UNION OF INDIAversusM/S. CONCRETE PRODUCTS & CONST. CO. ETC.

                   [2014] 3 S.C.R. 535


                     UNION OF INDIA                             A
                             v.
   MIS. CONCRETE PRODUCTS & CONST. CO. ETC.

          (Civil Appeal Nos. 2950-2951 of 2014)

                                                                B
                      MARCH 3, 2014

 [SURINDER SINGH NIJJAR AND FAKKIR MOHAMED
            IBRAHIM KALIFULLA, JJ.]

       Arbitration and Conciliation Act, 1996: s.37(1) - Interest C
for the amount withheld by the railway administration - Grant
of - Held: Arbitrator passed an award directing the railway
administration to refund the amount along with interest and
subsequent interest @ 18% PA. - Arbitrator in awarding
interest to the contractors failed to take into ac.count the D
provisions contained in Indian Railways Standard Conditions
of Contract which disentitled the contractors from claiming any
interest or damages for withholding or retention under lien by
railway administration - Also, as per s.37(1), the arbitrator
could not have awarded any interest from the date when the E
recovery was made till the award was made - Interest would
have been payable from the date when the award was made
till the money was deposited in the court - Upon the amount
being deposited, no further interest could be paid to the
contractors - Interest.                                           F.
     The appellant-Railway administration and the
contractor-respondents entered into contract for supply
of concrete sleepers. By letter dated 12 July 1997,
appellant-Railway administration informed the
respondents that the excess payments had been made              G
to the respondents and, therefore, certain amount was
recoverable from the respondents and that said amount
would be recovered from sum due or payable from
                             535                                 H
     536    SUPREME COURT REPORTS               (2014] 3 S C.R

A running contract. This gave rise to dispute which was
    referred to arbitrator. The arbitrator passed an award
   directing the appellant to refund the amount along with
   interest and subsequent interest @ 18% PA. The
   respondents filed an application seeking direction to the
B appellant to pay amount awarded from the amount
   deposited by the appellant with the High Court along with
   the accrued interest as on date on the said amount. The
   application was allowed. The appellant filed intra court
  appeals challenging the order of the single judge
c principally on the ground that the appellant was not liable
  to pay any interest for the period subsequent to the
  deposit of the principal amount into the court. The
  Division Bench of the High Court dismissed the appeal
  holding that appellant had not questioned the power of
  the sole arbitrator to award interest; that the said issue
0
  was also not raised before the single judge and a pie.a
  was raised for the first time before the Division Bench that
  the award of interest was contrary to Clause No. 2401 of
  the Indian Railways Standard Conditions of Contract.

E        The question which arose for consideration in the
    instant appeals was whether the contractors are entitled
    to interest for the amount withheld.

        Allowing the appeals, the Court
F      HELD: 1.1. Clause 2401 provides that the railways
  shall be entitled to withhold and also have a lien to retain
  any amount deposited as security by the contractor to
  satisfy any claims arising out of or in the contract. In such
  circumstances, the railways can withhold the amount
G deposited by the contractors as security and also have
  lien over the same pending finalization or adjudication of
  the claim. In case, the security deposit is insufficient to
  cover the claim of the railways, it is entitled to withhold
  and have lien to the extent of the amount claimed from
H any sum payable for any works done by the contractor
UNION OF INDIA v. MIS. CONCRETE PRODUCTS & 537
              CONST. CO. ETC.
thereafter under the same contract or any other contract.        A
This withholding of the money and the exercise of the lien
is pending finalization or adjudication of any claim. This
clause further provided that the amount withheld by the
railways over which it is exercising lien will not entitle the
contractor to claim any interest or damages for such             B
withholding or retention under lien by the railways. [Para
15) [548-D-G]

     1.2. Clause 2403 provides that any sum of money due
and payable to the contractor under the contract may be C
withheld or retained by way of lien by the railway
authorities or the Government in respect of payment of
a sum of money arising out of or under any other cont~act
made by the contractor with the railway authority or the
Government. Clause 2403(b) further provides that it is an
agreed term of the contract that against the sum of D
money withheld or retained under lien, the contractor
shall have no claim for interest or damages whatsoever
provided the claim has been duly notified to the
contractor. [paras 16, 17) [548-H; 549-A-B]
                                                            E
     2. The sole arbitrator in awarding interest to the
contractors has failed to take into account the provisions
contained in the said two clauses. The award of interest
at-least from the date when the amount was deposited in
Court was wholly unwarranted. Therefore, the High Court F
as well as the arbitrator have committed an error of
jurisdiction in this respect. As per section 37(1), the
arbitrator could not have awarded any interest from the
date when the recovery was made till the award was
made. However, interest would have been payable from G
the date when the award was made till the money was
deposited in the High Court and thereafter converted to
fixed deposit receipts. Upon the amount being deposited
in the High Court, no further interest could be paid to the
respondents. The respondents shall not be entitled to any H
    538      SUPREME COURT REPORTS                 [2014] 3 S.C.R.


