ION Civil Appeal No 4096 of 1987
From the Judgment and order dated 261987 of the Calcutta High Court in Appeal NQ
344 of 1980
332 AK Sen Sk Gambhir and Vivek Gambhir for the Appellant
Dr Shankar Ghosh and Rathin Das for the Respondent
The Judgment of the Court was delivered by SABYASACHI MUKHARJI J
Special leave granted
The respondent was appointed a transport and handling contractor by the appellant subject to the terms and conditions mentioned in three successive agreements in writing entered into by both the parties
After disputes arose between the parties as per the terrns of arbitration clause an arbitrator was appointed to adjudicate upon the disputes
Both the respondent and the appellant filed their respective claims and counter claims before the arbitrator
After considering the documents and evidence filed before the arbitrator he made and published an award which was a speaking one
The arbitrator did not allow the appellant s claim for demurrage and wharfage charges paid to Railways amounting to Rs156386302 by reason of the alleged wrongful conduct of respondent but the arbitrator awarded only 55 of the claim
The arbitrator also did not allow the appellant s claim for shortage in transit but reduced the claim by 40 and allowed only 60 of it amounting to Rs5297199
By the award the arbitrator awarded to the respondent Rs126417597 and pendente lite interest at 6 per annum
The appellant filed objections in the High Court of Calcutta under sections 30 and 33 of the hereinafter called the Act  for setting aside the award
On 18th September 1980 the learned single judge of the High Court by his judgment and order set aside the award
There was an appeal to the Division Bench of the High Court
On 2nd June 1987 the Division Bench of the High Court allowed the respondent s appeal by its judgment and order and set aside the judgment of the learned single judge and upheld the award
Being aggrieved thereby the appellant has come up before this Court by special leave under Article 136 of the Constitution
While issuing notice on the application under Article 136 of the Constitution it was indicated that only three questions will be adjudicated upon in this appeal viz Rs139498246 which was the amount allowed on account of demurrage and wharfage charges mentioned in the award and secondly the sum of Rs23576946 and lastly on the question of interest
So far as the second question of the matter is concerned Sree AK Sen counsel appearing for the appellant has not made any sub 333 mission before us
We also cannot find any substance in this aspect
Therefore it is not necessary for us to deal with this aspect of the matter
So far as the amount of Rs 139498246 on account of demurrage and wharfage is concerned which was allowed the award dealt with the question as set out in the paper book
It appears that the total demurrage and wharfage charges paid by the Corporation to the Railways in respect of the wagons cleared by the claimant firm respondent herein after obtaining such waiver as the Railways were persuaded to make was for Rs156386321
The charges were alleged to have been paid under Credit Notes which were produced before the arbitrator
There was no dispute about the actual payment of the charges
The appellant s case was that it was entitled to recover the entire amount it had to pay on account of the demurrage and wharfage charges from the respondent under clause 9a of the agreement
Clauses 9 9a and 9b of the agreement are as follows 9
The Agent shall commence to load andor unload all the wagons and trucks as well as all streamers flats barges and boats or any other conveyance on the day of these arrival and shall carry out the orders and directions of the Manager with all possible despatch and shall be responsible for and make good all demurrage or other waiting charges and expenses that may accrue and all other charges that may in the opinion of the Manager be payable because of or through any reasonable detention or delay 9a The Agent shall be responsible for unloadingloading the wagons within the free period allowed by the Railways and also for loadingunloading for truckscarts or any other transport vehicles expeditiously
The Agent shall be liable to make good any compensationdemurragewharfage as per Railway rules in force during the period of contract other charges or expenses that may be incurred by the Corporation on account of delay in loadingunloading of truckcarts and unloadingloading of Wagons unless the delay is for reason beyond the Agents  control
The decision of the manager in this respect shall be final and binding on the Agent 9b The Agent be present himself or send his duly 334 authorised representative to be present at all weighments A with which the Agent is concerned under this Agreement and in case he fails or chooses not to do so no claim what soever shall lie against the Corporation in this regard
