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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL No.8530 OF 2009
Union of India ….Appellant(s)
VERSUS
M/s. Susaka Pvt. Ltd. & Ors. …Respondent(s)
J U D G M E N T
Abhay Manohar Sapre, J.
1. This appeal is filed by the Union of India
against the final judgment and order dated
11.02.2005 passed by the High Court of Bombay in
Appeal (Ld) No.666 of 2003 in Arbitration Petition
No.96 of 2003 whereby the Division Bench of the
High Court allowed the appeal filed by respondent
No.1 herein and set aside the order dated
21.04.2003 passed by the Single Judge in
Arbitration Petition No.96 of 2003.
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2. The issue involved in the appeal is short and,
therefore, it is not necessary to set out the entire
factual scenario of the case except to the extent
necessary to appreciate the issue.
3. In short, the question, which arises for
consideration in this appeal, is whether the Arbitral
Tribunal was justified in awarding interest on
various claims for different periods to the claimant
(respondent No.1), namely, (i) for a pre-reference
period, i.e., 04.03.1996 to 05.05.1999 @ 15% p.a.;
(ii) pendent lite, i.e., for the period from 06.05.1999
to 09.09.2002 @ 12% p.a.; and (iii) post reference
period, i.e., 09.09.2002 till payment @ 18% p.a.,
total (first and second) Rs.12,89,033/- on the
awarded sum.
Brief facts:
4. A works contract (repairing work of 25 No.
stators of TAO-659 Traction Motors of Electric
Locomotives type WCAMI of Electric Loco
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Shed-Valsad) was awarded by the Union of India
(Railways) - the appellant herein to respondent No.1
(claimant) on 19.12.1994.
5. In execution of the works contract, various
disputes arose between the parties. Since the
General Conditions of Contract (in short, “GCC”)
contained Clause 56(1) to decide the disputes
arising out of the contract through arbitration,
respondent No.1(claimant) invoked the arbitration
clause and filed an application in the High Court of
Bombay under Section 11(5) of the Arbitration and
Conciliation Act (hereinafter referred to as “the Act”)
praying therein for appointment of the Arbitral
Tribunal in terms of Clause 56(1) and to make a
reference to the Arbitral Tribunal for deciding the
disputes which had arisen between the parties.
6. The High Court, by order dated 27.07.2001,
with consent of both the parties allowed respondent
No.1's application and referred the various claims (1
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to 17) made by the respondent (claimant) against
the appellant for their adjudication by the Arbitral
Tribunal, which consisted of three Arbitrators
(Railway Officials). The order making the reference
to the Arbitral Tribunal reads as under:
“There is no dispute that claims Nos. 1
to 13 which are mentioned in the letter dated
19th August, 1999, Exhibit “B” to the
Application, are already referred for
arbitration to Shri B.B. Verma, Presiding
Joint Arbitrator & FA & CAO (I), Churchgate
and two other Arbitrators, (i) Shri Arunendra
Kumar, Jt. Arbitrator & CRSE, Churchgate
and (ii) Shri S.K. Kulshrestha, Jt. Arbitrator &
CE, N.F. Railway.
2. By Consent, claim at Sr. No. 16 (Claim
No. 2.1) and at Sr. No. 17 (Claim No. 2.2) are
also referred for arbitration to the same
Arbitrators who shall decide these claims
along with claim Nos. 1 to 15. They shall also
be free to decide pre-reference interest,
Pendente lite interest, further interest and
costs considering the agreement. The
Respondent shall be free to file
counter-claim, if any.”
7. Parties submitted to the jurisdiction of the
Arbitral Tribunal, filed their statement of
claim/reply etc. and adduced evidence. The Arbitral
Tribunal, by their unanimous reasoned award dated
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11.09.2002, partly allowed the claims of respondent
No.1 against the appellant as under:
Claim
No.
Brief
Description
Claim
Amount in
Rs.
Amount
awarded in
Rs.
1.1 Loss
suffered due
to
under-utiliz
ation of
equipment
purchased
specially for
this
contract.
6,97,554 3,48,777
1.2 Material
purchased
not utilized.
3,00,723 3,00,723
1.3 Loss of
Profit
4,65,409
(Revised to
Rs.
4,44,620)
2,32,703
1.4,1.5 &
2.1
1.4
–Overheads
during
contracted
period
under
utilized- 1.5
–Overheads
from
9.6.1995 to
4.3.1996 –
2.1
–Overheads
from
5.3.1996 to
30.06.1996
4,65,409
3,89,165
3,06,748
3,41,830
1.7 & 2.2 1.7 –
Amount for
the period
1.7.94 to
3,28,085 1,64,042
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29.6.1996
2.2 –
Amount for
the period
5.3.96 to
30.09.1996
1,24,174
1.6 Payment
under price
variation
clause
85,106 85,106
1.8 & 2.3
2.4
Payment of
pre lite
interest
from
13.12.95 to
5.5.99
As accrued 12,89,033
Total 27,62,214
8. The appellant-Union of India, felt aggrieved of
the Arbitral Award, challenged its legality by filing
an application under Section 34 of the Act in
Bombay High Court (Single Judge).
