=1= IN IN IN THE THE THE HIGH COURT OF JUDICATURE AT BOMBAY HIGH COURT OF JUDICATURE AT BOMBAY HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORDINARY ORDINARY ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION APPEAL APPEAL APPEAL NO.1038 NO.1038 NO.1038 OF 2001 OF 2001 OF 2001 IN IN IN ARBITRATION ARBITRATION ARBITRATION PETITION NO.473 OF 2001 PETITION NO.473 OF 2001 PETITION NO.473 OF 2001 DSL Enterprises Pvt.Ltd. ...Appellants v/s Maharashtra State Electricity Distribution Co.Ltd. ...Respondents Mr R.A. Dada, Sr. Advocate with Mr Z.A. Dada, Mrs Swati Deshpande and Mr M. Tally i/b M/s S. Mahomedbhai and Co. for Appellants. Mr Narendra Rai, Sr. Advocate with Mr P.P. Chavan i/b M/s Khare and Co. for Respondents. CORAM CORAM CORAM : D.K. DESHMUKH AND A.A. SAYED JJ. : D.K. DESHMUKH AND A.A. SAYED JJ. : D.K. DESHMUKH AND A.A. SAYED JJ. DATE DATE DATE : 12TH MARCH 2009 12TH MARCH 2009 12TH MARCH 2009 =2= P.C. :- 1. By this appeal, the appellants challenge the order dated 4th September 2001 passed in arbitration petition No.473 of 2001 by the learned Single Judge of this Court only in so far as it relates to the change of the rate of interest fixed by the learned Arbitrators in their award. The arbitration petition No.473 of 2001 was filed by the respondents under section 34 of the Arbitration and Conciliation Act 1996 challenging the award made by the Arbitral Tribunal directing the respondents to pay an amount of Rs.76,65,049/- with interest on Rs.38,77,346/- at the rate of 21 % p.a. from 1st April 1999 till payment and interest on Rs.37,87,703/- with interest at the rate of 21 % p.a. from 31st May 1999 till payment. The claim of the respondents for liquidated damages was rejected. The learned Arbitrators have also awarded cost. The learned Single Judge held that on merits the findings of the Arbitral Tribunal cannot be interfered with, the only part which has been interfered with by the learned Single Judge is the order of the learned Arbitrators awarding interest at the rate of 21 % p.a. for pre-reference period as also for the period from the date of the award till the date of realisation. The =3= learned Single Judge has held that the appellants are entitled to the amounts as per the award of the learned Arbitrators with interest at the rate of 10 % p.a. for the pre-reference period and at the rate of 18 % p.a. for the period after the date of the award till the date of realisation. The original petitioners i.e. the present respondents have not filed any appeal. In other words, the respondents have accepted that it is liable to pay interest at the rate of 10 % p.a. for the pre-reference period and 18 % p.a. for the after the award. 2. The learned counsel appearing for appellants submitted that so far as the rate at which interest on the amount is payable is concerned, it is in the discretion of the Arbitral Tribunal. The Arbitral Tribunal while awarding interest at the rate of 21 % p.a., has relied on three circumstances and the findings recorded by it viz. (1) that the conduct of the respondents of withholding the amount which was admittedly due was blameworthy; (2) that because of withholding of such huge amount by the respondents without there being any justification has obviously adversely affected the business of the appellants and (3) both the parties have claimed interest at the rate of 24 % p.a. The learned counsel submits that perusal of the judgment of the learned Single Judge shows that =4= the learned Single Judge has interfered with the discretion of the Arbitral Tribunal with regard to award of interest. The learned counsel submits that the learned Single Judge has not given any reason while setting aside the finding recorded by the learned Arbitrators that the conduct of the respondents of withholding the amount which was admittedly due is blameworthy. He has not considered the finding recorded by the learned Arbitrators that the conduct of the respondents for withholding the amount which was admittedly due has adversely affected the business of the appellants. The learned Single Judge though took into consideration the fact that both the parties have claimed interest at the rate of 24 % p.a., has not given any reason why he is not accepting that rate of interest. On the contrary, the learned Single Judge has reduced the rate of interest for two reasons viz. (1) that according to the learned Single Judge, the defence put up by the respondents was bonafide and (2) that the respondent is a public sector undertaking. The learned counsel submits that the respondent is a public sector undertaking is not relevant while deciding the rate of interest. The learned counsel further submits that the learned Single Judge has not given any