State of Orissa Vs. Sudhakar Das (dead) by Lrs.
EmailAppeal: Civil Appeal No. 2256 of 1984
(From the Judgment and Order dated 9.12.83 of the Orissa High Court in Misc.A. No. 209 of 1982)
(From the Judgment and Order dated 9.12.83 of the Orissa High Court in Misc.A. No. 209 of 1982)
Petitioner: State of Orissa
Respondent: Sudhakar Das (dead) by Lrs.
Apeal: Civil Appeal No. 2256 of 1984
(From the Judgment and Order dated 9.12.83 of the Orissa High Court in Misc.A. No. 209 of 1982)
(From the Judgment and Order dated 9.12.83 of the Orissa High Court in Misc.A. No. 209 of 1982)
Judges: DR. A.S. ANAND, CJI., S.RAJENDRA BABU & R.C. LAHOTI, JJ.
Date of Judgment: Feb 23, 2000
Appearances:
Mr. Raj Kumar Mehta, Ms. Mana Chakraborty and Ms. M. Sarda, Advocates for the appellant.
Mr. J.K. Das, Advocate for the Respondent.
Head Note:
ARBITRATION LAW
Arbitration Act, 1940
Sections 30, 33 – Arbitration – Powers of Arbitrator – Power to award amount towards escalation. Held that where the arbitration agreement contains no escalation clause, the arbitrator cannot award any amount towards escalation. Such award cannot be sustained in view of its patent error. (Para 2)
Arbitration Act, 1940
Sections 30, 33 – Arbitration – Powers of Arbitrator – Power to award amount towards escalation. Held that where the arbitration agreement contains no escalation clause, the arbitrator cannot award any amount towards escalation. Such award cannot be sustained in view of its patent error. (Para 2)
Sections 30, 33 – Arbitration – Powers of Arbitrator – Power to award interest pendente lite. Held that where the arbitration agreement does not prohibit grant of such interest, award of interest cannot be considered to be bad. Point no longer res-integra in view of decision in Secretary, Irrigation Deptt. Govt. of Orissa v. G.C.Roy. (JT 1991 (6) SC 349). (Para 3)
Interest
Arbitration – Interest for pre-reference period – Proceedings pending for long time. Held. Decree relating to award of interest for pre-reference period ordered to be executed only upon furnish-ing of bank guarantee to the extent of the amount. (Para 4)
Cases Reffered:
1. Secretary, Irrigation Department, Government of Orissa & Others v. G.C. Roy, JT 1991 (6) SC 349
2. Executive Engineer (Irrigation) Balimela & Others v. Abhaduta Jena & Others, JT 1987 (4) SC 8
2. Executive Engineer (Irrigation) Balimela & Others v. Abhaduta Jena & Others, JT 1987 (4) SC 8
JUDGEMENT:
ORDER
1. 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, Bhubaneshwar making an award made by the Arbitrator a rule of the Court. The three main issues with which we are concerned in this appeal are:
“1. 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 pre-reference period?”
2. 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 esca-lation charges is clearly not sustainable and suffers from a patent error. The decree, insofar as the award of escalation charges is concerned, cannot, therefore, be sustained.
3. It is conceded by Ms. Mana Chakraborty, learned counsel for the State that the issue relating to the power of the Arbi-trator 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 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, JT 1991 (6) SC 349 = (1992) 1 SCC 508, over-ruling the view to the contrary as expressed in Executive Engineer (Irrigation) Balimela & Others v. Abhaduta Jena & Oth-ers, JT 1987 (4) SC 8 = (1988) 1 SCC 418. The decree to the extent, it awards pendente lite interest in favour of the respondents, therefore, is sustained and the challenge to it fails.
4. So far as the award of interest for pre-reference period is 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 decade and the arbitration started as early as in 1975, to direct that the respondent shall exec-ute the decree relating to the award of pre-reference interest only on furnishing a bank guarantee to the extent of that amount together with an undertaking that in the event the Consti-tution Bench, to which this issue has been referred to in Execu-tive Engineer, Dhankanal Minor Irrigation Division, Orissa v. N.C. Budhiraj (dead) by L.Rs. (Civil Appeal No. 3586 of 1984), decides against the decreeholder-respondents, the State shall be entitled to encash the bank guarantee. The respondents shall keep the bank guarantee alive during the pendency of the matter before the Constitution Bench and on furnishing the bank guaran-tee and the undertaking the respondents can execute the decree in that behalf.
5. Thus, the appeal is disposed of in above terms. The im-pugned judgment and decree shall stand modified accordingly. No costs.
1. 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, Bhubaneshwar making an award made by the Arbitrator a rule of the Court. The three main issues with which we are concerned in this appeal are:
“1. 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 pre-reference period?”
2. 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 esca-lation charges is clearly not sustainable and suffers from a patent error. The decree, insofar as the award of escalation charges is concerned, cannot, therefore, be sustained.
3. It is conceded by Ms. Mana Chakraborty, learned counsel for the State that the issue relating to the power of the Arbi-trator 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 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, JT 1991 (6) SC 349 = (1992) 1 SCC 508, over-ruling the view to the contrary as expressed in Executive Engineer (Irrigation) Balimela & Others v. Abhaduta Jena & Oth-ers, JT 1987 (4) SC 8 = (1988) 1 SCC 418. The decree to the extent, it awards pendente lite interest in favour of the respondents, therefore, is sustained and the challenge to it fails.
4. So far as the award of interest for pre-reference period is 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 decade and the arbitration started as early as in 1975, to direct that the respondent shall exec-ute the decree relating to the award of pre-reference interest only on furnishing a bank guarantee to the extent of that amount together with an undertaking that in the event the Consti-tution Bench, to which this issue has been referred to in Execu-tive Engineer, Dhankanal Minor Irrigation Division, Orissa v. N.C. Budhiraj (dead) by L.Rs. (Civil Appeal No. 3586 of 1984), decides against the decreeholder-respondents, the State shall be entitled to encash the bank guarantee. The respondents shall keep the bank guarantee alive during the pendency of the matter before the Constitution Bench and on furnishing the bank guaran-tee and the undertaking the respondents can execute the decree in that behalf.
5. Thus, the appeal is disposed of in above terms. The im-pugned judgment and decree shall stand modified accordingly. No costs.
