THE HON’BLE SRI JUSTICE A. GOPAL REDDY AND THE HON’BLE SRI JUSTICE B. CHANDRA KUMAR Civil Miscellaneous Appeal No. 3995 of 2003 and Civil Revision Petition No.5857 of 2003 Date: 18.03.2010 C.M.A. No. 3995 of 2003 Between: The Deputy Executive Engineer, Marketing Sub-Division, Subhash Nagar, Nizamabad. .. Appellant. And G. Radha Krishna Murthy and another .. Respondents. THE HON’BLE SRI JUSTICE A. GOPAL REDDY AND THE HON’BLE SRI JUSTICE B. CHANDRA KUMAR Civil Miscellaneous Appeal No. 3995 of 2003 and Civil Revision Petition No.5857 of 2003 Common Judgment: (per Hon’ble Sri Justice A. Gopal Reddy) Both the C.M.A and C.R.P arise out of the common order dated 04.09.2002 passed by the learned Senior Civil Judge, Nizamabad, in O.P. Nos.40 of 1998 and 39 of 1998, filed by the appellant and the respondent herein for setting aside the award of the sole arbitrator dated 30.06.1998 and for making the award dated 30.06.1998 as rule of the Court respectively, whereby the learned Senior Civil Judge, while dismissing O.P. No.40 of 1998, allowed O.P. No.39 of 1998 making the award dated 30.06.1998 passed by the sole arbitrator as rule of the Court. The respondent-Contractor entered into an agreement on 11.04.1986 for construction of a compound wall around the Marketing Yard at Armoor, and the value of the contract was at Rs.2,97,011.62 ps. The work has to be completed within four months from the date of marking out given by the Department. As certain disputes arose between the parties, the contractor filed O.P. No.45 of 1991 for appointment of an arbitrator. The said O.P was allowed on 27.07.1996 appointing a retired District Judge as an arbitrator, and on his death, a substitute Sri K. Yegna Narayana, Chief Engineer, R & B (Retired) was appointed as an arbitrator, before whom the respondent-contractor filed claim statement consisting of five claims, to which the Department filed a counter and rejoinder by the respondent-contractor. The arbitrator passed an award on 30.06.1998 allowing three claims, namely (1) Rs.21,320/- towards loss due to payment of wages during the idle period from 12.05.1986 to 28.03.1987 as against the claim of Rs.1,63,280/- claimed by the contractor, (2) Rs.44,050/- towards extra expenditure incurred by the contractor due to increased cost of execution for the work done beyond the agreement period and (3) Rs.13,500/- towards loss of profit over the value of work that could not be executed as against the claim of Rs.16,300/- claimed by the contractor, and rejected claim Nos.4 and 5. In all the arbitrator awarded a sum of Rs.78,872/- under claim Nos.1 to 3 with interest at 18% p.a., on the awarded amount from 18.02.1991 to 30.06.1998, which comes to Rs.1,04,546/-, and also future interest at 18% p.a., from the date of award i.e., 30.06.1998 till the date of realization. To make the said award as rule of Court, the contractor filed O.P. No.39 of 1998. Whereas the appellant-Department filed O.P. No.40 of 1998, under Section 30 of the Arbitration Act, 1940, for setting aside the award, contending that the appellant is not satisfied with the award passed by the arbitrator in awarding of interest on the claim, hence the same is to be set aside. The learned Senior Civil Judge, after considering the rival claims and since the appellant has not raised any objection with regard to the jurisdiction of the arbitrator in entertaining the claims and awarding the amounts, except opposing awarding of interest right from the date of appointment of the arbitrator till the date of payment, has allowed O.P. No.39 of 1998 making the award as rule of Court, and dismissed O.P. No.40 of 1998. Aggrieved by the same, the present appeal and the revision petition are filed. Learned Government Pleader for Arbitration has fairly contended that no ground has been pleaded in O.P. No.40 of 1998, filed under Section 30 of the Arbitration Act, 1940, about the jurisdiction of the arbitrator in entertaining the claims or prohibitions in entertaining the claims under the agreement nor such objection has been raised before the arbitrator by the Department about the entitlement of the claims by the contractor. Therefore, he contends that the department is only aggrieved by the awarding of interest at 18% p.a., and he placed reliance on a Division Bench judgment of this Court reported in Dhirubai D & Co. Engineers and Contractors v. Nizam Sugar Factory Ltd[1], and seeks for reduction of interest. On the other hand, learned counsel for the respondent- contractor supported the awarding of interest contending that the contractor was deprived of utilizing money due and likely profit for the balance of work. The arbitrator, after considering the respective claims, was of the view that the department failed to obtain permission from the Grampanchayat, which caused delay in completion of the construction of the compound wall and the contractor was forced to prolong the work beyond the period specified for completion and awarded wages for the period of such prolongation, expenditure incurred due to increased cost of execution for the work done beyond the agreement period and loss of profit over the value of work that could not be executed, but rejected the claims of the contractor towards overhead expenditure incurred in executing the work beyond the agreed period and towards loss sustained due to delay in release of deposit. Taking into consideration of the claims, we are of the view that awarding of interest at 18% p.a., by the arbitrator is excessive. In view of the same, while confirming the award of the arbitrator, we reduce the rate of interest from 18% p.a., to 9% p.a., on the amount awarded by the arbitrator from the date of award till the date of realization. Accordingly, the CMA and the Revision Petition are allowed in part to the extent as indicated above. No costs. ________________ A. GOPAL REDDY, J. ___________________ B. CHANDRA KUMAR, J. Date: 18.03.2010 Nsr [1] 2010(1) ALD 675 (DB)