JAIPRAKASH ASSOCIATES LTD. (JAL) THROUGH ITS DIRECTOR versus TEHRI HYDRO DEVELOPMENT CORPORATION INDIA LTD. on 7 February 2019

[2019] 2 S.C.R. 41

JAIPRAKASH ASSOCIATES LTD. (JAL)THROUGH ITS DIRECTOR

v.

TEHRI HYDRO DEVELOPMENT CORPORATION INDIA LTD.(THDC) THROUGH ITS DIRECTOR

(Civil Appeal No. 1539 of 2019)

FEBRUARY 07, 2019

[A. K. SIKRI, S. ABDUL NAZEER AND M. R. SHAH, JJ.]

Arbitration and Conciliation Act, 1996:

s. 31(7)(a) – Power of arbitrator to award pendente-lite interest– Arbitral Tribunal while allowing the claims, also granted pendente-lite interest – Objection to award of interest in view of clauses 50and 51 of General Conditions of Contract which barred grant ofinterest – Single Judge of High Court quashed the award limitedto the interest – Order of Single Judge affirmed by Division Benchof High Court – On appeal, held: As the clauses 50 and 51 ofGeneral Conditions of Contract put a bar on arbitral Tribunal toaward interest, arbitral Tribunal did not have jurisdiction to do so.

Doctrines/Principles:

Principle of ejusdem generis – Applicability of – Discussed –The principle is not applicable in the present case – Interpretationof Statutes – Rules of Interpretation.

Dismissing the appeal, the Court

HELD: 1.1 Right from the stage of arbitration proceedingstill the High Court, clauses 50 and 51 of General Conditions ofContract (GCC) are interpreted to hold that they put bar on thearbitral tribunal to award interest. Even the majority award ofthe arbitral tribunal recognised this. Notwithstanding the same,it awarded the interest by relying upon *Board of Trustees for thePort of Calcutta case. In case clauses 50 and 51 of GCC put a baron the arbitral tribunal to award interest, the arbitral tribunal didnot have any jurisdiction to do so. The High Court, both SingleBench as well as Division Bench, rightly noted that the aforesaidjudgment was under the 1940 Act and the legal position in this

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Abehalf have taken a paradigm shift which position is clarified in**Sayeed Ahmed and Company case. This rationale given by theHigh Court is in tune with the legal position which standscrystallised by catena of judgments. [Para 16][55-C-E]

1.2 The judgment in #Harish Chandra case is under theB1940 Act. This judgment is explained and distinguished in**Sayeed Ahmed and Company case. The judgment in SayeedAhmed and Company distinguishing the restrictive wording in#Harish Chandra case has been consistently followed by this Courtin number of cases thereafter. In this scenario, when it is foundthat #Harish Chandra case which is of the vintage of 1940 ActCand is distinguished in **Sayeed Ahmed and Company casecoupled with the fact that the ratio of **Sayeed Ahmed andCompany case has been consistently followed, there is no reasonto deviate from the construction to Clauses 50 and 51 of the GCCgiven by the arbitral tribunal in the first instance as well as theDHigh Court. [Paras 19 and 20][56-C-D, 57-H, 58-A-B]Secretary, Irrigation Department, Government of Orissa& Ors. v. G.C. Roy (1992) 1 SCC 508: [1991] 3 Suppl.SCR 417 – followed.

Tehri Hydro Development Corporation (THDC) LimitedE& Anr. v. Jai PrakashAssociates Limited (2012) 12SCC 10 : [2012] 8 SCR 813 ; **Sayeed Ahmed andCompany v. State of Uttar Pradesh & Ors. (2009) 12SCC 26 : [2009] 10 SCR 841 ; Sree Kamatchi AmmanConstructions v. Divisional Railway Manager (Works),Palghat & Ors. (2010) 8 SCC 767 : [ 2010] 10 SCRF487 ; Union of India v. Bright Power Projects (India)Private Limited (2015) 9 SCC 695: [2015] 6 SCR488 ; Sri Chittaranjan Maity v. Union of India (2017)9 SCC 611 : [2017] 11 SCR 722; Reliance CelluloseProducts Limited v. Oil and Natural Gas CorporationGLimited (2018) 9 SCC 266 : [2018] 6 SCR 618 – reliedon.

*Board of Trustees for the Port of Calcutta v. EngineersDe-Space-Age (1996) 1 SCC 516 : [1995] 6 Suppl.SCR 327 – distinguished.

#State of Uttar Pradesh v. Harish Chandra and Company(1999) 1 SCC 63 : [1998] 2 Suppl. SCR 660 – stooddistinguished.

