Supreme Court Upholds Arbitrator's Award, Rules General Manager's Decision on Excepted Matters Not Final, Interest Award Permissible

The SC set aside the HC's judgment, upholding the arbitrator's award. The SC determined that the arbitrator was correct in considering the disputes arbitrable, as the General Manager's decision on excepted matters was not final. The SC also found that the HC erred in concluding certain claims as non-arbitrable, emphasizing the arbitrator's role as the master of facts. Furthermore, the SC ruled that the arbitrator had the authority to award interest, as the contract did not explicitly prohibit it. The appeal was allowed with no order as to costs.

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Issues Involved:
1. Jurisdiction of the Court
2. Arbitrability of Disputes
3. Excepted Matters
4. Award of Interest by the Arbitrator

Detailed Analysis:

Jurisdiction of the Court:
The High Court concluded that the court below had the jurisdiction to entertain the application under Section 17 of the Arbitration Act, 1940. This was affirmed despite the respondent Railways' contention that the disputes were not arbitrable as they fell under 'excepted matters' in the contract.

Arbitrability of Disputes:
The High Court held that the decision of the General Manager regarding excepted matters is not final between the parties and that the General Manager could not exclude the jurisdiction of the Court by wrongly deciding this question. The High Court also concluded that the trial court did not address the issue of excepted matters, leaving it to be decided by the Arbitrator, who held that none of the contractor's claims were excepted matters.

Excepted Matters:
The High Court identified Item Nos. 1 to 3 and 5 to 8 as excepted matters and non-arbitrable, concluding that the Arbitrator committed an illegality in allowing them. However, the Supreme Court found this conclusion incorrect, emphasizing that the Arbitrator, as the master of facts, had found manipulations and alterations by the Railways, which the High Court ignored without deeming those findings perverse. The Supreme Court held that the procedure prescribed for bringing claims under excepted matters must be scrupulously followed, which was not done in this case.

Award of Interest by the Arbitrator:
The High Court held that the contract prohibited the payment of interest based on Clause 16(2) of the GCC, Clause 30 of the SCC, and Clause 52 of the GCC. The Supreme Court, however, noted that these clauses did not contain any prohibition on the arbitrator to grant interest. The Supreme Court referenced several judgments, including G.C. Roy and N.C. Budharaj, to support the arbitrator's authority to award interest, concluding that the High Court erred in interfering with the arbitrator's award on interest.

The Supreme Court emphasized that an arbitrator has the power to award interest for the pre-reference period, pendente lite, and post-award period unless explicitly prohibited by the contract. The judgment of the High Court was set aside, and the arbitrator's award was upheld. The appeal was allowed with no order as to costs.

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