B.P Saraf, J.:— This is an appeal from the order of the learned Single Judge dated 9th February, 1995 on an application of the respondents. Oil and Natural Gas Commission, under section 30 of the Arbitration Act, 1940 by which the learned Single Judge set aside the award of the arbitrators dated 11th March 1992.
2. The material facts of the case giving rise to this appeal are as below. Under a contract dated 24th January 1996, the appellants, Poonam. Investments Company Limited, agreed to construct and sell to the respondents, Oil and Natural Gas Commission, a building comprising of 200 “A” Type and 200 “B” Type tenements aggregating to 400 tenements having an area admeasuring 2,32,000 sq. feet built-up, which built-up area was to be ascertained by a joint survey. The total number of flats/tenements later came to be reduced to 384 flats. The flats were to be constructed at Mahakali Caves Road, Andheri (East), Bombay. The deal was a package deal. The rate was fixed at Rs. 305/- per sq. ft. and the overall period for completion of the work was 22 1/2 months from the date of the agreement. During the progress of the work, some disputes and differences arose between the parties which were referred to arbitration of two arbitrators. The appellants submitted six claims before the arbitrators. As against that the respondents submitted 10 counter-claims. The first claim of the appellants was for payment at the rate of Rs. 350/- per sq. ft. of the built-up area as against the agreed rate of Rs. 305/- per sq. ft. This claim was rejected by the arbitrators. Claim No. 2 was for a declaration that the “duct area” should be treated as built-up area in calculating the total built-up area for determining the amount payable to them. According to the appellants, on such a calculation, the built-up area would be 2,48,800 sq. ft. This claim was allowed by the arbitrators. Claim No. 3 was in respect of increased cost of labour, material etc. which was allowed by the arbitrators. Claim No. 4 was in respect of (i) lifts, (ii) doors, and (iii) septic tanks and soak pits. The claim for cost of lifts was disallowed by the arbitrators on the ground that the cost of the lifts was a part of the aggregated price of Rs. 305/- per sq. ft. The arbitrators, however, allowed 10% of the cost of the lifts on the ground that the same bad to be incurred by the appellants on account of delay in completion of the buildings for which the respondents were responsible. The arbitrators also allowed the claim of the appellants for a sum of Rs. 12,23,850/- for 597 extra doors. The claim for cost of septic tanks and soak pits was, however, disallowed because, as in case of lifts, the cost of providing the same was part of the aggregated price of Rs. 305/- per sq. ft. Claim No. 5 for reimbursement of additional burden of interest on the loan of Rs. 24 lacs advanced by the respondents to the appellants during the course of the construction work of the buildings was disallowed. Claim No. 6 which pertained to interest on the amounts wrongfully withheld by the respondents was allowed. Counter-claim Nos. 1, 2 and 7 to 10 were rejected by the arbitrators. Against counter claim Nos. 3 to 6, a sum of Rs. 1 Lakh was awarded in favour of the respondents.
3. The respondents filed an arbitration petition before the learned Single Judge challenging the award in respect of claim Nos. 2, 3, 4 and 6 and for setting aside the award. In the said petition, although the respondents had also challenged the rejection of their counter-claim, the said challenge was not pressed at the time of hearing. The learned Single Judge who heard the arbitration petition, therefore, considered the challenge of the respondents to the award only in respect of claims Nos. 2, 3, 4 and 6. So far as the award of the arbitrators against claim No. 2 is concerned, the learned Single Judge held that inclusion of about 20,500 sq. ft. in the built-up area on account of “duct area” was contrary to the terms of the contract. While arriving at the above conclusion, the learned Single Judge referred to Clause I of the contract, in particular, the definition of the built-up area contained therein. So far as claim No. 3 which pertains to escalation of cost of construction of materials and labour is concerned, the learned Single Judge held that the allowance of the above claim by the arbitrators was contrary to Clause 1 of the contract. According to the learned Single Judge, in view of the above Clause, the contractors (appellants) were not entitled to claim any escalation on account of delay in completion of the work. In the opinion of the learned Single Judge, there was a positive prohibition on grant of any escalation in Clause I of the contract. The learned Single Judge, therefore, held that acceptance of claim No. 3 of the appellants by the arbitrators was contrary to the express terms of the contract. So far as claim No. 4 is concerned, the learned Single Judge held that grant of escalation at the rate of 10% of the price of lifts by the arbitrators was contrary to the provisions of the contract. The learned Single Judge was, however, of the opinion that the arbitrators were right in granting the claim of Rs. 12,23,854/- for 597 extra doors put up by the appellants. In so far as the award of interest on delayed payments and interest on short payments under claim No. 6 is concerned, the learned Single Judge held that allowance of such interest for delayed payments and short payments was opposed to the terms of the contract. It was observed that Clause 17 of the contract only provided for extension of time if the payments were delayed but did not give any right to the appellants to claim any interest. Thus the learned Single Judge found the award of the arbitrators erroneous in-regard to claim Nos. 2, 3, 6 and part of claim No. 4. He, however, set aside the entire award. Aggrieved by the above order of the learned Single Judge, the appellants are in appeal before us.
