Case Note & Summary
The dispute arose between the State of Rajasthan and Nav Bharat Construction Co. regarding an arbitration award. The appellant contended that the High Court's confirmation of the arbitrator's award was illegal on several grounds, including the failure to consider a counter-claim, the maintainability of a second reference under Order 2 Rule 2 of the Code of Civil Procedure, 1908 (CPC), and the awarding of interest contrary to the agreement. The respondent argued that no counter-claim was pleaded or proved, and that the claims arose after the preparation of the final bill, thus negating the applicability of Order 2 Rule 2 CPC. The court noted that the appellant had not raised the issue of interest before the arbitrator or the lower courts, and that the arbitrator's award was reasoned and within his authority. The court ultimately modified the interest rate from 18% to 6% per annum, stating that the original rate was excessive. The appeal was disposed of with parties bearing their own costs. The Special Leave Petition filed by the contractor for enhancement of the interest rate was dismissed as it did not survive the court's order.
Headnote
A) Arbitration - Counter-Claim - Non-Consideration of Counter-Claim - Arbitration and Conciliation Act, 1996 - The arbitrator did not consider a counter-claim as it was neither pleaded nor proved by the appellant before the arbitrator, and the High Court found no legal basis for requiring the arbitrator to consider it. Held that the arbitrator acted within his authority (Paras 1-2). B) Arbitration - Interest on Award - Modification of Interest Rate - Arbitration and Conciliation Act, 1996 - The court modified the interest rate awarded by the arbitrator from 18% to 6% per annum, finding that the original rate was excessive and not supported by the agreement. Held that the respondent is entitled to recover the amount with interest at the modified rate (Paras 2-2).
Issue of Consideration
Whether the arbitrator's award was illegal for not considering a counter-claim and for awarding interest contrary to the agreement.
Final Decision
The Supreme Court modified the interest rate awarded by the arbitrator from 18% to 6% per annum and upheld the arbitrator's decision regarding the counter-claim. The appeal was disposed of with parties bearing their own costs.
Law Points
- Arbitration
- Interest on Award
- Counter-Claim
- Order 2 Rule 2 CPC
- Modification of Award
