CHINNAPPA REDDY - (1.) THE Judgment of the court was delivered by -
(2.) THIS group of appeals raises the question of award of interest by an arbitrator to whom a reference is made with out the intervention of the court. Special leave to appeal was granted under Article 136 of the Constitution limited to the question of award of interest during the period prior to the reference and during the pendency of the arbitration proceedings, special leave was not granted in regard to the award of interest subsequent to the date of the arbitrator's award, THIS question, therefore, does not concern us in these appeals. The various references to arbitration in these cases were in regard to work done by different contractors in excess of what was stipulated under the several contracts. The contracts generally contained a clause to the following effect : Clause 11. The Engineer-in-charge shall have power to make any alterations in or additions to the original specifications, drawings, designs, and instructions that may appear to him to be necessary or advisable during the progress of the work, and the contractor shall be bound to carry out the work in accordance with any instructions which may be given to him in writing signed by the Engineer-in-charge, and such alteration shall not invalidate the contract; and any additional work which the contractor may be directed to do in the manner above specified as part of the work shall be carried out by the contractor on the same conditions in all respects on which he agreed to do the main work, and at the same rates as are specified in the tender for the main work. The time for the completion of the work shall be extended in the proportion that the additional work bears to the original work bears to the original contract work and the certificate of the 422 Engineer-in-charge shall be conclusive as to such proportion. And if the additional work includes' any class of work, for which no rate is specified in this contract, then such class of work shall be carried out at the rates entered in the sanctioned schedule of rates of the locality during the period when the work is being carried on and if such last mentioned class of work is not entered ill the schedule of rates of the district then the contractor shall within seven days of the date of his receipt of the order to carry out the work inform the Engineer-in-charge of the rate which it is. his intention to charge for such class of work, and if the Engineer-in-charge does not agree to this rate he shall by notice in writing be at liberty to cancel his order to carry out such class of work and arrange to carry it out in such manner as he may consider advisable, provided always that if the contractor shall commence work order of any expenditure in regard thereof before the rates shall have been determined as lastly here in before mentioned, then and in such a case he shall only be entitled to be paid in respect of the work carried out or expenditure incurred by him prior to the date of the determination of the rate as aforesaid according to such rate or rates as shall be fixed by the Engineer-in-charge. In the event of a dispute, the decision of the Superintending Engineer of the circle will be final: Provided always that the contractor shall not be entitled to any payment or any additional work done unless he has received an order in writing from the Engineer-in-charge for the additional work that the contractor shall be bound to submit his claim for any additional work done during any month on or before the 15th day of the following month accompanied by a copy of the older in writing of the Engineer-in-charge fur the additional work, and that the contractor shall not be entitled to any payment in respect of such additional work it he fails to submit his claim within the aforesaid period. All the contracts also contained a provision for a reference to arbitration in case of disputes. The clause of the contract enabling the reference was as follows: Clause 23. Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, designs, drawings, and instructions here in before mentioned and as to the quality of workmanship, or materials used on the work, or as to any other question, claim, right matter, or thing whatsoever, in any way arising out or, or relating to the contract, designs, drawings, specifications, estimates, instructions, orders, or these conditions, or otherwise concerning the work or the execution, or failure to execute the same, whether arising during the 423 progress of the work, or after the completion or abandonment thereof shall be referred to the sale arbitration of a Superintending Engineer of the State Public Works Department unconnected with the work at any stage nominated by the concerned Chief Engineer. If there be no such Superintending Engineer it should be referred to the sole arbitration of the Chief Engineer concerned. It will be no objection to any such appointment that the arbitrator so appointed is a government servant. The award of the arbitrator so appointed shall be final, conclusive and binding on all parties to these contract. Pursuant to the clause in the contracts enabling the Chief Engineer to refer disputes to an arbitrator, references were made. For the purposes of our decision, we are proceeding on the basis that in the notices of demand made by the contractors before the disputes were referred to arbitration interest on the amounts said to be payable was claimed.
(3.) THE general statutory provisions in regard to the award of interest by a court are contained in the Interest Act and the Civil Procedure Code. THE Interest Act of 1839 contained only one S. and it was as follows : 1. It is, therefore, hereby enacted that, upon all debts or sums certain payable at a certain time or otherwise, the court before which such debts or sums may be recovered may, if it shall mink tit, allow interest to the creditor at a rate not exceeding the current rate of interest from the time when such debts or sum certain were payable, if such debts or sums be payable by virtue of some written instrument at a certain time ; or it payable otherwise, then from the time when demand of payment shall have been made in writing, so as such demand shall give notice to the debtor that interest will be claimed from the date of such demand until the term of payment : provided that interest shall be payable in ail cases in which it is now payable by law. In 1978, the Interest Act of 1839 was repealed and a new Interest Act was enacted. THE Statement of Objects and Reasons of the new Act recited: THE Law Commission of India in its sixty-third report had recommended the revision of the existing Interest Act, 1839. This Act is a very short one, besides a preamble, it contains only one S. and a proviso. However, it is a statute of importance, since it prescribes the general law of interest which becomes applicable in the absence of any contractual or statutory provisions specifically dealing with the subject. According to 424 rise to problems of interpretation and judicial decisions have disclosed divergence of views in respect of the same. THE Commission has revised the Act comprehensively so as to make its provisions more precise, specific, unambiguous and juristically satisfactory. It is proposed to replace the existing Act by a new Act based on the recommendations of the Law Commission. THE new Act has made some important changes. One of the important changes is that the expression 'court' is denied to include a tribunal and an arbitrator. Debt is defined as meaning any liability for an ascertained sum of money, including a debt payable in kind, but not including a judgment debt. S. 3(1) enables the court, if it so thinks fit, to award interest, in any proceeding for the recovery of any debt or damages or in any proceeding in which a claim for interest in respect of any debt or damages already paid is made, to the person entitled to the debt or damages or to the person making such claim, for the whole or part of the following period: (a) if the proceeding relates to a debt payable by virtue of a written instrument at a certain time, then, from the date when the debt is payable to the date of institution of the proceedings; (b) if the proceeding does not relate to any such debt, then from the date mentioned in this regard in a written notice given by the person entitled or the person making the claim to the person liable that interest will be claimed, to the date of institution of the proceeding. S. 3(3) provides that nothing in the S. shall apply in relation to (i) any debt or damages upon which interest is payable as of right, by virtue of any agreement; or (ii) any debt or damages upon winch payment of interest is barred by virtue of an express agreement. S. 3(3)(C) provides that nothing in the S. shall empower the court to award interest upon interest. S. 4(1) provides, notwithstanding anything contained in S. 3, interest shall be payable in all cases in which it is payable by virtue of any enactment or other rule of law or usage having the force of law. S. 4(2) further provides, notwithstanding anything as S. 4 [sic as aforesaid, and without prejudice to the generality of the provisions of Ss. (1),] the court shall allow interest in the class of cases specified in S. 4(2) from the dates stipulated to the dates stipulated in the provision. S. 5 provides that nothing in the Act shall affect the provisions of S. 34 of the Code of Civil Procedure, 1908.;