2. The principle of ejusdem generis is not applicable in thepresent case. The rule of ejusdem generis would be applied onlyif there is distinct genus or a category, which is lacking in theinstant case. This rule is applicable when particular wordspertaining to a clause, category or genus are followed by generalwords. In such a situation, the general words are construed aslimited to things of same kind as those specified. In that sense,this rule reflects an attempt ‘to reconcile incompatibility betweenthe specific and general words in view of the other rules ofinterpretation that all words in a statute are given effect ifpossible, that a statute is to be construed as a whole and that nowords in a statute were presumed to be superfluous’.[Para 21][58 C, E-F]

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Lokmat Newspapers Pvt. Ltd. v. Shankarprasad (1999)6 SCC 275 : [1999] 3 SCR 907; Bharat HeavyElectricals Limited v. Globe Hi-Fabs Limited (2015) 5SCC 718 – relied on.

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Case Law Reference

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ACIVIL APPELLATE JURISDICTION : Civil Appeal No.1539of 2019

From the Judgment and Order dated 14.12.2012 of the High Courtof Delhi at New Delhi in FAO (OS) No. 596 of 2011

Rupinder S. Suri, Sr. Adv., Pawan Upadhyay, Sarvjit Pratap Singh,BMs. Kriti Chopra, Ratik Sharma, Binod Kr. Behera, Ms. Swati SmitaPati, Salman Khan (for Ms. Sharmila Upadhyay), Advs. for theAppellant.

Gourab Banerji, Sr. Adv., Puneet Taneja, Ms. Shaheen, MohitPandey, S.B. Mukherjee, Ms. Raka Chatterjee, Ms. Manisha Sinha, Advs.Cfor the Respondent.

The Judgment of the Court was delivered by A.K. SIKRI, J. 1. Leave granted.

2. The appellant herein was awarded the contract under which itwas to execute certain Works. Agreement in this behalf was signed onD18[th] December, 1998. Some disputes arose between the parties. Sincethe agreement contained an arbitration clause, two claims raised by theappellant were referred for arbitration. The arbitral tribunal was of threeArbitrators. This arbitration was under the Arbitration and ConciliationAct, 1996 (hereinafter referred to as the ‘1996 Act’). The majorityEaward pronounced on October 10, 2010 allowed the two claims to certainextent. On the said claims awarded, the Arbitrators also granted interestat the rate of 10% per annum from the date when the arbitration wasinvoked, i.e., October 09, 2007, till 60 days after the award. Futureinterest at the rate of 18% per annum till the date of payment was alsoawarded.F

3. Dispute which has travelled upto this Court pertains only to thequestion as to whether the Arbitrators could award any interest in viewof Clauses 50 and 51 of the General Conditions of Contract (GCC)which governed the terms between the parties. The objections werefiled before the High Court. A Single Judge of the High Court of DelhiGpassed the order dated November 15, 2011 quashing the award limitedto the interest that was awarded by the Arbitrators. The appellantpreferred intra-court appeal which has been dismissed by the DivisionBench of the High Court, thereby upholding the judgment of the SingleJudge. The effect is that the High Court has held that no interest isHpayable as Clauses 50 and 51 of GCC bar the arbitrators from grantinginterest.

4. It may be pointed out that on interpreting Clauses 50 and 51 ofthe General Conditions of Contract, the view taken by the High Court isthat these clauses categorically provide that no interest would be payableto the contractor on the money due to him. The said Clauses read asunder:

“Clause 50.0 Interest on money due to the contractor

No omission on the part of the Engineer in charge to pay theamount due upon measurement or otherwise shall vitiate or makevoid the contract, nor shall the contractor be entitled to interestupon any guarantee or payments in arrears nor upon any balancewhich may on the final settlement of his account, be due to him.

Clause 51.0 No claim for delayed payment due to disputeetc.

No claim for interest or damage will be entertained or be payableby the corporation in respect of any amount or balance whichmay be lying with the corporation owing to nay dispute, differentor misunderstanding between the parties or in respect of any delayor omission on the part of he Engineer in charge in makingintermediate or final payments on in any other respectwhatsoever.”

The Award makes the following observations in this behalf:

“As seen from above, Clause 50.0 and 51.0 of the Contractdeny interest on the Claimant’s dues by the Respondent due todispute etc. However as per above quoted judgment of Hon’bleSupreme Court of India, the claim for interest can be consideredby the Arbitration Tribunal.”

