^. cr IN THE HIGH COURT QF CHHATTISGARH AT BILASPUR [<^-50, Arbitration AppealNo. H5' of 2010 BJ^Jlion BeOCl APPELLANT/: ^(Applicant) ,....-rA"' ^•^^ ^^-v ^^^!^ ^-"^' '^^ ^ ^" South Eastern Coalfields Limited, Through the Chief General Manager, S.E.C.L., Jamuna Kotma Area, Post Jamuna Colliery, Distt. Anuppur (M.P.) - Versus - RESPONDENT/: ^fNon-applicant) ^' fs. Shyamlal Agrawal, Contractor, Through its Partner Shri Shyamlal Agrawal, S/o Shri R.K. Agrawal, R/o 'Anand', Station Road, Raigarh (C.G.) The appeal is within time. Appropriate Court fees is affixed. APPEAL UNDER SECTION 37 OF THE ARBITRATION. AND CONCILIATION ACT, 1996 M $r HIQH COURT OF CHHATTSSGARH AT BILASPUR DB: Hon'ble Shri Satish K. Aanihotri & Hon'ble Shrl Radhe Shvam Sharma. JJ. Arbttration Aopeai No.4S of 2010 Appeliant/ (Appiicant) Respondent/ (Non-appIJcant) South Eastern Coaifields Limited Vs. M/s. Shyamlat Agrawal (Appea! under Section 37 ofthe Arbitration and Conciliation Act, 1996.) Present: Dr. N.K. Shukla, Sr. Advocate with Shri Om Prakash Agrawal, counsel for the appeilant. Shri Rahui Jha, counsel for the respondent. ORAL JUDGMENT (20.09.2011) Per_RadheShvam Sharma, J.: The appeilant has filed the instant appeal against impugned order 'dated 10th September, 2010 passed in MJ.C. No.29/2005, whereby learned District Judge, Bilaspur has rejected the application of the appeliant, fiied under Section 34 of the Arbitration and Conciliatlon Act, 1996 (for short 'the Act, 1996) for setting aside av^ard dated 23rd January, 2005. 2. BriefSy stated, facts of the case are that appelfant SECL deais with excavation and marketing of coal in India in various areas including Jamuna Kotma Area, Distt. Anuppur (MP). On 20th Juty, 1995, the appellant and the respondent entered into ^n agreement for the work of open excavation, waSEing, rooflng, drivage of^wo numbers of incline shafts and one number airshaft for Amadand Block "A" of Jamuna and Kotma Area of SECL. The value of the work v^as Rs.99,58,374.54/- and duration of the work was 14 ^l^ ^^ /y^^ ^•s^ s -^y s3^ months commencing from the 10th day of issuance of the letter of acceptance. The respondent did not finish the work within the stipulated time and got time extended several times. The Genera! Manager of the Jamuna and Kotma Area, sent intimatlon on 19th November, 1994 through reglstered post to the respondent about the siow progress of the work assigned to him. It was expressed that the respondent would take advise in proper perspective and submit detaiied work programme and arrange labour iicense on priority basis and further take up the work seriously with a view to compiete the same as per the commitment given by him. Although the respondent vide letter dated 12.7.97 promised to complete the work of airshaft, no work was initiated tiil December, 1997. The respondent, in spite of the promise, faiied to complete his work, as a result of which, the appeilant terminated the contract on 29.01.98 imposing penalty of Rs.9.958 iakh, which is 10% ofthe value of awarded work. 3. The respondent preferred petition before Madhya Pradssh High Court, Jabalpur under Section11(6) of the Act 1996. The High Court directed the Chairman-cum-Managing Director, SECL to appoint an Arbltrator. in compliance of the said order, the Chairman-Cum-Managing Director, SECL appointed Shri S.P. Mathur as Soie Arbitrator. The respondent submitted a statement of claim for Rs.1,18,00,000/- under various heads. The appellant submitted a reply and opposed the claim and aiso submitted that the claim is barred by iimitation. 4. The appellant objected the claim of the respondent and filed reievant documents and affidavits before the Sole Arbitrator. The Sole Arbitrator, after hearing both the parties, passed award on 23.01.2005, in which, claim t^r^ b° h"" '"-<h of the respondent was rejected, but allowed hjs claim only to the extent of Rs.17,95,923/- along with interest @ 7.5% per annum to be paid to him from 01.01.1999 till the date of realization. S. The appellant challenged the award dated 23.01.2005 passed by the Sole Arbitrator on the ground that the respondent did not start the work of airshaft and as such SECL had rightiy imposed penalty of 10% as per the agreement. Thus, the award of Rs.17,95,923/- was not justifled. The respondent is aiso not entitled to any interest as per the agreement. Under Section 34 of the Code of Civi! Procedure, 1908 (for short "CPC") and the jnterest Act, 1978, interest could not be awarded more than 6% per annum against the prevalent bank rate. Thus, the award of interest @ 7.5% per annum is excessive. Completion of the work was an important condition of the agreement and the respondent did not fulfitt the condition, as such, the award dated 23.01.2005 deserves to be set aside. 