State of Orissa Vs. Sri S.C. Roy (dead) by LRs.
EmailAppeal: Civil Appeal No. 3034 of 1981
Petitioner: State of Orissa
Respondent: Sri S.C. Roy (dead) by LRs.
Apeal: Civil Appeal No. 3034 of 1981
Judges: DR. A.S. ANAND, CJI, R.C. LAHOTI & SHIVARAJ V. PATIL JJ.
Date of Judgment: Jun 02, 2001
Head Note:
ARBITRATION
Arbitration Act, 1940
a) Sections 30, 33 – Objections – Award granting escalation costs in labour and material – No clause in agreement – Permissibility. Held that in view of judgment in Secretary, Irrigation v. G.C. Roy (JT 1991 (6) SC 349), escalation cost could not be awarded in absence of such a clause in the agreement. Award to that extent set aside. (Para 4)
b) Sections 30, 33 – Interest – Pre-reference period – Award allowing 12% P.A. interest for pre-reference period – Permissibility – Jurisdiction of Arbitrator – No clause prohibiting such interest. Held that Arbitrator has jurisdiction to grant interest for pre-reference period on amount found due. (Para 5)
Cases Reffered:
1. Executive Engineer, Dhenkanal Minor Irrigation Division Orissa etc. v. N.C. Budhiraj (Dead) by LRs. (JT 2001 (1) SC 486) (Para 5)
2. Secretary, Irrigation Department, Government of Orissa & Ors. v. G.C. Roy (JT 1991 (6) SC 349) (Para 4)
2. Secretary, Irrigation Department, Government of Orissa & Ors. v. G.C. Roy (JT 1991 (6) SC 349) (Para 4)
JUDGEMENT:
ORDER
1. This appeal by special leave puts in issue an order of the High Court of Orissa, dated 16.1.1981. By the impugned order, High Court dismissed an appeal filed by the appellant in limine against the order of the Subordinate Judge, Sambalpur, dated 6.10.1980, making an Award of the Arbitrator a Rule of the Court after over-ruling the objections raised by the appellant herein.
2. On certain disputes having arisen between the parties, the matter was referred to the Arbitrator on 2.7.1979. The Arbitrator made his Award on 21st June, 1980 in favour of the predecessor-in-interest of the respondent, though the claim amount was re-duced.
3. Learned Counsel for the appellant has, in this appeal, ques-tioned only two items of the Award, namely, (1) enhancement of the cost of labour and material for which the respondent has been awarded a sum of Rs. 1,77,200/- and (2) the direction to pay interest for the period 01.03.1976 till date of the Award @ 12% P.A. (being the pre-reference period).
4. Both the issues are no longer res-integra. Insofar as the Award of claim of escalation is concerned, it stands settled by this Court in Secretary, Irrigation Department, Government of Orissa & Ors. v. G.C. Roy (JT 1991 (6) SC 349) wherein it has been held that where arbitration agreement contains no escalation clause, the Arbitrator does not have any jurisdiction to Award any amount towards escalation. In the instant case, we find that there is no escalation clause in the arbitration agreement and a specific objection was raised by the appellant before the Arbi-trator in that behalf. That part of the Award, therefore, which grants escalation charges is not sustainable, as it suffers from a patent error. The decree insofar as the Award of escalation charges is concerned, therefore, cannot be sustained and is hereby set aside.
5. Insofar as the Award of interest for the pre-reference period is concerned, a Constitution Bench of this Court in Executive Engineer, Dhenkanal Minor Irrigation Division Orissa etc. v. N.C. Budhiraj (Dead) by LRs. (JT 2001 (1) SC 486), speaking through the majority, has held that the Arbitrator has jurisdiction to Award interest on the sums found due and payable for pre-reference period also, in the absence of any specific stipulation or prohibition in the contract to claim or grant any such inter-est. In this case it is not disputed that there is no such prohi-bition, either specific or implied in the contract or agreement between the parties. Consequently, the Award insofar as it allows interest for the pre-reference period is upheld and the appeal against that part of the Award fails.
6. As a result, the appeal is disposed of in above terms. The impugned judgment and decree shall stand modified accordingly. No costs.
1. This appeal by special leave puts in issue an order of the High Court of Orissa, dated 16.1.1981. By the impugned order, High Court dismissed an appeal filed by the appellant in limine against the order of the Subordinate Judge, Sambalpur, dated 6.10.1980, making an Award of the Arbitrator a Rule of the Court after over-ruling the objections raised by the appellant herein.
2. On certain disputes having arisen between the parties, the matter was referred to the Arbitrator on 2.7.1979. The Arbitrator made his Award on 21st June, 1980 in favour of the predecessor-in-interest of the respondent, though the claim amount was re-duced.
3. Learned Counsel for the appellant has, in this appeal, ques-tioned only two items of the Award, namely, (1) enhancement of the cost of labour and material for which the respondent has been awarded a sum of Rs. 1,77,200/- and (2) the direction to pay interest for the period 01.03.1976 till date of the Award @ 12% P.A. (being the pre-reference period).
4. Both the issues are no longer res-integra. Insofar as the Award of claim of escalation is concerned, it stands settled by this Court in Secretary, Irrigation Department, Government of Orissa & Ors. v. G.C. Roy (JT 1991 (6) SC 349) wherein it has been held that where arbitration agreement contains no escalation clause, the Arbitrator does not have any jurisdiction to Award any amount towards escalation. In the instant case, we find that there is no escalation clause in the arbitration agreement and a specific objection was raised by the appellant before the Arbi-trator in that behalf. That part of the Award, therefore, which grants escalation charges is not sustainable, as it suffers from a patent error. The decree insofar as the Award of escalation charges is concerned, therefore, cannot be sustained and is hereby set aside.
5. Insofar as the Award of interest for the pre-reference period is concerned, a Constitution Bench of this Court in Executive Engineer, Dhenkanal Minor Irrigation Division Orissa etc. v. N.C. Budhiraj (Dead) by LRs. (JT 2001 (1) SC 486), speaking through the majority, has held that the Arbitrator has jurisdiction to Award interest on the sums found due and payable for pre-reference period also, in the absence of any specific stipulation or prohibition in the contract to claim or grant any such inter-est. In this case it is not disputed that there is no such prohi-bition, either specific or implied in the contract or agreement between the parties. Consequently, the Award insofar as it allows interest for the pre-reference period is upheld and the appeal against that part of the Award fails.
6. As a result, the appeal is disposed of in above terms. The impugned judgment and decree shall stand modified accordingly. No costs.
