Partly allowed

M/S Fertilizer Corporation of v. M/S Balaji Laminating Works

Jharkhand HC5 Apr 2019Arb. Appeal/12/2011

Case brief

AI extract

What is this about?

Two arbitration appeals arising from the same proceedings. The court upheld the refusal to set aside a non-speaking award, holding the arbitrator did not lose jurisdiction on retirement and the award was not based on no evidence. In the second appeal it set aside the grant of interest from the date of the award till the date of decree, upholding interest from the date of decree till realisation.

What did the court decide?

Impugned order set aside to the extent it awards interest from the date of the award till the date of the decree; direction granting interest from the date of the decree till realisation upheld.

M/S Fertilizer Corporation of Vs M/S Balaji Laminating Works — Arbitration | Jharkhand HC (2019)

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IN THE HIGH COURT OF JHARKHAND AT RANCHI

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Arbitration Appeal No. 04 of 2006

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Fertilizer Corporation of India, Sindri Unit, Sindri through its General Manager Jai Prakash R/o Sindri P.O. Sindri, P.S. Sindri, District- Dhanbad … … Plaintiff/Appellant

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Versus

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M/s Balaji Laminating Works, 81, Nilganj Road, Agar Para, 24 Paraganas, West Bengal

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… … Defendant/Respondent

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With

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Arbitration Appeal No. 12 of 2011

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M/s Fertilizer Corporation of India, a Government of India Undertaking, having its one of the Unit at Sindri, P.O. & P.S. Sindri, District Dhanbad (Jharkhand), through its Unit Incharge Kalwant Singh, Son of Shri Rup Singh, Resident of Qrs. No. K1-118, Saharpura, P.O. & P.S. Sindri, District Dhanbad. … … Plaintiff/Appellant

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Versus

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M/s Balaji Laminating Works, having its Office at 81, Nilgunj Road, Agarapara, P.O. & P.S. Agarapara, District 24 Paraganas (West Bengal).

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… … Defendant/Respondents

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CORAM: HON’BLE MRS. JUSTICE ANUBHA RAWAT CHOUDHARY

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--For the Appellant :Mr. Vikash Pandey, Advocate : Ms. Rakhi Sharma, Advocate For the Respondents :Mr. P. D. Agarwal, Advocate : Mr. S. N. Agarwal, Advocate ---

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09 /05.04.2019

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1. Heard Mr. Vikash Pandey, counsel appearing on behalf of the appellant along with Ms. Rakhi Sharma, Advocate.

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2. Heard Mr. P. D. Agarwal and Mr. S. N. Agarwal, Advocates on behalf of the sole respondent in both the cases.

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3. This Arbitration Appeal No. 04 of 2006 has been filed against judgment dated 30.08.2005 and decree signed on 12.09.2005 in Title (Arbitration) Suit No. 54 of 1985 passed by learned Sub-Judge-II, Dhanbad, whereby the appellant’s objection under Sections 30 and 33 of the Arbitration Act, 1940

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has been rejected and the arbitral award has been made the rule of the Court.

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4. So far as Arbitration Appeal No. 12 of 2011 is concerned, the same has been filed under Section 39 (1) (iii) of the Arbitration Act, 1940 against the order dated 31.05.2011 passed in Title (Arbitration) Case No. 54 of 1985 by learned Sub-Judge-II, Dhanbad, whereby the said learned court has been pleased to pass an order to the effect that the respondent is entitled to get interest from the date of the Award till realization @ 18% per annum, and the Award has been modified for the purpose of granting interest from the date of the Award till realization and separate order passed in the matter of interest has been directed to form part of the main judgment delivered by the learned court below on 30.08.2005.

