UNION OF INDIA versus MANRAJ ENTERPRISES on 18 November 2021

[2021] 7 S.C.R. 413

UNION OF INDIA

v.

MANRAJ ENTERPRISES

(Civil Appeal No. 6592 of 2021)

NOVEMBER 18, 2021

[M. R. SHAH AND B. V. NAGARATHNA, JJ.]

Interest: Interest pendente lite – Award of interest by arbitratorcontrary to clause 16(2) of the General Conditions of Contract –Correctness of – Dispute related to work contract – Arbitratorawarded pendente lite and future interest at the rate of 12% and18% respectively on the entire awarded amount except for the earnestmoney deposit and security deposit – Said order upheld by the HighCourt – On appeal, held: Once the contractor agrees that he shallnot be entitled to interest on the amounts payable under the contract,including the interest upon the earnest money and the securitydeposit as mentioned in clause 16(2) of the agreement/contractbetween the parties, the arbitrator in the arbitration proceedingshas no power to award interest, contrary to the terms of theagreement/contract between the parties and contrary to clause 16(2)– Expression “amounts payable to the contractor under thecontract” cannot be read in conjunction with “earnest moneydeposit” or “security deposit” – It has to be read independentlyand disjunctively to earnest money deposit and security deposit asthe word used is “or” and not “and” between “earnest moneydeposit”, “security deposit” and “amounts payable to the contractorunder the contract” – Thus, the principle of ejusdem generis is notapplicable – Furthermore, even if the Government would have beenawarded interest, the same also was not permissible and could havebeen a subject matter of challenge – There cannot be an estoppelagainst law – Arbitrator erred in awarding pendente lite and futureinterest on the amount due and payable to the contractor under thecontract and the same was erroneously confirmed by the High Court,thus, the order passed by both the High Courts and the award passedby the arbitral tribunal set aside – Arbitration and ConciliationAct, 1996 – ss. 34, 37.

413

A

B

C

DEF

G

H

414SUPREME COURT REPORTS

AAllowing the appeal, the Court

HELD: 1.1 The submission raised on behalf of therespondent that de hors the bar under clause 16(2) of the GeneralConditions of Contract, the Arbitral Tribunal independently andon equitable ground and/or to do justice can award interestBpendente lite or future interest has no substance and cannot beaccepted. Once the contractor agrees that he shall not be entitledto interest on the amounts payable under the contract, includingthe interest upon the earnest money and the security deposit asmentioned in clause 16(2) of the agreement/contract betweenthe parties herein, the arbitrator in the arbitration proceedingsCbeing the creature of the contract has no power to award interest,contrary to the terms of the agreement/contract between theparties and contrary to clause 16(2) of the agreement/contract inquestion. [Para 8.1][427-D-F]

1.2 The respondent submitted that clause 16 has to be readDas a whole and on doing so, it can be said that clause 16 pertainsspecifically to earnest money and security deposit and that thesame can in no way be read in a manner to imply a bar on pendentelite interest. It is required to be noted that clause 16(1) is withrespect to earnest money/security deposit. However, clause 16(2)Eis specifically with respect to interest payable upon the earnestmoney or the security deposit or amounts payable to thecontractor under the contract. The words used in clause 16(2) is“or”. Therefore, the expression “amounts payable to thecontractor under the contract” cannot be read in conjunction with“earnest money deposit” or “security deposit” by applying theFprinciple of ejusdem generis. The expression “amounts payableto the contractor under the contract” has to be readindependently and disjunctively to earnest money deposit andsecurity deposit as the word used is “or” and not “and” between“earnest money deposit”, “security deposit” and “amountsGpayable to the contractor under the contract”. Therefore, theprinciple of ejusdem generis is not applicable in the instant case.[Para 10][427-F-H; 428-A-B]

1.3 In view of clause 16(2) of the GCC, the arbitrator couldnot have awarded the interest, pendente lite or future interest H

on the amount due and payable to the contractor under thecontract in the instant case. [Para 11][430-H; 431-A]

1.4 It is required to be noted that the concession if any bythe counsel which is contrary to the law laid down by this Courtshall not be binding on the parties. Further, merely because theappellant has claimed interest, does not imply that the contractorshall be entitled to interest pendente lite. Even if the appellantwould have been awarded interest, the same also was notpermissible and could have been a subject matter of challenge.In short, there cannot be an estoppel against law. [Para 12][431-B-D]

