Asalat Zaman (Md) and others (Appellants)
Government of Bangladesh and others (Respondents)
Md. Fazlul Karim J
Syed JR Mudassir Husain J
AS Ahammed J
Judgment dated : November 17, 2002.
The Arbitration Act, 1940 (X of 1940), Section 29
The Arbitrator has no jurisdiction to grant interest on the awarded amount till realisation in the absence of any agreement.
The Court has jurisdiction in its discretionary power to grant interest on the awarded amount or any part thereof till realisation.
Cases Referred to-
Bangladesh Agricultural Development Corporation vs. Kibria and Associates Ltd. 46 DLR (AD) 97; Bux Shipping Line vs. BWDB 7 BLC (AD) 27.
Ozair Farooq, Senior Advocate, (Zahedul Bari, Advocate with him) instructed by Md. Nawab Ali, Advocate?on?Record?For the Appellant (In Civil Appeal No. 97 of 2000).
Khandkar Mahbubuddin, Senior Advocate, (SM Munir, Advocate with him) instructed by Md. Aftab Hossain, Advocate?on?Record?For the Appellant (In Civil Appeal No. 98 of 2000).
Ozair Farooq, Senior Advocate, (Zahedul Bari, Advocate with him) instructed by Md. Nawab Ali, Advocate?on?Record?For the Respondents(In Civil Appeal No. 98 of 2000).
Khandkar Mahbubuddin Ahmed, Senior Advocate (SM Munir Advocate with him) instructed by Md. Aftab Hossain, Advocate?on?Record?For the Respondent (In Civil Appeal No. 97 of 2000).
Civil Appeal Nos. 97 and 98 of 2000.
(From the judgment and order dated 21st June 1999 passed by the High Court Division in First Appeal No. 371 of 1996).
Mohammad Fazlul Karim J.- These two appeals by leave arose out of the selfsame arbitration proceeding, one at the instance of Janab Md. Asalat Zaman, the Contractor (in Civil Appeal No. 97 of 2000) and another at the instance of the Chief Engineer, West, Bangladesh Railway, Rajshahi (in Civil Appeal No. 98 of 2000) are directed against the judgment and order dated 21?7?1999 passed by the High Court Division in Appeal from Original Decree No. 371 of 1996.
2. Janab Md. Asalat Zaman, the appellant as the contractor entered into two agreements namely, agreement No. 16/LMH dated 12 September, 1988 and agreement No. 27/LMH dated 17 September, 1988, with the Government of Bangladesh for reconstruction of the railway line damaged, by flood. After the completion of the works the contractor submitted bills for payment which were not finally paid. This gave rise to a dispute. According to the provision of the General Conditions of Contract and Instructions for the Guidance of the Contractors, the matter was, referred to a sole arbitrator namely, Md. Abul Hashem, Additional Chief Engineer, East/Track, Bangladesh Railway. The arbitrator gave his award on 16 January, 1991 and submitting the same before the Subordinate Judge the contractor thereupon made an application for making the award a Rule of the Court. But the Chief Engineer, West, Rajshahi and Divisional Engineer, Bangladesh Railway Lalmonirhat, filed an objection under section 30 of the Arbitration Act, 1940 which was subsequently transferred to the Subordinate Judge, First Court, Rangpur and registered as Miscellaneous (Arbitration) Suit No. 42 of 1993. There was no appearance from the side of Bangladesh Railway. Resultantly, the learned Subordinate Judge passed an ex parte decree on 21 August 1996 making the award 4, Rule of the Court directing payment of the dues to the contractor with interest according to the bank rate within 30 days.
3. Aggrieved thereby, the Government of Bangladesh represented by Chief Engineer, West, Bangladesh Railway, Rajshahi and the Divisional Engineer, Bangladesh Railway, Lalmonirhat, preferred an appeal being FA No. 3 71 of 1996 to the High Court Division under section 39 of the Act. It was subsequently converted into an appeal under section 17 of the Act.
4. A division Bench of the High Court Division by the impugned judgment dismissed the appeals with cost upholding the decree of the Subordinate Judge but disallowing the interest given by the arbitrator in his award and the appeal of the Chief Engineer was dismissed without considering that the amount of Taka 18,56,500 have already been paid to the Contractor which has not been denied while passing the award.
