STATE OF RAJASTHAN AND ANR. versus M/S. NAV BHARAT CONSTRUCTION CO.

Citation: [2001] SUPP. 5 S.C.R. 350 · Decided: 27-11-2001 · Supreme Court of India · Bench: M.B. SHAH · Disposal: Disposed off
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Judgment (excerpt)

A 
B 
c 
D 
E 
F 
G 
STATE OF RAJASTHAN AND ANR. 
v. 
M/S. NA V BHARAT CONSTRUCTION CO. 
NOVEMBER 27, 2001 
[M.B. SHAH AND B.N. AGRAWAL, JJ.] 
Arbitration : 
Arbirration Award-Interest on delayed payment-Claim for-Award 
passed by arbitrator~Con.finned by High Court-On appeal, held, Arbitrator 
passed a reasoned av.1ard-Non-consideration of counter clailn and grant o.f 
interest of delayed payment by Arbitrator justified-Order 2 Rule 2 not appli-
cable to the second r~ference to the Arbitrator-Code o,f Civil P."ocedure, 1908 
Order 2 Rule 2. 
Respondent-contractor claimed interest on delayed payment from 
the appellants. Arbitrator passed an award and granted interest @ 18 % 
on the principal amount claimed. District Court awarded interest at the 
rate of 15% from the date of decree. High Court confirmed the award 
made by the Arbitrator. 
In this appeal, it was contended that the Award made by the Arbitra-
tor was illegal because Arbitrator failed to consider counter-claim; and 
that the second reference to Arbitrator was not maintainable under Order 
2 Rule 2 of CPC and that the Arbitrator awarded interest despite the 
.contrary condition in the agreement. 
Disposing of the appeal, the Court 
HELD 1. As no set off or any counter claim was filed by the appel-
lant for the alleged amount due and payable by the contractor on the 
alleged ground that Accountant General's Officer has raised objection for 
payment of labour charges at accelerated rate, Arbitrator has rightly not 
considered the same which was sought to be raised after lapse of 4 years of 
reference. (352-G; H; 353-A] 
2. With regard to subsequent claims arising after the first reference, 
H 
that is after the bill was prepared, second reference to tbe Arbitrator was 
350 
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STATE v. NA V BHARAT CONSTRUCTISJN CO. [SHAH. J.] 
351 
not maintainable under Order 2 Rule 2 CPC as rightly held by the Arbi· 
A 
tration and the courts below. [353-B; C] 
3. The appellant did not raise the contention before the arbitrator or 
at any stage thereafter that under Clause 23 of the Agreement between the 
parties, contractor was not entitled to recover any interest on delayed 
payment. Thus, it cannot be held that arbitrator has committed any error 
apparent on the face of the record or has misconducted himself in passing 
the impugued award. Further as the contention was not raised before the 
arbitrator or at any stage thereafter, it is not necessary to deal with or 
decide the same in the present appeal. [353-C; F) 
State of U.P. v. Harish Chandra and Co., [1999] l SCC 63, referred to. 
4. The Award is modified qua the rate of interest considering the 
dispute involved and overall circumstances of the case. Respondent-claim-
ant is entitled to recover the said amount with interest at the rate of 6% 
only. [353-G; H; 354-A) 
CIVIL APPELLATE JURISDICTION : Civil Appeal NO. 8115 of 200 !. 
From the Judgment and Order dated 4.12.2000 of the Rajasthan High 
B 
c 
D 
Court in S.B.C.M.A. No. 6.59 of 1999. 
E 
WITH 
Special Leave Petition (C) No. 6172 of 2001. 
Javed Mahmud Rao and V. Krishna Murthy for the appearing parties. 
F 
In-person for the Petitioner in S.L.P. (C) No. 6172 of 2001. 
The Judgment of the Court was delivered by 
SHAH, J. CA. No. 8JJ5 of 2001 @ S.L.P. (C) No. 7192 of 2001. 
G 
Leave granted. 
Learned Senior Counsel Mr. Ashwani Kumar appearing for the appellant 
contended that the judgment and decree passed by the High Court confirming 
H 
352 
SUPREME COURT REPORTS 
(2001] SUPP. 5 S.C.R. 
A 
the award made by the arbitrator is on the face of it illegal because : 
B 
c 
(a) 
Arbitrator has failed to consider counter-claim. 
(b) 
second reference to arbitrator was not maintainable under Order 
2 Rule 2 CPC, and 
(c) 
the arbitrator has awarded interest despite the contrary condition 
in the agreement. 
As against this, Mr. G.L. Sanghi learned senior counsel for the respond-
ent as well as the respondent who is appearing in person submitted that in the 
written statement, counter-claim or set off was neither pleaded nor proved by 
the appellant before the arbitrator. He also contended that in case of claims 
raised by the respondent after preparation of final bill, there is no question of 
application of Order 2 Rule 2 CPC as rightly held by the arbitrator and the 
Courts below. For the contention based on clause 23 of the Agreement, it is 
D 
submitted that the appellant never contended before the arbitrator that clause 
23 provides for non-payment of i
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