Case: P. Radhakrishna Murthy Vs. M/s. N.B.C.C. Ltd

they think fit, so long as they are not opposed to law. (The proviso to Section 41 and Section 3 of Arbitration Act illustrate this point). All the same, the agreement must be in conformity with law. The Arbitrator must also act and make his award in accordance with the general law of the land and the agreement. (iv) Over the years, the English and Indian courts have acted on the assumption that where the agreement does not prohibit and a party to the reference makes a claim for interest, the Arbitrator must have the power to award interest pendente lite. Thawardas has not been followed in the later decisions of this Court. It has been explained and distinguished on the basis that in that case there was no claim for interest but only a claim for unliquidated damages. It has been said repeatedly that observations in the said judgment were not intended to lay down any such absolute or universal rule as they appear to, on first impression. Until Jena case almost all the courts in the country had upheld the power of the Arbitrator to award interest pendente lite. Continuity and certainty is a highly desirable feature of law. (v) Interest pendente lite is not a matter of substantive law, like interest for the period anterior to reference (pre-reference period). For doing complete justice between the parties, such power has always been inferred. 44. Having regard to the above consideration, we think that the following is the correct principle which should be followed in this behalf: Where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (along with the claim for principal amount or independently) is referred to the Arbitrator, he shall have the power to award interest pendente lite. This is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and therefore when the parties refer all their disputes ? or refer the dispute as to interest as such ? to the Arbitrator, he shall have the power to award interest. This does not mean that in every case the Arbitrator should necessarily award interest pendente lite. It is a matter within his discretion to be exercised in the light of all the facts and circumstances of the case, keeping the ends of justice in view. 46. In view of the above discussion we hold that in two appeals namely Civil Appeal No. 1403 of 1986 and Civil Appeal No. 2586 of 1985 the Arbitrator acted with jurisdiction in awarding pendente lite interest and the High Court rightly upheld the award. In the result both the appeals fail and are, accordingly, dismissed but there will be no order as to costs. Even though we have held that the decision in Jena case does not lay down good law, we would like to direct that our decision shall only be prospective in operation, which means that this decision shall not entitle any party nor shall it empower any court to reopen proceedings which have already become final. In other words, the law declared herein shall apply only to pending proceedings.?20. The High Court has examined the rate of interest at 16.5% on the amount awarded in favour of the Contractor by the civil court and has considered the contention urged on behalf of NBCC that the rate of interest awarded is excessive and also the contention that there is no contract of payment of interest on the same and alternatively contended that the interest rate should not normally exceed 6% per annum. These contentions have been seriously contested by appellant?s counsel contending that the award of interest between 15% to 18% per annum on the basis of bank lending rates should be allowed as NBCC itself has claimed interest at the rate of 18.5% per annum on the amount claimed from the contractor. Keeping the aforesaid aspect in mind and in the absence of contract with regard to rate of interest to be awarded in favour of the contractor and having regard to the facts and circumstances of the case, the High Court has come to the right conclusion and awarded interest at the rate of 12% per annum on the amounts due to the contractor on the basis of the rate of interest paid by the Banks to its customers on long term deposits prevailing in 1988. The same cannot be found fault with by this Court for the reason that the High Court taking relevant aspects into consideration has rightly reduced the rate of interest to 12% per annum from 16.5% per annum after holding that exercise of discretionary power by the Arbitrator under Section 34 of CPC is a discretionary power and the same cannot be interfered with by the High Court.21. In our considered view the reasons recorded by the High Court on the contentious issues while examining the claims allowed by the Arbitrator in the award with reasons which is affirmed by the civil court, wherein certain claims have been rightly disallowed, certain other claims accepted and yet some other claims modified by the High Court by adding certain amounts, are based on sound legal principles and after coming to the conclusion that the findings of the Arbitrator and the court are erroneous and contrary to law. Therefore, the High Court has held that the impugned award passed by the Arbitrator which was made the rule of the court by the civil court is erroneous in law and it amounts to misconduct. Accordingly, the High Court has rightly set aside certain claims of the contractor and affirmed the award and granted extra amount on certain claims. It has also interfered with the damages awarded in favour of NBCC and partly allowed the appeal of the respondent NBCC by allowing certain claims, setting aside certain other claims and also reducing the rate of interest at 12% from 16.5%.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]20. The High Court has examined the rate of interest at 16.5% on the amount awarded in favour of the Contractor by the civil court and has considered the contention urged on behalf of NBCC that the rate of interest awarded is excessive and also the contention that there is no contract of payment of interest on the same and alternatively contended that the interest rate should not normally exceed 6% per annum. These contentions have been seriously contested by appellant?s counsel contending that the award of interest between 15% to 18% per annum on the basis of bank lending rates should be allowed as NBCC itself has claimed interest at the rate of 18.5% per annum on the amount claimed from the contractor. Keeping the aforesaid aspect in mind and in the absence of contract with regard to rate of interest to be awarded in favour of the contractor and having regard to the facts and circumstances of the case, the High Court has come to the right conclusion and awarded interest at the rate of 12% per annum on the amounts due to the contractor on the basis of the rate of interest paid by the Banks to its customers on long term deposits prevailing in 1988. The same cannot be found fault with by this Court for the reason that the High Court taking relevant aspects into consideration has rightly reduced the rate of interest to 12% per annum from 16.5% per annum after holding that exercise of discretionary power by the Arbitrator under Section 34 of CPC is a discretionary power and the same cannot be interfered with by the High Court.21. In our considered view the reasons recorded by the High Court on the contentious issues while examining the claims allowed by the Arbitrator in the award with reasons which is affirmed by the civil court, wherein certain claims have been rightly disallowed, certain other claims accepted and yet some other claims modified by the High Court by adding certain amounts, are based on sound legal principles and after coming to the conclusion that the findings of the Arbitrator and the court are erroneous and contrary to law. Therefore, the High Court has held that the impugned award passed by the Arbitrator which was made the rule of the court by the civil court is erroneous in law and it amounts to misconduct. Accordingly, the High Court has rightly set aside certain claims of the contractor and affirmed the award and granted extra amount on certain claims. It has also interfered with the damages awarded in favour of NBCC and partly allowed the appeal of the respondent NBCC by allowing certain claims, setting aside certain other claims and also reducing the rate of interest at 12% from 16.5%.