5. Leave has been granted to consider as to whether the learned Judges of the High Court Division on misconception of law held that the award was vague in the matter of interest inasmuch as the learned Judges of the High Court Division failed to consider that the decree has not been drawn up in accordance with the award and ought to have held that the award having not quantified by any, sum of money but simply stated quantum of work to be paid for at the rate given in the agreement the learned Subordinate Judge erred in law in not drawing up the decree in those terms and that the High Court Division as well as the lower Court committed an error of law in not considering that the amount of Taka 80,56,500 already paid to the contractor had, not been adjusted and deducted from the award money And that this has caused a failure of justice.
6. Mr. Ozair Farooq, the learned Counsel for the appellant, submits that the bank rate is a definite and universal banking term and it is the rate of interest at which the central bank of a country rediscounts the first class bills of exchange from commercial banks or other eligible paper in pursuance of definite statutory provision and the learned Judges of the Hon’ble High Court Division on misconception of law held that the award was vague in the matter of interest.
7. Mr. Khandkar Mahbubuddin Ahmed, the learned Counsel for the respondent, submits that learned Judges of the High Court Division held rightly that giving a vague award in the matter of interest cannot be accepted at all and such vague interest without any basis cannot be given to winning party in the suit. The learned Counsel further submits that the learned Judges of the High Court Division also held rightly that the first party Appellant is not entitled to any interest and the portion of awarding interest given by the arbitrator which was affirmed by the lower Court cannot be accepted.
8. Mr. Ozair Farooq, the learned Counsel for the appellant, however, did not contest the claim regarding the payment of Taka 80,57,500 which has already been paid to the contractor but submitted that after deduction of the same from the awarded amount, the contractor is entitled to interest over the amount from the date of award till realisation of the said decree at the prevailing bank rate as provided under Article 21 of the Bank Order, 1972.
9. Mr. Khandaker Mahbubuddin Ahmed, the learned Counsel for the respondent, has not disputed the question of awarding interest by the learned Subordinate Judge except that the award was indefinite as to the interest at the bank rate.
10. It is now settled principle of law that Arbitrator/Umpire could award interest over the awarded amount and the controversy so long existed in that respect has been set at rest in the case of Bangladesh Agricultural Development Corporation vs. Kibria and Associates Ltd. reported in 46 DLR (AD) 97 wherein it has been held that:
“In this case, the sole Arbitrator awarded a sum of Taka 20,40,712.06 to the Contractor? respondent to be recovered from appellant,(BADC) with an interest of 16% thereon from 1?7?84 till the date of realisation. The trial Court modified the award by deleting the interest on the recoverable amount as awarding of the interest, according to it, appeared to be an error apparent on the face of the record. The learned Judges of the High Court Division set aside the judgment of the Subordinate Judge and restored the interest as awarded by the Arbitrator and held that the Arbitrator derived his power impliedly from the very submission to him to arbitrate and the power of the Arbitrator to award interest is not excluded.”
11. Mr. Syed Ishtiaq Ahmed, learned Advocate appearing for the appellant, submits that in the instant case the arbitrator has awarded pre?reference interest during the pendency of the Arbitration proceeding and interest after making of the award till realisation of the same which he is not legally authorised to do.
“As to interest from the date of the award till realisation of the money thereunder, though it is permissible and within the power of the Arbitrator, but in the circumstances of the case, we do not think that this interest should be allowed to the respondents. The award was filed in Court for making it a Rule of the court by passing a decree. Any interest from the date of the decree till realisation may be allowed only by the Court under section 29 of the Arbitration Act. In other words, the learned Subordinate Judge in his discretion, could have allowed interest from the date of the decree till realisation of the money thereunder. This period partially coincides with the period from the date of the award till realisation. Therefore, interest from the date of the award till realisation, when the award has been brought to the Court, falls within the Court’s discretion.”
“Section 29 gives specific power to the Court to grant interest from the date of decree on the principal sum adjudicated by the award and confirmed by the decree. In the Arbitration Act there is no provision which confers power on the Court to grant interest prior to the date of the decree by the Court itself. Hence on the basis of section 29 of the Act it is palpably clear that in the instant case the Arbitrator could not grant future interest beyond the date of passing of the award. This part of the award about further interest was beyond the powers of the Arbitrator because it is only the Court which could award interest. But if in a given case the arbitration agreement or the contract itself provides for award of interest on the amount found due from one party to the other till the date of realisation, no question for absence of arbitrator’s jurisdiction to award interest can arise in that case as the parties agree to award such interest till the date of realisation. The parties may confer more or additional powers on the arbitrator by consent or agreement. It is the agreement, which is the foundation of the power of the arbitrator. Hence in this case the Arbitrator had no jurisdiction to grant interest beyond the date of the decree as the power to grant interest after passing of the decree vests exclusively in the Court under section 29 of the Act.”
