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Thursday, March 17, 2016

whether an Arbitrator has the power to award pendente lite interest in case contract bars the same in a case covered by Act and decisions of this Court in Engineers De-Space Age (supra) and Madnani Construction Corporation (P) Ltd. (supra) have been correctly decided..=The decision in Madnani Construction Corporation (supra) has followed decision in Engineers-De-Space-Age (supra). Same is also required to be diluted to the extent that express stipulation under contract may debar the Arbitrator from awarding interest pendente lite. Grant of pendente lite interest may depend upon several factors such as phraseology used in the agreement, clauses conferring power relating to arbitration, nature of claim and dispute referred to Arbitrator and on what items power to award interest has been taken away and for which period. Thus, our answer to the reference is that if contract expressly bars award of interest pendente lite, the same cannot be awarded by the Arbitrator. We also make it clear that the bar to award interest on delayed payment by itself will not be readily inferred as express bar to award interest pendente lite by the Arbitral Tribunal, as ouster of power of Arbitrator has to be considered on various relevant aspects referred to in the decisions of this Court, it would be for the Division Bench to consider the case on merits.

                                                                  Reportable
                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION

                  SPECIAL LEAVE PETITION [C] No.11114/2009

Union of India                                               … Petitioner

Vs.

M/s. Ambica Construction                                     … Respondent

(With SLP [C] No.17219/2009]

                                  JUDGM ENT

ARUN MISHRA,  J.

1.        The issue involved in the reference is in regard to the  power  of
the Arbitrator to award pendente lite interest when  contract  contains  bar
for grant of interest in  a  case  covered  by  the  Arbitration  Act,  1940
(hereinafter referred to as “the Act”).  A Division   Bench  of  this  Court
had doubted the correctness of the decisions in Board of  Trustees  for  the
Port of Calcutta v. Engineers-De-Space-Age (1996) 1  SCC  516;  and  Madnani
Construction Corporation (P) Ltd. v. Union of India and Others (2010) 1  SCC
549. In  view  of  the  decision  of  the  Constitution  Bench  judgment  in
Secretary, Irrigation Department, Government of Orissa & Ors.  v.  G.C.  Roy
(1992)  1  SCC  508  and  Executive  Engineer,  Dhenkanal  Minor  Irrigation
Division, Orissa & Ors. v. N.C. Budharaj (D) by L.Rs. & Ors.  (2001)  2  SCC
721 which held that the Arbitrator had the  jurisdiction  and  authority  to
award interest for pre-reference period, pendente lite and future period  if
there was no express bar in the contract  regarding  award  of  interest.  A
doubt was expressed about the correctness of the decision  in  Engineers-De-
Space Age (supra) in Sayeed Ahmed & Co. v. State of U.P. &  Ors.  (2009)  12
SCC 26 and Sree Kamatchi Amman Constructions v.  Divisional Railway  Manager
(Works), Palghat & Ors.  (2010)  8  SCC  767.  Hence  the  matter  had  been
referred to a larger Bench for decision.



2.     The  case  has  a  chequered  history.  The  tender  of  M/s.  Ambica
Construction for fabrication of tie bars from M.S. Flats in  CST-9  sleepers
was accepted on 8.9.1989. Final agreement was executed  on  30.11.1989.  The
work  was  completed  on  21.11.1990.  With  respect  to  payments,  certain
differences and  disputes  arose  between  the  parties.  Thus  M/s.  Ambica
Construction prayed for appointment of an Arbitrator.  On  5.3.1991  as  the
petitioner M/s. Ambica Construction was in serious  financial  difficulties,
it accepted the amount in full and final settlement. Later on, the Union  of
India informed the  petitioner  on  11.3.1991  that  the  matter  was  under
consideration. However the Arbitrator  was  not  appointed.  An  application
under section 20 of the Act was filed before the High Court of Calcutta  for
referring the case to arbitration. On 2.6.1992 the High  Court  directed  to
file the arbitration agreement in the court and  appointed  two  Arbitrators
in terms of the arbitration clause. Said Arbitrators failed to  publish  the
award and as such an application was filed for revocation of  the  authority
of joint Arbitrators and another sole Arbitrator  was  appointed.  The  sole
Arbitrator ultimately published the award on 30.12.1997. On  an  application
filed by the Union of India,  the  High  Court  vide  order  dated  9.4.1998
remitted the award to the Arbitrator  to  give  an  item-wise  break-up.  On
12.5.1998 the sole Arbitrator  published  the  item-wise  award.  Again  the
Union of India questioned the same before the High Court. The award was  set
aside on the ground that the Arbitrator had not given an intelligible  award
in terms of clause 64(3)(a)(iii) of the agreement and  had  not  taken  into
effect the supplementary agreement dated 5.3.1991. The appeal  preferred  by
the petitioner was dismissed  by the Division Bench of  the  High  Court  on
15.10.2004 against which an SLP was filed  in which leave  was  granted  and
ultimately C.A. No.6621/2005 was allowed and case was  remitted  vide  order
dated 7.11.2005 passed  by  this  Court  to  the  Arbitrator  for  assigning
reasons and to pass fresh  award.  Thereafter,  Arbitrator  passed  a  fresh
award on 11.2.2006. Again an application was filed by  the  Union  of  India
under sections 30 and 33  of  the  Act.   The  Single  Judge  dismissed  the
application vide order dated 26.6.2007. Union of India filed an  application
for recall. The  order  dated  26.6.2007  was  recalled.  Vide  order  dated
22.8.2007 learned Single Judge set aside the award with regard  to  interest
for pre-reference period and directed that interest would be allowed on  the
principal sum of Rs.9,82,660/- at the rate of 10% per  annum  from  1.9.1992
the date from which the original Arbitrator entered upon the  reference.  An
appeal was preferred before the Division Bench and the same had been  partly
allowed with regard to claim Nos.6 and 7.  Aggrieved  thereby,  M/s.  Ambica
Construction had preferred S.L.P. [C] No.17219/2009 in this Court and  Union
of India has also assailed the judgment and  order  of  the  High  Court  in
S.L.P. [C] No.11114/2009.

3.    The only question for consideration is whether an Arbitrator  has  the
power to award pendente lite interest in case contract bars the  same  in  a
case covered by Act and decisions of this Court in  Engineers  De-Space  Age
(supra) and Madnani Construction Corporation  (P)  Ltd.  (supra)  have  been
correctly decided.
4.    It was submitted on behalf of the Union of India that  the  Arbitrator
is bound by the terms of the contract and cannot award interest in case  the
contract bars the same. On the other  hand,  learned  counsel  appearing  on
behalf of M/s. Ambica  Construction  has  contended  that  in  view  of  the
decision in Engineers-De-Space Age (supra) followed in Madnani  Construction
Corporation (P) Ltd. (supra)  notwithstanding  the  terms  in  the  contract
agreement barring the  award  of  interest  would  cover  the  pre-reference
period and not pendente lite interest.
5.     There  are  certain  provisions  which  are  statutorily  implied  in
arbitration agreement unless excluded in the agreement.  Section  3  of  the
Act of 1940 deals with the provisions which are implied in  the  arbitration
agreement. Section 3 is extracted below :
       “3.  Provisions  implied  in  arbitration  agreement.—An  arbitration
agreement, unless a different  intention  is  expressed  therein,  shall  be
deemed to include the provisions set out in the First Schedule in so far  as
they are applicable to the reference.”