Notwithstanding the same, the learned Arbitrators granted theinterest by relying upon the law declared by this Court in Board ofTrustees for the Port of Calcutta v. Engineers-De-Space-Age[1 ]andfollowing observations from the said judgment were quoted:

“………..In other words, according to their Lordships thearbitrator is expected to act and make his award in accordancewith general law of the land but subject to an agreement,provided, the agreement is valid and legal. Lastly, it was pointedout that interest pendent like is not a matter of substantive law,interest for the period anterior to reference. Their Lordship A

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Aconcluded that when the agreement between the parties doesnot prohibit grant of interest and where a party claims interestand that dispute is referred to the arbitrator, he will have thepower to award interest pedente lite for the simple reason thatin such a case it is presumed that interest was implied term ofthe agreement between the parties; it is then a matter of exerciseBof discretion by the arbitrator. The position of law, has, therefore,been clearly stated in the aforesaid decision of the ConstitutionBench.…………………...Strictly construed the term of thecontract merely prohibits the Commissioner from paying interestto the contractor for delayed payment but once the matter goes toCthe arbitration the discretion of the Arbitrator is not, in any manner,stifled by this term of the contract and the Arbitrator would beentitled to consider the question of grant of interest pendent liteand award interest if he finds the claim to be justified. We are,therefore, of the opinion that under the clause of the contract theArbitrator was in no manner prohibited from awarding interestDpendente lite.”

5. As stated above, the High Court, on the other hand, has takenthe view that if interest is prohibited as per the expressed terms of thecontract between the parties, the Arbitrator does not get jurisdiction toaward interest. Further, insofar as interpretation to the aforesaid clausesEis concerned, the High Court noticed that these Clauses were on thesame terms as Clause 1.2.14 and 1.2.15 of the contract which weresubject matter of construction in Tehri Hydro DevelopmentCorporation (THDC) Limited & Anr. v. Jai Prakash AssociatesLimited[2]. In the said judgment, this Court has categorically held thatFthose clauses to mean that no interest was payable on claim for delayedpayment due to the contractor. Therefore, same construction needed tobe given to Clauses 50 and 51 of GCC in the instant case.

6. Mr. Rupinder S. Suri, learned senior counsel appearing for theappellant made two-fold submissions before us, which are to the followingeffect:G

(i) In the first place, it is submitted that judgment inJayprakash Associates Limited case is contrary to the earlierjudgment rendered by this Court in State of Uttar Pradesh v.Harish Chandra and Company[3] . Both the judgments are by 2(2012) 12 SCC 10H3(1999) 1 SCC 63

the Benches of Three-Judges. His submission is that judgmentof Harish Chandra is earlier in point of time, which has notbeen taken note of in Jayprakash Associates Limited case. Insuch a scenario, as per Mr. Suri, the judgment which is passedearlier should hold the field and, therefore, we should be guidedby the law laid down in Harish Chandra case.

(ii) Second submission, in the alternative, is that in orderto resolve the conflict, the matter should be referred to alarger Bench.

7. Dilating on the first submission, an attempt of Mr. Suri was toshow that the clauses of the contract in question, when interpretedcorrectly would clearly bring about that these clauses did not prohibit theArbitrators from granting interest. The learned counsel emphasised thewords “or any other respect whatsoever” occurring in Clause 51 of theGCC and argued that these are to be read ejusdem generis and shouldtake their colour from the earlier part of clause. He submitted thatwhen these words are read in the aforesaid manner, it is only in thosecases where some amount or balance is lying with the respondent becauseof any dispute, difference or misunderstanding between the parties etc.,interest is not payable. Such a situation would not arise in those caseswhere claim is raised on other counts and awarded by the Arbitrators.He also submitted that Clause 51 in the contract in the instant case wassimilar to Clause 1.9 of the contract in Harish Chandra case and theCourt interpreted the said clause to mean that Arbitrator was notprecluded from awarding the interest.

8. In this hue, his alternate submission was that two similar oralmost identical clauses are interpreted in a different manner in HarishChandra case and Jayprakash Associates case and, therefore, conflictarises which needs to be resolved.

9. Mr. Gourab Banerji, learned Senior Counsel appearing forthe respondent gave equally emphatic reply to the aforesaid submissionsof Mr. Suri. His first argument was that clauses in Harish Chandracase and the present case were altogether different. Insofar as theinstant case is concerned, it was governed by the law laid down inJayprakash Associates judgment which was in fact a case betweenthe same parties and in that case the Court had, while construing theidentically worded clauses, came to the conclusion that the Arbitratorswere precluded from granting any interest. His another contention wasthat there was a difference between the scheme provided under the A

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AArbitration Act, 1940 (hereinafter referred to as the ‘1940 Act’) whencontrasted with the 1996 Act. He argued that most of the judgmentscited by the appellant including Harish Chandra were under 1940 Actwhereas in the instant case award was passed under the 1996 Act. Healso referred to certain recent judgments which have been rendered bythis Court touching upon this very aspect. The precise manner in whichBhe structured his arguments are recapitulated below:10. In the first instance, he pointed out that even the arbitratorsaccepted, on the interpretation of GCC Clauses 50 and 51, that theseclauses deny interest on the appellant’s dues by the respondent due todispute etc. Notwithstanding the same, the majority opinion awardedCthe interest relying upon the judgment of this Court in Board of Trusteesfor the Port of Calcutta. The learned Single Judge of the High Court,while reversing the aforesaid view, pointed out that 1996 Act had alteredthe position contained in the 1940 Act. Under the new Act, an arbitratorcould not award pendente lite interest when there was an express bar

