# STATE OF MADHYA PRADESH v. M/S. SAITH & SKELTON (P) LTD. lan,uary 28, 1972

- **Citation:** [1972] 3 S.C.R. 233
- **Court:** Supreme Court of India
- **Decided:** 1970-08-06
- **Bench:** C. A. Vaidialingam, I. D. Dua, G. K. Mitter
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-madhya-pradesh-v-m-s-saith-skelton-p-ltd-lan-uary-28-1972-5524
- **Pages:** 14

## Headnote

.Arbitration Act (10 of 1940), ss. 2(c) and 14(2)-Power of r.rbitrator
to file •ward suo motu--Court in which award should be filed-Power of
arbitrator to 'awapd interest prior to date of reference or aWard.
Disputes having arisen between the ~ppellant and the respondent with
reference to the pe'rformance of a contract which provided for arbitration,
steps were taken to appoint arbitrators .and an umpire.
The appellant
filed a petition . ip the District Judge's Court, having jurisdiction over the
matter, fOr settin(g aside the nominations.
When the matter came up to
this Court in appeal, this Court appointed a sole arbitrator v,ith consent
of the panie•. · Thereafter in the presence of counsel for both panics
this· Court gave .directions in the ~ppeal. that the arbitration records be
sent to the sole arbitrator, and .later extended the time for making the
award, and gave directions regarding the venue. The arbitrator gave his
aWard, directing the payment of a certain sum by the appellant to the
respondent with simple interest at 9% &-om a date anterior to the, reference, .41Dd
file~. the award in this Court the next day.
The respondent
filed a petition for p-:tsSing a decree in terms of the a1,1.·ard but the appellant
opposed the petition.
On the queslions: (1) Whether the arbitrator had no pov-,.·cr suo n1oru
to file his award; (2) Whether the aw~rd should not have been filed in
this Court as it is not the Court contemplated by ss. 2(q) and 14(2) of
the Arbitration Act, 1940; and (3) Whother the arbitrator had no juris·
diction to '3Ward the interest from a date anterior to the date of a"rafd
or reference,
HELD: (I) There is nothing in s. 14(2) of the Act which precludes
the arbitrator from filing the award suo 1110.qu and it is not cottect to
•ay that the award should be filed only if the parties make a request to
the arbitrator to file it, or make an appli~tion to the Court for that
purpose. The arbitrator having filed the award the next day after making
it, no question of limitation arises. 1239 G-H]
Narayan Bhawu v. Dewaiibhawu, A.I.R. 1945 Nag. 117, approved.
(2) The expresion 'Court' occurring in s. 14(2) of the Act will have
to be understood in the context in which it occurs, beqause, the definition of the word in s. 2(c) applies only when there is nothing repugnant
in the subject or context. The word 'Court' would include 'an appellate
court' and the wdrd 'suit' would include 'appellate proceedings'.
Merely
because the order of this Court appointing the sole arbitrator stated 'the
'lppeal is allowed' it is not as if this Court had lost 'all jurisdiction regard·
ing the arbitration proceedings.
The various directions given by this
Court indicate that this Coun retaine~ full control over the arbitration
prQCeedings. Therefore this Court is the Court under s. 14(2) where the
arbitration award should be validly filed. [240 E·H; 241 B·Dl
234
SUPREME COURT REPORTS
[1972] 3 S.C.Jt
Ct. A. Ct. Nachiappa Chettiar & Ors. v. Ct. A. Ct. Subramaniam
Chettiar, [.1960] 2 S.C.R. 209, referred to.
(3) In the present case, all the disputes including the claim for the
rayment of interest had been referred to the arbit,rator. The contract does
not provide that no interest w-:is payable on the amount that may be
found due.
Therefore the respondent was entitled, under s. 61 (2) of the
Sale of Goods Act, 1930, to claim inte'rest from the date on which the
price became due and payable. The arbitrator had found that the price
had become payable from a date anterior to the date of the aw~. Theroiore, the award of interest from the anterior date was justified. The
award of interest at 9% is also not exorbitant because the parties them·
selves claimed interest at 12%. [245 At-OJ
Union of India v. A. L. Rallia Ram, [1964} 3 S.C.R. 164 and Firm
Madanlal Roshanlal Mahajan v. Hukumchand Mills Ltd. Indore, [1967} 1
S.C.R. 105, followed.
ClvIL APPELLATE JURISDICTION: C. A. No. 136 Of 1971.
Appeal by special leave from lhe judgment and order dated
Augu

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STATE OF MADHYA PRADESH
v.
M/S. SAITH & SKELTON (P) LTD.
lan,uary 28, 1972
233
[C. A. VAIDIALINGAM, I. D. DUA AND G. K. MITTER, JJ.]
