitrator has jurisdiction to deal with matters which on a fair construction of the terms of the contract, the parties agreed to refer to him. Whether or not the arbitrator acts within the jurisdiction depends solely upon the clause of reference. The Court may grant a declaration that the party appointed by the defendants as the arbitrator has no jurisdiction. The submission furnishes the source and prescribes the limit of the arbitrators authority. The arbitrator takes upon himself an authority which the submission does not confer on him (sic). The award must in substance and form conform to the submission. It must comply in point of form to the directions contained in the submission. If the award determines any matter not referred to arbitration and such matter cannot be separated without affecting the determination of the matters referred, the award is invalid. It may be remitted to the arbitrator for reconsideration under Section 16 and if the arbitrator acts in excess of authority, the award should be set aside. f. AIR 1988 SC 1166 in the case of Continental Construction Co. Ltd. Vs. State of Madhya Pradesh para 5 . . .The arbitrator is not a conciliator and cannot ignore the law or misapply it in order to do what he thinks is just and reasonable. The arbitrator is a tribunal selected by the parties to decide their disputes according to law and so is bound to follow and apply the law, and if he does not he can be set right by the Court provided his error appears on the face of the award. In this case, the contractor having contracted, he cannot go back to the agreement simply because it does not suit him to abide by it. The decision of this Court in M/s. Alopi Parshad Vs. , (1960) 2 SCR 793 may be examined. There it was observed that a contract is not frustrated merely because the circumstances in which the contract was made, altered. The Contract Act does not enable a party to a contract to ignore the express covenants thereof, and to claim payment of consideration for performance of the contract at rates different from the stipulated rates, on some vague plea of equity. The parties to an executory contract are often faced in the course of carrying it out, with a turn of event which they did not at all anticipate, a wholly abnormal rise or fall in prices, a sudden depreciation of currency, an unexpected obstacle to execution, or the like. There is no general liberty reserved to the courts to absolve a party from liability to perform his part of the contract merely because on account of an uncontemplated turn of events, the performance of the contract may become onerous. g. (1994) 3 SCC 521 in the case of Tarapore & Co. Vs. State of M.P. paras 13 and 28 As Shri Nariman has not contested the legal proposition that an arbitrator cannot travel beyond the contract, it is not necessary to labour on this point. It would be enough if we take note of aforesaid two decisions, in first of which it was stated clearly that an arbitrator cannot go out of contract and if he does so, the award would be without jurisdiction. In that case, the award was so found because of which it was stated in paragraph 30 that the award flew in the face of the contract and so it was set aside. In the second decision, this Court stated that if the question of jurisdiction of arbitrator is raised, the only way to test the correctness is to look into the agreement between the parties as reference can be one which is contemplated by the agreement. In the aforesaid view of the matter, the contention of Shri Nariman that the error, if any committed by the arbitrators, was an error within their jurisdiction (the same being relatable to interpretation of the contract) and such an error is not amenable to correction by courts as held in Sudarshan Trading co. Vs. Government of Kerala does not really survive for consideration, as in the case where an arbitrator travels beyond the contract, the award would be without jurisdiction, because of what was held in Associated Engineering Co. and Good Luck Carpets cases. The error in the present case cannot be regarded as one within jurisdiction; the same is really an error or jurisdiction insofar as that para of award is concerned which is relatable to increase in minimum wages. Needless to say that if an arbitrator acts beyond jurisdiction, the same would amount to misconduct (see para 10 of Hindustan Construction Co. Ltd. Vs. State of J & K because of which the award would become amenable of being set aside by a court. h. AIR 1997 SC 1376 in the case of Tamil Nadu Electricity Board Vs. Bridge Tunnel Constructions & Otherspara 36 It is well settled that in the matter of challenge to the award, there are two distinct and different grounds viz., that there is an error apparent on the face of the record and that the arbitrator has exercised his jurisdiction. In the latter case, the Court can look into the arbitration agreement but under the former, it cannot do so unless the agreement was incorporated or cited in the award of evidence was made part of the agreement. In the case of jurisdictional error, there is no embargo on the power of the Court to admit the contract into evidence and to consider whether or not the umpire had exceeded the jurisdiction because the nature of the dispute is something which has to be