Case Note & Summary
The case involves two appeals under Section 37 of the Arbitration and Conciliation Act, 1996 arising from a dispute between the State of Maharashtra (through its Executive Engineer, Public Works Division) and Khare & Tarkunde Infrastructure Pvt. Ltd., a contractor. The State had invited tenders for construction of two bridges on a BOT (Build, Operate, Transfer) basis. Disputes arose and were referred to a sole arbitrator, R.H. Tadvi, who passed an award on 04/03/2004. The State filed an application under Section 34 of the Act before the Principal District Judge, Chandrapur (Misc. Civil Application No.63/2004) challenging the award. The District Judge partly allowed the application by maintaining the award on all counts except one: the rate of future interest was reduced from 25% per annum to 18% per annum from the date of the award till realization. Aggrieved, the State filed First Appeal No.240/2007 challenging the maintenance of the award, and the contractor filed First Appeal No.213/2007 challenging the reduction in interest. The High Court heard both appeals together. The court held that the District Judge's modification of interest was justified and within the scope of Section 34, as 18% per annum is reasonable and not contrary to public policy. The State's challenge to the award on merits was rejected as the award did not contravene public policy. Consequently, the State's appeal was dismissed, and the contractor's appeal was also dismissed, upholding the District Judge's judgment.
Headnote
A) Arbitration Law - Appeal under Section 37 - Scope of Interference - The appeals under Section 37 of the Arbitration and Conciliation Act, 1996 challenge the judgment of the Principal District Judge partly allowing the State's application under Section 34. The court held that the scope of interference under Section 37 is limited and the District Judge's modification of interest rate was within permissible limits. (Paras 1-2) B) Arbitration Law - Interest Rate - Reduction by Court - The District Judge reduced future interest from 25% to 18% per annum. The court upheld this reduction, noting that 18% is reasonable and not contrary to public policy. The contractor's appeal for restoration of 25% was dismissed. (Paras 2, 4) C) Arbitration Law - Award Challenge - Public Policy - The State's challenge to the award on merits was rejected as the award did not contravene public policy under Section 34(2)(b)(ii) of the Act. The court found no error in the arbitrator's findings. (Paras 2-3)
Issue of Consideration
Whether the learned Principal District Judge was justified in reducing the rate of future interest from 25% per annum to 18% per annum while maintaining the rest of the arbitral award, and whether the State's challenge to the award on merits is maintainable.
Final Decision
Both appeals dismissed. The judgment of the Principal District Judge, Chandrapur dated 15/12/2006 in Misc. Civil Application No.63/2004 is upheld. No order as to costs.
Law Points
- Section 37 of the Arbitration and Conciliation Act
- 1996
- Section 34 of the Arbitration and Conciliation Act
- Interest rate reduction by court under Section 34
- Scope of interference with arbitral award
- Public policy under Section 34(2)(b)(ii)
