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Andhra Pradesh High Court
Judges : D.H.NASIR, P.VENKATRAMA REDDY
State Of A.P. - Appellant
Versus
P.L.Raju - Respondent
Decided On : 07-21-95
ARBITRATION - AWARD - SETTING ASIDE - JURISDICTION OF ARBITRATOR - CONTRACT - INTERPRETATION - INTEREST - AWARD OF INTEREST FROM DATE OF REFERENCE TILL DATE OF AWARD - WHETHER ARBITRATOR HAS JURISDICTION TO AWARD INTEREST FOR ANY PERIOD PRIOR TO THE PASSING OF THE AWARD - WHETHER ARBITRATOR EXCEEDED HIS JURISDICTION IN AWARDING INTEREST - WHETHER ARBITRATOR HAS JURISDICTION TO AWARD PENDENTE LITE INTEREST - WHETHER INTEREST CAN BE AWARDED IN THE ABSENCE OF ANY PROVISION IN THE CONTRACT - WHETHER ARBITRATOR CAN AWARD INTEREST CONTRARY TO THE TERMS OF THE CONTRACT - WHETHER ARBITRATOR CAN AWARD INTEREST FOR THE PERIOD BETWEEN THE DATE OF REFERENCE AND THE DATE OF AWARD - WHETHER ARBITRATOR CAN AWARD INTEREST FROM THE DATE OF AWARD TILL THE DATE OF REALISATION.
Fact of the Case:
The respondent is a contractor. The contract was to construct a high-level causeway across Alair river at KM 31/4-6 of Torruru-Voligonda road. Nalgonda district. The work was awarded to him pursuant to the acceptance of the respondent's tender. An agreement was entered into in this behalf on 10.2.1978. The site was handed over to him on the same day. The value of the work, as per the agreement was Rs. 22 lakhs. A period of 18 months was stipulated for completion of the work. The contractor expressed his inability to proceed with the work when certain supplemental items as per the revised foundation designs were included in the scope of the contract. By that time, according to the appellants, the respondent did not keep up the expected progress of work. The contract was cancelled by the Executive Engineer on 7.2.1981 and the same was ratified by the Superintending Engineer on 9.3.1981. Therefore, the respondent requested the arbitrators named in the agreement to enter on a reference to adjudicate the disputes in relation to the contract. As there was no response, the respondent moved the court under Section 8 of the Arbitration Act for appointment of an Arbitrator. Initially, the arbitrators named in the Agreement were appointed. On their refusal to act, the respondent once again approached the court by filing O.P. 122/83 praying for the removal of the named-arbitrators and for appointment of a sole arbitrator to fill up the vacancy. By an order dated 30.1.1984, the III Additional Judge, City Civil Court removed the named arbitrators and appointed Sri C.K. Mohan Rao, Chief Engineer (Retired) as the sole arbitrator to decide the dispute between the parties. Accordingly, the said arbitrator entered on the reference on 7.3.1984 and passed his award on 31.5.1985. The arbitrator passed a non-speaking award. However, he specified the amounts allowed by him under each claim, the total amount awarded was a sum of Rs. 6,07,605.00 with interest at 18% from the date of reference i.e., 7.3.1984 till the date of payment or decree whichever was earlier. Thus, the award is not a lumpsum award but it is an item-wise award.
Finding of the Court:
1. The arbitrator exceeded his jurisdiction in awarding interest for the period between the date of reference and the date of award. 2. The arbitrator has no jurisdiction to award interest for any period prior to the passing of the award in view of Clause 69 of APDSS which forms part of the Agreement. 3. The arbitrator has no power to award pendente lite interest except in a case where the dispute in a pending suit, instead of being adjudicated by the court, is referred to arbitrator for decision. 4. The terms of Section 3 of the Interest Act, 1978 have not been satisfied in this case and therefore, pendente lite interest should not have been awarded.