4. We have heard Mr. Virendra Tulzapurkar, learned Counsel for the appellants. The first submission of Mr. Tulzapurkar is that the learned Single Judge erred in law in setting aside the entire award when on the face of it the award was divisible and the learned Single Judge himself held that the challenge to the award in so far as it pertained to other claims was not sustainable. According to Mr. Tulzapurkar if the award is divisible and a part of the award is valid, the valid part of the award can be upheld. He, therefore, submits that the impugned order of the learned Judge setting aside the entire award is erroneous and liable to be set aside. In support of this contention, reliance is placed on the decision of the Privy Council in (Mt. Amir Begam v. Syed Badruddin Husain)1, A.I.R 1914 P.C 105 and of the Supreme Court in (M. Chelamayya v. M. Venkataratna)2, (1972) 3 SCC 799 : A.I.R 1972 S.C 1121. So far as the decision of the learned Single Judge on claim No. 2, which pertains to the inclusion of “duct area” in the built-up area, is concerned, the submission of Mr. Tulzapurkar, the learned Counsel for the appellants contractors, is that the claim under the said head was granted by the arbitrators on the basis of interpretation of the terms of the contract and it was not open to the learned Single Judge to substitute his own views on the interpretation unless the interpretation of the arbitrators was found to be perverse. Counsel further submits that the arbitrators construed the definition of built-up area and arrived at the conclusion that the “duct area” was covered by the said definition. It is contended by the learned Counsel that there is no express provision in the contract excluding the duct area from the definition of the built-up area nor is there any provision in the contract providing for inclusion of the “duct area” in the built-up area. In such a situation, according to Mr. Tulzapurkar, the learned Single Judge erred in law in holding that inclusion of the “duct area” in the built-up area was contrary to the terms of the contract. Counsel further submits that in so far as the decision of the learned Single Judge upholding the challenge to the award of claim No. 3 of the appellants is concerned, the learned Single Judge erred in holding that allowance of the same was contrary to the express terms of the contract. According to the learned Counsel, the claim was in the nature of damages and there was no clause in the contract barring such claim. The Counsel submits that the arbitrators interpreted Clauses 1 and 17 of the contract and held that the appellants were entitled to 25% of the increased cost during the extended period. It is contended that once the arbitrators awarded the said amount by interpreting Clauses 1 and 17 and the interpretation was a possible interpretation, it was not open to the learned Single Judge to substitute his own interpretation for that of the arbitrators and to hold that the award was contrary to Clause I of the contract. It was pointed out that the arbitrators interpreted Clause I to mean that if there was delay on the part of the respondents resulting in increased cost, the appellants were entitled to claim damages. There was no absolute prohibition against grant of damages for delay in completing the work for any reason whatsoever. The submission of the learned Counsel is that once the arbitrators had jurisdiction to award the claim, the award cannot be faulted with on the ground that a second view on the construction of the clauses of the contract is also possible. It is contended that the arbitrators did not commit any jurisdictional error in awarding 25% of the claim for escalation. Reliance is placed in support of this contention on the decisions of the Supreme Court in (State Of U.P v. Ram Nath International Construction (P) Ltd.. Pvt. Ltd.)3 (1996) 1 SCC 18 : A.I.R 1996 S.C 782 and (P.M Paul v. Union Of India .)4 1989 Supp (1) SCC 368 : A.I.R 1989 S.C 1034. So far as the decision of the learned Single Judge upholding the challenge of claim No. 4 on the ground that the said award was contrary to the provisions of the contract is concerned, the submission of the learned Counsel is that the above finding of the learned Single Judge is erroneous. According to the learned Counsel, the arbitrators interpreted the contract and awarded 10% of the price of the lifts the installation of which was delayed on account of the delay on the part of the respondents. The award of the above amount by the arbitrators, according to the learned Counsel, was on interpretation of the terms of the contract and the learned Single Judge was not justified in setting aside the same on a different interpretation of the terms of the contract. Mr. Tulzapurkar also submits that the learned Single Judge committed a manifest