ORISSA HIGH COURT: CUTTACK W.P. (C) NO. 11233 OF 2010 In the matter of an application under Articles 226 and 227 of the Constitution of India. ------------- State of Orissa, represented through the Executive Engineer, Mahanadi Barrage Division, Cuttack. … Petitioner -Versus- M/s. Samantray Construction Pvt. Ltd. … Opp. Party For petitioner: Additional Government Advocate For opp. party : M/s. Y. Das, Senior Advocate, S.K. Sanganeria, P.C. Naik & A. Sanganeria ------------------------------ Date of Judgment: 16.05.2011 ------------------------------ P R E S E N T: THE HONOURABLE SHRI JUSTICE M.M.DAS --------------------------------------------------------------------------------------------------------- - M.M. Das, J. M/s. Samantray Construction Pvt. Ltd., the opposite party herein, was awarded with the work of construction of “Mahanadi Barrage from the right side from the right divide wall including right head regulator” vide agreement bearing No. CLV-2/85-86. The total cost of the project was Rs. 5,15,63,106.00 and the date of completion of the said work was fixed to 11.11.1987. After entering into the agreement, the work was commenced, but the same could be completed only up to 24.99% within the time stipulated under the agreement. On the request of the opposite party, time for completion of the wok was extended up to 21.03.1988. But, however, the opposite party was unable to complete the work by the said extended date and completed the same only up to 36.81%. Invoking Clause – 46 of the general conditions of contract, the agreement was terminated on 21.04.1988, by which time, only 47.67% of the work was completed. Termination of the contract gave rise to a number of correspondences between the parties. As the matter could not be settled amicably, a dispute was raised by the opposite party claiming Rs. 6,99,00,000/-. On such dispute being raised, the State Government appointed Shri Justice B.K. Behera, a former Judge of this Court to be a Special Arbitration Tribunal to adjudicate the dispute inter se between the parties arising out of the aforesaid agreement. During continuance of the arbitration proceeding, due to the amendment of the Arbitration Act, the dispute was transferred to the State Arbitration Tribunal. It remained pending before the said Tribunal till 06.04.2011, when the Tribunal dropped the case, as no extension of time was obtained for making the award. The opposite party being aggrieved, approached this Court for appointment of an Arbitrator under the provisions of the Arbitration and Conciliation Act, 1996 (for short, ‘the Act’). Justice Behera was again appointed as an Arbitrator by order dated 21.09.2001 passed in MJC No. 233 of 2001. The said judgment was challenged before this Court itself in a writ application, being, OJC No. 17163 of 2001, which was, however, not entertained. Again a review application was filed by the State 2 (petitioner), being Civil Review No. 15 of 2002, which was also dismissed on 15.02.2002. The State moved in an SLP before the apex Court against the order appointing Shri Justice Behera as the Arbitrator and the order passed in the review petition. The SLP was dismissed in the Supreme Court on 30th September, 2002. Both the parties participated in the arbitration proceeding and exhibited various documents in support of their respective claims. Ultimately, the learned Arbitrator passed an award in favour of the opposite party amounting to Rs. 4,45,27,453.00 (Rupees four crores forty five lakhs twenty seven thousand four hundred fifty three) only and also an amount of Rs. 1,37,16,892.00 (Rupees one crore thirty seven lakhs sixteen thousand eight hundred ninety two) only in favour of the department on the cross claim. An application under section 34 of the Act was filed by the State before the learned District Judge, Cuttack with a prayer to set aside the said award. The learned District Judge, after vividly discussing the point of law and considering the materials produced, discussing each item of the claim and counter-claim vis-à-vis the finding of the Arbitrator thereon, came to the conclusion that the Arbitrator had assigned good reasons and there is no error apparent on the face of the record, while holding that a Court, while hearing an application under section 34 of the Act and examining the correctness of the reasons given by the Arbitrator, was not required to substitute its own findings. However, the learned District Judge held that the 3 opposite party was not entitled to get Rs. 3,00,00,000/- (Rupees three crores) only, which has been awarded, under claim item No.18, but was entitled to get Rs. 68,44,332/- (Rupees sixty eight lakhs forty four thousand three hundred thirty two) towards the said claim item. It also held that the opposite party was not entitled to Rs. 2,67,300/- (Two lakhs sixty seven thousand three hundred) only under claim item No.21 on the face of the materials on record. Thus the excess amount awarded in favour of the opposite party according to the learned District Judge was Rs. 2,34,22,968/- (Rupees two crores thirty four lakhs twenty two thousand nine hundred sixty eight) only under the claim item Nos. 18 and 21. Deducting the said excess amount from the amount awarded, he found that the net amount payable to the opposite party was held to be Rs. 2,11,04,485/- (Rupees two crores eleven lakhs, four thousand four hundred eighty five) only. The State was directed to pay the said amount with interest at the rate awarded by the Arbitrator. The