LexUNION OF INDIA versus M/S. JAIN ASSOCIATES AND ANR.
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UNION OF INDIA
A
v.
M/S. JAIN ASSOCIATES AND ANR.
APRIL 19, 1994
(K. RAMASWAMY AND N. VENKATACHALA, JJ.]
B
The Arbitration Act, 1940.
.
Sections 20, 29, 30( a }-Arbitrator-Misconduct-Reference made to Ar-
bitrato,-.C/aim and counter claim by parties-Award of damages, twice over,
C
against two claims based on self same alleged /aches and negligence of Dep/Jlt-
ment-Refusal to consider counter claim treating it as a belated counter state-
men..-Held, Arbitrator committed misconduct in non-application of his mind
in deciding the claims and in refusing to consider counter claim
Section 21)-{nterest on award-Arbitrator granting interest up to the D
date joint arbitrators entered upon reference as also post award interes..-High
Court granting interest pendente lite-Held, Section 29 enables court to grant
interest on principal amount adjudged in the award and confirmed in decree
only from the date of decree-ft carries a negative import with it that court
has no p3wer to grant interest pendente lite.
E
Doctrine of severabi/ity-Applicability of in an award given by ar-
bitrator.
Words and phrases: 'misconduct' Section 30(a) of the Arbitration Ac~
194o-Meaning of
F
The parties entered into a contract whereunder the respondent was
to construct a residential complex at the estimated cost or Rs. 27,34,000
an hand over its possession to the appellant by August 13, 1984. Non-com-
pletion of the work, despite several extensions or time upto June 30, 1988,
resulted in termination or the contract. A sum or Rs. 24,34,100 was paid G
to the respondent towards the execnted work. The respondent initiated
proceedings under section 20 of the Arbitration Act and the matter was
ultimately taken to the umpire to arbitrate the dispute. The contractor laid
his claim for Rs. 37,37,885. The appellant also laid a counter claim for Rs.
9,49,701 which the umpire refused to consider on the ground of delay. The H
551
552
SUPREME COURT REPORTS
(1994) 3 S.C.R.
A
umpire made a total award of Rs. 24,10,330 in favour of the contractor. He
awarded interest at 18% upto 10.4.89 i.e. the date on which the joint
arbitrators entered into the reference, as also the post award interest. The
award made by the umpire included Rs. 4,11,400 against claim No. 11 and
Rs. 6,00,000 against claim No. 12. On appeal by the contractor the High
B Court held that claim mentioned in items nos. 11 and 12 was one and the
same, but the umpire had wrongly given damages twice over and thus there
was an error of' law as well as of fact. It rejected the claim in resp.ct of
item No. 11, but affirmed Rs. 6,00,000 towards claim No. 12. The High
Court confirmed the award for a sum of Rs. 20,07,320. It also awarded
pendente lite interest. Aggrieved, the Union of India filed the appeals hy
C special leave.
It was contended on behalf of the appellant that the umpire com-
mitted illegality in awarding damages twice over on claims no. 11 and 12
and in refusing to consider the counter claim of the Department, which
indicated non-application of judicious mind and thus the umpire had
D misconducted the proceedings; that in the circumstances the doctrine of
severability become inapplicable and the entire award was liable to set
aside that in view of section 29 of the Arbitration Act, the court lacked
power to award pendente lite interest. The respondent contended that
despite the award being a non-speaking one, since the umpire granted each
E claim separately, the claims in respect of items No. 11 and 12 are severable
from the rest of the award which could be sustained.
Allowing the appeal and modifying the judgment of the High Court,
this Court
F
HELD : 1.1. The Hir,h Court was right in holding that the claimant
was not entitled to different amounts under claims no. 11 and 12 due to
damages, and the umpire committed an error of law as well as fact while
awarding damages mechanically twice over against the same claim. Claim
no. 11 is founded upon the allegations of delay, !aches, negligence and
G default on the part of the appellant, said to have resulted in loss of profits
to the contractor. Claim No. 12 again founded upon the self same alleged
)aches negligence of the appellant. These claims are founded on breach of
contract and Sec. 73 of the Contract Act, 1872 encompasses both the claims
as well as damages. (558-D-H, 559-A]
H
1.2. The rejection of the counter claim was unwarranted. There was
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