.Arbitration Act (10 of 1940), ss. 2(c) and 14(2)-Power of r.rbitrator
to file •ward suo motu--Court in which award should be filed-Power of
arbitrator to 'awapd interest prior to date of reference or aWard.
Disputes having arisen between the ~ppellant and the respondent with
reference to the pe'rformance of a contract which provided for arbitration,
steps were taken to appoint arbitrators .and an umpire.
The appellant
filed a petition . ip the District Judge's Court, having jurisdiction over the
matter, fOr settin(g aside the nominations.
When the matter came up to
this Court in appeal, this Court appointed a sole arbitrator v,ith consent
of the panie•. · Thereafter in the presence of counsel for both panics
this· Court gave .directions in the ~ppeal. that the arbitration records be
sent to the sole arbitrator, and .later extended the time for making the
award, and gave directions regarding the venue. The arbitrator gave his
aWard, directing the payment of a certain sum by the appellant to the
respondent with simple interest at 9% &-om a date anterior to the, reference, .41Dd
file~. the award in this Court the next day.
The respondent
filed a petition for p-:tsSing a decree in terms of the a1,1.·ard but the appellant
opposed the petition.
On the queslions: (1) Whether the arbitrator had no pov-,.·cr suo n1oru
to file his award; (2) Whether the aw~rd should not have been filed in
this Court as it is not the Court contemplated by ss. 2(q) and 14(2) of
the Arbitration Act, 1940; and (3) Whother the arbitrator had no juris·
diction to '3Ward the interest from a date anterior to the date of a"rafd
or reference,
HELD: (I) There is nothing in s. 14(2) of the Act which precludes
the arbitrator from filing the award suo 1110.qu and it is not cottect to
•ay that the award should be filed only if the parties make a request to
the arbitrator to file it, or make an appli~tion to the Court for that
purpose. The arbitrator having filed the award the next day after making
it, no question of limitation arises. 1239 G-H]
Narayan Bhawu v. Dewaiibhawu, A.I.R. 1945 Nag. 117, approved.
(2) The expresion 'Court' occurring in s. 14(2) of the Act will have
to be understood in the context in which it occurs, beqause, the definition of the word in s. 2(c) applies only when there is nothing repugnant
in the subject or context. The word 'Court' would include 'an appellate
court' and the wdrd 'suit' would include 'appellate proceedings'.
Merely
because the order of this Court appointing the sole arbitrator stated 'the
'lppeal is allowed' it is not as if this Court had lost 'all jurisdiction regard·
ing the arbitration proceedings.
The various directions given by this
Court indicate that this Coun retaine~ full control over the arbitration
prQCeedings. Therefore this Court is the Court under s. 14(2) where the
arbitration award should be validly filed. [240 E·H; 241 B·Dl
234
SUPREME COURT REPORTS
[1972] 3 S.C.Jt
Ct. A. Ct. Nachiappa Chettiar & Ors. v. Ct. A. Ct. Subramaniam
Chettiar, [.1960] 2 S.C.R. 209, referred to.
(3) In the present case, all the disputes including the claim for the
rayment of interest had been referred to the arbit,rator. The contract does
not provide that no interest w-:is payable on the amount that may be
found due.
Therefore the respondent was entitled, under s. 61 (2) of the
Sale of Goods Act, 1930, to claim inte'rest from the date on which the
price became due and payable. The arbitrator had found that the price
had become payable from a date anterior to the date of the aw~. Theroiore, the award of interest from the anterior date was justified. The
award of interest at 9% is also not exorbitant because the parties them·
selves claimed interest at 12%. [245 At-OJ
Union of India v. A. L. Rallia Ram, [1964} 3 S.C.R. 164 and Firm
Madanlal Roshanlal Mahajan v. Hukumchand Mills Ltd. Indore, [1967} 1
S.C.R. 105, followed.
ClvIL APPELLATE JURISDICTION: C. A. No. 136 Of 1971.
Appeal by special leave from lhe judgment and order dated
August 6, 1970 o( the Madhya Pradesh High Court, Indore Bench
in Civil Revision No, 415 of 196.91. N. Shroff, for the appellant.
S. V. Gupte, S. K. Mehta and K. L. Mehta, for respondent
No. 1.
The Judgment of the Court was delivere.d by.
Vaidialingam, J.-Civil Miscellaneous Petition No. 5801 of
1971, is by the first respondent, is an application under ss. 17
and 29 of the Arbitration Act, 1940 {hereinafter to be referred as
the Act) to pass a judgment and decree according to the Award
of the arbitrator dated August 24, 1971 and to grant interest from
the date of the decree, on ~he amount found payable by the
appellant.
Civil Miscellaneous Petition No. 5802 of 1971, by the State
of Madhya Pradesh, the appellant in the Civil Appeal, is an appli·
cation requesting this Court to decline to take the. Award dated
August 24, 1971 on its file.