Issues: 1. Whether the arbitrator exceeded his jurisdiction in awarding interest for the period between the date of reference and the date of award? 2. Whether the arbitrator has jurisdiction to award interest for any period prior to the passing of the award in view of Clause 69 of APDSS which forms part of the Agreement? 3. Whether the arbitrator has power to award pendente lite interest except in a case where the dispute in a pending suit, instead of being adjudicated by the court, is referred to arbitrator for decision? 4. Whether the terms of Section 3 of the Interest Act, 1978 have been satisfied in this case and therefore, pendente lite interest should not have been awarded?
Ratio Decidendi: 1. An arbitrator who acts in manifest disregard of the contract acts without jurisdiction. 2. An arbitrator cannot award interest contrary to the terms of the contract. 3. An arbitrator cannot award interest for the period between the date of reference and the date of award.
Final Decision: Appeal and Revision partly allowed.
( 1 ) THE C. M. A. and the C. R. P. are filed by the State of Andhra Pradesh against the common judgment in O. S. No. 830 of 1985 and O. P. 313 of 1985 on the file of the II Additional Judge, City Civil Court, Hyderabad respectively, O. S. No. 830/85 was filed by the respondent under Sections 14 and 17 of the Arbitration Act to make the Award dated 31. 5. 1985 a Rule of the Court and to pass a decree in terms thereof. O. P. 313/85 was filed by the appellants under Sections 30 and 33 of the Arbitration Act to set aside the Award. The suit was decreed and the Government was directed to pay the amount awarded by the arbitrator together with interest at 18% per annum from the date of reference till the date of realisation. O. P. No. 313/88 was dismissed.
( 2 ) THE respondent is a contractor. The contract was to construct a high-level causeway across Alair river at KM 31/4-6 of Torruru-Voligonda road. Nalgonda district. The work was awarded to him pursuant to the acceptance of the respondent s tender. An agreement was entered into in this behalf on 10. 2. 1978. The site was handed over to him on the same day. The value of the work, as per the agreement was Rs. 22 lakhs. A period of 18 months was stipulated for completion of the work. It is not in dispute that on 10. 7. 1979, the contractor expressed his inability to proceed with the work when certain supplemental items as per the revised foundation designs were included in the scope of the contract. By that time, according to the appellants, the respondent did not keep up the expected progress of work. By a letter dated 18. 6. 1980, the respondent requested the Superintending Engineer to settle the accounts and arrange for payment of the amount due to him. Invoking Clause 60 of the preliminary specifications to A. P. D. S. S. (A. P. Detailed Standard Specifications) the contract was cancelled by the Executive Engineer on 7. 2. 1981 and the same was ratified by the Superintending Engineer on 9. 3. 1981. Therefore, the respondent requested the arbitrators named in the agreement to enter on a reference to adjudicate the disputes in relation to the contract. As there was no response, the respondent moved the court under Section 8 of the Arbitration Act for appointment of an Arbitrator. Initially, the arbitrators named in the Agreement were appointed. On their refusal to act, the respondent once again approached the court by filing O. P. 122/83 praying for the removal of the named-arbitrators and for appointment of a sole arbitrator to fill up the vacancy. By an order dated 30. 1. 1984, the III Additional Judge, City Civil Court removed the named arbitrators and appointed Sri C. K. Mohan Rao, Chief Engineer (Retired) as the sole arbitrator to decide the dispute between the parties. Accordingly, the said arbitrator entered on the reference on 7. 3. 1984 and passed his award on 31. 5. 1985. The arbitrator passed a non-speaking award. However, he specified the amounts allowed by him under each claim, the total amount awarded was a sum of Rs. 6,07,605. 00 with interest at 18% from the date of reference i. e. , 7. 3. 1984 till the date of payment or decree whichever was earlier. Thus, the award is not a lumpsum award but it is an item-wise award. The documents filed by the parties are set out in the index. However, on a perusal of the index, we do not get the details of the documents filed excepting a few. The learned II Additional Judge held that it was not open to him to determine whether the conclusions arrived at by the arbitrator were right or wrong in the absence of any reasons contained in the award. He also held that O. P. 313/85 was not barred by limitation. In the result, the award was made the Rule of the court over-ruling the objections of the State Government.
( 3 ) ARGUMENTS were addressed before us by the learned Government Pleader with reference to three principal items/claims. They are Items 1a, 6a and 7a, the amounts awarded towards damages with ref
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