The present First Appeal has been filed by the appellantUnion of India (original respondent) through Deputy Chief Engineer (C&S) Western Railway, Ahmedabad under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”) being aggrieved and dissatisfied with the order passed by the Principal District Judge, District Court, Kheda at Nadiad in Civil Misc. Application No.183 of 2005 dated 21.05.2011 on the grounds mentioned in the appeal. Heard learned counsel, Mr.Ravi Karnavat for the appellant and learned counsel, Mr.Mehul Sharad Shah for the respondent.
Learned counsel, Mr.Ravi Karnavat has referred to the provisions of the Act and has tried to submit that Section 34 of the Act provides that award of the Arbitrator could be challenged as provided under sub sections (2) and (3) of the Act. He, therefore, submitted that the Court below could not have interfered with the award and substituted its own finding with regard to the award of the interest. He has also submitted that the interest on the security deposit is erroneous. For that purpose, he has referred to and relied upon judgment of the Hon’ble Apex Court in case of Mcdermott Internation Inc. Vs. Burn Station Co. Ltd. & Ors., reported in (2006) 11 SCC 181 and submitted that Court cannot correct the errors and has to quash the award leaving it to the parties to begin the arbitration again or take appropriate measures. Therefore, he submitted that the impugned order may be quashed and set aside.
Per contra, learned counsel, Mr.Mehul Sharad Shah has referred to the order and emphasized that claim nos.1 to 4 are not in dispute and the controversy in the present Appeal is focused qua claim no.5 regarding the interest. He has also referred to the impugned order and submitted that when the security deposit has been illegally forfeited or retained by the railway organization, the interest could be awarded. He submitted that the order has been passed referring to this aspect and, therefore, the present Appeal may not be entertained. In support of this submission, he has referred to and relied upon the judgment of the Hon’ble Delhi High Court in case of M/s. Lloyd Insulations (India) Ltd. Vs. M/s. NBCC Limited, reported in 2008(2) R.A.J. 410 (Del).
In view of these rival submissions, it is required to be considered whether the present First Appeal can be entertained or not.
The facts narrated in the impugned order briefly summarized are that a sole was appointed arbitrator for the arbitration case regarding the contract or the agreement with regard to the railway work. After considering the record and the rival submissions, the sole arbitrator submitted a report, which was a matter of dispute in Civil Misc. Application No.183 of 2005 and the impugned order came to be passed confining to the claim no.5 with regard to the interest only. As rightly submitted referring to the provisions of the Act as well as the facts, the learned Judge has clearly observed that normally the security deposit has to be forfeited and no interest may be awarded, however, when the security deposit has been illegally forfeited or retained then clause would not apply with regard to the security deposit and the interest. The clause may provide that no interest will be payable on the amount of security deposit. However, clause 16 of the general conditions of the contract particularly subclause (3), which has also been quoted make the position clear for the payment of the interest. In other words, the security deposit has to be retained as per the terms of the contract without any interest. However at the same time, if the amount has been retained unauthorizedly, which is subsequently a matter of litigation then, the interest could be awarded depending upon the facts of the case. Therefore, since the present Appeal is confined to the aspect of the interest only as discussed hereinabove, it does not call for any intereference with the impugned award. Therefore, present First Appeal deserves to be dismissed and accordingly stands dismissed. Notice is discharged.
Interim relief granted earlier as per the order passed in Civil Application No.4647/2012 dated 13.07.2012 shall stand vacated.
Gautam Sd/ (RAJESH H.SHUKLA, J.)