OIL AND NATURAL GAS COMMISSIONversusM/S M.C. CLELLAND ENGINEERS S.A.

A                  OIL AND NATURAL GAS COMMISSION
                                          v.
                      MIS M.C. CLELLAND ENGINEERS S.A.

                                  APRIL 23, 1999

B              [S. RAJENDRA BABU AND S.N. PHUKAN, JJ.]


        Arbitration Act, 1940-Section 29-Interest upon interest-Grant a/-
  Arbitration proceedings-Award for payment of balance amount claimed and
  interest on delayed payment-Interest on the amount awarded-Validity of-
C Held, Arbitrators have power to grant interest-Interest on the amount of
  interest may be termed as interest on damages or compensation for delayed
  payment, which becomes part of the principal-Thus, interest is not granted
  upon interest awarded but upon the claim made-Interest Act, 1978-
  Section 3.
D        limitation

         Arbitration-Claim for interest on delayed payment-Plea that it was
    barred by limitation-Insufficient Pleadings before the arbitrators-Held,
    plea of bar of limitation cannot be entertained.
E         In an Arbitration proceeding between the parties, an award was passed
    directing the appellant company to pay the amount claimed along with interest
    at 12% p.a. from the date of award till realisation. Subsequently a decree
    was passed in terms of the award, by single Judge of High Court. Appeal
    before Division Bench was also dismissed. Hence the present appeal.
F         The appellant contended that what was awarded by the Arbitrators in
    respect of two claims was itself interest for different periods and under
    Section 3 of the Interest Act, the arbitrators could not have awarded interest
    upon interest; the claim of respondent for delayed payments was barred by
    limitation.
G
         Dismissing the appeal, this Court

          HELD : 1.1. The Arbitrators have power to award interest under Section
    29 of the Arbitration Act, 1940.

H         1.2. Interest is not granted upon interest awarded but upon the claim
                                         830
-           O.N.G.C. v. M.C. CLELLAND ENGINEERS S.A. (RAJENDRA BABU, J.]

      made. The claim made in the proceedings is under two heads-One is the A
                                                                               831

     ·balance of amount claimed under invoices and letter and the amount certified
      and paid by the appellant and the second is the interest on delayed payment.
      That is how the claim for interest on delayed payment stood crystallized by
      the time the claim was filed before the Arbitrators. Therefore, the power of
      the Arbitrators to grant interest on the amount of interest which may, in B
      other words, be termed as interest on damages or compensation for delayed
      payment which would also become part of the principal. In the instant case
      Section 3 of the Interest Act has no relevance in the context of the matter.
      The High Court was justified in dismissing the appeal against the decree
      passed in terms of the award. (832-E-GI

            2. Before the Arbitrator a very bald statement without setting out the
                                                                                     c
      details was made on the point of limitation. The plea raised was not sufficient
      to meet the claim on the bar of limitation. No foundation was laid in the
      course of the proceedings before the Arbitrators either in the pleadings or
    · in the evidence. Thus, the plea regarding bar of limitation cannot be
      entertained. [833-C-DI                                                          D
           CIVIL APPELLATE JURISDICTION: Civil Appeal No. 932of1991.

           From the Judgment and Order dated 25.10.88 of the Bombay High Court
     in A. No. 1253 of 1988.
                                                                                     E
           B. Datta, (R.K. Joshi) for Sushi! Kumar Jain for the Appellant.

           E.C. Agrawala for the Respondent.

           The Judgment of the Court was delivered by
                                                                                     F
           RAJENDRA BABU, J. This appeal arises out of certain arbitration
     P.roceedings between the parties to this appeal resulting in an award made on
     February 29, 1988. The Arbitrators by their award directed that the appellant
     shall pay to the respondent as follows :

            "(i) US$ 1004.50 being interest on US$ 40, 102.97 at 12% p.a. from G
            10. ~2.1985 to 16.4.1986.

             (ii) US$ 59,583 being interest on US$ 3,12,011.00 at 12% p.a. from
            3.5.1983 to 5.l l.1984."

