TaxTMI 
TaxTMI 
2024 (8) TMI 1141
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. 77,85,290 and that was in addition to seven other claims under different heads, owing to alleged delays on part of the Respondent. As the respondent denied any liability, the dispute was referred to Arbitration for resolution. 4. The Arbitrator gave his award on 30.01.2018, holding the respondents are liable to the tune of Rs.1,37,25,252, with interest. There were seven claims. Claim no. 1 related to loss of business, with respect to which Rs. 3,87,530 was awarded; claim no. 2 related to uneconomic utilization of plant and machinery, with respect to which Rs. 61,22,000 was awarded and claim no. 3 related to labour charges for uneconomical stoppage of work, with respect to which Rs.5,80,500 was awarded; claim no. 4 related to interest on delayed payment of running account bills and escalation bill for which the Arbitrator awarded Rs. 54,84,024; claim no. 5 related to escalation with respect to which Rs.11,51,198 was granted; and claim 6 related to interest on the sum awarded, with respect to which interest @12% p.a. was awarded from 12.04.2016 to 30.01.2018 and @ 9.25% p.a. post award interest till date of actual payment. Finally claim no.7 pertained to costs and the Arbitrator ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cked capital (when amount exceeded Rs.1 crore) @12% pa. Award upheld by the District Court. Set aside because monthly bills raised by appellants were paid without delay. As per clauses 7-9, no claim for interest arises. 5. Escalation Bill Awarded Rs.11,51,198/- as respondent has already paid part of such amount. The claimant is entitled to the balance. Award upheld by the District Court. Affirmed the Award and decision of the District Judge. 6. Interest Arbitrator awarded interest @12% on amount of claims w.e.f 12.04.2016 to the date of Award and further interest @9.25% p.a. from date of award till actual payment. Award upheld by the District Judge. Modified. Only interest pendent lite and post award payable. No interest for pre-reference period. 7. Cost Awarded Rs.4 Lakhs towards legal and administrative expenses. 6. Mr. Saurav Agarwal, counsel for the appellant, confined his submissions to claim no. 3, 4 and 6 awarded by the Arbitrator and upheld by the District Judge but set aside/modified by the High Court. We will deal with each of these claims. 7. Re claim no. 3: This claim rel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ltered, i.e. the tender is revalidated upon the extended period. EXTENSION OF TIME For cogent reasons over which the contractor will have no control and which will retard the* progress, extension of time for the period lost will be granted on receipt of application from the contractor before the expiry date of contract. No claim whatsoever for idle labour, additional establishment, cost of materials and labour and hire charges of tools & Plants etc. would be entertained under any circumstances. The contractor should consider the above factor while quoting this rate. Applications for such extension of time should be submitted by the contractor in the manner indicated in Clause 5 of the printed form of W.B.F. No. 2911 (ii). IDLE LABOUR Whatever the reasons may be no claim or idle labour, enhancement of labour rate additional establishment cost, cost of TOLL and hire and labour charges of tools and plants Railway freight etc. would be entertained under any circumstances." 7.4. Mr. Saurav Agarwal submitted that the High Court under Section 37 ignored the plausible view of the Arbitrator, as upheld under Section 34, and substituted it with its own reasoning. 7.5. This submissio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....% p.a. which is not allowed. I restrict rate of interest @ 12% p.a. only and thereby the admissible amount of the claim stands at Rs. 54,84,024/- [Rs. 82,26,036 / 18 X 12] 23.2 The claimant notified loss of interest during the execution period under Interest Act (vide annexure-K, page 109, Annexure-m page-112, annexure-O, page 115, annex.- R1, page-119 & 122 with claimant's document). Moreover, such payment is out of the written contract for executed quantities. There is no prohibition in the contract for payment of interest on blocked capital. The claimant is otherwise entitled to receive payment on account of interest on blocked capital. Such principle of law is laid down in the case of Secretary, Irrigation Department Government of Orissa Vs. G.C. Ray reported in (1992) 1 SCC 508. The claimant is entitled to receive compensation for any loss or damage and/or blockage of capital which arose naturally from the breach or which the parties knew to be likely to arrive from such breach. The injured party is to be placed in the same financial position, as he would have been in, if the other party had duly carried out the contract, i.e., to place the injured party in the same positio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted on 9th November, 2012. What the learned Arbitrator did not determine were the following: a) Who was responsible for non-preparation of the RA bill within time? b) Which of the RA bill claims of the appellant were to be treated as advance under the above clause of the contract? c) Was any notice under the Interest Act, 1978 issued by the appellant and to what effect? d) For what amount and for which period the claim for interest was being entertained and granted by him? From the above narration of facts it appears that the bills were paid soon after they were prepared. In that case there could not have been any claim for interest. If a claim for interest has been made for running account bill below one crore, under the said terms it is to be treated as a claim for interest for unpaid advance. No right to claim interest arose. Now, unless these facts were established by the appellant and discussed by the learned Arbitrator to show that there was delay in the preparation of the bills by the respondent, that those bills were over one crore and not be treated as advance and that the right to obtain payment thereof arose on their due submission and service of a noti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made. (b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of two per cent higher than the current rate of interest prevalent on the date of award, from the date of award to the date of payment. Explanation.-The expression "current rate of interest" shall have the same meaning as assigned to it under clause (b) of section 2 of the Interest Act, 1978 (14 of 1978)." 9.5. The power of the Arbitrator to grant pre-reference interest, pendente lite interest, and post-award interest under Section 31(7) of the Act is fairly well-settled. The judicial determinations also highlight the difference in the position of law under the Arbitration Act, 1940. The following propositions can be summarised from a survey of these cases: I. Under the Arbitration Act, 1940, there was no....
X X X X Extracts X X X X
X X X X Extracts X X X X
....% higher than the current rate of interest, from the date of the award to the date of payment. IV. The wording of Section 31(7)(a) marks a departure from Arbitration Act, 1940 in two ways: first, it does not make an explicit distinction between pre-reference and pendente lite interest as both of them are provided for under this subsection; second, it sanctifies party autonomy and restricts the power to grant pre-reference and pendente lite interest the moment the agreement bars payment of interest, even if it is not a specific bar against the Arbitrator. Sayeed Ahmed and Company v. State of Uttar Pradesh, (2009) 12 SCC 26, paras 14, 23, 24; Union of India v. Saraswat Trading Agency, (2009) 16 SCC 504; Sree Kamatchi Amman Constructions v. The Divisional Railway Manager (Works), Palghat, (2010) 8 SCC 767, para 19; Union of India v. Bright Power Projects (India) Pvt Ltd., (2015) 9 SCC 695, para 13; Reliance Cellulose Products Ltd (supra), para 24; Jaiprakash Associates Limited v. Tehri Hydro Development Corporation India Limited, (2019) 17 SCC 786, paras 13-15; Delhi Airport Metro Express Private Limited v. Delhi Metro Rail Corporation, (2022) 9 SCC 286, paras 16-20, 24. V. The po....