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State of Rajasthan vs. Nav Bharat Construction Co
(Objection to award of interest on delayed payments and other issues not raised by the Appellant before the Arbitrator or Courts below and hence not considered in this appeal)
.

Case Reference :
Civil Appeal No.8115 of 2001 with SLP(C) No. 6172 of 2001 decided on November 27, 2001.

Judges :
Justice M.B.Shah and Justice B.N.Agarwal

Parties :
State of Rajasthan and another (Appellants) Vs. Nav Bharat Construction Co.(Respondent)
and
Nav Bharat Construction Co.(Petitioner) Vs. State of Rajasthan and another (Respondent)

Question of Law :
When no objection has been raised by a party with regard to award of interest on the claim amount by the Arbitrator or the courts, even though there exists a clause in the Agreement of the parties not permitting such payment of interest, can such objection be raised for the first time before the Supreme Court in appeal.
 

Gist of the Case:

The Appellant contended that the judgement and decree passed by the Rajasthan High Court confirming the award made by the Arbitrator was illegal because
(a) Arbitrator failed to consider the counter-claim.
(b) second reference to Arbitrator was not maintainable under Order 2 Rule 2 of CPC.
(c) the Arbitrator awarded interest despite the contrary condition in the agreement.
(d) The Respondent contended that in the written statement, counter-claim or set-off was neither pleaded not proved by the Appellant before the Arbitrator. The Respondent also contended that in case of claims raised by them after the preparation of the final bill, there is no question of application of Order 2 Rule 2 of CPC, as rightly held by the Arbitrator and courts below. The Respondent pointed out that neither before the Arbitrator nor before the courts below, the Appellant contended that the Arbitrator had no authority to grant interest in view of Clause 23 of the agreement between the parties. The only contention which was raised was with regard to the grant of interest pendente lite for which reliance was placed on various decisions of the Supreme Court.
The Supreme Court agreed with the Respondent’s plea that the Appellants did not claim any set-off nor did they file a counter-claim for the alleged amount due and payable by the contractor on the alleged ground that Accountant-General’s office had raised objection for payment of labour charges at accelerated rate. As such the Arbitrator was right in not considering the same which was sought to be raised after lapse of four years of reference. Further the High Court has pointed out that the learned Additional Advocate-General was unable to point out any legal basis to support the contention that the Arbitrator was required to go into the counter-claim in the circumstances of the present case.

The Supreme Court also held that there is no substance in the contention of the Appellant that the second reference was barred by Order 2 Rule 2 of CPC. In any case, the dispute with regard to the subsequent claims arose after the first reference, that is, after the final bill was prepared and this aspect was rightly dealt with by the Additional District Judge.

The Supreme Court held that the Appellant did not raise the contention before the District Court nor before the High Court objecting to payment of interest on delayed payments to the contractor under Clause 23 of the Agreement between the parties. In view of the same, it cannot be held that the Arbitrator committed any error apparent on the face of the record nor did he commit any misconduct in passing the impugned award. Since the objection with regard to payment of interest was not raised before the Arbitrator or at any stage thereafter, the Supreme Court held that it was not necessary for them to deal with or decide the same in this appeal.

The Arbitrator granted interest on the principal amount of claims at the rate of 18% p.a. and the District Court awarded interest at the rate of 15% from the date of decree. However, considering the dispute involved and overall circumstances of the case the Supreme Court modified the award qua the rate of interest and reduced the rate of interest to 6% per annum. The SLP filed by the contractor for enhancement of interest rate from 15% to 18% was dismissed.
 

Citation :
(2002) 1 SCC 659
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LIST OF SUPREME COURT CASES RELATING TO ARBITRATION AND CONCILIATION ACT, 1996 ----- Click Here