determined, outside the award, whatever might be said about it in the award or by the arbitrator. In the case of non-speaking award, it is not open to the Court to go into the merits. Only in a speaking award, the Court can look into the reasoning in the award and correct wrong proposition of law or error of law. It is not open to the Court to probe the mental process of the arbitrator and speculate, when no reasons have been given by the arbitrator, as to what impelled the arbitrator to arrive at his conclusion. But in the later case, the court, with reference to the terms of the contract/arbitration agreement, would consider whether or not the arbitrator/umpire has exceeded his jurisdiction in awarding or refusing to award the sum of money awarded or omitted a consolidated lumpsum. i. AIR 1999 SC 3627 in the case of Rajasthan State Mines & Minerals Ltd. Vs. Eastern Engineering Enterprises and Another paras 21 and 44 Further, in the present case, there is no question of interpretation of clauses 17 & 18 as the said clauses are so clear and unambiguous that they do not require any interpretation. It is both, in positive and negative terms by providing that contractor shall be paid rates as fixed and that he shall not be entitled to extra payment of further payment for any ground whatsoever except as mentioned therein. The rates agreed were firm, fixed and binding irrespective of any fall or rise in the cost of the work covered by the contract or for any other reason or any ground whatsoever. It is specifically agreed that contractor will not be entitled or justified in raising any claim or dispute because of increase in cost of expenses on any ground whatsoever. By ignoring the said terms, arbitrator has traveled beyond his jurisdiction as his existence depends upon the agreement and his function is to act within the limits of the said agreement. This deliberate departure from the contract amounts not only to manifest disregard of the authority or misconduct on his part but it may tantamount to mala fide action. From the resume of the aforesaid decisions, it can be stated that .
.
(g) in order to determine whether arbitrator has acted in excess of his jurisdiction, what has to be seen is whether the claimant could raise a particular claim before the arbitrator. If there is a specific term in the contract or the law which does not permit or given the arbitrator the power to decide the dispute raised by the claimant or there is a specific bar in the contract to the raising of the particular claim, then the award passed by the arbitrator in respect thereof would be in excess of jurisdiction.
(h) The award made by the Arbitrator disregarding the terms of reference or the arbitration agreement or the terms of the contract would be a jurisdictional error which requires ultimately to be decided by the Court. He cannot award an amount which is ruled out or prohibited by the terms of the agreement. Because of specific bar stipulated by the parties in the agreement, that claim could not be raised. Even if it is raised and referred to arbitration because of wider arbitration clause such claim amount cannot be awarded as agreement is binding between the parties and the arbitrator has to adjudicate as per the agreement. j. (2001) 4 SCC 241 in the case of Ramachandra Reddy & Co. Vs. State of A.P. & Others para 7 . . .The excavation of hard rock cannot be held to be a supplemental item and, on the other hand, it is an item of work tendered and accepted, and as such, clause 63 will have no application to Claim item 1. Mr. Rao had also relied upon the decision of this Court in National Fertilizers Vs. Puran Chand Nangia wherein this Court had held that an interpretation of a particular clause of the agreement must be such, so as to balance the rights of both the parties and when a variation clause permits the employer to make variation in the work upto a specified limit beyond the said limit, the claimant could be paid at a higher rate . . . k. (2001) 1 MLJ 636 in the case of The State of Tamil Nadu Vs. K. Ramaswamy & Another paras 9 and 10:
The scope of interfering with an Award of the Arbitrator is limited. Under Sec. 30 of the Arbitration Act, 1940, the Court can interfere only in case the Arbitrator has misconducted himself or the proceedings or that the Award has been improperly procured otherwise invalid. The Supreme Court, in Associated Engineering Company V. Government of A.P., A.I.R. 1992 SC 232, has held that the Arbitrator cannot act arbitrarily, irrationally, capriciously or independently of the contract. His sole function is to arbitrate in terms of the contract. He has no power apart from what the parties have given him under the contract. If he has traveled outside the bounds of the contract, he has acted without jurisdiction. Conscious disregard of the law or provision of the contract from which he has derived his authority vitiates the award. In State of Uttar Pradesh Vs. Ramnath International Construction (P) Ltd., (1996) 1 SCC 18, the Supreme Court held that the Court can interfere with the Award only on the ground set out under Section 30 of the Act. It cannot re-appreciate the evidence to examine the correctness of the conclusions of the Arbitrator. But, it can examine the clauses of the agreement to determine the