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5. Counsel for the appellant submits that the Award dated 17.07.1985 was subject matter of Title (Arbitration) Suit No. 54 of 1985, which was made the rule of the Court vide judgment dated 30.08.2005 delivered by the learned court below. Against the said judgment, a writ petition being W. P. (C) No. 6607 of 2005 was filed by the respondent herein before this Court which was disposed of vide order dated 23.02.2011. The grievance of the respondent in the said writ petition was that the learned court below while making the arbitration award, a rule of the Court, did not pass any order for payment of interest for the period from the date of the Award till realization and the learned court below had not assigned any reason for not granting interest for the said period. It was also contended that a petition was also filed on 04.06.1990 for the purposes of aforesaid claim of interest, but the same was not considered by the learned court below and no order was passed on the said petition. In the writ petition , the pendency of the aforesaid petition dated 04.09.1990, was not in dispute and accordingly, the writ Court, remanded the matter back to the learned court below to consider the said relief

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claimed by the writ petitioner (Respondent herein) with a direction to pass a reasoned order in accordance with law, after hearing both the parties. Consequently, the reasoned order dated 31.05.2011 has been passed by the learned court below which is the impugned order in the other arbitration appeal i.e. Arbitration Appeal No. 12 of 2011. He further submits that since both the arbitration appeals arise out of the same proceedings, therefore, both have been clubbed together.

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Arbitration Appeal No. 04 of 2006

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6. Counsel for the appellant on the merits of the case submits as under:-

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A. The respondent submitted its tender which was accepted by the appellant and a purchase order no. P/RM/Urea bags/Jan-June/80/3880 dated 24.12.1979 was issued to the appellant for the purchase of 11.5 lakh bags. According to the respondent, immediately on receipt of the aforesaid purchase order it entered into an agreement on 27.12.1979 with another trading company for purchase of jute clothe at the then prevalent rate. Subsequently, in the month of February 1980, the appellant corporation had requested the respondent not to supply jute bags till further instructions. Thereafter, the dispute arose between the parties and the dispute was referred to the learned sole Arbitrator for adjudication.

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B. The learned Arbitrator passed a non-speaking award dated 17.05.1985 and allowed the claim of the respondent to the tune of Rs. 11,47,500/- with interest from 2^nd May, 1983 in addition to Rs. 17,05,000 with interest from 2^nd May, 1983. So far as the counter claim for an amount of Rs. 12,52,200/- is concerned, the same was rejected. He submits that as per the Award, interest @ 18% per annum was awarded till the date of the Award.

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C. The appellant filed a petition under Sections 30 and 33 of the Arbitration Act, 1940 for setting aside the award which was rejected vide impugned judgment dated 30.08.2005 and award was made the rule of the Court and decree was signed on 12.09.2005.

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D. The specific case of the appellant before this Court is that the respondent right from February, 1980 knew that the appellant corporation had requested the respondent not to supply jute bags till further instructions, in that circumstances the respondent could not have manufactured and supplied the remaining consignment of the bags and in spite of there being no actual loss sustained by the respondent, it had claimed for loss and damage of Rs. 11,47,500/- and Rs. 17,05,000/- being the price difference between the contract rate and the market rate of the cloth for which it became liable to said Trading Company with whom the respondent had entered into another agreement pursuant to the agreement between the appellant and the respondent involved in this case .

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E. Counsel for the appellant further submits that before the learned sole Arbitrator, there was no evidence to substantiate the claim of the respondent.

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F. The other point which has been raised is that the learned sole Arbitrator passed the Award after the arbitration proceeding became invalid on cessation of his office under the appellant as he retired during the pendency of the arbitration proceedings and in spite of cessation of the office, the learned sole Arbitrator continued to hold the arbitral proceeding. The learned sole Arbitrator was the then Secretary of the appellant and having retired during the pendency of the arbitration proceedings, had no jurisdiction to continue with the arbitration.

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G. He has further referred to another judgment passed by Hon’ble Supreme Court reported in 1995 Supp (4) SSC 525 (Union of India and Ors. Vs. Prabhat Kumar and Bros. and Anr.) to submit that the learned Arbitrator having retired during the pendency of the proceeding before him, lost jurisdiction over the proceeding and accordingly, the arbitration proceeding itself wholly without jurisdiction.

