REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL  APPELLATE JURISDICTION

CIVIL APPEAL NO(S).   1539   OF 2019 (ARISING OUT OF SLP (C) NO. 13551 OF  2013)

JAIPRAKASH ASSOCIATES LTD. (JAL) THROUGH ITS DIRECTOR .....APPELLANT(S)

VERSUS

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

J U D G M E N T

A.K. SIKRI, J.

Leave granted.

2) The appellant  herein was awarded the contract  under which it

was  to  execute  certain  Works.   Agreement  in  this  behalf  was

signed on 18th December, 1998.  Some disputes arose between

the parties.  Since the agreement contained an arbitration clause,

two claims raised by the appellant were referred for arbitration.

The arbitral tribunal was of three Arbitrators.  This arbitration was

under  the  Arbitration  and  Conciliation  Act,  1996  (hereinafter

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referred to as the ‘1996 Act’).  The majority award pronounced on

October 10, 2010 allowed the two claims to certain extent.  On

the said claims awarded, the Arbitrators also granted interest at

the rate of 10% per annum from the date when the arbitration was

invoked,  i.e.,  October  09,  2007,  till  60  days  after  the  award.

Future  interest  at  the  rate  of  18% per  annum till  the  date  of

payment was also awarded.   

3) Dispute which has travelled upto this Court pertains only to the

question as to whether the Arbitrators could award any interest in

view of Clauses 50 and 51 of the General Conditions of Contract

(GCC)  which  governed  the  terms  between  the  parties.   The

objections were filed before the High Court.  A Single Judge of the

High Court of Delhi passed the order dated November 15, 2011

quashing the award limited to the interest that was awarded by

the Arbitrators.   The  appellant preferred intra-court appeal which

has been dismissed by the Division Bench of  the High Court,

thereby upholding the judgment of the Single Judge.  The effect is

that  the  High  Court  has  held  that  no  interest  is  payable  as

Clauses  50  and  51  of  GCC  bar  the  arbitrators  from  granting

interest.   

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4) It may be pointed out that on interpreting Clauses 50 and 51 of

the General Conditions of Contract, the view taken by the High

Court is that these clauses categorically provide that no interest

would be payable to the contractor on the money due to him.  The

said Clauses read as under:

"Clause 50.0  Interest on money due to the contractor

No omission on the part of the Engineer in charge to pay the  amount  due  upon  measurement  or  otherwise  shall vitiate or make void the contract, nor shall the contractor be entitled to interest upon any guarantee or payments in arrears  nor  upon  any  balance  which  may  on  the  final settlement of his account, be due to him.

Clause  51.0   No  claim  for  delayed  payment  due  to dispute etc.

No claim for interest or damage will be entertained or be payable by the corporation in respect  of  any amount  or balance which may be lying with the corporation owing to nay  dispute,  different  or  misunderstanding  between  the parties or in respect of any delay or omission on the part of he  Engineer  in  charge  in  making  intermediate  or  final payments on in any other respect whatsoever.”

The Award makes the following observations in this behalf:

"As  seen  from  above,  Clause  50.0  and  51.0  of  the Contract  deny  interest  on  the  Claimant’s  dues  by  the Respondent  due to  dispute  etc.  However  as  per  above quoted judgment of Hon’ble Supreme Court of India, the claim  for  interest  can  be  considered  by  the  Arbitration Tribunal.”

Notwithstanding the same, the learned Arbitrators granted

the interest  by  relying  upon the law declared by this  Court  in

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Board of Trustees for the Port of Calcutta v. Engineers-De-Space-

Age1 and  following  observations  from the  said  judgment  were

quoted:

