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        REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL No.8530 OF 2009

Union of India           ….Appellant(s)

VERSUS

M/s. Susaka Pvt. Ltd. & Ors.         …Respondent(s)

J U D G M E N T

Abhay Manohar Sapre, J.

1. This  appeal  is  filed  by  the  Union  of  India

against  the  final  judgment  and  order  dated

11.02.2005 passed by the High Court of Bombay in

Appeal (Ld) No.666 of 2003 in Arbitration Petition

No.96 of  2003 whereby the Division Bench of  the

High Court allowed the appeal filed by respondent

No.1  herein  and  set  aside  the  order  dated

21.04.2003  passed  by  the  Single  Judge  in

Arbitration Petition No.96 of 2003.

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2. The issue involved in the appeal is short and,

therefore, it is not necessary to set out the entire

factual  scenario  of  the  case  except  to  the  extent

necessary to appreciate the issue.  

3. In  short,  the  question,  which  arises  for

consideration in this appeal, is whether the Arbitral

Tribunal  was  justified  in  awarding  interest  on

various claims for different  periods to the claimant

(respondent  No.1),  namely,  (i)  for  a  pre-reference

period, i.e., 04.03.1996 to 05.05.1999 @ 15% p.a.;

(ii)  pendent lite, i.e., for the period from 06.05.1999

to 09.09.2002 @ 12% p.a.; and (iii)  post reference

period,  i.e.,  09.09.2002  till  payment  @  18% p.a.,

total  (first  and  second)  Rs.12,89,033/-  on  the

awarded sum.  

Brief facts:

4. A  works  contract  (repairing  work  of  25  No.

stators  of  TAO-659  Traction  Motors  of  Electric

Locomotives  type  WCAMI  of  Electric  Loco

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Shed-Valsad)  was  awarded  by  the  Union  of  India

(Railways) - the appellant herein to respondent No.1

(claimant) on 19.12.1994.  

5. In  execution  of  the  works  contract,  various

disputes  arose  between  the  parties.  Since  the

General  Conditions  of  Contract  (in  short,  “GCC”)

contained  Clause  56(1)  to  decide  the  disputes

arising  out  of  the  contract  through  arbitration,

respondent  No.1(claimant)  invoked  the  arbitration

clause  and filed an application in the High Court of

Bombay under Section 11(5) of the Arbitration and

Conciliation Act (hereinafter referred to as “the Act”)

praying  therein  for  appointment  of  the  Arbitral

Tribunal  in terms of Clause 56(1) and to make a

reference to the Arbitral  Tribunal for  deciding the

disputes which had arisen between the parties.

6. The  High Court,  by  order  dated  27.07.2001,

with consent of both the parties allowed respondent

No.1's application and referred the various claims (1

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to  17)  made by the  respondent (claimant)  against

the appellant for their adjudication by the Arbitral

Tribunal,  which  consisted  of  three  Arbitrators

(Railway Officials).  The order making the reference

to the Arbitral Tribunal reads as under:  

“There is no dispute that claims Nos. 1 to 13 which are mentioned in the letter dated 19th August,  1999,  Exhibit  “B”  to  the Application,  are  already  referred  for arbitration  to  Shri  B.B.  Verma,  Presiding Joint Arbitrator & FA & CAO (I), Churchgate and two other Arbitrators, (i) Shri Arunendra Kumar,  Jt.  Arbitrator  &  CRSE,  Churchgate and (ii) Shri S.K. Kulshrestha, Jt. Arbitrator & CE, N.F. Railway.  

2. By Consent, claim at Sr. No. 16 (Claim No. 2.1) and at Sr. No. 17 (Claim No. 2.2) are also  referred  for  arbitration  to  the  same Arbitrators  who  shall  decide  these  claims along with claim Nos. 1 to 15. They shall also be  free  to  decide  pre-reference  interest, Pendente  lite  interest,  further  interest  and costs  considering  the  agreement.  The Respondent  shall  be  free  to  file counter-claim, if any.”  

7. Parties  submitted  to  the  jurisdiction  of  the

Arbitral  Tribunal,  filed  their  statement  of

claim/reply etc. and adduced evidence.  The Arbitral

Tribunal, by their unanimous reasoned award dated

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11.09.2002, partly allowed the claims of respondent

No.1 against the appellant as under:   

Claim No.  