Dagainst award of such an interest. This legal position is contained inSection 31(7)(a) of the 1996 Act and the legal position stood crystallisedin the case of Sayeed Ahmed and Company v. State of Uttar Pradesh& Ors.[4]. Therefore, held the learned Single Judge, when Clauses 50and 51 of GCC imposed a complete bar on arbitral tribunal to award pendente lite interest, the arbitrators had no jurisdiction to award interest.EMr. Banerji submitted that the learned Single Judge even noticed thejudgment in Harish Chandra case and distinguished the same on theground that it arose under the 1940 Act. Furthermore, clause 1.9 inHarish Chandra case was indeed restrictive and differed from thewordings of Clauses 50 and 51 of the GCC which were closer to ClauseFG1.09 in Sayeed Ahmed case. On that basis, Harish Chandra judgmentwas distinguished which position has been upheld by the Division Benchof the High Court also. Mr. Banerji submitted that by the time DivisionBench decided the case in September, 2012, it had the benefit of anotherjudgment of this Court in THDC case which was not only between thesame parties but even the clauses in the said case are pari materia withGthe clauses in the present case.

11. We have considered the respective submissions and have gonethrough the legal position contained in the case laws cited before us byboth the parties.

H4(2009) 12 SCC 26

12. Insofar as power of the arbitral tribunal in granting pre-reference and/or pendente lite interest is concerned, the principles whichcan be deduced from the various judgments are summed up below:

(a) A Constitution Bench judgment of this Court in the caseof Secretary, Irrigation Department, Government of Orissa & Ors.v. G.C. Roy[5] exhaustively dealt with this very issue, namely, power ofthe arbitral tribunal to grant pre-reference and pendente lite interest.The Constitution Bench, of course, construed the provisions of the 1940Act which Act was in vogue at that time. At the same time, theConstitution Bench also considered the principle for grant of interestapplying the common law principles. It held that under the general law,the arbitrator is empowered to award interest for the pre-reference,pendente lite or post award period. This proposition was culled outwith the following reasoning:

“43. The question still remains whether arbitrator has the powerto award interest pendente lite, and if so on what principle. Wemust reiterate that we are dealing with the situation where theagreement does not provide for grant of such interest nor doesit prohibit such grant. In other words, we are dealing with acase where the agreement is silent as to award of interest. Ona conspectus of aforementioned decisions, the followingprinciples emerge:

(i) A person deprived of the use of money to which he islegitimately entitled has a right to be compensated for thedeprivation, call it by any name. It may be called interest,compensation or damages. This basic consideration is as validfor the period the dispute is pending before the arbitrator as it isfor the period prior to the arbitrator entering upon the reference.This is the principle of Section 34, Civil Procedure Code and thereis no reason or principle to hold otherwise in the case of arbitrator.

(ii) An arbitrator is an alternative form (sic forum) for resolutionof disputes arising between the parties. If so, he must have thepower to decide all the disputes or differences arising betweenthe parties. If the arbitrator has no power to award interestpendente lite, the party claiming it would have to approach thecourt for that purpose, even though he may have obtained AB

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Asatisfaction in respect of other claims from the arbitrator. Thiswould lead to multiplicity of proceedings.

(iii) An arbitrator is the creature of an agreement. It is open tothe parties to confer upon him such powers and prescribe suchprocedure for him to follow, as they think fit, so long as they arenot opposed to law. (The proviso to Section 41 and Section 3 ofArbitration Act illustrate this point). All the same, the agreementmust be in conformity with law. The arbitrator must also act andmake his award in accordance with the general law of the landand the agreement.

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(iv) Over the years, the English and Indian courts have acted onCthe assumption that where the agreement does not prohibit and aparty to the reference makes a claim for interest, the arbitratormust have the power to award interest pendente lite. Thawardas[Seth Thawardas Pherumal v. Union of India, (1955) 2 SCR48 : AIR 1955 SC 468] has not been followed in the later decisionsDof this Court. It has been explained and distinguished on the basisthat in that case there was no claim for interest but only a claimfor unliquidated damages. It has been said repeatedly thatobservations in the said judgment were not intended to lay downany such absolute or universal rule as they appear to, on firstimpression. Until Jena case [(1988) 1 SCC 418 : (1988) 1 SCRE253] almost all the courts in the country had upheld the power ofthe arbitrator to award interest pendente lite. Continuity andcertainty is a highly desirable feature of law.