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H. Counsel for the appellant while advancing his argument has submitted that the Award which was a non-speaking Award, was fit to be set aside as the same itself was based on no evidence. He has referred to a judgment passed by Hon’ble Supreme Court reported in (1999) 7 SCC 339 (State of J & K and Anr. Vs. Dev Dutt Pandit) and has referred to Para 18 thereof, to submit that the Hon’ble Supreme Court has laid down as to how a non-speaking Award has to be looked into and he submits that even a non-speaking Award could be set aside, if it was against the terms of the contract and if the learned Arbitrator travelled beyond the order of reference. He further submits that a non-speaking Award is not sacrosanct, which could not have been looked into and set-aside by the learned court below considering the fact that the specific case of the appellant that there was no evidence for passing impugned Award.

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I. The counsel for the appellant submits that the learned court below has not properly appreciated these aspects of the case and has rejected the objection filed by the appellant and made the award a rule of the Court by the impugned judgment.

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J. However, during the course of hearing, counsel for the appellant could not dispute the fact that the appellant throughout participated in the proceedings even after retirement of the learned sole Arbitrator from his office

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under the appellant on 31.08.1984 and that both the parties filed joint petition for enlargement of time before him and subsequently the learned arbitrator passed the award.

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Arbitration Appeal No. 12 of 2011

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K. So far as Arbitration Appeal No. 12 of 2011 is concerned, counsel for the appellant submits that the only dispute in connection with the said proceeding is relating to the subsequent order of interest passed by the learned court below vide impugned order dated 31.05.2011 passed pursuant to the writ petition as already mentioned above. He submits that as per the provision of Section 29 of the Arbitration Act, 1940, the Court has the power to Award interest from the date of decree till realization, but the Court has no power to Award interest from the date of the Award till the date of decree, as the award in the instant case has been passed for payment of interest only till the date of the award. He submits that the learned court below had no jurisdiction to pass any order for payment of interest from the date of Award till the date of the decree and modify the award accordingly. He submits that the impugned order of payment of interest should be restricted to the period from the date of the decree till realization.

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L. He has referred to a judgment passed by Hon’ble Supreme Court reported in (2010) 3 SCC 690 (State of Haryana &Ors. vs. S. L. Arora and Company) and has referred to Para16 of the said judgment and submits that it has been held in this judgment that under the Arbitration Act, 1940, there was no provision dealing with the power of the Arbitral Tribunals to award interest. Section 29 of the old Act merely provided for post-decree interest and authorized the Court to direct in the decree, where the award was for payment of money, payment of interest

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from the date of decree at such rate as the court deemed reasonable, to be paid on the principal sum as adjudged by the award and confirmed the decree. The power of Arbitral Tribunals to award interest was governed by the provisions of the Interest Act, 1978 and the law enunciated by courts. The counsel submits that the learned Arbitrator in the instant case has consciously granted interest, only till the date of the Award. Therefore, the learned sole Arbitrator has exercised his jurisdiction, so far as grant of interest is concerned and had consciously confined it till the date of the Award, which could have been modified by the learned court below and accordingly, the Award of interest from the date of Award till the date of decree calls for interference by this Court.

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ARGUMENTS OF THE RESPONDENT

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7. Counsel appearing on behalf of the respondent, on the other hand, submits as under:-

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I. Although the arbitration Award is a non-speaking Award, but from the perusal of Paragraph G, H, I and J of the award it is apparent that the parties have filed their claim, written statement, counter claim, rejoinder, documents, evidences as well as other documents and written argument were also filed before the learned sole Arbitrator and the learned sole Arbitrator has also recorded that he has carefully gone through the various materials on record while passing the Award. Accordingly, he submits that the contention of the appellant that the Award itself is based on no evidence, is contrary to what has been mentioned in the Award. He further submits that even oral evidences were led before the learned Arbitrator.