1.5 The Arbitrator erred in awarding pendente lite andfuture interest on the amount due and payable to the contractorunder the contract in question and the same has been erroneouslyconfirmed by the High Court. [Para 13][431-D-E]

1.6 The impugned judgment and order passed by theDivision Bench of the High Court in an appeal under Section 37of the 1996 Act and the order passed by the Single Judge in anapplication under Section 34 of the 1996 Act and the award passedby the Arbitral Tribunal awarding pendente lite and future intereston the amounts held to be due and payable to the contractor underthe contract are quashed and set aside. In view of specific barcontained in clause 16(2) of the GCC, the contractor shall not beentitled to any interest pendente lite or future interest on theamounts due and payable to it under the contract. [Para 14][431-E-F]

Union of India v. M/s Pradeep Vinod Construction Co.Civil Appeal No. 2099 of 2007 decided on 03.08.2017– held inapplicable.

Union of India v. Bright Power Projects (India) (P) Ltd.(2015) 9 SCC 695 : [2015] 6 SCR 488; JaiprakashAssociates Ltd. v. Tehri Hydro Development Corporation(India) Ltd. (2019) 17 SCC 786 : [2019] 2 SCR 41 –relied on.

AB

C

DE

F

G

AGarg Builders v. Bharat Heavy Electricals Limited (2021)SCC OnLine SC 855 : 2021 (11) SCALE 693;Secretary, Irrigation Department, State of Orissa v.G. C. Roy (1992) 1 SCC 508 : [1991] 3 Suppl. SCR417; Raveechee and Company v. Union of India (2018)7 SCC 664 : [2018] 5 SCR 138; Kailash v. NanhkuB(2005) 4 SCC 480 : [2005] 3 SCR 289; State ofKarnataka v. Shree Rameshwara Rice Mills (1987) 2SCC 160 : [1987] 2 SCR 398; Ambica Construction v.Union of India (2017) 14 SCC 323 – referred to.

Case Law Reference

FCIVIL APPELLATE JURISDICTION: Civil Appeal No.6592 of2021.

G

From the Judgment and Order dated 12.04.2021 of the High Courtof Delhi at New Delhi in FAO(OS) No.52 of 2018.

K. M. Nataraj, ASG, Balendu Shekhar, Shailesh Madiyal, BalajiSrinivasan, Varun Chugh, Amrish Kumar, Advs. for the Appellant.

Vikas Singh, Sr. Adv., Varun Singh, Nitin Saluja, Ms. DeepeikaKalia, Kapish Seth, Mrityunjai Singh, Satwik Misra, Ms. Priyanka Khosla,Ms. Parul Sharma, Advs. for the Respondent.H

The Judgment of the Court was delivered by

M. R. SHAH, J.

1. Feeling aggrieved and dissatisfied with the impugned judgmentand order dated 12.04.2021 passed by the High Court of Delhi in FAO(OS)No.52/2018, whereby the Division Bench of the High Court has dismissedthe said appeal of the appellant and has confirmed the order passed bythe learned Single Judge upholding the award of interest by the solearbitrator, the Union of India has preferred the present appeal.

2. That a contract was entered into between the appellant and therespondent with regard to three work contracts. A dispute arose betweenthe parties and both the parties went into arbitration for the resolution ofthe dispute. The learned sole arbitrator vide award dated 17.01.2011awarded an amount of Rs.78,81,553.08. The learned arbitrator alsoawarded pendente lite and future interest at the rate of 12% and 18%respectively on the entire awarded amount except for the earnest moneydeposit and security deposit.

2.1 That the Union of India preferred an appeal under Section 34of the Arbitration & Conciliation Act, 1996 (hereinafter referred to asthe ‘1996 Act’) challenging the award made on claim no.5 vide awarddated 17.01.2011 pertaining to pre-suit, pendente lite and future interestawarded on the balance due payment, from the due date of payment.

2.2 The learned Single Judge of the High Court dismissed the saidappeal. The matter was carried further before the Division Bench byway of FAO(OS) No. 52/2018 under Section 37 of the 1996 Act. By theimpugned judgment and order, the Division Bench of the High Court hasdismissed the said appeal and has confirmed the award made by thelearned arbitrator awarding pendente lite interest and future interestawarded on the balance due payment. Hence, the present appeal.