Without prejudice to the above
prayer, there is a further request made to this Court to set aside
or modify the Award in certain respects.
The relevant facts leading up to the filing of the two applica·
tions may be adverted to : The erstwhile State of · Madhya
Bharat had entered into a contract with M / s. Saidi & Skelton
(P.) Ltd., the first respondent, for the supply and erection of Pen•
stocks for Gandhi Sagar Power Station, Chambal Hyde! workS.
The acceptance of the contract was by tender No. Project/SE/
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M.P. STATE v. SAITH & SKELTON (P) LTD. (Vaidialingam, 1.) 235
2522-F/II/25 dated June 5, 1956. Under the said contract, the
first respondent firm was required to supply material for the five
penstocks of P.O.R. Jhalwar Road, Railway Station at ~· 1,5.70
per M. Ton within Ille time stipulated, the total quantity bemg
463.939 M. Tons.
The material was to be transported from
Jhalwar Road Railway Station to the works site by the consignee,
the Madhya Bharat Government, and the work of erection was
to commence on the receipt at the work site of running length of
96 ft. for any of the p~nstocks. Clause 21 of the contract provided
for any question or dispute, arising under the conditions of the
contract or in connection therewith, to be referred to the arbitrators, one to be nominated by the StaJe and the other by the fir,m.
The said clause also provided for the matter being referred to an
Umpire to be appointed by the arbitrators in case of disagreement
between them. That clause also referred to certain other matters
relating to arbitration proceedings.
Disputes arose between the appellant and the respondent firm
with reference to the performan,ce of the contract. The firm intimated the appellant on December 31, 1959 nominating one Shri
T. R. Sharma, as an arbitrator under Cl. 21 of the contract and
also called upon the appellant to nominate an arbitrator. The
Directorate General of Supplies and Disoosals, who were acting
as the agent of the Madhya Bharat Government, nominated one
Shri G. S. Gaitonde, as an arbitrator on behalf of the appellant.
But the said arbitrator resigned his appointment and in conse"
quence on April 26, 1960 one Shri R. R. Desai, was nominated
as an arbitrator on behalf of the appellant. This nomination was
also by the Direct/Orate General of Supplies and Disposals. On
September 6, 1960, the two arbitrators appointed one Sri R. C.
Soni, as an Umpire. The two arbitrators disagreed in their views
resulting in the matter being referred to the Umpire on October
20, 1961. According to t;he appellant, the appointment of Shri
Gaitonde, in the first instance and of Shri R. R. Desai, lat«, as
an arbitrator, by the Directorate General of Supplies and Disposals
was without any authority from the appellant. Later on, the
Directorate General of Supplies and Disposals again reappointed
Shri R. R. Desai as an arbitrator on behalf of the appellant on
January 4, 1961.
According to the appellant the appointment of Shri R. C.
Sone, as Umpire on September 6, 1960 was not valid. Accordingly,
the appellant filed in the Court of the Additional District Judge,
Mandsaur, Civil Miscellaneous Case No. 16 of 1962 under s. S
of the Act, for setting aside the nominations, as arbitrators of
Shri T. R. Sharma and Shri R. R. Desai, as well as the appointment by them of Shri R. C. Soni, as the Umpire. By order dated
October 19, 1963, the Addi. Distriell Judge, Mandsaur held that
the appointments of Shri R. R. Desai, as an arbitrator and Shri
236
SUPREME COURT .REPORTS
[1972] 3 S.C.R.
R. C. Soni, as Umpire, were both invalid and not binding on the
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appellant.
The firm filed an appeal before the High Court of
Madhya Pradesh againsv the order of the Add!. District Judge.
This appeal was later on treated as a Revision. and numbered as
Civil Revision No. 415 of 1969. The High Court, by its order
dated August 6, 1970 appointed Shri R. C. Soni as . the Sole
Arbitrator under s. 12(2) of the Act and accordingly modified the
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order of the Add!. District Judge, Mandsaur.
The appellant filed Special Leave Petition No. 23 70 of 1970
in this Court for grant of Special Leave to Appeal against the
order of the High Court dated August 6, 1970. The firm entered
caveat. On January 29, 1971, thi~ Court granted Special Leave; c
and, by consent of parties, appointed an arbitrator, whose Award
is sought to be made a decree of the Court by the respondent in
its application C.M.P. No. 5801 of 1971 and is sought to be set
aside by the appellant hy C.M.P. No. 5802 of 1971. As the terms
of the order passed by this Cour~ are materfol, it is reprodnced
below:
"Special Leave is granted.
The appeal is •allowed.
The appointment of Shri R. C. Soni as the sole arbitrator is set aside by .consent of the parties.
Mr. V. S. Desai, Senior Advocate,
is appointed
Arbitrator by consent of the parties liO go into all the
questions in this matter and make his awar.