 Under clause 9a according to the appellant the Agent was liable to make good any compensationdemurragewharfage as per Railway rates in force during the period of contract other charges or expenses that might be incurred by the Corporation on account of delay in loadingunloading of truckscarts and unloadingloading or wagons unless the delay was for reasons beyond the Agent s control
It appears that the appellant and periodically served notices upon the respondent firm calling upon it to pay demurrage and wharfage charges with liberty to prefer objections
Such objections as the respondent firm preferred were heard and disposed of by the District Manager
This procedure continued till the end of November 1975
Then the respondent firm went to the Civil Court and obtained discontinuance of all proceedings for recovery of demurrage and wharfage charges
The arbitrator noted that as a result of the hearings by the Corporation upto November 1975 relief to the tune of Rs12188455 was granted to the respondent firm and recovery of Rs4699620 was made from the respondent firm s bills
The Corporation therefore claimed before the arbitrator recovery of remaining of the claim of Rs139498246
The respondent on the other hand claimed refund of the amount already deducted from the bills on the ground that it was not liable for any part of the demurrage and wharfage charges
The claim of the respondent was that the demurrage and wharfage charges accrued invariably in circumstances beyond its control and accordingly under clause 9a of the agreement it could not be made liable for such charges
The arbitrator noted that the respondent firm had impressive documentary evidence in support of its case
It had produced numerous letters in which it fully explained to the authorities concerned the difficulties it was experiencing in timely clearance of goods from railway wagons and sheds
It was claimed that it had produced month wise report of its work accounting for nearly all cases of demurrage and wharfage
On 9th of October 1975 the respondent had informed the Corporation by a letter Exhibit 128 which inadvertently was not marked exhibit that it was resuming work there had been a break in his contract on the condition that it would not be required to clear more than 10 cc
Or 4 box wagons ie 200 mt
approximately daily
This is a belated and rather grudging acceptance of this condition by the letter Exhibit 44 dated 3rd of August 1976
335 The Arbitrator noted that from the letters and reports it appeared that timely clearance was hampered and often made impossible by arrival of too many wagons at a time congestion at the sidings and at the weighbridges with consequent detention of lorries labour unrest and chronic want of space in the Corporation s godowns and by others
The arbitrator noted that there was insistent complaint about this want of space in the Corporation s godown which led to the goods being left in railways sheds for days together incurring unusually heavy wharfage charges
The Corporation sometimes prepared over ambitious programmes of work for the contractors as if unaware
Of the existing situation
The arbitrator noted that the appellant had examined several witnesses from the sidings
But they did not according to the Arbitrator prove anything beyond the procedure of work generally adopted at the sidings
The arbitrator further noted about the foregoing explanations that the very often the objection of the railway shed staff to the claimant regarding not clearing of the wagons timely from the railway shed because of non space there owing to heavy stock kept therein remaining uncleared and further that the claimant under the direction and order of the respondent being given limited programme because of non space in the receiving depots godowns were causes of delay
The arbitrator noted that it would be fair to make the claimant firm liable for only 25 of the demurrage and wharfage charges sought to be recovered by the Corporation leaving the remaining 75 to be borne by the Corporation itself
Therefore out of Rs139498246 the Corporation according to the arbitrator could recover only Rs34874561
The appellant felt aggrieved thereby and challenges this grant of 25
So far as respondent s claim for refund of Rs4699620 already recovered the arbitrator felt that there was no ground for interference
The arbitrator noted that after hearing the claimant firm s objections the deductions had been made
The claimant firm had been granted relief in respect of Rs12188455
The arbitrator had not been able to ascertain precisely the total claim of the appellant till the end of November 1975 but he noted that the sum of Rs4699620 represented not much more than 25 of the total claim
Therefore the arbitrator noted that the claimant namely the respondent was not entitled to any refund and that the appellant could recover only Rs34874561 on account of demurrage and wharfage charges
As mentioned hereinbefore that is the main contention in this challenge before this Court
The appellant claimed that it should have been entitled to the benefit of Rs139498246 and not to 25 of the same
