(1) CMA-113/2009 (State of Rajasthan Vs. M/s Gyan Chand Mehta & Anr.) (2) cma -615/2008 (M/s Gyanchand Mehta Vs. State of Raj. & Ors.) Judgment dt.13.7.2009 1/7 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR. JUDGMENT 1. State of Rajasthan Vs. M/s Gyan Chand Mehta & Anr. S.B. CIVIL MISC. APPEAL NO.113/2009 2. (M/s Gyanchand Mehta Vs. State of Rajasthan & Ors.) S.B. CIVIL MISC. APPEAL NO.615/2008 Date of order : 13th July, 2009 PRESENT HON'BLE DR. JUSTICE VINEET KOTHARI Mr. Mukul Singhvi for the State of Rajasthan. Ms. Rekha Borana) for the M/s Gyanchand Mehta. Mr. M.S. Panwar ) ------- BY THE COURT:- 1. These two cross appeals, one filed by State and another by the Contractor are directed against the order of the learned Additional District Judge, Raisingh Nagar, District Sri Ganganagar dated 9.8.2007 whereby the learned court below made the arbitration award dated 30.6.2001 as rule of Court awarding a sum of Rs.4,77,823.18 against the PWD department of the State in favour of the Contractor. 2. The State has preferred this appeal challenging the said Rule of Court on the ground that the learned Arbitrator had awarded the transportation cost in favour of the contractor beyond the rates (1) CMA-113/2009 (State of Rajasthan Vs. M/s Gyan Chand Mehta & Anr.) (2) cma -615/2008 (M/s Gyanchand Mehta Vs. State of Raj. & Ors.) Judgment dt.13.7.2009 2/7 prescribed in “G” Schedule of the Contract and, therefore, the award deserves to be set aside. 3. On the other hand, the appeal filed by the Contractor is to the extent that the learned court below could not reduce the rate of interest of 18% awarded by the learned Arbitrator to 6% while deciding the application under Section 34 of the Arbitration Act, 1996. 4. Ms. Rekha Borana, learned counsel for the respondent- contractor has also raised an objection that one the hand the learned court below held that the proceedings were governed by the new Arbitration and Conciliation Act, 1996 under which the award was not even required to be made a rule of Court whereas the Arbitration proceedings in question having been initiated prior to the commencement of 1996 Act were governed by the earlier Act of 1940 and since the State has admittedly filed the application under the new enactment Section 34 thereof, the same was not maintainable and, therefore, the application deserves to be rejected. She has relied upon the decision of the Hon'ble Supreme Court in N.S. Nayak and Sons Vs. State of Goa 2003(3) Arbv.LR 109 (SC) and Milkfood Ltd. Vs. GMC Ice Cream (P) Ltd. - 2004(1) Arb.LR 613 (SC). 4. The learned counsel for the respondent Contractor has (1) CMA-113/2009 (State of Rajasthan Vs. M/s Gyan Chand Mehta & Anr.) (2) cma -615/2008 (M/s Gyanchand Mehta Vs. State of Raj. & Ors.) Judgment dt.13.7.2009 3/7 also relied upon a decision of this Court in case of M/s Choudhary Construction Company Vs. State of Rajasthan (S.B. Civil Revision Petition No.127/2003) reported in 2009(1)DNJ 543. 6. The learned counsel for the State, Mr. Mukul Singhvi however urged that since the award was unsustainable as the learned Arbitrator had given the rates for transportation in favour of the contract beyond “G” Schedule, the same was unsustainable and deserves to be set aside. He also justified the reduction of rate of interest by the learned ADJ in the impugned judgment. 7. Having heard learned counsels and in view of the judgments cited at the Bar, this Court does not find any force in the appeal filed by the State. Since arbitration proceedings were initiated in 1989 itself, therefore, the proceedings were governed by the earlier Act of 1940. As per the aforesaid two Supreme Court decisions cited at the Bar, there is considerable force in the contention raised by the learned counsel for the respondents that the State could not file the application under Section 34 of the new Arbitration Act, 1996 for setting aside of the impugned award. Moreover there is apparent contradiction in the impugned judgment dated 9.8.2007. On the one hand the learned court below held that the proceedings are governed by the 1996 Act under which admittedly there is no need to make the arbitration award, a rule of Court ,as there is no such provision in the (1) CMA-113/2009 (State of Rajasthan Vs. M/s Gyan Chand Mehta & Anr.) (2) cma -615/2008 (M/s Gyanchand Mehta Vs. State of Raj. & Ors.) Judgment dt.13.7.2009 4/7 new enactment of 1996 and the Arbitration Award itself is an enforceable decree, and on the other hand still while making the arbitration award in question a rule of Court thereby the learned court below resorted to the provisions of old Arbitration Act, 1940. The learned court below also reduced the rate