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SUPREME COURT OF INDIA
JAGDISH SINGH KHEHAR, CJI., D.Y. CHANDRACHUD, SANJAY KISHAN KAUL, JJ.
ASSAM STATE ELECTRICITY BOARD AND ORS. – Appellants
VERSUS
BUILDWORTH PVT. LTD. – Respondens
CIVIL APPEAL NO 484 OF 2008 WITH C A NO OF 2017 @ S L P(C)NOS 6428-6429 OF 2008
Decided On : 04-07-2017
(b) Contract Act, 1872 – Section 55 and 56 – Contract not rescinded by a party – The party accepting belated performance of reciprocal obligations – The other party would be entitled to make a claim for damages – Instantly work was to be completed within 12 months from 25 June 1983 – It was subsequently extended until 6 September 1983 – Actual work was completed on 28 May 1985 while one portion of the work was completed on 31 January 1986 – Price escalation clause capping the same at Rs 9.16 lacs – Arbitrator holding this cap to be applicable within the period of the project – Arbitrator also holding that in view of the Board extending the period up to 6 September 1983 and allowing the claimant to work beyond that period and settling the accounts as on 31.1.86, the period would be deemed to be extended up to 31.1m .86 – Arbitrator therefore holding the claimant entitled to cost escalation from 6 September 1983 to 31.1.86 – No infirmity. (Para 15, 16)
1989 Supp (1) SCC 368; (2006) 13 SCC 779; (2007) 13 SCC 43; (2002) 4 SCC 45 – Relied upon
(c) Arbitration – Damages for idling of manpower and machinery etc. – Arbitrator holding contributory delay on part of the claimant – Yet arbitrator awarding damages – It cannot be said that aspect of contributory delay was not duly considered while computing the damages. (Para 18)
(d) Arbitration Act, 1940 – Section 29 – Interest – For pre-reference period and pendente lite – Within the power of the arbitrator, particularly in absence of any bar to it in the contract. (Para 19, 20, 23)
(1992) 1 SCC 508; (2001) 2 SCC 721; (2016) 6 SCC 36 – Relied upon
(e) Interest Act, 1978 – Section 3(1)(b) – interest on damages – Arbitrator empowered to grant interest on damages from the date mentioned in this regard in a written notice claiming such interest. (Para 21)
(2009) 12 SCC 1 – Relied upon
Facts of the case:
An arbitral award was rendered on 31 December 1998 by a sole arbitrator under the Arbitration Act, 1940. By the award an amount of Rs 30,73,916/-was awarded to Buildworth Pvt Ltd -the claimant in the proceedings together with future interest at 18 per cent per annum against the Assam State Electricity Board.
Assam State Electricity Board, against whom the claim was awarded, filed its objections. The Civil Judge, Senior Division, Kamrup made the award a Rule of the Court pursuant to the legislative regime which prevailed at the material time.
An appeal was filed against the judgment of the Civil Judge. A Division Bench of the Gauhati High Court by its judgment dated 21 November 2006 upheld the award except for the award of interest by the arbitrator between 7 March 1986 and 31 December 1997.
Finding of the Court:
There is no infirmity in the impugned judgment.
Result: Appeal filed by the claimant allowed and the appeal filed by the Board dismissed.
JUDGMENT
Dr D.Y. CHANDRACHUD, J
1. An arbitral award was rendered on 31 December 1998 by a sole arbitrator under the Arbitration Act, 1940. By the award an amount of Rs 30,73,916/-was awarded to Buildworth Pvt Ltd -the claimant in the proceedings together with future interest at 18 per cent per annum.
2. The arbitrator filed his award. Assam State Electricity Board, against whom the claim was awarded, filed its objections. On 22 December 2000 the Civil Judge, Senior Division, Kamrup made the award a Rule of the Court pursuant to the legislative regime which prevailed at the material time. An appeal was filed against the judgment of the Civil Judge. A Division Bench of the Gauhati High Court by its judgment dated 21 November 2006 upheld the award except for the award of interest by the arbitrator between 7 March 1986 and 31 December 1997. The High Court found no ground to interfere with the merits of the award on the claim for idling charges and escalation. However, the Division Bench opined that Section 29 of the Arbitration Act, 1940 did not confer jurisdiction on the arbitrator to award interest prior to the date of the reference.
3. Assam State Electricity Board as well as Buildworth Pvt Ltd are before this Court. The former seeks to impugn the correctness of the judgment of the Division Bench which found no reason to interfere with the award on merits. The latter has challenged that part of the order of the High Court by which the award of interest has been set aside. Leave was granted in the proceedings initiated by the Board under Article 136 on 15 January 2008. We grant leave in the Special Leave Petitions filed by the claimant and proceed to dispose of both sets of appeals.
4. For convenience of reference, Assam State Electricity Board would be referred to as ‘the Board’ while the Buildworth Pvt Ltd would be referred to as ‘the claimant’ in this judgment.
5. Pursuant to a purchase order dated 6 September 1982 an agreement was entered into between the Board and the claimant for the supply and installation of a circulating Water Piping System for the Bongaigaon Thermal Power Station. The purchase order contains provisions inter alia for the consideration payable, delivery, escalation, period for commissioning, penalty, disputes, terms of payment and arbitration. The total value of the contract was determined at Rs 86.82 lacs and the period for completion was 12 months from 25 June 1983, the date of the issue of the indent. The date for the completion of the work was subsequently extended until 6 September 1983. The actual work was completed on 28 May 1985 while one portion of the work of TG-IV was completed on 31 January 1986.
6. During the course of the arbitration the claimant raised several claims amounting to Rs 77.16 lacs including those on account of : (i) price variation; (ii) idling charges of supervisory staff and labour; (iii) idling charges for machines, tools and tackles; (iv) compensation for extended stay for civil work; (v) interest from 7 March 1986 (i.e. the date of submission of bills) to 31 December 1997 at 18 per cent; (vi) escalation on account of gas; (vii) price variation of electrodes; (viii) legal expenses; and (ix) future interest at 18 per cent.
7. The sole arbitrator awarded a sum of Rs 10,73,969/-on account of idling charges of labour and machinery and towards price escalation. In addition, a lumpsum of Rs 20 lacs as interest was awarded between 7 March 1986 and 31 December 1997. Future interest was awarded at the rate of 18 per cent per annum on the sum awarded, after a period of three months from the date of the award.
8. The award was made a Rule of the Court on 22 December 2000 by the Civil Judge, Senior Division. The High Court partially allowed the appeal filed by the Board by setting aside the award of interest of Rs 20 lacs by the arbitrator.
9. We will initially consider the submissions which have been urged on behalf of the Board to challenge the arbitral award. Two submissions have
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