A   interest on the amount which was recovered by the
    appellant, till the date of award and thereafter till the date
    when the amount awarded was deposited in the High
    Court. [paras 18, 20, 21] [549-C-D; 550-8-E]

         Sayeed Ahmed & Company v. State of Uttar Pradesh &
8
    Ors. (2009) 12 SCC 26: 2009 (10). SCR 841; Sree Kamatchi
    Amman Construction v. Divisional Railway Manager (Works},
    Pa/ghat & Ors. (2010) 8 SCC 767: 2010 (10) SCR 487 -
    relied on.

C       Himachal Pradesh Housing and Urban Development
  Authority & Anr. v. Ranjit Singh Rana (2012) 4 SCC 505:
  2012 (2) SCR 427; Union of India v. Krafters Engineering and
  Leasign Private Limited (2011) 7 SCC 279: 2011 (8) SCR
  196; Executive Engineer, Dhenkanal Minor Irrigation
D Division, Orissa & Ors. v. N. C. Budharaj (Deceased) by LRs.
  & Ors. (2001) 2 SCC 721: 2001 (1) SCR 264; Secretary,
  Irrigation Department, Government of Orissa & Ors. v. G. C.
  Roy (1992) 1 SCC 508: 1991 (3) Suppl. SCR 417 - referred
  to.
E
                       Case Law Reference:
          2012 (2) SCR 427             referred to      Para 10
          2010 (10) SCR 487            relied on        Para 11
F         2009 (10) SCR 841            relied on        Para 11
          2011 (8) SCR 196             referred to     Para 11
          2001 (1) SCR 264             referred to     Para 12

G         1991 (3) Suppl. SCR 417      referred to     Para 12
        CIVIL APPELLATE JURISDICTION : Civil Appeal No.
    2950-2951 of 2014.

      From the Judgment & Order dated 21.03.2012 of the High
H Court of Madras in OSA No. 44 and 45 of 2012.
UNION OF INDIA v. M/S. CONCRETE PRODUCTS & 539
              CONST. CO. ETC.
    Mohan Jain, ASG, D.S. Thakur, Prachi Bajpai, Shreekant           A
N. Terdal for the Appellant.

     C.S. Vaidyanathan, G. Umapathy, Rakesh K. Sharma for
the Respondents.

     The Judgment of the Court was delivered by                      B

     SURINDER SINGH NIJJAR, J. 1. Leave. granted.

      2. These appeals impugn the final judgment and decree
dated 21st March, 2012 passed by the High Court of                   C
Judicature at Madras in OSA No. 44 & 45 of 2012 and M.P.
No. 1 of 2012, whereby the letters patent appeals of the Union
of India were dismissed. The appellant had entered into
agreements with the respondents on 30th January, 1983 and
30th March, 1984 for supply of mono block concrete sleepers
(in short "Sleepers"). The agreements were renewed from time         D
to time under which the Union of India agreed to pay specified
rates for supply of each sleeper. The agreements/contracts also
provided that the rates payable shall be based on certain
standard rates of principal raw materials, such as cement, High
Tensile Steel (HTS) wires, molded steel, etc. The contracts          E
further provided that whenever the cost of the principal raw
materials increased or decreased, the contract price for
sleepers shall also correspondingly be increased or decreased
with effect from the date of such increase or decrease. The
agreements/contracts also provided for escalation, subject to        F
certain conditions prescribed under Clause 11 of the Contract.
The contracts/agreements further provided that the respondents
must exercise utmost economy in the purchase of raw materials
and that the escalation will be admitted on the basis of actual
price paid for the respective raw material. This was subject to      G
the ceiling on the price. As per Clause 12.2(c), ceiling was fixed
"in the case of raw materials not covered by either of the above,
the lowest price (for destination) arrived at on the basis of at
least three quotations obtained by the Contractor for each
supply from various established sources of supply of the             H
    540     SUPREME COURT REPORTS                 [2014] 3 S.C.R. .