(v) Interest pendente lite is not a matter of substantive law, likeinterest for the period anterior to reference (pre-referenceperiod). For doing complete justice between the parties, such powerhas always been inferred.”

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It is clear from the above that the Court decided to fall back ongeneral principle that a person who is deprived of the use of money towhich he is legitimately entitled to, has a right to be compensated for theGdeprivation and, therefore, such compensation may be called interestcompensation or damages.

(b) As a sequitur, the arbitrator would be within his jurisdictionto award pre-reference or pendente lite interest even if agreementbetween the parties was silent as to whether interest is to be awarded ornot.

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(c) Conversely, if the agreement between the parties specificallyprohibits grant of interest, the arbitrator cannot award pendente liteinterest in such cases. This proposition is predicated on the principlethat an arbitrator is the creature of an agreement and he is supposed toact and make his award in accordance with the general law of the landand the agreement. This position was made amply clear in G.C. Roycase in the discussion that ensued thereafter:

“44. Having regard to the above consideration, we think that thefollowing is the correct principle which should be followed in thisbehalf:

Where the agreement between the parties does not prohibitgrant of interest and where a party claims interest and thatdispute (along with the claim for principal amount orindependently) is referred to the arbitrator, he shall have thepower to award interest pendente lite. This is for the reasonthat in such a case it must be presumed that interest was animplied term of the agreement between the parties andtherefore when the parties refer all their disputes — or referthe dispute as to interest as such — to the arbitrator, he shallhave the power to award interest. This does not mean that inevery case the arbitrator should necessarily award interestpendente lite. It is a matter within his discretion to be exercisedin the light of all the facts and circumstances of the case,keeping the ends of justice in view.”

(d) Insofar as 1940 Act is concerned, it was silent about thejurisdiction of the arbitrator in awarding pendente lite interest. However,there is a significant departure on this aspect insofar as 1996 Act isconcerned. This distinction has been spelt out in Sayeed Ahmed case inthe following manner:

“Re: Interest from the date of cause of action to date of award7. The issue regarding interest as noticed above revolves aroundClause G1.09 of the Technical Provisions forming part of thecontract extracted below:

“G. 1.09. No claim for interest or damages will beentertainedby the Government with respect to any money or balance whichmay be lying with the Government or any become due owingto any dispute, difference or misunderstanding between theEngineer-in-Charge on the one hand and the contractor on the AB

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other hand or with respect to any delay on the part of theEngineer-in-Charge in making periodical or final payment orany other respect whatsoever.”

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14. The decisions of this Court with reference to the awardsunder the old Arbitration Act making a distinction between thepre-reference period and pendente lite period and theobservation therein that the arbitrator has the discretion to awardinterest during pendente lite period in spite of any bar againstinterest contained in the contract between the parties are notapplicable to arbitrations governed by the Arbitration andConciliation Act, 1996.”

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13. The aforesaid position is reiterated in Sree Kamatchi AmmanConstructions v. Divisional Railway Manager (Works), Palghat &Ors.[6] and Union of India v. Bright Power Projects (India) PrivateLimited[7]. Later judgment is by a bench of three Judges. This legalDposition is reiterated in Sri Chittaranjan Maity v. Union of India[8]which is authored by one of us (Nazeer, J.). In that case, the Courtconsidered the same very question which falls for determination by us,namely, whether the arbitral tribunal was justified in awarding intereston delayed payments in favour of the appellant? After noticing thatEclause 16(2) of GCC in that case bars the payment of interest, it washeld that under the 1996 Act, the position wherein is different from 1940Act, the interest could not be awarded. Following observations fromthis judgment may be noted:

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“16. Relying on a decision of this Court in Ambica ConstructionFv. Union of India [Ambica Construction v. Union of India,(2017) 14 SCC 323] , the learned Senior Counsel for the appellantsubmits that mere bar to award interest on the amounts payableunder the contract would not be sufficient to deny payment onpendente lite interest. Therefore, the arbitrator was justified inawarding the pendente lite interest. However, it is not clear fromGAmbica Construction [Ambica Construction v. Union of India,(2017) 14 SCC 323] as to whether it was decided under theArbitration Act, 1940 (for short “the 1940 Act”) or under the 1996

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Act. It has relied on a judgment of Constitution Bench in State ofOrissa v. G.C. Roy [State of Orissa v. G.C. Roy, (1992) 1 SCC508] . This judgment was with reference to the 1940 Act. In the1940 Act, there was no provision which prohibited the arbitratorfrom awarding interest for the pre-reference, pendente lite or post-award period, whereas the 1996 Act contains a specific provisionwhich says that if the agreement prohibits award of interest forthe pre-award period, the arbitrator cannot award interest for thesaid period. Therefore, the decision in Ambica Construction[Ambica Construction v. Union of India, (2017) 14 SCC 323]cannot be made applicable to the instant case.”

