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2005(3) Supreme 141
Supreme Court of India
(From Rajasthan High Court)
R.C. Lahoti, CJI, D.M. Dharmadhikari & P.K. Balasubramanyan, JJ.
State of Rajasthan etc. etc. —Appellants
versus
M/s. Nav Bharat Construction Co. —Respondent
Civil Appeal No. 8052 of 2001
With
C.A. No. 8053/2001, C.A. No. 8054/2001, C.A. No. 8055/2001
And
Civil Appeal No. 1400 of 2002
Decided on 28-3-2005
Counsel for the Parties :
For the Appellant : Aruneshwar Gupta, Additional Advocate General for Rajasthan, Naveen Kr. Singh and Ms. Shivangi, Advocates.
Respondent-In-Person in C.A.No. 8052/2001 and Appellant in C.A.No. 1400/2002.
Held : Clause 23 of the Agreement is undoubtedly not an arbitration clause and the sitting Chief engineer, to whom earlier reference was made, could not have acted as an arbitrator and made the award. The sitting Chief Engineer to whom initial reference was made did not complete the arbitration proceedings. The substituted arbitrator was a retired Chief Engineer and parties agreed to his appointment and submitted to his jurisdiction. By consent of parties, he was chosen sole arbitrator and disputes were referred to him. The State, without demur or protest, submitted to the jurisdiction of the arbitrator and participated in the proceedings. The State is estopped on the doctrine of acquiescence and waiver from raising objection to the competence of the substituted arbitrator and validity of the arbitration proceedings by taking recourse to clause 23 of the agreement on the basis of which initial reference was made to sitting Chief Engineer. See following observations in the case of Prasun Roy vs. Calcutta Metropolitan Development Authority [1987(4) SCC 217]. (Para 12)
(ii) Arbitration Act, 1940—Sections 29 and 30—Civil Procedure Code, 1908—Section 152—Arbitration award made rule of Court dismissing objections—Court omitted to mention interest payable on amount awarded—On an application filed by Contractor for rectification of decree, Court granted decree of interest @ 12% on award amount from date of award till payment—Section 29 of the Act empowered Court to order payment of interest at such rate as Court deemed reasonable on principal sum as adjudged by award and confirmed by decree—Interest at 12% on principal sum awarded by Court could not be held to be so low as to treat it as unreasonable—Court in awarding interest had corrected mere accidental error or an omission and that too with consent of parties—No interference was warranted.
Held : On the question of rate of future interest from the date of decree to the date of payment, Section 29 of the Act empowers the Court to order payment of interest at such rate as the court deems reasonable to be paid on the principal sum as adjudged by the award and confirmed by the decree. The decision in the case of Central Bank of India vs. Ravindra (supra) was based on Section 34 of the Code of Civil Procedure as it stood prior to and after its amendment by Act No 66 of 1956 and has no direct application to the rate of future interest payable on the principal sum awarded by the arbitrator in the proceedings under the Arbitration Act. The interest @ 12% awarded on the principal sum by the court cannot be held to be so low as to treat it as unreasonable. We decline to interfere under Article 136 of the Constitution in the rate of interest awarded by the civil court treating it to be a reasonable rate. The appeal, preferred by the Contractor claiming future interest at higher rate, is dismissed. (Para 18)
The High Court is dismissing the appeal against the said order has stated that merely an accidental error or an omission in the initial decree passed, was corrected and that too with the consent of the parties. This appeal preferred against the order of the High Court passed on consent of parties cannot be interfered with. It is also, accordingly, dismissed. (Para 22)
Judgment
Dharmadhikari, J.—These appeals arise out of an award dated 29.9.1997 passed by the sole Arbitrator viz. S.S. Mathur, retired Additional Chief Engineer, Public Works Department, on a reference of dispute concerning civil construction work awarded to the Contractor by the State of Rajasthan. The arbitration proceedings were regulated by provisions of the Arbitration Act, 1940 (for short ‘the Act’). The sole Arbitrator awarded a sum of Rs. 6,68,058.16 with interest @ 18% per annum from the date of the award till date of decree or payment, whichever is earlier.
2. The State of Rajasthan under Section 30(1) of the Act filed objections to the Award. The Contractor by application under Section 17 of the Act prayed for passing a decree in terms of the Award. The objections of the State were rejected by the Court of the District Judge who made the Award Rule of the Court by passing a decree in terms thereof on 5.10.1999. In the order making award Rule of the Court and passing a decree thereon, there was omission of not mentioning the interest payable on the amount awarded. On the application under Section 152 of the Code of Civil Procedure (CPC) filed by the Contractor for rectification of the decree, the court passed the order on 29.4.2000 and granted a decree of interest @ 12% p.a. on the awarded sum of Rs. 6,68,058.16 from the date of award i.e. 29.9.1997 till the date of payment. Pursuant to the above order a modified decree for the above-mentioned amount with 12% future interest was passed.
3. We shall first dispose of the appeals preferred by the State against the revisional and appellate orders of the High Court arising out of orders passed by the civil court during proceedings of the arbitration.
Civil Appeal No. 8052 of 2001
4. Civil Appeal No. 8052 of 2001 arises from of an order of the High Court passed in appeal confirming the order of the civil court dated 24.8.1992 whereby, in exercise of powers under Section 8B read with Section 41(b) of the Act, in place of the arbitrator initially appointed, new arbitrator was substituted on the suggestions and proposals of the parties.
5. Learned counsel appearing for the State of Rajasthan invited our attention to the contents of clause 23 of the Agreement on the basis of which the arbitration proceedings were initiated. Clause 23 reads thus :
“Clause 23 : Except where otherwise specified in the contract the decision of the Chief Engineer of the Government of Rajasthan for the time being shall be final conclusive and binding on all parties to the contract upon all questions relating to the meaning of the specifications, decisions, 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 of or relating to the contract, designs, drawings specifications, estimates, instructions, orders or these conditions, or otherwise concerning the works, or the execution or failure to execute the same, whether arising during the progress of the work or after the completion or abandonment thereof, of the contract by the contractor shall be final, conclusive and binding on the contractor.”
6. On behalf of the State, it is argued that the aforesaid clause, making a provision for settlement of questions relating to specification, design, quality and workmanship and other technical aspects by the sitting Chief Engineer of the Government, has not been held to be an arbitration clause in a series of the decisions of this Court. Reliance is placed on Executive Engineer, REO vs. Suresh Chandra Panda (d) through LRs. [1999(9) SCC 92]; State of UP vs. Tipper Chand [1980(2) SCC 341]; State of Madhya Pradesh vs. KK Shukla [2001(10) SCC 194]; and Prabartak Commercial Corporation Ltd. vs. Chief Administrator, Dandakaranya Project [1991(1) SCC 498].
7. The submission made on behalf of the State that the above-quoted clause 23 of the Agreemen
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