error of law in upholding the challenge to the award as regards claim No. 6 which pertains to grant of interest for delayed payments. According to the learned Counsel, the arbitrators bad jurisdiction to grant interest for delayed payments. The amounts had become due on a particular date there was a delay on the part of the respondents in making payments and hence the arbitrators were justified in granting interest. It is submitted by the learned Counsel that the arbitrators granted interest to the appellants on interpretation of Clause 17 of the contract. It is contended that the teamed Single Judge misinterpreted Clause 17 by reading into that clause that it provided only for extension of time if the payment was delayed and did not give any right to the appellants to claim interest. According to the Counsel, there was no prohibition in the contract against grant of interest and hence the arbitrators had the power to grant interest which they have granted. Learned Counsel submits that the finding of the learned Single Judge that in the absence of any provision for interest in the contract, the grant of interest by the arbitrators was opposed to the terms of the contract is manifestly erroneous. The power to grant interest, unless prohibited by a contract, according to the learned Counsel, is well within the jurisdiction of the arbitrators and having come to a conclusion that there was a delay in making payments of the amounts within the stipulated period of 14 days from the submission of the bills, the arbitrators were justified in holding that the appellants were entitled to claim interest. Reliance is placed in support of this contention on the decisions of the Supreme Court in (Executive Engineer, Irrigation Galimala v. Abnaduta Jena)5. (1988) 1 SCC 418 : A.I.R 1988 S.C 1520 and (Secretary, Irrigation Department, Government of India v. G.C Roy)6, (1992) 1 SCC 508 : A.I.R 1992 S.C 732. It is submitted that grant of interest under claim No. 6 is not opposed to the terms of the contract and the learned Single Judge erred in holding the same to be so.
5. We have also heard Mr. Zaiwala, learned Counsel for the respondents. Oil & Natural Gas Commission. Though Mr. Zaiwala does not seriously dispute the proposition that in a case where the award is severable, the Court need not set aside the entire award if it finds that certain part of the award is good, he vehemently opposes the submission of Mr. Tulzapurkar in so far as his challenge to the decision of the learned Single Judge on claim Nos. 2, 3, 4 and 6 is concerned. According to Mr. Zaiwaia, the learned Single Judge correctly held that the arbitrators acted contrary to the express Clauses of the contract and exceeded their jurisdiction in allowing the above claims and allowed the same contrary to the express prohibition in the contract. According to Mr. Zaiwaia, the arbitrators acted unreasonably, irrationally and capriciously in ignoring the limits and the clear provisions of the contract in allowing the claims of the appellants under claim Nos. 2, 3, 4 and 6 which are opposed to the provisions of the contract and misconducted. So far as allowance of claim No. 2 by the arbitrators is concerned, Mr. Zaiwaia submits that the teamed Single Judge was right in his conclusion that it was clear from Clause 1 of the contract which specifically defines built-up area that the same includes the total plinth of the building and not the “duct area”. Learned Counsel supports the reasons and conclusions of the learned Single Judge in so far as it pertains to claim Nos. 2, 3, 4 and 6 and submits that the learned Single Judge was justified in holding that the arbitrators went wrong in allowing the same.
6. We have considered the rival submissions of the Counsel for the parties and carefully perused the award and the impugned order of the learned Single Judge. Obviously, the learned Single Judge held only a part of the award to be bad and the remainder of the award was held by him to be good. Admittedly, the part of the award held to be bud is separable. In such a situation, it was not open to the learned Single Judge to set aside the whole of the award. He should have set aside only that part of the award which is bad and maintained the remainder of the award, which is good. In the instant case, the learned Single Judge, in our view, erred in setting aside the entire award when the bad part of the award was separable from the rest. He should have maintained the remainder of the award which was good.
7. We are supported in our above conclusion by the decision of the Privy Council in Mt. Amir Begum v. Syed Badruddin, A.I.R 1914 P.C 105, where it was observed (at p. 1067):
“It is well-recognised law that when a separable portion of the award is bad, the remainder of the award, if good, can be maintained.”
