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1997 Supreme(Del) 635

High Court Of Delhi
M.L.SHARMA,NEW DELHI - Appellant
Versus
STATE TRADING CORPORATION OF INDIA LIMITED - Respondent
Suit 2369 of 1991
Decided On : 08/04/1997

Advocates Appeared:
B.P.AGRAWAL, S.K.KAPOOR

Headnote:Arbitration Act, 1940 - Section 20 — Rule of court — Interest — Entitlement of — Dispute — Referred — Award — Objections — Not maintainable as the Arbitrator cannot award pre-reference interest — Objection not maintainable — Has jurisdiction to award interest — Objection rejected — Entitled to interest — Made rule of Court.

       Held:

       Arbitrator has the jurisdiction to award pre-reference interest in case it arose after the Interest Act, 1978 which became applicable w.e.f. August 19, 1981.

       Interest Act, 1978 - Section 3 — Pre-reference interest — Applicability of — Section 20 Arbitration Act, 1978 — Reference of dispute between parties — Referred — Claimed — Amount due in final bill — Refund of security — Loss of profitability — Interest on claim for presuit period & pendenlife and future interest — Cost of Arbitration — No serious challenge — Cogent reasons — Respondent pleaded arbitrator has no jurisdiction to grant interest — Arbitrator has jurisdiction to award pre-reference interest.

       It is, thereforee, established that the arbitrator has the jurisdiction to award pre-reference interest in case it arose after the Interest Act, 1978 which became applicable w.e.f. August 19, 1981. In the present case, the interest was claimed by the claimant and the same was granted as it was held by the arbitrator that the legitimate payment due to the claimant had been considerably delayed and, thereforee, they were entitled to interest.

C. M. Nayar, J.

( 1 ) THIS judgment will dispose of three petitions being Suit No. 2369/91 (M/s M. L. Sharma and Company v. State Trading Corporation), Suit No. 2370/91 (M/s M. L. Sharma and Company v. State Trading Corporation) and Suit No. 2371/91 (M/s-M. L. Sharma and Company v. State Trading Corporation) as they raise common questions and were decided by the respective awards by the same arbitrator.

( 2 ) THE respondent State Trading Corporation (for short STC) entered into three separate contracts dated July 6, 1979 for the work of Sanitary installations and plumbing works for Community Centre Project at STC Colony, New Delhi; dated November 12, 1979 for the work of external services for Community Centre Project at STC Colony, New Delhi and dated July 8, 1980 for construction of compound wall and underground tank at STC Colony, New Delhi.

( 3 ) CERTAIN disputes arose out of the execution of the works and such disputes were REFERRED TO in the respective petitions filed under Section 20 of the Arbitration Act before this Court i. e. Suit Nos. 341-A/87, 342-A/87 and 343-A/87. The order dated September 23, 1988 which is common in all the three petitions was passed which is common in all the three petitions was passed in one of the petitions and the same reads as follows:

"this is a petition under Section 20 of the Arbitration Act seeking direction to Respondent State Trading Corporation of India Ltd, for short STC, to file the arbitration agreement in Court and disputes be REFERRED TO for arbitration in terms of the arbitration clause. The petitioner was awarded the work of construction of compound wall all round the community Hall Water tanks and installation of booster pumps etc. at STC Colony, Mehrauli Road, New Delhi. Certain disputes arose out of the execution of the work. The petitioner has raised certain disputes which are mentioned in para 7 of the petition. According to the petitioner he invoked the arbitration clause by letter dated 2nd March, 1984 but did not have any effect and hence this petition has been filed. I do not see any serious opposition to this petition on behalf of the STC except that claims, if any, of the STC have also to be REFERRED TO for arbitration. I have also heard the counsel for the parties and noted their respective contentions. In the result, the petition is allowed. The respondent is directed to file the arbitration agreement in Court and the disputes arising out of this agreement are REFERRED TO for arbitration in terms of the arbitration clause. The Chief Engineer STC is directed to appoint an Arbitrator within four weeks from the date of receipt of this order for deciding the disputes between the parties. The claims of the petitioner are mentioned in para 7 of this petition which are required to be REFERRED TO for arbitration. STC is at liberty to file their claim before the Arbitrator if they have any. The petition is disposed of. "

( 4 ) THE disputes arising between the parties were REFERRED TO to the named arbitrator in terms of Clause 7 of the respective Agreements which may be reproduced as under:- Settlement of disputes by Arbitrator

"7. Except where otherwise provided in the contract, all questions and disputes relating to the meaning of the specifications, designs, drawings, and instructions herein before mentioned and as to the quality of workmanship of materials used on the work or as to any other question, claim, right, matter of other things whatsoever, if any, way arising out of or relating to the contract, designs, drawings, specifications, estimate, instructions, orders or these conditions; or otherwise, concerning the work, or the execution of failure to execute the same whether arising during the progress of the work of after the completion or abandonment thereof shall be REFERRED TO to the sole arbitration of the persons appointed by the Chief Engineer, State Trading Corporation, New Delhi. It will not be that the Arbitrator so appointed is a Government servant, that he





















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