Case: Rajendra Construction Company Vs. Maharashtra Housing&amp; Area Dev.Auth

3. The relevant facts leading to these appeals may now be stated in brief; Appellant Rajendra Construction Company (RCC for short) is a partnership firm doing business in construction work. Maharashtra Housing & Area Development Authority (MHADA for short) issued a Tender Notice No. 4/87-88 calling offers from registered contractors for the construction of 444 tenements under the Low Income Group Scheme (LIGs), near Scot Grini, Garkheda, Aurangabad and 192 tenements under Middle Income Group Scheme (MIGs), near Griha Nirman Bhavan, Aurangabad.4. In November, 1987, work orders were issued in favour of RCC for an amount of Rs. 50,38,068/- in respect of the first work and for an amount of Rs. 74,56,972/- in respect of the second work. According to the appellant, the time limit within which the construction was to be completed was eighteen months for the first scheme and twelve months for the second scheme. However, the execution of construction work was delayed on account of variation in the existing and agreed items as also certain extra work as per the instructions of MHADA. Requests were, therefore, made by RCC for extension of time which was granted and within that extended period, the work was completed to the satisfaction of MHADA. MHADA, however, took no steps to prepare final bill on one pretext or the other and no payment was made to RCC. It was the case of RCC that its claim was not properly worked out. Still, however, RCC accepted the payment made by MHADA under protest.5. RCC then issued notice to MHADA on April 17, 1991 demanding additional amount of Rs. 19,01,600 for construction work in the first scheme and Rs. 21,08,100/- for the work in the second scheme. MHADA, however, refused to make payment. RCC filed two appeals before MHADA Board on May 06, 1991 under Clause 30 of the agreement claiming the above amounts with interest at the rate of 18 per cent per annum. On June 14, 1991, RCC requested the Board to decide its claim. On June 29, 1991, RCC issued notice to MHADA under Section 173 of Maharashtra Housing & Area Development Act, 1976 to settle the claim within a period of sixty days. As the claim was not settled, and payment was not made, RCC filed two suits in the Court of Civil Judge, (Senior Division); Aurangabad being Special Civil Suit No. 265 of 1991 for Rs. 19,01,100/- with running interest of 18 per cent per annum from the date of the suit till realization of the amount and Special Civil Suit No. 266 of 1991 for Rs. 21,08,100/- with running interest of 18 per cent per annum for the second scheme. The Civil Judge, (Senior Division), Aurangabad issued summons to MHADA. MHADA filed written statements in the suits. On September 3, 1993, the Court framed issues in Special Civil Suit No. 266 of 1991 and on October 27, 1993 in Special Civil Suit No. 265 of 1991. On January 5, 1995, RCC filed an application (Ex. 38) for appointment of sole arbitrator under Section 21 of Arbitration Act, 1940 for settling of the disputes/claims in the light of Clause 30 of contract giving the names of five officers. A copy was served on defendant MHADA immediately and the court passed the order "Call say other side". On March 10, 1995, MHADA filed application (Ex. 45) thereby giving no objection for appointment of sole arbitrator but suggested three different names. On April 3, 1995, RCC, vide its application (Ex. 47) agreed to the appointment of Mr. S.R. Wadekar as sole arbitrator as suggested by MHADA and to refer the dispute to the said arbitrator. In pursuance of the above agreement, the learned Civil Judge, (Senior Division), Aurangabad passed an order on April 6, 1995 vide ex. 48 and on April 7, 1995 vide Ex. 51. The order Ex. 47 reads as under :ORDER PASSED BELOW EXH. NO.S.R. Wadekar, Ex. Chief Engineer is appointed as Sole Arbitrator who shall settle the terms of the agreement along with the record if any, relevant and necessary. The sole Arbitrator shall also collect the record from the Court and shall report and shall write the award within 60 days from the date of passing of this order, and without any further delay.The Court thenare therefore hereby appointed as Sole Arbitrator in the matter. Accordingly the disputes and claims between the parties are referred to you for Arbitration. You are required to complete the proceedings as per provisions of Arbitration Act, 1940 and file your award in this Court within the time fixed by this Court. You may fix up terms of fees and expenses with the parties after entering on this reference. (Rs.2,000/- deposited in Court). Please notify the parties at the earliest. Please acknowledge receipt of this order.On the same day, the Court communicated the decision to sole Arbitrator Mr. Wadekar. Mr. Wadekar sent his acceptance vide letter dated April 10, 1995. The Arbitrator then conducted the proceedings, called for record of the Civil Court and examined it. He also visited the site of construction. After going through all the documents, terms and conditions of tender agreement and other relevant records and after hearing the parties, he passed awards on August 17, 1995. He considered the claims under different heads and awarded an amount of Rs. 14,36,708.00 in respect of Scheme No.1 and an amount of Rs.11,80,935.00 in respect of Scheme No.2. The sole Arbitrator also awarded interest at the rate of 18 per cent per annum on the principal amount of the award from the date of the suit till the date of the