14. In a recent judgment in the case of Reliance CelluloseProducts Limited v. Oil and Natural Gas Corporation Limited[9], theentire case law on the subject is revisited and legal position re-emphasised.That was also a case which arose under the 1940 Act. The Court heldthat under the 1940 Act, an arbitrator has power to grant pre-referenceinterest under the Interest Act as well as pendente lite and future interest,however, he is constricted only by the fact that an agreement betweenthe parties may contain an express bar to the award of pre-referenceand/or pendente lite interest. Further, the Court has evolved the test ofstrict construction of such clauses, and unless there is a clear and expressbar to the payment of interest that can be awarded by an arbitrator,clauses which do not refer to claims before the arbitrators or disputesbetween parties and clearly bar payment of interest, cannot stand in theway of an arbitrator awarding pre-reference or pendente lite interest.Further, unless a contractor agrees that no claim for interest will eitherbe entertained or payable by the other party owing to dispute, difference,or misunderstandings between the parties or in respect of delay on thepart of the engineer or in any other respect whatsoever, leading theCourt to find an express bar against payment of interest, a clause whichmerely states that no interest will be payable upon amounts payable tothe contractor under the contract would not be sufficient to bar anarbitrator from awarding pendente lite interest. Further, the grant ofpendente lite interest depends upon the phraseology used in theagreement, clauses conferring power relating to arbitration, the natureof claim and dispute referred to the arbitrator, and on what items thepower to award interest has been taken away and for which period.Also, the position under Section 31(7) of the 1996 Act, is wholly different,9(2018) 9 SCC 266

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Ainasmuch as Section 31(7) of the 1996 Act sanctifies agreements betweenthe parties and states that the moment the agreement says otherwise, nointerest becomes payable right from the date of the cause of action untilthe award is delivered.

15. After discussing and analysing almost all the judgments onBthis subject, the legal position is summed up in the following manner:

“24. A conspectus of the decisions that have been referred toabove would show that under the 1940 Act, an arbitrator haspower to grant pre-reference interest under the Interest Act,1978 as well as pendente lite and future interest. However, he isconstricted only by the fact that an agreement between the partiesmay contain an express bar to the award of pre-reference and orpendente lite interest. Since interest is compensatory in natureand is parasitic upon a principal sum not having been paid in time,this Court has frowned upon clauses that bar the payment ofinterest. It has therefore evolved the test of strict construction ofsuch clauses, and has gone on to state that unless there is a clearand express bar to the payment of interest that can be awardedby an arbitrator, clauses which do not refer to claims before thearbitrators or disputes between parties and clearly bar paymentof interest, cannot stand in the way of an arbitrator awarding pre-reference or pendente lite interest. Thus, when one contrasts aclause such as the clause in Second Ambica Construction case[Ambica Construction v. Union of India, (2017) 14 SCC 323 :(2018) 1 SCC (Civ) 257] with the clause in Tehri HydroDevelopment Corpn. Ltd. [Tehri Hydro Development Corpn.Ltd. v. Jai Prakash Associates Ltd., (2012) 12 SCC 10 : (2013)2 SCC (Civ) 122] , it becomes clear that unless a contractor agreesthat no claim for interest will either be entertained or payable bythe other party owing to dispute, difference, or misunderstandingsbetween the parties or in respect of delay on the part of theengineer or in any other respect whatsoever, leading the Court tofind an express bar against payment of interest, a clause whichmerely states that no interest will be payable upon amounts payableto the contractor under the contract would not be sufficient to baran arbitrator from awarding pendente lite interest under the 1940Act. As has been held in First Ambica Construction case [Unionof India v. Ambica Construction, (2016) 6 SCC 36 : (2016) 3SCC (Civ) 36] , the grant of pendente lite interest depends upon C

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the phraseology used in the agreement, clauses conferring powerrelating to arbitration, the nature of claim and dispute referred tothe arbitrator, and on what items the power to award interest hasbeen taken away and for which period. We hasten to add that theposition as has been explained in some of the judgments aboveunder Section 31(7) of the 1996 Act, is wholly different, inasmuchas Section 31(7) of the 1996 Act sanctifies agreements betweenthe parties and states that the moment the agreement saysotherwise, no interest becomes payable right from the date of thecause of action until the award is delivered.”

16. In this whole conspectus and keeping in mind, in particular,that present case is regulated by 1996 Act, we have to decide the issueat hand. At this stage itself, it may be mentioned that in case clauses 50and 51 of GCC put a bar on the arbitral tribunal to award interest, thearbitral tribunal did not have any jurisdiction to do so. As pointed outabove, right from the stage of arbitration proceedings till the High Court,these clauses are interpreted to hold that they put such a bar on thearbitral tribunal. Even the majority award of the arbitral tribunal recognisedthis. Notwithstanding the same, it awarded the interest by relying uponBoard of Trustees for the Port of Calcutta case. The High Court,both Single Bench as well as Division Bench, rightly noted that theaforesaid judgment was under the 1940 Act and the legal position in thisbehalf have taken a paradigm shift which position is clarified in SayeedAhmed and Company case. This rationale given by the High Court isin tune with the legal position which stands crystallised by catena ofjudgments as noted above.

