Case: JAIPRAKASH ASSOCIATES LTD. (JAL)THROUGH ITS DIRECTOR Vs. TEHRI HYDRO DEVELOPMENT CORPORATION INDIA LTD. (THDC )INDIA LTD.THROUGH ITS DIRECTOR

The objections were filed before the High Court. A Single Judge of the High Court of Delhi passed the order dated November 15, 2011 quashing the award limited to the interest that was awarded by the Arbitrators. The appellant preferred intra-court appeal which has been dismissed by the Division Bench of the High Court, thereby upholding the judgment of the Single Judge. The effect is that the High Court has held that no interest is payable as Clauses 50 and 51 of GCC bar the arbitrators from granting interest4. It may be pointed out that on interpreting Clauses 50 and 51 of the General Conditions of Contract, the view taken by the High Court is that these clauses categorically provide that no interest would be payable to the contractor on the money due to him. The said Clauses read as under:Interest on money due to the contractorNo omission on the part of the Engineer in charge to pay the amount due upon measurement or otherwise shall vitiate or make void the contract, nor shall the contractor be entitled to interest upon any guarantee or payments in arrears nor upon any balance which may on the final settlement of his account, be due to himNo claim for delayed payment due to dispute etcNo claim for interest or damage will be entertained or be payable by the corporation in respect of any amount or balance which may be lying with the corporation owing to nay dispute, different or misunderstanding between the parties or in respect of any delay or omission on the part of he Engineer in charge in making intermediate or final payments on in any other respect whatsoeverThe Award makes the following observations in this behalf:As seen from above, Clause 50.0 and 51.0 of the Contract deny interest on the Claimants dues by the Respondent due to dispute etc. However as per above quoted judgment of Honble Supreme Court of India, the claim for interest can be considered by the Arbitration TribunalNotwithstanding the same, the learned Arbitrators granted the interest by relying upon the law declared by this Court in Board of Trustees for the Port of Calcutta v. Engineers-De-Space- Age (1996) 1 SCC 516     and following observations from the said judgment were quoted:………..In other words, according to their Lordships the arbitrator is expected to act and make his award in accordance with general law of the land but subject to an agreement, provided, the agreement is valid and legal. Lastly, it was pointed out that interest pendent like is not a matter of substantive law, interest for the period anterior to reference. Their Lordship concluded that when the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute is referred to the arbitrator, he will have the power to award interest pedente lite for the simple reason that in such a case it is presumed that interest was implied term of the agreement between the parties; it is then a matter of exercise of discretion by the arbitrator. The position of law, has, therefore, been clearly stated in the aforesaid decision of the Constitution Bench. …………………...Strictly construed the term of the contract merely prohibits the Commissioner from paying interest to the contractor for delayed payment but once the matter goes to the arbitration the discretion of the Arbitrator is not, in any manner, stifled by this term of the contract and the Arbitrator would be entitled to consider the question of grant of interest pendent lite and award interest if he finds the claim to be justified. We are, therefore, of the opinion that under the clause of the contract the Arbitrator was in no manner prohibited from awarding interest pendente lite5. As stated above, the High Court, on the other hand, has taken the view that if interest is prohibited as per the expressed terms of the contract between the parties, the Arbitrator does not get jurisdiction to award interest. Further, insofar as interpretation to the aforesaid clauses is concerned, the High Court noticed thatthese Clauses were on the same terms as Clause 1.2.14 and 1.2.15 of the contract which were subject matter of construction in Tehri Hydro Development Corporation (THDC) Limited & Anr. v. Jai Prakash Associates Limited. In the said judgment, this Court has categorically held that those clauses to mean that no interest was payable on claim for delayed payment due to the contractor. Therefore, same construction needed to be given to Clauses 50 and 51 of GCC in the instant case.

Court's reasoning:
16. In this whole conspectus and keeping in mind, in particular, that present case is regulated by 1996 Act, we have to decide the issue at hand. At this stage itself, it may be mentioned that in case clauses 50 and 51 of GCC put a bar on the arbitral tribunal to award interest, the arbitral tribunal did not have any jurisdiction to do so. As pointed out above, right from the stage of arbitration proceedings till the High Court, these clauses are interpreted to hold that they put such a bar on the arbitral tribunal. Even the majority award of the arbitral tribunal recognised this. Notwithstanding the same, it awarded the interest by relying upon Board of Trustees for the Port of Calcutta case. The High Court, both Single Bench as well as Division Bench, rightly noted that the aforesaid judgment was under the 1940 Act and the legal position in this behalf have taken a paradigm shift which position is clarified in Sayeed Ahmed and Company case. This rationale given by the High Court is in tune with the legal position which stands crystallised by catena of judgments as noted above17. Another reason given by the High Court is equally convincing. The Clauses 50 and 51 of GCC are pari materia with Clauses 1.2.14 and 1.2.15 of GCC in THDC case. Those clauses have been interpreted by holding that no interest is payable on claim for delayed payment due to the contractor. Same construction adopted in respect of these clauses, which, in fact, is a case between the same parties, is without any blemish18. In this backdrop, the only argument of the appellant that remains to be considered is as to whether such a construction is contrary to the judgment in Harish Chandra case20. It is also pertinent to note that the judgment in Sayeed Ahmed and Company distinguishing the restrictive wording in Harish Chandra has been consistently followed by this Court in number of cases thereafter. In this scenario, when we find that Harish Chandra case which is of the vintage of 1940 Act and is distinguished in Sayeed Ahmed and Company coupled with the fact that the ratio of Sayeed Ahmed and Company has been consistently followed, there is no reason to deviate from the construction to Clauses 50 and 51 of the GCC given by the arbitral tribunal in the first instance as well as the High Court. Above all, these clauses is pari materia with with Clauses 1.2.14 and 1.2.15 of GCC in THDC case which was a judgment between the same parties.