U.P. COOPERATIVE FEDERATION LTD. versus M/S. THREE CIRCLES

Citation: [2009] 14 S.C.R. 310 · Decided: 10-09-2009 · Supreme Court of India · Bench: TARUN CHATTERJEE · Disposal: Dismissed

Judgment (excerpt)

(2009] 14 (ADDL.) S.C.R. 310 
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A 
U.P. COOPERATIVE FEDERATION LTD. 
+ ..... 
v. 
M/S. THREE CIRCLES 
(Civil Appeal No. 2732 of 2001) 
B 
SEPTEMBER 10, 2009 
[TARUN CHATTERJEE AND HARJIT SINGH BEDI, JJ.] 
ARBITRATION ACT, 1940: 
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,. 
c 
Award passed by arbitrator - Application for setting it 
aside - Employer claiming deduction of penal rates on the 
balance steel remaining with contractor and towards ' bad 
workmanship' - Claim rejected by arbitrator - High Court 
dismissing employer's application - Held: The findings of 
D arbitrator that in the absence of evf dence regarding the 
"' • 
balance steel, payment was to be made at the issue rates and 
not at penal rates and that the bills presented by contractor 
for use of materials having been passed by architect of 
employer without any objection, employer was estopped from 
E raising issue of inferior quality of workmanship, do not suffer 
from any infirmity - Besides, the relevant clauses of the 
agreement did not include within their purview ' bad 
workmanship' - High Court rightly rejected the argument that 
-t 
'negligence or lack of proper care' was synonymous- to 'bad 
F 
workmanship' - There is no·ground for setting aside the award 
under the Act - Interest. 
Interest: 
Arbitration-Award - Interest for pre-reference period and 
G pendente lite - Interest on interest - Interest on cost - Held: 
High Court rightly held that in the instant case, co·ntract being 
1--
silent as to awarding of interest, arbitrator had power to award 
· interest for pre-reference period, pendent elite interest , 
interest on cost and interest on interest - High Court rightly 
H 
310 
u:P. COOPERATIVE FEDERATION LTD. v. THREE 
311 
"" 
CIRCLES 
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reduced interest on 'current rate' as per s.3 of Interest Act -
A 
However, keeping in view the long lapse of time from the date 
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of award, for the ends of justice, interest reduced to 15% by 
High court is further reduced to 7% in exercise of jurisdiction 
under Article 142 of the Constitution - Interest Act, 1978 -
Constitution of India, 1950 - Article 142. 
B 
WORDS AND PHRASES: 
41 
~ 
Expression 'wqrkmanship' - Connotation of in the context 
of construction contract. 
c 
A contract was entered into between the appellant 
Co-operative Federation and the respondent for 
construction of a cold storage. Disputes arose between 
the parties. in respect of claims made by the respondent-
• 
concern, which filed a suit for appointment of arbitrator . D 
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Ultimately, the High Court, appointed an arbitrator, who 
passed an award directing the appellant to pay a sum of 
Rs. 32,68,805.80 to the respondent along with interest till 
the date of final payment. The application of the appellant 
for setting aside the award was dismissed by the single E. 
Judge of the High Court. The appeal filed by the appellant 
was partly allowed by the Division Bench of the High 
..., 
Court limited to the rate of interest only. 
~ 
In the instant appeal filed by the Co-operative 
Federation, it was, inter alia, contended for the appellant 
F 
'• 
that there was an error apparent on the face of the award 
on the issue of 'balance steel recovery' as the 
respondent was having steel balance with it which was 
not consumed or returned and the respondent should, 
therefore, pay penal rates in terms of Clause 15 (2) (6) of G 
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t 
the contract; that there was inferior quality of 
work_manship as a result of which the appellant was 
entitled to make deduction from the bills. 
H 
" 
312 
SUPREME COURT REPORTS [2009] 14 (ADDL.) S.C.R. 
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A 
Dismissing the appeal, the Court 
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HELD: 1. The finding of the arbitrator was that there 
"' 
was no clear evidence put forward by either of the parties 
as to what happened to the balance steel; and, in the 
B circumstances, the respondent-claimant was directed to 
pay at the issue rates and not at the penal rates. However, 
though this was the observation in the body of the award, 
in Appendix 'C', the arbitrator had given certain 
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deductions based on balance steel under three heads. 
c The High Court rightly held that Appendix 'C' did not 
mean to be a positive finding by the arbitrator that such 
steel was unutilized and had been appropriated by the 
respondent. There is no infirmity either in the award of 
the arbitrator or in the findings of the Division Bench as 
well as of the Single Judge of the High Court on this 
y 
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D count. [Para 7] [323-B-D, G-H; 324-A] 
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2. The arbitrator has held that 

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