M/S. MUKUND LTD.versusHINDUSTAN PETROLEUM CORPORATION LTD.

A                             M/S. MUKUND LTD.
                                        v.
               HINDUSTAN PETROLEUM CORPORATION LTD.

                                 APRIL 2 I, 2006

B             [S.B. SINHA AND P.K. BALASUBRAMANYAN, JJ.]


         Arbitration Act, 1940-Section 30-Arbitra/ award-Post-decree interest
    of 11% per annum granted by High Court-Challenge to--Held: On facts,
C   reduced to 7'lS % per annum.

          The present appeal arises out of an arbitral award passed by a single
    arbitrator under the Arbitration Act, 1940. In terms of the award, the
    Appellant was directed to pay a sum of Rs. 1.26 crores and costs of
    Rs. 75,600/- to Respondent and on failing to make the payment within the
D   stipulated date, pay post-decree interest at the rate of It% per annum.
    High Court rejected objections of the Appellant to the award except as
    regards the quantum which it reduced to Rs.71 lakhs with further interest
    at the rate of 11 % per annum from the date of the decree till the date of
    payment or final realization.

E        The Appellant pleaded in appeal to this Court that in the facts and
    circumstances of the case, post-decree interest be reduced from 11 % per
    annum to 6% per annum.

         Disposing of the appeal, the Court

F         HELD: 1. Having considered the rival submissions and having taken
    note of the circumstances and the transaction in question in the light of
    the correspondence between the parties and on an overall view of the
    situation, it would be appropriate to reduce the post-decree interest
    awarded by the High Court. In the circumstances, seven and a half per
G   cent per annum would .be the reasonable rate of interest that could be
    directed to be paid by the Appellant to the Respondent, for the period
    subsequent to the decree. The amount awarded by the High Court would
    bear interest at the rate of seven and a half per cent per annum from the
    date of that decree till the date of final payment and/or realization plus
    costs of the arbitration proceedings as awarded therein. [185-D-G]
H                                      182
MUKUND LTD. v. HINDUSTAN PETROLEUM CORPN. LTD. [P.K. BALASUBRAMANYAN, J.J 183

      CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2153 of2006.                      A
      From the Judgment and Order dated 17.12.2004 of the High Court of
Judicature at Bombay in Appeal No. 1147(98 in A.P. No. 177/1994.

      Ashok H. Desai, Prakash Sah, Reena Bagga and Jay Savla for the_
~~                                                                                      B
     T.R. Andhiyarujina, Parijat Sinha, Snehasish Mukherjee, S.C. Ghosh
and Mrinal Kanti Manda! for the Respondent.

      The Judgment of the Court was delivered by

      P.K. BALASUBRAMANY AN, J. Leave granted.
                                                                                        c
      1. This appeal arises out of an award made by the arbitrator on a
reference made to him under the Arbitration Act, 1940 (for short "the Act").
Though there was controversy between the appellant and the respondent as
to whether there existed an arbitration clause justifying reference to an               D
arbitrator, ultimately, the appellant agreed to the appointment of one of the
arbitrators suggested by the respondent clarifying that the appellant was
agreeing to the appointment of the arbitrator "not under the alleged contract
but outside the alleged contract to decide whether there is a concluded contract
and in any event can you invoke the arbitration clause under the alleged
contract'~ Thus, the dispute stood referred to a sole arbitrator. The sole arbitrator   E
while making an award held that there had come into existence a valid
contract between the parties; that there was an arbitration clause in the contract
and proceeded to adjudicate the claim on merits and passed an award directing
the appellant to pay a sum of Rs.1,26,67,529.l 0 and costs of Rs. 75,600/- to
the respondent on or before 31.07.1994 and failing payment, directed the                F
appellant to pay interest at the rate of 11 per cent per annum on the sum of
Rs.1,26,67,529. l 0 from 28.06.1994 till the date of payment. The award was
pronounced on 27 .06.1994.

       2. The appellant moved the High Court of Bombay in its original civil
jurisdiction seeking to have the award set aside in terms of Section 30 of the          G
Act. A learned single Judge of the Bombay High Court rejected the objections
of the appellant to the award except as regards the quantum-. The single judge
modified the award by reducing the amount payable by the respondent to the
 appellant to Rs.71,31,954.40 with costs of arbitration of Rs.75,600/-, with
 further interest at the rate of 11 per cent per annum from the date of the             H
    184                        SUPREME COURT REPORTS [2006] SUPP. I S.C.R.

