Case Note & Summary
The Government of Maharashtra, through its Irrigation Department, appealed against a judgment and order dated 24.4.1992 passed by the Civil Judge, Senior Division, Pune, which made a decree in terms of an arbitral award. The dispute arose from a construction contract for the Veer Baji Pasalkar Dam awarded to Atur India Private Limited. A work order was issued on 6.10.1976. Disputes regarding payment were referred to a panel of arbitrators constituted by Government Resolution dated 10.4.1989. The arbitrators pronounced an award on 11.9.1990 directing the Government to pay Rs.210.68 lakhs, which included Rs.58.18 lakhs as interest for the pre-reference period and Rs.2.03 lakhs as bank guarantee commission. The award also directed payment of interest at 18% per annum from 16.10.1990 if the amount was not paid within one month. The respondent filed a Special Civil Suit No.1109 of 1990 to have the award filed and a decree passed. The appellant filed Misc. Application No.672 of 1990 to set aside the award, challenging only the grant of pre-reference interest and bank guarantee commission, but not the principal amount of Rs.150.47 lakhs. The Civil Judge upheld the award, leading to this appeal. The main legal issue was whether the arbitrators could award interest for the pre-reference period. The appellant argued that the arbitrators had no power to award such interest. The respondent contended that the award was valid. The High Court held that arbitrators have the power to award interest for the pre-reference period and that the court's interference with an arbitral award is limited. The Court found no perversity or error in the award and dismissed the appeal, upholding the decree.
Headnote
A) Arbitration Law - Pre-Reference Interest - Power of Arbitrator - Section 39 Arbitration Act, 1940 - The main issue was whether the arbitrators could award interest for the period prior to the reference to arbitration. The Court held that arbitrators have the power to award interest for the pre-reference period, and such award is not liable to be set aside unless it is contrary to the contract or perverse. The Court upheld the award of Rs.58.18 lakhs as pre-reference interest. (Paras 1-6) B) Arbitration Law - Scope of Court's Interference - Section 39 Arbitration Act, 1940 - The Court reiterated that the jurisdiction of the court while deciding objections to an arbitration award is limited. The findings of the arbitrators on facts and law cannot be interfered with unless they are perverse or contrary to the terms of the contract. (Para 6)
Issue of Consideration
Whether the arbitrators and the Civil Judge were right in granting interest for the pre-reference period under the Arbitration Act, 1940.
Final Decision
The High Court dismissed the appeal and upheld the judgment and order of the Civil Judge, Senior Division, Pune, thereby confirming the decree in terms of the arbitral award.
Law Points
- Arbitration Act
- 1940
- Section 39
- Interest Act
- 1978
- Pre-reference interest
- Arbitrator's power to award interest
- Limited scope of court's interference with arbitral award
