M/S RAVEECHEE AND CO versus UNION OF INDIA

Citation: [2018] 5 S.C.R. 138 · Decided: 03-07-2018 · Supreme Court of India · Bench: S.A. BOBDE · Disposal: Appeal(s) allowed

Cited by 5 judgment(s) · cites 4 · see the full citation network in Lexace

Judgment (excerpt)

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138
SUPREME COURT REPORTS
[2018] 5 S.C.R.
M/S RAVEECHEE AND CO.
v.
UNION OF INDIA
(Civil Appeal Nos. 5964-65 of 2018)
JULY 03, 2018
[S. A. BOBDE AND L. NAGESWARA RAO, JJ.]
Arbitration Act, 1940 – Interest pendente lite – Award of –
Power of the arbitrator – Award of mining contract to appellant –
Dispute between parties – Award of interest pendente lite on damages
excluding the security deposits, from the date of commencement of
the arbitral proceedings to the date of award – High Court set aside
the award in so far as the order of pendente lite interest – On appeal,
held: Liability to pay interest pendente lite arises because the
claimant has been found entitled to the damages and has been kept
out from those dues due to the pendency of the arbitration-pendente
lite – Thus, the liability for interest pendente lite does not arise from
any term of the contract, or during the terms of the contract, but in
the course of determination by the Arbitrators of the losses or
damages that are due to the claimant – When a dispute is referred
to for adjudication to an arbitrator, a contract clause excluding
interest upon the earnest money and security deposit, that is binding
on the parties cannot be extended to bind an Arbitrator – Arbitrator
has power to award interest pendente lite where justified – Thus,
judgment of the High Court is set aside – Order of interest pendente
lite restored.
Allowing the appeals, the Court
HELD: 1.1 The Arbitrators have awarded amounts to the
claimant on account of the losses suffered by them for various
reasons, mainly due to the ban on mining. These amounts are
not awarded on account of any payment due under the contract
but are awarded on losses determined in the course of arbitration
or the ‘lis’. A claimant becomes entitled to interest not as
compensation for any damage done but for being kept out of the
money due to him. Obviously, in a case of unascertained damages
such as this, the question of interest would arise upon the
[2018] 5 S.C.R. 138
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ascertainment of the damages in the course of the lis. Such
damages could attract interest pendente lite for the period from
the commencement of the arbitration to the award. Thus, the
liability for interest pendente lite does not arise from any term of
the contract, or during the terms of the contract, but in the course
of determination by the Arbitrators of the losses or damages that
are due to the claimant. Specifically, the liability to pay interest
pendente lite arises because the claimant has been found entitled
to the damages and has been kept out from those dues due to
the pendency of the arbitration i.e. pendente lite. [Para 11][143-
D-G]
1.2 The Arbitrators rightly awarded interest pendente lite
for the period from 26.09.1988 to 23.03.2001 which is the date of
the award, on the amounts found due to the claimant. Undoubtedly,
such a power must be considered inherent in an Arbitrator who
also exercises the power to do equity, unless the agreement
expressly bars an Arbitrator from awarding interest pendente
lite. An agreement which bars interest is essentially an agreement
that the parties will not claim interest on specified amounts. It
does not bar an Arbitrator, who is never a party to the agreement
from awarding it. The instant case must be decided on the general
rule that an arbitrator has the power to award interest unless
specifically barred from awarding it; and the bar must be clear
and specific. [Para 12][143-H; 144-A-C]
1.3 When a dispute is referred to for adjudication to an
arbitrator, a term of such a nature as contained in the Clause
16(3) of General Clauses Contract, that is binding on the parties
cannot be extended to bind an Arbitrator. The Arbitrator has
power to award interest pendente lite where justified. Therefore,
the judgment of the High Court is set aside and the award passed
by the Arbitral Tribunal is restored. [Para 18][146-B]
Irrigation Deptt., State of Orissa v. G.C Roy [1991] 3
Suppl. SCR 417: (1992) 1 SCC 508; Board of Trustee
for the Port of Calcutta v. Engineers-De-Space Age
[1995] 6 Suppl. SCR 327 : (1996) 1 SCC 516; Madnani
Construction Corporation Pvt. Ltd. v. Union of India
and Ors. [2009] 16 SCR 216 : (2010) 1 SCC 549;
Sayeed Ahmed & Co v. State of Uttar Pradesh and Ors.
M/S RAVEECHEE AND CO. v. UNION OF INDIA
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SUPREME COURT REPORTS
[2018] 5 S.C.R.
[2009] 10 SCR 841: (2009) 12 SCC 26; Superintending
Engineer and Ors. v. B. Subba Reddy [1999] 2 SC

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