3. Shri K.M. Nataraj, learned Additional Solicitor Generalappearing on behalf of the appellant – Union of India has vehementlysubmitted that as agreed between the parties and as per clause 16(2) ofthe General Conditions of Contract (for short, ‘GCC’) governing thecontract between the parties, there was a bar against payment of interest.It is submitted that as agreed between the parties and as per clause16(2), no interest shall be payable upon the earnest money or the securitydeposit or the amounts payable to the contractor under the contract.

A

B

C

D

E

F

G

H

A3.1 It is urged that even under Section 31(7)(a) of the 1996 Act,unless otherwise agreed between the parties, the Arbitral Tribunal mayinclude in the sum for which the award is made interest, at such rate asit deems reasonable, on the whole or any part of the money. It is submittedthat if there is an expression “agreed between the parties” governingthe contract that no interest shall be payable, parties are bound by suchBan agreement and no interest either pendente lite or future interest onthe amount due and payable under the contract shall be awarded.

A

3.2 It is contended that in the present case, clause 16(2) of theGCC governing the contract between the parties specifically bars paymentof interest, not only on the earnest money or security deposit, but alsoCupon any amounts payable to the contractor under the contract. It isurged that since the parties are governed by the contract and the arbitratorand the arbitration proceedings are creatures of the contract, they cannottraverse beyond what has been contemplated in the contract betweenthe parties.D

3.3 It is further submitted that the power of the arbitrator to awardpendente lite interest considering parimateria clause to clause 16(2) ofthe GCC has been examined by a three Judge Bench of this Court in thecase of Union of India v. Bright Power Projects (India) (P) Ltd.,(2015) 9 SCC 695. It has been specifically observed and held in theEsaid case that in view of the specific contract between the parties andthe bar for awarding the interest, the payment of interest was notpermissible even on earnest money deposit or security deposit or amountspayable to the contractor under the contract. It is submitted thatthe expression “amounts payable to the contractor under the contract”is wide enough to cover every payment of amount payable under theFcontract.

3.4 It is submitted that the expression “money due under thecontract” has been dealt with and considered by this Court in the caseof Garg Builders v. Bharat Heavy Electricals Limited, 2021 SCCOnLine SC 855 = 2021 (11) SCALE 693. It is observed and held that ifGthe contract prohibits pre-reference and pendente lite interest, thearbitrator cannot award interest for the said period. It is contended thatin the aforesaid case, the expression used was “any moneys due to thecontractor” by the employer which includes the amount awarded by thearbitrator. Therefore, where the contract contains a specific clause which H

expressly bars payment of interest, then it is not open for the arbitratorto grant pendente lite interest.

3.5 It is further submitted by Shri Nataraj, learned ASG that theexpression “amounts payable to the contractor under the contract” cannotbe read with “earnest money deposit” or “security deposit” by applyingthe principle of ejusdem generis. It is urged that the expressions havebeen employed in clause 16(2) of the GCC disjunctively by use of theword “or” and are intended to cover different situations which may arise.It is submitted that the earnest money deposit and security deposit arethe amounts which are payable by the contractor whereas the amountawarded by the arbitrator or any other amounts payable under the contractcould be under different circumstances and could be payable by eitherparty. It is submitted therefore that the expression “amounts payable tothe contractor under the contract” has been employed to cover suchother situations or circumstances. It is therefore submitted that it is notpossible to apply the principle of ejusdem generis. Heavy reliance isplaced on the decision of this Court in the case of Jaiprakash AssociatesLtd. v. Tehri Hydro Development Corporation (India) Ltd., (2019)17 SCC 786 (paragraphs 22 & 23). It is contended that in theaforesaid decision also, while discussing the power of the arbitrator togrant pendente lite interest, it has been held that if the agreement betweenthe parties specifically prohibits grant of interest, the arbitrator cannotaward pendente lite interest in such cases.

3.6 Making the above submissions and relying upon the aforesaiddecision, it is prayed to allow the present appeal and quash and set asidethe judgments and orders passed by the High Court as well as the awardpassed by the learned arbitrator awarding the interest, pendente lite andfuture interest.

4. The present appeal is vehemently opposed by Shri Vikas Singh,learned Senior Advocate appearing on behalf of the respondent. It issubmitted that if the entire clause 16 of GCC is read, it is evident that itpertains specifically to earnest money and security deposits and the samecan in no way be read in a manner to imply a bar on pendente liteinterest or other amounts as contended on behalf of the Union of India.