The remuneration for the arbitrator would be Rs. 5,000, which
will be shared by both the parties equally.
The arbitrator will make his award within three
months from today.
The parties will be at liberty to
mention for extension of time for making the award.
Sd. G. K. Mitter J.
January 29, 1971.
Sd. A. N. Ray J."
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On February 1, 1971 this Court gave directions in the appeal, in
the presence of the counsel for both parties, that the records of the
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arbitration be called for forthwith and sent to the sole arbitrator
Mr. y. S. Des.ai, appoin•ed ~s per ord7r dated January 29, 1971.
Agam OD April 30, 1971, this Court, Ill the presence of the counsel for both the parties, extended the time for making the Award
by four months and also permitted the arbitrator to hold the arbitration proceedini?s at Bombay.
The arbitrator gave his Award
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on August 24, 19?1 and filed the same in this c;ourt, the next day.
He also gave notice to the parl!es of the making and signing of
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M.P. STATE v. SAITH & SKELTON (P) LTD. (Vaidialingarn;J.) 237
the Award. A signed copy of the Award was also sent to both
t_h~ parties. The operative part of the Award is as follows :
"(l) The opponents, the State of Madhya Pradesh
will pay IQ the claimants a sum of Rs.
1,79,653.18 p. for the balance payable to them
in respect of the price of supply and erection of
the 5 penstocks.
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(2) The State will also pay interest on the said
amount at 9% per annum simple interest from
7th June, 1958 to the date of decree. The State
will also refund to the claimants a sum of Rs.
15,414,19 p. which they have recovered from
the claimants as excess railway freight.
Sd. V. S. Desai,
Sole Arbitrator."
In C.M.P. No. 5801 of 1971, the firm prays for passing a
judgment and decree, according to the Award and also prays for
·grant of interest from the date of decree at the rate of 9 % per
annum. On the other hand, the appellant State, in its application
C.M.P. No. 5802 of 1971 prays for an order declining to take
the Aw~d on its file or in any event to set aside or modify the
~ward in respect of interest granted prior to August 24, 1971 as
well as the direction regarding the refund by the appellant of the
sum of Rs. 15,414.19 P. The Award is also sought to be modified on the ground that the award of interest at 9% is very excessive.
The question of pronouncing judgment according to the
A l'iard, as provided under s. 17 of the Act and which is _the prayer
in C.M.P. No. 5801 of 1971 will arise only if the prayer to set
aside the Award made in C.M.P. No. 5802 of 1971, by the State,
is rejected. Therefore, we wi.U proceed to consider the contentions
raised by Mr. I. N. Shroff, learned counsel for the appellant, in
rnpport of the application C.M.P. No. 5802 of 1971.
Mr. Shroff has raised the following four contentions : (1) The
arbitrator had no power to suo molll file his Award, as he has done
in this case, and as such no action can be taken on such -an Award;
(2) This Court is not the Court as contemplated by s. 14(2) read
with s. 2(c) of the Ac~. Hence the filing of the Award in this
Court is illegal and ineffective in law; (3) The arbitrator had no
jurisdiction to award interest from a period anterior to the date of
the award or reference; and (4) The Arbitrator has committed a
manifest error in directing the refund of Rs. 15,414.19 P. when
this amount has alre"dv ·been taken into account in arriving at the
figure of Rs. 1,79,653.18 P.
238
SUPREME COURT REPORTS
(1972) 3 S.C.R
We will now proceed to deal with these contentions scriatim.
With regard to the first contention, which relat,l:s to the vaEdity of the filing of the Award in this Court suo motu, r~iiance is
placed by Mr. Shroff oil s. 14(2) of the Act. It is the contention
of the counsel that under this section an arbitrator can cause an
award to be filed iii court only under two circumstances : (a) wh~n
a request to do so is made by any party to the arbitration agreement or any person cla(ming under such party; and (b) when the
arbitrator is directed by the Court to file the award. In this c~>e.
it is pointed out, that no such request was made by any of the
parties to the arbitratiQn agreement or any person claiming under
such party to ~e arbitrator to file the Award. It is pointed out
that (here was no direction by this Court to the arbitrator to file
the Award. Hence it is urged that the filing of the Award mo
motu is illegal, as being contrary to the terms of s. 14(2) of the
Act.
Mr. S. V. Gupte, learned counsel for the respondent firm, re·
ferred us to s. 38 of the Act and pointed out that the scheme of the
Act clearly shows that the Award has to be filed in the Court by
the arbitrator either suo motu or on request made by the parties
to the arbitration agreement or any person claiming under such
party or on being directed by the Court. The counsel pointed out.
there is no prohibition ins. 14(2) of the Act, against the arbitrator
filing the Award in Court suo motu.
