AI Drafter 
TaxTMI 
TaxTMI 
2019 (2) TMI 375
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....st at the rate of 10% per annum from the date when the arbitration was invoked, i.e., October 09, 2007, till 60 days after the award. Future interest at the rate of 18% per annum till the date of payment was also awarded. 3) Dispute which has travelled upto this Court pertains only to the question as to whether the Arbitrators could award any interest in view of Clauses 50 and 51 of the General Conditions of Contract (GCC) which governed the terms between the parties. The objections were filed before the High Court. A Single Judge of the High Court of Delhi passed the order dated November 15, 2011 quashing the award limited to the interest that was awarded by the Arbitrators. The appellant preferred intra-court appeal which has been dismissed by the Division Bench of the High Court, thereby upholding the judgment of the Single Judge. The effect is that the High Court has held that no interest is payable as Clauses 50 and 51 of GCC bar the arbitrators from granting interest. 4) It may be pointed out that on interpreting Clauses 50 and 51 of the General Conditions of Contract, the view taken by the High Court is that these clauses categorically provide that no interest would be....
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....of discretion by the arbitrator. The position of law, has, therefore, been clearly stated in the aforesaid decision of the Constitution Bench. ........................Strictly construed the term of the contract merely prohibits the Commissioner from paying interest to the contractor for delayed payment but once the matter goes to the arbitration the discretion of the Arbitrator is not, in any manner, stifled by this term of the contract and the Arbitrator would be entitled to consider the question of grant of interest pendent lite and award interest if he finds the claim to be justified. We are, therefore, of the opinion that under the clause of the contract the Arbitrator was in no manner prohibited from awarding interest pendente lite." 5) As stated above, the High Court, on the other hand, has taken the view that if interest is prohibited as per the expressed terms of the contract between the parties, the Arbitrator does not get jurisdiction to award interest. Further, insofar as interpretation to the aforesaid clauses is concerned, the High Court noticed that these Clauses were on the same terms as Clause 1.2.14 and 1.2.15 of the contract which were subject matter o....
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....e, his alternate submission was that two similar or almost identical clauses are interpreted in a different manner in Harish Chandra case and Jayprakash Associates case and, therefore, conflict arises which needs to be resolved. 9) Mr. Gourab Banerji, learned Senior Counsel appearing for the respondent gave equally emphatic reply to the aforesaid submissions of Mr. Suri. His first argument was that clauses in Harish Chandra case and the present case were altogether different. Insofar as the instant case is concerned, it was governed by the law laid down in Jayprakash Associates judgment which was in fact a case between the same parties and in that case the Court had, while construing the identically worded clauses, came to the conclusion that the Arbitrators were precluded from granting any interest. His another contention was that there was a difference between the scheme provided under the Arbitration Act, 1940 (hereinafter referred to as the '1940 Act') when contrasted with the 1996 Act. He argued that most of the judgments cited by the appellant including Harish Chandra were under 1940 Act whereas in the instant case award was passed under the 1996 Act. He also referred to c....
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....up below: (a) A Constitution Bench judgment of this Court in the case of Secretary, Irrigation Department, Government of Orissa & Ors. v. G.C. Roy (1992) 1 SCC 508 exhaustively dealt with this very issue, namely, power of the arbitral tribunal to grant pre-reference and pendente lite interest. The Constitution Bench, of course, construed the provisions of the 1940 Act which Act was in vogue at that time. At the same time, the Constitution Bench also considered the principle for grant of interest applying the common law principles. It held that under the general law, the arbitrator is empowered to award interest for the pre-reference, pendente lite or post award period. This proposition was culled out with the following reasoning: "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....
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....ite. Continuity and certainty is a highly desirable feature of law. (v) Interest pendente lite is not a matter of substantive law, like interest for the period anterior to reference (prereference period). For doing complete justice between the parties, such power has always been inferred." It is clear from the above that the Court decided to fall back on general principle that a person who is deprived of the use of money to which he is legitimately entitled to, has a right to be compensated for the deprivation and, therefore, such compensation may be called interest compensation or damages. (b) As a sequitur, the arbitrator would be within his jurisdiction to award pre-reference or pendente lite interest even if agreement between the parties was silent as to whether interest is to be awarded or not. (c) Conversely, if the agreement between the parties specifically prohibits grant of interest, the arbitrator cannot award pendente lite interest in such cases. This proposition is predicated on the principle that an arbitrator is the creature of an agreement and he is supposed to act and make his award in accordance with the general law of the land and the agreement. ....