4.1 It is submitted that none of the judgments cited by the learnedASG has taken into account the fact that the law laid down by variousjudicial pronouncements under the Arbitration Act, 1940 has been codifiedstatutorily under Section 31(7)(a) of the 1996 Act.

A

B

C

D

E

F

G

H

A4.2 It is submitted that a five Judge Bench of this Court in thecase of Secretary, Irrigation Department, State of Orissa v. G.C.Roy, (1992) 1 SCC 508 had an occasion to consider the question ofpower of the arbitrator to award interest pendente lite and it has beenheld that when the agreement between the parties does not prohibitgrant of interest and where the party claims interest and the dispute hasBbeen referred to an arbitrator, then the arbitrator does have the power toaward interest pendente lite.

A

4.3 It is submitted that even in the case of Raveechee andCompany v. Union of India, (2018) 7 SCC 664, it has been held thatthe power to grant interest pendente lite is inherent in an arbitrator whoCalso exercises the power to do equity and unless the agreement expresslybars the arbitrator from awarding interest pendente lite, the arbitratorhas all the powers to grant pendente lite interest. It is urged that in thepresent case, clause 16 does not bar an arbitrator to award interestpendente lite. It is submitted that the arbitrator is never a party to theDagreement and therefore it does not bar the arbitrator from awardingpendente lite interest. It is contended that the bar is on the parties fromclaiming interest on security deposits and earnest money and not on thearbitrator from awarding interest pendente lite on other amounts. Insupport of the same, reliance is placed on the decision of this Court inthe case of Kailash v. Nanhku, (2005) 4 SCC 480, wherein this CourtEwhile dealing with Order VIII Rule 1 CPC, has held that the bar is on aparty before the Court and not on the court’s inherent powers. It issubmitted that even on a fair reading of Section 31(7)(a) of the 1996Act, it is clear that the bar to claim interest is on the parties and not thearbitrator specifically.F

4.4 It is contended that in the present case, the High Court hascorrectly placed reliance on Union of India v. M/s Pradeep VinodConstruction Co., Civil Appeal No. 2099 of 2007 decided on 03.08.2017and has rightly distinguished the judgments relied upon by the appellantas the said judgments did not contain any discussion on clause 16(2) ofGthe GCC. It is submitted that this Court in the case of M/s PradeepVinod Construction Co. (supra) has considered clause 16(2) of theGCC and after having considered the judgments relied upon by theappellant, namely, Bright Power Projects (India) P. Ltd. (supra) andother judgments relied upon, has held that no interest is awardable onearnest money and security deposit. It is submitted therefore that unlessH

there is an express and specific bar against the arbitrator to award thependente lite interest, the arbitrator is not precluded from awarding theinterest on the amounts awarded.

4.5 It is urged that the decision of this Court in the case of TehriHydro Development Corporation Ltd. (supra), relied upon on behalfof the appellant, is not applicable to the facts of the case on hand as theclauses in the said case were materially different from clause 16(2). It issubmitted that clauses 50 & 51 contained an express bar on payment ofinterest on money due to the contractor and payment of interest on moneydue to dispute.

4.6 It is further submitted that as such before the High Court,learned counsel appeared on behalf of the appellant conceded to thefact that the issue raised in the present appeal is covered by the judgmentof this Court in the case of M/s Pradeep Vinod Construction Co.(supra) and therefore once it has been conceded, thereafter it is notopen for the Union of India to raise the same issue after having made aclear concession.

4.7 It is submitted that in the present case, even the appellant toohad claimed interest at the rate of 18% from the respondent by way ofcounter-claim and the same has been recorded in the Arbitral Tribunal’saward dated 17.01.2011. It is submitted that the appellant cannot nowbe permitted to say that no interest pendente lite is liable to be awardedby the learned arbitrator.

4.8 Making the above submissions and relying upon the aforesaiddecisions, it is prayed to dismiss the present appeal.

5. In rejoinder, it is submitted by Shri Nataraj, learned ASG thatdecision of this Court in the case of M/s Pradeep Vinod ConstructionCo.(supra) does not lay down any law/legal precedent. It is urged thatin any case, the same has been rendered prior to the three Judges Benchdecision in the case of Jaiprakash Associates Ltd. v. Tehri HydroDevelopment Corporation (India) Ltd. (supra).

6. We have heard learned counsel for the respective parties atlength and pondered over the issues raised before us.

6.1 The short question which is posed for the consideration of thisCourt is in view of the specific clause 16(2) of the GCC, whether thecontractor is entitled to any interest pendente lite on the amounts payable AB

CD

E

F

G

H

Ato the contractor other than upon the earnest money or the securitydeposit.