"………..In other words, according  to their Lordships the arbitrator  is  expected  to  act  and  make  his  award  in accordance with general law of the land but subject to an agreement,  provided,  the  agreement  is  valid  and  legal. Lastly, it was pointed out that interest pendent like is not a matter of substantive law, interest for the period anterior to reference.   Their  Lordship  concluded  that  when  the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute is referred to the arbitrator, he will have the power to award interest pedente lite for the simple reason that in such a case it is presumed that interest was implied term of the agreement  between  the  parties;  it  is  then  a  matter  of exercise of discretion by the arbitrator. The position of law, has,  therefore,  been  clearly  stated  in  the  aforesaid decision  of  the  Constitution  Bench. …………………...Strictly construed the term of the contract merely prohibits the Commissioner from paying interest to the contractor  for  delayed payment  but  once the matter goes to the arbitration the discretion of the Arbitrator is not, in any manner, stifled by this term of the contract and the Arbitrator  would  be  entitled  to  consider  the  question  of grant of interest pendent lite and award interest if he finds the claim to be justified.  We are, therefore, of the opinion that under the clause of the contract the Arbitrator was in no  manner  prohibited  from  awarding  interest  pendente lite.”

5) As stated above, the High Court, on the other hand, has taken the

view that if interest is prohibited as per the expressed terms of the

contract  between  the  parties,  the  Arbitrator  does  not  get

jurisdiction to award interest.  Further, insofar as interpretation to

the aforesaid clauses is concerned, the High Court noticed that

1 (1996) 1 SCC 516

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these Clauses were on the same terms as Clause 1.2.14 and

1.2.15 of the contract which were subject matter of construction in

Tehri Hydro Development Corporation (THDC) Limited & Anr.  v.

Jai Prakash Associates Limited2. In the said judgment, this Court

has categorically held that those clauses to mean that no interest

was payable on claim for delayed payment due to the contractor.

Therefore, same construction needed to be given to Clauses 50

and 51 of GCC in the instant case.

6) Mr. Rupinder S.  Suri,  learned senior counsel appearing for the

appellant made two-fold submissions before us, which are to the

following effect:

(i) In the first place, it is submitted that judgment in Jayprakash

Associates  Limited case  is  contrary  to  the  earlier  judgment

rendered  by  this  Court  in  State  of  Uttar  Pradesh  v.  Harish

Chandra and Company3 . Both the judgments are by the Benches

of  Three-Judges.  His  submission  is  that  judgment  of  Harish

Chandra is earlier in point of time, which has not been taken note

of in Jayprakash Associates Limited case.  In such a scenario, as

per Mr. Suri, the judgment which is passed earlier should hold the

field and, therefore, we should be guided by the law laid down in

Harish Chandra case.  2 (2012) 12 SCC 10 3 (1999) 1 SCC 63

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(ii) Second submission,  in  the alternative,  is  that  in  order  to

resolve  the  conflict,  the  matter  should  be  referred  to  a  larger

Bench.

7) Dilating on the first  submission,  an attempt of  Mr.  Suri  was to

show  that  the  clauses  of  the  contract  in  question,  when

interpreted correctly would clearly bring about that these clauses

did not prohibit the Arbitrators from granting interest.  The learned

counsel emphasised the words “or any other respect whatsoever”

occurring in Clause 51 of the GCC and argued that these are to

be read  ejusdem generis and should take their colour from the

earlier part of clause.  He submitted that when these words are

read in  the aforesaid  manner,  it  is  only  in  those cases where

some amount or balance is lying with the respondent because of

any  dispute  different  or  misunderstanding  between  the  parties

etc., interest is not payable.  Such a situation would not arise in

those cases where claim is raised on other counts and awarded

by  the  Arbitrators.   He  also  submitted  that  Clause  51  in  the

contract  in  the  instant  case  was  similar  to  Clause  1.9  of  the

contract  in  Harish Chandra case and the Court  interpreted the

said  clause  to  mean  that  Arbitrator  was  not  precluded  from

awarding the interest.   

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8) In  this  hue,  his  alternate  submission  was  that  two  similar  or

almost identical clauses are interpreted in a different manner in

Harish  Chandra  case  and  Jayprakash  Associates case  and,

therefore, conflict arises which needs to be resolved.

