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Bombay High Court
VAIDYA,MRIDUL
Union of India - Appellant
Versus
D.P.Wadia - Respondent
Decided On : 04/15/1976
ARBITRATION - INTEREST - JURISDICTION OF ARBITRATOR - AWARD OF INTEREST - VALIDITY - ERROR APPARENT ON THE FACE OF THE AWARD - POWER OF ARBITRATOR TO GRANT INTEREST - IMPLIED INCIDENT OF REFERENCE - CONDITIONS FOR AWARDING INTEREST - CLAIM FOR INTEREST REFERRED TO ARBITRATOR - AWARD NOT SPEAKING AWARD - NO ERROR APPARENT ON THE FACE OF THE AWARD - UNION OF INDIA CLAIMED INTEREST AND INVITED ARBITRATOR TO DECIDE THE CLAIM - UNION OF INDIA CANNOT RAISE ANY CONTENTION RELATING TO THE AWARD OF INTEREST - APPROBATE AND REPROBATE - DEPOSITED AMOUNTS IN COURT TO BE RECALLED AND PAID TO RESPONDENTS - RESPONDENTS WILLING TO FORGO INTEREST BY REASON OF EARLIER RECALL OF THESE AMOUNTS.
Fact of the Case:
The Union of India challenged the awards of the arbitrator B.S. Sekhon, in respect of the disputes and differences between the Union of India and the Respondents, viz. M/s. D.P. Wadia and Sons, on the ground of invalidity. The main contention was that the direction in the award for payment of interest was beyond the ambit of the arbitrator's authority and that the award of interest was ex facie contrary to law and therefore, constituted an error apparent on the face of the award.
Finding of the Court:
The Court held that the claim of payment of interest respecting the amounts payable under the works contract was a claim or a question or a matter which arose out of the said works-contract or related to the said works-contract. The parties themselves by making a claim for interest prior to the reference proceeded upon the footing that such a claim was claim which arose out of or related to the works-contract. The disputes and differences relating to interest were thus enumerated and set out in the correspondence and were referred amongst other disputes and differences, to the arbitration of the said arbitrator. The Court further held that an arbitrator has powers analogous to the powers conferred upon the Civil Court in regard to the proceedings before or for arbitration of disputes referred to him. These judgments relate to power and authority of the arbitrator to grant adjournments, permit amendments of the pleadings, compel evidence and production of documents and several other matters which are normal features of a civil litigation before a court of law. This principle is statutorily recognised by the Arbitration Act 1940. S.13 of the Arbitration Act enumerates powers of arbitrators subject to a contrary intention expressed in the agreement. First Schedule of the said Act sets out the implied conditions of the arbitration agreement. The recent judicial trends also show that the courts read into the scope of the power of an arbitrator, the powers which are accorded to the Civil Courts. The Court also held that it is an implied incident of all arbitrations that all disputes of civil nature can be referred to the arbitration end that in deciding the said disputes the arbitrator shall have all powers which normally the Court has in matters of such determination. In other words, the arbitrator can grant such reliefs as are normally granted by the Courts of law in that behalf. The Court further held that a dispute as to payment of interest is a dispute which is capable of reference to arbitration under the provisions of the Arbitration Act. Such a dispute, if referred to the arbitrator, brings it within his competence to make an award in respect of payment of interest by one party to the other. The perimeters governing the exercise of his jurisdiction, however, will be the same as obtain to a court of law, in the matter of awarding interest.
Issues: 1. Whether the direction as to the payment of interest made in the said awards was beyond the ambit of the arbitrator's authority? 2. Whether the direction as to payment of interest was ex facie illegal and disclosed error of law apparent on the face of the award?