6.2 Clause 16 of the GCC reads as under:

“16: Earnest Money and Security Deposit- (1) The earnest moneydeposited by theContractor with his tender will be retained by theBRailway as part of security for the dueand faithful fulfilment ofthe contract by the contractor. The balance to make up thissecuritydeposit which will be 10 per cent of the total value of thecontract, unless otherwise specifiedin the special conditions, ifany, may be deposited by the Contractor in case or in the form ofCGovernment Securities or may be recovered by percentagededuction from theContractor’s “on account” bills provided alsothat in case of a defaulting contractor theRailway may retain anyamount due for payment to the contractor on spending ‘onaccountbills’, so that the amount or amounts so retained may notexceed 10% of the total value ofthe contract.

D

(2) No interest will be payable upon the earnest money or thesecurity deposit or amountspayable to the Contractor under theContract, but Government Securities deposited in termsof Sub-clause (1) of this Clause will be repayable with interest accruedthereon.”

EThus, as such, as per clause 16(2) no interest would be payableupon the earnest money or the security deposit or amounts payable tothe contractor under the contract.

6.3 The scope of the expression “money due under the contract”Fhas been considered by this Court in the case of State of Karnataka v.Shree Rameshwara Rice Mills, (1987) 2 SCC 160. In paragraph 9, itis observed and held as under:

“9. ……..What the Full Bench has failed to notice is that eventhough the damages become payable on account of breach ofconditions of the contract, the liability to pay damages does notGfall outside the terms of the contract but within the terms of thecontract. The words “any amount that may become due or payableby the first party to the second party under any part of thisagreement” have to be read in conjunction with the earlier portionof the clause stipulating liability on the party contracting with theHState to pay damages for breach of conditions. Therefore, it follows that though damages become payable on account of breach ofconditions of the agreement they nevertheless constitute amountspayable under the contract i.e. under one of the terms of thecontract imposing liability to pay damages for breach of conditions.To illustrate the position if the agreement provides for a liquidatedsum being paid as damages for breach of conditions instead of asum to be assessed by the Deputy Commissioner, it cannot besaid that the specified damages will not be money due under thecontract and hence the damages cannot be recovered under theRevenue Recovery Act. What applies to specified damages willlikewise apply to damages which are quantified afterassessment…..”

Therefore, it is held that though damages become payable onaccount of breach of conditions of the agreement they neverthelessconstitute amounts payable under the contract.

7. An identical question came up for consideration before thisCourt in the recent decision of this Court in the case of Garg Builders(supra). In the said case, this Court considered clause 17, which readsas under:

“Clause 17 : No interest shall be payable by BHEL on EarnestMoney Deposit, Security Deposit or on any moneys due to thecontractor.”

[Bold letters are ours]

After considering various decisions on award of interest pendentelite and the future interest by the arbitrator and after discussing thedecisions of this Court in the cases of Ambica Construction v. Unionof India, (2017) 14 SCC 323 and Raveechee and Company(supra)and other decisions on the point, this Court has observed inparagraphs 9 to 18 as under:

“9. On the other hand, Mr. Pallav Kumar, learned counselfor the respondent, submitted that Section 31(7)(a) of the 1996Act gives paramount importance to the contract entered intobetween the parties and categorically restricts the power of anarbitrator to award pre-reference and pendente lite interest whenthe parties themselves have agreed to the contrary. He arguedthat if the contract itself contains a specific clause which expresslybars the payment of interest, then it is not open for the arbitrator A

B

C

D

E

F

G

H

A

B

C

D

E

F

G

H

to grant pendente lite interest. It was further argued that AmbicaConstruction (supra) is not applicable to the instant case becauseit was decided under the Arbitration Act, 1940 whereas the instantcase falls under the 1996 Act. It was further argued that Section3 of the Interest Act confers power on the Court to allow interestin the proceedings for recovery of any debt or damages or inproceedings in which a claim for interest in respect of any debt ordamages already paid. However, Section 3(3) of the Interest Actcarves out an exception and recognizes the right of the parties tocontract out of the payment of interest arising out of any debt ordamages and sanctifies contracts which bars the payment ofinterest arising out of debt or damages. Therefore, Clause 17 ofthe Contract is not violative of any the provisions of the IndianContract Act, 1872. In light of the arguments advanced, the learnedcounsel prays for dismissal of the appeal.