9) Mr.  Gourab  Banerji,  learned Senior  Counsel  appearing for  the

respondent  gave  equally  emphatic  reply  to  the  aforesaid

submissions of Mr. Suri.  His first argument was that clauses in

Harish  Chandra  case  and  the  present  case  were  altogether

different.   Insofar  as  the  instant  case  is  concerned,  it  was

governed  by  the  law  laid  down  in  Jayprakash  Associates

judgment which was in fact a case between the same parties and

in that case the Court had, while construing the identically worded

clauses,  came  to  the  conclusion  that  the  Arbitrators  were

precluded from granting any interest.  His another contention was

that there was a difference between the scheme provided under

the Arbitration Act, 1940 (hereinafter referred to as the ‘1940 Act’)

when contrasted with the 1996 Act.  He argued that most of the

judgments cited by the appellant including Harish Chandra were

under 1940 Act whereas in the instant case award was passed

under the 1996 Act.  He also referred to certain recent judgments

which have been rendered by this Court touching upon this very

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aspect.   The  precise  manner  in  which  he  structured  his

arguments are recapitulated below:

10) In  the  first  instance,  he  pointed  out  that  even  the  arbitrators

accepted, on the interpretation of GCC Clauses 50 and 51, that

these  clauses  deny  interest  on  the  appellant’s  dues  by  the

respondent due to dispute etc.  Notwithstanding the same, the

majority opinion awarded the interest relying upon the judgment

of this Court in  Board of Trustees for the Port of Calcutta.  The

learned  Single  Judge  of  the  High  Court,  while  reversing  the

aforesaid view, pointed out that 1996 Act had altered the position

contained in the 1940 Act.  Under the new Act, an arbitrator could

not award pendente lite interest when there was an express bar

against award of such an interest.  This legal position is contained

in Section 31(7)(a) of the 1996 Act and the legal position stood

crystallised in the case of Sayeed Ahmed and Company v. State

of  Uttar  Pradesh & Ors.4.   Therefore,  held  the  learned Single

Judge, when Clauses 50 and 51 of GCC imposed a complete bar

on arbitral tribunal to award pendente lite interest, the arbitrators

had no jurisdiction to award interest.  Mr. Banerji submitted that

the learned Single Judge even noticed the judgment in  Harish

Chandra case and distinguished the same on the ground that it

4 (2009) 12 SCC 26

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arose under  the 1940 Act.   Furthermore,  clause 1.9 in  Harish

Chandra case  was  indeed  restrictive  and  differed  from  the

wordings of Clauses 50 and 51 of the GCC which were closer to

Clause G1.09 in  Sayeed Ahmed case.   On that  basis,  Harish

Chandra judgment  was distinguished  which  position  has  been

upheld by the Division Bench of the High Court also.  Mr. Banerji

submitted that by the time Division Bench decided the case in

September, 2012, it had the benefit of another judgment of this

Court  in  THDC case  which  was  not  only  between  the  same

parties but even the clauses in the said case are pari materia with

the clauses in the present case.

11) We have considered the respective submissions and have gone

through the legal position contained in the case laws cited before

us by both the parties.

12) Insofar as power of the arbitral tribunal in granting pre-reference

and/or  pendente lite interest is concerned, the principles which

can  be  deduced  from the  various  judgments  are  summed  up

below:

(a) A Constitution Bench judgment of this Court in the case of

Secretary, Irrigation Department, Government of Orissa & Ors. v.

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G.C. Roy5 exhaustively dealt with this very issue, namely, power

of  the arbitral  tribunal to grant  pre-reference and  pendente lite

interest.   The  Constitution  Bench,  of  course,  construed  the

provisions of the 1940 Act which Act was in vogue at that time.  At

the  same  time,  the  Constitution  Bench  also  considered  the

principle for grant of interest applying 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  out  with  the  following

reasoning:

"43.  The question still remains whether arbitrator has the power to award interest pendente lite, and if so on what principle. We must reiterate that we are dealing with the situation where the agreement does not provide for grant of such interest nor does it  prohibit  such grant.  In other words, we are dealing with a case where the agreement is silent  as  to  award  of  interest.  On  a  conspectus  of aforementioned decisions, the following principles emerge:

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

(ii)  An  arbitrator  is  an  alternative  form  (sic  forum)  for resolution of disputes arising between the parties. If so, he must  have  the  power  to  decide  all  the  disputes  or differences arising between the parties. If the arbitrator has no  power  to  award  interest  pendente  lite,  the  party

5 (1992) 1 SCC 508

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claiming  it  would  have  to  approach  the  court  for  that purpose, even though he may have obtained satisfaction in respect of other claims from the arbitrator. This would lead to multiplicity of proceedings.