A decree till payment or final realization. An appeal filed by the appellant
    before the Division Bench was dismissed by the Division Bench upholding
    the finding of the arbitrator that there had come into existence a concluded
    contract between the parties and that there was an arbitration clause based on
    which the disputes between the parties could be referred to arbitration. and
    consequently, the award was one rendered within jurisdiction. Feeling
B   aggrieved thereby, this appeal by special leave has been filed by the appellant.

           3. Learned senior counsel for the appellant challenged the decision of
    the High Court and that of the arbitrator that there had come into existence
    a concluded contract between the parties. He further contended that even if
C   there was a concluded contract, there was no arbitration agreement in the
    contract or in the correspondence relating thereto. He also contended on
    merits that the arbitrator was not justified in awarding damages. Learned
    senior counsel for the respondent, on the other hand, submitted that the
    finding by the arbitrator that there had come into existence a concluded
    contract was based on an appreciation of the materials available and the
D   circumstances obtaining and such a finding by the arbitrator was not amenable
    to correction in proceedings under Section 30 of the Act which conferred on
    the court only a circumscribed jurisdiction. Counsel submitted that the
    arbitrator had neither misconducted himself nor the proceedings. He also
    submitted that there was no error apparent on the face of the record justifying
E   interference by this Court especially when the single judge and the Division
    Bench of the Bombay High Court have refused to interfere with the award
    subject to the modification of the quantum realizable by the respondent. The
    award could not also be said to be otherwise invalid.

           4. We were taken elaborately through the materials by senior counsel
F   for the appellant in an attempt to show that there was no concluded contract
    between the parties and there existed no arbitration clause. He attempted to
    argue that what the appellant had agreed to was to the appointment of an
    arbitrator to decide whether there was a concluded contract between the
    parties containing an arbitration clause and there is no consistent finding on
    this question by the arbitrator, the learned single Judge and by the Division
G   Bench of the High Court and the approach and the reasoning of all the three
    had differed materially. Counsel for the respondent necessarily submitted that
    the question referred to arbitration was whether there was a concluded contract
    between the parties, whether there was an arbitration clause, and what was
    the amount, if any, due to the respondent from the appellant. He submitted
H   that the findings on these aspects based on the materials was perfectly correct
 MUKUND LTD. v. HINDUSTAN PETROLEUM CORPN. LTD. [P.K. BALASUBRAMANYAN, J.} 85

and that there was no occasion for interfering with the same.                        A
        5. We do not think it necessary to deal in detail with the materials
 placed before us by learned counsel for the appellant. During the course of
the hearing when we took note of the nature of the transaction between the
 parties and the continuing and prospective business relationship between them,
 we put it to the counsel for the appellant that even if we accept his contention    B
and hold that there was no arbitration agreement, that may not put an end to
the dispute and the same would lead to the parties fighting another round of
litigation for year~ to come, thus, further souring their commercial relationship.
Ultimately, counsel for the appellant submitted that the appellant was really
aggrieved by the award of future interest at 11 per cent per annum from the          C
date of decree till the date of payment or realization by the learned single
 Judge. He pleaded that in the circumstances, post decree interest be reduced
to six per cent per annum. Learned counsel for the respondent submitted that
the conduct of the appellant did not justify any such reduction of interest as
 sought for and considering the nature of the contract and the default on the
part of the appellant, the rate of post decree interest awarded was justified.       D
Having considered the rival submissions and having taken note of the
circumstances and the transaction in question in the light of the correspondence
between the parties and on an over all view of the situation, we are of the
view that it would be appropriate to reduce the post decree interest awarded
by the learned single Judge. We think that in the circumstances seven and a          E
half per cent per annum would be the reasonable rate of interest that could
be directed to be paid by the appellant to the respondent, for the period
subsequent to the decree. Therefore, while we confirm the decision of the
Division Bench upholding the modified award made by the learned single
Judge, we reduce the interest awarded by the learned single Judge subsequent
to the decree from eleven per cent per annum to seven and a half per cent            F
per annum. In other words, we hold that the amount awarded by the learned
single Judge in terms of paragraph 13 of his judgment would bear interest at
the rate of seven and a half per cent per annum from the date of that decree
(18.08.1998) till the date of final payment and/or realization plus costs of the
arbitration proceedings as awarded therein. In the circumstances we direct           G
the parties to bear their respective costs in this Court.

      6. The appeal is disposed of on the above terms.

B.B.B.                                                      Appeal disposed of.