Case Note & Summary
The appellants, Central Mine Planning & Design Institute Ltd., a Union of India undertaking, had invited tenders for construction work. The respondent, M/s Anupam Rai, a registered partnership firm, submitted an offer and an agreement was entered into on 24-4-1986. The work was to be completed within 12 months from 10-4-1986 to 9-4-1987. The work could not be completed within the stipulated period and time was extended twice via communications dated 14-5-1987 and 14-12-1987. The work was completed on 31-1-1988. Disputes arose between the parties, and the respondent sought appointment of an arbitrator in terms of the agreement. By order dated 20-12-1995, the Civil Court directed the appellants to file the arbitration agreement and appointed a sole arbitrator. The arbitrator made his award on 30-6-1997, holding that the respondent was entitled to a total amount of Rs. 6,50,000 with interest at 18% per annum from the date of the award till realization. The appellants challenged the award in Special Civil Suit No.67/1992, which was dismissed by judgment dated 23-4-1998, making the award rule of the court. The appellants then filed the present appeal under Section 39 of the Arbitration Act, 1940. The main legal issues were whether the arbitrator exceeded jurisdiction, failed to consider counterclaims, and awarded excessive interest. The appellants argued that the arbitrator ignored the terms of the contract and awarded amounts not claimed. The respondent contended that the award was final and not liable to be interfered with. The court analyzed the scope of appeal under Section 39, holding that it is limited and findings of fact by the arbitrator are not open to reappraisal unless perverse. The court found that the arbitrator had considered the counterclaim and rejected it on merits. Regarding interest, the court held that while the arbitrator had discretion, the rate of 18% per annum was excessive and reduced it to 12% per annum from the date of award till realization. The appeal was partly allowed, modifying the interest rate.
Headnote
A) Arbitration Law - Appeal against decree making award rule of court - Section 39, Arbitration Act, 1940 - Scope of interference - The court held that an appeal under Section 39 is not an appeal against the award itself but against the judgment making it rule of court; interference is limited to grounds such as misconduct, error of law apparent on face, or jurisdictional error. The arbitrator's findings on facts and quantification of claims are final and not open to reappraisal unless perverse. (Paras 1-10) B) Arbitration Law - Interest - Award of interest at 18% per annum - Section 29, Arbitration Act, 1940 - The court reduced the rate of interest from 18% to 12% per annum from the date of award till realization, holding that 18% was excessive in the facts and circumstances, though the arbitrator had discretion to award interest. (Paras 11-15) C) Arbitration Law - Counterclaim - Failure to consider counterclaim - Section 30, Arbitration Act, 1940 - The court found that the arbitrator had considered the counterclaim and rejected it on merits; no ground to interfere as the arbitrator's decision on counterclaim is a finding of fact. (Paras 16-18)
Issue of Consideration
Whether the judgment of the trial court making the arbitral award rule of the court is liable to be set aside on the grounds raised by the appellants, including that the arbitrator exceeded jurisdiction, failed to consider counterclaims, and awarded excessive interest.
Final Decision
The appeal is partly allowed. The judgment of the trial court making the award rule of court is modified to the extent that the rate of interest awarded by the arbitrator at 18% per annum from the date of award till realization is reduced to 12% per annum. The rest of the award is upheld.
Law Points
- Arbitration Act 1940
- Section 39
- scope of appeal
- interference with arbitral award
- interest rate
- perversity
- findings of fact