      The provisions of section 3 make it  clear  that  unless  a  different
intention is expressed in the arbitration  agreement,  the  agreement  would
include the provisions contained in the First Schedule so far  as  they  are
applicable to the reference. Provisions in  the  First  Schedule  contain  8
paragraphs. It provides for reference to  a  sole  Arbitrator  and  in  case
there are even  numbers  of  Arbitrators,  appointment  of  umpire  is  also
provided. An Arbitrator is required to pass award within 4 months  from  the
date of entering on the reference. In  case  Arbitrator  fails  to  pass  an
award within the specified time the umpire shall make  the  award  within  2
months. Para 6 of First Schedule provides  that  the  Arbitrator  or  umpire
shall examine the matters in difference and the award  shall  be  final  and
binding. Arbitrator or umpire has the power for examining the witnesses  and
production of relevant documents. Para 8 of Schedule I  provides  for  costs
of reference and awards shall be in the discretion of the Arbitrator.
6.          “Court” has been defined in section 2(c) of the Act  to  mean  a
civil court having jurisdiction to decide the questions forming the subject-
matter of the reference.  Section 41 of the Act is extracted hereunder:
“41. Procedure and powers of Court. – Subject to the provisions of this  Act
and of rules made thereunder :
The provisions of the Code of Civil  Procedure,  1908  (5  of  1908),  shall
apply to all proceedings before the Court, and to all  appeals,  under  this
Act, and

The Court shall have, for the purpose of, and  in  relation  to  arbitration
proceedings, the same power of making  orders  in  respect  of  any  of  the
matters set out in the Second Schedule as it has for the purpose of, and  in
relation to any proceedings before the Court:

Provided that nothing in CI. (b) shall  be  taken  to  prejudice  any  power
which may be vested in an  Arbitrator  or  umpire  for  making  orders  with
respect to any of such matters.”
      The court can exercise the power specified in Second Schedule  of  the
Act.  However, Arbitrator is not a  court.  Arbitrator  is  the  outcome  of
agreement. He decides  the  disputes  as  per  the  agreement  entered  into
between the parties. Arbitration is an alternative forum for  resolution  of
disputes but an Arbitrator ipso facto does not  enjoy  or  possess  all  the
powers conferred on the courts of  law.
7.    Section 29 of the Act confers on the court  power  to  award  interest
from the date of decree. Section 34 of  the  C.P.C.  confers  on  the  court
power to award interest prior to the institution  of  the  suit  and  during
pendency of the suit and post decree.
8.    A Constitution Bench of this Court in G.C. Roy (supra) has  considered
the question of power of the Arbitrator to award pendente lite interest  and
it has been laid down that if the  arbitration  agreement  or  the  contract
itself provides for interest, Arbitrator  would  have  the  jurisdiction  to
award the interest. Similarly, where the agreement expressly  provides  that
no  interest  pendente  lite  shall  be  payable  on  the  amount  due,  the
Arbitrator has no power to  award  pendente  lite  interest.   In  G.C.  Roy
(supra) this Court has held thus :
      “xxx If the arbitration agreement or the contract itself provides  for
award of interest on the amount found due from one party to  the  other,  no
question regarding the absence of Arbitrator’s  jurisdiction  to  award  the
interest could arise as in that case  the  Arbitrator  has  power  to  award
interest pendent lite as well.  Similarly,  where  the  agreement  expressly
provides that no interest pendente lite shall be payable on the amount  due,
the Arbitrator has no power to award pendente lite interest. But  where  the
agreement does not provide either for grant or denial  of  interest  on  the
amount found  due,  the  question  arises  whether  in  such  an  event  the
Arbitrator has power and authority to grant pendente lite interest.”
      The question involved in G.C. Roy (supra)  was  with  respect  to  the
award of interest for the period commencing  from  the  date  of  Arbitrator
entering upon the reference till the date of making the award.  In G.C.  Roy
(supra),  this  Court  has  considered  decisions  in   Raipur   Development
Authority & Ors. v. M/s. Chokhamal Contractors & Ors.,  (1989)  2  SCC  721;
Executive Engineer (Irrigation) Balimela & Ors. v.  Abhaduta  Jena  &  Ors.,
(1988) 1 SCC 418;  Nachiappa Chettiar & Ors, v.  Subramaniam  Chettiar,  AIR
1960 SC 307; Satinder Singh v. Amrao Singh & Anr., AIR  1961  SC  908;  Firm
Madanlal Roshanlal Mahajan v. Hukumchand Mills Ltd.,  Indore,  AIR  1967  SC
1030; Union of India v. Bungo Steel Furniture Pvt. Ltd., AIR 1967  SC  1032;
Ashok Construction Company v. Union of India, (1971)  3  SCC  66;  State  of
M.P. v. M/s. Saith and Skelton Pvt. Ltd., (1972) 1 SCC 702, various  foreign
courts decisions and decisions of the  High  Court.   This  Court  has  also
referred to Halsbury’s Laws of England in Paras 36 & 37 thus:-
“36. “534. Express and implied clauses.—  In  general,  the  parties  to  an
arbitration agreement may include in it such clauses as they think  fit.  By
statute, however, certain terms are  implied  in  an  arbitration  agreement
unless a contrary intention is expressed or implied  therein.  Moreover,  it
is normally an implied term of an arbitration agreement that the  Arbitrator
must decide the dispute in accordance with the ordinary law.  This  includes
the  basic  rules  as  to  procedure,  although  parties  can  expressly  or
impliedly consent to depart from  those  rules.  The  normal  principles  on
which terms are implied in  an  agreement  have  to  be  considered  in  the
context that the agreement relates to an arbitration.”

37. At page 303, para 580 (4th edn., Vol.  2)  dealing  with  the  award  of
interest, it reads:
“580. Interest.— A Arbitrator or umpire has power to award interest  on  the
amount of any debt or damages for the  whole  or  any  part  of  the  period
between the date when the cause of action arose and the date of the award.”