12. This Court as well in a recent decision in the case of Bux Shipping Line vs. B WDB reported in 7 BLC (AD) 27 held that:
“The contention of the appellant that on making of the award Rule of the Court, as the award merged in the decree of the Court and consequent thereupon interest that was awarded by the umpire on, the awarded amount till realisation thereof must be in the decree of the Court, in the instant case in the decree of the Court of Subordinate Judge, High Court Division erred in not holding that interest awarded by the umpire deemed to have been allowed by the Court of Subordinate Judge is not a well founded one, since it has already been noticed in the reported case, reliance whereupon has been placed by the learned Counsel of the appellant, it is not within the jurisdiction of the umpire to award future interest on the awarded amount till realisation thereof, but granting of interest on the awarded amount, when the award is brought to the Court, is within the discretion of the Court. We are of the opinion it is not within the jurisdiction or power of Arbitrator Umpire, in the absence of agreement, to grant future interest on the awarded amount till realisation thereof, but said power or, in other words, granting of interest on the awarded money or part thereof, as has been decreed, till realisation thereof is, as per provision of section 29 of the Arbitration Act, 1940, within the jurisdiction of the Court or, in other words, if the Curt, when till award is brought to the Court, then, in its discretion, may or may not grant interest on the award amount or part thereof as decreed till realisation thereof”.
13. Thus the jurisdiction or power of Arbitrator/Umpire, in the absence of any agreement to grant future interest in the awarded amount till realisation thereof is not within the power or jurisdiction of the Arbitrator/Umpire but such power of granting interest on the awarded amount or part thereof till realisation could be awarded as per provision of section 29 of the Arbitration Act which is within the jurisdiction of the Court or, in other words, when the award is brought to the Court then the Court in its discretion may or may not grant interest on the awarded amount or part thereof as decreed till realisation.
14. In view of the above we are of the view that the appellant is entitled to interest on the awarded amount till realisation.
15. Now the question is what is the bank rate. Mr. Ozair Farooq, the learned Counsel for the appellant, has however, submitted that the bank rate is the rate which the Bangladesh Bank being the regulatory bank of all the banks, may direct from time to time under Article 21(3) of the Bangladesh Bank (Nationalisation) Order, 1972 (President’s Order No. 26 of 1972). Thus bank rate being a specified and definite rate prevailing on the date of realisation would be the rate of interest which the Bangladesh Bank rediscounts the first class bill of exchange from the commercial bank and, as such, we are of the view that the learned Judges of the High Court Division erred in law in refusing to award interest on ground of vagueness and indefiniteness and the same is not sustainable in law and is, accordingly, set aside.
16. The plaintiff?appellant is accordingly entitled to interest at the rate of bank on the awarded amount.
17. Next, Mr Khondaker Mahbubuddin Ahmed, in support of his submission regarding adjustment of the amount, has referred to the consistent case of the department that the said amount was already paid to the contractor against his running bills and referred to the statement in the pleading and ground No. 19 in the memo of appeal but the arbitrator also did not deduct the amount of Taka 80,56,500 which amount the defendant has already paid to the first party in its running bills. The appellant by way of additional paper book has produced running bills in support of the payment of said amount and submitted that as the assertion regarding the payment of Taka 80,56,500 to the contractor against the running bills was never challenged by the Contractor, no proof of such payment ever arose and the same remained an admitted fact.
18. This Division thus considered the plea of non?adjustment of the said amount as one of the grounds for granting leave in Civil Appeal No. 98 of 2000. The appellant accordingly, produced the documentary proof thereof by way of additional paper book, the copy of which has been served upon the respondent?contractor who has not controverted or denied the same and in view of the above, ends of justice demand that the said admitted amount already forming part of the running bills has been paid to the contractor and the said amount is required to be deducted from the amount awarded by the Court below.
19. In that view of the matter, the decree for the award is modified deducting the said amount of Taka 80,56,500 and accordingly, it is directed for realisation of the awarded amount as modified with interest at the prevailing bank rate till realisation.
In the result, the appeals are allowed in part modifying, the amount of awarded amount as aforesaid with interest at the bank rate till realisation.
Source : 55 DLR (AD) (2003) 139