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II. Counsel for the respondent further submits that it is neither a case of Award beyond the reference nor the Award is beyond the contract and accordingly, the judgment which

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has been relied by the counsel for the appellant reported in (1999) 7 SCC 339 (State of J & K and Anr. Vs. Dev Dutt Pandit) does not apply to the facts and circumstances of this case. he has further referred to another judgment passed by Hon’ble Supreme Court reported in (2016) 9 SCC 478 (Harish Chandra and Company vs. State of Uttar Pradesh) and has referred to Para Nos. 25, 26 and 28 of the said judgment to submit that it has been held by the Hon’ble Supreme Court that the Award can be set aside only on the ground specified in clauses(a), (b) and (c) of Section 30 of the Arbitration Act, 1940 and the scope of challenge under Section 30 of the Arbitration Act, 1940 is very limited. Considering the scope of Section 30 of Arbitration Act, 1940, he submits that the learned court below has rightly passed the impugned judgment within the limits of his jurisdiction under Section 30 of the Arbitration Act, 1940. Therefore, the impugned judgment passed by the learned court below or the Award under consideration does not call for any interference.

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III. Counsel for the respondent, by responding to the plea regarding the learned Arbitrator losing his jurisdiction after his retirement, submits that the learned sole Arbitrator was appointed by his name, therefore, even after retirement, he could still continue to adjudicate the matter and passed the Award. He submits that the dispute was referred to the learned sole Arbitrator by the General Manager of the appellant, who vide letter dated 07.12.1982 appointed Shri J. R. Malik, the then General Secretary of the appellant to be the sole Arbitrator. Accordingly, he submits that merely because he retired from his office and he was not disentitled from continuing as an Arbitrator. He further submits that the counsel for the appellant has not disputed the fact that the appellant throughout participated in the proceedings

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even after retirement of the learned sole Arbitrator from his office under the appellant on 31.08.1984 and that both the parties filed joint petition for enlargement of time before him and subsequently the learned arbitrator passed the award.

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IV. Counsel for the respondent has relied upon a judgment reported in AIR 1977 NOC 262 (CAL.) (ChhaganLall Daga and Ors. Vs. Sm. Tripti Das and Another) to submit that it has been held in that case that when describing the person to whom an order of reference is made or an agreement is entered into referring dispute to him, whether the reference is to the person designated as holding the office or whether the mention of the office is merely descriptive of the person to whom the reference is made or to whom the parties agreed to refer the dispute depends upon the facts and circumstances of each case. In that case, the reference was made not by designation, but by name and the mention of the post was merely descriptive to whom the reference was made, accordingly, it was held that the Award made by the arbitrator after retirement cannot be said to be invalid.

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V. Counsel for the respondent has relied upon another judgment passed by Hon’ble Supreme Court reported in AIR 1998 SC 717 (M/s Construction India vs. Secretary, Works Department, Govt. of Orissa and Ors.) and has referred to para 6 of the said judgment and submits that it has been held in the said case that the parties had consciously shown acquiescence on their part regarding continued jurisdiction of the arbitrator even after he ceased to hold his office as Chairman Arbitral Tribunal, Orissa and accordingly , the Hon’ble supreme court rejected the arguments regarding loss of jurisdiction upon cessation of office by the learned arbitrator . He submits that in the instant case the arbitrator was appointed by his name and

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further the parties duly participated even after his retirement from his office. The learned court below has considered theses aspects of the matter and rejected such plea of the appellant.