Sree Sen counsel for the appellant drew out attention to clauses 336 9a and b as set out hereinbefore and submitted that the respondent was only entitled to the amount as determined by the Manager which was described as final
Sree Sen submitted that according to clause 9a aforesaid the adjudication made by the manager was final and there was no dispute thereafter and therefore there could be no determination beyond 25
He drew our attention to that part of the 13 clause 9a to the following effect the decision of the manager in this respect shall be final and binding on the Agent So according to Sree Sen apart from what had been granted by the Manager for determination on account of demurrage and wharfage charges no further deduction was possible nor was it arbitrable because it was final
He drew our attention to certain observation in Wadsworth vs Smith LR Vol
Vl QB 332
There by a written agreement the plaintiff therein had agreed to build four houses on land of defendant and the defendant to grant plaintiff a lease when the houses were completed the architects of the defendant for the time being were to certify as to the progress of the work and if there should be any unnecessary delay or unsatisfactory conduct on the part of the plaintiff with regard to the erection of the buildings on any matter or thing connected therewith the fact of such delay or unsatisfactory conduct to be ascertained and decided in writing by the architects against whose decision there shall be no appeal then it should be lawful for defendant to employ other persons to execute the works and to sell the buildings and lease the land to other persons
On an application to make the agreement a rule of court under section 17 of the Common Law Procedure Act 1854 of England it was held by Cockburn CJ Blackburn and Mellor JJ
that assuming the agreement to be an agreement or submission to arbitration within the section the clause that there was to be no appeal against the decision of the architects amounted to words purporting that the parties intended that it should not be made a rule of court
 The question was raised whether the agreement was not a submission to arbitration
Cockburn CJ Observed that this clause was certainly more like a submission to arbitration  it was on the confines of the two classes  but on the whole it seems to His Lordship to savour more of a mere architect s certificate than of a judicial proceeding
Moreover even if this were a submission within section 17 the Chief Justice thought that it could not be made a rule of court because it was clear that the parties intended that the matter should be left to the decision of the architects without appeal but to make it a rule of court would be to submit the decision to the jurisdiction of the Court
Blackburn J agreed
His Lordship observed that where by an agreement the right of one of the parties to have or to do a particular thing was made to depend on the determination of a third person that 337 was not a submission to arbitration nor was the determination an award but where there was an agreement that any dispute about a particular thin shall be enquired into and determined by a person named that might amount to a submission to arbitration and the determination though in the form of a certificate be an award
Hannen J was of the view that this is not an agreement or submission to arbitration the clause in question appeared to be no more than an extension of the ordinary clause in building contracts that the certificate of the architect should be conclusive as to work done and the mode of doing it
If we proceed on this basis then the logical conclusion of this would be that where there is a decision by the manager as in the instant case that would be final
Where a dispute has been adjudicated by the manager in this aspect there was nothing for the arbitrator to decide
It appears to us on the facts as recorded by the arbitrator in his award that there was adjudication really by the Manager of the claims upto November 1975
Thereafter there could be no adjudication as a result of injunction obtained from the court
Therefore it appears to us that there was really in fact no adjudication of all the disputes
The remaining points were arbitrable because of the amplitude of the arbitration clause
The relevant arbitration clause in this case contained inter alia as follows 
In the event of any question or dispute arising under this Agreement regarding the construction thereof or any clause herein or in respect of any act matter or thing relating to this agreement the same shall be referred to the Sole Arbitration of any person appointed by the Managing Director of the Food Corporation of India   
The Award of such Arbitrator shall be final and binding on the parties to this Agreement   The point there having been decision before the Manager that disallowance of the claim beyond 25 was beyond the jurisdiction of arbitration was not agitated before the High Court
Prabir Kumar Majumdar J speaking for the Division Bench of the High Court of Calcutta observed at page 24 of the paper book as follows It has not been brought to our notice whether there has been any such decision by the Manager