Brief Description

Claim Amount in Rs.  

Amount awarded in Rs.  

1.1 Loss suffered due to under-utiliz ation  of equipment purchased specially  for this contract.  

6,97,554 3,48,777

1.2 Material purchased not utilized.

3,00,723 3,00,723

1.3 Loss  of Profit

4,65,409 (Revised  to Rs. 4,44,620)

2,32,703

1.4,1.5  & 2.1

1.4 –Overheads during contracted period under utilized-  1.5 –Overheads from 9.6.1995  to 4.3.1996  – 2.1 –Overheads from 5.3.1996  to 30.06.1996

4,65,409

3,89,165

3,06,748

3,41,830

1.7 & 2.2 1.7  – Amount  for the  period 1.7.94  to

3,28,085 1,64,042

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29.6.1996

2.2  – Amount  for the  period 5.3.96  to 30.09.1996

1,24,174

1.6 Payment under  price variation clause  

85,106 85,106

1.8 & 2.3 2.4

Payment  of pre  lite interest from 13.12.95  to 5.5.99

As accrued 12,89,033

Total 27,62,214

8. The appellant-Union of India, felt aggrieved of

the Arbitral Award, challenged its legality by filing

an  application  under  Section  34  of  the  Act  in

Bombay High Court (Single Judge).    

9. The Single Judge, by order dated 21.04.2003,

allowed  the  appeal  in  part  and  made  two

modifications in the arbitral award with respect to

the  date  of  award  of  interest  on  the  claim  of

respondent No.1 for  damages and on the claim of

one  purchase  item.  The  Single  Judge  made  the

interest  payable  from  the  date  of  award  till

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realization.  So far as the challenge to other claims

including  award  of  interest  on  such  claims  were

concerned, the Single Judge rejected the appellant’s

all objections and upheld the award in totality for all

purposes.

10. Respondent  No.1  (claimant),  felt  aggrieved

against that part of  the order of  the Single Judge

which interfered in part in the arbitral award, filed

appeal  before  the  Division Bench.   So  far  as  the

appellant-Union of  India  was  concerned,  they  did

not file any appeal against that part of the order of

the Single Judge which had rejected substantially

their application filed under Section 34 of the Act.

In this view of the matter, the award to that extent

became final.

11. By impugned judgment, the Division Bench of

the  High  Court  allowed  respondent  No.1’s  appeal

and set aside the order of the Single Judge.  It was

held that no ground under Section 34 of the Act had

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been made out by the Union of India to modify the

award  to  the  extent  of  awarding  interest  on  the

claim.  In other words,  in the opinion of  Division

Bench, the ground on which the limited interference

was made by the Single Judge for setting aside a

part of  the Award in relation to award of  interest

from  a  particular  date  on  two  (2)  claims  to

respondent No.1 (claimant) was not a ground falling

under Section 34 of the Act and, therefore, the order

of Single Judge was not legally sustainable.  It was

accordingly set aside resulting in upholding of the

entire award and dismissal of Section 34 application

in its entirety.  It is against this order, the Union of

India (Railways) felt aggrieved and filed the present

appeal by way of special leave in this Court.

12. Heard Ms. Kiran Suri, learned senior counsel

for  the  appellant  and  Mr.  Vinay  Navare,  learned

counsel for respondent No.1.

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13. Ms.  Kiran  Suri,  learned  senior  counsel,

appearing for  the  appellant  (Union of  India)  while

challenging  the  legality  and  correctness  of  the

impugned judgment has argued only one point.

14.  According  to  learned  counsel,  the  Arbitral

Tribunal  mis-conducted  in  awarding  interest  on

various claims and, therefore, a ground to set aside

the arbitral  award under Section 34 of  the Act is

made out.

15.  Placing  reliance  on  Clause  13(3)  of  GCC,

learned  counsel  urged  that  since  clause  13(3)

provides that no interest will be payable upon the

earnest money or the security deposit or amounts

payable to the contractor under the contract (except

Government securities), respondent No.1 (claimant)

was  not  entitled  to  claim  interest  on  any  of  the

heads.

