Partly allowed

Haryana State Agricultural Marketing Boa v. Ram Kumar, Contractor and Another

Punjab & Haryana HC4 Aug 2009FAO/777/2002

Case brief

AI extract

What is this about?

In an appeal against an arbitral award granting interest, the Court held that contractual clauses preventing interest awards do not prohibit arbitrators from awarding interest. Citing Section 34 CPC and precedents, the Court allowed the appeal only to reduce the interest rate to 9% per annum.

What did the court decide?

The rate of interest awarded in the arbitration award is reduced to 9% per annum.

Haryana State Agricultural Marketing Boa Vs Ram Kumar… — Arbitration | Punjab & Haryana HC (2009)

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FAO No.777 of 2002

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IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH.

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F.A.O No.777 of 2002

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Date of Decision: 04-08-2009

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Haryana State Agricultural Marketing Board.

....Appellant

Versus

Ram Kumar Contractor

...Respondent

CORAM : Hon'ble Ms. Justice Nirmaljit Kaur

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Present:Mr. Jatinder J.C. Nagpal, Advocate for the appellant.

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Mr. R.N. Raina, Advocate for the respondents.

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Whether Reporters of Local Newspapers may be allowed to see the judgment ?

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To be referred to the Reporters or not ?

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Whether the judgment should be reported in the Digest ?

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NIRMALJIT KAUR, J.

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This is an appeal against the order dated 22-09-2001 passed by District and Sessions Judge, Karnal, dismissing the objection petition filed by the appellant against award dated 31-12-1998.

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As per the solitary argument raised by learned counsel for the appellant, the Arbitrator acted beyond his jurisdiction by violating the terms of the agreement between the parties to the extent that as per Clause 25-A of the Agreement, no interest could have been awarded, whereas, the Arbitrator has granted interest to the respondent in violation of the terms of

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FAO No.777 of 2002

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provisions of the agreement. Clause 25-A of the agreement is reproduced below :-

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“Clause 25-A- It shall be a term of the contract agreement that arbitrator shall give a speaking award otherwise the award shall be null and void and will not be binding on the parties. It shall also be a term of this contract that in any dispute/difference referred to the arbitrator, the arbitrator shall not award interest to the parties on any of the items of contract agreement executed in between the parties. If the arbitrator awards interest, the same shall not be binding on the parties.”

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Learned counsel for the respondent, while meeting the above argument of learned counsel for the appellant, submitted that the Board had suppressed a vital fact and have relied upon a Clause 25-A of the Agreement which has become non-existant. Attention of this Court was drawn to an application dated 10-04-2005 under Order 12 Rules 2 and 4 read with Section 151 of the C.P.C., was moved by the respondentContractor with a prayer to direct the Haryana State Agricultural Marketing Board to produce and admit Resolution no.27 dated 30-08-1994 vide which, the Clause 25-A of the Agreement stood amended. Learned counsel for the appellant, at this stage, submitted that this argument was not raised by the respondent-Contractor before the District Judge.

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After hearing learned counsel for the parties, I find that the respondent-Board has indeed suppressed a very important vital fact in the appeal. They have relied upon a Clause, which does not exist. In case, the said Resolution had been brought to the notice, the appeal would have been dismissed outright and no substantial dispute would then have remained for adjudication. The affidavit filed in reply to the application is silent qua Resolution no.27 dated 30-08-1994 vide which, the Clause 25-A of the agreement has been deleted. The said fact has not been denied in their reply. The only stand taken in the affidavit is

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FAO No.777 of 2002

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that the application is not maintainable. The appeal was filed by the appellant against the award. It was for them to have disclosed this fact and filed the appeal with clean hands.

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At this stage, learned counsel for the appellant submitted that the new amended clause does not talk of interst. It obviously means that there is no clause, restraining the Arbitrator from granting interest.

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Even otherwise, such clauses have been held not to be a prohibition on the authority of the Arbitrator to grant interest. A reference to Section 34 of the Code of Civil Procedure, 1908, which empowers the Court to award interest, is as under :-

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“34. Interest.- (1) Where and in so far as a decree is for the payment of money, the Court may, in the decree, order interest at such rate as the Court deems reasonable to be paid on the principal sum adjudged, from the date of the suit to the date of the decree, in addition to any interest adjudged on such principal sum for any period prior to the institution of the suit, [with further interest at such rate not exceeding six per cent per annum, as the Court deems reasonable on such principal sum], from the date of the decree to the date of payment, or to such earlier date as the Court thinks fit:

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[Provided that where the liability in relation to the sumso adjudged had arisen out of a commercial transaction, the rate of such further interest may exceed six per cent. Per annum, but shall not exceed the contractual rate of interest or where there is no contractual rate, the rate at which moneys are lent or advanced by nationalised banks in relation to commercial transactions.

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(2) Where such a decree is silent with respect to the payment of further interest [on such principal sum] from the date of the decee to the date of payment or other earlier date, the Court shall be deemed to have refused such interest, and a

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FAO No.777 of 2002

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separate suit therefore shall not lie.”

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The Delhi High Court, while dealing with the award of interest by the Arbitrator exhaustively dealt with the same in Thermospares India Vs BHEL and others 2006(2) Arb LR 404 (Delhi).

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After taking into account the aforesaid judgment and the law settled by the Hon'ble Apex Court and other High Courts, it was held as follows :-

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On consideration of the aforesaid judgment, I am in full agreement with the views expressed by Sanjiv Khanna, J. in Union of India vs. R.C. Singhal ad others case (supra). In my considered view the effect of the judgment in Secretary, Irrigation Department, Government of Orissa and others vs. G.C. Roy case (supra), fully stands explained in cases like the present one by the judgment in The Board ofTrustees for the Port of Calcutta vs. Engineers-De-Space-Age case (supra) and State of U.P. vs. Harish Chandra & Co. case (supra). The two ratios which clearly emerge are that the restrictions of sch clauses do not operate on the arbitrator and it is for the arbitrator to interpret such clauses. A Constitution Bench of the Supreme Court in Secretary, Irrigation Department, Government of Orissa and others vs. G.C. Roy case (supra), thus fully explained the issue inasmuch as there are certain observations that the power to grant interest by the arbitrator exists unless prohibited by the contract. Such clauses have been held not to be a prohibition on the authority of the arbitrator to grant interest. A reference was also made to the provisins of Section 34 of the Code of Civil Procedure, 1908, which empowers the court to award interest. Arbitration being an alternative forum to the Courts where disputes are decided, there is no justification in law and equity to deny arbitrators the right to award interest. The right under Section 34 is discretionary right of the court

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FAO No.777 of 2002

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and is not dependent upon the terms agreed or contract between the parties. It is in view thereof that the learned Single Judge in Union of India vs. R.C. Singhal and others case (supra), observed “in my opinion the said clause does not prohibit or prevent an arbitrator from awarding interest for the period after the arbitration clause is invoked till payment.”

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In view of the above discussion, I find no ground to interefere with the Order dated 22-09-2001 passed by District and Sessions Judge, Karnal dismissing the objection petition filed by the appellant against award dated 31-12-1998 and the appeal is, accordingly, dismissed except with the modification that the rate of interest so awarded vide award dated 31-12-1998, shall stand reduced @ 9%.

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(NIRMALJIT KAUR) JUDGE

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04.08.2009 gurpreet

Haryana State Agricultural Marketing Boa v. Ram Kumar, Contractor and Another

Case brief

What is this about?

What did the court decide?

Haryana State Agricultural Marketing Boa v. Ram Kumar, Contractor and Another

Case brief

What is this about?

What did the court decide?

What the court decided

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