10. We have carefully considered the submissions of thelearned counsel for both the parties made at the Bar. The lawrelating to award of pendente lite interest by Arbitrator underthe 1996 Act is no longer res integra. The provisions of the 1996Act give paramount importance to the contract entered intobetween the parties and categorically restricts the power of anarbitrator to award pre-reference and pendente lite interest whenthe parties themselves have agreed to the contrary. Section31(7)(a) of the 1996 Act which deals with the payment of interestis as under:

“31(7)(a) Unless otherwise agreed by the parties, whereand insofar as an arbitral award is for the payment of money, thearbitral tribunal may include in the sum for which the award ismade interest, at such rate as it deems reasonable, on the wholeor any part of the money, for the whole or any part of the periodbetween the date on which the cause of action arose and the dateon which the award is made.”

11. It is clear from the above provision that if the contractprohibits pre-reference and pendente lite interest, the arbitratorcannot award interest for the said period. In the present case,clause barring interest is very clear and categorical. It uses theexpression “any moneys due to the contractor” by the employerwhich includes the amount awarded by the arbitrator.

12. In Sayeed Ahmed and Company v. State of UttarPradesh, (2009) 12 SCC 26, this Court has held that a provisionhas been made under Section 31(7)(a) of the 1996 Act in relationto the power of the arbitrator to award interest. As per this section,if the contract bars payment of interest, the arbitrator cannot awardinterest from the date of cause of action till the date of award.

13. In Sree Kamatchi Amman Constructions v. DivisionalRailway Manager (Works), Palghat, (2010) 8 SCC 767, it washeld by this Court that where the parties had agreed that the interestshall not be payable, the Arbitral Tribunal cannot award interestbetween the date on which the cause of action arose to the dateof the award.

14. Bharat Heavy Electricals Limited v. Globe Hi-FabsLimited, (2015) 5 SCC 718, is an identical case where this Courthas held as under:

“16. In the present case we noticed that the clause barringinterest is very widely worded. It uses the words “any amountdue to the contractor by the employer”. In our opinion, these wordscannot be read as ejusdem generis along with the earlier words“earnest money” or “security deposit”.”

15. In Sri Chittaranjan Maity v. Union of India, (2017)9 SCC 611, it was categorically held that if a contract prohibitsaward of interest for pre-award period, the arbitrator cannot awardinterest for the said period.

16. Therefore, if the contract contains a specific clausewhich expressly bars payment of interest, then it is not open forthe arbitrator to grant pendente lite interest. The judgment onwhich reliance was placed by the learned counsel for the appellantin Ambica Construction (supra) has no application to the instantcase because Ambica Construction was decided under theArbitration Act 1940 whereas the instant case falls under the 1996Act. This has been clarified in Sri Chittaranjan Maity (supra)as under:

“16. Relying on a decision of this Court in AmbicaConstruction v. Union of India, (2017) 14 SCC 323, the learnedSenior Counsel for the appellant submits that mere bar to awardinterest on the amounts payable under the contract would not be AB

C

D

E

F

G

H

Asufficient to deny payment on pendente lite interest. Therefore,the arbitrator was justified in awarding the pendente lite interest.However, it is not clear from Ambica Construction (supra) as towhether it was decided under the Arbitration Act, 1940 (for short“the 1940 Act”) or under the 1996 Act. It has relied on a judgmentof Constitution Bench in State of Orissa v. G.C. Roy, (1992) 1BSCC 508. This judgment was with reference to the 1940 Act. Inthe 1940 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 forCthe pre-award period, the arbitrator cannot award interest for thesaid period. Therefore, the decision in Ambica Construction(supra) cannot be made applicable to the instant case.”

A

17. The decision in Raveechee and Company (supra) reliedon by the learned counsel for the appellant is again under theDArbitration Act 1940 which has no application to the facts of thepresent case.

18. Having regard to the above, we are of the view thatthe High Court was justified in rejecting the claim of the appellantseeking pendente lite interest on the award amount.”

E

In the case of Garg Builders(supra), this Court observed andheld that the decisions of this Court in the cases of Ambica Construction(supra) and Raveechee and Company (supra), relied upon by thelearned senior counsel appearing on behalf of the respondent herein,shall have no application as the same were under the Arbitration Act,F1940. It is not in dispute that in the present case, the parties are governedby the 1996 Act.