16. In other words, the submission was that the

Arbitral  Tribunal  mis-conducted  in  awarding

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interest  to  respondent  No.1  (claimant)  on  their

various claims when the clause 13(3) of GCC did not

allow  them  to  claim  any  interest  on  the  sums

payable under the contract except on Government

securities, if deposited with the appellant.

17. It  was,  therefore,  her  submission  that  the

award  to  this  extent  was  not  legally  sustainable

and, therefore, it was liable to be set aside under

Section 34 of the Act.  Learned counsel elaborated

this  submission  by  placing  reliance  on  the

provisions of the Act and some decided cases cited

at the Bar.  

18. In reply, learned counsel for respondent No.1

(claimant)  supported  the  impugned judgment  and

contended that the aforementioned point urged by

the appellant was neither raised nor urged before

the Arbitral Tribunal nor the High Court, i.e., Single

Judge and also Division Bench and hence it cannot

be permitted to be raised, for the first time, in an

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appeal  under  Article  136  of  the  Constitution  for

want of any factual foundation and finding by any

Court on such plea.   

19.  Having heard learned counsel for the parties

and on perusal  of  the  record of  the  case,  we are

inclined to accept the argument of learned counsel

for respondent No.1 as, in our view, it has a force

and hence deserves acceptance.

20. It is not in dispute that the appellant did not

raise  the  plea  based  on  clause  13(3)  of  the  GCC

against  respondent  No.1  at  any  stage  of  the

proceedings  either  in  their  reply  filed  before  the

Arbitral  Tribunal  or/and  in  submissions  except

raising it, for the first time, before this Court in this

appeal.  

21. On the other hand, we find that in Section 11

(5)  proceedings,  the  appellant  did  not  raise  this

objection  in  their  reply  and  instead  gave  their

express  consent  to  refer  the  issue  of  award  of

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interest  payable  on  various  claims  (1  to  17)  to

Arbitral  Tribunal  considering the said claim to be

arbitrable under the contract.  

22. In  our  opinion,  the  appellant  could  have

registered their objection before the Single Judge at

the  time  of  making  a  reference  to  the  Arbitral

Tribunal  by  pointing  out  Clause  13(3)  of  GCC or

could  have  reserved  their  right  to  raise  such

objection  before  the  Arbitral  Tribunal.   It  was,

however, not done.

23. Not  only  that,  we  further  find  that  the

appellant,  in  their  reply,  filed  before  the  Arbitral

Tribunal also did not raise this plea and allowed the

Arbitral  Tribunal  to  adjudicate  the  said  issue  on

merits.  

24. If the appellant was so keen to place reliance

on  clause  13(3)  of  GCC  to  defeat  the  claim  of

respondent No.1 relating to the award of interest on

various  claims,  then  it  was  necessary  for  the

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appellant  to have  raised such plea specifically,  in

their reply, before the Arbitral Tribunal.   No such

plea was raised even before the Arbitral Tribunal.

25. Though we find that the appellant raised this

ground, for the first time, in Section 34 proceedings

[see-ground (cc)] before the Single Judge but again

this  ground  was  not  pressed  at  the  time  of

arguments.  It is clear from the perusal of the Single

Judge’s order.   Not only that,  the appellant again

did not raise this plea before the Division Bench.

26. In the light of aforementioned factual scenario

emerging  from the  record  of  the  case,  we  cannot

grant  any  indulgence  to  the  appellant  (Union  of

India) to raise such plea for the first time here.  In

our  view,  it  is  a  clear  case  of  waiver  or/and

abandonment of a plea at the initial stage itself.

27.  Everyone has a right to waive and to agree to

waive  the  advantage  of  a  law made solely  for  the

benefit  and  protection  of  the  individual  in  his

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private  capacity,  which  may  be  dispensed  with

without infringing any public right or public policy.

Cuilibet  licet  renuntiare  juri  pro  se  introducto.  (See

Maxwell  on The Interpretation of Statutes 12th

Edition at page 328)

28. If a plea is available-whether on facts or law, it

has to be raised by the party at appropriate stage in

accordance with law.  If not raised or/and given up

with  consent,  the  party  would  be  precluded  from

raising such plea at a later stage of the proceedings

on the principle of waiver.  If permitted to raise, it

causes prejudice to other party.  In our opinion, this

principle applies to this case.

