1996 Supreme(Bom) 401

IN THE HIGH COURT OF BOMBAY
Shah M.B., C.J. Patankar P.S., J.
Maharashtra State Electricity Board.... Appellants.
Versus
Bharat Conductors Pvt. Ltd. others.... Respondents.
Appeal No. 884 of 1994 in Arbitration Petition No. 69 of 1994 in Award No. 87 of 1994 with Appeal No. 468 of 1994 in Arbitration Petition No. 2 of 1995 in Award No. 87 of 1994, decided on 17/23-7-1996.
Advocates appeared :
Shiraz Rustomjee, L.N. Dholakia i/b Little Co., for appellants.
Janak Dwarkadas, R.D. Dhanuka Levi Rubens i/b Gagrat Co., for respondents.

Headnote:Section 29-Interest Act, 1978-Section 3 (1) (a)-Contract Act, 1872 - Section 73-Large amount of interest in unascertained damages-When can be said to be illegal?

       Held, with regard to the finding given by the arbitrators with regard to issue No. 15 viz., whether the company is eligible for an amount of Rs. 1,07,17,0028.44 towards interest at 21 % per annum as per banking norms as per trade and commence practice at quarterly rests on as the amounts shown in Columns 7 to 14 for the period :-8-1983 till 30-7-1993 and for further interest at the same rate and same norms till the date of final payment by tile Board, it is apparent that there is total non- application of mind by the arbitrators in awarding interest amount of Rs. 25,44,379.14 towards the awarded claim of Rs. 13,47,814.91. Admittedly, prior to 1992, the company had never demanded the said amount from the Board. No notice of demand was issued by the Company demanding the said amount. By issue No.4 an amount of Rs. 4,78,878.20 is awarded to the company as a result of loss sustained by it because of the delay in completion of the contract by the Board. In Courts view, with regard to the said unascertained damages, the award of interest @ 18% per annum is, on the face of it, unjustified. It is true that Court cannot go into the question whether the amount of damages awarded is rightly awarded or not, but at the same time, with regard to the interest on unascertained damages, the law is settled. As far as Issue No. 15 is concerned, which is with regard to the sum of Rs. 25,44,379.14 towards interest awarded by the arbitrators, it is outcome of their answer to issues Nos. 7, 8,11,13 and 14. Issue No.7 provides whether the company is eligible to get an amount of Rs. 42,137.60 reimbursed by the Board towards bank interest deducted by the Board Issue No.8 provides for reimbursement of Rs. 1,23,499.46 towards Bank interest deducted by the Board. Issue No. 11 provides for reimbursement of Rs. 10,329.57 towards C.S.T. (Central Sales Tax) not paid by the Board. Issue No. 12 provides for reimbursement of Rs. 4,92,537.21 but the Board towards differential duty drawback which has remained unpaid. Issue No. 13 provides for reimbursement of Rs. 23,914.60 by the Board towards C.ST. in Lieu of C. Form not issued by the Board. Issue No. 14 provides for reimbursement of Rs. 6,69,055.48 towards price variation on HT.G. Steel Core Wire. This claim also is in the nature of damages which was required to be ascertained at the trial. At no point of time, it was an ascertained sum upon which interest could be awarded.

       Admittedly, proceedings before arbitrators were not relating to debt payable by virtue of written instrument. Hence, clause (a) of Section 3 (1) of the Interest Act would not be applicable. The alleged claims by the company were relating to damages or deductions allegedly wrongly made by the Board. But for those claims the company has not raised any demand till December 1992. The written notice was issued by the Company only in December 1992 when the Board was claiming large amount towards exercise drawback. So the amount of interest from 1st February, 1983 to December 1992, is on the face of it unjustified. In any case, Section 3 (1) (b) of the Interest Act, 1978 only provides for grant of interest from the date of written notice given by a person making the claim to the person liable to pay that interest. As stated, until end of year 1992 i.e. till a reply was given by the company in December 1992, the company had never raised any claim nor had demanded any amount for loss sustained by it because of the delay or loss sustained because of the price variation on H.T.G. Steel Core Wire. Further the contract between the parties nowhere provides for payment of any interest on the damages because of delay in performing the contract. Hence, award of large amount of Rs. 25,44,379/- towards interest is on the face of it, illegal and unjustified.

