TaxTMI 
TaxTMI 
2011 (7) TMI 1296
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....oint an arbitrator and refer the disputes for adjudication. Since the Arbitrator appointed could not deliberate the matter within the time limit, the respondent invoked the jurisdiction of the Umpire. The Umpire, by order dated 26.04.2005, gave award for Claim Nos. 1, 3, 6, 8, 9, 10, 11, 12 & 13 and rejected Claim Nos. 2, 5, 7 & 14 and mentioned that a bank guarantee towards security deposit against claim No. 4 is to be returned. (b) Challenging the award given by the Umpire for Claim Nos. 11 & 13, the appellant herein filed Arbitration Petition No. 274 of 2005 before the High Court. The learned Single Judge of the High Court, vide order dated 06.12.2005 dismissed their petition. (c) Aggrieved by the order passed by the learned single Judge, the appellant herein filed an appeal being Arbitration Appeal No. 219 of 2006 before the Division Bench of the High Court. The Division Bench, by impugned order dated 24.04.2006, dismissed the appeal. Challenging the said order, the Union of India preferred this appeal by way of special leave before this Court. 3) Heard Mr. A. S. Chandhiok, learned Additional Solicitor General for the Union of India and Mr. Ramesh Babu M.R., learned co....
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....t the provisions of the Arbitration Act, 1940 alone are applicable to the case on hand. Now, let us consider various decisions of this Court dealing with similar prohibition in the agreement for grant of interest. In Secretary, Irrigation Department, Government of Orissa and Others vs. G.C. Roy, (1992) 1 SCC 508, the Constitution Bench had considered Section 29 of the Arbitration Act, 1940 which deals with interest pendente lite. After analyzing the scheme of the Act and various earlier decisions, the Constitution Bench considered the very same issue, namely, whether an arbitrator has power to award interest pendente lite and, if so, on what principle. The relevant paragraphs are extracted hereunder:- "43. The question still remains whether arbitrator has the power to award interest pendente lite, and if so on what principle. We must reiterate that we are dealing with the situation where the agreement does not provide for grant of such interest nor does it prohibit such grant. In other words, we are dealing with a case where the agreement is silent as to award of interest. On a conspectus of aforementioned decisions, the following principles emerge: (i) A person deprived ....
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....o reference (pre- reference period). For doing complete justice between the parties, such power has always been inferred. 44. Having regard to the above consideration, we think that the following is the correct principle which should be followed in this behalf: Where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (along with the claim for principal amount or independently) is referred to the arbitrator, he shall have the power to award interest pendente lite. This is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and therefore when the parties refer all their disputes -- or refer the dispute as to interest as such -- to the arbitrator, he shall have the power to award interest. This does not mean that in every case the arbitrator should necessarily award interest pendente lite. It is a matter within his discretion to be exercised in the light of all the facts and circumstances of the case, keeping the ends of justice in view." 8) In Executive Engineer, Dhenkanal Minor Irrigation Division, Orissa and Others vs. N.C Budharaj (de....
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....Space-Age that the term of the contract merely prohibits the department/employer from paying interest to the contractor for delayed payment but once the matter goes to the arbitrator, the discretion of the arbitrator is not in any manner stifled by the terms of the contract and the arbitrator will be entitled to consider and grant the interest pendente lite, cannot be used to support an outlandish argument that bar on the Government or department paying interest is not a bar on the arbitrator awarding interest. Whether the provision in the contract bars the employer from entertaining any claim for interest or bars the contractor from making any claim for interest, it amounts to a clear prohibition regarding interest. The provision need not contain another bar prohibiting the arbitrator from awarding interest. The observations made in the context of interest pendente lite cannot be used out of contract. 24. The learned counsel for the appellant next contended on the basis of the above observations in Engineers-De-Space- Age, that even if Clause G1.09 is held to bar interest in the pre-reference period, it should be held not to apply to the pendente lite period, that is, from....
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....n Act, 1940. There also, Clause 30 of SCC and Clause 52 of GCC prohibits payment of interest. Though the Bench relied on all the earlier decisions and considered the very same clause as to which we are now discussing, upheld the order awarding interest by the arbitrator de hors to specific bar in the agreement. It is relevant to point out that the decision of Madnani Construction Corporation Private Limited (supra) was cited before another Bench of this Court in Sree Kamatchi Amman Constructions vs. Divisional Railway Manager (Works), Palghat and Others, (2010) 8 SCC 767, wherein the decision in Madnani Construction Corporation Private Limited (supra) was very much discussed and considered. After adverting to all the earlier decisions including the Constitution Bench judgments, this Court has analyzed the effect of Madnani Construction Corporation Private Limited (supra). The following discussion and ultimate conclusion are relevant: "17. In Madnani the arbitrator had awarded interest pendente lite, that is, from the date of appointment of arbitrator to the date of award. The High Court had interfered with the same on the ground that there was a specific prohibition in the ....
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....st, it amounts to a clear prohibition regarding interest. The provision need not contain another bar prohibiting the arbitrator from awarding interest. The observations made in the context of interest pendente lite cannot be used out of contract. 24. The learned counsel for the appellant next contended on the basis of the above observations in Engineers-De-Space-Age, that even if Clause G 1.09 is held to bar interest in the pre-reference period, it should be held not to apply to the pendente lite period, that is, from 14-3-1997 to 31-7-2001. He contended that the award of interest during the pendency of the reference was within the discretion of the arbitrator and therefore, the award of interest for that period could not have been interfered with by the High Court. In view of the Constitution Bench decisions in G.C. Roy and N.C. Budharaj rendered before and after the decision in Engineers-De-Space-Age, it is doubtful whether the observation in Engineers-De-Space-Age in a case arising under the Arbitration Act, 1940 that the arbitrator could award interest pendente lite, ignoring the express bar in the contract, is good law. But that need not be considered further as this i....