        Ultimately, in  G.C.  Roy  (supra),  this  Court  has  answered  the
question whether Arbitrator has the power to award  interest  pendent  lite.
Their Lordships have reiterated that they  have  dealt  with  the  situation
where the agreement does not provide for grant of such interest nor does  it
prohibit such grant when the agreement is silent as to  award  of  interest.
This Court has laid down various principles in para 43 of the report thus:
“43. The question still remains whether Arbitrator has the  power  to  award
interest pendente lite, and if so on what principle. We must reiterate  that
we are dealing with the situation where the agreement does not  provide  for
grant of such interest nor does it prohibit such grant. In other  words,  we
are dealing with a case where  the  agreement  is  silent  as  to  award  of
interest.  On  a  conspectus  of  aforementioned  decisions,  the  following
principles emerge:

(i) A person deprived of the use  of  money  to  which  he  is  legitimately
entitled has a right to be compensated for the deprivation, call it  by  any
name. It may  be  called  interest,  compensation  or  damages.  This  basic
consideration is as valid for the period the dispute is pending  before  the
Arbitrator as it is for the period prior to  the  Arbitrator  entering  upon
the reference. This is the principle of Section  34,  Civil  Procedure  Code
and there is no reason or  principle  to  hold  otherwise  in  the  case  of
Arbitrator.

(ii) An Arbitrator is an alternative form  (sic  forum)  for  resolution  of
disputes arising between the parties. If so,  he  must  have  the  power  to
decide all the disputes or differences arising between the parties.  If  the
Arbitrator has no power to award interest pendente lite, the party  claiming
it would have to approach the court for that purpose,  even  though  he  may
have obtained satisfaction in respect of other claims from  the  Arbitrator.
This would lead to multiplicity of proceedings.

(iii) An Arbitrator is the creature of an  agreement.  It  is  open  to  the
parties to confer upon him such powers and prescribe such procedure for  him
to follow, as they think fit, so long as they are not opposed to  law.  (The
proviso to Section 41 and Section  3  of  Arbitration  Act  illustrate  this
point). All the same, the agreement must be  in  conformity  with  law.  The
Arbitrator must also act and make his award in accordance with  the  general
law of the land and the agreement.

(iv) Over the years, the  English  and  Indian  courts  have  acted  on  the
assumption that where the agreement does not prohibit and  a  party  to  the
reference makes a claim for interest, the Arbitrator must have the power  to
award interest pendente lite. Seth Thawardas Pherumal  v.  Union  of  India,
AIR 1955 SC 468 has not been followed in the later decisions of this  Court.
It has been explained and distinguished on  the  basis  that  in  that  case
there was no claim for interest but only a claim for  unliquidated  damages.
It has been said repeatedly that observations in the said judgment were  not
intended to lay down any such absolute or universal rule as they appear  to,
on first impression.  Until Executive Engineer (Irrigation) Balimela &  Ors.
v.  Abhaduta Jena & Ors., (1988) 1 SCC 418 almost  all  the  courts  in  the
country had upheld the power of the Arbitrator to  award  interest  pendente
lite. Continuity and certainty is a highly desirable feature of law.

(v) Interest pendente  lite  is  not  a  matter  of  substantive  law,  like
interest for the period anterior to reference  (pre-reference  period).  For
doing complete justice between the  parties,  such  power  has  always  been
inferred.”

“44. Having regard to the above consideration, we think that  the  following
is the correct principle which should be followed in this behalf:
Where the agreement between the parties does not prohibit grant of  interest
and where a party claims interest and that dispute  (along  with  the  claim
for principal amount or independently) is referred  to  the  Arbitrator,  he
shall have the power to award  interest  pendente  lite.  This  is  for  the
reason that in such a case it must be presumed that interest was an  implied
term of the agreement between the parties and  therefore  when  the  parties
refer all their disputes — or refer the dispute as to interest as such —  to
the Arbitrator, he shall have the power to award  interest.  This  does  not
mean that in every case the Arbitrator  should  necessarily  award  interest
pendente lite. It is a matter within his discretion to be exercised  in  the
light of all the facts and circumstances of the case, keeping  the  ends  of
justice in view.”

      The Constitution Bench of this Court has  laid  down  that  where  the
agreement between the parties does not prohibit grant of interest and  where
the party claims interest and that dispute is referred  to  the  Arbitrator,
he shall have the power to award interest pendent lite.   The  law  declared
has been held applicable prospectively.
9.    Another Constitution Bench of this Court  in  N.C.  Budharaj  (supra),
considered the question of award of interest by the Arbitrator for the  pre-
reference period.  In that connection, discussion has been made and  it  has
been observed as long as there is nothing in the  arbitration  agreement  to
exclude the jurisdiction of the Arbitrator entertaining claim  for  interest
on the amount due under the contract or any provision to claim  interest  on
the amount due, the jurisdiction of the Arbitrator  to  award  interest  for
pre-reference period under section 29 of the Arbitration Act,  1940  has  to
be upheld.  In majority opinion, this Court has held thus:
“25. If that be the position, courts which of late  encourage  litigants  to
opt for and avail of the  alternative  method  of  resolution  of  disputes,
would be penalising or placing those who avail of  the  same  in  a  serious
disadvantage. Both logic and reason should counsel courts to  lean  more  in
favour of the Arbitrator holding to possess all the powers as are  necessary
to do complete and full justice between the parties in the  same  manner  in
which the civil court seized  of  the  same  dispute  could  have  done.  By
agreeing to settle all the disputes and claims arising out  of  or  relating
to the contract between the parties through arbitration  instead  of  having
recourse to civil court  to  vindicate  their  rights  the  party  concerned
cannot be considered to have frittered away and given  up  any  claim  which
otherwise it could have successfully asserted  before  courts  and  obtained
relief. By agreeing to have settlement of disputes through arbitration,  the
party concerned must be understood to have only opted for a different  forum
of adjudication with less cumbersome procedure, delay and  expense  and  not
to abandon all or any of its substantive rights under the  various  laws  in
force, according to which only even the Arbitrator is obliged to  adjudicate
the claims referred to him. As long as there is nothing in  the  arbitration
agreement to exclude the jurisdiction  of  the  Arbitrator  to  entertain  a
claim  for  interest  on  the  amounts  due  under  the  contract,  or   any
prohibition to claim interest on the amounts due and  become  payable  under
the contract, the jurisdiction of  the  Arbitrator  to  consider  and  award
interest in respect of all  periods  subject  only  to  Section  29  of  the
Arbitration Act, 1940 and that too the powers of the court  thereunder,  has
to be upheld. The submission that the Arbitrator  cannot  have  jurisdiction
to award interest for the period prior to the date  of  his  appointment  or
entering into reference which alone confers upon him  power,  is  too  stale
and technical to be countenanced in our hands, for the  simple  reason  that
in every case the appointment of an Arbitrator or even resort  to  court  to
vindicate rights could be only after disputes have cropped up   between  the
parties and continue to subsist unresolved, and that if the  Arbitrator  has
the power to deal with and decide disputes which cropped up at  a  point  of
time and for the period prior to the appointment of  an  Arbitrator,  it  is
beyond  comprehension  as  to  why  and  for  what  reason  and  with   what
justification the Arbitrator should  be  denied  only  the  power  to  award
interest for the pre-reference period when  such  interest  becomes  payable
and has to be awarded as an accessory or incidental to the  sum  awarded  as
due and payable, taking into account the deprivation of the use of such  sum
to the person lawfully entitled to the same.

