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2005 Supreme(Cal) 374
High Court Of Calcutta
ALOKE CHAKRABARTI, ANIRUDDHA BOSE
UNION OF INDIA - Appellant
Versus
PAM DEVELOPMENT PVT.LTD - Respondent
A. P. 137 Of 2002
Decided On : 06/15/2005
1. The arbitrator had jurisdiction to adjudicate upon the disputes and make the award. 2. The arbitrator had the authority to decide on excepted matters. 3. The award of interest was not illegal, being contrary to the provisions of Section 31 (7) of the ACA 1996.
Headnote:
ARBITRATION - Setting aside award - Composition of Arbitral Tribunal - Jurisdiction - Excepted matters - Interest - Legality.
Fact of the Case:
An application was filed under Section 34 of the Arbitration and Conciliation Act, 1996 (the Act) for setting aside an award made and published by a retired Judge of the Calcutta High Court. The appellant, Union of India, had entered into an agreement with the respondent for the construction of an industrial covered loco shed and certain allied works at a place close to Calcutta. Disputes arose between the parties and the matter was referred to arbitration. The arbitrator awarded a sum of Rs. 74,95,177/- (Rupees seventy-four lacs ninety-five thousand one hundred seventy-seven) together with interest at the rate of twelve per cent per annum from 19th April, 1994 till the date of the award within 28th February, 2002. The appellant challenged the award on various grounds including the jurisdiction of the Arbitrator to adjudicate upon the disputes and make the award. The Hon'ble Single Judge of the Calcutta High Court rejected the application under Section 34 of the Act, holding against the appellant/petitioner on all these points.
Finding of the Court:
The Court held that the arbitrator did not lack jurisdiction to enter upon reference and adjudicate on the dispute and in its opinion his award was not a nullity on this ground. The Court also held that the arbitrator had wide discretion to award interest and that interest could be awarded by the Arbitrator for unliquidated amount also, provided of course, the parties have not agreed otherwise. The Court further held that in order to decide as to whether an Arbitrator has been divested of his jurisdiction to award interest for the post-reference period by an agreement, it would have to analyse the manner in which the terms have been agreed upon. In the present case, the interest prohibition clause admittedly was incorporated in the GCC, but not in the Arbitration clause forming the arbitration Contract. In the opinion of the Court, a plain reading of the contract does not reflect intention of the parties to denude the power of the Arbitrator to award interest.
Issues: 1. Whether the Arbitrator had jurisdiction to adjudicate upon the disputes and make the award. 2. Whether the arbitrator had the authority to decide on excepted matters. 3. Whether the award of interest was illegal, being contrary to the provisions of Section 31 (7) of the ACA 1996.
Ratio Decidendi: 1. The Court held that the arbitrator did not lack jurisdiction to enter upon reference and adjudicate on the dispute and in its opinion his award was not a nullity on this ground. 2. The Court held that the arbitrator had wide discretion to award interest and that interest could be awarded by the Arbitrator for unliquidated amount also, provided of course, the parties have not agreed otherwise. 3. The Court further held that in order to decide as to whether an Arbitrator has been divested of his jurisdiction to award interest for the post-reference period by an agreement, it would have to analyse the manner in which the terms have been agreed upon. In the present case, the interest prohibition clause admittedly was incorporated in the GCC, but not in the Arbitration clause forming the arbitration Contract. In the opinion of the Court, a plain reading of the contract does not reflect intention of the parties to denude the power of the Arbitrator to award interest.
Final Decision: The appeal was dismissed.
( 1 ) THE present appeal before us is against a judgment of an Hon'ble Single Judge of this Court rejecting an application filed under section 34 of the Arbitration and Conciliation Act, 1996 (the Act) for setting aside an award made and published by Sri Satyabrata Mitra, a retired Judge of this Court. The appellant before us is Union of India, who had entered into an agreement with the respondent for the purpose of construction of an industrial covered loco shed and certain allied works at a place close to Calcutta, being Santragachi. The respondent had entered into the agreement after being successful in a tender floated by the railway administration, being a department of the appellant.
( 2 ) THE agreement contained an arbitration clause being clause 64 of the general conditions of contract, the text of which is reproduced below :"64 (3) (a) ARBITRATION: Matters in question, dispute or difference to be arbitrated upon shall be referred for decision to : 3 (a) (i) A sole Arbitrator who shall be the General Manager or a Gazetted railway Officer nominated by him in that behalf in cases where the claim in question is below Rs. 5,00,000/- (Rupees five lakhs) and in cases where the issues involved are not of a complicated nature. The General Manager shall be the sole Judge to decide whether or not the issues involved are of a complicated nature. 3 (a) (ii) Two Arbitrators who shall be Gazetted Railway Officers of equal status to be appointed in the manner laid in clause 64 (3 ) (b) for all claims of rs. 5,00,000/- (Rupees five lakhs) and above, and for all claims irrespective of the amount of value of such claims if the issues involved are of a complicated nature. The General Manager shall be the sole Judge to decide whether the issues involved are of a complicated nature or not. In the event of the two Arbitrators being divided in their opinions the matter under disputes will be referred to an Umpire to be appointed in the manner laid down in clause 3 (b) for his decision. 3 (a) (iii) It is a term of this contract that no person other than a Gazetted railway Officer, should act as an Arbitrator/umpire and if for any reason, that is not possible, the matter is not to be referred to arbitration at all. 3 (a) (iv) In cases where the claim is up to Rs. 5,00,000/- (Rupees five lakhs), the Arbitrators)/ Umpire appointed, as the case may be, shall give the award on all matters referred to arbitration indicating therein break-up of the sums awarded separately on each individual item of dispute. In cases where the claim is more than Rs. 5,00,000/- (Rupees five lakhs), the Arbitrators (s)/ umpire so appointed, as the case may be, shall be given intelligible award (i. e. the reasoning leading to the award should be stated) with the sums awarded separately on each individual item of dispute referred to arbitration. 3 (b) For the purpose of appointing two arbitrators as referred to in sub-clause (a) (ii)above, the Railway will send a panel or more than three names of Gazetted Railway Officers of one or more departments of the Railway to the contractor who will be asked to suggest to the General Manager one name out the list for appointment as the contractor's nominee. The General manager, while so appointing the contractor's nominee, will also appoint a second arbitrator as the Railway's nominee either from the panel or from outside the panel, ensuring that one of the two arbitrators so nominated is invariably for the Accounts Department. Before entering upon the reference the two arbitrators shall nominate an Umpire who shall be a Gazetted railway officer to whom the case will be referred to in the event of any difference between the two arbitrators. Offices of the Junior Administrative grade of the Accounts Department of the Railway shall be considered as of equal status of the Officers in the intermediate administrative grade of other departments of the Railway for the purpose of appointment as arbitrators. "
( 3 ) TH
