INDIAN HUME PIPE CO. LTD. versus STATE OF RAJASTHAN

Citation: [2009] 15 S.C.R. 254 · Decided: 19-10-2009 · Supreme Court of India · Bench: V.S. SIRPURKAR · Disposal: Appeal(s) allowed

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Judgment (excerpt)

A 
B 
(2009] 15 (ADDL.) S.C.R. 254 
INDIAN HUME PIPE CO. LTD. 
v. 
STATE OF RAJASTHAN 
(Civil Appeal No. 6971 1 of 2009) 
OCTOBER 19, 2009 
[V.S. SIRPURKAR AND DEEPAK VERMA, JJ.] 
Arbitration Act, 1940 - s. 29 - Interest on arbitral award -
Competence, jurisdiction and power of arbitrator to award 
C interest - Held: If certain amount was withheld wrongly and 
without justification, then the aggrieved party would be. fully 
justified in claiming interest - This is mandate of s.34 CPC 
as also s. 29 of the Act - Power to award interest at all stages 
vests with the arbitrator - If there is no embargo or legal hurdle 
D in awarding interest, there cannot be any justifiable reason to 
deny the same - Code of Civil Procedure, 1908 - s.34. 
The parties .entered into an agreement for laying of 
PSC pipeline. The agreement contained an arbitration 
E clause. Dispute arose between the parties. The matter 
was referred for arbitration. 
The arbitrator passed award substantially allowing 
the claim of appellant-contractor and also granted 
interest on the outstanding payment at all the three 
F stages i.e. p.-e-reference, pendente lite interest and future 
interest from the date of the award till the date of payment 
or the date 0f making of the award a rule of Court, 
whichever is earlier. On Respondent-State filing 
objections un Jer Section 30 read with Section 33 of the 
G Arbitration Act, 1940, the District Court disallowed the 
grant of pendente lite interest and future interest. The order 
was upheld by the High Court. Hence the presen~ appeal. 
Allowing the appeal, the Court 
H 
254 
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.... 
INDIAN HUME PIPE CO. LTD. v. STATE OF 
255 
RAJASTHAN 
HELD:1.1. It is well settled that arbitrators have the 
A 
f 
competence, jurisdiction and power to award interest for 
the period from the date of award to date of payment as 
also for pre-reference, pendente lite and post award. The 
' 
only caveat is that the amount of interest so awarded 
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should be reasonable and agreement between the 
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parties should not prohibit grant of such interest. [Para 
14] [258-E-F] 
... 
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1.2. The High Court erred in coming to the conclusion 
that even though arbitrator was competent to award c 
interest but it was not mandatory on his part to do so. The 
said reasoning does not appear to be legally tenable and 
convincing, for the simple reason, if the amount has been 
withheld wrongly and without any justification then of 
course the aggrieved party would be fully justified in 
D 
claiming interest. This is the mandate of Section 34 CPC 
t-
as also Section 29 of the Arbitration Act, 1940. Both the 
aforesaid provisions make it abundantly clear that power 
to award interest at all stages vests with the arbitrators. 
Arbitrators are bound to make the award in accordance 
with law and if there is no embargo or legal hurdle in 
E 
awarding interest for the aforesaid three stages 
mentioned hereinabove then there cannot be any 
justifiable reason to deny the same. [Paras 20 and 21] 
'Ii 
[263-D-F] 
1.3. The impugned orders passed by District Court 
F 
, 
and the High Court insofar as they refused to grant 
' 
interest pendente lite and future are quashed and the 
amount together with interest as awarded by the 
arbitrator is restored. [Para 23] [264-8] 
G 
Hindustan Construction Co. Ltd. Vs. State of Jammu & 
-t 
Kashmir (1992) 4 SCC 217 and Bhagawati Oxygen Ltd. etc. 
v. Hindustan Copper Ltd. etc. (2005) 6 SCC 462, relied on. 
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A 
B 
c 
D 
E 
F 
G 
H 
256 SUPREME COURT REPORTS [2009) 15 (ADDL.) S.C.R. 
Case Law Reference: 
(1992) 4 sec 211 
relied on 
Para 16 
(2005) 6 sec 462 
relied on 
Para 17 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 
6971 of 2009. 
From the Judgment & Order dated 15.5.2007 of the High 
Court of Judicature for Rajasthan, Jaipur Bench, Jaipur in S.B. 
Civil Misc. Appeal No. 1631 of 2006. 
K. Ramamoorthy, N. Shoba, Sriam J. Thalapathy and Adhi 
Venkataraman for the Appellant. 
Mukul Kumar (for Milind Kumar) for the Respondent. 
The Judgment of the Court was delivered by 
DEEPAK VERMA, J. 1. Leave granted. 
2. This appeal arises out of order and Judgment dated 
15.5.2007 passed by learned Single Judge of High Court of 
Judicature for Rajasthan, Jaipur Bench in SB Civil 
Miscellaneous Appeal No. 1631/2006, whereby and 
whereunder the appeal preferred by appellant herein under 
Section 39 of the Arbitration Act, 1940 (hereinafter shall be 
referred to as 'the Act') has been dismissed, which arose out 
of the orders

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