29. In our opinion, the appellant is otherwise not

entitled to raise the plea on yet another ground.  It

is  not  in  dispute  that  the  appellant’s  application

filed under Section 34 of the Act was partly allowed

by the Single Judge only to the extent of two claims

regarding  award  of  interest.   In  other  words,  the

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application  suffered  dismissal  substantially  on  all

other  claims  except  two  claims  mentioned  above.

However,  despite  suffering  substantial  dismissal,

the appellant did not file any appeal to challenge the

part dismissal of their application.  

30. In  this  view  of  the  matter,  in  our  view,  the

order of the Single Judge insofar as it  resulted in

dismissal of the appellant’s application became final

and  attained  finality.  In  order  to  keep  the  issue

alive,  the  appellant  was  under  obligation  to  file

regular  appeal  before  the  Division  Bench  against

that part of the Single Judge’s order by which their

application under Section 34 of the Act in relation to

all  other claims had been dismissed.  It was only

then in  the  event  of  dismissal  of  the  appeal,  the

issues raised therein could have  been pursued in

appeal  to  this  Court  under  Article  136  of  the

Constitution  and  that  too  only  on  the  grounds

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raised therein and decided against the appellant.  It

was, however, not done by the appellant.  

31. In our opinion,  therefore,  this  is  yet  another

infirmity  which  renders  the  appeal  devoid  of  any

merit.  

32. In our considered view, the grant of award of

interest  on  arbitrable  claims  by  the  Arbitral

Tribunal  is  not  inherently  illegal  or  against  any

public  policy  or  per  se bad in law or  beyond the

powers of the Arbitral Tribunal.  In other words, it is

permissible to award interest in arbitrable claims by

the Arbitral Tribunal.  

33. Indeed,  Section  31(7)  (a)  and  (b)  of  the  Act

empowers the Arbitral Tribunal to award interest on

the awarded sum and secondly, it is always subject

to the agreement between the parties.

34. It is a well-settled principle in Arbitration Law

that the award of an Arbitral Tribunal once passed

is binding on the parties.  The reason being that the

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parties  having  chosen  their  own  Arbitrator  and

given  him  an  authority  to  decide  the  specific

disputes  arising  between  them  must  respect  his

decision as far as possible and should not make any

attempt to find fault in each issue decided by him

only because it is decided against one party.  It is

only when the issue decided is found to be bad in

law in the light of any of the specified grounds set

out in Section 34 of the Act, the Court may consider

it appropriate to interfere in the award else not.  The

case at hand falls in former category.  

35. This case reminds us of the apt observations

made by former Chief Justice M.C. Chagla in Firm

Kaluram Sitaram vs. The Dominion of India, AIR

1954 Bombay 50.  That was also a case between the

Railways  and  private  party  (citizen)  wherein  the

learned  Chief  Justice,  in  his  distinctive  style  of

writing, commented upon the manner in which the

Railway contested the case against the private party

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(citizen)  by  raising  some  technical  pleas  and

observed as under:

“Now, we have often had occasion to say that when the State deals with a citizen it should not  ordinarily  rely  on  technicalities,  and if the  State  is  satisfied  that  the  case  of  the citizen  is  a  just  one,  even  though  legal defences may be open to it, it must act, as has  been  said  by  eminent  judges,  as  an honest person.”

36. The  aforementioned  observations  has  full

application to the case at hand because here also,

the  appellant  (railways)  pursued  their  technical

legal point up to this Court against respondent No.1

(claimant)  without  even raising  it  at  any  stage  of

proceedings much less to find out whether it could

be made a ground under Section 34 of the Act to

seek its setting aside.  All was being done to defeat

respondent No.1’s just claim of interest which was

rightly awarded by the Arbitral Tribunal and upheld

by the Courts below on other grounds.    

37. Learned counsel for the appellant did not urge

any other point to attack the impugned judgment

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including  the  reasoning  given  in  support  of  the

award of interest except to urge the aforesaid point

to challenge its legality, which we have repelled by

not  permitting  the  appellant  to  raise  it  in  this

appeal.

38.   In view of foregoing discussion, we find no

merit  in  the  appeal,  which  thus  fails  and  is

accordingly dismissed.

               ………...................................J.   [ABHAY MANOHAR SAPRE]

                             …... ……..................................J.             [NAVIN SINHA]

New Delhi; December 08, 2017