(iii) An arbitrator is the creature of an agreement. It is open to  the  parties  to  confer  upon  him  such  powers  and prescribe such procedure for him to follow, as they think fit, so long as they are not opposed to law. (The proviso to Section 41 and Section 3 of Arbitration Act illustrate this point). All the same, the agreement must be in conformity with law. The arbitrator must also act and make his award in accordance with  the general  law of  the land and the agreement.

(iv)  Over the years,  the English and Indian courts  have acted on the assumption that where the agreement does not prohibit and a party to the reference makes a claim for interest,  the  arbitrator  must  have  the  power  to  award interest  pendente  lite.  Thawardas  [Seth  Thawardas Pherumal  v.  Union of India, (1955) 2 SCR 48 : AIR 1955 SC 468] has not been followed in the later decisions of this Court.  It  has  been  explained  and  distinguished  on  the basis that in that case there was no claim for interest but only a claim for unliquidated damages. It  has been said repeatedly that observations in the said judgment were not intended to lay down any such absolute or universal rule as  they  appear  to,  on  first  impression.  Until  Jena case [(1988)  1 SCC 418 :  (1988) 1  SCR 253]  almost  all  the courts in the country had upheld the power of the arbitrator to award interest pendente lite. Continuity and certainty is a highly desirable feature of law.

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

 It is clear from the above that the Court decided to fall back

on general principle that a person who is deprived of the use of

money to which he is legitimately entitled to, has a right to be

Civil Appeal arising out of SLP (C) No. 13551 of 2013 Page 11 of 25

compensated  for  the  deprivation  and,  therefore,  such

compensation may be called interest compensation or damages.

(b) As a sequitur, the arbitrator would be within his jurisdiction

to award pre-reference or pendente lite interest even if agreement

between the parties was silent  as to whether  interest  is  to  be

awarded or not.   

(c) Conversely,  if  the  agreement  between  the  parties

specifically prohibits grant of interest, the arbitrator cannot award

pendente  lite interest  in  such  cases.   This  proposition  is

predicated on the principle that an arbitrator is the creature of an

agreement  and he is  supposed to act  and make his  award in

accordance with the general law of the land and the agreement.

This  position  was made amply  clear  in  G.C.  Roy case  in  the

discussion that ensued thereafter:

"44.  Having regard to the above consideration, we think that the following is the correct principle which should be followed in this behalf:

Where the agreement between the parties does not prohibit  grant  of  interest  and  where a party  claims interest  and  that  dispute  (along  with  the  claim  for principal amount or independently) is referred to the arbitrator, he shall have the power to award interest pendente lite.  This is for the reason that in such a case  it  must  be  presumed  that  interest  was  an implied term of the agreement between the parties and therefore when the parties refer all their disputes — or refer the dispute as to interest as such — to the arbitrator, he shall have the power to award interest.

Civil Appeal arising out of SLP (C) No. 13551 of 2013 Page 12 of 25

This does not mean that in every case the arbitrator should necessarily award interest pendente lite. It is a matter within his discretion to be exercised in 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 the

jurisdiction  of  the  arbitrator  in  awarding  pendente  lite interest.

