Document Fragment View

Matching Fragments

1. This appeal under section 39(vi) of the Arbitration Act, 1940 (hereinafter referred to as "the Act") is directed against the judgment and. order of the learned Single Judge dated 19th October 1994 refusing to set aside an Arbitration Award No. 166 of 1989 dated 20th October 1989.

2. Some time in 1983, the appellant had floated tenders for construction of 14,000 M.T. cold storage at Vashi, New Mumbai. The respondent, a construction firm, had tendered for the work and was awarded the contract for the said construction work. The contract was signed some time in 1984. Some time during the year 1986, disputes arose between the appellant and the respondent. The respondent filed Arbitration Suit No. 3219 of 1986 under the Act for appointment of an arbitrator. There was protracted litigation between the parties which even went to the Supreme Court and came back. We are not concerned with the details of the said litigation except that as a result of certain directions made by the Supreme Court, this Court ultimately appointed one S.N. Mishra, as the sole arbitrator by an order dated 2nd November 1988. The arbitrator entered upon the reference on 1st March 1989. The respondent filed its statement of claim on 2nd March 1989 which was replied by the written statement of the appellant filed on 16th March 1989. A rejoinder was filed on 28th March 1999 and the award came to be made on 20th October 1989. The arbitrator by his award directed the appellant to pay a sum of Rs. 32,68,805.80 ps. to the respondent and further directed that if the appellant failed to pay the said sum to the respondent on or before 15th December 1989, then the said sum was to carry interest at 18% p.a. upto the date of final payment.

Ground (iv)

17. The next item pertains to interest. There are three limbs to the argument and we shall deal with them separately.

18. As already pointed out, the arbitrator entered upon the reference on 1st March 1989. The arbitrator having found that the appellant was liable to pay total sum of Rs. 32,68,805.80 ps., directed that if the said amount is not paid by the appellant to the respondent upto 15th December 1989, the same would carry interest @ 15% p.a. till the date of payment. This total amount of Rs. 32,68,805.80 includes the following three claims :

"43. 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 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, Civil Procedure Code and there is no reason or principle to hold otherwise in the case of arbitrator.

30. We may reiterate here the observation of the Supreme Court in G.C. Roy (supra) where it was, highlighted that a person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name, interest, compensation or damages. The Supreme Court emphasized that 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 and emphasized that this was the principle also under section 34 of the Code of Civil Procedure and that there was no reason or principle to hold otherwise in the case of an arbitrator