correctness of the conclusion with reference to the clauses. The Arbitrator is a creature of the agreement itself and therefore, he is duty bound to enforce the terms of the agreement and cannot adjudicate the matter beyond the agreement itself. In State of Rajasthan Vs. Puri Construction Co. Ltd. (1994) 6 SCC 485, the Supreme Court held that an erroneous application of law constituting the very basis of the Award and improper and incorrect findings of facts without closer and intrinsic scrutiny demonstrable on the face of the material on the record amounts to misconduct. In S. Harcharan Singh Vs. , (1990) 4 SCC 647, the Supreme Court held that the jurisdiction of the Arbitrator is limited by the reference and if the Arbitrator has assumed jurisdiction not possessed by him, the Award, to that extent, is beyond the Arbitrators jurisdiction, would be invalid and liable to be set aside. In Food Corporation of India Vs. Joginder Pal Mohinder Pal, (1989) 2 SCC 347, the Supreme Court held that in case of errors apparent on the face of the Award, it can be set aside. In P.M. Paul Vs. , (1989)1 SCC (Supp.) 368, the Supreme Court held that if the claim was outside the purview of the contract, then it will be an adjudication in excess of jurisdiction, which may constitute legal misconduct. In Tarapore & Co. Vs. State of Madhya Pradesh, (1994) 3 SCC 521, it was held by the Supreme Court that an Arbitrator cannot travel beyond the contract and if an Arbitrator acts so, it would be misconduct.
Applying the principles set out above, we find that there is no provision or scope for admitting the claim of the respondents for the extra expenses incurred for carting. It is the sole responsibility of the first respondent to locate the quarry and find out the availability of the materials. If the quarry initially located could not be operated, he should have anticipated the availability and found out other alternative sources before making the tender. In spite of such a clear stipulation and the clauses of the notice and the said facts having been pointed out, the Arbitrator did not apply the clauses against the first respondent, but has gone into the claims and accepted them. We are not going into the admissibility or acceptance of such a claim on its merits. . . Therefore, we are of the clear view that the Arbitrator has gone beyond the scope of the contract and hence, the Award passed by him is liable to be set aside. l. AIR 1970 SC 967 (V 57 C 196) in the case of Dewan Singh Vs. Champat Singh & Others - para 9 . . .The recital in that agreement that the arbitrators may decide the disputes referred to them in whatever manner they think does not mean that they can decide those disputes on the basis of their personal knowledge. The proceedings before the arbitrators are quasi-judicial proceedings. They must be conducted in accordance with the principles of natural justice. The parties to the submission may be in the dark as regards the personal knowledge of the arbitrators. There may be misconceptions or wrong assumptions in the mind of the arbitrators. If the parties are not given opportunity to correct those misconceptions or wrong assumptions, grave injustice may result. . . .It is true that parties to an agreement of reference may include in it such clauses as they think fit unless prohibited by law. It is normally an implied term of an arbitration agreement that the arbitrators must decide the dispute in accordance with the ordinary law: see Chandris Vs. Isbrandtsen Moller Co. 1951-1 KB 240 that rule can be departed from only if specifically provided for in the submission. m. AIR 1999 SC 3275 in the case of Steel Authority of India Limited Vs. J.C. Budharaj, Government & Mining Contractor paras 15,16,17,28,29 and 31 It is settled law that arbitrator derives the authority from the contract and if he acts in manifest disregard and if he acts in manifest disregard of the contract, the award given by him would be arbitrary one. This deliberate departure from the contract amounts not only to manifest disregard of the authority or misconduct on his part, but it may tantamount to mala fide action.
. . . The arbitrator is not a conciliator and cannot ignore the law or misapply it in order to do what he thinks is just and reasonable.
. . . Arbitrator may have jurisdiction to entertain claim and yet he may not have jurisdiction to pass award for particular items in view of the prohibition contained in the contract and, in such cases, it would be a jurisdictional error. For this implied purpose, reference to the terms and conditions is a must. Dealing with similar question, this Court in New India Civil Erectors (P) Ltd. Vs. Oil & Natural Gas Corporation (1997) 11 SCC 75: (1997 AIR SCW 941: AIR 1997 SC 980 (para 7 of AIR) held thus:
It is exiomatic that the arbitrator being a creature of the agreement, must operate within the four corners of the agreement and cannot travel beyond it. More particularly, he cannot award any amount which is ruled out or prohibited by the terms of the agreement. In this case, the agreement between the parties clearly says that in measuring the built-up area, the balcony areas should be excluded. The arbitrators could not have acted contrary to the said stipulation and awarded any amount to the appellant on that count.