reason for holding that the defence put up by the respondents is bonafide in the face of a clear finding recorded by the learned Arbitrators that the conduct was blameworthy. =5= The learned counsel appearing for respondents, on the other hand, relying on the judgment of the Supreme Court in the case of Krishna Bhagya Jala Nigam Ltd. v/s G. Harischandra Reddy and anr., reported in (2007) 2 SCC 720 submitted that awarding of interest in view of the present interest rate at the rate of 21 % p.a. was not proper. The learned counsel also relies on a judgment of the Division Bench of this Court in the case of Maharashtra Industrial Development Corporation Ltd. v/s Govardhani Construction Co., reported in 2008(5) Bom.C.R. 500 to claim that relying on the judgment of the Supreme Court in Krishna Bhagya Jala Nigam Ltd. (supra), the Division Bench has also reduced the rate of interest. The learned counsel also submits that this Court should take judicial notice of the fact that the rate of interest has been reduced. 3. Now if in the light of these rival submissions the record of the case is perused, it is clear that the Arbitral Tribunal had fixed the rate of interest after giving reasons. At what rate interest on the amount is to be paid is in the discretion of the Arbitral Tribunal but that discretion has to be exercised by the Arbitrators for good and valid reason. In the present case, the learned Arbitrators had given three reasons why according to them awarding of interest at the rate of 21 % p.a. would be appropriate and proper. The =6= first reason was that the conduct of the respondents of not making payment of the admitted amount was blameworthy. The learned Arbitrators in paragraph 3.10(b) of their award have observed thus :- "3.10(b) The conduct of the respondents in not making payment of the amount admittedly due and payable by the respondents to the claimants and not relying to the letters of demand and not expressing their intentions - one way or the other - is blameworthy." . Thus the Arbitral Tribunal has clearly found that the respondents were not at all justified in withholding the amount and they had no valid reason to do so and therefore their conduct was blameworthy. The Arbitral Tribunal thereafter has considered the submissions made on behalf of the claimants that withholding of such a huge amount has adversely affected the business of the claimants and the Arbitral Tribunal has held that withholding of the amount has adversely affected the business of the respondents. The learned Arbitrators then found that both the parities have claimed interest at the rate of 24 % p.a. and therefore the learned Arbitrators awarded the interest at the rate of 21 % p.a. So far as the decision of the learned Single Judge on this aspect of the matter is concerned, =7= it is contained in following paragraph :- "We then have the issue of interest. It is no doubt true that on behalf of the respondents, learned counsel has drawn my attention to the fact that the judgment of the Division Bench of this Court was rendered under the Act of 1940. My attention was also invited to section 31(7)(a) that it is within the discretion of the Arbitral Tribunal to award interest at such rate as it deems reasonable on the whole or in part from the date of which cause of action arose. If this language is considered, it may be possible to argue that the provisions of the interest may not be attracted considering Act 1996. However, in the instant case without going into that issue, the petitioners had not disputed the amount. The entire case was that they were entitled for adjustment in terms of clause 25 of the agreement. This has been held against them. Therefore, the dispute as raised by them cannot be said not to be bonafide. It is no doubt true that my attention was also invited on behalf of the respondents by the learned counsel that the petitioners themselves in their claim had sought interest =8= at the rate of 21 %. However, as set out earlier, considering the nature of defence raised and the petitioners being the Board constituted under the provisions of the Electricity (Supply) Act 1948 and on the peculiar facts of this case, interest awarded is reduced from 21 % to 10 % upto the date of the award. In so far as interest, after the award considering the language of section 31(7)(b) will be at the rate of 18 % from the date of the award to the date of the payment. The award must be modified accordingly." . Perusal of this paragraph shows that the learned Single Judge has not considered the finding recorded by the Arbitral Tribunal that the conduct of the respondents in withholding the amount was blameworthy, he has held that the defence raised by the respondents cannot be said