The question specifically arose before the Nagpur High Court
in Narayan Bhawu. v. Dewa;ibhawu( 1). The High Court held
that there is nothing in s. 14(2) of the Act, which precludes the
arbitrator from filing the Award suo motu and it is not correct w
say that the Award should be filed only if the parties make a request to the arbitrator to file the award or make an application to
the Court .for that purpose. We are in agreement with this view
of the law, especially when there is no prohibition in the Act, par~
ticular!y in s. 14(2) against the arbitrator filing suo motu hi;
Award in Court.
Mr. Shroff referred us to the decision in Parasramka Commercial Company v. Union of India('). From the facts stated in
the said decision, it is seen that the arbitrator made his Award and
signed the same on April 26, 1950. The arbitrator without sending any notice of the making and signing of the Award, sent a
copy of the signed Award to the paf(ies. The appellant therein
acknowledged receipt of the said si.ened copy of the Award by his
letters dated 5th and 16th May, 1950; but he filed an applicatlion
on March 30, 1951 in the Subordinate Jud1te's Court for passing a
decree in terms of the Award. An objection was raised by the
(!)AIR l945Nag 117
(2) [1970] 2 SC R 136
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M.P'. STATB v. SAITH & SKELTON (P) LTD. (Vaidlalingam, J.)239
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opponent that the application was out of time under Art. 178 of
the Indian Limitation Act, 1908, as not having been filed within
90 ·days of the date of service of the notice of the making -of the
Award. It is also seen that the arbitrator on July 3, 1951 filed
the original Award before the Court suo motu. The Subordinate
Judge rejected the application filed on March 30, 1951 as barred
by time. That order was confirmed by t11e High Court. This Court,
after a consideration of s. 14(1) of the Act held tha~ the serving,
by the arbitrator on the appellant before this Court of a signed,
copy of the Award amounted to giving him notice in writing of
the making of the Award. This Court further upheld, as correct,
the view of the Subordinate Judge and the High Coun that the
application filed by the appellant, beyond tlie period prescribed
under Art. 178 of tlie Indian Limitation Act, 1908, was barred.
This Courq did not express any view regarding tlie action taken
by the arbitrator in filing suo motu the Award and left open the
question as follows :
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" ..... But we make it clear tliat the other part of
tlie case, namely what is to happen to uhe award sent
by the Arbitrator himself to the court has yet to be determined and what we say here will not affect t11e determination of that question. Obviously enough that matt.er
arises under the second sub-section of s. 14 and will
have to be considered quite apart from the application
made by the company to have the award made into rule
"f Court."
Again tlie question whetlier a plea of limitation can be raised
witli respect to tlie suo motu filin12; of the award by the arbitrator
was left open as follows :
" .... As to whether similar objections can be raised
in answer to the award filed at the instance of the arbitrator is a question which we• cannot go into tlie present
appeal and no expression of opinion must be attributed
to us on that point."
Therefore, it is clear from what is stated above -that in ihe said
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decision this Court had no occasion to consider whether an award
can be filed ~uo motu by an arbitrator; nor the further question
whetlier such filing should be witliin the period of limitation provided under the relevant provisions of tlie Limitation Act. In the
case before us the period of limitation is dealt with under Entry
119 of the Schedule to the Limitation Act, 1963. As the arbiH
trator in this case made his Award on August 24, 1971 and filed
the same the next day, the question of limitation, if any, does not
at all arise.
We do not express any opinion whether the period
of limitation will apply when the arbitrator files his award MW
3-L887Sap.C!/72
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SUPREME COURT REPORTS
[1972] 3 S.C.R.
moiu. Ju the filin~ of the Award by !he Arbitrator suo motu is
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legal, tho fim coirte11.tiou of Mr. Shroff has to be rejected.
The second canlal.tion of Mr. Shroff is that this Court is not
the "Court" as defined under s. 2( c) of the Act, where the Award
could be filed. Section 2(c) of the Act is as follows :
"2. In this Act, unless there is anything repugnant
in the subject or context,-
(c) "Court" means a Civil Court having jurisdiction
to decide the questions forming the
subjec~
matter of the reference if the same had been the
subject martter of a suit, but does not, except for
the purpose of arbitration proceedings under
section 21, include a Small Cause Court."
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According to Mr. Shroff the Award should have been filed, not
in this Court, but in the Court of the Addi. District Judge,
Mandsaur, as that is the Court which will have jurisdiction to entertain the suit regarding the subject matter of the reference. We
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are not inclined to accept this conten~on of Mr. Shroff. It should
be noted that the opening words of s. 2 are "In this Act, unless
there is anything· repugnant in the subject or context. Therefore
the expression "Court'' will have to be understood as defined in
s. 2(c) of the Act, only if there is nothing repugnant in the subject
or context. It is in that light that the expression "Court" occurrE
ing in s. 14(2) of the Aca will have to be understood and interpreted. It was this Court that appointed Shri V. S. Desai on January
29, 1971, by consent of parties, on an arbitrator and to make his
Award.