. . . The Court also referred to the earlier decision in Panchu Gopal Bose Vs. Board of Trustees for Port of Calcutta (1993) 4 SCC 338;(1994 AIR SCW 1335:AIR 1994 SC 1615), where the Court observed as under (para 11 of AIR)-
The period of limitation for commencing an arbitration runs from the date on which the cause of arbitration accrued, that is to say, from the date when the claimant first acquired either a right of action or a right to require that an arbitration takes place upon the dispute concerned.
. . .Applying the aforesaid ratio in the present case, right to refer the dispute to the arbitrator arose in 1979 when Contractor gave a notice demanding the amount and there was no response from the appellant and the amount was not paid. The cause of action for recovery of the said amount arose from the date of notice. Contractor cannot wait indefinitely and is required to take action within the period of limitation.
. . .Letter dated 3rd September 1983 written by the appellant repudiating the respondents claim on account of damages or losses sustained by him would not give fresh cause of action. . . . Under Section 3 of the Limitation Act, it was the duty of the arbitrator to reject the claim as it was on the face of it, barred by the period of limitation
29. In support of his contentions, the learned counsel for the first respondent has relied on the following judgments:
a. (2000) 8 SCC 626 in the case of Deo Narain Choudhury Vs. Shree Narain Choudhury para 13 Mr. Misra also relied upon the case of Food Corporation of India Vs. E. Kuttappan wherein again it is reiterated that the notice need not be in writing. In this case, the arbitrator had forwarded the award along with the entire record to the respondents counsel. This was done at the request of the respondents counsel. The respondents counsel then filed the award in the court. The court thereupon issued notice to the parties. The question was what was the date from which the period of limitation started running. This Court held that as the respondents counsel filed the award in court, he did so as an agent of the arbitrator. It was held that as the respondents counsel had filed the award in the court, the respondent had knowledge about the filing of the award and the period of limitation started running from the date when the award was filed in the court by the respondents counsel. This Court held that the mere fact that subsequently court had issued a notice to the parties did not extend the period of limitation. Thus, in this case, the notice by court was deemed to be the act of the respondents counsel in filing the award amount. b. (2003) 7 SCC 396 in the case of State of U.P. Vs. Allied Constructions para 4 . . . The arbitrator is a Judge chosen by the parties and his decision is final. The court is precluded from reappraising the evidence. Even in a case where the award contains reasons, the interference therewith would still be not available within the jurisdiction of the court unless, of course, the reasons are totally perverse or the judgment is based on a wrong proposition of law. An error apparent on the face of the records would not imply closer scrutiny of the merits of documents and materials on record. Once it is found that the view of the arbitrator is a plausible one, the court will refrain itself from interfering (see U.P. SEB Vs. Searsole Chemicals Ltd. and Ispat Engg. & Foundry Works Vs. Steel Authority of India Ltd.).
30. A detailed analysis of the above rulings would reveal under what circumstances, this Court can exercise its jurisdiction to set right any miscarriage of justice and mishandling of Arbitration proceedings by the Arbitrator. In Clause 78 of Conditions of Contract as cited supra, it has been dealt with in that in the event of breach of contract by either of the parties, the issue may be referred to an Arbitrator. Having agreed to appoint the Arbitrator and participated in the proceedings, the petitioner has no manner of right to question the award of the Arbitrator.
31. It is also the clear findings of the learned Sub-Judge that work can be commenced only after the approval of the layout and handing over of the site to the first respondent and the work has to be completed within a period of 120 days. But the first respondent has consciously taken note of the visit of the Prime Minister and had put in extra efforts to complete the work within a reasonable time as there was pressure on him to do the same at the earliest by engaging more labour and by procuring necessary equipments immediately. This situation has been taken into consideration by the Arbitrator and the Sub-Judge, taking the overall picture and after analysing the various rulings relied on by both the sides, has opined that the Arbitrator was appointed to conclude whether the demand for additional amount is just or not and whether there is any basis to demand such amount and various kinds of disputes arise while the contracts are made in Government public sector undertakings or private concerns. It is also his opinion that a new law is made just for the reason that there would be a lot of delay if the disputes are taken to the Courts. Keeping in mind the above findings, the learned Sub-Judge has confirmed the order of the Arbitrator.