17. Another reason given by the High Court is equally convincing.The Clauses 50 and 51 of GCC are pari materia with Clauses 1.2.14 and1.2.15 of GCC in THDC case. Those clauses have been interpreted byholding that no interest is payable on claim for delayed payment due tothe contractor. Same construction adopted in respect of these clauses,which, in fact, is a case between the same parties, is without any blemish.

18. In this backdrop, the only argument of the appellant that remainsto be considered is as to whether such a construction is contrary to thejudgment in Harish Chandra case.

19. Complete answer to this argument is provided in RelianceCellulose Products Limited judgment. Following discussion containedtherein which discussed THDC judgment would amply demonstrate this:

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A“Also, unlike the clause in Tehri Hydro Development CorporationLtd. (Supra), clause 16 does not contain language which is sowide in nature that it would interdict an arbitrator from grantingpendente lite interest. It will be remembered that the clause inTehri Hydro Development Corportation Ltd. (supra) spoke of noclaim for interest being entertained or payable in respect of anyBmoney which may be lying with the Government owing to disputes,difference or misunderstanding between the parties and not merelyin respect of delay or omission; Further, the clause in Tehri HydroDevelopment Corporation Ltd. (supra) goes much further andmakes it clear that no claim for interest is payable “in any otherCrespect whatsoever.”

It is pertinent to mention that the aforesaid judgment also discussesand analyses Harish Chandra case. In the first place, the judgment inHarish Chandra case is under the 1940 Act. More pertinently, thisjudgment is explained and distinguished in Sayeed Ahmed and CompanyDcase in the following paragraphs:

“17. The appellant strongly relied upon the decision of this Courtin State of U.P. v. Harish Chandra & Co. [(1999) 1 SCC 63]to contend that Clause 1.09 of the contract did not bar the awardof interest. The clause barring interest that fell for considerationin that decision was as under: (SCC p. 67, para 9)

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“1.09. No claim for delayed payment due to dispute, etc.No claim for interest or damages will be entertained by theGovernment with respect to any moneys or balances whichmay be lying with the Government owing to any dispute,difference; or misunderstanding between the Engineer-in-FCharge in making periodical or final payments or in any other respect whatsoever.”

This Court held that the said clause did not bar award of intereston any claim for damages or for claim for payment for workdone. We extract below the reasoning for such decision: (SCC p.67, para 10)

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“10. A mere look at the clause shows that the claim for interestby way of damages was not to be entertained against theGovernment with respect to only a specified type of amount,namely, any moneys or balances which may be lying with theGovernment owing to any dispute, difference between the H

Engineer-in-Charge and the contractor; or misunderstandingbetween the Engineer-in-Charge and the contractor in makingperiodical or final payments or in any other respect whatsoever.The words ‘or in any other respect whatsoever’ also referredto the dispute pertaining to the moneys or balances which maybe lying with the Government pursuant to the agreementmeaning thereby security deposit or retention money or anyother amount which might have been with the Governmentand refund of which might have been withheld by theGovernment. The claim for damages or claim for paymentfor the work done and which was not paid for would notobviously cover any money which may be said to be lyingwith the Government. Consequently, on the express languageof this clause, there is no prohibition which could be culled outagainst the respondent contractor that he could not raise theclaim for interest by way of damages before the arbitrator onthe relevant items placed for adjudication.”

(emphasis supplied)

18. In Harish Chandra [(1999) 1 SCC 63] a different versionof Clause 1.09 was considered. Having regard to the restrictivewording of that clause, this Court held that it did not bar awardof interest on a claim for damages or a claim for payments forwork done and which was not paid. This Court held that thesaid clause barred award of interest only on amounts whichmay be lying with the Government by way of security depositretention money or any other amount, refund of which waswithheld by the Government.

19. But in the present case, Clause G1.09 is significantly different.It specifically provides that no interest shall be payable in respectof any money that may become due owing to any dispute,difference or misunderstanding between the Engineer-in-Chargeand contractor or with respect to any delay on the part of theEngineer-in-Charge in making periodical or final payment or inrespect of any other respect whatsoever. The bar under ClauseG1.09 in this case being absolute, the decision in Harish Chandra[(1999) 1 SCC 63] will not assist the appellant in any manner.”

20. It is also pertinent to note that the judgment in Sayeed Ahmedand Company distinguishing the restrictive wording in Harish Chandrahas been consistently followed by this Court in number of cases thereafter.

