AshutoshMohunta, J.

This appeal is filed by the appellants-railways against the order and decree dated 18.10.2005 passed in O.P No.265 of 2002 by the I Additional Chief Judge, City Civil Court, Secunderabad, insofar as it relates to awarding of interest over the amounts awarded under Claim Nos. 1 and 2 by the 2nd respondent-Arbitrator.

2. The appellants entrusted certain construction works to the 1st respondent-contractor under a contract in the year 1992. Subsequently, the contract could not be performed by the 1st respondent-contractor within the specified period and, therefore, a dispute arose between the appellants-railways and the 1st respondent-contractor. Thereafter, the 1st respondent-contractor made an application under Section 11 of the Arbitration and Conciliation Act, 1996 before this Court and this Court appointed the 2nd respondent herein as an Arbitrator for resolving the dispute. As many as seven claims were made by the 1st respondent-contractor before the 2nd respondent-Arbitrator. The 2nd respondent-Arbitrator while allowing claims 1, 2 and 6, rejected claims 3 to 5 and 7 and accordingly passed an award dated 28.08.2002 observing that the 1st respondent is entitled to recover a sum of Rs.1,12,885/-(being the final bill) with interest at the rate of 18% per annum from 01.07.1997 till the date of payment and also a sum of Rs.63,289/-(being the security deposit) with interest at 18% per annum from 01.07.1997 till the date of payment after deducting interest that might have accrued on the fixed deposit of Rs.18,206/- made in the Central Bank of India, Vijayawada branch. Feeling aggrieved by the award inasmuch as it relates to awarding of interest over the amounts awarded under Claim Nos. 1 and 2, the appellants-railways filed O.P.No.265 of 2002 before the I Additional Chief Judge, City Civil Court, Secunderabad. The learned Additional Chief Judge by impugned order dated 18.10.2005 dismissed the said O.P. Challenging the said order, the appellants-railways preferred this appeal.

3. Learned Counsel for the appellants-railways submits that awarding of interest on the payment of earnest money or security deposit or amounts payable to the contractor under the contract is prohibited by virtue of Clause 16 (2) of the General Conditions of Contract.

4. Clause 16 (2) of the General Conditions of Contract reads as under:

“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 with interest accrued thereon”.

5. Learned Counsel for the appellants-railways has placed reliance on a decision of the Supreme Court in M/s Sree Kamatchi Amman Constructions V. Divisional Railway Manager (Works), Palghat and others (AIR 2010 SUPREME COURT 3337), wherein the apex Court held as under:

“Arbitral Tribunal cannot award interest from date of cause of action to date of award, on amount awarded to contractor under contract in terms of which there was specific bar on payment of interest.”

6. Learned Counsel for the appellants-railways has also placed reliance on a decision of the Supreme Court in Union of India V. M/s Krafters Engineering and Leasing (P) Ltd. (AIR 2011 SUPREME COURT 2620), wherein the apex Court held as under:

“Where there was a contract between parties expressly prohibiting grant of interest, in that event, the Arbitrator cannot grant pendente lite interest ignoring the terms of contract.”

7. On the other hand, learned Counsel for the 1st respondent-contractor submits that the Order of the Court below confirming the award of the 2nd respondent-Arbitrator is quite legal and valid and in that view of the matter, no interference is called for.

8. After hearing the learned Counsel for the parties and keeping in mind the aforesaid decision of the Supreme Court in M/s Sree Kamatchi Amman Constructions V. Divisional Railway Manager (Works), Palgh