Union Of India vs Saraswat Trading Agency & Ors

At the time of the final settlement of the respondent's claims the Railway authorities offered to it a sum of Rs.6,848=00 as additional payment for the period January 1993 to August 1994. The respondent 8 naturally declined to accept the paltry amount offered by the authorities and requested for a proper consideration of its claim as earlier promised. Finally, the Railway authorities appointed a high level committee to consider the respondent's claim for enhanced payment for the period January 1, 1993 to August 31, 1994. The committee fixed the respondent's claim at Rs.3, 61,058=00 but it was not acceptable to the respondent.

A departmental arbitrator was then appointed in order to resolve the disputes and differences arising between the parties. The departmental arbitrator gave his award on June 4, 1998. Not being satisfied with the award the respondent challenged it by filing an application under section 34 of the Act before the High Court. The High Court by its order dated February 12, 1999 upheld the award on items 1 & 2 but set it aside in respect of items 3, 4 & 5 and appointed a certain advocate, a member of the bar to decide afresh in regard to the respondent's claim under those three items. On an application made under section 11, the Acting Chief Justice of the High Court, by order dated July 1, 1999, substituted another advocate as arbitrator in place of the one appointed by the Court on the application under section 34 of the Act.

The arbitrator gave to the respondent pre-reference, pendente lite and post-award interest on both its claims under items 3 & 4 as would be evident from the following passages from the award:

It is thus to be seen that the arbitrator allowed interest on the amounts determined under Items Nos.3 and 4 both for the pre-reference period and pendente lite at the rate of 16% per annum. He further allowed interest on the consolidated amount for the post-award period at the rate of 18% per annum till the date of payment.

In the case in hand clause 31 of the agreement is materially different. It bars payment of any interest or damage to the contractor for any reason whatsoever. We are, therefore, clearly of the view that no pre-reference or pendente lite interest was payable to the respondent on the amount under Item No.3 and the arbitrator's award allowing pre-reference and pendente lite interest on that amount was plainly in breach of the express term of the agreement. The order of the High Court insofar as pre-reference and 2 1 pendente lite interest on the amount under Item No.3 is concerned is, therefore, unsustainable.

The position with regard to the claim under Item No.4 is quite different. That relates to the period after the termination of the agreement and hence, the bar of clause 31 would not apply to it in the same way as it would apply to Item No.3. We, therefore, find no infirmity in grant of pre- reference and pendente lite interest on the amount under Item No.4.

In light of the discussions made above, the respondent shall be entitled to interest only on the sum of Rs.10, 79,456=80, the amount determined under Item No.4, at the rate of 16% per annum for the period November 1, 1994 to September 9, 2000. The final amount under the award shall be accordingly worked out. The consolidated amount of the award after being re-calculated shall carry, as provided in the award, interest at the rate of 18% from the date of the award till the date of payment. In working out the amount of interest for the post-award period, the period(s) for which the operation of the award was stayed by the court would be excluded.

In the result the appeal is allowed to the limited extent indicated above. There shall be no order as to costs.

....................................J. 2 2 [Tarun Chatterjee] ...................................J. [Aftab Alam] New Delhi, July 16, 2009.