Summary
A railway contractor challenged an appellate order setting aside an arbitral award on a no-claims-certificate objection first raised in appeal. The Court rejected that belated objection and sustained the principal award, but disallowed interest under the contractual prohibition. Although the contractor had already withdrawn more than the principal, recovery of the excess was expressly prohibited on the case’s facts.
Issues
- Whether a no-claims-certificate arbitrability objection could first be entertained in appeal after arbitration and Section 34 proceedings.
- Whether the contract barred pre-reference and pendente lite interest under the 1996 Act.
- How sums already withdrawn should be treated.
Provisions considered
- Section 31(7)(a), Arbitration and Conciliation Act, 1996The statutory power to award pre-award interest is subject to the parties’ contrary agreement, covering both pre-reference and pendente lite periods. (¶ 15–21)
Held
- The no-claims-certificate objection had not been urged before the Section 11 court, the arbitral tribunal or the Single Judge under Section 34. The Division Bench was not justified in considering it for the first time in appeal and ordering a fresh reference. (¶ 10–14)
- GCC Clause 16(2) prohibited interest on earnest money, security deposit and contractual amounts. Under Section 31(7)(a), that prohibition barred pre-award interest, including pendente lite interest. Authorities applying the 1940 Act did not displace the specific 1996 statutory rule. (¶ 15–21)
- The principal award was Rs.11,13,136, separately from interest of Rs.12,44,546. The Court held the contractor not entitled to interest. As he had already withdrawn half the deposited Rs.38,82,150, exceeding the principal, the railway was directed not to recover that excess in the particular circumstances. (¶ 22–23)
Result
Appeals partly allowed without costs: principal award sustained, interest disallowed, and recovery of the excess amount already withdrawn by the contractor prohibited.