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.... of any bar against interest contained in the contract between the parties are not applicable to arbitrations governed by the Arbitration and Conciliation Act, 1996." 13) The aforesaid position is reiterated in Sree Kamatchi Amman Constructions v. Divisional Railway Manager (Works), Palghat & Ors. (2010) 8 SCC 767 and Union of India v. Bright Power Projects (India) Private Limited (2015) 9 SCC 695. Later judgment is by a bench of three Judges. This legal position is reiterated in Sri Chittaranjan Maity v. Union of India (2017) 9 SCC 611 which is authored by one of us (Nazeer, J.). In that case, the Court considered the same very question which falls for determination by us, namely, whether the arbitral tribunal was justified in awarding interest on delayed payments in favour of the appellant? After noticing that clause 16(2) of GCC in that case bars the payment of interest, it was held that under the 1996 Act, the position wherein is different from 1940 Act, the interest could not be awarded. Following observations from this judgment may be noted: "16. Relying on a decision of this Court in Ambica Construction v. Union of India [Ambica Construction v. Union of India, (2....
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....es or in respect of delay on the part of the engineer or in any other respect whatsoever, leading the Court to find an express bar against payment of interest, a clause which merely states that no interest will be payable upon amounts payable to the contractor under the contract would not be sufficient to bar an arbitrator from awarding pendente lite interest. Further, the grant of pendente lite interest depends upon the phraseology used in the agreement, clauses conferring power relating to arbitration, the nature of claim and dispute referred to the arbitrator, and on what items the power to award interest has been taken away and for which period. Also, the position under Section 31(7) of the 1996 Act, is wholly different, inasmuch as Section 31(7) of the 1996 Act sanctifies agreements between the parties and states that the moment the agreement says otherwise, no interest becomes payable right from the date of the cause of action until the award is delivered. 15) After discussing and analysing almost all the judgments on this subject, the legal position is summed up in the following manner: "24. A conspectus of the decisions that have been referred to above would sho....
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.... is wholly different, inasmuch as Section 31(7) of the 1996 Act sanctifies agreements between the parties and states that the moment the agreement says otherwise, no interest becomes payable right from the date of the cause of action until the award is delivered." 16) In this whole conspectus and keeping in mind, in particular, that present case is regulated by 1996 Act, we have to decide the issue at hand. At this stage itself, it may be mentioned that in case clauses 50 and 51 of GCC put a bar on the arbitral tribunal to award interest, the arbitral tribunal did not have any jurisdiction to do so. As pointed out above, right from the stage of arbitration proceedings till the High Court, these clauses are interpreted to hold that they put such a bar on the arbitral tribunal. Even the majority award of the arbitral tribunal recognised this. Notwithstanding the same, it awarded the interest by relying upon Board of Trustees for the Port of Calcutta case. The High Court, both Single Bench as well as Division Bench, rightly noted that the aforesaid judgment was under the 1940 Act and the legal position in this behalf have taken a paradigm shift which position is clarified in Sayeed....
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....t fell for consideration in that decision was as under: (SCC p. 67, para 9) "1.09. No claim for delayed payment due to dispute, etc.-No claim for interest or damages will be entertained by the Government with respect to any moneys or balances which may be lying with the Government owing to any dispute, difference; or misunderstanding between the Engineer-in-Charge in making periodical or final payments or in any other respect whatsoever." This Court held that the said clause did not bar award of interest on any claim for damages or for claim for payment for work done. We extract below the reasoning for such decision: (SCC p. 67, para 10) "10. A mere look at the clause shows that the claim for interest by way of damages was not to be entertained against the Government with respect to only a specified type of amount, namely, any moneys or balances which may be lying with the Government owing to any dispute, difference between the Engineer-in-Charge and the contractor; or misunderstanding between the Engineer-in-Charge and the contractor in making periodical or final payments or in any other respect whatsoever. The words 'or in any other respect wha....
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....truction to Clauses 50 and 51 of the GCC given by the arbitral tribunal in the first instance as well as the High Court. Above all, these clauses is pari materia with with Clauses 1.2.14 and 1.2.15 of GCC in THDC case which was a judgment between the same parties. 21) Insofar as argument based on the principle of ejusdem generis is concerned, the Division Bench has held that that is not applicable in the present case. We find that it is rightly so held. Ejusdem generis is the rule of construction. The High Court has negated this argument in the following manner: "18. The rule of ejusdem generis guides us that where two or more words or phrases which are susceptible of analogous meaning are cupled together, a noscitur a sociis,they are to be understood to mean in their cognate sense and take colour from each other but only if there is a distinct genus or a category. Where this is lacking i.e. unless there is a category, the rule cannot apply." As rightly held, the rule of ejusdem generis would be applied only if there is distinct genus or a category, which is lacking in the instant case. This rule is applicable when particular words pertaining to a clause, category or....