          On these two items of claim the Arbitrators also awarded interest at 12% H
    832                     SUPREME COURT REPORTS                     (1999) 2 S.C.R.

A   per annum from the date of award till realisation. The award so made by the •
    Arbitrators was filed into the Court. Objections filed thereto stood dismissed 1
    and decree was passed in terms of the award. Against that order made by the
    learned Single Judge in his original jurisdiction an appeal was carried to a
    division bench which also stood dismissed. Hence this appeal.

B         Shri B. Datta, learned senior counsel for the appellant, contended that
    what was awarded by the Arbitrators in respect of the two claims referred to
    earlier in the course of this order is itself interest for different periods. He,
    therefore, submitted that Arbitrators could not have further awarded interest
    on the claims awarded at 12% per annum from the date of award till realisation.
C   He did not dispute, and very fairly and correctly, that the Arbitrators do have
    the power to grant interest on the amount claimed in the arbitration and the
    power of the Arbitrators was very characteristically described by him as
    'before, during and after' of the arbitration proceedings. His point is that there
    cannot be interest upon interest when the claim itself is one of interest and
    interest upon that amount could not have been granted by the Arbitrators
D   and relied upon Section 3 of the Interest Act.

          There cannot be any doubt that the Arbitrators have powers to grant
    interest akin to Section 34 of the CPC which is the power of the court in view
    of Section 29 of the Arbitration Act, I 940. It is clear that interest is not
E   granted upon interest awarded but upon the claim made. The claim made in
    the proceedings is under two heads - one is the balance of amount claimed
    under invoices and letter dated February IO, 1981 and the amount certified
    and paid by the appellant and the second is the interest on delayed payment.
    That is how the claim for interest on delayed payment stood crystallized by
    the time the claim was filed before. the Arbitrators. Therefore, the power of
F   the Arbitrators to grant interest on the amount of interest which may, in other
    words, be termed as interest on damages or compensation for delayed payment
    which would also become part of the principal. If that is the correct position
    in law, we do not think that Section 3 of the Interest Act has any relevance
    in the context of the matter which we are dealing with in the present case.
G   Therefore, the first contention raised by Shri Datta, though interesting, deserves
    to be and is rejected.

          The next contention urged by Shri Datta is that the claim made by the
    appellant for interest on the alleged delayed payments made by the respondent
    is barred by law of limitation. It is pointed out that the award itself notices
H   that the claimants cannot lose their right to interest due on the next delayed
           0.N.G.C. v. M.C. CLELLAND ENGINEERS S.A. [RAiENDRA BABU, J .]        833
     payment at the end of the three years ~er each due date the claim would be A
     barred and that principle was not applied on the delayed payment for the
     period May 3, 1983 to November 5, 1984. On this aspect of the matter we may
     notice the pleading raised before the Arbitrators. It is stated at para lO(a) as
     follows:

              "The present arbitration itself is barred by limitation as the alleged   B
              claims are relating to the work done in 1981-82"

     This is a very bald statement without setting out the details as to how the
     claim made by the respondent before the Arbitrators have become barred by
     the limitation particularly when the stand of the respondent is that they had
     running bills and payments were made from time to time and an account has C
     to be taken as to what amount became due and when; the same has to be
     worked out. Whether all such details have to be worked out and whether the
     transactions between the appellant and the respondent did not become complete
     until the payment of final amount are matters for adjudication,. Thus, it becomes
     very difficult to appreciate that the plea raised before the Arbitrators was D
     sufficient to meet the situation to defeat the claim on the bar of limitation.
     Therefore, we do not think that we can examine the matter in the light
     suggested now by the learned senior counsel for the appellant when no
     foundation has been laid in the course of the proceedings before the Arbitrat-0rs


--
     either in the pleadings or in the evidence. We are, therefore, of the view that
     the High Court was justified in dismissing the appeal against the decree E
     passed in terms of the award.

           The appeal, therefore, stands dismissed. However, in the circumstances


--   of the case, there shall be no order as to costs.

     S.V.KL                                                      Appeal dismissed.     F