awards as also from the date of the awards to the date of payment or the date of decrees, whichever is earlier.8. The Arbitrator issued notice to both the parties intimating them about passing of the awards. The Arbitrator also filed awards in the court. On 16th September, 1995, sealed envelope of award was opened in the court. MHADA raised objection against the awards under Section 30 of the Act, vide objections (Ex. 62 and 66) on October 13, 1995. RCC filed its objections (Ex. 63 and 67) on October 16, 1995 to the applications of MHADA. On the same day, RCC filed applications (Exs. 64 and 68) under Section 17 of the Act for making awards of the Arbitrator as rule of the court by pronouncing judgment. By final order dated April 25, 1996, the Civil Judge, (Senior Division), Aurangabad made Arbitrators awards as "rule of court". He also passed an order to draw up decrees accordingly.9. Against the above judgment of the Civil Court, MHADA filed two First Appeals. The Division Bench of the High Court, by the judgment impugned in the present appeals, allowed those appeals, set aside the order passed by the trial court and remitted arbitration proceedings to the sole arbitrator to pass fresh awards. According to the High Court, the awards passed by the sole Arbitrator were not speaking awards and, therefore, could not be said to be in accordance with law. The High Court concluded that the awards were vitiated under Section 30 of the Act.10. The Court observedare, therefore, of the view that the award of the sole arbitrator which has been made rule of the court by the trial court is unsustainable on the ground that it suffers from errors apparent on the face of the record and the sole arbitrator misdirected the proceedings, in as much as, he was required to adjudicate upon the issues framed by the trial court and give reasons thereof in respect of the claims allowed by him. In addition, the directions to pay interest at 18% per annum for the post- pendente lite period are not supported by any reasons, howsoever short they may be, and therefore, the said directions are also unsustainable. We, therefore, deem it appropriate to remit the arbitration proceedings to the sole arbitrator for fresh award and thereupon the trial court would examine the same for its decision under Section 21 of the Act.11. In the result, the appeals are allowed and the decrees passed by the trial court in Special Civil Suit Nos. 265 and 266 of 1991 are hereby quashed and set aside. The arbitration proceedings initiated pursuant to the order passed by the trial court are restored to the sole arbitrator Shri S.R. Wadekar. He shall pass a fresh award within a period of 60 days from the date of appearance of the parties before him. The parties shall appear before the sole arbitrator on1 16.6.2003. No order as to costs."

Court's reasoning:
21. This Court noted that a consistent view has been taken by all courts that an award was not liable to be set aside merely because reasons were not given except where the arbitration agreement or the deed of submission or an order made by the court under Sections 20, 21 or 34 of the Act or the statute governing the arbitration required the Arbitrator or Umpire to give reasons for the award.22. In our opinion, the ratio in Chokhamal applies to the case on hand. The law laid down in that case has been reiterated by this Court in many cases.24. The present awards are not under the new Act but under the old Act. It is, therefore, obvious that they could not have been set aside by the High Court on the ground that they were not supported by reasons and were not speaking awards.As already observed by us, all these principles apply to Administrative Law and in the public law field. They would not get attracted in the field of private law. The court, in such matters, does not exercise appellate jurisdiction and cannot substitute its decision for the decision of the Arbitrator. Those principles, therefore, have no place when one is considering the legality of an award made by an Arbitrator with the consent of parties, which is otherwise legal and valid.For the foregoing reasons, the awards passed by the sole Arbitrator cannot be held illegal or unlawful. In making such awards the rule of the court, the Court of Civil Judge, (Senior Division), Aurangabad had not committed any illegality which vitiated the awards and the High Court could not have set aside them.33. The question then remains as to interest. The appellant had claimed interest in the suits. The Arbitrator awarded interest at the rate of 18 per cent per annum on the principal amount from the date of the suits to the date of awards and also from the date of the awards to the date of payment or up to the date of decrees, whichever is earlier. This Court has dealt with the power of Arbitrator to award interest for (i) pre-reference period [Executive Engineer, Dhenkanal Minor Irrigation Division & Others v. N.C. Budhraj (Deceased) by LRs & Others (2001) 2 SCC 721 ]; (ii) pendente lite [Secretary, Irrigation Department, Government of Orissa & Others v. G.C. Roy (1992) 1 SCC 508 ]; and (iii) post-award period [Hindustan Construction Co. Ltd. v. State of Jammu & Kashmir, (1992) 4 SCC 217 ]. In Bhagwati Oxygen Ltd. v. Hindustan Copper Ltd., AIR 2005 SC 2071 : JT (2005) 4 SC 73 , one of us (C.K. Thakker, J.) had an occasion to consider the relevant decisions on the power of Arbitrator to award interest at all the three stages. It was held that the arbitrator had power to award interest.