However, there is a significant departure on this aspect insofar as

1996 Act  is  concerned.   This distinction has been spelt  out  in

Sayeed Ahmed case in the following manner:

"Re: Interest from the date of cause of action to date of award

7.  The issue regarding interest as noticed above revolves around Clause G1.09 of the Technical Provisions forming part of the contract extracted below:

“G.  1.09.  No claim for  interest  or  damages will  be entertained by the Government with respect to any money  or  balance  which  may  be  lying  with  the Government  or  any  become  due  owing  to  any dispute, difference or misunderstanding between the Engineer-in-Charge  on  the  one  hand  and  the contractor on the other hand or with respect to any delay  on  the  part  of  the  Engineer-in-Charge  in making  periodical  or  final  payment  or  any  other respect whatsoever.”

xx xx xx   

14.  The  decisions  of  this  Court  with  reference  to  the awards under the old Arbitration Act making a distinction between the pre-reference period and pendente lite period and  the  observation  therein  that  the  arbitrator  has  the discretion to award interest during pendente lite period in spite of any bar against interest contained in the contract between  the  parties  are  not  applicable  to  arbitrations governed by the Arbitration and Conciliation Act, 1996.”

Civil Appeal arising out of SLP (C) No. 13551 of 2013 Page 13 of 25

13) The  aforesaid  position  is  reiterated  in  Sree  Kamatchi  Amman

Constructions v.  Divisional Railway Manager (Works), Palghat &

Ors.6 and Union of India v.  Bright Power Projects (India) Private

Limited7.   Later judgment is by a bench of three Judges.  This

legal position is reiterated in  Sri Chittaranjan Maity  v.  Union of

India8 which is authored by one of us (Nazeer, J.).  In that case,

the  Court  considered  the  same  very  question  which  falls  for

determination  by  us,  namely,  whether  the  arbitral  tribunal  was

justified in awarding interest on delayed payments in favour of the

appellant?  After noticing that clause 16(2) of GCC in that case

bars the payment of interest, it was held that under the 1996 Act,

the position wherein is different from 1940 Act, the interest could

not be awarded.  Following observations from this judgment may

be noted:

"16. Relying  on  a  decision  of  this  Court  in  Ambica Construction v.  Union  of  India  [Ambica  Construction v. Union of India, (2017) 14 SCC 323] , the learned Senior Counsel for the appellant submits that mere bar to award interest on the amounts payable under the contract would not be sufficient 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 [Ambica  Construction v.  Union  of  India, (2017) 14 SCC 323] as to whether it was decided under the Arbitration Act, 1940 (for short “the 1940 Act”) or under the 1996 Act. It has relied on a judgment of Constitution Bench in  State of Orissa v.  G.C. Roy [State of Orissa v. G.C. Roy,  (1992) 1 SCC 508] .  This judgment was with

6 (2010) 8 SCC 767 7 (2015) 9 SCC 695 8 (2017) 9 SCC 611

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reference to the 1940 Act. In the 1940 Act, there was no provision  which  prohibited  the  arbitrator  from  awarding interest for the pre-reference, pendente lite or post-award period, whereas the 1996 Act contains a specific provision which says that if the agreement prohibits award of interest for  the  pre-award  period,  the  arbitrator  cannot  award interest  for  the  said  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 Cellulose Products

Limited v.  Oil  and Natural  Gas Corporation Limited9, the entire

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 held that under the 1940 Act, an arbitrator has

power to grant pre-reference interest  under the Interest  Act  as

well  as pendente  lite and  future  interest,  however,  he  is

constricted  only  by  the  fact  that  an  agreement  between  the

parties may contain an express bar to the award of pre-reference

and/or pendente lite interest.  Further, the Court has evolved the

test of strict construction of such clauses, and unless there is a

clear  and  express  bar  to  the  payment  of  interest  that  can  be

awarded by an arbitrator,  clauses which do not refer to claims

before the arbitrators or disputes between parties and clearly bar

payment  of  interest,  cannot  stand  in  the  way  of  an  arbitrator

awarding pre-reference or pendente lite interest.  Further, unless

9 (2018) 9 SCC 266

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a  contractor  agrees  that  no  claim  for  interest  will  either  be

entertained  or  payable  by  the  other  party  owing  to  dispute,

difference,  or  misunderstandings  between  the  parties  or  in

respect  of  delay  on  the  part  of  the  engineer  or  in  any  other

respect  whatsoever,  leading the  Court  to  find an express bar

against payment of interest, a clause which merely states that no

interest will be payable upon amounts payable to the contractor

under the contract would not be sufficient to bar an arbitrator from

awarding  pendente lite interest.  Further, the grant of  pendente

lite interest  depends  upon  the  phraseology  used  in  the

agreement,  clauses conferring power relating to arbitration, the

nature of claim and dispute referred to the arbitrator, and on what

items the power 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, inasmuch as Section 31(7) of the 1996 Act

sanctifies  agreements  between the  parties  and states  that  the

moment  the  agreement  says  otherwise,  no  interest  becomes

payable right from the date of the cause of action until the award

is delivered.