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VI. So far as Arbitration Appeal No. 12 of 2011 is concerned, counsel for the respondent has referred to judgment passed by Hon’ble Supreme Court reported in AIR 1992 SC 732 (Secretary, Irrigation Department, Govt. of Orrisa and Others vs. G. C. Roy with Secretary to Government of Orissa and Others vs. Ragunath Mohapatra) , equivalent to (1992) 1 SCC 508 to submit that the learned Arbitrator has the power to Award interest pendente lite and no illegality has been committed by the learned court below while passing an order for payment of interest from the date of Award till realization. Accordingly, the impugned order in Arbitration Appeal No. 12 of 2011 does not call for any interference.

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Rejoinder arguments on behalf of the appellant

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8. In response, counsel for the appellant refers to Para 9 of the aforesaid judgment passed by Hon’ble Supreme Court reported in AIR 1998 SC 717 (M/s Construction India vs. Secretary, Works Department, Govt. of Orissa and Ors.), to submit that the fact as to whether the learned Arbitrator has lost his jurisdiction upon retirement, will depend upon the facts and circumstances of each case and the said judgment relied upon by the respondent does not apply to the facts and circumstances of this case.

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9. The counsel for the appellant has also referred to the other judgment reported in AIR 1992 SC 732 (Secretary, Irrigation Department, Govt. of Orrisa and Others vs. G. C. Roy with Secretary to Government of Orissa and Others vs. Ragunath Mohapatra) , , and submits that the Hon’ble Supreme Court has specifically dealt with in Para-9 of the said judgment that

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the question of Award of interest by the learned Arbitrator may arise in respect of three different periods:-

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(a) For the period commencing from the date of dispute till the learned Arbitrator enters upon reference.

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(b) For the period commencing from the date of learned Arbitrator entering upon reference till the date of making the Award.

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(c) For the period commencing from the date of making of the Award till the date of the award is made the rule of the Court or till the date of realization, whichever is earlier.

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He submits that the Hon’ble Supreme Court has considered the entire aspect of the matter and ultimately has held that the learned Arbitrator had the power to Award interest pendente lite. He submits that in the instant case, the learned Arbitrator has consciously awarded interest only till the date of the award and has not committed any illegality in awarding of interest. Accordingly, the order of the learned court below to the extent, the interest has been awarded from the date of Award till the date of decree, is wholly without jurisdiction in view of Section 29 of Arbitration Act, 1940.

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FINDINGS OF THE COURT

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10. After hearing the counsel for the parties and after considering the materials on record, this Court finds that two issues arise for consideration before this Court in Arbitration

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Appeal No. 04 of 2006 :-

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(a) Whether the learned court below ought to have setaside the award on the sole ground that the learned Arbitrator continued with the arbitration proceedings in

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spite of having retired from his office in the midst of the arbitration proceedings and has thereby committed legal mis-conduct while conducting the arbitration proceedings?

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(b) Whether the learned court below ought to have setaside the award even if the same is a non-speaking award, on the ground that it is based on no evidence?

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11. The arbitration clause which is involved in this case is quoted herein below for ready reference:-

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“In the event of dispute or difference

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arising between the parties here to as to the supplies, interpretation or operation of this contract of the respective rights, and liabilities of the parties, such dispute or difference shall be referred to the sole arbitration of the General Manager of the concerned Unit of the Hindustan Fertilizer Corporation Ltd. /Fertilizer Corporation of India Ltd. or his nominee whose decision in the matter shall be final and binding upon the parties. The Arbitrator may from time to time with the consent in writing of the parties enlarge the time for making and publishing the Award. The Venue of the Arbitration shall be Headquarters of the Unit concerned.”

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12. Upon perusal of the arbitration clause, this Court finds that the difference or dispute was required to be referred to the General Manager of the concerned unit of the appellant or his nominee, whose decision was said to be final and binding on the parties and the Arbitrator may from time to time with the consent in writing of the parties enlarge the time for making and publishing the Award.

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13. The General Manager of the appellant by letter dated 07.12.1982 appointed Shri J. R. Malik, the then General Secretary of the appellant to be the sole Arbitrator.

