1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JAIPUR BENCH, JAIPUR ORDER S.B.CIVIL MISC. APPEAL NO.2712/2007. The Executive Engineer, PWD, Jhalawar. VERSUS M/s.Sethi Construction Company. 06.05.2008. HON'BLE MR.JUSTICE DALIP SINGH Mr.R.S.Shekhawat, Dy.Govt.Advocate. Mr.J.P.Goyal, for the respondent. ***** This appeal has been filed by the non- claimant/appellant against the judgment of the learned District Judge dated 02.03.2007 by which the application under Section 34 of the Arbitration and Conciliation Act, 1996 filed by the appellant has been dismissed. The submission of the learned counsel for the appellant is that the learned Arbitrator awarded interest @ 18% p.a. for the period 23.08.1993 upto 18.02.2004 i.e. the date of the award. The contention of the learned counsel for the appellant is that the learned Arbitrator has misconstrued the provisions of sub-section (7) of Section 31 of the Act of 1996 and has awarded the interest @ 18% p.a. for the amount awarded under the award for the period 23.08.1993 to 18.02.1994 i.e. the date of the award and further interest @ 18% p.a. on the total amount of Rs.5,47,097/- from 18.02.2004 which is the date of award till the date of actual payment. 2 Learned counsel for the respondent, on the other hand, submitted that the learned Arbitrator has not committed any illegality in awarding interest @ 18% p.a. as the same is provided under clause (b) of sub-section (7) of Section 31 of the Act of 1996 itself. I have considered the rival submissions and perused the provisions of sub-section (7) of Section 31 of the Act of 1996. The said provision reads as follows:- “(7)(a) Unless otherwise a reed by the parties, where and 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 eighteen percentum per annum from the date of the award to the date of payment.” A look at the above provision goes to show that sub-section (7) of Section 31 of the Act of 1996 has been bifurcated in two clauses (a) and (b). Clause (a) of sub-section (7) of Section 31 deals with the award of interest at such rate as it may deem reasonable, giving a discretion to the learned Arbitral Tribunal for awarding the interest on the amount as a whole or any part of the amount and for such period 3 which may be either the whole of the period from the date when cause of action arose till the date of award or part thereof. Under clause (a) of sub-section (7) of Section 31 the Legislature has not provided any specific rate of interest unlike clause (b). Under clause (b) of sub-section (7) of Section 31 of the Act of 1996, it has been provided that once an award is passed and in case no rate of interest on the amount awarded has been prescribed, the award shall carry an interest @ 18% p.a., if, however, the Arbitrator has fixed the rate of interest otherwise then the said rate of interest shall prevail. In the instant case the learned Arbitrator has awarded interest on the sum payable i.e. under clause (a) of sub-section (7) of Section 31 of the Act of 1996 @ 18% p.a. as also under clause (b) of sub-section (7) of Section 31 of the Act of 1996 from the date of passing of the award till realization as 18% p.a. I have perused the award, more particularly, the findings on issue No.11. The learned Arbitrator while awarding interest @ 18% p.a. has not relied upon any provisions of any clause in the contract between the parties prescribing the rate of interest. On the contrary, the finding given by the learned Arbitrator is “that the contention of the respondent that there is no provision in the terms and conditions of the agreement for payment of interest, is not tenable. There is no specific clause in the agreement prohibiting 4 grant of interest to the Contractor”. While it may be true that in the absence of the condition in the contract making a provision for award of interest and prescribing the rate of interest, the learned Arbitrator has the jurisdiction to award the interest on the amount found due under clause (a) of sub- section (7) of Section 31 of the Act of 1996, but it does not follow the rate of interest @ 18% p.a., as has been prescribed under clause (b) of sub-section (7) of Section 31 of the Act of 1996 is also to be made applicable while awarding interest under clause (a). A look at the clause (a) of sub-section (7) of Section 31 of the Act goes to show that discretion has been given by the Legislature and the said discretion has to be exercised on the sound principles, in awarding the interest, the rate of interest as prescribed under the various statutes including the provisions of the Interest Act or Section 34 C.P.C. may be taken into account as a guideline. In the instant case, the interest has been awarded w.e.f. 23.08.1993 upto 18.02.2004 i.e. for the period of nearly eleven years. The amount which has been found due is Rs.5,47,097/- which is inclusive of interest @ 18% p.a., as would be seen in the award while determining the relief under the issue No.13. The interest which has been awarded is nearly twice the amount which has been held due under each of the counts, under issues No.1 to 8. Under the provisions of Section 34 of C.P.C. which may be taken as a guiding factor, 5 the Legislature has prescribed the interest @ 6% p.a. which is the outer limit, however, in the cases whereof any commercial transaction the same may be raised to either the contractual rate of interest already agreed upon on such rate as may be prescribed by the R.B.I. for the Scheduled Nationalized Bank. Admittedly, in the instant case there was no contractual rate of interest agreed upon. It would, therefore, be safe, considering the amount involved in the award and the duration of the pendency, to grant interest @ 9% p.a. instead of 18% p.a. The rate of 18% p.a. which has been prescribed under the clause (b) of sub-section (7) of Section 31 of the Act of 1996 cannot be taken to be a guideline for determining the rate of interest under claim (a), as a scope and object of clause (b) of sub-section (7) of Section 31 of the Act of 1996 is distinct from that of clause (a) of sub-section (7) of Section 31 of the Act of 1996. Since the entire object of the Act of 1996 is to provide a mechanism achieving finality of disputes reffed for arbitration and not keep the awards pending indefinitely in various forums the deterrent rate of interest of 18% p.a. has been prescribed by the Legislature so that by dilatory tactics, the litigant may not bring undue harm and loss to a party despite there being an award in his favour. In that view of the matter, this appeal is partly allowed. While not interfering with the award on merits, the appeal of the appellant is 6 partly accepted that the interest which has been awarded under the issue No.11 @ 18% p.a. shall stand reduced to 9% p.a. and the relief which has been awarded under the issue No.13 based upon the interest @ 18% p.a. shall be redetermined calculating the interest @ 9% p.a. of each count. This appeal accordingly stands disposed of. (DALIP SINGH),J. Solanki DS, Jr.P.A.