15) After discussing and analysing almost all the judgments on this

subject, the legal position is summed up in the following manner:

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"24. A conspectus of the decisions that have been referred to above would show that under the 1940 Act, an arbitrator has  power  to  grant  pre-reference  interest  under  the Interest  Act,  1978  as  well  as  pendente  lite  and  future interest. However, he is constricted only by the fact that an agreement  between the parties may contain an express bar  to  the  award  of  pre-reference  and/or  pendente  lite interest. Since interest is compensatory in nature and is parasitic  upon a  principal  sum not  having  been  paid  in time,  this  Court  has frowned upon clauses  that  bar  the payment  of  interest.  It  has therefore evolved the test  of strict  construction of  such clauses,  and has gone on to state that unless there is a clear and express bar to the payment of interest that can be awarded by an arbitrator, clauses which do not refer to claims before the arbitrators or  disputes between parties  and clearly  bar  payment  of interest, cannot stand in the way of an arbitrator awarding pre-reference or  pendente  lite  interest.  Thus,  when one contrasts a clause 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  Hydro  Development  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  agrees  that  no claim for interest will either be entertained or payable by the  other  party  owing  to  dispute,  difference,  or misunderstandings  between  the  parties  or  in  respect  of delay on the part of the engineer or in any other respect whatsoever,  leading  the  Court  to  find  an  express  bar against payment of interest, a clause which merely states that no interest will be payable upon amounts payable to the contractor under the contract would not be sufficient to bar  an  arbitrator  from  awarding  pendente  lite  interest under  the  1940  Act.  As  has  been held  in  First  Ambica Construction case [Union of India v. Ambica Construction, (2016) 6 SCC 36 : (2016) 3 SCC (Civ) 36] , the grant of pendente lite interest depends upon the phraseology used in  the  agreement,  clauses  conferring  power  relating  to arbitration, the nature of claim and dispute referred to the arbitrator, and on what items the power to award interest has been taken away and for which period. We hasten to add that the position as has been explained in some of the judgments above under Section 31(7) of the 1996 Act, is wholly different, inasmuch as Section 31(7) of the 1996 Act sanctifies agreements between the parties and states that the  moment  the  agreement  says  otherwise,  no  interest

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becomes payable right from the date of the cause 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

issue at hand.  At this stage itself, it may be mentioned that in

case clauses 50 and 51 of GCC put a bar on the arbitral tribunal

to award interest, the arbitral tribunal did not have any jurisdiction

to do so. As pointed out above, right from the stage of arbitration

proceedings till the High Court, these clauses are interpreted to

hold that they put such a bar on the arbitral tribunal.  Even the

majority  award  of  the  arbitral  tribunal  recognised  this.

Notwithstanding the same, it awarded the interest by relying upon

Board of Trustees for the Port of Calcutta case.  The High Court,

both Single Bench as well as Division Bench, rightly noted that

the aforesaid judgment  was under  the 1940 Act  and the legal

position in this behalf have taken a paradigm shift which position

is clarified in Sayeed Ahmed and Company case.  This rationale

given by the High Court is in tune with the legal position which

stands crystallised by catena of judgments 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 and 1.2.15 of GCC in  THDC case.  Those clauses have

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been interpreted by holding that no interest is payable on claim

for delayed payment due to the 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 remains

to be considered is as to whether such a construction is contrary

to the judgment in Harish Chandra case.   