8. In the case of Bright Power Projects (India) (P) Ltd. (supra),while considering parimateria clause with clause 16(2) of the GCC, athree Judge Bench of this Court has held that when the parties to theGcontract agree to the fact that interest would not be awarded on theamount payable to the contractor under the contract, they are bound bytheir understanding and having once agreed that the contractor wouldnot claim any interest on the amount to be paid under the contract, hecould not have claimed interest either before a civil court or before anArbitral Tribunal. In the aforesaid case, this Court considered clauseH13(3) of the contract, which reads as under:

“13.3 – No interest will be payable upon the earnest money andthe security deposit or amounts payable to the contractor underthe contract, but government securities deposited in terms of sub-clause (1) of this clause will be repayable with interest accruedthereon.”

8.1. In the said decision, this Court also considered Section 31(7)(a)of the 1996 Act. It is specifically observed and held that Section 31(7) ofthe 1996 Act, by using the words “unless otherwise agreed by the parties”categorically specifies that the arbitrator is bound by the terms of thecontract insofar as award of interest from the date of cause of action todate of the award is concerned. It is further observed and held thatwhere the parties had agreed that no interest shall be payable, the ArbitralTribunal cannot award interest. Thus, the aforesaid decision of a threeJudge Bench of this Court is the answer to the submission made onbehalf of the respondent that despite the bar under clause 16(2) which isapplicable to the parties, the Arbitral Tribunal is not bound by the same.Therefore, the contention raised on behalf of the respondent that dehors the bar under clause 16(2), the Arbitral Tribunal independently andon equitable ground and/or to do justice can award interest pendente liteor future interest has no substance and cannot be accepted. Once thecontractor agrees that he shall not be entitled to interest on the amountspayable under the contract, including the interest upon the earnest moneyand the security deposit as mentioned in clause 16(2) of the agreement/contract between the parties herein, the arbitrator in the arbitrationproceedings being the creature of the contract has no power to awardinterest, contrary to the terms of the agreement/contract between theparties and contrary to clause 16(2) of the agreement/contract in questionin this case.

10. The further submission made on behalf of the respondent isthat clause 16 has to be read as a whole and on doing so, it can be saidthat clause 16 pertains specifically to earnest money and security depositand that the same can in no way be read in a manner to imply a bar onpendente lite interest. It is required to be noted that clause 16(1) is withrespect to earnest money/security deposit. However, clause 16(2) isspecifically with respect to interest payable upon the earnest money orthe security deposit or amounts payable to the contractor underthe contract. The words used in clause 16(2) is “or”. Therefore, theexpression “amounts payable to the contractor under the A

BC

D

E

F

G

H

Acontract”cannot be read in conjunction with “earnest money deposit”or “security deposit” by applying the principle of ejusdem generis. Theexpression “amounts payable to the contractor under the contract”has to be read independently and disjunctively to earnest money depositand security deposit as the word used is “or” and not “and”between“earnest money deposit”, “security deposit” and “amounts payable toBthe contractor under the contract”. Therefore, the principle of ejusdemgeneris is not applicable in the present case. On the principle of ejusdemgeneris, this Court in the case of Tehri Hydro DevelopmentCorporation (India) Ltd. (supra), in paragraphs 22 and 23, hasobserved and held as under:C

“22. Insofar as argument based on the principle of ejusdemgeneris is concerned, the Division Bench has held that that is notapplicable in the present case. We find that it is rightly soheld. Ejusdem generis is the rule of construction. The High Courthas negated this argument in the following manner: [JaiprakashDAssociates Ld. V. Tehri Hydro Development Corpn. (India) Ltd.,2012 SCC OnLine Del 6213]

“18. The rule of ejusdem generis guides us that where two ormore words or phrases which are susceptible of analogous meaningare coupled together, a noscitur a sociis, they are to be understoodEto mean in their cognate sense and take colour from each otherbut only if there is a distinct genus or a category. Where this islacking i.e., unless there is a category, the rule cannot apply.”

As rightly held, the rule of ejusdem generis would be appliedonly if there is distinct genus or a category, which is lacking in theFinstant 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 ofGinterpretation that all words in a statute are given effect, if possible,that a statute is to be construed as a whole and that no words in astatute were presumed to be superfluous”. [See LokmatNewspapers (P) Ltd. v. Shankarprasad [Lokmat Newspapers(P) Ltd. v. Shankarprasad, (1999) 6 SCC 275].

