SAYEED AHMED & CO. versus STATE OF UP & ORS.

Citation: [2009] 10 S.C.R. 841 · Decided: 09-07-2009 · Supreme Court of India · Bench: R.V. RAVEENDRAN · Disposal: Case Partly allowed

Cited by 9 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

..... 
[2009] 10 S.C.R. 841 
SAYEED AHMED & CO. 
A 
V. 
STATE OF UP & ORS. 
(Civil Appeal No. 4197 of 2009) 
JULY 9, 2009 
B 
[R. V. RAVEENDRAN AND P. SATHASIVAM, JJ.) 
~ 
Arbitration and Conciliation Act, 1996: s.31(7)(a) and (b) 
- Power of arbitrator to award interest - Pre-reference period, 
pendente lite and future interest - Held : If arbitration c 
agreement bars payment of interest, then such bar would 
operate for pre-reference period and pendente lite only i.e. 
only till date of award and not thereafter - Award of interest 
by arbitrator from date of award till date of payment@ 18% 
p.a. upheld. 
D 
The construction work entrusted to appellant under 
an agreement was completed on 31.3.1996. The 
respondent rejected some of the claims of appellant 
which gave rise to dispute. The matter was referred to E 
arbitrator on 13.3.1997. The arbitrator made an award 
dated 31.7.2001 directing the respondents to pay to the 
appellant Rs.24, 18,5861- with interest at 18% p.a. from 
1.4.1996 till date of payment; the amount if any, due to 
appellant on finalizing the final bill with interest at 14% 
F 
p.a. from 1.5.1996 till date of payment; and the security 
deposit amount due with interest at 12% p.a. from 
1.10.1996 till date of payment. The application was filed 
under Section 34 of Arbitration and Conciliation Act, 1996 
for setting aside the award, which was dismissed. 
G 
.., 
The High Court held that having regard to the bar 
contained in clause G 1.09 of the contract, the arbitrator 
had no power to award interest and consequently, it set 
aside that part of the award granting interest till date of 
841 
H 
842 
SUPREME COURT REPORTS 
[2009] 10 S.C.R. 
A award. It however granted interest at 6% p.a. from the 
date of award till the date of payment. Hence the appeal. 
Partly allowing the appeal, the Court 
HELD : 1.1. The legislature while enacting the 
B Arbitration and Conciliation Act, 1996, incorporated a 
specific provision in regard to award of interest by 
Arbitrators. Sub-section (7) of section 31 of the Act deals 
with the arbitrator's power to award interest. Clause (a) 
relates to the period between the date on which the cause 
C of action arose. and the date on which the award is made. 
Clause (b) relates to the period from the date of award to 
date of paymen~. [Para 10] [849-E-F] 
Secretary, Irrigation Department, Govt. of Orissa vs. G. C. 
D Roy 1992 (1) SCC 508; Executive Engineer, Dhenkanal 
Minor Irrigation Division vs. N. C. Budharaj 2001 (2) SCC 721; 
Bhagawati Oxygen Ltd. vs. Hindustan Copper Ltd. 2005 (6) 
SCC 462; Superintending Engineer v. Subba Reddy 199 9 
(4) SCC 423 and State of Rajasthan v. Ferro Concr.ete 
E 
Construction Pvt. Ltd. 2009(8) SCALE 753, referred to. 
1.2. Clause G-1.09 of the Contract makes it clear that 
no interest or damages will be paid by Government, in 
regard to : (i) any money or balance which may be lying 
with the Government; (ii) any money which may become 
F 
due owing to any dispute, difference or misunder-
standing between the Engineer-in-charge on the one 
hand and the contractor on the other hand; (iii) any delay 
on the part of the Engineer-in-Charge in making 
periodical or final payment; or (iv) any other respect 
G whatsoever. The clause is comprehensive and bars 
interest under any head in clear and categorical terms. 
In view of clause (a) of sub-section (7) of section 31 of 
the Act, it is clear that the Arbitrator could not have 
awarded interest upto the date of the award, as the 
H 
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SAYEED AHMED & CO. v. STATE OF U P & ORS. 843 
~ 
agreement between the parties barred payment of A 
interest. The bar against award of interest would operate 
not only during the pre-reference period that is up to 
13.3.1997 but also during the pendente lite period that is 
from 14.3.1997 to 31.7.2001. Whether the provision in the 
contract bars the employer from entertaining any claim B 
for interest or bars the contractor from making any claim 
for interest, it amounts to a clear prohibition regarding 
interest. The provision need not contain another bar 
prohibiting arbitrator from awarding interest. [Paras 11 
and 14] (850-H; 855-D-E] 
c 
State of U.P. v. Harish Chandra & Co. 1999 (1) sec 63; 
State of Orissa vs. 8.N. Agarwal/a 1997 (2) Sec 469, held 
inapplicable. 
)_ 
Board of Trustees for Port of Calcutta vs. Engineers-De-
D 
Space-Age 1996(1) SCC 516, referred to. 
1.3. The arbitrator awarded interest at the rate of 18% 
p.a. on Rs.24.18 lacs, 14% 

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