19) Complete  answer  to  this  argument  is  provided  in  Reliance

Cellulose  Products  Limited judgment.   Following  discussion

contained therein which discussed THDC judgment would amply

demonstrate this:

"Also,  unlike  the  clause  in  Tehri  Hydro  Development Corporation  Ltd.  (Supra),  clause  16  does  not  contain language which is so wide in nature that it would interdict an arbitrator from granting pendente lite interest.  It will be remembered that the clause in Tehri Hydro Development Corportation  Ltd.  (supra)  spoke  of  no  claim for  interest being  entertained  or  payable  in  respect  of  any  money which  may  be  lying  with  the  Government  owing  to disputes,  difference  or  misunderstanding  between  the parties  and not  merely  in  respect  of  delay  or  omission; Further,  the  clause  in  Tehri  Hydro  Development Corporation Ltd. (supra) goes much further and makes it clear  that  no claim for  interest  is  payable  “in  any  other respect whatsoever.”

It is pertinent to mention that the aforesaid judgment also

discusses and analysis  Harish Chandra case.  In the first place,

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the  judgment  in  Harish  Chandra case  is  under  the  1940  Act.

More pertinently, this judgment is explained and distinguished in

Sayeed Ahmed and Company case in the following paragraphs:

"17. The appellant strongly relied upon the decision of this Court in  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 award of interest. The clause barring interest that fell  for consideration in that decision was as under: (SCC p. 67, para 9)

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

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

“10. A mere look at the clause shows that the claim for  interest  by  way  of  damages  was  not  to  be entertained against the Government with respect to only a specified type of amount, namely, any moneys or balances which may be lying with the Government owing  to  any  dispute,  difference  between  the Engineer-in-Charge  and  the  contractor;  or misunderstanding  between  the  Engineer-in-Charge and  the  contractor  in  making  periodical  or  final payments  or  in  any other  respect  whatsoever.  The words  ‘or  in  any  other  respect  whatsoever’  also referred to the dispute pertaining to the moneys or balances which may be lying with the Government pursuant to the agreement meaning thereby security deposit  or  retention  money  or  any  other  amount which  might  have  been  with  the  Government  and refund  of  which  might  have  been  withheld  by  the Government.  The  claim  for  damages  or  claim  for payment for the work done and which was not paid

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for would not obviously cover any money which may be  said  to  be  lying  with  the  Government. Consequently,  on  the  express  language  of  this clause, there is no prohibition which could be culled out against the respondent contractor that he could not raise the claim for interest by way of  damages before the arbitrator on the relevant items placed for adjudication.”

(emphasis supplied)

18.  In  Harish  Chandra [(1999)  1  SCC  63]  a  different version of Clause 1.09 was considered. Having regard to the restrictive wording of that clause, this Court held that it did not bar award of interest on a claim for damages or a claim for payments for work done and which was not paid. This  Court  held  that  the  said  clause  barred  award  of interest  only  on  amounts  which  may  be  lying  with  the Government by way of security deposit/retention money or any other  amount,  refund of  which was withheld 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 respect of  any money that may become due owing  to  any  dispute,  difference  or  misunderstanding between  the  Engineer-in-Charge  and  contractor  or  with respect to any delay on the part of the Engineer-in-Charge in making periodical or final payment or in respect of any other respect whatsoever. The bar under Clause G1.09 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 Ahmed

and  Company  distinguishing  the  restrictive  wording  in  Harish

Chandra has been consistently followed by this Court in number

of cases thereafter.  In this scenario, when we find that  Harish

Chandra  case  which  is  of  the  vintage  of  1940  Act  and  is

distinguished in  Sayeed Ahmed and Company  coupled with the

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fact  that  the  ratio  of  Sayeed  Ahmed and  Company  has  been

consistently  followed,  there  is  no  reason  to  deviate  from  the

construction  to  Clauses  50  and  51  of  the  GCC given  by  the

arbitral  tribunal in the first  instance as well  as the High Court.

Above all, these clauses is pari materia with with Clauses 1.2.14

and 1.2.15 of GCC in THDC case which was a judgment between

the same parties.