8. To the same effect is the decision of the Supreme Court in M. Chelamayya v. M. Venkataratnam, (1972) 3 SCC 799 : A.I.R 1972 S.C 1121 where the Supreme Court repelled the contention of the appellant that an award was one and indivisible and to direct that effect be given to a part of the award would amount to modifying the award and observed (at pp. 1125-26):
“Where a severable part of an award cannot be given effect to for a lawful reason, there is no bar to enforce the part to which effect could be justly given. See Mt. Amir Begum v. Badruddin Husain, A.I.R 1914 P.C 105 where as a general principle it is laid down that when a separable portion of an award is bad, the remainder of the award, if good, can be maintained. By giving effect to a part of the award in this case no prejudice is caused to the appellants. In fact they stand to benefit……It is true that judgment should be pronounced according to the award, but that does not bar giving effect to the severable part of the award if it could be justly done……..”
9. We now turn to the challenge of the appellants to the order of the learned Single Judge in so far as it pertains to their claim Nos. 2, 3, 4 and 6. We shall take up claim No. 2 first.
Claim No. 2:
10. Claim No. 2 of the appellants contractors was for a declaration that the “duct area” should be included in determining the built-up area for the purpose of payment of the price for the construction of the building which was to be calculated at the aggregated price of Rs. 305/- per sq. ft. built-up area and for a direction to the respondents to make payment on that basis. This claim of the appellants was allowed by the arbitrators. On the award of the arbitrators being challenged by the respondents, the learned Single Judge referred to Clause 1 of the contract and held that the duct area i.e open passage or “square open and unbuilt area” in between built-up areas was not included in the built-up area. The teamed Judge also observed that an open area cannot be treated as built-up area. He, therefore, concluded that the inclusion of an area of about 20,500 sq. ft. in the built-up area on account of duct area was clearly contrary to the terms of the contract. The appellants have challenged the above finding of the learned Single Judge. According to Mr. Tulzapurkar, the learned Counsel for the appellants, the arbitrators construed the definition of built-up area in Clause 1 of the contract and arrived at the conclusion that the duct area was covered by the said definition. It was stated that there is no express provision in the contract excluding the duct area from the definition of built-up area. It was, therefore, contended that the finding of the learned Single Judge that inclusion of the duct area in the built-up area was contrary to the terms of the contract is erroneous. The learned Counsel for the respondents Mr. Zaiwala, on the other hand, submits that a plain reading of Clause 1 of the contract and the definition of built-up area contained therein clearly goes to show that the open space known as duct area, which obviously is an unbuilt area, cannot be regarded as built up area. Mr. Zaiwala further submits that question of construction or interpretation of the definition of built-up area in Clause 1 of the contract cannot arise because by no stretch of interpretation, open passage or unbuilt area like duct area can be regarded as built-up area.
11. We have carefully considered the rival submissions of the learned Counsel for the parties. We have also perused Clause 1 of the contract. On a plain reading of the same, it is clear that the appellants had agreed to construct and sell to the respondents the land with buildings constructed thereon on package deal basis at the rate aggregated to Rs. 305 per sq. ft. built-up area. It is specifically stated in the said Clause:
“The reference to the built up area in the Agreement will include total plinth area of buildings including stair case, stair case landing, lift space (if applicable) and full balconies but excluding stilts, chowkidar cabins, servants, toilets and meter room pump houses and terrace.”
12. It is apparent from the above definition of built-up area that in the total built-up area, besides plinth area, staircase landing, lift space and balconies have also been specifically included. It is also clear that built-up areas like stilts, chowkidar cabins, servants toilets and meter room, pump houses and terrace are excluded from the built up area. It is apparent merely from looking at the above definition of built-up area that the unbuilt area like duct area can never be regarded as built up area. In fact, as observed by the learned Single Judge in the impugned judgment, it was never the case of the appellants themselves that duct area formed part of the built-up area. It was at a later stage that the appellants contended that the open space known as duct area should be multiplied by the number of floors and included in the built-up area. Admittedly, that area was open to the sky. There was no construction thereon at all. That being so, by no stretch of imagination or process of interpretation or construction, such open area can be deemed to be built-up area and hypothetical area arrived at by multiplying such area by the number of floors can be included in the built-up area for the purpose of computing the amount payable to the contractors at the aggregated and fixed rate of Rs. 305/- sq. ft. built-up area. In our opinion, the arbitrators, acted totally outside the terms of the contract in including the duct area multiplied by the number of floors in the total built-up area for payment of price and the learned Single Judge rightly set aside the same. In that view of the matter, we do not find any cogent reason to interfere with the impugned judgment of the learned Single Judge is so far as it pertains to claim No. 2.