32. Mr. N.A.K. Sarma, learned counsel for the appellant, has vehemently argued convincing this Court to come to the conclusion that there is a legal misconduct committed by the Arbitrator. But, in support of his contention, he has not made out any point which goes to prove that there is violation of rules and regulations leading to miscarriage of justice or mishandling of arbitration proceedings or serious neglect of duties on the part of the Arbitrator. In the absence of any such convincing reason made before this Court, I am not inclined to accept the arguments advanced by the counsel for the petitioner. Rather, I have to only accept the award of the Arbitrator which has been confirmed by the learned Sub-Judge. Accordingly, in my opinion, the award of the Arbitrator confirmed by the learned Sub-Judge is a correct proposition of law and I reject the contention of the learned counsel for the petitioner on the point of arbitrability as well as legal misconduct on the part of the Arbitrator. In that view of the matter, the appeal deserves no consideration.
33. While deciding the two issues namely arbitrability and legal misconduct, it is also one of the paramount points to consider whether the arbitrator is justified in awarding interest from the date of the claim of the first respondent by awarding interest @ 12% per annum from 22.11.1987.
34. It is pointed out by the counsel for the appellant that it was informed to the first respondent that the appellant was not responsible for the additional expenses incurred on 13.04.1987 and the first respondent was asked to collect the amount due to him as per the contract and he neither did come to the office of the appellant nor accepted the payment. So, the first respondent himself is responsible for the delay caused in the payment. It is the further contention of the counsel for the appellant that it is not proper to ask for that payment three years after 1989 and as such, this has to be considered as barred by limitation.
35. In support of the above contention, the learned counsel for the appellant has relied on a decision reported in 1997 (I) CTC 206 in the case of The Tamil Nadu Cements Corporation Limited Vs. Albert & Co. paras 9 and 10:
Secretary, Irrigation Department, etc. AIR 1992 SC 732 already referred to is not an authority for the proposition that interest is payable even for the period prior to the date of demand. The Constitution Bench while over-ruling the three-Judge Bench decision in Executive Engineer, Irrigation, Galimala Vs. Abna Duta Jena, AIR 1988 SC 1520 which held that the Arbitrator to whom the reference is made without the intervention of the Court did not have jurisdiction to award interest pendente lite, observed as follows:
Where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (along with the claim for principal amount or independently) is referred to the arbitrator, he shall have the power to award interest pendente lite. This for the reason that in such a case, it must be presumed that interest was an implied term of the agreement between the parties and therefore, when the parties refer all their disputes or refer the dispute as to interest a such to the arbitrator, he shall have the power to award interest. This does not mean that in every case, the arbitrator should necessarily award interest pendente lite. It is a matter within his discretion to be exercised in the light of all the facts and circumstances of the case, keeping the ends of justice in view. . . . There is therefore no justification for awarding interest from 15.04.1984. We are of the view that the award of interest for the period prior to the date of reference is not sustainable and the same has to be set aside.
36. Controverting the above contention of the appellant, the first respondent has relied on the decision of this Court reported in 1992 (1) LW 136 in the case of Tamil Nadu Cements Corporation Ltd., Chennai Vs. M/s. Sathyapal & Co., Chennai wherein it was held as follows:
"While this is the position in cases, which arose prior to the coming into force of the Interest Act, 1978, in cases arising after the coming into force of the acts, the position now is that though the award of pendente lite interest is still governed by the same principles, the award of interest prior to the suit is now governed by the Interest Act. Under the Interest Act, 1978, an Arbitrator is by definition, a Court and may now award interest in all the cases to which the Interest Act applies."
Relying on the above referred judgment, the counsel for the first respondent has contended that the interest awarded by the Arbitrator is justified.
37. The objects and reasons for the enactment of the Interest Act, 1978 clearly lay down that Interest Act was enacted only to prescribe the general law of Interest in a comprehensive and precise manner which becomes applicable in the absence of any contractual or statutory provision specifically dealing with interest. Even assuming that Interest can be awarded on the ground of equity, it can be awarded only on the reduced sum to be quantified and only from the date when it becomes due i.e. from the date of reference and not from any earlier date.
