1999 JTR(SC) 349
1999 AIR(SC) 1258 ; 1999 AIR(SCW) 940 ; 1999 2 AllCJ 1118 ; 1999 AllLJ 976 ; 1999 36 AllLR 35 ; 1999 1 ArbLR 696 ; 1999 1 BC 590 ; 1999 3 CivLJ 224 ; 1999 2 CLT(SC) 115 ; 1999 2 CTC 240 ; 1999 2 ICC 567 ; 1999 2 JT 268 ; 1999 2 RAJ 111 ; 1999 2 RCR(Civ) 400 ; 1999 2 Scale 141 ; 1999 3 SCC 257 ; 1999 1 UJ 655 ; 1999 KHC 1049 ; 1999 1 KLT(Online) 960 ; 1999 3 Supreme 22
1999(3) Supreme 22
Supreme Court of India
(From Allahabad High Court)
S. Rajendra Babu and S.N. Phukan, JJ.
M/s. Jagdish Rai & Brothers -Appellants
versus
Union of India -Respondent
Civil Appeal No. 2541 of 1988
Decided on 19.3.1999
Counsel for the Parties :
For the Appellants : Pankaj Kalra, R.P. Gupta, Advocates.
For the Respondent : V.C. Mahajan, Sr. Advocate, Mrs. Anubha Jain, (Arvind Kumar Sharma) Advocate for C.V. Subba Rao, Advocate.
Important Points
1. If claim for interest on award is not made before the court in which proceedings for making interest the award the rule of court were pending by challenging non-award of interest, in an application u/s 29 of Arbitration Act, 1940, the High Court cannot grant interest for period during first three stages of pre-arbitration and post-arbitration, that is, between award and filing of application.
2. Interest on award for post decretal period till realisation of award money could be granted by the High Court in an application under Section 29 of the Arbitration Act, 1961, notwithstanding fact that non-granting of interest without assigning any reason by arbitrator was not challenged before Court which made the award rule of Court.
Act
Referred
:ARBITRATION ACT : S.14, S.29, S.17
CIVIL PROCEDURE CODE : S.34
(A) The Arbitration Act, 1940 (Sections 14, 17, 29) read with the Civil Procedure Code, Section 34, governs the enforcement and correction of arbitral awards. Section 29 provides for making an award, Section 17 for interim relief, and Section 34 for setting aside or modifying an award. The present case examines the interplay between these provisions in the context of a partys entitlement to interest from the date of the arbitral award through to realization, particularly where the claim for interest was not made before the court that passed the decree. The High Courts decree is evaluated under these statutory frameworks to determine whether interest can be retrospectively awarded.
(B) Interest may be awarded under Section 34 CPC as a matter of procedure in all cases involving decrees for money unless strong reasons exist to deny it. A party is generally entitled to interest from the date of the arbitral award if the claim was made before the arbitrator, and the court must correct its decree to include appropriate interest post-decree if omitted. Interim relief and withdrawal of funds do not automatically bar interest if the decree fails to provide for it.
Facts of the case:
An arbitration award was passed, and a decree was made by the Sub-Judge in its terms. The appellant did not challenge the award for non-award of interest before the Sub-Judge. An appeal to the High Court followed, and the appellant later applied for interest, which was rejected on the grounds that the claim should have been made earlier and that interim relief had been withdrawn. The High Court also noted that no interest was granted in the award itself.
Findings of Court:
The High Courts rejection of the interest claim for pre-decision stages was upheld. However, the Court held that the High Court should have examined the entitlement to interest post-decree. The grant of interest being a procedural matter, and the appellant having applied before the High Court, the decree was required to be modified to include interest from the date of the award until realization.
Issues:
Whether a party who did not claim interest before the arbitral tribunal or the lower court is entitled to interest after the award when approaching the High Court for enforcement of the decree. Whether the High Court was correct in not awarding interest despite the procedural nature of interest under Order 34 CPC.
Ratio Decidendi:
Interest is a procedural remedy available under Section 34 CPC and Order 34, and can be granted by the court even if not claimed earlier, provided the party seeks it at the enforcement stage before the High Court. The court may modify its decree to include interest retrospectively to align with statutory provisions, unless strong reasons exist to deny it.
Result:
The appeal was allowed in part, with the decree of the Sub-Judge modified to include interest at 12% per annum from the date of the award until realization. No order as to costs was passed.
(A) The Arbitration Act, 1940 (Sections 14, 17, 29) read with the Civil Procedure Code, Section 34, governs the enforcement and correction of arbitral awards. Section 29 provides for making an award, Section 17 for interim relief, and Section 34 for setting aside or modifying an award. The present case examines the interplay between these provisions in the context of a partys entitlement to interest from the date of the arbitral award through to realization, particularly where the claim for interest was not made before the court that passed the decree. The High Courts decree is evaluated under these statutory frameworks to determine whether interest can be retrospectively awarded.