A respective raw materials".

       3. The respondents/contractors purchased HTS wires from
  established sources in terms of the various clauses of the
  contract. The material was used in the manufacture of sleepers.
B Payment for the sleepers was made by the contractors at the
  lowest price quoted by the suppliers. The quotation was also
  scrutinized alongwith the supporting documents. The Railway
  authorities release the payment to the respondent contractors
  only upon their satisfaction, upon scrutiny of all the relevant
  documents.
c
       4. A new contract was entered into between the parties in
  May, 1997. The railway administration changed the policy and
  allowed the respondents/contractors to purchase the HTS
  wires, subject to escalation as noticed above. By letter dated
D 12th July, 1997, the railways administration informed the
  respondents that the Railway Board had found that excess
  payments had been made between 1989 and November, 1994
  under escalation clause for HTS wires. It was stated that the
  amounts paid to the contractors were more than the prevalent
E market price. Therefore, a sum of Rs. 1,80,92,462/- was
  recoverable from M/s Concrete Products and Construction
  Company, respondent in C.A. No.                     (arising,.out
  of SLP(C) No. 5384 of 2013) and a sum of Rs.1,78,09,789/-
  was recoverable from Mis. Kottukulam Engineers Private
F Limited, respondent in C.A. No.          (arising out of SLP(C)
  No. 5385 of 2013). It was also pointed out that the aforesaid
  sums would be recoverable from the sums due and payable to
  them in the current/running contracts.
       5. The contractors (respondents herein) challenged the
G aforesaid recovery by filing Writ Petition No. 11805 and 10814
  of 1999, before the High Court of Madras. The railway
  administration took up the preliminary objection, pleading that
  the writ petition is not maintainable as the dispute has to be
  referred to arbitration. The objection of the appellant was
H
 UNION OF INDIA v. MIS. CONCRETE PRODUCTS & 541
  CONST. CO. ETC. [SURINDER SINGH NIJJAR, J.]
accepted. The High Court appointed a Former Judge of the               A
Madras High Court as the arbitrator to adjudicate the dispute.
The contractors/respondents herein challenged the aforesaid
order of the learned Single Judge by filing Writ Appeal Nos.
251 and 2.52 of 2000, on the plea that the arbitrator had to be
appointed in terms of the agreement. By order dated 22nd               B
March, 2000, the writ appeals were allowed, and the order of
the learned Single Judge was set aside. The matter was
remanded back to the Single Judge for disposal in terms of
the agreement.

         On remand, the learned Single Judge, instead of referring
                                                                       c
  matter to arbitration in terms of the contract between the parties
  allowed the writ petitions filed by the respondents herein and
  direct~d the railway authorities to refund the sum of
. Rs.1,69, 78,883/- and Rs.1, 78,09, 789/- to the respondent firms,
  respectively with interest thereon from the date of withholding      D
  till the date the same is refunded. The order was directed to
  be complied within a period of 4 week from the date of the
  receipt of the order. This order was again challenged by the
  railway administration by filing, first of all, Writ Appeal Nos.
  2822 and 2823 of 2001. Subsequently, writ appeal                     E
  miscellaneous petition No. 21103 and 21104 of 2001 were
  also filed in the aforesaid two writ appeals, seeking stay of the
 judgments under appeal. On 30th April, 2004, the Division
  Bench dismissed the writ appeals as well as the miscellaneous
 petitions.                                                            F

     6. The railway administration challenged the aforesaid
order of the Division Bench, before this Court by filing SLP No.
18244 and 18245 of 2004. Special leave was granted in both
the special leave petitions and the same were converted to Civil       G
Appeal Nos. 2999 and 3000 of 2005. By a short order passed
on 2nd May, 2005, the disputes between the parties were
referred by this court for adjudication by an Arbitration Tribunal
consisting solely of Mr. Justice K. Venkataswami, a former
Judge of this Court. This order was passed without going into
                                                                       H
    542      SUPREME COURT REPORTS                  [2014] 3 S.C.R.