said order of the learned District Judge was challenged before this Court in ARBA Nos. 49 and 52 of 2005 by both the parties. This Court by judgment dated 08.11.2006, considering the ground of challenge made by the State as well as the opposite party with regard to the deduction made by the learned District Judge in respect of the claim item Nos. 18 and 21, in an elaborate judgment discussing various judgments rendered by the apex Court ultimately held as follows:- 4 “In view of the discussions made above, this Court finds that the Arbitrator had not blindly accepted the claims of the contractor. There was also no bias, nor was any misconduct committed by the Arbitrator. The Arbitrator followed the principles of natural justice and equity. He discussed all the materials available before him and after giving reasons in his own way arrived at the conclusion. With regard to reduction of the amount from Rs. 3.00 (Rupees three crores) to Rs. 68, 44, 332/- (Rupees sixty eight lakhs forty four thousand three hundred thirty two) in reference to claim item no. 18, this Court reversed the said finding of the learned District Judge holding as follows:- The learned District Judge lost sight of the said claim. The Arbitrator while considering the said claim though came to a finding that the claimant was entitled to much more than Rs. 3,00,00,000.00 (three crores) observed that an award of Rs. 3,00,00,000.00 (three crores) would be fair, reasonable and equitable. It appears that the Arbitrator considered all aspects, and I do not find any error in the conclusions arrived at by him. As stated earlier, the learned District Judge lost sight of Annexure-P to the claim petition. Thus the judgment of the learned District Judge so far as reducing the award amount of Rs. 3,00,00,000.00 (three crores) to Rs. 68,44, 332.00 (sixty eight lakhs forty four thousand three hundred thirty two) is concerned cannot be sustained. Accordingly while setting aside the impugned judgment so far as it relates to claim item No. 18, this Court confirms the award of the Arbitrator with regard to the said claim item No.18”. 2. At this juncture, it would be profitable to quote the award given by the learned Arbitrator and the interest thereon. With regard to the amount awarded in issue No.9 the learned Arbitrator concluded as follows:- “Issue No.9: To what relief, if any, the parties are entitled to ? 5 As per my findings, the following claim amounts of the claimant have been awarded:- (a) Excavation of foundation: Rs. 51, 54,609/- (b) Claim towards final bill Rs. 67, 21,895/- Claim for escalation charges Rs. 13, 37,000/- (c) Hire charges for machineries: Rs.3,00,00,000/- (d) Price of gunny bags Rs. 2,67,300/- (e) Security deposit Rs. 10, 46,649/-. This makes a total sum of Rs. 4,45,27,453/-”. From the above amount awarded in the application under section 30, as stated above, the finding of the learned District Judge that the opp. party is not entitled to the amount of Rs. 2, 67, 300/- (Rupees two lakhs sixty seven thousand three hundred) only, as mentioned in “(d)” above, and the said finding was confirmed by this Court in the judgment passed in ARBA Nos. 49 and 52 of 2005. 3. With regard to payment of interest, the learned Arbitrator referring to Section 31 (7) (a) and (b) of the Act awarded interest to the following effect:- “49. I have already indicated that I would not be inclined to award any amount towards interest on the sum of Rs.3 crores awarded by me as hire charges up to the date of the award. I direct the opposite parties to release the machineries within 30 days from the date of the award. The claimant would be entitled to 18% per annum towards interest on the hire charges awarded by me from the date of the award till the date of payment. As regards the other amounts awarded by me in favour of the claimants, the claimants would be entitled to the payment of interest @ 12% per annum from the date on which the cause of action arose, that is, from 21.4.1988 to the date of the award and from the date of the award till the date of payment, interest shall be paid @ 18% per annum. 50. As far as the opposite parties are concerned, I have already indicated earlier that except for a particular amount towards the interest claimed by them for a period up to 1991, they have not claimed any 6 interest in the counter statement and no interest has been claimed and prayed for even in the prayer portion of the counter statement. I see no justification, therefore, to grant interest on the sums awarded in their favour till the date of the award. They must, however, be entitled to receive interest from the claimants @ 18% per annum from the date of award till the date of payment. Both the parties are left to bear their own costs of the proceeding.” 4. As the amount was not paid by the petitioner, the opposite party levied Execution Case No. 4 of 2006, which is pending before the learned District Judge, Cuttack. Order dated 27.04.2010 passed in the aforesaid Execution Case is impugned in the present writ application by the State on the ground that the learned District Judge has committed an error in directing payment of interest on interest by accepting the calculation sheet by its previous orders dated 21.01.2008 and 22.07.2008 and ultimately, directing the State to pay a sum of Rs.2,97,50,333.13 (Rupees two crores ninety seven lakhs fifty thousand three hundred thirty three and paise thirteen) only as per the calculation sheet prepared by the office on 06.01.2010, on or before 14.05.2010. 