STATE OF ORISSA

SUDHAKAR DAS (DEAD) BY LRS.

FEBRUARY 23, 2000

[DR. A.S. ANAND CJ., S. RAJENDRA BABU AND

R.C. LAHOTI, JJ.)

Arbitration-Award-Subordinate Judge made award rule of Court- Appeal dismissed by High Court-Appeal before Supreme Court-Validity of C decree passed based on award.

Arbitration-Agreement-Absence of escalation clause-In such a case arbitrator cannot sume any jurisdiction to award any amount towards escalatiort-Held decree insofar as it awards escalatioll charges cannot be D sustained.

Arbitrator-Power to award imerest pendente lite-Decree to the extent awards pendente lite interest in favour of contractor held sustainable.

Secretary, Irrigation Department, Government of Orissa&: Ors. v. G. C.

E Roy, (1992] 1 SCC 508; Executive Engineer (Irrigation) Balimela &: Ors. v.

Abhaduta lena & Ors., [1988] 1 SCC 418, referred to .

Arbitrator--Power to award interest for pre-reference period-Arbitration proceedings pending for one and a half decade-In view of this contractor allowed to execute decree relating to award of pre-reference interest on furnishing a bank guarantee-Contractor should also give an undenaking that if issue is decided against /rim State will be entitled to encash the bank guarantee.

CML APPELLATE JURISDICI'ION: Civil Appeal No. 2256 of

G 1984.

From the Judgment and Order dated 9.U .83 of the Orissa High Court in Misc. A. No. 209 of 1982.

Raj Kumar Mehta, Ms. Mana Chakraborty and Ms. M. Sarda for the H Appellant. 1136

STATEv. SUDHAKARDAS 1137

J .K. Das for the Respondent.

The following Order of the Court was delivered :

This appeal by special leave arises out of arbitration proceedings.

The High Court of Orissa dismissed an appeal filed by the appellant against the order of Subordinate Judge, Bhubancshwar making an award B madt: by the Arbitrator a rule of th!! Court. The three main issues with which we are concerned in this appeal are :

al. Whether the Arbitrator could have granted an award for escalation in favour of the contractor?

2. Whether the Arbitrator could have awarded pendente lite interest in favour of the contractor? and

3. Whether the Arbitrator could have granted interest for the pn:-reference period'?"

It is not disputed that the arbitration agreement contained no escalation clause. In the absence of any escalation clause, an Arbitrator cannot assume any jurisdiction to award any amount towards escalation. That part

of the Award which grants escalation charges is clearly not sustainable and suffers from a patent error. The decree, insofar as the award of escalation E charges is concerned, cannot, therefore, be sustained.

It is conceded by Ms. Mana Chakraborty, learned counsel for the State that the issue relating to the power of the Arbitrator to grant interest pendente lite where the agreement between the parties, as in the present case, did not prohibit grant of interest and the dispute referred to the F Arbitrator included the claim of interest, is no longer res-integra and stands settled in favour of the claimant and against the State in Secretary, Irrigation Department, Government of Orissa & Others v. G. C. Roy, (1992] 1 SCC 508, overruling the view to the contrary as expressed in Executive Engineer (Inigation) Balimela & Others v.Abhaduta lena & Others, [1998)1 SCC 418. G The decree to the extent, it awards pendente lite interest in favour of the respondents, therefore, is sustained and the challenge to it fails.

So far as the award of interest for pre-ccference period i~ concerned, it appears appropriate to us, keeping in view the fact that the proceedings in this case have remained pending for almost one and a half H

SVPREME CO CRT REPORTS

(2000]1 S.C.R.

A decade and the arbitration started as t:arly as in 1975, to direct that tht:

respondent shall excute the decree relating to the award of pre-reference intert:st only on furnishing a bank guarant<.:e to thc cxtent of that amount

togtb.er with an undertaking that in tbe event the Constitution Bench, to which this issue has been n.:ferred to in Executive Ettgineer, Dftankanal

:\linur Irrigation Division, Olissa v. N.C. Budltiruj (Dead) by L.Rs. (Civil Appeal !'lo. 3586 of lYM), decides against the decrc.:chulder-respoudents, the State shall be t.:ntit:cd to t:ncash tbt: bank guarantet!.. The rc:.pondt:nts shall keep the bank guarantee aliv<.: during the pendency of the matter before the Constitution Bench and on furnishing the bank guarantee and tbt: undertaking the respondents can execute the decree in that behalf.

Thus, the appeal is dispo!.t:d of in above terms. The impugned judgmt:nt and dt:crl..t: shall stand modified accordingly. No costs.

T.NA.

Appeal disposed of.