21) Insofar as argument based on the principle of ejusdem generis is

concerned, the Division Bench has held that that is not applicable

in the present case.  We find that it is rightly so held.  Ejusdem

generis is the rule of construction.  The High Court has negated

this argument in the following manner:

"18.  The rule of ejusdem generis guides us that where two or  more  words  or  phrases  which  are  susceptible  of analogous  meaning  are  cupled  together,  a  noscitur  a sociis,they are to be understood to mean in their cognate sense and take colour from each 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 cannot apply.”

As  rightly  held,  the  rule  of  ejusdem  generis  would  be

applied  only  if  there  is  distinct  genus  or  a  category,  which  is

lacking in the instant case.  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

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construed as limited to things of same kind as those specified.  In

that  sense,  this  rule  reflects  an  attempt  ‘to  reconcile

incompatibility between the specific and general words in view of

the other  rules  of  interpretation 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  a  statute  were  presumed  to  be

superfluous’.  (See  Lokmat  Newspapers  Pvt.  Ltd. v.

Shankarprasad10).   In  fact,  construing  the  similar  clause,  this

Court in the case of Bharat Heavy Electricals Limited v. Globe Hi-

Fabs  Limited11 has  held  that  rule  of  ejusdem  generis  is  not

applicable inasmuch as:

"12.  The rule of ejusdem generis has to be applied with care and caution. It is not an inviolable rule of law, but it is only permissible inference in the absence of an indication to  the  contrary,  and  where  context  and  the  object  and mischief  of  the  enactment  do  not  require  restricted meaning  to  be  attached  to  words  of  general  import,  it becomes the duty of the courts to give those words their plain and ordinary meaning. As stated by Lord Scarman:

“If the legislative purpose of a statute is such that a statutory series 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 the purpose of the statute.  The rule  like many other  rules  of  statutory interpretation, is a useful servant but a bad master.”

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

10 (1999) 6 SCC 275 11 (2015) 5 SCC 718

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xx xx xx

15. A word of caution is here necessary. The fact that the ejusdem  generis  rule  is  not  applicable  does  not necessarily mean that the prima facie wide meaning of the word “other” or similar general words cannot be restricted if  the language or  the context  and the policy of  the Act demand a restricted construction. In the expression “defect of jurisdiction or other cause of a like nature” as they occur in Section 14(1) of the Limitation Act the generality of the words “other cause” is cut down expressly by the words “of a like nature”, though the rule of ejusdem generis is strictly not applicable as mention of  a single species “defect  of jurisdiction” does not constitute a genus. Another example that may here be mentioned is Section 129 of the Motor Vehicles  Act  which  empowers  any  “police  officer authorised in this behalf or other person authorised in this behalf  by  the  State  Government”  to  detain  and  seize vehicles used without certification of registration or permit. The  words  “other  person”  in  this  section  cannot  be construed by the rule of ejusdem generis for mention of single species, namely, “police officer” does not constitute a genus but having regard to the importance of the power to detain and seize vehicles it is proper to infer that the words  “other  person”  were  restricted  to  the  category  of government officers. In the same category falls the case interpreting the words “before filing a written statement or taking any other steps in the proceedings” as they occur in Section 34 of the Arbitration Act, 1940. In the context in which the expression “any other steps” finds place it has been  rightly  construed  to  mean  a  step  clearly  and unambiguously  manifesting  an  intention  to  waive  the benefit  of  arbitration  agreement,  although  the  rule  of ejusdem generis has no application for mention of a single species viz. written statement does not constitute a genus.

16. In the present case we noticed that the clause barring interest  is  very  widely  worded.  It  uses  the  words  “any amount  due  to  the  contractor  by  the  employer”.  In  our opinion, these words cannot be read as ejusdem generis along with the earlier words “earnest money” or “security deposit”.

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22) The upshot of the aforesaid discussion would be to hold that the

conclusions  of  the  High  Court  in  the  impugned  judgment  are

correct  and  need  no  interference.   This  appeal  is  accordingly

dismissed.

.............................................J. (A.K. SIKRI)

.............................................J. (S. ABDUL NAZEER)

.............................................J. (M. R. SHAH)

NEW DELHI; FEBRUARY 07, 2019

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