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IN THE HIGH COURT OF BOMBAY
A.P. Shah, J.
Mazgaon Dock Ltd..... Petitioners.
Versus
McDermott International Inc..... Respondents.
Arbitration Petition No. 367 of 1994 in Award No. 204 of 1993, decided on 15-7-1994.
Advocates appeared :
V.V. Tulzapurkar with S. Doctor i/b Crawford Bayley Co., for the petitioners.
S.H. Doctor with D.D. Madon i/b Mulla Mulla Craigie Blunt Caroe, for the respondents.
Held, The Arbitrator undoubtedly is a domestic forum other than a Court of law constituted by the parties, or by provisions of law for determination of disputes and differences, after hearing both the sides, in judicial manner. The Arbitrator has to conform broadly to judicial trappings. It has been held by the several judgments of the Court that an Arbitrator is bound by the legal principles and has to adhere to the 1?rovisions of law applicable to the adjudication of matters before him Having regard to the functions and position of the Arbitrator, It is Implicit that an Arbitrator must have the powers of the judicial nature so as to facilitate determination of disputes and differences between the parties relating to an award, which when made a rule of the Court acquires legal sanctity, and becomes final, binding and conclusive. Application of this principle to the question of competence of the Arbitrator to award the interest is a matter of some controversy, which can be divided broadly into two parts, namely, the power to award the interest pendente lite and future interest and the second part is power to award pre-reference interest.
A person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation, can it by any name. It may be called interest, compensation or damages. This basis consideration is as valid for the period the dispute is pending before the arbitrator as it is for the period prior to the arbitrator entering upon the reference. This is the principle of Section 34 C. P. C. and there is no reason or principle to hold otherwise in the case of arbitrator.
If there was a slightest possibility of ,the entitlement of the claimant to interest on one or other of the legally permissible ground, it may not be open to the Court to go behind the award and decide whether the award of interest was justifiable. The umpire has not committed any error or mistake in awarding interest on late payment of invoices and on priority world. The Umpire has also taken into consideration the fact that the petitioners have successfully word off the bulk of the claim of interest an the ground of limitation. The Umpire cannot be faulted for accepting the respondents claim for interest.
Section 14
See Arbitration Act, 1940, Section 30.
2. Certain disputes arose between the petitioners and the respondents. The respondents by their letter dated August 7, 1989 appointed their arbitrator and called upon the petitioners to appoint their arbitrator to decide the disputes that had arisen. Thus the disputes came to be referred to the Joint Arbitration of Shri R.P. Bhatt and Shri. B. Datta. The Joint Arbitrators differed and consequently, the reference was made to the Umpire, Shri. Y.V. Chandrachud, the Ex Chief Justice of the Supreme Court of India. The arbitration relating to the disputes under the contract bearing Reference No. D-2318 for the sake of convenience was referred to by parties, and by the learned Umpire in his Award as "Case No. 1" as there were references to arbitration of the same Umpire in respect of disputes arising out of the two later agreements between the parties bearing Ref. Nos. D-2807 and D-2827.
3. The learned Umpire, after hearing the parties, made and published three Awards all dated September 12, 1993 in respect of all the three cases. As far as Contract No. D-2318 (Case No. 1) with which I am concerned in the present petition, the respondents had preferred claims aggregating to U.S. $ 2,091,817.50 under the following four principal heads of claim together with interest in respect of those claims and the learned Umpire was pleased to partly grant respondents claim as follow :-
PARTICULARS OF CLAIM AMOUNT OF CLAIMS AS CLAIM AWARDED (IN U.S.$) (U.S. $)
I. Priority work 222,000.00 46,410.00
II. Reimbursement of Income Tax 584,790.00 Nil paid by M.I.I. under assessment orders
III. Interest by way of damages on 851,747.50 Nil amounts withheld by Income Tax authority on other MII contracts
IV. Interest on invoices which were 333,280.00 36,439.00 paid late
2,0921,817.50 82,849.00
4. In this petition under section 30 of the Arbitration Act,1940 ("the said Act", for short), the petitioners are challenging the claim allowed at serial No. IV of interest on invoices which were paid late. The petitioners are also challenging the claim of interest allowed by the learned Umpire for payment of interest at 12% per annum from June 30, 1987 on item at serial No. 1 viz. `Priority work.
5. In order to appreciate the challenge raised by the petitioners in the present petition, it will be necessary to refer to para 5.1 of the Statement of Claim in which the respondents claimed a sum of U.S.$ 3,33,280.01 by way of interest on late payment of invoices. The interest is claimed at 15% per annum from the date the paymet was due until the payment was made. Under the contract, the petitioners were required to pay invoices within 30 days of their receipt. Though, in the Statement of Claim, the interest on late payment of invoices is shown as U.S. $ 3,33,280.01 in the "Details of MIIs Claims" filed by the respondents before the learned Umpire on November 11, 1992, such interest is shown as U.S.$ 1,62,534.78. The learned Umpire disallowed the major part of the claim for interest on the ground of limitation. As regards the claim for interest, which was within limitation, the learned Umpire held that the respondents will be entitled to interest on late payment of invoices. The relevant finding of the learned Umpire on this claim is as follows :-
"In fairness and in equity, M.D.L. should be asked to pay the sum of U.S.D. 36,
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