M/S. DURGA RAM PRASAD versus GOVT. OF ANDHRA PRADESH

Citation: [1994] SUPP. 6 S.C.R. 1 · Decided: 23-11-1994 · Supreme Court of India · Bench: K. RAMASWAMY, K. JAYACHANDRA REDDY · Disposal: Dismissed

Judgment (excerpt)

, 
MIS DUGRA RAM PRASAD 
v. 
GOVT. OF ANDHRA PRADESH 
NOVEMBER23, 1994 
[K. RAMASWAMY AND K. JA YACHANDRA REDDY, JJ.] 
Arbitration Act, 1940-Contract to execute work-Amount due to 
contractor withheld-Claim of State that work not executed as per 
contract-Arbitration-Entitlement of interest on amounts withheld by 
State-Held: Party not entitled to interest. 
A 
B 
c 
The appellant had entered into a contract to construct foodgrains 
godown. In execution thereof, a dispute had arisen whether the 
appellant had executed the work as per the contract and was entitled to 
certain sums of money withheld by the engineer and also to the interest 
payable thereon. The dispute had been referred to the Arbitrator, who D 
in his Award awarded a sum of money with interest on the amounts 
wrongfully withheld by the engineer. The State challenged the 
entitlement of interest on the amounts withheld by the engineer. The 
High Court negatived the claim for interest. These appeals by special 
leave arise from the judgment of the High Court. 
The appellant contended that when the appellant had executed the 
work within the period, in terms of the contract, and the officials of the 
respondent had wrongfully withheld the due payment, on the respective 
dates, the appellant was entitled to the interest on the amounts 
wrongfully withheld. It further contended that Clause 69 of the M.D. 
E 
S.S. was inapplicable to the facts of this case. 
F 
The questions which arose for consideration were whether the 
appellant was entitled to payment of interest from the respective dates 
on which the amounts were withheld by the concerned engineer and 
whether the dispute was arbitrable. 
Dismissing the appeal, this Court 
----
HELD: I.I. The claim of the State appears to be that the appellant 
had not constructed the godown in accordance with the specifications 
G 
and that, therefore, they withheld the payment. Unless the dispute is 
resolved and the amount is found due, the contractor is not entitled to H 
2 
SUPREME COURT REPORTS 
(1994] SUPP. 6 S.C.R 
A 
the payment of it. The interest in terms of clause 69 of MDSS is 
contracted out. When such be the position, then mere reference does 
give jurisdiction to the arbitrator to award interest for the period prior 
to the reference. [4G & H, 5 A] 
B 
A.P. S.R.T.C. v. P. Ramana Reddi, (1989) 1ALT195, Distinguished. 
1.2. In this case the contractor is not entitled to payment of interest 
in terms of clause 69 of MDSS for the period anterior to the reference 
for arbitration until the final settlement of the amount due to the 
contractor of his account is determined. In this case that dispute was 
determined by the arbitrator in his award. Therefore, from the date of 
C 
withholding till the date of award the appellant is not entitled to the 
payment of interest. The arbitrator has no jurisdiction to arbitrate that 
dispute. The High Court, therefore, rightly negatived the claim for 
interest. [SE & F] 
Executive Engineer (Irrigation) v. Abhaduta Jena, [1988] 1 SCC 418; 
D 
State of Orissa v. Niranjan Swain, [1989) 4 SCC 269; Secretary, Irrigation 
Department v. G.C. Ray, [1992)-1 SCC 508; Distinguished. 
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2262-63 of 
1977. 
E 
From the Judgment and Order dated 23.4.75 of the Andhra Pradesh 
F 
G 
H 
High Court in Memo of Cross-Objection in C.M.A. No. 191of1973. 
B. Kanta Rao for the Appellant. 
A.K. Ganguli, T. V.S.N. Chari and Nikhil Nayyar for the Respondent. 
The following Order of the Court was delivered: 
. These appeals by special leave arise from the judgment of the Division 
Bench of the Andhra Pradesh High Court in Memo of, Corss Objection in 
C.M.A. No. 191/75 dated 23.4.75. The appellant had entered into a contract 
on 16.3.65 to construct foodgrains godown at Karimnagar. In execution 
thereof, a dispute had arisen whether the appellant had executed the work as 
per the contract and is intitled to certain sums of money withheld by the 
engineer and also to the interest payable thereon at 12% etc. The dispute 
has been referred to the Arbitrator, a retired Chief Engineer, who in his 
Award dated 12.4.72 awarded a sum of Rs. 27, 776 with interest at 12% on 
the amounts wrongfully withheld by the Engineer. We are concerned in 
I 
D.R. PRASAD v. GOVT. OF A.P. 
r )3 
these appeals only with the entitlement of interest on the amounts withheld A 
by the engineer. The Division Bench concluded, while negativing the claim 
for interest, thus: 
"We are, h

Excerpt shown. Read the full judgment & AI analysis in Lexace.