G

H

23. In fact, construing the similar clause, this Courtin BHEL v. Globe Hi-Fabs Ltd., (2015) 5 SCC 718 has held thatrule of ejusdem generis, is No. applicable inasmuch as : (BHELcase [BHEL v. Globe Hi-Fabs Ltd., (2015) 5 SCC 718 : (2015)3 SCC (Civ) 287] , SCC pp. 722-23, paras 12 & 15-16)

“12. The rule of ejusdem generis has to be applied with careand caution. It is not an inviolable rule of law, but it is onlypermissible inference in the absence of an indication to the contrary,and where context and the object and mischief of the enactmentdo not require restricted meaning to be attached to words of generalimport, it becomes the duty of the courts to give those words theirplain and ordinary meaning. As stated [Quazi v. Quazi, 1980 AC744 : (1979) 3 WLR 833 HL] by Lord 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 of statutoryinterpretation, 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.

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 be A

BC

D

E

F

G

H

A

BC

D

E

F

G

H

Aconstrued 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 writtenBstatement or taking any other steps in the proceedings” as theyoccur 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 arbitrationCagreement, although the rule of ejusdem generis, has No.application for mention of a single species viz. written statementdoes not constitute 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 theDcontractor by the employer”. In our opinion, these words cannotbe read as ejusdem generis along with the earlier words “earnestmoney” or “security deposit”.”

11. Further, heavy reliance is placed on the decision of this Courtin the case of M/s Pradeep Vinod Construction Co. (supra) by theElearned counsel appearing on behalf of the respondent. The same shallnot be applicable for the reason that the said decision is by a two JudgeBench and the contrary view taken by this Court in the case of BrightPower Projects (India) (P) Ltd. (supra) is by a three Judge Bench.Also, in the case of M/s Pradeep Vinod Construction Co. (supra),this Court has not considered the binding decision of this Court in theFcase of Bright Power Projects (India) (P) Ltd. (supra), which is by aBench of three Judges. Even otherwise, the same is prior to the decisionof this Court in the case of Tehri Hydro Development Corporation(India) Ltd. (supra), and the said subsequent decision of this Court isalso a three Judge Bench decision. Moreover, in the case of M/s PradeepGVinod Construction Co. (supra), though in clause 16(2), the expressionused is “or amounts payable to the contractor under the contract”, thisCourt has only considered the non-award of interest on earnest moneyand security deposit. In any case, in view of the subsequent decisions ofthis Court, referred to hereinabove and in view of clause 16(2) of theGCC, the arbitrator could not have awarded the interest, pendente lite orH

future interest on the amount due and payable to the contractor underthe contract in the instant case.

12. The last submission made on behalf of the respondent is thatas the learned counsel appearing on behalf of the appellant herein, beforethe High Court, conceded that the issue raised in the petition is coveredby the judgment of this Court in M/s Pradeep Vinod Construction Co.(supra) and that even the appellant has claimed interest @ 18% againstthe respondent-contractor, therefore it is not open for the appellant tore-agitate the issue before this Court is concerned, it is required to benoted that the concession if any by the counsel which is contrary to thelaw laid down by this Court shall not be binding on the parties. Further,merely because the appellant has claimed interest, does not imply thatthe contractor shall be entitled to interest pendente lite. Even if theappellant would have been awarded interest, the same also was notpermissible and could have been a subject matter of challenge. In short,there cannot be an estoppel against law.

13. In view of the aforesaid discussion and for the reasons statedabove, we hold that the learned Arbitrator in the instant case has erredin awarding pendente lite and future interest on the amount due andpayable to the contractor under the contract in question and the samehas been erroneously confirmed by the High Court.

14. Accordingly, the present appeal succeeds. The impugnedjudgment and order passed by the Division Bench of the High Court inan appeal under Section 37 of the 1996 Act and the order passed by thelearned Single Judge in an application under Section 34 of the 1996 Actand the award passed by the learned Arbitral Tribunal awarding pendentelite and future interest on the amounts held to be due and payable to thecontractor under the contract are hereby quashed and set aside. It isheld that in view of specific bar contained in clause 16(2) of the GCC,the contractor shall not be entitled to any interest pendente lite or futureinterest on the amounts due and payable to it under the contract.

15. The appeal is allowed accordingly. However, in the facts andcircumstances of the case, there shall be no order as to costs.

Nidhi Jain

Appeal allowed.

A

B

C

D

E

F

G

H