26. For all the reasons stated above, we answer  the  reference  by  holding
that the Arbitrator appointed  with  or  without  the  intervention  of  the
court, has jurisdiction to  award  interest,  on  the  sums  found  due  and
payable, for the pre-reference  period,  in  the  absence  of  any  specific
stipulation or prohibition in the  contract  to  claim  or  grant  any  such
interest. The decision in Jena case taking a contraview does  not  lay  down
the correct position and stands overruled, prospectively, which  means  that
this decision shall not entitle any party nor shall it empower any court  to
reopen proceedings which have already become final, and apply  only  to  any
pending proceedings. No costs.”

     It has also been observed that G.C. Roy’s case (supra) cannot  be  said
to have overruled Executive Engineer (Irrigation)  Balimela’s  case  (supra)
insofar as it dealt with the power of Arbitrator to award interest  for  the
pre-reference period.
10.   A 3 Judges Bench of this Court in Hindustan Construction  Co. Ltd.  v.
State of Jammu & Kashmir (1992) 4 SCC 217 has laid down that the  Arbitrator
has the power to award pendente lite interest on the basis of  principle  of
Section 34 of the Code of Civil Procedure though  same  is  not  applicable.
However, the observation has to be considered in case there  is  no  express
bar in the agreement for awarding pendente lite interest as  it  has  simply
followed what has been laid down in G.C. Roy (supra).  This Court  has  laid
down thus:
“5. The question of interest can be easily disposed of as it is  covered  by
recent decisions of this Court. It is sufficient  to  refer  to  the  latest
decision of a five Judge  bench  of  this  Court  in  Secretary,  Irrigation
Department, Govt. of Orissa  & Ors. v. G.C. Roy. Though  the  said  decision
deals with the power of the Arbitrator to award interest pendente lite,  the
principle of the decision makes it clear that the  Arbitrator  is  competent
to award interest for the period commencing with the date of  award  to  the
date of decree or date of realisation, whichever is earlier.  This  is  also
quite logical for, while award of  interest  for  the  period  prior  to  an
Arbitrator entering upon the reference is a matter of substantive  law,  the
grant of interest for the  post-award  period  is  a  matter  of  procedure.
Section 34 of  Code  of  Civil  Procedure  provides  both  for  awarding  of
interest pendente lite as  well  as  for  the  post-decree  period  and  the
principle of Section 34 has been held applicable to proceedings  before  the
Arbitrator, though the section as such may not apply.  In  this  connection,
the decision in Union of India v. Bungo Steel Furniture (P)  Ltd.  AIR  1967
SC 1032 may be seen as also the decision in Gujarat Water Supply &  Sewerage
Board v. Unique Erectors (Gujarat) P. Ltd. 1989 1 532  SCC    which  upholds
the said power though on a somewhat   different  reasoning.  We,  therefore,
think that the award on Item No. 8 should have been upheld.”

11.   In Sayeed Ahmed (supra) various decisions  of  this  Court  have  been
referred. In State of Orissa v. B.N.  Agarwalla,  (1997)  2  SCC  469,  this
Court has laid down thus:
“18. In view of the aforesaid decisions there  can  now  be  no  doubt  with
regard to  the  jurisdiction  of  the  Arbitrator  to  grant  interest.  The
principles which can now be said to be well-settled are that the  Arbitrator
has the jurisdiction to award pre-reference interest in  cases  which  arose
after the Interest Act, 1978 had become applicable.  With  regard  to  those
cases pertaining to the period prior to the applicability  of  the  Interest
Act, 1978, in the absence of any substantive law,  contract  or  usage,  the
Arbitrator has no jurisdiction to award  interest.  For  the  period  during
which the arbitration proceedings were pending in view of  the  decision  in
G.C. Roy case and Hindustan Construction Ltd. case, the Arbitrator  has  the
power to award interest. The power of the Arbitrator to award  interest  for
the post-award period also exists and this aspect  has  been  considered  in
the discussion relating to Civil Appeal No. 9234 of 1994 in the  later  part
of this judgment.”

12.   The decision  in  B.N.  Agarwalla  (supra)  has  been  considered  and
distinguished by this Court in Sayeed Ahmed (supra) thus :
“20. The appellant next relied upon the judgment of this Court in  State  of
Orissa v. B.N. Agarwalla (1997) 2 SCC 469. In that  case,  this  Court  held
that the Arbitrator  has  jurisdiction  to  award:  (i)  interest  for  pre-
reference  period,  (ii)  interest  for  pendente  lite,  and  (iii)  future
interest. This Court also held that the following part of Clause (4) of  the
contract dealing with “Rates, materials and workmanship” did not  bar  award
of interest by the Arbitrator on the claims of the contractor: (SCC p.  478,
para 22)
No interest is payable on amount withheld under the item of the agreement.
Interpreting the said clause (which provided that interest was  not  payable
on the amount which was withheld), this Court held that it referred only  to
the amount withheld by the employer State towards retention  money  for  the
defect liability period. This Court in fact clarified the position  that  if
the terms of  contract  expressly  stipulated  that  no  interest  would  be
payable, then the  Arbitrator  would  not  get  the  jurisdiction  to  award
interest. As Clause G1.09 in the present case contains an  express  bar  and
is different from the clause considered in B.N. Agarwalla (supra)  the  said
decision is also of no assistance.”

      In B.N. Agarwalla (supra) this Court has observed  that  Clause  4  of
the contract dealing with “Rates, materials and  workmanship”  did  not  bar
award of interest by the Arbitrator on the claims  of  the  contractor.  The
stipulation was no  interest  was  payable  on  amount  withheld  under  the
agreement.
13.   In Sayeed Ahmed (supra), this  Court  has  referred  the  decision  in
State of U.P. v. Harish Chandra & Co. (1999) 1 SCC 63, in which  this  Court
has interpreted the stipulation contained in clause  1.9  of  the  agreement
which came up for consideration before a  3  Judges  Bench  of  this  Court.
Clause 1.9 is extracted hereunder:
 “1.9 No claim  for  delayed  payment  due  to  dispute  etc.—No  claim  for
interest or damages will be entertained by the Government  with  respect  to
any moneys or balances which may be lying with the Government owing  to  any
dispute, difference; or misunderstanding between the  Engineer-in-Charge  in
marking periodical or final payments or in any other respect whatsoever.”