It will be seen that no further directions were given in
the said order which will indicate that this Court had not divested
itself of its jurisdiction to deal with the Award or matters arising
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out of the Award. In fact the :indications are to the contrary. The
direction in the order dated January 1!9, 1971 is that the arbitrator
is "to make his Award". Surely the law contemplates further steps
to be taken after the Award has been made, and quite naturally
the forum for taking the further action is only this Court. There
was also direction to the effect that the parties are at liberty to
apply for extension of time for making the Award. In the absence
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of anv other court havin11 been invested with such jurisdiction bv
the order, the only concluonsion that is possible is that such a request
must be made only to tho court which passed that order, namely,
this Court.
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That this Court retained complete control over the arbitration
proceedings is made clear by its orders dated February 1, 1971
and April 30, 1971. On the former daie, after hearing counsel
for ~th the parties, this Court gave direction that the record of
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M.P. STATE v. SAITH a: SULTON (P) LTD. (Vaidialingam, I.) 241
the arbitration proceeding$ be called for and delivered to the Sole
Arbitrator Mr. V. S. Desai. On the latter date, again, after hearing the couruel, this Court extended the time for making the
Award by four month!J and further permitted the arbitrator to
hold the arbitration proceedings at Bombay.
The nature of the
order passed on January 29, 1971 and the subsequent proceedings,
referred to above, clearly show that this Court retained full control
over the arbitration proc~.
Mr. Shroff referred us to the fact that in the "rder dated January 29, 1971, iU is ~!early stated "The appeal is allowed". Ae;-
cording to him, when the appeal has come to an end finally, this
Court had lost all jurisdiction regarding the arbitration proceed'
ings and therefore the filing of the Award should be only in the
Court as defined in s. 2(c) of the Act. Here again, we are not
inclined to accep~ the contention of .Mr. Shroff. That the appeal
was allowed, is no doubt correct. B\'f.the appeal was allowed by
setting aside the order of the High Court and this Court in turn
appointed Mr. V. S. ~ai as the Sole Arbitrator. All other directions contained in the order dated January 29, 1971 and the further proceedings, as pointed out earlier, indicate the retention of
full control by this Court over the arbitration ~gs.
In Ct. A. Ct. Nachiappa Chettiar and others v. Ct. A. Ct ..
Subramaniam Chettiar('), the question arose whether the trial
eourt had jurisdiction to refer the subject-matter of a suit to an
arbitrator when the decree passed in 'the suit was pending appeal
before the High Court. Based upon s. 21, it was .urged before
this Court that the reference made by the trial court, when the
appeal was pending, and the award made in consequence of such
reference, were both invalid as the trial court was .not competent to·
1118ke the order of reference. This Court rejected the said conaention and .11fter a reference to ss. 2 ( c) and 21 of the Act held
that the CXPfCSSion "Court" occurring in s. 21 includes also the
Appellate C<>.utt, proceedings before which arc a continuance of
the sui<t. It was further held that the word "suit" in s. 21 includes
also appellate proceedings. In our opinion, applying the analogy
of the above decision, the expression "Court" occurring in s. 14
(2) of the Act will have to be understood in the context in which
it occurs. So understood, it follows that this Court is the Court
under s. 14(2) where the arbitration Award could be validly field.
The decision in Union of India v. Surjeet Singh Atwa/(1 )
relied on by Mr. Shroff, dealt with a different aspect and therefore,
it is not necessary for !IS to refer to the same.
The above reasoning leads us to the conclusion that the
filing of the Award in this Court by the arbitrator was valid. and
legal. The second contention of Mr. Shroll.will stand rejected.
(I) [1960) 2 s.c.R. 209.
(2) (19691 2 S.C.R. 211.
SUPREME COURT REPORTS
[1972) 3 S.C.R.
The third contention of Mr. Shroff is that the arbitrator
had no jurisdiction to award interest from a period anterior
to the date of award or reference. Before we deal with this contention, it is necessary to refer to the findings of the arb!trator
in his Award. Issues Nos. 6, 7 and 19 frame by the arbttrator
and which are relevant on this aspect are as foilows:
"6 (a) Was the claimant entitled to the payment for
supply as \veil as for erection on the total weight of
463.939 M. tons inclusive of electrodes ?
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6 (b) If not, what are the weights on which the
price of supply and the erection charges are to be calG
culated.
7. What is due to the claimant from the respondent in respect of the supply and erection of the penstocks ?
19. Are any of the parties entitled to ill'lerest and/
or any other relief."
On iss~ No. 6 (a) the arbitrator found that the firm was
entitled to the same weight both for the calculation of price as
well as for the price for erection and the said weight was 463.939
M. Tons inclusive of electrodes. In view of the above finding on issue No. 6(a), the arbitrator held that issue No. 6(1:5)
does not survive. On issue No. 7 he found that for the price of
supply and erection of 463.939 M. Tons at the rate specified in
contract, the total price due
¢0
the
firm
comes
to
Rs. 12,15,520.18P.