of interest from 18% awarded by the learned Arbitrator to 6% without any valid reason. This Court in M/s Choudhary Construction Company's case (Supra) after discussing the decision of the Hon'ble Supreme Court in case of B.L. Gupta Construction Company (P) Ltd. Vs. Bharat Cooperative Group Housing Society Ltd. - 2003 (3) Arb.LR 570 (SC) has held that learned District Judge while deciding the application for making arbitration award a rule of Court cannot interfere with the rate of interest awarded by the learned Arbitrator. The relevant portion of the aforesaid judgment is quoted below:- “5. The Hon'ble Supreme Court in B.L. Gupta Construction Company's case (Supra) held that the arbitrator had exercised his jurisdiction under Section 34 of the C.P.C. by grant of pendente lite interest at the rate of 18% per annum and the High Court could not have interfered with the said discretionary order where no reason was assigned for the same. The Hon'ble Supreme Court, however, reduced the rate for pre-reference stage and pre-arbitration stage to 10% per annum payable to the party. In Paradip Port Trust's case where High Court (1) CMA-113/2009 (State of Rajasthan Vs. M/s Gyan Chand Mehta & Anr.) (2) cma -615/2008 (M/s Gyanchand Mehta Vs. State of Raj. & Ors.) Judgment dt.13.7.2009 5/7 modifying the award, denied the interest on the ground that there was no claim for interest pendente lite, the Hon'ble Supreme Court modified that part of the order of the High Court and awarded 18% interest per annum pendente lite and future interest or post-award interest at the rate of 12% per annum from the date of decretal payment. Similarly this Court in Alim & Company's case (supra) modified the impugned order of the learned District Court and modified the arbitration award by awarding interest at the rate of 18% per annum and awarding the arbitrator award also made rule of Court. 6. The judgment relied upon by the learned counsel for the respondents of course indicates that the Hon'ble Supreme Court reduced the rate of interest from 18% per annum to 9% per annum by observing that “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 further interest to be reduced to 9%”, however, with great respects, this reduction of interest by the Hon'ble Supreme Court in the facts of the peculiar case without laying down it is a matter of law that the learned District Court or for that matter the High court in revisional jurisdiction to reduce the rate of (1) CMA-113/2009 (State of Rajasthan Vs. M/s Gyan Chand Mehta & Anr.) (2) cma -615/2008 (M/s Gyanchand Mehta Vs. State of Raj. & Ors.) Judgment dt.13.7.2009 6/7 interest as awarded by the learned Arbitrator in the arbitration award, cannot be applied in the facts of the present case. On the other hand the judgments relied upon by the learned counsel for the petitioner clearly indicate that the rate of interest awarded by the arbitration in his discretion as per Section 34 of the C.P.C. cannot be reduced without assigning cogent reasons for that. In the present order impugned in the revision petition before this Court, no such reason is found by this Court and simply in the operative part of the impugned order the same has been directed to be paid with pendent lite interest at the rate of 9% per annum.” 8. The contention of the learned counsel for the State that the Arbitrator had gone beyond the terms of the contract and, therefore, the award deserves to be set aside is also of no avail because unless the conditions of Section 30 of 1940 Act for setting aside of the award were satisfied, such award could not be interfered with by the learned court below in the present proceedings. The application filed before the learned court below apparently under Section 34 of the new enactment of 1996 was not maintainable. Be that as it may merely because the learned Arbitrator has awarded particular rates for transportation of the goods in question that per se does not amount to misconduct of arbitral proceedings by the learned Arbitrator. Therefore, on this contention, the award cannot be set (1) CMA-113/2009 (State of Rajasthan Vs. M/s Gyan Chand Mehta & Anr.) (2) cma -615/2008 (M/s Gyanchand Mehta Vs. State of Raj. & Ors.) Judgment dt.13.7.2009 7/7 aside. Therefore, this Court does not find any force in the appeal filed by the State. 9. Consequently, the appeal No.113/2009 is dismissed whereas the cross appeal No.615/2008 filed by the contractor is allowed to the extent that the rate of interest could not be reduced from 18% to 6% by the learned court below. The said impugned order, therefore, would stand modified accordingly. No order as to costs. [ DR. VINEET KOTHARI ], J. item No.68 & 69 babulal/