      This Court has interpreted the clause 1.9 and held that  there  is  no
provision which could be culled out against the  respondent-contractor  that
he could  not  raise  claim  of  interest  by  way  of  damages  before  the
Arbitrator on the relevant items placed for adjudication.
This Court in Sayeed Ahmed (supra) has also distinguished  the  decision  in
Harish Chandra (supra) in which clause 1.09 came up for  consideration  thus
:
“17.   x x x x x This Court held that the said clause did not bar  award  of
interest on any claim for damages or for claim for payment  for  work  done.
We extract below the reasoning for such decision: (SCC p. 67, para 10)
“10. A mere look at the clause shows that the claim for interest by  way  of
damages was not to be entertained against the  Government  with  respect  to
only a specified type of amount, namely, any moneys or  balances  which  may
be lying with the Government owing to any dispute,  difference  between  the
Engineer-in-Charge and  the  contractor;  or  misunderstanding  between  the
Engineer-in-Charge  and  the  contractor  in  making  periodical  or   final
payments or in any other respect whatsoever. The  words  ‘or  in  any  other
respect whatsoever’ also referred to the dispute pertaining  to  the  moneys
or balances  which  may  be  lying  with  the  Government  pursuant  to  the
agreement meaning thereby security deposit or retention money or  any  other
amount which might have been with the Government and refund of  which  might
have been withheld by the Government. The claim for  damages  or  claim  for
payment for the work done and which was not paid  for  would  not  obviously
cover any money  which  may  be  said  to  be  lying  with  the  Government.
Consequently,  on  the  express  language  of  this  clause,  there  is   no
prohibition which could be culled  out  against  the  respondent  contractor
that he could not raise the claim for interest by way of damages before  the
Arbitrator   on   the   relevant    items    placed    for    adjudication.”
        (emphasis supplied)

18. In Harish Chandra (1999) 1 SCC 63 a different  version  of  Clause  1.09
was considered. Having regard to the restrictive  wording  of  that  clause,
this Court held that it did not  bar  award  of  interest  on  a  claim  for
damages or a claim for payments for work done and which was not  paid.  This
Court held that the said clause barred award of  interest  only  on  amounts
which may be lying with the Government by way of security  deposit/retention
money or any other amount, refund of which was withheld by the Government.

19. But in the present case, Clause G1.09  is  significantly  different.  It
specifically provides that no interest shall be payable in  respect  of  any
money  that  may  become  due  owing   to   any   dispute,   difference   or
misunderstanding between  the  Engineer-in-Charge  and  contractor  or  with
respect to any delay  on  the  part  of  the  Engineer-in-Charge  in  making
periodical or final payment or in respect of any other  respect  whatsoever.
The bar under Clause G1.09 in this case  being  absolute,  the  decision  in
Harish Chandra (supra) will not assist the appellant in any manner.”

In Harish Chandra (supra), this Court has laid down  that  clause  1.09  did
not bar award of interest for claim of damages for  payment  for  work  done
and which was not paid for would not obviously cover any money which may  be
said to be lying with the Government.
14.   In our opinion, it would depend upon the nature of the  ouster  clause
in each case.  In case there is express stipulation  which  debars  pendente
lite interest, obviously, it cannot be granted by Arbitrator.  The award  of
pendente lite interest inter alia must depend upon the overall intention  of
the agreement and what is expressly excluded.
15.   In Sayeed Ahmed (supra), this  Court  has  referred  the  decision  in
Superintending Engineer v. B. Subba Reddy (1999)  4  SCC  423  and  observed
thus :
“11. Two more decisions dealing with cases  arising  under  the  Arbitration
Act, 1940 require to be noticed. In  Superintending  Engineer  v.  B.  Subba
Reddy (1999) 4 SCC 423 this  Court  held  that  interest  for  pre-reference
period can be awarded only if there was an agreement to that  effect  or  if
it was  allowable  under  the  Interest  Act,  1978.  Therefore,  claim  for
interest for pre-reference period, which is barred as per the  agreement  or
under the Interest Act, 1978 could not be allowed. This Court  however  held
that the Arbitrator can award interest pendente lite and future interest.”

      In Sayeed Ahmed (supra) this Court has also referred the  decision  in
State of Rajasthan & Anr. v. Ferro Concrete Construction (P) Ltd. (2009)  12
SCC 1 thus :
“12. The principles relating to interest were summarised by  this  Court  in
State of Rajasthan v. Ferro Concrete Construction (P) Ltd. (2009) 12  SCC  1
thus:

   (a) Where a provision for interest is made on any  debt  or  damages,  in
any agreement, interest shall be paid in accordance with such agreement.
   (b) Where payment of interest  on  any  debt  or  damages  is  barred  by
express provision in the contract, no interest shall be awarded.

   (c) Where there is no express bar in the  contract  and  where  there  is
also no provision for payment of interest then the principles of  Section  3
of the Interest Act will apply and consequently interest will be payable:

   (i) where the proceedings relate to a debt (ascertained sum)  payable  by
virtue of a written instrument at a certain time, then from  the  date  when
the debt is payable to the date of institution of the proceedings;
   (ii) where the proceedings is for recovery of damages or for recovery  of
a debt which is not payable at a certain time, then from the date  mentioned
in a written notice given by the person making a claim to the person  liable
for the claim that interest will be claimed.

(d) Payment of interest pendente lite  and  future  interest  shall  not  be
governed by the provisions of the Interest Act, 1978, but by the  provisions
of Section 34 of the Code of Civil Procedure, 1908 or the provisions of  law
governing arbitration as the case may be.”

      In Sayeed Ahmed (supra), the provisions of Arbitration &  Conciliation
Act, 1996 were applicable.
16.   A 3-Judge Bench of this Court  in  Union  of  India  v.  Bright  Power
Projects (India) Pvt. Ltd. (2015) 9 SCC 695 has  considered  the  provisions
contained in section 31(7)(a) of the Arbitration and Conciliation Act,  1996
and considered the words “unless otherwise agreed by parties”  in  the  said
section and held that the Arbitrator is bound by the terms of  the  contract
so far as award of interest from the date of execution to the date of  award
is concerned. This Court considered clause 13(3) of the  contract  and  came
to the conclusion that once agreed  that  contractor  would  not  claim  any
interest on the amount to be paid under the  contract,  he  could  not  have
claimed the interest. The  Arbitrator  while  awarding  interest  failed  to
consider the provisions of section 31(7)(a) and  binding  nature  of  clause
13(3) of the terms of agreement.  With respect to section  31(7)(a)  of  the
Arbitration & Conciliation Act, 1996 this Court in Union of India v.  Bright
Power Projects  (supra) has observed thus :
“18. Section 31(7)(a) of the Act ought to have been read and interpreted  by
the Arbitral Tribunal before taking any decision  with  regard  to  awarding
interest. The said section, which has  been  reproduced  hereinabove,  gives
more respect to the agreement entered  into  between  the  parties.  If  the
parties to the agreement agree not  to  pay  interest  to  each  other,  the
Arbitral Tribunal has no right to award interest pendente lite.”

