Mr. A.N. Jindal, J.:- The judgment dated 05.03.2012 dismissing the application filed by the appellants under Section 34 of the Arbitration and Conciliation Act, 1996 (for brevity ‘the Act’) for setting aside an exparte Award dated 27.04.2005, is under challenge.

2. As per terms of the agreement dated 03.10.2001, executed between the parties, the appellants were allotted 4606 metric tones of paddy for milling up to 30.06.2002. After milling, the said rice was to be supplied to the respondent-corporation within the stipulated period and the agreement was to remain in force w.e.f. 03.10.2001 till 30.09.2002 or till the clearance of dues, whichever is later. However, the said agreement could be extended at the behest of the Director/Managing Director for further period on the same terms and conditions. On account of short supply of rice, a dispute arose, as such, the matter was referred to the Arbitrator Sh. G.S. Bhatia, who vide order dated 27.04.2005 passed an Award to the tune of Rs.3,64,48,779.71 along with interest at the rate of 21% for the first year and at the rate of 30% for the subsequent period till realization of the amount. It was further ordered that since the appellants have been proceeded against exparte in the case and have not deposited their share of arbitration fee, therefore, the respondentcorporation would pay the share of the appellants to the arbitrator in terms of Section 38(2) Proviso 1 of the Act.

3. The claim set up by the respondent-corporation before the Arbitrator was as under:-

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“Total Paddy : 2553.434

MT Rice Due : 1710.80

MT Cost of Rice Due & Rs.10663.31 : Rs.1,82,42,432

paise per qtl.

Interest Compound quarterly @ 21% : Rs.3,54,10,537.71

from 01.08.2002 to 31.07.2003 (included interest of

and 30% from 01.08.2003 to 28.02.2005 Rs.1,71,68,105.71)

Cost of bags i.e. 34046 bags of 75 Kg. : Rs.10,38,242

Each @ Rs.29.21 per bag + Sales Tax

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Total : Rs.3,64,48,779.71

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4. The Additional District Judge, Ludhiana, vide judgment dated 05.03.2012, dismissed the objection petition filed by the appellants.

5. It would be pertinent to mention here that though the Award was passed exparte, yet the same was not set aside and the objection petition filed against the same, was dismissed.

6. The first contention raised by learned counsel for the appellants is that the Arbitrator has no jurisdiction to pass a compound quarterly interest over the claim amount. The interest so ordered by the Arbitrator i.e. at the rate of 21% per annum for the first year and at the rate of 30% for the subsequent years, was quite exorbitant and against the principles of natural justice.

7. While answering to the aforesaid argument, learned counsel for the respondent-corporation has stated that he accedes to the argument raised to this extent and the Award, in so far as it relates to the granting of compound interest, may be set aside. Similarly, he has also accepted the contention that the agreement was executed on 03.10.2001, whereby paddy for the crop year 2001-02 was supplied, which was to be shelled up to 30.06.2002. Therefore, certainly the respondent-corporation was entitled to the interest from 01.08.2002 when the accounts were settled, till realization of the Award amount of Rs.1,82,42,432/-.

8. As regard the clause governing the interest, the case of the appellants is not covered by clause 8 of the agreements. Actually, the case of the appellants falls within Clause 6 of the agreement, which reads as under:-

“6. The miller shall be responsible for the safe custody of paddy lifted till the delivery of rice as