THE STATE OF KERALA ETC. ETC. versus M/S. ARYA REFRIGERATION & A/C CO. ETC. ETC.

Citation: [2004] SUPP. 3 S.C.R. 291 · Decided: 03-08-2004 · Supreme Court of India · Bench: S.N. VARIAVA · Disposal: Disposed off

Judgment (excerpt)

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THE ST ATE OF KERALA ETC. ETC. 
V. 
MIS. ARYA REFRIGERATION & AIC CO. ETC. ETC. 
AUGUST 3, 2004 
[S.N. VARIAVA AND ARIJIT PASAYAT, JJ.] 
Arbitration Act, 1940; Section 91/nterest on Delayed Payments to 
Small Scale and Industrial Undertakings Act, 1993; Ss. 3, 5 and 6 : 
A 
B 
Agreement with State Government for supply and erection of a C 
storage plant-Plant could not be installed due to non-construction of 
building by the State-Dispute referred to Arbitrators-Award-
Cancellation of contract by the State-Challenged by the party by referring 
the matter to arbitration-State neither nominated arbitrator nor participated 
in the proceeding-Award-Trial Court made the award rule of the 
Court-Correctness questioned by the State-Award set aside by the High D 
Court-Supreme Court referred the matter aji-esh to arbitrator appointed 
by it and, as an interim measure, directed the State to deposit the sum as 
awarded by the Arbitrator and permitted the party to withdraw the amount 
with stipulation to return the amount with interest @ 15% if appeal 
allowed-Award filed-Challenged by the party-Held : Award is well- E 
reasoned and detailed one-Terms of the contract not disregarded-
Findings not perverse/unreasonable-Since payment of interest @ 15% on 
the amount received by the claimant was conditional and condition not 
fi1ljilled, claimant not liable to pay interest @ 15% but could pay @ 9% 
only-Award modified-Code of Civil Procedure, 1908; Section 115. 
F 
Respondent had entered into an agreement with appellant-State 
for supply and erection of an ice-cum-cold storage plan. Respondent 
could not install the plant as building to house it was not constructed 
b!' the State Government. Thus dispute arose which was referred for G 
Arbitration. Arbitrator gave award in favour of the respondent. Later, 
State Government cancelled the contract. Respondent referred the 
matter also to Arbitration by nominating an Arbitrator, The State, 
however, did not nominate any Arbitrator, nor did it participate in the 
arbitration proceedings. The Arbitrator made award in favour of the 
respondent. Award was made rule of the Court. State challenged it H 
291 
292 
SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R. 
A before the High Court. Division Bench of the High Court set aside the 
award. Hence the appeal and the cross appeal. 
This Court appointed an Arbitrator and referred the matters for 
arbitration. In the meantime, it directed the appellant-State to deposit 
B the amount as awarded by the Arbitrator in earlier arbitration 
proceedings and allowed the respondent to withdraw the amount 
subject to the condition that it should return the same along with 
interest@ 15% if the appeal is allowed. The Arbitrator appointed by 
this Court has filed the award for making it rule of the Court. 
c 
It was contended by the respondent that the award was liable to 
be vacated on grou11ds that the Arbitrator exceeded his jurisdiction, 
disregarded the terms of the contract in making the award; that the 
liability to interest ought to be in terms of provisions of the Delayed 
Payment of Small Scale Industrial Undertakings Act; and that the 
D Arbitrator failed to take notice of certain adjustment of amount 
received by the respondent and payment though ordered but not 
received by it. 
It was submitted for the State that nothing ~as been shown by the 
E respondent in support of its submission that the Arbitrator overlooked 
any relevant material or the award suffered from any patent illegality. 
Disposing of the appeals by modifying the award, the Court 
HELD : I.I. The Arbitrator has given a very well reasoned and 
F detailed award. It could not be shown as to in what way the fundamental 
terms of the contract were disregarded. The Arbitrator has referred 
to various clauses of the contract and the effect thereof. The findings 
are in no way perverse or unreasonable. There is no substance in the 
plea of the claimant that the award suffered from any infirmity. So far 
G as applicability of the Interest as per Delayed Payments Act is 
concerned, it appears that before the Arbitrator no claim in that 
regard was made. In order to attract the provisions of the said Act, 
the factual aspect like prevailing bank rate of interest etc. were to be 
brought on record. This has not been done. So the plea in that regard 
H is also without any substance. [297-B-CI 
STATE v. ARYA REFRIGERATION & NC CO. (PASAYAT, J.]293 
1.2. There is nothing on record to show that

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