Back
2004 Supreme(SC) 788
2004(6) Supreme 8
SUPREME COURT OF INDIA
(From Kerala High Court)
S.N. Variava & Arijit Pasayat, JJ.
The State of Kerala etc.etc. -Appellants
versus
M/s Arya Refrigeration & A/C Co. etc.etc. -Respondents
Civil Appeal No. 2078 of 1984
With
I.A. No.6 and Civil Appeal No. 362 of 1988
Decided on 3-8-2004
Counsel for the Parties :
For the Appellant : Ramesh Babu, M.R., Advocate.
For the Respondent : R. Satish, Advocate.
Headnote:Arbitration Act, 1940-Section 9-Arbitration Award, well reasoned and detailed award-Plea of claimant that the award suffered from any infirmity-Claimant entered into an agreement with State of Kerala for supply and erection of a 100 tonne ice-cum-cold storage plant-Reference of dispute to arbitrators-State Government cancelled the contract and it was terminated-Claimant questioned the cancellation and raised the claims-Award passed objections-Interim order directing that appellant State should deposit Rs. 5,75,000/- as awarded by the Arbitrator with registry of Court-Award challenged alleging that Arbitrator disregarded fundamental terms of contract and exceeded his jurisdiction-Liability for interest disputed-Whether considering facts and circumstances of the case, award can be held as infirm-(No)-Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993.
Held : It has to be noticed that the arbitrator has given a very well reasoned and detailed award. It could not be shown as to in what way the fundamental terms of the contract were disregarded. The arbitrator has referred to various clauses of the contract and the effect thereof. The findings are in no way perverse or unreasonable. We do not find substance in the plea of learned counsel for the claimant that the award suffered from any infirmity. So far as applicability of the Interest On Delayed Payments Act is concerned, it appears that before the arbitrator no claim in that regard was made. In order to attract the provisions of the said Act, the factual aspect like the prevailing bank rate of interest were to be brought on record. This has not been done. So the plea in that regard is also without any substance. We, however, find substance in the plea relating to computation of the amounts receivable by the claimant. As rightly submitted, there was nothing on record to show that the claimant had withdrawn the amount which was deposited with the Subordinate Court, Trivandrum. Similarly, a sum of Rs. 47,000/- has been adjusted more than once. Necessary adjustment in this regard has to be made. So far as the plea relating to 15% rate of interest is concerned, it has to be noted that this Court directed that in case appeal is allowed, State would be entitled to interest @ 15%. That situation has not come. It would, therefore, be proper to apply 9% rate of interest on the sum of Rs. 5,75,000/-. With the above modifications and computation award of the arbitrator is made rule of the Court and entire respective amounts be worked out and decree drawn up accordingly. (Paras 8 and 9)
JUDGMENT
Arijit Pasayat, J.-These two appeals are interlinked and, therefore, taken up together for disposal. Civil Appeal No. 2078 of 1984 is by the State of Kerala questioning correctness of the decision rendered by learned Single Judge of the Kerala High Court directing deposit for Rs. 5,75,500/- in Court, upholding the directions of deposit given by Sub Court, Trivandrum in E.P. No. 109 of 1981 in O.P. (Arbitration) No. 4 of 1979. Learned Single Judge held that there was nothing wrong with the direction to warrant interference under Section 115 of the Code of Civil Procedure 1908 (in short the Code ). Civil appeal No. 362 of 1988 has been filed by M/s Arya Refrigeration and Air Conditioning Co. Ltd. (hereinafter referred to as the claimant ) questioning correctness of the judgment rendered by the Division Bench of the Kerala High Court setting aside the decree in terms of the award given by the two arbitrators appointed by the Court.
2. Though the case has a chequered history, it is not necessary to deal with the factual position in detail, as the same is almost undisputed. Claimant entered into an agreement with the State of Kerala on 18.1.1965 for supply and erection of a 100 tonne ice-cum-cold storage plant at Willington Island Cochin. The agreed amount was Rs. 9,40,000/-. Though some plants and machines were supplied, they could not be installed because of non-construction of the building to house them. As time passed, dispute arose between the parties and the matter was referred to arbitrators in terms of clause 15 of the agreement. There were two arbitrators who passed an award on 2.11.1978. The amount awarded by the arbitrators was Rs. 5,05,500/-. Soonafter the award was passed, the State Government cancelled the contract and the same was terminated w.e.f. 17.11.1978. Claimant questioned the cancellation and raised the claims. In view of the cancellation of the contract the claimant referred the matters to arbitration and nominated the arbitrator under Section 9 of the Arbitration Act 1940 (in short the Act ). Notice was served on the State but it did not nominate any arbitrator. Arbitration proceedings continued, State did not participate before the sole arbitrator and finally the award was passed on 17.5.1982 awarding Rs. 22,72,500/- to the claimant. The State questioned correctness of the award. But the trial Court overruled objections of the State and made the award given by the Arbitrator rule of the Court. The State questioned the correctness of the decree passed by the Subordinate Court in terms of the award. By the impugned judgment dated 10.11.1986, a Division Bench of the High Court, as noted above, set aside the award. Before this Court also the matter was taken up. Parties finally agreed to settle the dispute out of the Court, but later on requested for appointment of an arbitrator by this Court to adjudicate the dispute. By order dated 13.12.1999 Mr. Justice B.M. Tulsidas, a retired Judge of the Kerala High Court was appointed as an Arbitrator, though initially another Arbitrator was appointed. As an interim measure, by order dated 16.4.1984 in civil appeal No. 2078 of 1984, it was directed that the appellant-State should deposit Rs. 5,75,500/- as awarded by the Arbitrator with the registry of this Court. The claimant was permitted to withdraw the amount with the stipulation that the claimant shall return the amount together with interest @ 15% p.a. in case the appeal is allowed. Mr. Justice Thulsidas has filed the award before this Court. In the award the Arbitrator has held, after consideration of the claimant s claim and counter-claim of the State, that claimant is liable to pay to the State a sum of Rs. 28,12,554/- with interest @ 15% from the date of award i.e. 11.12.2002 till payment or deposit. The claimant was also directed to pay Rs. 25,666/- by way of Arbitrators remuneration. The Arbitrator has held that out of the agreed amount of consideration stipulated in the contract i.e. Rs. 9,40,000