9. The Single Judge, by order dated 21.04.2003,
allowed the appeal in part and made two
modifications in the arbitral award with respect to
the date of award of interest on the claim of
respondent No.1 for damages and on the claim of
one purchase item. The Single Judge made the
interest payable from the date of award till
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realization. So far as the challenge to other claims
including award of interest on such claims were
concerned, the Single Judge rejected the appellant’s
all objections and upheld the award in totality for all
purposes.
10. Respondent No.1 (claimant), felt aggrieved
against that part of the order of the Single Judge
which interfered in part in the arbitral award, filed
appeal before the Division Bench. So far as the
appellant-Union of India was concerned, they did
not file any appeal against that part of the order of
the Single Judge which had rejected substantially
their application filed under Section 34 of the Act.
In this view of the matter, the award to that extent
became final.
11. By impugned judgment, the Division Bench of
the High Court allowed respondent No.1’s appeal
and set aside the order of the Single Judge. It was
held that no ground under Section 34 of the Act had
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been made out by the Union of India to modify the
award to the extent of awarding interest on the
claim. In other words, in the opinion of Division
Bench, the ground on which the limited interference
was made by the Single Judge for setting aside a
part of the Award in relation to award of interest
from a particular date on two (2) claims to
respondent No.1 (claimant) was not a ground falling
under Section 34 of the Act and, therefore, the order
of Single Judge was not legally sustainable. It was
accordingly set aside resulting in upholding of the
entire award and dismissal of Section 34 application
in its entirety. It is against this order, the Union of
India (Railways) felt aggrieved and filed the present
appeal by way of special leave in this Court.
12. Heard Ms. Kiran Suri, learned senior counsel
for the appellant and Mr. Vinay Navare, learned
counsel for respondent No.1.
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13. Ms. Kiran Suri, learned senior counsel,
appearing for the appellant (Union of India) while
challenging the legality and correctness of the
impugned judgment has argued only one point.
14. According to learned counsel, the Arbitral
Tribunal mis-conducted in awarding interest on
various claims and, therefore, a ground to set aside
the arbitral award under Section 34 of the Act is
made out.
15. Placing reliance on Clause 13(3) of GCC,
learned counsel urged that since clause 13(3)
provides that no interest will be payable upon the
earnest money or the security deposit or amounts
payable to the contractor under the contract (except
Government securities), respondent No.1 (claimant)
was not entitled to claim interest on any of the
heads.
16. In other words, the submission was that the
Arbitral Tribunal mis-conducted in awarding
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interest to respondent No.1 (claimant) on their
various claims when the clause 13(3) of GCC did not
allow them to claim any interest on the sums
payable under the contract except on Government
securities, if deposited with the appellant.
17. It was, therefore, her submission that the
award to this extent was not legally sustainable
and, therefore, it was liable to be set aside under
Section 34 of the Act. Learned counsel elaborated
this submission by placing reliance on the
provisions of the Act and some decided cases cited
at the Bar.
18. In reply, learned counsel for respondent No.1
(claimant) supported the impugned judgment and
contended that the aforementioned point urged by
the appellant was neither raised nor urged before
the Arbitral Tribunal nor the High Court, i.e., Single
Judge and also Division Bench and hence it cannot
be permitted to be raised, for the first time, in an
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appeal under Article 136 of the Constitution for
want of any factual foundation and finding by any
Court on such plea.
19. Having heard learned counsel for the parties
and on perusal of the record of the case, we are
inclined to accept the argument of learned counsel
for respondent No.1 as, in our view, it has a force
and hence deserves acceptance.
20. It is not in dispute that the appellant did not
raise the plea based on clause 13(3) of the GCC
against respondent No.1 at any stage of the
proceedings either in their reply filed before the
Arbitral Tribunal or/and in submissions except
raising it, for the first time, before this Court in this
appeal.
21. On the other hand, we find that in Section 11
(5) proceedings, the appellant did not raise this
objection in their reply and instead gave their
express consent to refer the issue of award of
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interest payable on various claims (1 to 17) to
Arbitral Tribunal considering the said claim to be
arbitrable under the contract.
22. In our opinion, the appellant could have
registered their objection before the Single Judge at
the time of making a reference to the Arbitral
Tribunal by pointing out Clause 13(3) of GCC or
could have reserved their right to raise such
objection before the Arbitral Tribunal. It was,
however, not done.
23. Not only that, we further find that the
appellant, in their reply, filed before the Arbitral
Tribunal also did not raise this plea and allowed the
Arbitral Tribunal to adjudicate the said issue on
merits.
24. If the appellant was so keen to place reliance
on clause 13(3) of GCC to defeat the claim of
respondent No.1 relating to the award of interest on
various claims, then it was necessary for the
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appellant to have raised such plea specifically, in
their reply, before the Arbitral Tribunal. No such
plea was raised even before the Arbitral Tribunal.