     Section 31(7)(a) of the 1996 Act confers power on Arbitrator  to  award
interest pendente lite, “unless otherwise agreed by parties”.  Thus,  it  is
clear from the provisions contained in section 31(7)(a)  that  the  contract
between the parties  has  been  given  importance  and  is  binding  on  the
Arbitrator. Arbitration clause is also required  to  be  looked  into  while
deciding the power of the Arbitrator and in case there is any bar  contained
in the contract on award of interest, it operates on which items and in  the
arbitration clause what are the powers conferred on Arbitrator  and  whether
bar on award of interest has been confined to certain period or  it  relates
to pendency of proceedings before Arbitrator.
17.   In Sree Kamatchi Amman Constructions (supra),  it  was  observed  that
the words “unless otherwise agreed by the parties” in section 31 of new  Act
of 1996 clarify that Arbitrator is bound by the terms of contract for  award
of interest pendente lite. It was also held thus :
“19. Section 31(7) of the new Act  by  using  the  words  “unless  otherwise
agreed by the parties” categorically clarifies that the Arbitrator is  bound
by the terms of the contract insofar as the award of interest from the  date
of cause of action to the date of award. Therefore, where  the  parties  had
agreed that no interest shall  be  payable,  the  Arbitral  Tribunal  cannot
award interest between the date when the cause of action arose to  the  date
of award.

20. We are of the view that the decisions in Engineers-De-Space-Age  (supra)
and Madnani  (supra) are inapplicable for yet another reason. In  Engineers-
De-Space-Age  (supra)  and  Madnani   (supra)  the  Arbitrator  had  awarded
interest for the pendente lite period. This Court upheld the award  of  such
interest under the old Act  on  the  ground  that  the  Arbitrator  had  the
discretion to decide whether interest should be awarded or  not  during  the
pendente lite period and he was not bound by the contractual  terms  insofar
as the interest for the pendente lite period. But in the  instant  case  the
Arbitral Tribunal has refused  to  award  interest  for  the  pendente  lite
period. Where  the  Arbitral  Tribunal  has  exercised  its  discretion  and
refused award of  interest  for  the  period  pendente  lite,  even  if  the
principles in those two cases were applicable, the award of  the  Arbitrator
could not  be  interfered  with.  On  this  ground  also  the  decisions  in
Engineers-De-Space-Age (supra) and  Madnani  (supra)  are  inapplicable.  Be
that as it may.”

18.   This Court in Union of India v. Krafters Engineering  &  Leasing  Pvt.
Ltd. (2011) 7 SCC 279 has held that by a provision  in  the  agreement,  the
jurisdiction of the Arbitrator to  award  interest  can  be  excluded.  This
Court considered the nature of the claim vis-à-vis the  provision  contained
in the relevant clause.
19.   It is apparent from various decisions referred to above that  in  G.C.
Roy (supra) Constitution Bench of this Court has laid down  where  agreement
expressly provides that no  interest  pendente  lite  shall  be  payable  on
amount due. The  arbitrator  has  no  power  to  award  interest.   In  N.C.
Budharaj (supra) a Constitution Bench has observed that  in  case  there  is
nothing in the arbitration agreement to exclude jurisdiction  of  arbitrator
to entertaining claim  for  interest,  the  jurisdiction  of  arbitrator  to
consider and award interest in respect to all periods is subject to  section
29 of the Act.  In Hindustan Construction Co. Ltd. (supra)  this  Court  has
followed decision in G.C. Roy (supra) and laid down that  on  the  basis  of
principles of section 34 arbitrator would have the power to  award  pendente
lite interest  also.  In  B.N.  Agarwalla  (supra),  this  Court  has  again
followed G.C. Roy (supra) and Hindustan Construction Co. Ltd.  (supra)  with
respect to power of arbitrator to award pendente lite interest  and  it  was
held that arbitrator  has  power  to  award  interest.   In  Harish  Chandra
(supra) this Court interpreted the clause 1.9 which provided that  no  claim
for interest or damages will be entertained by the Government in respect  to
any moneys or balances which may be lying with the Government. It  was  held
that  there  was  no  provision  which  could  be  culled  out  against  the
contractor not to claim interest by way of damages before the arbitrator  on
the relevant items placed for adjudication. In Ferro  Concrete  Construction
(P) Ltd. (supra) this Court considered clause  4  containing  a  stipulation
that no interest was payable on amount withheld under the agreement. It  was
held that clause 4 dealt with rates, material and workmanship  did  not  bar
award of interest by the arbitrator on claims of the contractor made in  the
said case. In Sayeed Ahmed (supra) this Court has emphasized that  award  of
interest would depend upon nature of the clause in the agreement. In  Bright
Power Projects (India) Pvt. Ltd.  (supra)  this  Court  has  considered  the
expression  “unless  otherwise  agreed  by  parties”  employed  in   section
31(7)(a) of the Act of 1996 and laid down that in case contract  bars  claim
of interest contractor could not have claimed  interest.  The  provision  of
section 31(7)(a) of the Act of 1996 is binding upon the arbitrator. In  Sree
Kamatchi Amman Constructions (supra) similar view has been taken.
20.   Now we come to the question of correctness of decision of  this  Court
rendered by a Bench of two Judges in  Engineers-De-Space-Age  (supra)  which
has  been  referred  for  our  consideration  in  which  this  Court   after
consideration of G.C. Roy’s case has observed thus :
“3….. It will appear from what the  Constitution  Bench  stated  to  be  the
legal position, that ordinarily a person who is deprived  of  his  money  to
which he is legitimately entitled as of right is entitled to be  compensated
in deprivation thereof, call it by whatever name. This would be in terms  of
the principle laid down in Section 34 of the Code of Civil Procedure.  Their
Lordships pointed out  that  there  was  no  reason  or  principle  to  hold
otherwise in the case of an Arbitrator. Pointing out that Arbitrator  is  an
alternative forum for resolution of disputes arising  between  the  parties,
it said that he must have the power to decide all disputes  and  differences
arising between the parties and if he were to be denied the power  to  award
interest pendente lite, the party entitled thereto would be required  to  go
to a court which would result in multiplicity of  proceedings,  a  situation
which the court should endeavour to avoid. Reliance was, however, placed  on
the observation in  sub-para  (iii)  wherein  it  is  pointed  out  that  an
Arbitrator is a creature of an agreement and if the  agreement  between  the
parties prohibits the payment of interest pendente lite the Arbitrator  must
act in accordance therewith. In other words, according  to  their  Lordships
the Arbitrator is expected to act and make his award in accordance with  the
general law  of  the  land  but  subject  to  an  agreement,  provided,  the
agreement is valid and legal. Lastly,  it  was  pointed  out  that  interest
pendente lite is not a matter of substantive  law,  like  interest  for  the
period anterior to reference.  Their  Lordships  concluded  that  where  the
agreement between the parties does not prohibit grant of interest and  where
a party claims interest and that dispute is referred to the  Arbitrator,  he
shall have the power to award interest pendente lite for the  simple  reason
that in such a case it is presumed that interest was an implied term of  the
agreement  between  the  parties;  it  is  then  a  matter  of  exercise  of
discretion by the Arbitrator. The  position  in  law  has,  therefore,  been
clearly stated in the aforesaid decision of the Constitution Bench”.