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Admittedly, in the instant case as per the arbitration clause, there is no consequence provided in connection with retirement of the person who has been appointed as an Arbitrator. This is over and above the fact that appointment of the learned sole Arbitrator in the instant case, was specifically mentioned by name to be J. R. Malik, the then General Secretary of the appellant.

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14. In the judgment passed by Hon’ble Supreme Court reported in 1995 Supp (4) SSC 525 (Union of India and Ors. Vs. Prabhat Kumar and Bros. and Anr.) , the Hon’ble Supreme Court had considered the arbitration clause in that case, which specifically provided that if the Arbitrator vacates his office, then a new Arbitrator was required to be appointed. In the instant case, there is no such clause.

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15. In the judgment passed by Hon’ble Supreme Court reported in AIR 1998 SC 717 (M/s Construction India vs. Secretary, Works Department, Govt. of Orissa and Ors.) the aforesaid judgment reported in 1995 Supp (4) SSC 525 (Union of India and Ors. Vs. Prabhat Kumar and Bros. and Anr.) has been considered in para 11 where it has been distinguished by holding that the judgement reported in 1995 Supp (4) SSC 525 (Union of India and Ors. Vs. Prabhat Kumar and Bros. and Anr.) was entirely on the arbitration clause which expressesly provided that upon arbitrator ceasing to hold office, a new arbitrator has to be appointed. In the said judgement reported in AIR 1998 SC 717 (M/s Construction India vs. Secretary, Works Department, Govt. of Orissa and Ors.) it has been held at para 12 of the said judgement that the objection to jurisdiction was of the arbitrator was withdrawn during the arbitration proceedings and that there was a conscious acquiescence on the part of the respondent of the said case.

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16. This Court is of the considered view that the objection to the jurisdiction as argued by the appellant , is fit to be rejected on three grounds, firstly, in the arbitration clause involved in this case , there is no such provision that the learned Arbitrator will not be entitled to proceed further upon cessation of his office, secondly, it is an admitted fact that the appellant throughout participated in the proceedings even after retirement of the learned sole Arbitrator from his office and that both the parties filed joint petition for enlargement of time before him and subsequently the learned Arbitrator passed the award, thirdly , the learned Arbitrator was appointed by his name and accordingly there was no question of his discontinuing with the arbitral proceedings even after cessation of office. Thus this court finds that there has been no illegality on the part of the learned Arbitrator in continuing with the proceedings and declaring the award.

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17. This Court finds that this point has been rightly decided by the learned court below by a well-reasoned order while deciding issue number 9. Accordingly, this Court finds that the learned court below has rightly refused to set-aside the award on the ground that the learned Arbitrator continued with the arbitration proceedings in spite of having retired from his office in the midst of the arbitration proceedings. This Court is of the considered view that no legal misconduct has been committed by the learned arbitrator while conducting himself or while conducting the proceedings.

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18. So far as the other point regarding the arbitration award being based on no evidence, is concerned, this Court finds that the parties had filed their claims, counter claims, rejoinder, documents, evidences as well as other documents and written arguments etc. before the learned Arbitrator and the learned Arbitrator has also recorded that he has carefully gone through various documents etc. while passing the

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Award, accordingly, it cannot be said that the Award was based on no evidence.

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19. This Court finds that the Award being a non-speaking award under the provisions of Arbitration Act, 1940, the scope of its examination by the learned court below was limited and confined the grounds mentioned in Section 30 of Arbitration Act, 1940. On the perusal of the Award itself, it does not appear to be an Award based on no evidence. Admittedly, the learned court below was neither sitting in appeal nor could sit in appeal against the arbitral award.

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20. In the judgment reported in (1999) 7 SCC 339 (State of J & K and Anr. Vs. Dev Dutt Pandit) , the Hon’ble supreme court has held that though there are certain limitations in examining non speaking awards , but there is no complete bar if the award is in terms of the reference or in terms of the contract.