6. The respondent fiied objection before the learned District Judge that SECL failed to hand over worksite free from all encumbrances in time. Compensation to villagers was actually paid much after the site was handed over. Regular monthly payments were not made. Out of the construction work done for total 38 months, bills for the work relating to only 11 months were paid to the respondent. SECL did not pay 10% of excess work along with account bills. The RE bills have not yet been paid. Pumps were not provided continuously and were removed at sweet-will of the appellant. Tipping- tubes were also not provided. Instead, coal-tubs, without tippler, were provided. Electricity was not provided by a regular overhead line but by a Diesel Generator of inadequate capacity. Electrical supply was -'^ ^\ irreguiar. Therefore, the respondent totaily eliminated work of airshaft provided for in the agreement. The respondent changed location of inciined shafts which increased their length from 82 to 90 meter for traveling inctine and 102.5 to 1 08 meters for hauling incline. Approach road to worksite was not constructed although it was the responsibility of the Respondent. The contract was wrongiy terminated as no notice for termination was given as required under the agreement. Attention was drawn to provlslons of Sectlons 54 and 67 of the Contract Act. 7. Learned counsel appearing for the appeliant argued that the Impugned order passed by the learned District Judge is contrary to the iaw and facts. The appeltant opposed the claim of the respondent and submitted that the claim Is barred by limitation, but the Sole Arbitrator or the learned District Judge did not take it into consideration. The Sole Arbitrator was not permitted to cross-examine the witnesses. The Sole Arbitrator has committed misconduct and, therefore, the award is liable to be set aside. The Sole Arbitrator awarded Rs.17,95,923/- to the respondent along with interest @ 7.5% per annum from 01.01.99 till the date of realization, which is contrary to the agreement and Section 34 of CPC. The Sole Arbitrator and the learned District Judge have wrongly set aside the penalty imposed by the appellant on the respondent for breach of the conditions of the contract. Therefore, the impugned order dated 10 September, 2010 passed by the learned District Judge, Bilaspur and the award dated 23.01.2005 passed by the Soie Arbitrator are liable to be set aside. Learned counse! for the appellant placed reliance on State of Harvana & Ors. V. M/s. S.L. Arora and Companv. AIR 2010 SC 1S11. ^'/f^. l^^y°1 ^ m 8. Learned counsel appearing for the respondent submitted that the Court below has rightly rejected the application of the appellant under Section 34 of the Act, 1996. He supported the impugned order passed by the District Judge and the award dated 23.1.2005 passed by the Sole Arbitrator. 9. We have heard learned counsel for the parties and have also perused the record. Learned counsel appearing for the appetlant raised the question of iimitation and submitted that the claim of the respondent preferred before the Sote Arbitrator was barred by limitation. We have perused the record of MJC No. 29/05. In the application filed by the appellant under Section 34 of the Act, 1996, it did not raise the question of limitation, therefore, it cannot be altowed to ralse this question in appeal before this Court for the first time. So far as the argument of cross-examination of witnesses by the Sole Arbitrator is concerned, it is mentioned in the award that "a total of 24 sittlngs were held. No party produced oral evidence. Both the parties submltted affidavits mentioning their case. A iarge number of documents were submitted by both parties. Oral and written arguments were submitted