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Issues: (i) Whether the arbitration award and the courts below could sustain the claim for Rs. 10,17,461 on the final bill, (ii) whether the claim for Rs. 12.50 lakhs lying in deposit could be decreed and whether the High Court was right in remitting that claim for fresh adjudication, and (iii) whether interest could be awarded on the contractor's monetary claim in the face of the contractual clauses barring such interest.
Issue (i): Whether the arbitration award and the courts below could sustain the claim for Rs. 10,17,461 on the final bill.
Analysis: The monetary claim became crystallized after preparation of the final bill and was specifically referred to arbitration. The record also showed that both sides agreed that the disputes relating to refund of deposit and payment of the final bill could be adjudicated by the arbitrators. The earlier arbitration did not bar adjudication of these quantified claims.
Conclusion: The claim for Rs. 10,17,461 was validly arbitrable and the award on that amount was upheld.
Issue (ii): Whether the claim for Rs. 12.50 lakhs lying in deposit could be decreed and whether the High Court was right in remitting that claim for fresh adjudication.
Analysis: The arbitrators had not adjudicated that claim on the footing that it was outside the arbitral reference and to be worked out by amicable settlement or civil suit. The trial court therefore lacked power to decree it. The High Court was right in setting aside that part of the decree, but the further direction for adjudication by an arbitrator nominated by the High Court was unwarranted; the matter had to be pursued only in the manner agreed between the parties, if at all.
Conclusion: The decree for Rs. 12.50 lakhs was unsustainable, and the remand direction by the High Court was set aside.
Issue (iii): Whether interest could be awarded on the contractor's monetary claim in the face of the contractual clauses barring such interest.
Analysis: The contract contained an express prohibition against interest on delayed or withheld payments, including amounts lying as security deposit. In such a situation, pendente lite interest could not be sustained. The statutory amendment in paragraph 7A of the First Schedule to the Arbitration Act, 1940 was only enabling and did not override the express contractual bar. However, post-award interest stood on a different footing under Section 29 of the Arbitration Act, 1940, and the award of interest from the date of award till payment or decree was supportable.
Conclusion: Pendente lite interest was disallowed, but post-award interest on Rs. 10,17,461 was upheld.
Final Conclusion: The appeal succeeded only in part: the award for the quantified final-bill amount was maintained, the deposit claim was not sustained, and the interest component was modified by deleting pendente lite interest while preserving post-award interest.
Ratio Decidendi: Where the contract expressly prohibits interest on delayed or withheld payments, pendente lite interest cannot be awarded in arbitration, though post-award interest may still be governed by Section 29 of the Arbitration Act, 1940.
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