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21. In the judgment which has been relied upon by the counsel for the respondent reported in (2016) 9 SCC 478 (Harish Chandra and Company vs. State of Uttar Pradesh) this Court finds that the scope of proceeding under Section 30 of Arbitration Act, 1940 has been duly considered at Para 25 and 26 as follows:-

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25. “One cannot, therefore, dispute the legal proposition, which is now fairly settled keeping in view the aforementioned law laid down by this Court that an award can be set aside only on the grounds specified in clauses (a), (b) and (c) of Section 30 of the 1940 Act and on no other grounds. Indeed this is clear from the opening words of Section 30 itself which starts with the words “An award shall not be set aside except on one or more of the following grounds”. A fortiori, a reasoned award cannot be set aside unless it falls in any of the three clauses (a), (b) and (c) of Section 30 of the 1940 Act.

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26 . “The grounds such as inadequacy of reasons in support of an award, error committed by the arbitrator on facts, alternate and/or more plausible view could be taken the what is taken by the arbitrator, improper appreciation of evidence done by the arbitrator in recording any finding, etc. are not the grounds on which ay award much less a reasoned award can be set aside. In other words, none of these grounds can be made the foundation for setting aside the award because they do not fall within the four corners of any of the three sub-clauses of Section 30 of the 1940 Act.”

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22. This Court finds that this aspect of the matter has also been duly considered by the learned court below and the learned court below has recorded a finding as follows:-

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“In the present case neither the agreement specified for a reasoned Award nor the parties requested for the same and therefore it cannot be set aside. Arbitrator made a non-speaking award and it appeared from the award that he had considered all the documents, evidences, pleadings, claims and counter claims, written notes of argument and had given full opportunity to the parties and therefore there was no misconduct legally or otherwise on the part of the arbitrator in the present case.”

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23. Accordingly, the contention of the counsel for the appellant, that the Award itself was based on no evidence, is hereby rejected and this Court finds that the learned court below has rightly appreciated this aspect of the matter and passed an impugned judgment.

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24. As a cumulative effect of the aforesaid findings, this Court does not find any illegality or perversity in the impugned judgment and accordingly the Arbitration Appeal No. 04 of 2006 is hereby dismissed .

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25. So far as Arbitration Appeal No. 12 of 2011 is concerned , the only point involved in this case is as to

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“ whether the learned court below was justified in modifying the award (which had awarded interest till the date of award only ) and directing that the interest would also be payable from the date of award till date of decree and also from date of decree till its payment considering the provisions of section 29 of Arbitration Act, 1940?”

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26. This Court finds that in the instant case, the Award clearly indicated that the claimant would be entitled to interest only till the date of the award. The learned arbitrator has exercised his discretion in awarding the interest and has not awarded any interest beyond the date of the award.

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27. This Court also finds that so far as Section 29 of Arbitration Act, 1940 is concerned, it clearly provides that the learned court below has the power to grant interest from the date of decree till realization, but no such power has been conferred upon the learned court below to grant interest from the date of Award till the date of decree.

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28. In the aforesaid judgment reported in AIR 1992 SC 732 (Secretary, Irrigation Department, Govt. of Orrisa and Others vs. G. C. Roy with Secretary to Government of Orissa and Others vs. Ragunath Mohapatra) , which has been referred to by both the parties, in para 9 it has been observed as follows:-

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“Generally, the question of award of interest by the Arbitrator may arise in respect of three different periods, namely; (i) for the period commencing from the date of dispute till the date of Arbitrator enters upon the reference; (ii) for the period commencing from the date of the Arbitrator’s entering upon reference till the date of making the award; and (iii) for the period commencing from the date of making of the award till the date award is made the rule of the Court or till the date of

