SupremeToday Landscape Ad
Back
Next
Judicial Analysis Court Copy Headnote Facts Arguments Court observation
Listen Audio Icon Pause Audio Icon
judgment-img

1991 Supreme(MP) 24

High Court Of Madhya Pradesh
B. C. VARMA, R. D. SHUKLA
UNION OF INDIA, SOUTH EASTERN RAILWAY - Appellant
Versus
K.S.KALRA - Respondents
MISC. CIV. APPEAL 265 Of 1988
Decided On : 01/11/1991

Advocates Appeared:
ANUP CHOUDHARY, R.K.THAKUR

An arbitrator has jurisdiction to award interest prior to the commencement of the arbitration proceedings, but lacks jurisdiction to award interest pendente lite or interest on the amount of interest itself accrued due prior to the institution of the proceedings.

Headnote:

ARBITRATION - AWARD - INTEREST - ARBITRATOR'S JURISDICTION - INTEREST PRIOR TO COMMENCEMENT OF ARBITRATION PROCEEDINGS - INTEREST PENDENTE LITE - INTEREST ON INTEREST - AWARD MODIFIED.

Fact of the Case:

In an arbitration proceeding, the arbitrator awarded interest on the principal amount found due to the respondent, including interest prior to the commencement of the arbitration proceedings and interest pendente lite. The appellant challenged the award, arguing that the arbitrator lacked jurisdiction to award such interest.

Finding of the Court:

The court held that the arbitrator had jurisdiction to award interest prior to the commencement of the arbitration proceedings, as the Interest Act, 1978 applies to arbitration proceedings and permits the arbitrator to award interest on an ascertained sum of money from the date it became due up to the date of the institution of the proceedings. However, the court held that the arbitrator lacked jurisdiction to award interest pendente lite or interest on the amount of interest itself accrued due prior to the institution of the proceedings.

Issues: 1. Whether the arbitrator had jurisdiction to award interest prior to the commencement of the arbitration proceedings? 2. Whether the arbitrator had jurisdiction to award interest pendente lite? 3. Whether the arbitrator had jurisdiction to award interest on the amount of interest itself accrued due prior to the institution of the proceedings?

Ratio Decidendi: 1. The Interest Act, 1978 applies to arbitration proceedings and permits the arbitrator to award interest on an ascertained sum of money from the date it became due up to the date of the institution of the proceedings. 2. The arbitrator is not a 'court' for the purpose of S. 34 of the Civil Procedure Code and, therefore, cannot award interest pendente lite. 3. The arbitrator lacks jurisdiction to award interest on the amount of interest itself accrued due prior to the institution of the proceedings.

Final Decision: The court partly allowed the appeal and modified the award and decree by reducing the amount awarded as interest on the sum of Rs. 1,60,749/- awarded on account of interest prior to the initiation of proceedings, as also the amount awarded and decreed towards interest pendente lite.

B. C. VARMA, AG. C. J.

( 1 ) IN This appeal u/ S. 39 of the Arbitration Act against the judgment making the award of the arbitrator the rule of the Court and consequent decree, the only question agitated relates to the award of interest on the principal amount found due to the respondent.

( 2 ) ON 13/08/1986, the Civil Court in a pending suit between the parties, appointed Shri V. Balasubramanyam, Additional Divisional Railway Manager (Technical), South-Eastern Railway, Bilaspur the sole arbitrator. Claims were laid before the arbitrator who by its award held the respondent entitled to Rs. 1,19,926 / - in full and final settlement of the various claims in suit. In addition, a sum of Rs. 1,60,749 / - has been awarded towards the full and final settlement of claim of interest up to the date of the making of the award. Some small amounts were also awarded towards the incidental expenses and other clerkage charges. Then, while concluding, the arbitrator awarded simple interest at Rs. 12 / - per cent per annum on a sum of Rs. 2,80,675 / - (i. e. , the total sum awarded) from the date of award till payment.

( 3 ) WHEN the award was filed in the Court, the appellant objected to the award of Rs. 1,60,749 /- as interest alleging it to be arbitrary and outside the scope of reference. Award of future interest was also objected to. The respondent inter alia pleaded that the objections raised by the appellant were barred by limitation. This objection as to the limitation found favour with the Court and the objections were, therefore, dismissed as barred by limitation. After rejecting the objections, the Court, vide the impugned judgment, upheld the award of Rupees 2,80,675/- together with future interest thereon at the rate of Rs. 12 /- per cent per annum.

( 4 ) THE finding that the objections were barred by limitation cannot be assailed. The award was filed in Court on 7-3-1987 and the parties took notice of the award on 16-6-1987. The objections to the award were filed by the appellant on 3-8-1987, i. e. , admittedly beyond the period of thirty days. No application was made to condone the delay, even if such application can be held to be tenable. The objection to set aside the award has, therefore, been rightly held barred by limitation.

( 5 ) SHRI Anoop Choudhary, learned counsel for the appellant-Union of India, however, submitted that even if the objections taken by the appellant to the award made by the arbitrator are held barred by limitation, the Court ought to have considered that the arbitrator had no jurisdiction to award interest and in no case could interest pendente lite be awarded by the arbitrator, and, therefore, should have set aside at least the part of the award directing payment of interest. This argument appears to be based upon the effect of and consequences flowing from the terms of Section 17 of the Arbitration Act. Section 17 of the Act provides that if the Court sees no cause to set aside the award, it shall, after the time for making an application to set aside the award has expired or when an application to set aside the award is refused, proceed to pronounce judgment according to the award. A Division Bench of the Kerala High Court, in P. Mulji and Sons v. K. P. Exporting Co. AIR 1976 Ker 3, considered the effect of Section 17 of the Arbitration Act and observed that the requirement is that the Court has to be satisfied that there is no ground to set aside the award and if so satisfied, to pass a decree. An order to set aside an award need not necessarily be on an application by a party. But such an order can as well be contained in the order passed under s. 17. Such suo motu power of the Court to invalidate the award, however, can be exercised only if there is any patent illegality or voidness or the award directs a party to do an act which is prohibited by law. If such illegality is not patent but requires an enquiry to find that out, the Court may not be justified in exercising its suo motu jurisdiction. (S





Click Here to Read the rest of this document

1
2
3
4
5
6
7
8
9
10
11
SupremeToday Portrait Ad
supreme today icon
logo-black

An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers

Please visit our Training & Support
Center or Contact Us for assistance

qr

Scan Me!

India’s Legal research and Law Firm App, Download now!

For Daily Legal Updates, Join us on :

whatsapp-icon Back to top