ORDER [CASE NUMBER] WITH [CASE NUMBER] IN THE HIGH COURT AT CALCUTTA Civil Appellate Jurisdiction [ENTITY] Versus THE [ENTITY] BEFORE: The Hon'ble JUSTICE [ENTITY] The Hon'ble JUSTICE [ENTITY] Date : 27th September 2019. APPEARANCE: Mr. [ENTITY], Sr. Advocate Mr. [ENTITY], Advocate for the appellant. Mr. [ENTITY], Advocate Mr. [ENTITY], Advocate Mr. [ENTITY], Advocate for the respondent.
This appeal arises out of an order dated 5th March 2019 in an application for setting aside under [SECTION] of the [ACT] (hereinafter referred to as "the Act").
The award was passed on 21st July 2010. In paragraph 29 of the statement of claim, the appellant had claimed a principle sum of Rs. 7,42,64,033/- and pendente lite interest on the said sum from 30th November 2004 till 10th January 2007 at 12% p.a. The arbitrator allowed the principal claim in part but rejected the claim on account of interest. However, there were no reasons provided for not allowing the interest.
The Learned Single Judge has allowed the application on the reasoning that reasons were mandated under [SECTION] of the Act, the parties did not come under the exceptions provided thereto, and since no reasons were supplied for not allowing interest, that portion of the award was liable to be set aside under [SECTION] of the Act as being in conflict with the public policy of India.
The appellant has preferred this appeal on the ground that the Learned Single Judge erred in not awarding interest after having set aside the relevant portion of the award. It is contended that the Court exercising jurisdiction under [SECTION] of the Act had an inherent power to award interest, especially after having set aside the finding of the arbitrator disallowing interest. It is submitted that the appellant would suffer grave prejudice and serious injustice if the appellant is compelled to start the process of arbitration again after a lapse of nearly 15 years only for claiming interest; and thus, the appellant ought to be granted relief for payment of interest at such rate as the Court would deem fit.
On the power to remand, Mr. [ENTITY], learned senior counsel appearing on behalf of the appellant, has relied on [ENTITY] and Anr. v. Ghanshyam Das Damani (2018) 11 SCC 328 and [PRECEDENT] (decision dated 10th October 2018 in [CASE NUMBER]) to submit that the court does not enjoy a power of remand to remit the matter back to the arbitrator once it has been set aside.
On the power to modify an award, Mr. [ENTITY] has referred to [ENTITY] Ltd. v. G. Harischandra Reddy and Anr. (2007) 2 SCC 720 (paragraph 11), [PRECEDENT], The [PRECEDENT], [PRECEDENT], and [PRECEDENT].
The respondent relies on paragraph 52 of [PRECEDENT] to submit that the role of the courts for review of arbitral awards is to ensure fairness and that there is a limited channel for interference. It is submitted that McDermott International has categorically held that under [SECTION], a civil court has the power to only quash the award leaving the parties free to begin the arbitration again if it is desired. It is submitted that this dictum has been followed by a number of courts including our court in [PRECEDENT], the Delhi High Court in [PRECEDENT] and the Bombay High Court in [PRECEDENT]. It is submitted that the power under [SECTION] is a power of annulment and not a power of appeal and the scope is limited to setting aside or affirmation of the award and nothing beyond.
On remanding back to the arbitrator, it is quite clear that in view of [ENTITY], the same is not possible. Firstly, the impugned judgment has already set aside the portion of the award. And secondly, the appellant has not made any application for remand on this specific ground, as is held in [ENTITY] as being mandatory. The only time when remand is possible is as mentioned in [SECTION] of the Act. Therefore, the question of remand does not arise. In any event, the grounds made out for appeal by the appellant is to the effect that the award should instead be modified by this Court.
However, the judgments cited by Mr. [ENTITY] on the power to modify an award can all be distinguished from the facts of the present case. In the present case, for rejecting the claim for pendente lite interest, the arbitrator has not given reasons as is required by the Act. Therefore, this is a case of no adjudication having taken place at all. In [ENTITY], in paragraph 11 of the judgment, pre-award interest, pendente lite interest and future interest which was awarded at 18%p.a. was reduced to 9%p.a. on the basis that there was a substantial reduction of interest rate after economic reforms in the country. This was a situation where the arbitrator has decided one way or the other by stating reasons but the Supreme Court deemed it fit to modify the award for the specific reason mentioned. In Hindustan Zinc Ltd., in paragraph 23, it is held that the arbitrator has been correct in stating that the respondent was entitled to price escalation but the calculation of escalation was incorrect. The Supreme Court modified the award but putting in the correct calculations. This too is a case where the arbitrator has adjudicated on the matter and arrived at a finding and the Supreme Court merely acted to correct a calculation error. In Tata Hydro- Electric Power Supply Co. Ltd., in paragraph 21 of the judgment, interest awarded by the arbitrator at 12% p.a. from August 1993 was modified to interest being awarded at the same rate from 30th March 1998. In Arctic India, in paragraph 27 of the judgment, it is merely noted, relying on [ENTITY], Hindustan Zinc and Tata Hydro-Electric Power Supply Co. Ltd., that awards have been modified by courts in the past. In Modern Laminators Ltd., the Learned Single Judge reduced the amount payable on the basis of a concession voluntarily made by the award holder.
All the judgements relied on by Mr. [ENTITY] on the power to modify relate to cases where the award has not been set aside but only some modifications have been made with regard to the rate of interest. In all of these cases, interest had already been awarded. However, in the present case, the issue of whether or not interest as claimed in the statement of claim by the appellant ought to be awarded itself is to be decided. Such an issue is a matter of adjudication. On adjudication, it may be found that the interest claimed ought to be granted and if such a finding is arrived at, the rate of interest would be awarded at discretion; or, it may also be found that such interest ought not to be granted. Such adjudicative function cannot be performed by the setting aside court. In terms of the contract between the parties, such adjudication could only have been done by the arbitrator.
For this reason, we find it difficult to modify the award. On Mr. [ENTITY]'s contention that the appellant would suffer grave prejudice and serious injustice if the appellant is compelled to start the process of arbitration again after a lapse of nearly 15 years only for claiming interest; and thus, the appellant ought to be granted relief for payment of interest at such rate as the Court would deem fit, only the Supreme Court could have granted such a relief, if at all, under its extraordinary powers to do complete justice. This appeal court does not have such a power. There will have to be a fresh arbitration.
At this stage, we enquired from the parties if they would be agreeable to the appointment of an arbitrator to decide pre reference interest and interest pendente lite which the appellant has admittedly claimed in paragraphs 29 and 30 of its statement of claim. Mr. [ENTITY], learned senior counsel appearing on behalf of the appellant and Mr. [ENTITY], learned counsel appearing on behalf of the respondent, have categorically submitted that the parties have no objection if the fresh reference is made to an arbitrator appointed by this Court with regard to pre reference interest as well as interest pendente lite.
On such consideration, we appoint Mr. [ENTITY], Senior Advocate, a member of the Bar Library Club, to act as a sole arbitrator, to decide the said dispute on the basis of the existing pleading within a period of six months from the date of communication of this order by either parties. The arbitrator is requested to fix his commensurate remuneration at the first sitting of the arbitration proceeding to be shared by the parties in equal measure, at the first instance, subject to the directions as to the costs as may be contained in the final Award. The parties have assured before us that they would cooperate with the learned arbitrator in disposing of the reference as early as possible.
The application stands disposed of.
([ENTITY], J.) ([ENTITY], J.) [ENTITY]