Lal Chand Roy v. Nerode Kanta Goswamy .

Sinha, J.:— This is an appeal against an order of Mallick, J. dated August 21, 1964 by which he dismissed an application made by the appellant to correct, remit or set aside an award. The facts of the case are shortly as follows: The appellant and the respondent jointly acquired three properties, namely, premises Nos. 2A, Colonel Biswas Road, No. 89, Bepin Ghosal Road and No. 21, Taltolla Bazar Street. The parties had equal shares in the said properties. The petitioner claimed that he had made excess contribution for acquisition of one of the said properties and in effecting a partition of the properties, this claim should be kept in view. The respondent disputed the claim about excess payment. All matters in dispute between the parties relating to partition, including the claim for excess payment, were referred to the sole arbitration of Dr. P.C Chunder by an agreement dated May 15, 1959. The relevant clauses in the said agreement are clauses 1, 5, 6 and 7 which are set out hereunder:

“1. All matters, questions, disputes, differences and/or claims arising out of and/or concerning and/or in connection with and/or in consequence of or relating to the partition of the said properties including the claim of the said Lal Chand Roy for such excess contribution towards the costs of acquisition of the said premises No. 21, Taltala Bazar Street, Calcutta, be and are hereby referred to the sole arbitration of Dr. P.C Chunder of No. 23, Nirmal Chunder Street, Calcutta.

5. It is agreed that the premises No. 89 Bepin Ghosal Road shall be sold by the parties jointly to such party and for such price as the arbitrator shall direct and the sale proceeds shall be appropriated by Lal Chand Roy at the first instance towards his share which shall be taken into account by the arbitrator in making that division between the parties.

6. The arbitrator Shall divide the properties into two lots and allot each of the parties one such lot. In making the division the arbitrator shall allot to Nerode Kanta Goswami the premises. No. 21 Taltolla Bazar Street and to Lal Chand Roy No. 2A balance Biswas Road.

7. To equalise the value of the shares the arbitrator shall have power to award owelty.”

2. The arbitrator made an award dated June 18, 1963. It will appear from the facts aforesaid that the agreement already provided as to who will get the respective premises, but the arbitrator was called upon to adjust the owelty that is to be paid by the respective parties. After valuation of the properties was effected by the Engineer appointed by consent of parties, the arbitrator allotted one property to each of the parties as provided in the agreement and adjusted the equities between the parties by directing a payment of Rs. 53,750 as owelty by the Appellant to the respondent. He further directed that separate possession of the respective allotments should be given within one week from the date of the confirmation of the award. To this part of the award, no objection has been taken. The objection centres round the following provision in the award:—

“I further award and direct that the said owelty money will carry interest at 6% per annum from the date when the separate possession of 2A, Colonel Biswas Road is delivered to Sri Lal Chand Roy as aforesaid till the date of payment.”

3. An application was made by the Appellant to set aside this award and it was contended that the award of interest cannot be sustained in law. The position that was takers in the Court below was that the arbitrator had no jurisdiction in law to award interest on the amount that has been awarded and reference was made to section 29 of the Arbitration Act, 1940 which empowers the Court to grant interest on the amount awarded from the date of the decree. It was conceded that if the learned Judge set aside the award with regard to the amount of interest after the decree, but interest was granted by the Court under the decree, then no objection could be made. This offer however did not find favour with the learned Judge who proceeded to consider the other point, namely, whether it was permissible for an arbitrator to award interest on moneys which have been awarded under the award itself. The learned Judge was of the opinion that in a case where the reference was in a wide form and the arbitrator had the right to adjust equities between the parties, it was competent in law for the arbitrator, not merely to grant owelty money but also to award interest payable thereon till payment is made. In the premises, the learned Judge dismissed the application with costs. It is against this order that this appeal has been preferred.