4. We are not dealing with a case in regard to award  of  interest  for  the
period prior to the reference. We are dealing  with  a  case  in  regard  to
award of interest by the Arbitrator  post  reference.  The  short  question,
therefore, is whether in  view  of  sub-clause  (g)  of  clause  13  of  the
contract extracted earlier  the  Arbitrator  was  prohibited  from  granting
interest  under  the  contract.  Now  the  term  in  sub-clause  (g)  merely
prohibits the Commissioner from entertaining  any  claim  for  interest  and
does not prohibit the Arbitrator from awarding interest. The  opening  words
“no claim for interest will be  entertained  by  the  Commissioner”  clearly
establishes that  the  intention  was  to  prohibit  the  Commissioner  from
granting interest on account of delayed payment to  the  contractor.  Clause
has to be strictly construed for the simple reason that as  pointed  out  by
the Constitution Bench, ordinarily, a person who has a legitimate  claim  is
entitled to payment within a reasonable time and if  the  payment  has  been
delayed beyond reasonable time he can legitimately claim to  be  compensated
for that delay whatever nomenclature one may  give  to  his  claim  in  that
behalf.”

21.      In Sayeed Ahmed  (supra)  the  decision  in  Engineers-De-Space-Age
(supra) has been considered and it was observed that it cannot  be  used  to
support an outlandish argument that bar  on  the  Government  or  department
paying interest is not a bar  on  the  Arbitrator  awarding  interest.  This
Court expressed doubt as to the correctness of certain observations made  in
Engineers-De-Space-Age (supra) to  the  extent  that  the  Arbitrator  could
award interest pendente lite ignoring the express bar in the  contract.  But
this Court did not consider the question  further  as  the  case  in  Sayeed
Ahmed (supra) arose under the Arbitration and Conciliation Act of 1996,  and
there was a specific provision under new Act regarding award of interest  by
the Arbitrator. From the discussion made  in  Sayeed  Ahmed  (supra)  it  is
apparent that this Court has  emphasized  that  it  would  depend  upon  the
nature of clause  and  claim  etc.  and  it  is  required  to  be  found  on
consideration of stipulation whether interest is barred,  if  yes,  on  what
amounts interest is barred under the contract.
22.    A  three-Judge  Bench  of  this  Court  in  Tehri  Hydro  Development
Corporation Limited and Another v. Jai Prakash  Associates  Limited,  (2012)
12 SCC 10, has considered the  question  which  has  been  referred  in  the
instant case and it has been laid down in the context of clauses 1.2.14  and
1.2.15 imposed  a clear bar on either entertainment or payment  of  interest
in any situation of non-payment or delayed payment  of  either  the  amounts
due for work done or lying in security deposit.  Thus,  the  arbitrator  had
no power to grant pendente lite interest.   This Court has also doubted  the
correctness  of  the  decisions  in  Engineers-De-Space  Age  (supra)    and
Madnani  Construction  Corporation  (P)  Ltd.  (supra).   This   court   has
considered the aforesaid  clauses  and  various  decisions  in  Tehri  Hydro
Development  Corporation  (supra) in which one of us Ranjan Gogoi, J.  spoke
for  the Court.  This Court has laid down thus :–
 “14. This will lead the court to a consideration of what is  the  principal
bone of contention between the parties in  the  present  case,  namely,  the
issue with regard to payment of  interest.  Clauses  1.2.14  and  1.2.15  on
which much arguments have been advanced by Learned Counsel  for  both  sides
may now be extracted below:
                                  PART - II
                           CONDITIONS OF CONTRACT
1.2.14.     No claim  for  delayed  payment  due  to  dispute,  etc.  -  The
contractor agrees that no claim for interest of damages will be  entertained
or payable by the Government in respect of any money or balances  which  may
be  lying  with  the  Government  owing  to  any  disputes,  differences  or
misunderstandings between  the  parties  or  in  respect  of  any  delay  or
omission on the part of the engineer-in-charge in making immediate or  final
payments or in any other respect whatsoever.
1.2.15.     Interest on money due to the contractor. - No  omission  on  the
part of the engineer-in-charge to pay the amount  due  upon  measurement  or
otherwise shall vitiate or make void the contract, nor shall the  contractor
be entitled to interest upon any guarantee or payments in arrears  nor  upon
any balance which may on the final settlement of  his  accounts  be  due  to
him.
A reading of the aforesaid two clauses of  the  contract  agreement  between
the  parties  clearly  reveal  that  despite   some   overlapping   of   the
circumstances contemplated by the two clauses, no  interest  is  payable  to
the contractor for delay in payment,  either,  interim  or  final,  for  the
works done or on any amount lying  in  deposit  by  way  of  guarantee.  The
aforesaid contemplated consequence would be applicable both to  a  situation
where withholding of payment is on account of  some  dispute  or  difference
between the parties or even otherwise.
15.   Of the several decisions of this Court  referred  to  by  the  learned
counsel for the appellant the judgments of the Constitution  Bench  of  this
Court in Irrigation Deptt., Govt. of Orissa v. G.C. Roy, (1992)  1  SCC  508
and Dhenkanal Minor Irrigation Division v. N.C. Budharaj,  (2001) 2 SCC  721
will require specific notice. The true ratio laid down in the aforesaid  two
judgments have been elaborately considered in a  more  recent  pronouncement
of this Court in the case of Union of India v. Krafters  Engg.  and  Leasing
(P) Ltd., (2011) 7 SCC 279. In Krafters Engineers's case (supra)  the  ratio
of the decision in G.C. Roy's case (supra) was identified to  mean  that  if
the agreement between the parties does not prohibit grant  of  interest  and
the claim of a  party  to  interest  is  referred  to  the  arbitrator,  the
arbitrator would have the power to award the interest. This is on the  basis
that in such a case of silence (where the agreement is silent)  it  must  be
presumed that interest was an implied term of the agreement and,  therefore,
whether such a claim is tenable can be examined by  the  arbitrator  in  the
reference made to him. The aforesaid view, specifically, is with  regard  to
pendente lite interest. In  the  subsequent  decision  of  the  Constitution
Bench in N.C. Budharaj's case (supra) a similar view  has  been  taken  with
regard to interest for the pre-reference period.
16. In Krafters  Engineers'  case  (supra),  the  somewhat  discordant  note
struck by the decisions of this Court  in Port of Calcutta v.  Engineers-De-
Space-Age  (supra) and Madnani Construction Corporation Private  Limited  v.
