Clause 16 (2) of the Standard General Conditions of Contract does not restrict the power of the Arbitrator to grant interest on the amounts payable to the contractor.

( 1 ) THESE two cases arise out of a common judgment relating to award passed on 21. 3. 1988 and hence are disposed of by this common judgment.

( 2 ) THE appellant-petitioner was the contractor of the respondent for the work of construction of road over-bridge at Ghorpuri 1 x 8. 0 Msq. (1 x 15. 1 Skew) span R. C. C. Slab at MK. 5/10-11 in lieu of level crossing No. 5 between Ghorpuri and Saswad Road Stations for which agreement was entered on 4/05/1978, but the site had been handed over earlier on 13/03/1978. The contract was to be completed within nine months i. e. , 12/12/1978. But it is the case of the appellant that the contract was extended three times last being up to 18/01/1980 for the reason that the respondent failed to remove obstructions upon the land. Disputes had arisen between the parties even earlier regarding payment, but ultimately, since the efforts made by the respondent for amicable settlement failed, the matter was referred to arbitration on 7. 1. 1981 by the respondent. The Arbitrator entered upon the arbitration on 20/01/1987. In the claim filed before the Arbitrator the appellant had laid specific claim for being allowed interest from the date of the dispute. While it is the case of the appellant that no objection was raised to the claim of interest, it is the submission of the learned Counsel for the respondent that objection, in fact, was taken in that matter. In the award, the Arbitrator, apart from determining the dues payable to the contractor, also allowed interest at the rate of 18% per annum i. e. , from the date of original claim i. e. , 21/03/1979 in respect of claim items 1 to 4, from 19/06/1979 inspect of claim item 5, and from 15/06/1980 in respect of claim items 6, 7 and 8. Application was made by the Arbitrator himself to make the award the rule of the Court to which the respondent filed O. P. No. 274 of 1988 seeking setting aside of the award to the extent the Arbitrator had granted interest. The application filed by the Arbitrator to make the award the rule of the court was registered as O. S. No. 509 of 1988.

( 3 ) THE III Additional Judge, City Civil Court, Secunderabad made the award the rule of the Court except so far as the interest was concerned which part of the award was set aside. Aggrieved by the judgment, the present appeal and revision have been preferred.

( 4 ) THE sole question for consideration is whether, in view of Clause 16 (2) of the Standard General Conditions of contract of the respondent-South Central Railway, the Arbitrator had no powers to grant interest.

( 5 ) THE learned Subordinate Judge has held, as is also strenuously supported by the learned Counsel for the respondent, that the Arbitrator had no jurisdiction to grant interest in respect of amounts payable to the appellant. Clause 16 (2) of the Standard General Conditions of Contract is as follows : "no interest will be payable upon the earnest money or the security deposit or amounts payable to the Contractor under the contract, but Government Securities deposited in terms of Sub-Clause (1) of this clause will be repayable interest accrued thereon. " It is the submission of the learned Counsel for the appellant, who admits that the clause forms part of the contract, that the restriction stipulated therein is only for the departmental officers, but does not bind the Arbitrator, whereas it is the submission of the learned Counsel for the respondent that the terms being general and applicable to the contracts between the parties, they are to be applied without exception for which reason no interest is at all payable to the contractor.

( 6 ) A closer analysis of the provision does not show as if the poser of the Arbitrator has been taken away to grant interest upon the determination of the amounts payable to the contractor. What the provision means, in the context, that where certain amounts are payable to the contractor, but are not paid in time by the department and are released after laps of time, the depart

Click Here to Read the rest of this document