       Section 30 - Non-speaking award in arbitration proceedings-It can be set aside by Court on limited permissible grounds.

       Section 37-Time-barred claims of company-Award made by arbitrators be unjustified. It is an admitted position that no dispute was raised with regard to the payment made by the Board from the year 1984 until 1992. The company has never demanded that the Board was required to pay certain amount as claimed by them before the arbitrators. When some officer of the Board dug out from the file that as per the contract the company was required to pay the excess duty drawback recovered by it and when the said officer insisted that the said amount be paid with interest @ 18% per annum, for the first time in December 1992 the company claimed that they were entitled to recover certain amounts which were illegally deducted at the time of making payment by the Board during the period 1981 to 1984. Prior to this, the company has admitted that with regard to excess excise duty drawback, the company would refund Rs. 2,57,000/- as confirmed by the company by their letter dated 24th July, 1992. In such a situation, can it be said that the issue decided by the arbitrators that the claim of the company was within time is by any standard justified. In Courts view, apparently the claim made by the company can be said to be barred by period of limitation.

       It specifically provides that if at any time any question, disputes or differences whatsoever shall arise between the purchaser and the contractor, upon or in relation to, or in connection with the contract, either party may forthwith give to the other, notice in writing of the existence of such question, dispute or differences and the same shall be referred to adjudication of three arbitrators. If the company thought that the amount as awarded by the arbitrators as per issues Nos. 7, 8, 11 and 13 was wrongly or erroneously deducted prior to 1984 or was not paid to the company, the company ought to have raised a dispute immediately in the year 1983 or 1984 and the mutter would have been settled at the relevant time. The arbitration clause further provides for issuance of notice in writing. No such notice in writing was given by the company when the amount was deducted or was not paid to the company at the relevant time even with regard to the so called damages awarded under Issue No.4 and price variation awarded under issue No. 14, no such demand was made in writing by the company either in the year 1983 or 1984. The company was required to give notice in writing for the said payment at the relevant time and not to wait till the Board raised some demand in 1992. In this view of the matter the award passed by the arbitrators with regard to the respondents claim is, on the face of it. Time-barred because no claim was raised at the relevant time nor notice in writing was given at any point of time for a period of more than 9 years.

       From the facts narrated above, it is also apparent that there is no justification for holding that the claim made by the company was within the period of limitation. In the notice given by the company for referring the matter to the arbitrator it has, been specifically stated (as referred earlier) that the supplies were completed before 9 years, that it was not in possession of the concerned record that the Board is claim itself was time-barred yet with regard to the cordial relations the company replied the Counsels letter, vide its letter dated 9th June, 1992, that the Board has to pay an amount of approximately Rs. 4.90 lacs towards duty drawback and, therefore, the Boards claim for Rs. 12 lacs and odd was not correct. In the written claim filed before the arbitrators it has been specifically stated that since the date of completion of supplies the Board has not demanded any amount from the company against the order under arbitration since there was no claim whatsoever and all of a sudden during April 1988 the Board issued a letter for invoking the permanent guarantee. Same is the reply filed in rejoinder that the Boards claim is time-barred. Similarly, a narrated above, the Board has also contended that the companys claim was time barred. There is nothing to indicate how the claim made by both the parties were within time before the arbitrators. The learned Counsel appearing for the respondents was not in a position to point out anything to suggest that the claims were within time. However, he contended that this Court cannot consider the said question as it is based upon evidence which might have been led by the parties and that the said evidence cannot be re-appreciated by the High Court. To this contention, the Counsel for the appellants replied that parties have not led any evidence before the arbitrator and it was solely based upon the claim and the counterclaim which were before the arbitrators, from the record as it stands, there is nothing to indicate that the claims made by the parties are within time. On the face of it, the claim made by the company in December, 1992 for the deductions made in the years 1981 to 1984 is time-barred.