B.V. RADHA KRISHNA versus SPONGE IRON INDIA LTD.

Citation: [1997] 2 S.C.R. 707 · Decided: 04-03-1997 · Supreme Court of India · Bench: A.M. AHMADI · Disposal: Appeal(s) allowed

Judgment (excerpt)

.. A,· 
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B.V. RADHA KRISHNA 
A 
v. 
SPONGE IRON INDIA LTD. 
MARCH 4, 1997 
[AM. AHMADI, CJ!. AND K. VENKATASWAMI, J.] 
B 
Arbitration Act, 194()-Section 2D-'-Contract to execute work-Dis-
pute-Amount due withheld-Matter Referred to Arbitration-Award by Ar-
bitrator for payment of dues with interest-Challenge before High 
Court~Interference by High Court-Held, not justified-High Court exceeded C 
its jurisdiction in substituting its views for those of Arbitrator. 
Interest Act 1978: Section 3( l)(b )-Entitlement of interest-Held, ap-
pellant entitle to interest from the date mentioned in the demand notice. 
The appellant entered into a contract to transport the waste and D 
finished products of the respondent company. Certain dispute arose be-
tween the parties and the appellant issued notice. to the respondent for 
settling the bills and claims. On failure to settle the bills, the appellant 
approached the City Civil Court under section 20 of the Arbitration Act, 
1940. The Arbitrator in his award determined a sum of money with interest E 
which was withheld by the respondent. The respondent unsuccessfully 
challenged the award before the City Civil Court. On further appeal, the 
High Court reduced the amount and interest payable to the appellant. 
Hence the present appeal. 
The contention of the appellant was t,hat the High Court exceeded F 
its jurisdiction by interfering with the award of the Arbitrator. It was also 
contended that in view of Section :3(1)(b) of the Interest Act 1978 interest 
would be available from the date mentioned in the demand notice. 
Allowing the appeal, this Court 
G 
HELD : 1. The High Court exceeded its jurisdiction under section 
30 of the Arbitration Act 1940 by dealing with the issue as an appellate 
court. The Arbitrator has taken into account the o,ral evidence of both the 
parties and also the documentary evidence placed before him. Despite the 
settled law, the, High Court has ~ubstituted its own view in place uf the H 
707 
708 
SUPREME COURT REPORTS 
(1997] 2 S.C.R. 
A Arbitrator's view as if it was dealing with an appeal. [710-E, G, 716-A] 
State of Rajasthan v. Puri Constrnction Co. Ltd. and Anr., [1994) 6 
SCC 485 and Hindustan Constrnction Co. Ltd. v. UOI & Ors., [1995) 3 SCC 
8, relied on. 
B 
2. The High Court was also wrong in awarding interest from the date 
of notice and not from the date mentioned in the notice. [717-A] 
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1745-46 
of 1997. 
C 
From the Judgment and Order dated 29.9.95 of the Andhra Pradesh 
D 
E 
High Court in C.M.A. No. 1277/88 and C.R.P. No. 3695/88. 
K. Madhava Reddy D. Prakash Reddy and G. Prabhakar for the 
Appellant. · 
T.V.S.N. Chari for the Respondent. 
The Judgment of the Court was delivered by 
K. VENKATASWAMI, J. Leave granted. 
Heard learned counsel for the parties. The short question that arises 
for our consi.deration is whether the High Court was justified in interfering 
with the award by reducing the amount for the· work done as well as 
allowing the interest only from the date of notice demanding the amount. 
F 
The appellant contractor undertook the work of transportation of 
waste and finished products within the plant of the respondent. company 
commencing from 16.4.1982 to 31.3.1983. The agreement in respect of that 
contract was executed by both th& parties on 8.6.1982. As certain disputes 
arose between the parties in respect of transportation work the appellant 
issued notices to the respo~dent calling upon them to settle the bills and 
G claims raised by him. As the respondent failed to settle the bills, the 
appellant moved the City Civil Court, Hyderabad under Section 20 of the 
Arbitration Act (hereinafter referred to as "the Act") for appoµitment of 
a Sole Arbitrator to adjudicate upon the dispute between the parties. Mr. 
Justice K. PullJl.ayya (retired Judge of the High Court of Andhra Pradesh) 
H was appointed as Sole Arbitrator by order dated 31.10.1985. The learned 
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._,,( 
B.V. RADHAKRISHNAv. SPONGE IRON(!.) LTD. [K. VENKATASWAMl,J.) 7(.'f} 
. 
i ! 
Arbitrator by the award dated 1.8.1986, after giving opportunity.to both' the A 
parties, determined the amount of Rs. 5,29,864.55 as payable by the respon-
dent Company to the appellant. In addition to that the Arbitrator also 
awarded interest at the rate of 18 per cent per annum on the said about 
from 1.4.1983 till the date of award being made the rule of Court. 
The appellant moved the City Civil Court. Hyder.a bad b

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