to be not bonafide. We do not find any reason given why the learned Single Judge holds that the defence did not lack bonafides. The learned Single Judge then notes that both the parties are claiming interest at the rate of 21 % p.a. The learned Single Judge however has reduced the rate of interest only for two reasons viz. the defence raised is not lacking bonafides and the fact that the respondent is a public sector undertaking. We have not =9= been pointed out anything on behalf of the respondents to show that the fact that the respondent is a public sector undertaking is relevant and material in deciding the rate of interest, in any case, for the purpose of reducing the rate of interest which has been fixed by the learned Arbitrators by a well reasoned award. In our opinion, what should be rate of interest is in the discretion of the Arbitrators and once the Arbitrators after giving reasons have fixed the rate of interest, considering the provisions of section 34 of the said Act, the award is incapable of being interfered with. In the present case, we find that the award has been interfered with by the learned Single Judge without even setting aside the finding recorded by the learned Arbitrators for fixing interest at a particular rate. Considering the law laid down by the Supreme Court from time to time while considering petition under section 34 of the said Act, in our opinion, if the Court finds that the view taken by the Arbitral Tribunal on the fact and law is a possible view, the Court hearing the petition filed under section 34 of the said Act will not be justified in interfering with the same. So far as the reliance placed by the learned Single Judge on the judgment of the Supreme Court in the case of Krishna Bhagya Jala Nigam Ltd. (supra) is concerned, the only portion of the judgment on which reliance is placed is contained in paragraph 11 which reads thus :- =10= "Here also we may add that we do not wish to interfere with the award except to say that after economic reforms in our country the interest regime has changed and the rates have substantially reduced and, therefore, we are of the view that the interest awarded by the Arbitrator at 18 % for the pre-arbitration period, for the pendente lite period and future interest be reduced to 9 %." . With deepest respect, we do not find that by these observations the Supreme Court has laid down any law which can be said to be precedent to be followed by subordinate Courts. The Supreme Court here has referred to change of interest regime. In our opinion, for reducing the rate of interest awarded by the Arbitrators on the ground of change in the interest regime, there has to be evidence. The rate of interest has varied from year to year and even more than once during an year. Under the Interest Act, interest can be awarded at the current lending rate, it has been held that what is current lending rate is always a question of fact because the party which is claiming that particular rate is a current lending rate, has to lead evidence to show what was the current lending rate at a particular time. The question to be considered is whether the rate of =11= interest which was prevailing on the date on which the amount was withheld is relevant or whether the rate of interest which was prevailing during the period the amount remained withheld is to be considered or the rate of interest applicable at the time when the payment is ordered is relevant. In our opinion, as to what should be the appropriate rate of interest will vary from case to case and will depend on facts of each case. It is difficult to lay down any law of universal application on what would be appropriate rate of interest because what would be appropriate rate of interest in one case may not be in the other case. So far as the judgment of the Division Bench of this Court in the case of Maharashtra Industrial Development Corporation Ltd. is concerned, it merely follows the judgment of the Supreme Court in Krishna Bhagya Jala Nigam Ltd.’s case which does not take the case further. In our opinion, the learned Single Judge was not at all justified in interfering with the award of the learned Arbitrators in relation to awarding of rate of interest either for the pre-reference period or for the post-reference period. The appeal thus succeeds and is allowed, the order of the learned Single Judge in so far as it modifies the award of the learned Arbitrators is set aside. Appeal is disposed off. The respondents are directed to pay costs of this appeal to the appellants. =12= . Parties to act on the copy of this order duly authenticated by the Associate / Private Secretary of the Court. . Certified copy is expedited. ( D.K. DESHMUKH J.) ( A.A. SAYED J.)