1989 (1) TMI 355 - SC - Companies Law

Supreme Court adjusts interest on award, sets 9% rate from specific dates.

GUJARAT WATER SUPPLY & SEWERAGE BOARD Versus UNIQUE ERECTORS (GUJARAT) PVT. LTD. & ANR

The Supreme Court modified the award, specifically regarding the interest pendente lite, directing that the principal sum should carry interest at 9% from ... Whether the interest has been awarded from the date of the institution of the proceedings? Held that:- The award was made on 8th July, 1985 and it was published on 19th July, 1985, and, therefore, the latter date would be taken as the date of the award. We would, however, delete the interest awarded by the arbitrator for the period from 22.8.1984 till the date of the award and confine the interest on the principal sum of ₹ 57,65,273 to interest at 9 per cent from 6.8.1981 till 21.8.1984 (which has been worked out at ₹ 29,82,443). However, in exercise of our powers under section 3 of the Interest Act, 1978 and section 29 of the Arbitration Act, 1940, we direct that the above principal sum or the unpaid part thereof should carry interest at the same rate from the date of the award (19.7.1985) till the date of actual payment. Issues Involved:1. Error apparent on the face of the award.2. Arbitrability of claims and counter-claims.3. Non-speaking award.4. Award of interest pendente lite.5. Reasonableness of the award.Detailed Analysis:1. Error Apparent on the Face of the Award:The petitioner contended that the award was bad due to an error apparent on the face of the award. It was argued that the arbitrator failed to decide or disclose his mind about the arbitrability of claims or counter-claims, especially when the Board's application for deciding the same was pending before the arbitrator. The Court found that the parties had agreed to proceed on the basis that all claims would be examined without first deciding the question of arbitrability. Therefore, the arbitrator did not act arbitrarily in discussing all questions raised without first deciding the question of arbitrability or non-arbitrability of an issue.2. Arbitrability of Claims and Counter-Claims:The petitioner argued that some claims were ex facie not arbitrable and some were withdrawn, including claims for interest. The Court noted that the arbitrator had considered the arbitrability of claims and counter-claims and proceeded with the consent of the parties. The arbitrator's award indicated that he had decided the arbitrability of the claims, and the amount awarded was on points that were arbitrable. The contention that the arbitrator had not decided the question of arbitrability as a preliminary issue was not sustained.3. Non-Speaking Award:The petitioner contended that the arbitrator made a non-speaking award, which resulted in great prejudice. The Court discussed that while there is a trend that reasons should be stated in the award, it is not obligatory for the arbitrator to give detailed reasons. The Court held that the arbitrator had indicated his mind sufficiently, and the award was not unintelligible. The point that the non-speaking award was per se bad was not agitated before the High Court, and thus, the Court did not sustain this submission.4. Award of Interest Pendente Lite:The petitioner argued that granting interest pendente lite was contrary to the decision of the Supreme Court. The Court found an infirmity in the award regarding the interest pendente lite. The arbitrator had awarded interest at 17% per annum from 6.8.1981 to 17.6.1986. The Court modified the grant of interest, stating that the arbitrator could award interest from 6.8.1981 to 21.8.1984 under the Interest Act, 1978, but not for the period from 22.8.1984 to 19.7.1985. The Court directed that the principal sum should carry interest at 9% from 6.8.1981 to 21.8.1984 and from the date of the award (19.7.1985) till the date of actual payment.5. Reasonableness of the Award:The petitioner contended that the award was unreasonable and disproportionate. The Court noted that the reasonableness of an award is not a matter for the court unless the award is per se preposterous or absurd. The Court held that the award was not unreasonable, and the appraisement of evidence by the arbitrator is not a matter for the court to consider.Conclusion:The Supreme Court modified the award concerning the interest pendente lite and directed that the principal sum should carry interest at 9% from 6.8.1981 to 21.8.1984 and from the date of the award (19.7.1985) till the date of actual payment. The appeals were disposed of in these terms.