It was admitted before the arbitrator that
the firm had been paid by the State of sum of Rs. 10,35,867/.
In view of this admission the arbitrator found that the balance
payable to the firm towards the price for supply and erection is
Rs. 1,79,653.18 P.
On issue No. 19, the arbitrator found that the firm is entitled
to interest at 9% per annum on the balance of Rs. 1,79,653.18
P. from June 7, 1958, the date on which the final inspection
of the penstock took place. The interest was to be paid till the
date of the decree. It is on the basis of the above findings that
the arbitrator made the Award, the operative part of which has
already been extracted in the earlier part of the judgment. The
direction regarding the payment of Rs. 1,79,653.18 P. is
not
challenged by the State. It is only the direction regarding the
period fyom which interest is payable, that is under chailenge.
The arbitrator has made the interest payable from June 7,
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M.P. STATE v. SAITH" SKELTON (!,') LTD. (Vaidialingam, 1.) 243
1958, on the ground that it was the date on which final inspection took place and when the amount become payable to the
respondent.
Mr. Shroff referred us to a decision of the Judicial Committee and to certain decisions of this Court to the effect that
s. 34 of the Code of Civil Procedure will not apply to the proceedings before an arbitrator, as he is not a Court and that interest cannot be awarded by way ol damages. He further referred
to those decisions in support of his contention. that in the absence
of any usage or contract, express or implied, or of any provision
of law, to justify the award of interest on an . amount for a
period before the institution of the suit, interest anterior to the
date of the suit' cannot be allowed. The decisions referred to by
Mr. Shroff are Bengal Nagpur Raliway Company Limited v.
Ruttanji Ramji and others('), Seth
'J:hawardas
Pherumal v.
The Union of lndia(2), Mahabir Prashad Rungta v. Durga
Datt('), Union of India v. A. L. Rallia Ram('), Vithal Das
v. Rupchand and others(') and Union of India v. Bungo Steel
Furniture Pvt. Ltd. (6). It is no doubt true that for awardil)g
interest under the Interest Act, 1939, or u.nder s. 34 of the Code
of Civil Procedure, certain circumstances must exist.
But one
of the principles laid down is that interest prior to the institution
of a suit can be awarded if there is any provision of a suit can
be awarded if there is any provision of law to justify the award
ol such interest. In the cases, referred to above, it is seen that
there was neither any agreement pleaded for payment of interest;
nor was any provision of law entitling the party to recover interest prior to the period of the suit or arbitration proceedings,
referred to or relied upon. Under such circumstances it was
held that the arbitrator or a court had no power to award interest prior to the date of the Award.
In Union of India v. Bungo Steel Furniture Pvt. Ltd.(")
this Court recognised the power of an· arbitrator to award interest on the amount of the award from the date of the award
till the date ol the decree. According to Mr. Shroff, the power
of the arblitrator to award interest is only from the date of the
award and not for any period anterior to that date.
In Firm Madan/al Roshan/al Mahajan v. Hukamchand Mills
Ltd. Indore('), the 'pOwer of the arbitrator, to whom the subject
matter of a suit )lad l:J&en referred for arbitration, to award pendr
ente lite intere5t 'was considered by this Court. It was held in
(I) L.R. 65 I.A. 66.
(2) [19l5] 2 S.C.R, 48.
(3) [1961] 3 S.C.R. 639.
(4) (1964} 3 s.c.11.. 164.
(S) [1966] Supp, S.C.R. 164.
(6) [1967] I s.c.R. 324.
(7) [1967) I S.C.R. 105.
244
SUPREME COURT REPORTS
[1972] 3 S.C.R,
the said decision that all the disputes in the suit were referred
to the arbitrator for his decision. One of the disputes, so referr7'1,. was whether the respondent therein was entitled to pendente
lite mterest. It was held that though in terms, s. 34 C.P .C. does
not apply to the arbitration, it was an implied term of the reference in: the suit that the arbitrator was to decide the dispute,
according to law, to grant such relief with regard to pendente lite
interest as the Court itself cowd give, if it decided the dispute.
It was further held that such a power of the arbitrator was not
fettered either by arbitration agreement or by the Act. The
decision in Seth Thawardas Pherumal v. The Union of India(')
distinguished on the ground that the said decision is silent on the
·question whether an arbitrator can award interest during the pendency of the arbitration proceedings, if all the disputes in ili;e
suit including the olaim for interCllt were
referred for
arbttion.
From the decision in Firm Madan/al Roshanlol Mahajan
v.
