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Andhra Pradesh High Court
Judges : P.RAMAKRISHNAM RAJU, S.S.M.QUADRI
Superintending Engineer, N.S.C.Circle, Pellur - Appellant
Versus
B.Subba Reddy - Respondent
Decided On : 12-23-92
ARBITRATION - MISCONDUCT - INTEREST - JURISDICTION - AWARD - MODIFICATION - SECTION 34 C. P. C. - SECTION 17 ARBITRATION ACT - SECTION 30 ARBITRATION ACT - SECTION 39 ARBITRATION ACT - SECTION 41 ARBITRATION ACT - ORDER 41 RULE 22 C. P. C. - CROSS-OBJECTIONS - MAINTAINABILITY - ARBITRATOR - POWER TO AWARD INTEREST - INTEREST PENDENTE LITE - FUTURE INTEREST - COURT'S POWER TO AWARD INTEREST - COURT'S POWER TO MODIFY AWARD - COURT'S POWER TO PASS DECREE IN TERMS OF AWARD - COURT'S POWER TO ENHANCE OR REDUCE RATE OF INTEREST AWARDED BY ARBITRATOR.
Fact of the Case:
Contractor entered into four agreements with the State for lining the bed and side slopes of a canal. Disputes arose between the parties and were referred to a sole arbitrator who passed four awards. The contractor filed suits to make the awards rule of the Court, while the State filed petitions to set aside the awards. The trial court made the awards rule of the Court, with a modification in the interest rate awarded by the arbitrator. Both parties appealed.
Finding of the Court:
1. The cross-objections filed by the contractor are maintainable under Order 41 Rule 22 C. P. C., as the provisions of the Code of Civil Procedure apply to all proceedings before the Court and to all appeals under the Arbitration Act. 2. The arbitrator did not misconduct himself by failing to apply his mind to the case, as he had heard arguments from both parties and invited written submissions, which were received before the awards were passed. 3. The arbitrator had jurisdiction to award interest pendente lite and future interest, as there was no agreement between the parties prohibiting the grant of interest and the dispute over interest was referred to the arbitrator. 4. The trial court erred in reducing the rate of interest awarded by the arbitrator from 18% to 12%, as it cannot modify the award and pass a decree otherwise than in terms of the award.
Issues: 1. Whether the cross-objections filed by the contractor are maintainable. 2. Whether the arbitrator misconducted himself by failing to apply his mind to the case. 3. Whether the arbitrator had jurisdiction to award interest pendente lite and future interest. 4. Whether the trial court erred in reducing the rate of interest awarded by the arbitrator.
Ratio Decidendi: 1. The provisions of the Code of Civil Procedure apply to all proceedings before the Court and to all appeals under the Arbitration Act, including the filing of cross-objections. 2. Misconduct on the part of an arbitrator includes failing to comply with the terms of the arbitration agreement, making an award that is inconsistent or uncertain, or refusing to hear evidence from a material witness. In this case, the arbitrator did not misconduct himself, as he had heard arguments from both parties and invited written submissions, which were received before the awards were passed. 3. An arbitrator has jurisdiction to award interest pendente lite and future interest where the agreement between the parties does not prohibit the grant of interest and the dispute over interest is referred to the arbitrator. 4. A court cannot modify an arbitration award and pass a decree otherwise than in terms of the award. In this case, the trial court erred in reducing the rate of interest awarded by the arbitrator from 18% to 12%.
Final Decision: The appeals and the Civil Revision Petition are dismissed, and the Cross-objections are allowed. The contractor is entitled to interest @ Rs. 18% per annum from the date of award till the date of realization.
( 2 ) THE contractor entered into four agreements with the State for "providing lining to the bed and side slopes of the Pamidipadu Branch Canal of N. S. Canals from K. M. O/4 to O/6," Disputes arose between the parties with regard to the works which were the subject matter of the said contracts. The disputes were referred to a sole arbitrator who passed four awards on 18-4-1986. In regard to the awards relating to agreement Nos. 8 to 11/se/82-83 the contractor filed original Suits No. 59/86, 55/86, 53/86, and 57/86 respectively to make the awards rule of the Court, whereas the State filed O. P. Nos. 85/86,86/86,87/86 and 88/86 respectively under Section 30 of the Arbitration Act, to set aside the award s. The learned Principal Subordinate Judge, Ongole, by common judgment dated September 6, 1989 made the awards rule of the Court in all these case except for the modification in the provision of interest awarded by the Arbitrator at the rate of 18% p. a. on the amounts awarded from the date of the reference i. e, 21-10-1985 to the date of actual payment or decree whichever is earlier which is reduced to 12% p. a. from the date of the award i. e. , 18-4-1986 till the date of realisation and dismissed the O. Ps. filed by the State. Against the said common judgment the State filed by above C. M. As. and C. R. Ps. and the contractor filed cross-objections in the appeals C. M. A. Nos. 5/90,386/90,493/91 and 1268/90 were filed against the common judgment in O. P. Nos. 85/86,87/86,88/86 and 86/86 respectively and C. R. P. Nos. 1135/90,1136/90,1134/90 and 818 / 90 were filed against the common judgment in O. S. Nos. 59/86, 53/86, 57/86 and 55/86 respectively.
( 3 ) MR. B. V. Rarnamohan Rao, the learned Government Pleader, contends that the Cross-objections in these appeals are not maintainable and that in passing the awards the arbitrator misconducted himself inasmuch as there has been no application of mind by the arbitrator. Therefore, the learned Principal subordinate Judge ought to have set aside the awards. He further contends that the arbitrator has no power to award interest by way of damages and also to award interest pendente lite and future interest. Therefore awarding the interest is without jurisdiction.
( 4 ) IT would be convenient to dispose of the preliminary objection with regard to maintainability of cross-objections. The contention of the learned Government pleader is that Section 39 of the Arbitration Act, 1940, provides appeals against six categories of orders and there is no provision in the Act for filing of Cross- objections, therefore the Cross-objections are not maintainble. It is further contended that if the contractor was aggrieved he could have filed an appeal under clause (iii) of sub-section (1) of Section 39, but he cannot file cross- objections.
( 5 ) MR. Gopal Reddy, the learned counsel for the Cross-objector, on the other hand, contends that in an appeal the respondent is entitled to file cross- objections as the provisions of the Code of Civil Procedure are applicable.
( 6 ) IT is no doubt true that Section 39 of the Arbitration Act provides appeals only against specified orders which are mentioned in sub-section (1) and may be enumerated hereunder: (i) superseding an arbitration; (ii) on an award stated in the form of a special case; (iii) modifying or correcting an award; (iv) filing or refusing to file an arbitration agreement; (v) staying or refusing to stay legal proceeding where there is an arbitration agreement; (vi) setting aside or refusing to set aside an award.
( 7 ) WE may also notice here Section41 of the Arbitration Actand is woul
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