SUSAKA P LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) Appeal admitted. Notice made returnable forthwith. Respondents waive service. By consent, appeal called out and heard.

(2.) The appellant company was given the work for repairs of starters in terms of the agreement dated 19th December, 1994. The contract was to be completed on or before 30th December, 1995. The duration of the contract was for a period of 15 months. There is no dispute that the said contract was extended on various occasions upto August, 1996. It appears that on 1st December, 1995, the appellant wrote to the respondents that 3 starters are ready for dispatch and thereafter on 11th December, 1995, the appellant wrote to the respondents to release further 8 starters for repairs. The respondents did not give to the appellant any further starters for repairs. Thus, the dispute having arisen the matter was referred to the Arbitral Tribunal. The Arbitral Tribunal by its award dated 9th september, 2002 allowed various claims made by the appellant on which interest has been also awarded. The arbitration award was challenged under section 34 of the Arbitration and Conciliation Act, 1996 by Arbitration Petition No. 96 of 2003. This petition was partly allowed by the learned single Judge by setting aside the interest awarded in the sum of Rs. 8,12,89,033 upto the date of award. The learned single Judge has held that as Claim Nos. 1.2, 1.3, 1.4, 1.5, 2.1, 1.7 and 2.2 are by way of damages, the interest could have been awarded only on the award being passed as then only it becomes a debt or the sums become crystalised and thus the award of interest was contrary to law and public policy of the country.

(3.) Mr. Godbole, learned counsel appearing for the appellants submitted that under section 31 (7) (a) of the Act, the Arbitral Tribunal is empowered to award interest at such rate as it deems reasonable for the whole or any part of the period between the date on which the cause of action arose and the date on which award is made. Insofar as the aforesaid period is concerned, the Act in fact provides that the amount awarded shall carry interest at the rate of 18% p. a. unless the award otherwise directs. The Arbitrators have exercised their discretion in a manner which is specifically provided in sub-section (7) of section 31. The award of interest was thus proper and the learned single Judge has erred in setting aside the award. Mr. Godbole further submitted that even under the old arbitration Act of 1940 it was permissible for the arbitrators to award interest on damages. He referred to the decisions of the Supreme Court in the case of Secy. Irrigation Deptt. Govt. of Orissa vs. G. C. Roy, (1992) 1 SCC 508, Executive engineer, Dhenkanal Minor Irrigation Division, Orissa and Others vs. N. C. Budharaj (deceased) by LRs and others, (2001) 2 SCC 721; T. P. George vs. State of Kerala and another, AIR 2001 SC 816 and Oil and Natural Gas commission vs. M. C. Clelland Engineers S. A. , 1999 (4) SCC 327. On the other hand Mr. Suresh Kumar learned Counsel for the respondents relying upon a decision of the Supreme Court in Union of India vs. A. C. Railing Ram, AIR 1963 sc 1685 submitted that it is not permissible for the Arbitral Tribunal to award interest on damages and the claim for interest was rightly disallowed by the learned single Judge.