25. Though we find that the appellant raised this
ground, for the first time, in Section 34 proceedings
[see-ground (cc)] before the Single Judge but again
this ground was not pressed at the time of
arguments. It is clear from the perusal of the Single
Judge’s order. Not only that, the appellant again
did not raise this plea before the Division Bench.
26. In the light of aforementioned factual scenario
emerging from the record of the case, we cannot
grant any indulgence to the appellant (Union of
India) to raise such plea for the first time here. In
our view, it is a clear case of waiver or/and
abandonment of a plea at the initial stage itself.
27. Everyone has a right to waive and to agree to
waive the advantage of a law made solely for the
benefit and protection of the individual in his
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private capacity, which may be dispensed with
without infringing any public right or public policy.
Cuilibet licet renuntiare juri pro se introducto. (See
Maxwell on The Interpretation of Statutes 12th
Edition at page 328)
28. If a plea is available-whether on facts or law, it
has to be raised by the party at appropriate stage in
accordance with law. If not raised or/and given up
with consent, the party would be precluded from
raising such plea at a later stage of the proceedings
on the principle of waiver. If permitted to raise, it
causes prejudice to other party. In our opinion, this
principle applies to this case.
29. In our opinion, the appellant is otherwise not
entitled to raise the plea on yet another ground. It
is not in dispute that the appellant’s application
filed under Section 34 of the Act was partly allowed
by the Single Judge only to the extent of two claims
regarding award of interest. In other words, the
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application suffered dismissal substantially on all
other claims except two claims mentioned above.
However, despite suffering substantial dismissal,
the appellant did not file any appeal to challenge the
part dismissal of their application.
30. In this view of the matter, in our view, the
order of the Single Judge insofar as it resulted in
dismissal of the appellant’s application became final
and attained finality. In order to keep the issue
alive, the appellant was under obligation to file
regular appeal before the Division Bench against
that part of the Single Judge’s order by which their
application under Section 34 of the Act in relation to
all other claims had been dismissed. It was only
then in the event of dismissal of the appeal, the
issues raised therein could have been pursued in
appeal to this Court under Article 136 of the
Constitution and that too only on the grounds
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raised therein and decided against the appellant. It
was, however, not done by the appellant.
31. In our opinion, therefore, this is yet another
infirmity which renders the appeal devoid of any
merit.
32. In our considered view, the grant of award of
interest on arbitrable claims by the Arbitral
Tribunal is not inherently illegal or against any
public policy or per se bad in law or beyond the
powers of the Arbitral Tribunal. In other words, it is
permissible to award interest in arbitrable claims by
the Arbitral Tribunal.
33. Indeed, Section 31(7) (a) and (b) of the Act
empowers the Arbitral Tribunal to award interest on
the awarded sum and secondly, it is always subject
to the agreement between the parties.
34. It is a well-settled principle in Arbitration Law
that the award of an Arbitral Tribunal once passed
is binding on the parties. The reason being that the
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parties having chosen their own Arbitrator and
given him an authority to decide the specific
disputes arising between them must respect his
decision as far as possible and should not make any
attempt to find fault in each issue decided by him
only because it is decided against one party. It is
only when the issue decided is found to be bad in
law in the light of any of the specified grounds set
out in Section 34 of the Act, the Court may consider
it appropriate to interfere in the award else not. The
case at hand falls in former category.
35. This case reminds us of the apt observations
made by former Chief Justice M.C. Chagla in Firm
Kaluram Sitaram vs. The Dominion of India, AIR
1954 Bombay 50. That was also a case between the
Railways and private party (citizen) wherein the
learned Chief Justice, in his distinctive style of
writing, commented upon the manner in which the
Railway contested the case against the private party
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(citizen) by raising some technical pleas and
observed as under:
“Now, we have often had occasion to say that
when the State deals with a citizen it should
not ordinarily rely on technicalities, and if
the State is satisfied that the case of the
citizen is a just one, even though legal
defences may be open to it, it must act, as
has been said by eminent judges, as an
honest person.”
36. The aforementioned observations has full
application to the case at hand because here also,
the appellant (railways) pursued their technical
legal point up to this Court against respondent No.1
(claimant) without even raising it at any stage of
proceedings much less to find out whether it could
be made a ground under Section 34 of the Act to
seek its setting aside. All was being done to defeat
respondent No.1’s just claim of interest which was
rightly awarded by the Arbitral Tribunal and upheld
by the Courts below on other grounds.
37. Learned counsel for the appellant did not urge
any other point to attack the impugned judgment
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including the reasoning given in support of the
award of interest except to urge the aforesaid point
to challenge its legality, which we have repelled by
not permitting the appellant to raise it in this
appeal.
38. In view of foregoing discussion, we find no
merit in the appeal, which thus fails and is
accordingly dismissed.
………...................................J.
[ABHAY MANOHAR SAPRE]
…...
……..................................J.
[NAVIN SINHA]
New Delhi;
December 08, 2017
