IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION APPEAL NO.422 OF 2003 IN ARBITRATION PETITION NO.468 OF 2002 Central Warehousing Corporation having his Head Office at 4/1, Siri Institutional Area, Khel Gaon Marg, New Delhi - 110 016 through the Executive Engineer, having his office at Construction Cell V, Cotton Green, ...Appellants Mumbai - 400 033. (Org.Petitioners) Versus 1.M/s.Pharmex Builders, 3/13, East Punjabi Bagh, New Delhi - 110 026. 2.Shri.Raj Kumar, Sole Arbitrator Ex.Member Engineering, Railway Board, 102/57, Silver Oaks, DLF City-I, ...Respondents Gurgaon - 122 002. (Org.Respondents) ...... Ms S.I.Shah for Appellants. Sri R.D.Suvarna for Respondents. ...... CORAM: SRI R.M.S.KHANDEPARKAR & CORAM: SRI R.M.S.KHANDEPARKAR & CORAM: SRI R.M.S.KHANDEPARKAR & SRI P.B.MAJMUDAR, JJ. SRI P.B.MAJMUDAR, JJ. SRI P.B.MAJMUDAR, JJ. DATED: APRIL 29, 2008. DATED: APRIL 29, 2008. DATED: APRIL 29, 2008. ORAL JUDGMENT : (Per R.M.S.Khandeparkar, J.) ORAL JUDGMENT : (Per R.M.S.Khandeparkar, J.) ORAL JUDGMENT : (Per R.M.S.Khandeparkar, J.) 1. Heard. : 2 : 2. This appeal arises from order dated 14th February 2003 passed in Arbitration Petition No.468 of 2003. The appeal came to be admitted on 24th June 2003 with specific observation that the same was admitted only with regard to the point of claim of interest. Consequently, the learned advocates for the parties were heard only in relation to the point pertaining to the claim of interest. 3. The only challenge to the impugned order in this appeal in relation to the claim of interest is that while dealing with the aspect of interest, it was necessary for the learned Single Judge to take into consideration Clause 29 of the agreement between the parties in its entirety and not only a portion thereof. It is the contention on behalf of the Appellants that the learned Single Judge has only considered first para of Clause 29 and has totally ignored para 2 of Clause 29 which deals with the matter pertaining to restrictions on the claim of interest on the sum retained towards the amount stated as due and payable to the Corporation. The contention is sought to be : 3 : seriously disputed on behalf of the Respondents while placing reliance in the decision in the matter of Executive Engineer, D.M.I. Divn., Orissa Executive Engineer, D.M.I. Divn., Orissa Executive Engineer, D.M.I. Divn., Orissa v. N.C.Budharaj reported in AIR 2001 SC 626 v. N.C.Budharaj reported in AIR 2001 SC 626 v. N.C.Budharaj reported in AIR 2001 SC 626. 4. Clause 29 of the agreement dated 8th April 1991 between the parties reads thus: "Clause 29 (i). Withholding and lien in "Clause 29 (i). Withholding and lien in "Clause 29 (i). Withholding and lien in respect of sums claimed: respect of sums claimed: respect of sums claimed: "Whenever any claim or claims for payment of a sum of money arises out of or under the contract against the contractor, the Engineer-in-Charge shall be entitled to withhold and also have a lien to retain such sum or sums in whole or in part from the security deposit and for the purpose aforesaid, the Engineer-in-Charge or the Corporation shall be entitled to withhold the security deposit, and shall have a lien over the same pending finalisation or adjudication of any such claim. In the event of the security being insufficient to cover the claimed amount or amounts or if no security has been taken from the contractor, the Engineer-in-Charge or the Corporation shall be entitled to withhold and has a lien to retain to the extent of such claimed amount or amounts referred to above, from any sum or sums found payable or which at any time thereafter may become payable to the contractor under the same contract or any other contract with the Corporation pending finalisation or adjudication of any such claim. It is an agreed term of the contract that the sum of money or moneys so withheld or retained under the lien referred to above, : 4 : by the Engineer-in-Charge or Corporation will be kept withheld or retained as such by the Engineer-in-Charge or Corporation till the claim arising out of or under the contract is determined by the Arbitrator, (if the contract i.e. governed by the arbitration clause) or by the competent Court as the case may be, and that the contractor will have no claim for interest or damages whatsoever on any account in respect of such withholding or retention under the lien referred to above and duly notified as such to the contractor. For the purpose of this clause, where the contractor is a partnership firm or a limited company the Engineer-in-Charge or the Corporation shall be entitled to withhold and also have a lien to retain towards such claimed amount or amounts in whole or in part from any sum found payable to any partner/limited company as the case may be, whether in his individual capacity or otherwise. Explanation : Explanation : Explanation : The provisions of the above said clause will fully apply tot he cases where the contractor has furnished the bank guarantee in lien of security deposit, and on any of the above eventualities arising, the Corporation shall be entitled to claim from the bank full amount of the guarantee and retain the deal within in the manner provided in the above clause." 5. Perusal of the impugned order discloses that while dealing with the matter, the learned Single Judge has merely taken note of the first para of Clause 29 of the said agreement. Indeed, the contents of sub-para (2) of Clause 29 have not been noted at all nor the impugned order discloses : 5 : any reason for failure to take note thereof and non-consideration thereof while dealing with the matter. It cannot be disputed that sub para (2) of Clause 29 deals with the subject relating to disentitlement of interest or damages to the contractor in relation to the amount retained on the basis that such amount is due and payable to the Corporation. Being so, and as rightly submitted by the learned Advocate for the Appellants, taking into consideration the decision of the Apex Court in State of Orissa vs. State of Orissa vs. State of Orissa vs. B.N.Agarwalla reported in AIR 1997 SC 925 B.N.Agarwalla reported in AIR 1997 SC 925 B.N.Agarwalla reported in AIR 1997 SC 925, it was necessary for the learned Single Judge to take into consideration the Clause 29 in its entirety and thereafter to consider the rival contentions in relation to the claim of interest. The learned Single Judge has totally ignored the second para of Clause 29 and has clearly failed to exercise its jurisdiction in the manner it was required to be exercised while dealing with the Arbitration Petition under consideration. 6. Even the majority view in N.C. Budharaj’s case (supra) clearly holds - "As long as there is : 6 : nothing in the arbitration agreement to exclude the jurisdiction of the arbitrator to entertain a claim for interest on the amounts due under the contract, or any prohibition to claim interest on the amounts due and become payable under the contract, the jurisdiction of the arbitrator to consider the award interest in respect of all periods subject only to Section 29 of the Arbitration Act, 1940 and that too the powers of the Court thereunder, has to be upheld". Being so, while dealing with the dispute in relation with the claim of interest, it is necessary for the adjudicating authority to consider the terms of the agreement which pertain to entitlement or disentitlement of the interest of the parties to the agreement. Failure to consider the same would render the decision to be improper and non-sustainable. Considering the same and as the learned Single Judge has failed to consider Clause 29 in its entirety, as rightly submitted on behalf of the Appellants, the impugned Judgment cannot be sustained and is liable to be set-aside and the matter is remanded to the learned Single Judge to deal with the Petition afresh as far as claim of amount of interest is concerned in : 7 : accordance with law and taking into consideration the decisions of the Supreme Court referred to above. 7. Needless to say that the learned Single Judge will have to consider the effect of the provisions of the Arbitration & Conciliation Act, 1996 while dealing with the matter. 8. The Appeal is accordingly allowed in the above terms with no order as to costs. P.B.MAJMUDAR, J. R.M.S.KHANDEPARKAR, J.