Claim No. 3:
13. Claim No. 3 was in respect of escalation of the cost of construction material and labour. The basis of this claim of the appellants was that there was delay on the part of the respondents in making interim payments as a result of which the work could not be completed by them within the stipulated time and the time for completion of the contract has to be extended. The appellants, claimed that they were, therefore, entitled to the increased cost of the material and labour during the extended period. The case of the respondents on the other hand was that Clause 1 of the agreement specifically provides that the appellants would be entitled to get payment at the rate of Rs. 305/- per sq. ft. built up area as lump sum and fixed rate and the same shall not be increased or decreased in any way whatsoever and during any periods (including extension if any). According to the respondents, there is a clear prohibition in Clause 1 against claim of escalation on any count. The arbitrators, however, allowed this claim of the appellants for the reasons set out below:
“This claim is in respect of increased cost of labour, materials etc., for working during the extended period. Under the terms of the Agreement dated January 24, 1986 all the six buildings were required to be constructed and delivered to the respondents by September 23, 1987. However, we find that by virtue of the stand taken up by the respondents upto December 31, 1990 the period for performance of the Agreement stood extended under Clause-17 at page 34 of the Agreement. Even though the Clause 1 at page 18 states that the rate of Rs. 305/- per sq. ft. for built-up area is fixed at the rate agreed to be paid by the purchasers to the developers and irrespective of ups and downs and increase and decrease in the cost of building materials or labour or construction cost the said mice shall be treated as lump-sum and fixed rate of the same will not be increased or decreased in any way whatsoever and during any periods (including extension if any) whatsoever. However, we find that it was because of the wrong stand taken up by the respondents regarding the interim payments to he made for each building during the course of construction of building that time for construction of the buildings got extended under Clause-17. We find that such extension of periods of the performance of the contract took place from October 1, 1987 to December 31, 1990 and we also find that the delay in payment of the Bills was after October 1, 1987 and we hold that the increased cost to be paid for by the respondents to the claimants will be calculated as follows. We find that out of the total increased cost during the extended period it would be just and fair considering all the facts and circumstances of the case, the respondents will pay to the Claimants 25% of the total increased cost during the extended period. The increased cost will be calculated as follows:—
(Emphasis supplied)
14. This part of the award was challenged by the respondents-Oil & Natural Gas Commission before the learned Single Judge. The case of the respondents was that the arbitrators allowed the above claim contrary to the clear stipulations contained in the agreement. The case of the appellants on the other hand was that this claim was allowed by the arbitrators on interpretation of the terms of the agreement and even if the arbitrators committed an error in interpreting the same, it was not open to the Court to interfere with the award of the arbitrators. The learned Single Judge did not accept this contention of the appellants. According to him, the above claim was allowed by the arbitrators contrary to the express terms of the contract and clear prohibition contained therein. This finding of the learned Single Judge is challenged before us by the appellants on the ground that the learned Single Judge committed an error of law in interfering with the award of the arbitrators in so far as it pertains to the allowance of the above claim for escalation because the said claim was allowed by the arbitrators on interpretation of the contract and it was not open to the learned Single Judge to substitute his own interpretation for that of the arbitrators.
15. We have carefully considered the above submission. We have perused Clause 1 of the agreement, the material part of which reads as follows:
“It is further expressly agreed that the rate of Rs. 305/- per sq. ft. built up area is fixed at the rate agreed to be paid by the purchasers to the Developers and irrespective of ups and downs and increase and decrease in the cost of building materials or labour or construction cost the said price shall be treated as lumpsum and fixed rate and the same will not be increased or decreased in any way whatsoever and during any periods (including extension if any) whatsoever.”