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AIn this scenario, when we find that Harish Chandra case which is ofthe vintage of 1940 Act and is distinguished in Sayeed Ahmed andCompany coupled with the fact that the ratio of Sayeed Ahmed andCompany has been consistently followed, there is no reason to deviatefrom the construction to Clauses 50 and 51 of the GCC given by thearbitral tribunal in the first instance as well as the High Court. Above all,Bthese clauses is pari materia with with Clauses 1.2.14 and 1.2.15 ofGCC in THDC case which was a judgment between the same parties.

21. Insofar as argument based on the principle of ejusdem generisis concerned, the Division Bench has held that that is not applicable inthe present case. We find that it is rightly so held. Ejusdem generis isCthe rule of construction. The High Court has negated this argument inthe following manner:

“18. The rule of ejusdem generis guides us that where two ormore words or phrases which are susceptible of analogousmeaning are cupled together, a noscitur a sociis,they are to beDunderstood to mean in their cognate sense and take colour fromeach other but only if there is a distinct genus or a category.Where this is lacking i.e. unless there is a category, the rule cannotapply.”

As rightly held, the rule of ejusdem generis would be appliedEonly if there is distinct genus or a category, which is lacking in the instantcase. This rule is applicable when particular words pertaining to a clause,category or genus are followed by general words. In such a situation,the general words are construed as limited to things of same kind asthose specified. In that sense, this rule reflects an attempt ‘to reconcileincompatibility between the specific and general words in view of theFother rules of interpretation that all words in a statute are given effect ifpossible, that a statute is to be construed as a whole and that no words ina statute were presumed to be superfluous’. (See Lokmat NewspapersPvt. Ltd. v. Shankarprasad[10]). In fact, construing the similar clause,this Court in the case of Bharat Heavy Electricals Limited v. GlobeHi-Fabs Limited[11]has held that rule of ejusdem generis is not applicableGinasmuch as:

“12. The rule of ejusdem generis has to be applied with careand caution. It is not an inviolable rule of law, but it is only 10(1999) 6 SCC 275H11(2015) 5 SCC 718

permissible inference in the absence of an indication to thecontrary, and where context and the object and mischief of theenactment do not require restricted meaning to be attached towords of general import, it becomes the duty of the courts togive those words their plain and ordinary meaning. As stated byLord Scarman:

“If the legislative purpose of a statute is such that a statutoryseries should be read ejusdem generis, so be it, the rule is helpful.But, if it is not, the rule is more likely to defeat than to fulfil thepurpose of the statute. The rule like many other rules ofstatutory interpretation, is a useful servant but a bad master.”

So a narrow construction on the basis of ejusdem generis rulemay have to give way to a broader construction to give effect tothe intention of Parliament by adopting a purposive construction.

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15. A word of caution is here necessary. The fact that the ejusdemgeneris rule is not applicable does not necessarily mean that theprima facie wide meaning of the word “other” or similar generalwords cannot be restricted if the language or the context and thepolicy of the Act demand a restricted construction. In theexpression “defect of jurisdiction or other cause of a like nature”as they occur in Section 14(1) of the Limitation Act the generalityof the words “other cause” is cut down expressly by the words“of a like nature”, though the rule of ejusdem generis is strictlynot applicable as mention of a single species “defect of jurisdiction”does not constitute a genus. Another example that may here bementioned is Section 129 of the Motor Vehicles Act whichempowers any “police officer authorised in this behalf or otherperson authorised in this behalf by the State Government” to detainand seize vehicles used without certification of registration orpermit. The words “other person” in this section cannot beconstrued by the rule of ejusdem generis for mention of singlespecies, namely, “police officer” does not constitute a genus buthaving regard to the importance of the power to detain and seizevehicles it is proper to infer that the words “other person” wererestricted to the category of government officers. In the samecategory falls the case interpreting the words “before filing a writtenstatement or taking any other steps in the proceedings” as they A

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Aoccur in Section 34 of the Arbitration Act, 1940. In the context inwhich the expression “any other steps” finds place it has beenrightly construed to mean a step clearly and unambiguouslymanifesting an intention to waive the benefit of arbitrationagreement, although the rule of ejusdem generis has no applicationfor mention of a single species viz. written statement does notBconstitute a genus.

16. In the present case we noticed that the clause barring interestis very widely worded. It uses the words “any amount due to thecontractor by the employer”. In our opinion, these words cannotbe read as ejusdem generis along with the earlier words “earnest Cmoney” or “security deposit”.

22. The upshot of the aforesaid discussion would be to hold thatthe conclusions of the High Court in the impugned judgment are correctand need no interference. This appeal is accordingly dismissed.

DKalpana K. Tripathy

Appeal dismissed.

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