M/S. MADNANI CONSTRUCTION CORPORATION (P) LTD versus UNION OF INDIA & OTHERS

Citation: [2009] 16 S.C.R. 216 · Decided: 07-12-2009 · Supreme Court of India · Bench: MARKANDEY KATJU · Disposal: Appeal(s) allowed
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Judgment (excerpt)

(2009] 16 (ADDL.) S.C.R. 216 
' 
A 
M/S. MADNANI CONSTRUCTION CORPORATION (P) 
LTD. 
v. 
UNION OF INDIA & OTHERS 
(Civil Appeal No. 8385 of 2004) 
B 
DECEMBER 7, 2009 
. 
[MARKANDEY KAT JU AND ASOK KUMAR 
GANGULY, JJ.] 
Arbitration Act, 1940: 
c 
Arbitration award - Scope of interference - Held: When 
arbitrator on the basis of record and materials placed before 
him arrives at specific findings which are not stigmatized as 
perverse by High Court, then High Court in reaching its 
D conclusions cannot ignore those findings. 
s. 29 - Interest -Award of interest by arbitrator- Interfered 
by High Court - On facts, held: Arbitration agreement did not 
contain prohibition on arbitrator to entertain claim for interest 
E 
on the amounts due under the contract - High Court erred in 
interfering with the award of interest. 
Dispute arose between the parties. Appellant served 
notice dated 16.11.1983 for appointment of arbitrator to 
settle the dispute. The authorities rejected the prayer. 
F Appellant filed application under Section 20 of Arbitration 
Act, 1940. The court appointed arbitrator. The Arbitrator 
gave his a.ward on 13.4.1992 holding that the Railways 
should pay an amount of Rs.4.48 lacs along wit!-. interest 
prevalent at that time from 16.11.1983 to 21.3.1992. In 
G passing the award, arbitrator relied on the Level book No. 
),, 
I, the Graph Sheets, the Log Book No. IA and the Log 
Book No. 4. The arbitrator found that there were 
subsequent alterations and overwriting in the entries 
made in the Log Book No.IA and the same were without 
H 
216 
MADNANI CONSTRUCTION CORPORATION (P) LTD. 217 
v. UNION OF INDIA 
.\ 
any initials by the concerned authority on behalf of the 
A 
respondent Railways. From such materials the arbitrator 
held that all the manipulations/alterations/overwritings 
had resulted in reducing the quantities of the work done 
-
by the appellant. Moreover in violation of the Railway 
rules and orders on the subject, the measurements were 
B 
not entered in the measurement book directly and mostly 
), 
entries in the measurement books were copied down 
from subsidiary records or note books. High Court held 
that Items Nos.1 to 3 of award were excepted matters and 
hence not arbitrable. On the award of interest, High Court c 
held that interest could not be awarded since the contract 
prohibited payment of interest. Hence the present appeal. 
Allowing the appeal, the Court 
HELD: 1. The arbitrator in his award after perusal of D 
i 
the level Book No.1, Graph-Sheets, Logbook No. 1A and 
Logbook No.4 came to a clear finding that there were 
manipulations/alterations/over writings by the railways 
and as a result of which the volume of work done by the· 
contactor was reduced. It is well settled that the arbitrator E 
is the master of facts. When the arbitrator on the basis 
of record and materials placed before him by the railways 
came to such specific findings and which were not 
-I 
stigmatized as perverse by the High Court, the High 
Court in reaching its conclusions cannot ignore those 
F 
findings. It goes without saying that in order to deny the 
claims of the contractor as covered under excepted 
matters, the procedure prescribed for bringing those 
claims under excepted matters must be scrupulously 
followed. The clear finding of the arbitrator is that it has G 
not been followed and the High Court did not express 
any dis-agreement on that. Therefore, finding of the High 
Court that those items were non-arbitrable cannot be 
sustained. [Paras 22 and 24] [225-F-H; 226-B-C] 
H 
218 
SUPREME COURT REPORTS [2009] 16 (ADDL.) S.C.R. 
_A 
2.1. Section 29 of the Arbitration Act enables the 
Court to award interest from the date of the decree and 
at such rate as the Court deems reasonable. The 
arbitrator's power to grant interest is governed by the 
provisions of Interest Act of 1978. There are three periods 
B for which interests are awarded - (a) pre-reference period 
i.e. from the date of the cause of action for going to 
arbitration and to the date of reference; (b) the pendente 
lite period i.e. from the date of reference to the date of 
award; and (c) the post-reference period i.e. from the date 
c of the award to the date of realization. [Paras 29, 30, 32 
and 34) [227-A-B; D-H; 228-A] 
Executive Engineer (Irrigation), Balimela and Others v. 
Abhaduta Jena and Others 1988(1 )SCC 418; Hindustan 
Construction Company Limited vs. State of Jammu and 
D Kashmir (1992) 4 SCC 217; State of O
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