38. On going through the reliance placed by the counsel on either side, I am of the view that the Arbitrator ought to have directed the appellant to pay interest from the date of reference only and not from the date of the claim made. Accordingly, this Court directs the appellant to pay interest only from the date of reference made to the Arbitrator, i.e. only from 04.03.1992 onwards.
39. Further, Cross Objection No.35 of 1998 has been filed by the first respondent. It is the contention of the counsel for the Cross Objector that the learned Sub-Judge ought to have held that the written notice to the appellant is therefore not necessary and the judgment of the Supreme Court in AIR 1996 SC 1421 should have been applied properly in dismissing the O.P. filed by the appellant as barred by limitation.
40. The counsel for the Cross Objector has raised a point that the learned Sub-Judge ought not to have held that the petition filed by the appellant was not barred by limitation and has been filed within 30 days and the learned Sub-Judge, having held that the appellant was given notice on 20.01.1993 itself regarding the filing of the award before the Court, should have held such an oral notice is sufficient for the purpose of computing the period of limitation.
41. It is seen that the Cross Objection is on the point of limitation only and the learned Sub-Judge has answered the point in an exhaustive way which is as follows:
"On 10.11.1992, the award passed by the second respondent-Arbitrator and it was communicated to this respondent on 14.11.1992. Immediately, this respondent sent a letter to the petitioner on 26.11.1992 to pay the award amount. it was received by the petitioner on 27.11.1992. Since it was not settled, this respondent filed the Arbitration O.P. No.519 of 1992 on 18.12.1992 under Section 14 of the Arbitration Act, for the direction to the second respondent to file the order in Court. Hence, the second respondent filed his order in Court on 10.12.1992. That was received by the court on 14.12.1992. A notice was sent by the Arbitrator to the petitioner and to this respondent intimating the factum of filing of arbitration order in Court. On 15.12.1992, that notice was received by the first respondent. Petitioner too received the same on 15.12.1992. so, the petitioner was aware of the filing of award in Court in 15.12.1992. The suit was posted to 20.01.1993 on which date also, the Arbitrator appeared in Court and informed about the filing of order in Court. The petitioner herein who entered appearance on that date had notice of the filing of the award and he took time for filing his statements. It was adjourned to file his counter to 23.02.1993, again at his request adjourned to 15.03.1993, finally posted on 19.04.1993 as a last chance and he filed the counter only on 19.04.1993, and even in that counter also, he has not prayed for setting aside the award. So, the petitioner herein has not taken any steps to set aside the award within the time prescribed by law. Hence, this petition filed beyond the prescribed time is barred by limitation and is liable to be dismissed. Hence, under Section 17 of the Arbitration Act, the first respondent should be awarded the amount due to him."
In my considered view, the findings of the learned Sub-Judge in calculating the period of limitation is found to be reasonable.
42. Considering the overall aspects of the matter and in the light of what has been elaborately dealt in the foregoing paragraphs, except modifying the period for which the interest has to be paid by the appellant to the first respondent, the appeal preferred by the appellant in all other aspects is dismissed. Accordingly, as already stated in paragraph 38 of this judgment, the appellant is liable to pay interest to the first respondent only from the date of reference of claim i.e. 04.03.1992 and not from the date of claim i.e. 22.11.1987.
43. By an interim order in C.M.P. No.479 of 1998 dated 02.02.1998, this Court has passed an order directing the appellant to deposit the entire award amount and the first repondent was permitted to withdraw 50% of that amount on furnishing security and remaining 50% was ordered to be deposited in a Fixed Deposit in a nationalised bank, initially for a period of three years and it was further held that the successful party would be at liberty to withdraw the same on finalisation of the appeal with interest. Now that this C.M.A. has been dismissed, the first respondent is entitled to get 50% of the award amount lying in bank deposit with interest and the interest has to be calculated as per the modification made in this judgment. Further, the security furnished by the first respondent shall be revoked and the C.M.P. No.479 of 1998 is ordered in these terms. No costs.
Further, in view of the discussion made in paragraph 41 of this judgment, the Cross Objection preferred by the first respondent is also dismissed.
cad To
1. The Sub-Court Vridhachalam
2. The Record Keeper V.R. Section High Court of Madras Pre-delivery judgment in C.M.A. (NPD-S) No.67 of 1998 & C.M.P. No.479 of 1998