(B) Interest may be awarded under Section 34 CPC as a matter of procedure in all cases involving decrees for money unless strong reasons exist to deny it. A party is generally entitled to interest from the date of the arbitral award if the claim was made before the arbitrator, and the court must correct its decree to include appropriate interest post-decree if omitted. Interim relief and withdrawal of funds do not automatically bar interest if the decree fails to provide for it.
Facts of the case:
An arbitration award was passed, and a decree was made by the Sub-Judge in its terms. The appellant did not challenge the award for non-award of interest before the Sub-Judge. An appeal to the High Court followed, and the appellant later applied for interest, which was rejected on the grounds that the claim should have been made earlier and that interim relief had been withdrawn. The High Court also noted that no interest was granted in the award itself.
Findings of Court:
The High Courts rejection of the interest claim for pre-decision stages was upheld. However, the Court held that the High Court should have examined the entitlement to interest post-decree. The grant of interest being a procedural matter, and the appellant having applied before the High Court, the decree was required to be modified to include interest from the date of the award until realization.
Issues:
Whether a party who did not claim interest before the arbitral tribunal or the lower court is entitled to interest after the award when approaching the High Court for enforcement of the decree. Whether the High Court was correct in not awarding interest despite the procedural nature of interest under Order 34 CPC.
Ratio Decidendi:
Interest is a procedural remedy available under Section 34 CPC and Order 34, and can be granted by the court even if not claimed earlier, provided the party seeks it at the enforcement stage before the High Court. The court may modify its decree to include interest retrospectively to align with statutory provisions, unless strong reasons exist to deny it.
Result:
The appeal was allowed in part, with the decree of the Sub-Judge modified to include interest at 12% per annum from the date of the award until realization. No order as to costs was passed.
JUDGMENT
Rajendra Babu, J.-A claim has been made for grant of interest in respect of an amount awarded pursuant to arbitration in an application under Section 29 of the Arbitration Act, 1940 read with Section 34 CPC. However, such a claim does not seem to have been made before the Court of the Sub-Judge when the proceedings were pending for making the award the rule of the court. The Subordinate Judge passed a decree in terms of the award and against which an appeal was filed in the High Court. When that appeal was pending in the High Court an application was made as stated earlier but was rejected firstly on the ground that the appellant is not entitled to award of interest when such a claim had not been made before the court of the Sub-Judge by challenging the award and secondly on the ground that when interim relief was granted against the order making the award a rule of the court to make payment to an extent of 50% which could be withdrawn after furnishing security to the satisfaction of the court and having withdrawn the money the appellant would not be entitled to claim interest.
2. There are four stage of grant of interest. Firstly, from the stage of accrual of cause of action till filing of the arbitration proceedings; secondly, during pendency of the proceedings before arbitrator; thirdly, future interest arising between date of award and date of the decree; and fourthly, interest arising from date of decree till realisation of award.
3. The claim for interest not having been made before the court in which proceedings for making the award the rule of the court were pending would certainly dis-entitle the appellant for making such a claim during first three stages of pre-arbitration and post-arbitration that is between award and filing of application inasmuch as several considerations will have to be examined before award of interest and at what rate. Therefore, when the award had not been challenged for not granting interest, the award could not be upset to that extent. The view taken by the High Court appears to be correct to that extent. However, that is not the end of the matter. The High Court ought to have further examined whether the appellant was entitled to any interest after the decree was made in terms of the award. The courts have taken the view that award of interest under Section 34 CPC is a matter of procedure and ought to be granted in all cases when there is a decree for money unless there are strong reasons to decline the same. In the present case the appellant had made a claim for interest before the arbitrator but the same had been denied and no reasons are forthcoming thereto. Whatever that may be, at any rate after the Sub-Judge made an award the rule of the court the decree ought to contain a provision for making payment of interest. If such payment had not been made, appropriate correction of the decree could be ordered to be made when an application had been made before the High Court.
4. We are conscious of the fact that the appellant had not preferred any appeal against the order made by the court of Sub-Judge which made the award the decree of the court but did not grant any interest. Even so, the grant of interest being a matter of procedure and the appellant having made an application before the High Court in that regard, we do not think there is any impediment to grant the same by bringing decree of subordinate court in conformity with law, namely, by awarding appropriate interest.
5. The learned counsel for the appellant relied upon several decisions of this Court to state the proposition that such interest could be granted. It is unnecessary to make any detailed reference to them. We think it appropriate to modify the decree of the court of Sub-Judge by including a direction for payment of interest @ 12% per annum from the date when the award was made the decree of the court of Sub-Judge till realisation. The appeal is allowed to the extent indication above. However, in the circumstances of the case, there shall be no orders as to costs.
(C.R.) Appeal partly allowed.
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