- (1.) THE above appeal challenges the order dated 25/02/2005 passed by the learned District Judge, North Goa at Panaji in Civil Miscellaneous Application No.257/2001.
(2.) " The appellant filed the said application challenging the award passed by the Arbitrator only to the extent of the award of interest by the Arbitrator at the rate of 21% per annum. The respondent disputed the contentions of the appellant and pointed out that the learned Judge had no powers to interfere in the discretion exercised by the Arbitrator in awarding such interest and modify the rate of interest under the provisions of Section 34 of the Arbitration Act. By the impugned order, the learned Judge rejected application filed by the appellant and confirmed the award passed by the Arbitrator awarding interest at the rate of 21% per annum. Being aggrieved by the said order, the appellant has preferred the present appeal. " Shri Guru Shirodkar, the learned Government Advocate appearing for the appellant has pointed out that the interest awarded by the Arbitrator is exorbitant as according to him as per the agreement executed between the parties there was no interest stipulated therein. The learned Counsel further submitted that the law is well settled as far as the grant of interest is concerned, it is entirely at the discretion of the Court and such discretion has to be exercised judiciously after considering the facts and circumstances of the case. The learned Counsel further submitted that the Arbitrator has erroneously awarded interest at the rate of 21% per annum on the assumption that the respondents had obtained loan for the purpose of depositing the security deposit when no such evidence was adduced before the learned Arbitrator. The learned Counsel further submitted that the Apex Court in the judgment reported in 2007 (2) SCC 720 in the case of Krishna Bhagya Jala Nigam Ltd. Vs. G. Harishchandra Reddy & Anr. has held that award of interest at the rate of 18% by the Arbitrator for pre-arbitration period, for the pendente lite period and future interest should be reduced to 9% in view of the substantial reduction of interest rate after economic reforms in the country. The learned Counsel as such submitted that the Arbitrator could not have awarded any interest beyond 9% per annum. " On the other hand, Shri Shivan Dessai, the learned Counsel appearing for the respondent has supported the impugned judgment. The learned Counsel fairly conceded that the agreement did not stipulate any rate of interest payable on the security deposit. He however submitted that the grant of interest is entirely at the discretion of the Court and considering that the Arbitrator has exercised such discretion no interference is called for in the impugned order. The learned Counsel has further submitted that in any event, considering the provisions of Section 31(7) of the Arbitration Act, 1996, the Court has power to award interest at the maximum rate of 18% and, as such, the rate of interest should at least be fixed at 18% per annum. The learned Counsel further submitted that there is no justification on the part of the appellant to hold on to the security deposit for such a long time and deprive the respondent from appropriating the said amount on account of the arbitrary and recalcitrant stand on the part of the appellant. The learned Counsel further submitted that the learned Judge has rightly rejected the application filed by the appellant and, as such, the question of any interference in the impugned order would not arise. The learned Counsel further submitted that merely because the Apex Court in the judgment Krishna Bhagya Jala Nigam Ltd. (supra) has awarded 9% per annum, it does not mean that in all the cases such interest is to be awarded and in support of such contentions, has relied upon the judgment of the Apex Court in the case of Sumtibai & Ors. Vs. Paras Finance Co. & Ors. reported in 2007 (10) SCC 82.
(3.) " Having heard the learned Counsel and on perusal of record, the following point for determination arises in the appeal: POINT FOR DETERMINATION : Whether the learned Tribunal was justified to award interest at the rate of 21% per annum from 1/01/1994 up to actual payment. " On perusal of the records and the award passed by the learned Arbitrator, I find that the amount which has been ordered to be refunded to the respondent is an amount of security deposit which was paid by the respondent to the appellant and was wrongly detained by the appellant. Once the learned Arbitrator has come to the conclusion that there was no justification for the appellant to hold on to such security deposit, naturally the respondents would be entitled for the refund of the said amount together with interest thereon. The learned Arbitrator while passing the award has held that in view of the statement of the respondents that he had taken loan for the purpose of effecting such security deposit the interest at the rate of 21% per annum would be justified in the circumstances of the case. The Apex Court in the said judgment relied upon by the learned Government Advocate in the case of Krishna Bhagya Jala Nigam Ltd. (supra) has held at para 11 thus: "11. On the merits of the claims made by the contractor we find from the impugned award dated 25-6-2000 that it contains several heads. The arbitrator has meticulously examined the claims of the contractor under each separate head. We do not see any reason to interfere except on the rates of interest and on the quantum awarded for letting machines of the contractor remaining idle for the periods mentioned in the award. Here also we may add that we do not wish to interfere with the award except to say that after economic reforms in our country the interest regime has changed and the rates have substantially reduced and, therefore, we are of the view that the interest awarded by the arbitrator at 18% for the pre-arbitration period, for the pendente lite period and future interest be reduced to 9%." In another judgment of the Apex Court in the case of Numaligarh Refinery Ltd. Vs. Daelim Industrial Co. Ltd. reported in 2007 (8) SCC 466, it has been held at para 28 thus: "28. The next claim is with regard to interest. The majority of the arbitrators have granted interest on the amount at the rate of 12 per cent pendente lite and post pendente lite at the rate of 18 per cent but the minority arbitrator, Justice M.M. Dutt has granted 10 per cent interest uniformly. The grant of interest is discretionary and the majority of the arbitrators have rightly granted interest at the rate of 12 per cent pendente lite and at the rate of 18 per cent post pendente lite. Therefore, no exception can be taken to grant of such interest. Consequently, we affirm this finding of the majority of the arbitrators and of the High Court.";