5. The main thrust of argument advanced on behalf of the petitioner-State is that the learned District Judge, as the executing court, has committed an error in going behind the award and in directing payment of aforesaid amount by calculating interest on interest (compound), which is not permissible under law. A counter argument advanced on behalf of the opposite party is that the State- Judgment debtor having not filed any objection after receiving the 7 notice under Order – XXI, Rule - 22 C.P.C. is estopped from objecting to the amount sought to be recovered in the execution petition. 6. This Court thus finds that the dispute only involves the question with regard to the correctness of the amount, as calculated by the learned District Judge, as the executing court. 7. Mr. Sisir Das, learned counsel appearing for the State – petitioner relied upon various decisions in support of his contention that interest upon interest cannot be calculated, i.e., compound interest is not payable to the opp. party – decree holder. He further submitted that the amount awarded in favour of the State – petitioner along with future interest from the date of the award has also not been paid by the decree holder, which should be deducted from the dues of the decree holder inclusive of interest. The above position of law is well settled by the apex Court in various case laws. This question came up before this Court in the case of Governor for the State of Orissa v. M/ s. Hyder Consulting Limited, (W.P. (C) No. 5302 of 2009 disposed of on 28.7.2010). Referring to various decisions of the apex Court, this Court came to the conclusion that clubbing the interest with the principal amount awarded up to the date of the award and thereby treating the said amount as the principal amount for calculation of interest subsequent to the award till the amount is paid amounts to claiming compound interest which is contrary to the award itself and is contrary to the law settled by the apex Court. 8 8. With regard to payment of the amount awarded in favour of the State – petitioner along with the interest subsequent to the date of the award, Mr. Y. Das, learned senior counsel for the opp. party – decree holder referred to the provisions of Order 21, Rule 18 (1) C.P.C., which is as follows:- “18(1) Execution in case of cross-decrees.-(1) Where applications are made to a Court for the execution of cross-decrees in separate suits for the payment of two sums of money passed between the same parties and capable of execution at the same time by such Court, then- (a) if the two sums are equal, satisfaction shall be entered upon both decrees; and (b) if the two sums are unequal execution may be taken out only by the holder of the decree for the larger sum and for so much only as remains after deducting the smaller sum, and satisfaction for the smaller sum shall be entered on the decree for the larger sum as well as satisfaction on the decree for the smaller sum.” Applying the above provision, the amount awarded in the counter claim is liable to be set off on the date of the award itself. In the instant case, therefore, the dispute only relates to calculation of the amount due to be paid to the opp. party – decree holder. 9. Though a writ Court should not ordinarily enter into a disputed question of fact and calculation of the amount due to be recovered from the judgment debtor by an executing court is a question of fact, but, however, considering the contention raised on behalf of the State – petitioner that the learned District Judge has calculated the interest as compound interest, i.e., interest on interest, inasmuch as 9 considering the fact that the calculation made by the learned District Judge involves simple arithmetic, this Court felt it appropriate to scrutinize the same in reference to the contention raised by the State – petitioner. 10.. On meticulously scrutinizing the claim made by the learned executing court in the impugned order and directing the judgment debtor – petitioner to pay to the decree holder the balance amount of Rs. 2,97,50, 333.13 is found to be correct. This Court further finds that while arriving at the said amount, the learned executing court in accordance with law has not calculated the interest upon interest as alleged by the petitioner and has set off the amount awarded in favour of the petitioner in the cross claim by the arbitrator, on the date of the award as per the provisions of Order XXI, Rule 18 (1) C.P.C. Hence, this Court does not find any illegality or impropriety or error apparent on the face of the order so as to be interfered with under Article 226 of the Constitution or by exercising power of superintendence under Article 227 of the Constitution. 11. The writ petition, therefore, being devoid of merit, is dismissed, but in the circumstances, without cost. Since the award was passed in the year 2003 for a work which commenced from 1987 and, in the meantime, more than three decades have passed, the amount as would be found due to be paid by the judgment-debtor-petitioner to the decree holder – opp. party, till the 10 date of payment, by the executing court, shall be paid as expeditiously as possible, preferably, within a period of two months from today failing which, the learned executing court shall proceed in the execution case in accordance with law to recover the said amount from the judgment debtor-petitioner. ………………….. M.M. Das, J. Orissa High Court, Cuttack. May 16th , 2011/Biswal. 11 12