HINDUSTAN CONSTRUCTION CO. LTD. versus STATE OF JAMMU AND KASHMIR

Citation: [1992] SUPP. 1 S.C.R. 297 · Decided: 28-08-1992 · Supreme Court of India · Bench: S. RANGANATHAN · Disposal: Appeal(s) allowed

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Judgment (excerpt)

HINDUSTAN CONSTRUCTION CO. LTD. 
A 
v. 
STATE OF JAMMU AND KASHMIR 
AUGUST 28, 1992 
(S. RANGANATHAN, V. RAMASWAMI AND B.P. JEEVAN 
B 
REDDY, JJ.] 
Arbitration Act, 1940: 
Sections 14, 29, 30 and 33-Award by Arbitrators-lnteiference 
with-When arise!l-Whether arbitrators competent to award· interest from the C 
date of award till date of payment. 
Civil Procedure Code, 1908: 
Section 34-Award of interest Pendente lite-Applicability to proceed- D 
ings before arbitrator. 
The appellant-company entered into a contract with the respondent-
State for the construction of a bridge. Certain disputes which arose 
between them were referred to arbitration, in pursuance of a clause there-
for in the contract. There were eight items of claims by the Contractor. E 
The two joint arbitrators appointed for the purpose made an award 
allowing the entire claim of the appellant on items Nos. 1 and 2 and totally 
rejected the claims under items Nos. 3 and 7. Items Nos. 4, 5, 6 and 8 were 
allowed in part. 
There were further proceedings before the High Court under sec-
F 
lions 30 and 33 of the Arbitration Act. A Single Judge made the award in 
respect of items Nos. 1, 4 and 6 a rule of Court, but set aside the award in 
respect of items Nos. 2 and 5. On items No. 8, he held that the arbitrators 
could not have awarded future interest upto the date of payment of the 
amounts awarded. Rejection of claims under item Nos. 3 and 7 was not G 
challenged before the High Court. 
The appeal by the contractor and the cross-objections by the State 
were dismissed by the Division Bench which, agreeing with the Single 
Judge, set aside the award on Items No. 2 and 5 viz., dewatering of piers 
by more than one pump and refund of toll tax payment, on the ground that H 
297 
298 
SUPREME COURT REPORTS[l992] SUPP. 1 S.C.R. 
A It was in violation of express terms of the clauses of the contract between 
the parites. On the issue of interest claim i.e. items No. 8, the Court held 
that the power to award future interest (i.e. from the date of the award till 
the date of payment) was available only to the Court and not to the 
arbitrator. 
B 
Hence the appellant-company filed two 11ppeals b•fore this Court in 
respect of item Nos. 2 and S, and also the grant of future interest. 
On behalf of the appellant, it was contended that in setting aside the 
award on items No. 2 and S the Court had overlooked that it was dealing 
C with a non-speaking award and travelled far beyond the scope of permis· 
slble grounds of judicial review of such an award; that in dealing with 
items No.5, the Division Bench considered itself at liberty to go beyond the 
award, take note of such reasons for the award as could proceed to 
examine whether those reasons were right or erroneous and, therefore, 
proceeded to place its own interpretation on clause 1.'~ and condition 32 
D of the contract, and having reached the conclusion that the interpretation 
placed by the arbitrators on the said clause was erroneous, proceeded to 
set aside that part of the award. 
It was contended on behalf of the State that since these were items 
E covered by certain terms of the contract, the Court should look at those 
terms and interpret them. 
Allowing the appeals, this Court, 
HELD : 1. The arbitrator is competent to award interest for the 
F 
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 refer· 
ence is a matter of substantive law, the grant of interest for the post 
award period is matter of procedure. Section 34 of the Code of Civil 
G Procedure, 1908 provides both for awarding of interest pendente lite as wen 
as for the post-decree period and the principles of Section 34 "has been 
held applicable to proceedings before the arbitrator, though the section as 
such may not apply. Therefore, the High Court was not right in setting 
aside the award of interest by the arbitrators. [303 8-D] 
H 
Secrermy; Imgation Depaltment of Orissa v. G.C. Roy, 1991 (6) J.T. 
HINDUSTAN CONSTRUCTION CO. v. J&K 
299 
349, followed. 
Union of India v. Bongo Steel Furniture (P) Ltd., (1967] 1 SCR 
324/329 and Gujarat Water Supply & Sewage Board v. Unique Erectors, 
(1989] 1 SCR 318, relied on. 
A 
2.1. The High Court was not correct In setting aside the award on B 
items No. 2 and S on the ground that there was an error apparent on the 
f

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