Further taking all the relevant materials into consideration the learned arbitrator has made a finding in respect of the appellant s 338 claim and respondent s counter claim in respect of demur rage and wharfage charges
 It has not been brought to our notice that there has been any such decision by the Manager beyond the claim for the period of November 1975 as mentioned hereinbefore
Therefore in our opinion the arbitrator was not in error in proceeding in the manner as he did
There was no other aspect of law on this aspect of the matter to which our attention was drawn
The submission on this aspect is therefore negatived
The challenge to the award on this aspect must therefore fail
So far as the grant of interest pendente lite in the award is concerned reliance was placed on various decisions of this Court
Reliance was placed on State of Orissa and others vs Construction India JT where the award of interest from the commencement of the proceedings before the Arbitrator to the date of the award was disallowed in consonance with the views expressed by this Court in the case of Executive Engineer Irrigation Galimala  Ors
vs Abaaduta Jena JT
Our attention was drawn by Dr Ghosh counsel for the respondent firstly to the decision in the case of Firm Madanlal Roshanlal Mahajan vs Hukumchand Mills Ltd Indore  There the respondent had filed a suit against the appellant claiming two sums as losses in respect of two items and interest on the same
The disputes were referred to an arbitrator before whom the respondent did not press for interest prior to the institution of the suit but pressed its claim for the two sums and interests from the date of the institution of the suit till recovery
Bachawat J speaking for the three learned Judges of this Court held that though in terms section 34 of the Code of Civil Procedure did not apply to arbitrations it was an implied term of the reference in the suit that the arbitrator would decide the dispute according to law and would give such relief with regard to pendente lite interest as the Court could give if it decided the dispute
This power of the arbitrator it was held was not fettered either by the arbitration agreement or by the 
Our attention was also drawn to the decision in the case of State of Madhya Pradesh vs Ms Saith  Skelton P Ltd  There disputes had arisen between the appellant and the respondent with reference to the performance of a contract which provided for arbitration
Steps were taken to appoint arbitrators and an umpire
339 The appellant filed a petition in the District Judge s Court having jurisdiction over the matter for Setting aside the nominations
When the matter came up to this Court in appeal this Court appointed a sole arbitrator with consent of the parties
Thereafter in the presence of counsel for both the parties this Court gave directions in the appeal that the arbitration records be sent to the sole arbitrator and later extended the time for making the award and gave directions regarding the venue
The arbitrator gave his award directing the payment of a certain sum by the appellant to the respondent with simple interest at 9 from the date anterior to the reference and filed the award in the Court the next day
One of the question that arose before this Court was whether the arbitrator had any jurisdiction to award the interest from a date anterior to the date of award or reference
This Court held that the claim for the payment of interest had been referred to the arbitrator
The contract did not provide that no interest was payable on the amount that might be found due
Therefore the respondent was entitled under section 612 of the  to claim interest from the date on which the price became due and payable
The arbitrator had found that the price had become payable from a date anterior to the date of the award
Therefore the award of interest from the anterior date was justified
The Court further held that the award of interest at 9 was also not exorbitant because the parties themselves claimed interest at 12
Our attention was also drawn to Ms Ashok Construction Company vs Union of lndia where a bench of three learned Judges at page 68 of the report held that the terms of the arbitration agreement did not exclude the jurisdiction of the arbitrator to entertain a claim for interest on the amount due under the contract and on this ground this Court upheld the grant of interest
Our attention was drawn by Dr Ghosh to the observations in the case of Ms Alopi Parshad  Sons Ltd vs The Union of India  This Court reiterated the well settled principle that an award was liable to be set aside because of an error apparent on the face of the award
An arbitration award may be set aside on the ground of an error on the face of it when the reasons given for the C decision either in the award or in any document incorporated with it are based upon any legal proposition which is erroneous