Ratio Decidendi: 1. The claim of payment of interest respecting the amounts payable under the works contract was a claim or a question or a matter which arose out of the said works-contract or related to the said works-contract. 2. The parties themselves by making a claim for interest prior to the reference proceeded upon the footing that such a claim was claim which arose out of or related to the works-contract. 3. The disputes and differences relating to interest were thus enumerated and set out in the correspondence and were referred amongst other disputes and differences, to the arbitration of the said arbitrator. 4. An arbitrator has powers analogous to the powers conferred upon the Civil Court in regard to the proceedings before or for arbitration of disputes referred to him. 5. It is an implied incident of all arbitrations that all disputes of civil nature can be referred to the arbitration end that in deciding the said disputes the arbitrator shall have all powers which normally the Court has in matters of such determination. 6. A dispute as to payment of interest is a dispute which is capable of reference to arbitration under the provisions of the Arbitration Act. Such a dispute, if referred to the arbitrator, brings it within his competence to make an award in respect of payment of interest by one party to the other.
Final Decision: Both the appeals failed and were dismissed with costs. The orders of the learned trial Judge in both the suits were confirmed.
MRIDUL, J. :- These two appeals, preferred by the Union of India, Original Defendants, are directed against the Judgments and Orders dated 31st December, 1974, passed by the Civil Judge, Sr. Dn., Nasik, in Special Civil Suit Nos.222 and 223 of 1974. By the said judgments and orders the learned trial Judge was pleased to repel the challenges made by the original Defendants as to the invalidity of the awards of the arbitrator B.S. Sekhon, in respect of the disputes and differences between the Union of India and the Respondents, viz. M/s. D.P. Wadia and Sons, being the Plaintiffs in the said suits.
2. As a common question of law arises in both the appeals, they are heard together and disposed of by this common judgment.
3. The facts in Special Civil Suit No.222 of 1974, may be summarised as follows:- The Plaintiffs M/s. D.P. Wadia and Sons (hereinafter referred to as "the Contractors"), entered into a contract with the Union of India for the construction of certain buildings or quarters for the Government of India Printing Press at Nasik Road in or about 1956. The said construction was completed but in regard to the claims of the contractors against the Union of India and the counter claims of the Union of India, disputes and differences arose by and between the parties. It appears that in the correspondence antecedent to making of the reference, the Contractors claimed from the Union of India amounts which were payable to them under the said works contract together with interest thereon. The Union of India also in their turn counter-claimed certain amounts from the Contractors together with interest thereon. Having regard to the provisions of Cl.25 of the said works contract, which was the arbitration clause therein, the parties referred their disputes and differences to the said arbitrator. In fact, the said arbitrator was appointed by the Chief Engineer (SWZ), C.P.W.D., Bombay, by his letter dated 6th September, 1972, as arbitrator to decide and make award regarding disputes between the parties, "which disputes fall within the purview of Clause 25 of the agreement".
4. The pleadings were filed on behalf of the Contractors and the Union of India before the learned arbitrator in the said reference. It is not disputed by the parties that in the said pleadings the question as to the payment of interest was raised by the parties. Upon the basis of the pleadings filed before the arbitrator issues in regard to the payment of interest by the Contractors to the Union of India and vice versa were raised. After hearing the parties, the arbitrator made and published his award on 17th October, 1973. The intimation relating thereto was given to the Contractors and the Union of India.
5. The award as filed in the Court, was challenged by the Union of India by an application dated 31st December, 1973. One of the contentions related to the direction in the award for payment of interest. It was contended that the awarding of interest to the Contractors was illegal as, "the said issue was never referred to the arbitrator". The learned trial Judge raised 4 issues. They related to the plea of limitation, in respect of the application dated 31st December, 1973, by which the award was sought to be challenged; as to whether the award was not legal and disclosed error apparent on the face of the award; as to whether the award was liable to be set aside or remitted and lastly, as to whether the direction as to interest was legal. The learned trial Judge made findings in favour of the Contractors, dismissed the application challenging the award and confirmed the award.
6. The facts in the Special Suit No.223 of 1974, are similar. In fact, they appear to be identical save and except with regard to the quantum of claims involved. Identical issues were raised by the learned trial Judge in the said suit. The facts of the said suit, therefore, need not be reproduced here.
7. In both the suits, the challenge to the direction for payment of interest was two
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