STATE OF RAJASTHAN & ANR. versus MIS. FERRO CONCRETE CONSTRUCTION PVT. LTD.

Citation: [2009] 10 S.C.R. 31 · Decided: 22-04-2009 · Supreme Court of India · Bench: R.V. RAVEENDRAN · Disposal: Appeal(s) allowed
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Judgment (excerpt)

-I 
[2009) 10 S.C.R. 31 
"< 
1 
STATE OF RAJASTHAN & ANR. 
A 
v. 
MIS. FERRO CONCRETE CONSTRUCTION PVT. LTD. 
(Civil Appeal No.· 2764 of 2009) 
APRIL 22, 2009 
B 
[R.V. RAVEENDRAN AND LOKESHWAR SINGH 
PANTA, JJ.] 
ARBITRATION ACT, 1940 
s.30- Setting aside of award- Held: When there is no c 
allegation of moral misconduct against arbitrator, award can 
be attacked if there was legal misconduct on the part of the 
~ 
arbitrator in making the award and/or if there was an error 
apparent on the face of the award - In the instant case, the D 
arbitrator, in respect of claims 1 and 37-A of the contractor 
and rate of interest payable to contractor (claims 12 and 13) 
committed a legal misconduct by ignoring terms of contract 
and it was also a case of error apparent on the face of award 
- In a reasoned award if claim of contractor is equated to proof E 
of the claim, then it is obviously a legal misconduct and an 
.-4 
error apparent on the face of award - Allowing of interest at 
18% in an award governed by 1978 Act was an error on the 
face of award -
The rate of interest could not exceed the 
current rate of interest - As regards the award in respect of 
F 
other claims and counter claims, neither want of jurisdiction 
nor legal misconduct nor any error apparent on the face of 
award was made out, therefore, the award in respect of those 
claims and counter-claims is upheld - Award modified 
~ accordingly - Interest Act, 1978. 
G 
INTEREST ACT, 1978 : 
S.3- Interest on claims allowed in an award made under 
.. 
Arbitration Act, 1940 - Held: In the absence of an express bar, 
31 
H 
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32 
SUPREME COURT REPORTS 
[2009] 10 S.C.R. 
~ 
arbitrator had jurisdiction to award interest for pre-reference, 
• 
A 
pendente lite and future periods - However, award of interest 
~ 
at a rate higher than the current rate is an error on the face of 
award - Award modified accordingly - Arbitration Act, 1940. 
B 
The appellant (employer) entered into a contract with 
the respondent-contractor for manufacture, laying, 
•
testing and commissioning of water pipeline at a length 
~ 
of 37.41 kilometers. The value of the work as per the work 
order was Rs. 9,91,94,602.50. Since the contractor could 
c not complete the work within the stipulated time, the 
employer got the work completed through alternate 
agency by treating the contract as having been 
abandoned. As regards the settlement of disputes 
between the parties through arbitration, the matter 
D 
reached the Supreme Court and ultimately a sole 
.. 
arbitrator was appointed. Before the arbitrator the 
contractor filed its claim in 43 heads aggregating to 
Rs.6,21,29,626/-. The employer, besides filing its reply to 
the claim statement, made five counter claims to the tune 
of Rs.11,55,98,388/-. The arbitrator allowed certain claims 
E 
of the contractor amounting to about Rs.1,&7,00,000 and 
one counter claim of the employer (amounting to 
Rs.59,42,275/-. The contractor filed an application to make 
j. 
the award a rule of the court. The civil court allowed the 
application subject to modification of the award made on 
F 
claim 37-A of the contractor (direction to employer to pay 
Rs.12,072/- per day towards idle charges for machinery 
and staff etc. from the date of award) holding that the said 
charges would be payable per day from the date of 
decree. Both, the employer as also the contractor filed 
G 
appeals. The High Court dismissed the appeal of the 
employer and allowed that of the contractor restoring the 
i-
direction of the arbitrator to pay the compensation of 
Rs.12,072/- per day from the date of the award. 
H 
In the appeals filed by the employer, the question for 
STATE OF RAJASTHAN v. FERRO CONCRETE 
33 
CONSTRUCTION PVT. LTD. 
_, 
consideration before the Court was : whether there was 
A 
any legal misconduct or error apparent on the face of the 
award, in regard to the award of the arbitrator in respect 
of the claims and counter-claims. 
Allowing the appeals in part, the Court 
B 
HELD: 1.1. Section 30 of the Arbitration Act, 1940 inter 
alia provides that the award can be set aside on the 
ground that the arbitrator had misconducted himself or 
the proceedings, or that the award had been improperly c 
procured or is otherwise invalid. An error apparent on the 
face of the award, is a ground for setting aside the award 
u/s 30 or for remitting the award to the arbitrator u/s 16(1) 
(c) of the Act. [Para 13] [46-8-C] 
. 
~ 
Champsey Bhara & Co. vs. Jivraj Ba/loo Sp
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