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realization, whichever is earlier. In the appeals before us we are concerned mentioned periods. In Jena’s case (AIR 1988 SC 1520), two questions arose for consideration of the Court, namely (i) the power of the Arbitrator to award interest for the period prior to his entering upon reference; and (ii) for the period the dispute remained pending before him pendente lite. Since, the Court held that the Arbitrator had no jurisdiction or authority to award interest pendente lite, we think it necessary to consider the reasons for the decision. Justice Chinnappa Reddy, J. speaking for the Bench held that neither the Interest Act, 1839 nor the Interest Act, 1978 conferred power on the Arbitrator for awarding interest pendente lite. The learned Judge observed that Section 34 of the Civil Procedure Code which provides for the same did not apply to Arbitrator inasmuch as an Arbitrator is not a Court within the meaning of the said provision. Consequently the Arbitrator could not award interest pendente lite.”( emphasis supplied)

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The Hon’ble Supreme Court in this judgment ultimately held as follows:-

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“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

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to be exercised in the light of all the facts and circumstances of the case, keeping the ends of justice in view.

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For the reason aforesaid we must hold that the decision in Jena (AIR 1988 SC 1520), insofar as it runs counter to the above proposition, did not lay down

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correct law .”(emphasis supplied)

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29. In the judgment reported in (1999) 7 SCC 339 (State of J & K and Anr. Vs. Dev Dutt Pandit) , it has been held at para 20 and 21 as follows:-

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“ 20 .Under the Interest Act, 1978, which came into force on 19-8-1981, court includes arbitrator. Under Section 5 of the Interest Act Section 34 of the Code of Civil Procedure would, therefore, apply to the arbitrator as well. The arbitrator is thus entitled to award interest pendente lite and future interest at the rate not exceeding the current rate of interest which has also been defined in clause (b) of Section 2 of the Interest Act.

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“ 21 . In the present case the arbitrator awarded interest at the rate of 10% per annum which was reduced by the learned Single Judge to 6% per annum and upheld by the Division Bench. Under Section 34 of the Code of Civil Procedure interest at a higher rate than 6% can be awarded where the liability in relation to the sum so adjudged had arisen out of a commercial transaction. There is nothing on the record to show that interest awarded by the arbitrator at the rate of 10% is in contravention of Section 34 of the Code of Civil Procedure. That being so we do not thing either the learned Single Judge or the Division Bench were correct in reducing the rate of interest as granted by the arbitrator. We would, therefore, restore the award of interest at the rate of 10% per annum as granted by the arbitrator from the date the arbitrator entered into reference till realization of the amount under the award.”

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30. Thus in view of the aforesaid judicial pronouncements, there is no doubt that the learned Arbitrator had the power to Award interest pendnte lite , but the fact remains that in the instant case, the learned Arbitrator, while exercising his power has chosen to award interest only till the date of the Award. This Court is of the considered view that the award could not be modified by the learned court below except on the ground mentioned under section 30 of the Arbitration Act, 1940 itself. This aspect of the matter has not been properly appreciated by the learned court below while passing the impugned order dealing with Award of interest. Thus, the learned court below has erred in modifying the Award so as to include interest from the date of the award to date of decree also. So far as the Award of interest from date of decree till realization is concerned, it is the specific case of the counsel appearing for the appellant that the learned court has the power to grant such interest under section 29 of the Arbitration Act, 1940.

¶121

31. Accordingly, the impugned order modifying the Award so as to include Award of interest from the date of Award till the date of decree, is hereby set-aside to the aforesaid extent. However, the direction in the impugned order to the extent it relates to payment of interest, from the date of the decree till realization, is upheld in view of the provisions of section 29 of the Arbitration Act, 1940.

¶122

32. Accordingly, Arbitration Appeal No. 12 of 2011 is partly allowed.

¶123

(Anubha Rawat Choudhary, J.)

¶124

Mukul

M/S Fertilizer Corporation of v. M/S Balaji Laminating Works

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M/S Fertilizer Corporation of v. M/S Balaji Laminating Works

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