Hukamchllnd Mills Ltd. Indore('), it is clear that if all the disputes are referred for arbitration, the arQitrator has power to
award interest pendente ·lite, i.e. durini: the. pendency of the arbitration proceedings.
In the case before there is no controvery that all the disputes
including a claim for payment of the amount with interest was
referred to the arbitrator. The arbitrator, as pointed out earlier,
found that the firm was entitled to the payment as price in the
~um of Rs. 1,79,653.18 P. The arbitrator has further found that
this amount became payable as balance price for the goods supplied by the firm on June 7, 1958, on which date the final inspection took place. If that is so, section 61 of the Sate of Goods
Act, 1930 squarely applies and it saves the right of the seller
(in this case the !inn) to recover interest, where by law interest
is recoverable.
Sub-section (2) of s. 61, which is material is
as follows:
"61 (2) In the absence of a contract to the contrary
the Court may award interest at. such rate as it thinks
fit on the amount of the price-
(a) to the seller in a suit by hinl for the amount
of the price-from the· date of the tender of the goods
or from the date on which the price was paya~e.
(b) to the buyer in a suit by him for the .refund
of .the price in a case of a breach .of. the contract on the
Part. of the seller-from the date on which the payment was made."
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(I) (1959] 2 S.C.R. 48.
(2) [1967] 1 s.c.R. JOS.
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M.P. STATE v. SAITH & SKELTON (P) LTD. (Vaidialingam, 1.) 245
In the case before us, admittedly the contract does not provide that no interest is payable on the amount that may be found
due to any one of them. If so, it follows that the seller, namely,
the firm is entitled to claim interest from the date on which the
price became due and payable. The finding of the arbitrator in
this case is that the price became payable on June 7, 1958. As
held by this Court in Union of India v . .A.. L. Rallia Ram(1),
which related to an arbitration proceeding, under sub-section (2)
of s. 61, in the aooence of a contract to the contrary, the seller is
eligible to be awarded interest on the amount of the price for the
goods sold.
On this principle it follows that the award of interest from June 7, 1958 is justified.
If the contention of Mr. Shroff that under no circumstances
anarbitrator ~an (!Ward interest prior to the date of the Award,
or prior to the date of reference, is accepted, then the _positioo
will be very anomalous. As an illustration, we may pomt oUt
that there may be cases where the only question that is referred
to the arbitrator is whether any of the parties is entitled to claim
interest on the ·amount due to him from a date which may be
Jong anterio.r to the date of reference. When such a question is
referred to the arbitrator, naturally he has to decide whether the
claim for award of interest from the date referred to by the parties
is acceptable or not. If the arbitrator accepts that claim, he will
be awarding interest from the date which will be Jong prior even _
to the date of reference.
Therefore, the question ultimately will
be whether the dispute referred to the arbJitrator included
the
claim for interest from any particular period or whether the party
is entitled by contract or usage or by a provision of law for
interest from a particular date.
Mr. Shroff further contended that the award of interest at 9%
per annum is exorbitant.
The short answer for negativing this
contention is that it is seen from the claim statement filed by
both the appellant and .the respondent-firm that each of them
claimed for payment of the amount, d11e to them with interest
at 12% per annum under s. 61 of the Sale of Goods Act. Therefore, it follows tJ\at the rate of interest awarded is not excessive.
As we have already held that the arbitrator has got power in this
case to award interest from June 7, 1958 at the rate specifiea
by him,
the third contention of Mr. Shroff will have to be
rejected.
The last contention of Mr. Shroff relates to the direction regarding the refund of Rs. 15,414.19 P. The contention is that this
amount has already been taken Into account by the arbitrator
when he directed the payment of Rs. 1,79,653.18 P. Mr. Shroff
(I) (1964] 3 S.C.R. 164.
246
$UPREME COURT REPORTS
[1972] 3 S.C.R:.
was not able to satisfy us that the amount, directed to be paid ' as
refund, has been already taken into account in the amount fixed
as the balance price payable bfy the State. Therefore, this contention also will have to be rejected.
Now that we have rejected all the contentions of Mr. Shroff
raised in C.M.P. No. 5802 of 1971, it follows that the prayer asked for therein cannot be granted.
Now coming to C.M.P. No. 5801 of 1971, filed by the firm,
that application is accepted and a judgment and decree are passed
on the basis of the Award as against the State is f11vour of the respondent-firm. The appellant State will pay to the respondent-firm
a sum oi Rs. 1,79,653.18 P. with 9% per annum simple interest
from June 7, 1958, till tl!e date of the decree and thereafter at
6% 1till the date of payment. The appellant State will also refund
to the respondent-firm a sum of Rs. 15,414.19 P. which they have
recovered from them as excess railway freight.
In the result, C.M.P. No. 5802'of 1971 will stand dismissed
with costs. C.M.P. No. 5801 of 1971 is allowed wi~h costs. A
decree as stated above will issue.
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