16. The above Clause contains clear prohibition against the claim of escalation on any count during the period of the contract including the extended period. By the above Clause, it was clearly stipulated between the parties that the price shall be treated as lumpsum and fixed rate and the “same will not be increased or decreased in any way whatsoever and during any periods (including extension if any) whatsoever.” To allow escalation over and above the lump sum and fixed price on the basis of increase in the cost of labour and building materials during the extended period of construction, on the face of it, is contrary to the above clause. That being so, in allowing the above claim, the arbitrators acted contrary to the specific bar contained in the contract. There is no scope for interpreting Clause I of the contract. It is so clear and unambiguous that question of interpretation of the same cannot arise. The decision of the arbitrators contrary to the specific bar on increase of the price in any event even during the extended period of contract contained in Clause 1 of the contract cannot be sustained by terming it as a decision arrived at on construction of the terms of the contract. The bar on increase of price contained in Clause 1 of the contract is in no way lifted by Clause 17. The said Clause rather makes the appellants liable to pay liquidated damages to the respondents in the event of delay in completion of the work within the stipulated period. The said clause, so far as relevant, reads:
“….Without prejudice to any other rights of the purchasers, the Developers (appellants) shall pay liquidated damages to the Purchasers which would commence after a grace period of 15 days from the date of expiry of 20 months plus the time taken for obtaining BMC's approval for the building plans limited to 2 months, from the date of execution of the sale agreement, and the same shall be adjusted and/or set off against further installments payable by the Purchasers to the Developers or recovered in any other manner at the discretion of the Purchasers after the delay or default being committed by the Developers in construction and completing each of the buildings consisting of residential 400 flats in all respects within a total period of 22 ½ months (time being essence of the contract) at the rate of 0.25% of the total purchase price of each building per week or part thereof subject to a maximum of 5% of the total value of each building. The said provision for payment of liquidated damages is without prejudice to all other rights which the. Purchasers may have inter alia against the Developers including option in the event of any delay and/or default in completion of the construction in all respects to claim refund of the amounts paid by the Purchasers to the Developers together with interest at the rate of 12% per annum or option to carry out the work of construction of remaining items of construction at the costs of the Developers and appropriate the amounts payable by the Purchasers to the Developers for the purpose of completing construction of the remaining items and in the event of the said amount or amounts being found inadequate or insufficient, than to claim the said additional amount or amounts and/or differences in amount from the Developers together with interest, costs, charges and expenses as the case may be.”
17. It is thus apparent merely by looking at Clauses 1 and 17 of the contract that it was agreed between the parties that the appellants would be paid at the fixed rate of Rs. 305/- per sq. ft. built-up area irrespective of ups and downs and increase and decrease in the cost of building material or labour or construction cost and that the same would not be increased or decreased in any way whatsoever and during any periods (including extension if any) whatsoever. On the face of such clear prohibition, the arbitrators misdirected and misconducted themselves in awarding 25% of the increased cost of the materials and labour by way of escalation merely because they felt that considering the facts and circumstances of the case, it was just and fair to do so. This action of the arbitrators is manifestly contrary to the terms of the contract. In doing so, the arbitrators exceeded their jurisdiction. As observed by the Supreme Court in (Alopi Parshad v. Union of India)7, A.I.R 1960 S.C 588, a party to a contract cannot ignore the express covenants of the contract and claim payments of consideration for performance of the contract at rates different from the stipulated fixed rate on a vague plea of equity. An arbitrator also cannot ignore the terms of the contract and the law or misapply the same in order to do what he thinks just and reasonable. He is not a conciliator. As an arbitrator his sole function is to arbitrate in terms of the contract. He cannot decide de hors the terms of the contract. If he does so, he can be set right by the courts. In the instant case that is exactly what the arbitrators have done. The award, in so far as it pertains to claim No. 3, is therefore liable to be set aside and the learned Single Judge has rightly set aside the same.
18. We have also perused the decision of the Supreme Court in State Of U.P v. Ram Nath International Construction (P) Ltd.ruction (P) Ltd. (supra) and P.M Pal v. Union of India (supra) on which reliance was placed by the learned Counsel for the appellants. The ratio of the said decisions, in our opinion, has no application to the facts and circumstances of this case. In the above cases, there was no specific prohibition in the contract against the enhancement or escalation of the price as in the case before us.
Claim No. 4:
19. This claim pertains to a number of items including cost of lifts, increased cost of lifts because of delay in completion of the construction and for extra doors supplied by the appellants. The arbitrators did not allow the claim for the cost of lifts as the cost of lifts was a part of the cost of construction which was included in the lump sum and fixed rate of Rs. 305/- per sq. ft. built-up area. The arbitrators, however, allowed the claim of the appellants for increase in the cost of the lifts to the extent of 10% of the cost thereof on the ground that the cost of the lifts had gone up due to delay in completion of the construction, for which the respondents were responsible. The arbitrators also awarded the claim of the appellants for the cost of additional doors supplied by them. The learned Single Judge upheld the award in so far as the cost of additional doors is concerned. He, however, found that the arbitrators acted contrary to the terms of the contract in allowing escalation of the cost of the lifts which was nothing but one of the materials used in the construction, for which the lump sum rate had been fixed under Clause 1 of the contract. The appellants seek to challenge this part of the order of the learned Single Judge.