by both parties mentioning Court judgments relied upon. Arguments were ciosed during the last hearing on 12.12.2004. However, a further time tiil 20.12.2004 was given to both parties if they had anything further to submit. No party made any further submission." It appears that the appeilant did not approach the Sole Arbitrator for cross-examining the witnesses and it also did not approach the Sole Arbitrator for adducing oral evidence. Therefore, the objection raised by the appellant is unsustainable. ^•: €^ ^-•^ ^ 10. The grievance of the appellant Is that the Sole Arbitrator awarded excessive interest @ 7.5% per annum. In Executive Enaineer . Dhenkanal IVIinor Imaation Division. Orissa and Others vs. N.C^ Budharaj (Deceased) Bv Lrs. And Others. (200112 SCC 721. it has been heid as under:- "26. for ali the reasons stated above, we answer the reference by holding that the arbitrator appointed with or without the intervention of the Court, has jurisdictlon to award interest, on the sums found due and payable, for the pre- reference period, in the absence of any specific stipuiation or prohibltion in the contract to claim or grant any such interest. The decision in Jens Case taking a contraview does not iay down the correct position and stands overruled, prospectively, which means that this decision shal! not entitle any party nor shali it empower any Court to reopen proceedings which have already become finat, and apply only to any pending proceedings." In Bhaaawatl Oxvaen Ltd. Vs. Hindustan Copper Ltd. AIR 05 SCC 2071 it has been held thus: "36. Now Section 34 of the Code of Civil Procedure has not application to arbitration proceedings since Arbitrator cannot be said to a 'court' within the meaning of the Code. But an Arbitrator has power and jurisdiction to grant interest for all the three stages provided the rate of interest is reasonable. 37. So far as interest for pre-reference period is concerned, in view of the conflicting decisions of this Court, the matter was referred to a larger Bench in Executive Engineer , Dhenkanal Minor Irrigation Division, Orissa and Others vs. N.C. Budharaj (Deceased) By Lrs. And Others. (2001) 2 SCC 721. The Court, by majority, held that the an arbltration has power to grant interest for pre-reference period provided there is no prohibition in the arbitration agreement excluding his ^ jurisdiction to grant interest. The forum of arbitration is created by the consent of the parties and is a substitute for conventiona! civil Court. It is, therefore, of unavoidable necessity that the parties be deemed to have agreed by implication that the Arbitrator would have power to award interest in the same way and same manner as a court. 38. Regarding interest pendente lite also, there was cleavage of opinion. The question was, therefore, referred top a iarger Bench in Secretary, irrigation Department, Government of Orissa& others V. G.C. Roy, (1992) 1 SCC 508. The Court considered several cases and laid down following principles; "The question still remains whether arbitrator has the power to award interest pendente lite, and if so on what principie. We must reiterate that we are dealing with the situation where the agreement does not provide for grant of such interest not does it prohibit such grant. !n other words, ws are deaiing with a case where the agreement is silent as to award of interest. On a conspectus of aforementioned decisions, the foliowing principles emerge: (i) A person deprived of the use of money to which he is legltlmately entitled has a right to be compensated for the deprivation, catl it by any name. It may be called interest , compensation or damages. This basic consideration Is as valid for the period the dispute is pending before the arbitrator as it is for the period prior to the arbitrator entering upon the reference. This is the principle of Section 34, Civil Procedure Code and there is no reason or principle to hold otherwise in the case of arbitrator. (ii) An arbitrator is an alternative forum for resoiution of disputes arising between the parties. If so, he must have the power to decide all the disputes or differences arising between the parties. If the arbitrator has not power to award interest pendent elite, the party ciaiming //^ Ife-^lg^ ^^^•—•••^1 %-~^ ^ it would have to approach the court for that purpose, even through he may have obtained satisfaction in respect of other claims from the arbitrator. This would lead to multiplicity of proceedings. (iii) An arbitrator is the creature of an agreement. It is open to the parties to confer upon him such powers and prescribe such procedure for him to fotlow, as they think fjt, so long as they are not opposed to taw. (The proviso to Section 41 and Section 3 of Arbitration Act illustrate this point). The arbitrator must also act and make his award in accordance with the general law of the land and the agreement. (iv) Over the years, the English and tndian courts have acted on the assumption that where the agreement does not prohibit and a party to the reference makes a claim for interest, the arbitrator must have the power to award interest pendente lite, Thawardas has not been foliowed in the later decisions of this court. It has been explained and distinguished on the basis that in that case there was no claim for interest but onty a claim for unliquidated damages. It has been said repeatedly that observations in the said judgment were not intended to tay down any such absolute or universal rule as they appear to, on first impression. Until Jena case almost all the courts in the country had upheld the power of the arbitrator to award interest pendente llte. Continuity and certainty is a high desirable feature of law. (v) Interest pendent elite is not a matter of substantive law, like interest for the period anterior to reference (pre- reference period). For doing complete justice between the parties, such power has always been inferred." 39. As post aw/ard interest, the point is covered by the decision of this Court in Hindustan construction Co. Ltd. V. State of Jammu & Kashmir, (1992) 4 SCC 217. it was heid there that an arbitrator is competent to award ;'1;..1'^^ '^'l ^-.^^ J^-^ 11. interest for the period from the date of the award to the date of decree or date of realization, whichever is earlier." In Mannalal Prabhudaval v. Orientai Insurance Co. Ltd. AIR 2006 SC 3026 it has been held thus: "13. As far as arbitration proceedings are concerned, it is weil established that an arbitrator, in absence of any prohibition In an arbitration agreement, has power to award Interest. Though it is not a "court" within the meaning of Section 34 of the Code of Civil Procedure, 1908 an arbitrator has power to grant reasonabte rate of interest at all the three stages; i.e. pre-reference period, pendent elite and post-award period." 12. In view of the law laid down in the aforesaid judgments, an Arbitrator has power to award interest for all the three stages i.e. pre-reference period, pendente lite and post award period. Hence, the learned Sole Arbitrator awarded the interest under his discretionary power which is neither arbitrary nor excessive; and, therefore, it does not call for any inferference. 13. The ground for setting aside the arbitrational award under Section 34 of the Act, 1996, law is provided under sub-sections (2) and (3) of Section 34 of the Act, 1996. The iearned District Judge, after carefully going through the award passed by the Sole Arbitrator, has categorically held that the learned Sole Arbitrator in exercise of his jurisdiction under Section 31(7) of the Act, 1996, has awarded interest @ 7.5 % per annum, which cannot be said to be excessive. The learned Arbitrator awarded interest exercising hls discretionary power under the law. Dr. Shukla, learned Sr. Advocate appearing on behaif of the appellant could not indicate any ground available under sub-sections (2) and (3) of Section 34 of the Act, 1996 for chalienging Blni 10 the arbitral award passed by the Sole Arbitrator. Therefore, in the considered opinion of this Court, the reasons assigned by the learned District Judge for rejecting the application under Section 34 of the Act,1996 are strictly in accordance with law and there is no ground available to the appellant to assail the findingsof the Sole Arbitrator arrived at by hjm in the award. 14. For the reasons aforestated, the appeat, being devoid of merit, deserves to be and js accordingly dismissed. No order as to cost. Sd/- Satish K.Agnihotri Judge Sd/- R.S. Sharma Judge