In a recent decision Chinnappa Reddy J speaking for a bench of three learned Judges in Executive Engineer Irrigation Galimala s case supra at paragraph 15 of the judgment considered the ques ll 340 tion of award of interest by an arbitrator
The learned Judge noted the decisions in Firm Madanlal Roshanlal Mahajan vs Hukamchand Hills Ltd supra Ashok Construction Company vs Union of India supra
and the State of Madhya Pradesh vs Ms Saith  Skelton Private Limited supra and expressed the view that these were cases in which the references to arbitration were made by the court or in court proceedings of the disputes in the suit
It was held that the arbitrator must be assumed in these cases to have the same power to award interest as the court
Therefore the grant of pendente lite interest on the analogy of section 34 of the Civil Procedure Code was permissible
In regard to interest prior to the suit it was held in most of these cases that since the Interest Act 1839 was not applicable interest could be awarded if there was an agreement to pay interest or a usage of trade having the force of law
This Court held in the last mentioned case that they are not entitled to claim interest for the period prior to the commencement of the arbitration proceedings for the reason that the Interest Act did not apply to their case and there was no agreement to pay interest or any usage of trade
It was further held that the claimants were not entitled to claim pendente lite interest as the arbitrator was not a court nor were the references to arbitration made in suits
In deference to the latest pronouncement of this Court which is a pronouncement of three learned Judges we must hold that the grant of pendente lite interest in this case was not justified
Though the award in this case is a speaking award it was not made clear on what basis the interest was awarded
We are of the opinion that the arbitrator was in error in granting the interest in the manner he did
It is true that in specific term there was no denial of this right to grant interest but there was denial as to get it in accordance with law
In the aforesaid view of the matter so far as the interest of the award is concerned we are of the opinion that in awarding the interest the arbitrator committed an error of law
With this modification the judgment and order of the High Court are confirmed
The appeal is disposed of in these terms without any order as to costs
SL Appeal disposed of


Summary:
 The respondent was a Sarpanch of a Gram Panchayat
Consequent upon a report made by the Sub Divisional officer against the respondent stating the facts and circumstances which satisfied the conditions mentioned in section 115 of the orissa Gram Panchayat Act 1964 for his suspension and removal the second appellant by his order dated 22485 suspended the respondent
A notice as required by sub section 2 of section 151 was served on the Sarpanch who filed his detailed reply and was also personally heard
As the explanation was not considered satisfactory an order dated 241086 removing him from the office of the Sarpanch was passed in which it was mentioned that the appellant s further continuance in office would be detrimental to the interest of the Gram Panchayat as also of the inhabitants of the Grama
A second notification dated 241086 under sub section 4 was also passed
The Sarpanch challenged the above notifications before the High Court
The High Court quashed the notifications on the sole and simple ground that the order did not satisfy one of the mandatory requirements ie the appellant s further continuance in the office would be detrimental to the interest of the Gram Panchayat or inhabitants of the Grama
Allowing the appeal  HELD The language of sub section 2 does not require a repetition of the necessary satisfaction in the same language as referable to sub section 1
Besides the section cannot be interpreted to mandatorily lay down a rule for the authority concerned to express his conclusion in relation to the fulfilment of the conditions mentioned therein in a particular form using a particular set of words
181B 178 What is contemplated by the section is the formation of an opinion in this regard after giving a reasonable opportunity to the Sarpanch in question to meet the allegations suggested and to announce the conclusion in unambiguous and express terms
All that has been done in the instant case
1 181B C The second appellant while passing the order of suspension under sub section l of section 115 expressly stated that further continuance of the appellant in the office would be detrimental to the interest of the Gram Panchayat and the inhabitants of the Grama
The State Government was of the opinion that the circumstances specified in sub section 1 existed
In the order of removal the State Government after mentioning the allegations stated that the explanation of the Sarpanch was not acceptable and he was therefore being removed from the office
The allegations made against him thus were accepted as correct
The High Court was therefore not justified in quashing the impugned orders180 H 181AC