Case Note & Summary
The case arises from a construction contract awarded by the Union of India (appellant) to M/s Bajaj & Co. (respondent) in 1986 for building an Air Route Surveillance Radar at Civil Aerodrome, Nagpur. Disputes arose and were referred to a sole arbitrator under the Arbitration Act, 1940. The arbitrator awarded the respondent a sum of Rs. 3,10,754.27 with interest at 12% per annum from 31/8/1989 to 15/11/1990 and future interest at 12% per annum from the date of award till payment. The respondent filed a suit (Special Civil Suit No. 1138 of 1992) to make the award a rule of court and sought modifications, particularly regarding interest. During arguments, the respondent gave up all objections except seeking interest at 18% per annum for eleven months from 16/11/1990 to 31/10/1991. The Civil Judge, Senior Division, Nagpur, partly modified the award by granting interest at 18% per annum for that period and made the award absolute. The Union of India appealed under Section 39 of the Arbitration Act, 1940. The High Court examined whether the Civil Judge could modify the arbitrator's award on interest. It held that the arbitrator's discretion on interest rate is final and should not be interfered with unless the award is perverse or unreasonable. The court noted that the arbitrator had already awarded interest at 12% per annum, which was reasonable, and the Civil Judge's modification was not justified. The appeal was allowed, the modification was set aside, and the original award was restored. The High Court directed the appellant to pay the awarded amount with interest at 12% per annum from the date of award till payment, within three months.
Headnote
A) Arbitration Law - Interest Award - Arbitrator's Discretion - Section 29, Arbitration Act, 1940 - The arbitrator awarded interest at 12% per annum from 31/8/1989 to 15/11/1990 and future interest at 12% per annum. The Civil Judge modified the award to grant interest at 18% per annum for eleven months from 16/11/1990 to 31/10/1991. The High Court held that the arbitrator's discretion on interest rate should not be interfered with unless perverse or unreasonable. The modification was set aside. (Paras 1-10)
Issue of Consideration
Whether the Civil Judge was justified in modifying the arbitrator's award by granting interest at 18% per annum for a period of eleven months from 16/11/1990 to 31/10/1991, when the arbitrator had awarded interest at 12% per annum.
Final Decision
The High Court allowed the appeal, set aside the modification made by the Civil Judge, and restored the original award of the arbitrator. The appellant was directed to pay the awarded amount with interest at 12% per annum from the date of award till payment, within three months.
Law Points
- Arbitrator's discretion on interest rate
- Section 29 Arbitration Act 1940
- Modification of award by court
- Interest rate reduction from 18% to 12% per annum
- No interference with arbitrator's discretion unless perverse
Case Details
2014 LawText (BOM) (02) 186
First Appeal No. 296 of 1998
Shri A. H. Mishra, Advocate H/f Shri S. K. Mishra, A.S.G.I. for the appellant; Shri A. V. Khare, Advocate with Ms Vidya Umale for the respondent
Union of India, through the Executive Engineer, Nagpur Central, Division I, Central Public Works Department, Nagpur
M/s Bajaj & Co., Civil Engineers & Contractors, a partnership firm, duly registered under the Indian Partnership Act, having its office at Dharaskar Road, Nagpur; through its partner Shri Narayan s/o Madanlal Bajaj
Subscribe to unlock Case Details (Citation, Judge, Date & more)
Subscribe Now
Nature of Litigation
Appeal under Section 39 of the Arbitration Act, 1940 against judgment and order of Civil Judge modifying arbitrator's award on interest.
Remedy Sought
Appellant (Union of India) sought setting aside of the modification of the arbitrator's award by the Civil Judge, which granted interest at 18% per annum for eleven months.
Filing Reason
The Civil Judge modified the arbitrator's award by granting interest at 18% per annum for a period of eleven months from 16/11/1990 to 31/10/1991, whereas the arbitrator had awarded interest at 12% per annum.
Previous Decisions
The arbitrator delivered an award directing the appellant to pay Rs. 3,10,754.27 with interest at 12% per annum from 31/8/1989 to 15/11/1990 and future interest at 12% per annum. The Civil Judge, Senior Division, Nagpur, in Special Civil Suit No. 1138 of 1992, modified the award to grant interest at 18% per annum for eleven months from 16/11/1990 to 31/10/1991 and made the award absolute.
Issues
Whether the Civil Judge was justified in modifying the arbitrator's award by granting interest at 18% per annum for a period of eleven months from 16/11/1990 to 31/10/1991, when the arbitrator had awarded interest at 12% per annum.
Submissions/Arguments
Appellant argued that the Civil Judge erred in modifying the award on interest as the arbitrator's discretion should not be interfered with.
Respondent argued that the modification was justified as the arbitrator had not awarded interest for the period from 16/11/1990 to 31/10/1991.
Ratio Decidendi
The arbitrator's discretion on the rate of interest is final and should not be interfered with by the court unless the award is perverse or unreasonable. The arbitrator had already awarded interest at 12% per annum, which was reasonable, and the Civil Judge's modification was not justified.
Judgment Excerpts
The arbitrator's discretion on the rate of interest is final and should not be interfered with by the court unless the award is perverse or unreasonable.
The Civil Judge's modification granting interest at 18% per annum for eleven months was not justified and is set aside.
Procedural History
In 1986, contract awarded to respondent. Dispute referred to sole arbitrator. Arbitrator delivered award on 15/11/1990. Respondent filed Special Civil Suit No. 1138 of 1992 to make award rule of court and seek modifications. Civil Judge modified award on 06/3/1998. Union of India filed First Appeal No. 296 of 1998 under Section 39 of Arbitration Act, 1940. High Court decided on 04/2/2014.
Acts & Sections
- Arbitration Act, 1940: Section 29, Section 39
