Case Note & Summary
The petitioner, G.D. Anklesaria & Co., a sole proprietorship, was awarded a contract by the respondent, Airports Authority of India, for replacement of existing 2 Nos. 166 KVA DG Sets at Airport Mumbai. Disputes arose, and the arbitration clause was invoked on 26/07/2007. The statement of claim was submitted on 31/01/2008, and written submissions were filed on 20/09/2008. The sole arbitrator passed an award on 27/11/2008, partly allowing the claim but not granting interest at 18% per annum as claimed from 21/06/2005, and not awarding service tax and levies. The petitioner challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, primarily on the grounds of interest and service tax. The court, relying on its earlier view in M/s. Anupam Engineers v. Indian Oil Corporation and Supreme Court judgments, held that an award can be challenged partly. The court considered the arbitrator's power to grant interest under Section 31(7) of the Act and the Interest Act, 1978, and noted that the arbitrator had granted interest at 9% per annum from 18/04/2006 to 12/01/2009. The court modified the interest rate to 6% per annum for the pre-award period and 6% per annum for the post-award period, finding the arbitrator's rate excessive. Regarding service tax, the court upheld the arbitrator's decision, noting that Clause 10(F)(1) of the contract stated that tendered rates were inclusive of all taxes and levies, and thus the claimant was not entitled to separate reimbursement. The petition was partly allowed, modifying the award only on the interest rate.
Headnote
A) Arbitration Law - Challenge to Award - Section 34 of the Arbitration and Conciliation Act, 1996 - Partial Challenge - The court held that an award can be challenged partly, relying on Supreme Court judgments including Tata Hydro-Electric Power Supply Co. Ltd. v. Union of India and McDermott International Inc. v. Burn Standard Co. Ltd. (Paras 2-3). B) Arbitration Law - Interest - Section 31(7) of the Arbitration and Conciliation Act, 1996 - Arbitrator's Power - The arbitrator has power to grant interest from the date of cause of action to the date of award, and from the date of award to the date of payment, unless the contract prohibits it. The court modified the interest rate from 9% to 6% per annum for the pre-award period and from 9% to 6% per annum for the post-award period, considering the prevailing economic conditions and the nature of the dispute (Paras 5-8). C) Contract Law - Service Tax - Liability - The court held that under Clause 10(F)(1) of the contract, the tendered rates were inclusive of all taxes and levies, and therefore the claimant was not entitled to separate reimbursement of service tax. The arbitrator's denial of service tax was upheld (Paras 7-9).
Issue of Consideration
Whether the arbitral award can be challenged partially under Section 34 of the Arbitration and Conciliation Act, 1996, and whether the arbitrator erred in not granting interest at 18% per annum and in not awarding service tax and levies.
Final Decision
The petition is partly allowed. The award is modified to the extent that the interest rate is reduced from 9% per annum to 6% per annum for the period from 18/04/2006 to 12/01/2009. The rest of the award, including the denial of service tax, is upheld.
Law Points
- Section 34 of the Arbitration and Conciliation Act
- 1996
- Section 31(7) of the Arbitration and Conciliation Act
- Interest Act
- 1978
- Arbitrator's power to grant interest
- Modification of award
- Service tax liability under contract