20. We have heard Mr. Tulzapurkar, learned Counsel for the appellants. We have also heard Mr. Zaiwaia, learned counsel for the respondents who submits that in view of Clause 1, the appellants are entitled to get only lump sum fixed rate per sq. ft. built-up area and nothing more than that irrespective of the increase or decrease in the cost of material or labour. The lifts in this case, according to Mr. Zaiwala was the material required for the construction and when the appellants were not entitled to get anything more than the lump sum fixed rate for the entire construction, they cannot claim separately anything on account of escalation in the cost of materials. Mr. Zaiwala submits that the arbitrators exceeded their jurisdiction in allowing this claim. We have carefully considered the rival submissions. We are in agreement with Mr. Zaiwala, learned Counsel for the respondents that the arbitrators exceeded their jurisdiction in allowing the claim of the appellants for increase in the cost of the lifts which was nothing but material required for construction, for which lump sum rate of Rs. 305/- per sq. ft. built up area had been fixed by the parties. Following the reasoning given by us in support of the judgment of the learned Single Judge setting aside the award of the arbitrators in respect of claim No. 3, we hold that the arbitrators acted in excess of their jurisdiction in allowing the above claim also and the learned Single Judge was justified in setting aside the same.
Claim No. 6:
21. Under claim No. 6, the appellants had claimed interest at the rate of 21% in respect of the amounts which were wrongfully withheld by the respondents. The arbitrators referred to Clause 17 of the contract which required the respondents to pay the bills of the appellants within 14 days of their submission and held that the same having not been paid within that period, the appellants were entitled to interest on those amounts for the period of delay at the rate of 18% per annum. On being challenged, the learned Single Judge set aside the order of the arbitrators allowing the above claim of the appellants for interest. While doing so, the learned Single Judge held that Clause 17 only provided for extension of time for completion of the contract and the appellants were not entitled to any interest. The learned Single Judge, therefore, held that the arbitrators acted illegally and in excess of their jurisdiction in allowing interest to the appellants for delayed payments. The appellants seek to challenge this part of the order of the learned Single Judge.
22. Mr. Tulzapurkar, learned Counsel for the appellants, submitted before us that under Clauses 2 and 17 of the contract, the respondents were obliged to make payment of the amounts of the bills payable to the appellants within a period of 14 days from the date of submission of the bills by the appellants. It was submitted that though Clause 17 does not deal with or provide for payment of interest in the event of the default of the respondents in making payment of the amount of installments within the stipulated period of 14 days from the date of notice of demand, the appellants are entitled to interest on the same under the Interest Act, of 1978. It was pointed out to us that in the instant case the Interest Act of 1978, which came into force with effect from 19th August 1981, is applicable. By virtue of Clause 2 read with Clause 17 of the written contract in this case, the amounts claimed by the appellants were payable within 14 days from the date of the submission of the bills. The grant of interest is not prohibited by the contract. That being so, interest was payable under the Interest Act of 1978 on the said amount.
23. We have carefully considered the above submission. We have perused the provisions of Interest Act, 1978. Under the Interest Act, 1978, interest is payable if the amount claimed is a certain sum payable at a certain time by virtue of a written instrument. Admittedly, Interest Act, 1978 is applicable in this case. There is no dispute about the fact that by virtue of the written contract between the parties the amounts due to the appellants were payable within 14 days from the date of the demand. That being so, the arbitrators acted within the parameters of law in allowing interest to the appellants for the delay in payment of the amounts due to them beyond the stipulated period. In that view of the matter, the learned Single Judge, in our opinion, was not justified in setting aside this part of the award. In the result, this appeal is allowed. The impugned judgment and order of the learned Single Judge is set aside. Part of the award which pertains to allowance of claim Nos. 2, 3 and claim No. 4 in so far as it relates to allowance of escalation of cost of the lifts, is set aside. Rest of the award is upheld. Arbitration Petition No. 82 of 1992 stands disposed of accordingly.
24. In the facts and circumstances of the case, there shall be no order as to costs.
25. Petition allowed with modification.