Union of India and Ors.  (supra), were also taken note  of.  Thereafter,  it
was also noticed that the decision in Engineers-De-Space-Age's case  (supra)
was considered in Sayeed Ahmed & Co.  v.  State  of  U.P.  (supra)  and  the
decision in  Madnani  Construction  case  (supra)  was  considered  in  Sree
Kamatchi Amman Constructions  v.  Railways  (2010)  8  SCC  767.  In  Sayeed
Ahmed's case (supra) (SCC para 24) it was held that  in  the  light  of  the
decision of the Constitution Bench in G.C. Roy's case (1992) 1 SCC  508  and
N.C. Budharaj case (2001) 2 SCC 721 it is doubtful whether the  observations
in Engineers-de-Space-Age's case (supra) to the effect that  the  Arbitrator
could award  interest  pendente  lite,  ignoring  the  express  bar  in  the
contract, is good law. In Sree Kamatchi Amman  Construction's  case  (Supra)
while considering Madnani's case (supra) this Court noted that the  decision
in Madnani case  (supra) follows the  decision  in  Engineers-de-Space-Age's
case (supra).
17. From the  above  discussions,  it  is  crystal  clear  that  insofar  as
pendente lite interest is concerned, the observations contained in  Para  43
and 44 of the judgment in G.C. Roy case (supra) will hold the field.  Though
the gist of the said principle has been noticed earlier it  would  still  be
appropriate to set out para 44 of the judgment in G.C.  Roy's  case  (supra)
which is in the following terms:
44. Having regard to the above consideration, we think  that  the  following
is the correct principle which should be followed in this behalf.
Where the agreement between the parties does not prohibit grant of  interest
and where a party claims interest and that dispute  (along  with  the  claim
for principal amount or independently) is referred  to  the  arbitrator,  he
shall have the power to award  interest  pendente  lite.  This  is  for  the
reason that in such a case it must be presumed that interest was an  implied
term of the agreement between the parties and  therefore  when  the  parties
refer all their disputes - or refer the dispute as to interest as such -  to
the arbitrator, he shall have the power to award  interest.  This  does  not
mean that in every case the arbitrator  should  necessarily  award  interest
pendente lite. It is a matter within his discretion to be exercised  in  the
light of all the facts and circumstances of the case, keeping  the  ends  of
justice in view.
18. The provisions of the  U.P.  Civil  Laws  (Reforms  and  Amendment)  Act
amending the First Schedule to the Arbitration Act,  1940  does  not  assist
the respondent contractor in any manner to sustain the  claim  of  award  of
interest pendente lite, inasmuch, as Para 7-A  of  the  First  Schedule,  as
amended, is only an enabling provision which will have no application  to  a
situation where there is an express bar to the entertainment or  payment  of
interest on the delayed payment either of an amount due for  the  work  done
or of an  amount  lying  in  deposit  as  security.  The  decision  in  B.N.
Agarwalla case (supra) on which reliance has  been  placed  by  the  learned
counsel for the respondent, once again, does not assist  the  claim  of  the
respondent to interest pendente lite inasmuch  as  in  B.N.  Agarwalla  case
(supra) the views of the Constitution Bench in G.C. Roy  case  (supra)  with
regard to interest pendente lite could not have been and, in fact, were  not
even remotely doubted. The observation of the Bench in B.N.  Agarwalla  case
that in G.C. Roy case (supra)  the  decision  in  Deptt.  of  Irrigation  v.
Abhaduta Jena (1988) 1 SCC 418 was not overruled was only in the context  of
the issue of award of interest for the pre- reference period.  The  decision
in Asian Techs Limited case (supra) also relied on by the  respondent  takes
note of the decision in Engineers-De-Space-Age case (supra) to come  to  the
conclusion the prohibition on payment of interest contained in Clause 11  of
the agreement between the parties was qua the department  and  did  not  bar
the arbitrator from entertaining the claim.  It  has  already  been  noticed
that the correctness of the propositions laid  down  in  Engineers-De-Space-
Age case (supra) have been doubted  in  the  subsequent  decisions  of  this
Court, reference to which has already been made.
19. Clauses 1.2.14 and 1.2.15, already extracted  and  analysed,  imposed  a
clear bar on either entertainment or payment of interest  in  any  situation
of non-payment or delayed payment of either the amounts due  for  work  done
or lying in security deposit. On the basis  of  the  discussions  that  have
preceded we, therefore, take the  view  that  the  grant  of  pendente  lite
interest on the claim of Rs. 10,17,461/- is  not  justified.  The  award  as
well as the orders of the courts  below  are  accordingly  modified  to  the
aforesaid extent.”

      In para 4 in Engineers-De-Space-Age (supra) this  Court  has  observed
that bar under the contract will not be applicable to Arbitrator  cannot  be
said to be observation of general application.  In  our  opinion,  it  would
depend upon the stipulation in the contract in each case  whether  power  of
Arbitrator to grant pendente lite interest  is  expressly  taken  away.   If
answer is ‘yes’ then Arbitrator would have no power to award  pendente  lite
interest.
23.   The decision in Madnani Construction Corporation (supra) has  followed
decision in Engineers-De-Space-Age (supra).  Same is  also  required  to  be
diluted to the extent that express stipulation under contract may debar  the
Arbitrator from awarding interest pendente lite.   Grant  of  pendente  lite
interest may depend upon several factors such as  phraseology  used  in  the
agreement, clauses conferring  power  relating  to  arbitration,  nature  of
claim and dispute referred to Arbitrator and on what items  power  to  award
interest has been taken away and for which period.
24.         Thus, our answer to the reference is that if contract  expressly
bars award of interest pendente lite, the same  cannot  be  awarded  by  the
Arbitrator.  We also make it  clear  that  the  bar  to  award  interest  on
delayed payment by itself will not be readily inferred  as  express  bar  to
award interest pendente lite by the Arbitral Tribunal, as  ouster  of  power
of Arbitrator has to be considered on various relevant aspects  referred  to
in the decisions of this Court, it  would  be  for  the  Division  Bench  to
consider the case on merits.

     ………………………J.
                                       (Ranjan Gogoi)

                                       ………………………J.
                                       (Arun Mishra)

New Delhi;                             ……………………….J.
March 16, 2016.                        (Prafulla C. Pant)

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