4. It is to be regretted that a Bench decision of this Court on this particular point in which judgment was delivered by Bachawat, J. Union Of India… v. Bungo Steel Furniture (Pr.) Ltd.…., AIR 1963 Cal 70 — was not at all cited, and so was not considered by the learned Judge. In that case, amongst other things, this precise point was raised and decided. It was contended in that case that under section 34 of the CPC, 1908 only the Court could, in a suit tried by it, award interest from the date of the decree passed by it, and as this section does not apply to arbitration proceedings, the arbitrator has no power to award any interest from the date of the award. Various authorities were cited before the learned Judges, but Bachawat, J. having considered all the authorities came to the conclusion that the position in law before the introduction of section 29 in the Arbitration Act, 1940 was that where the arbitration clause was wide enough for the arbitrator to adjust all equities between the parties, there was no impediment in his granting interest on any amount awarded, and that this power did not flow from section 34 of the CPC but from the submission of the parties to arbitration in terms which was wide enough for the arbitrator to adjust all equities between the parties, including the payment of interest or any sum awarded. There certainly was a conflict of decisions but the learned Judge pointed out that the consensus of opinion upheld the position stated above. The learned Judge, however, pointed out that the position was altered when S. 29 was introduced into the Arbitration Act, 1940. Section 29 provides that where, and in so far as an award is for the payment of money, the Court may, while passing a decree order interest, from the date of the decree at such rate as the Court deems reasonable, to be paid on the principal sum as adjudged by the award and confirmed by the decree. The learned Judge of rightly came to the opinion that an arbitrator, by making such an order for the payment of interest, could not fetter the discretion of the Court, from the date of the decree. He was finally of the opinion that if the arbitrator awarded interest, it would only be valid up to the date of the decree but granting interest after the date of the decree was beyond the powers of the arbitrator. The award was however set aside not on this point but on another point. Incidentally, the learned Judge made an observation that, if a judgment on award was made, it might be construed that the interest up to the decree was awarded by the arbitrator and thereafter by the Court. With respect, I am unable to appreciate this observation. This was, however, only mentioned casually and forms no part of the decision. As I have stated above, the application was really decided on another point altogether. I respectfully agree with the proposition that where the submission is in a sufficiently wide form and the arbitrator has been given the power to adjudicate on all disputes between the parties and to adjust all the equities, he can make an order as to interest, not as a result of section 34 of the CPC but by virtue of the submission. This power, however, comes to an end upon the passing of the decree.

5. The arbitrator has no power to make an award granting interest after the decree. If he exercised any such power, it would be in violation of the jurisdiction conferred upon the Court by S. 29 of the Arbitration Act, 1940 and as such, void. To say that a judgment on award should be passed and that should be taken to be an award of the arbitrator up to the decree but a judgment of the Court thereafter, so far as interest is concerned, would be to introduce an immense amount of confusion, which) will necessarily affect the passing of decrees or awards in future. In my opinion, it is much, safer to lay down the proposition that an arbitrator can only order payment of interest up-to the passing of the decree, and to strictly speaking follow it. If the arbitrator had no jurisdiction to make an award in respect of interest after the decree, any award made to that effect should not be confirmed. In appropriate cases, however, if the Court thinks that interest should be awarded, it should pass an order itself to that effect, in the decree.

6. Coming to the facts of the present case, it is conceded that possession was given to the parties on 1st February, 1965. The result is that the appeal succeeds in part. The award is set aside only to the extent of the award of interest after the passing of the decree. The provisions as to interest will therefore be that the owelty money will carry interest at the rate of six per cent per annum from the date when separate possession of premises No. 2A, Colonel Biswas Road was delivered to Sri Lal Charid Roy, that is to say, from the 1st February, 1965 up till today, under the award, and that we order that the decretal amount for owelty will carry interest from today until payment, at the same rate of six per cent per annum.

7. It must be understood that we are not disturbing any other part of the award parties have agreed that the matter should be treated as being in our list today for the passing of a judgment on award, and accordingly we pass, judgment on award with the variation mentioned above. So far as the cost of the appeal is concerned, each party will pay and bear his own cost.

Mitter, J.:— I agree.

CJ/SS/G.G.M

8. Appeal partly allowed.