A the merits of the disputes and the submissions made by the
  learned Solicitor General on behalf of the railways, that in view
  of the specific condition contained in the contract, the dispute
  cannot be referred to an arbitrator other than the authority
  referred to in the contract. This Court directed that the matter
B shall be referred to Mr. Justice Venkataswami. It was, however,
  made clear that the order shall not be treated as a precedent.
  Pursuant to the aforesaid order of this Court, the matter
  ultimately reached the arbitrator. At the conclusion of the arbitral
  proceedings, the final award was rendered on 24th June, 2006.
c The sole arbitrator directed the appellants to refund the amount
  awarded as follows:-

          "In the result I direct the Respondents to refund a sum of
          Rs.1, 78,09, 789/- recovered from the Claimants and
          interest of Rs.2,38,28,960/- and subsequent interest at
D         18% P:A from 1.9.2005 on Rs. 1, 78,09, 789/- till date of
          payment in Kottukulam Engineers Pvt. Ltd. matter. Ana a
          sum of Rs.1,69, 78,883/- and interest of Rs.2,25,25,513/-
          and subsequent interest at 18% P.A from 1.09.2005 till
          date of payment in m/s Concrete Product & Construction
E         Company Trivalam."

        The counter claims made by the appellants were
  dismissed. The railway administration challenged the common
  arbitration award in O.P. No. 142 & 143 of 2007 under Section
F 33 of the Arbitration and Conciliation Act, 1996 before High
  Court of Madras. The learned Single Judge dismissed the
  arbitration petitions filed by the railway administration by its
  order dated 30th November, 2010. Thereafter the contractors
  filed applications before the High Court for direction to the
G railways to make payments of the amount. Thereafter
  Application Nos. 780 & 781 of 2011 were filed in the O.P. Nos.
  142 & 143 of 2007 by the contractors seeking a direction from
  the Court directing that the amounts awarded by the learned
  Sole Arbitrator be paid from the amount deposited by the
  railway administration with the High Court along with the
H
 UNION OF INDIA v. MIS. CONCRETE PRODUCTS & 543
  CONST. CO. ETC. [SURINDER SINGH NIJJAR, J.]
accrued interest as on date on the aforesaid amount. These            A
applications were allowed by order dated 24th February, 2011.
The High Court directed that the awarded amount deposited
by the railways in the Court for satisfying the outcome of the
original petitions which was subsequently converted into fixed
deposit receipts, be dispersed to the respondent contractors.         B

      7. Again the railway administration filed intra court appeals
challenging the order of the learned Single Judge principally on
the ground that the railway administration was not liable to pay
any interest for the period subsequent to the deposit of the
principal amount into Court. The appeals filed by the railway         C
administration were dismissed by the High Court by the
impugned order dated 21st March, 2012. The High Court held
that railway administration had not questioned the power of the
sole arbitrator to award interest. The issue with regard to the
award of interest was also not raised before the learned Single       D
Judge. For the first time before the Division Bench, a plea was
raised that the award of interest was contrary to Clause No.
2401 of the Indian Railways Standard Conditions of Contract.
The Division Bench of the High Court came to the conclusion
that the aforesaid clause has no application at all as it applies     E
only to amounts, which have been withheld or retained under
lien. The amounts having already been paid were sought to be
illegally recovered from the contractors. The sole arbitrator
found that such order of recovery can not be sustained in law
and the recoveries affected were illegal. The High Court,             F
however, concluded that Clause No. 2401 would have
application only in respect of amounts which had not been paid
to the contractors. The railway administration can not exercise
lien over the amounts already paid to the contractors. Therefore,
award of the arbitrator did not suffer from any error apparent. It    G
was further held that the learned Single Judge having upheld
the award, the appeals deserve to be dismissed.

    8. The appeals having been dismissed, the Union of India
has approached this Court in these Civil Appeals.
                                                                      H
    544       SUPREME COURT REPORTS                  [2014] 3 S.C.R.


A        9. We have heard Mr. Mohan Jain, learned Additional
    Solicitor General, appearing for the appellants.

           10. It is submitted that the only question which arises for
    consideration of this Court is whether the contractors are
    entitled to interest for the amount withheld and if so at what rate.
8
    The contractors had claimed interest @18 per cent from the
    date of recovery till payment. Mr: Jain submitted that the High
    Court has wrongly held that the appellant had no authority to
    exercise lien on the current payments in relation to the amount
    already released to the contractors. It is submitted by Mr. Jain
C   that the arbitrator had no authority to award interest in view of
    the prohibition contained under Section 31 (7) of the Arbitration
    Act, 1996. Learned Additional Solicitor General pointed out that
    the contract entered into between the parties did not provide
    for any payment of interest. Mr. Jain also pointed out that under
D   Clause 2403, the railway administration has a lien on all the
    amounts of money that may be due to the contractors, in
    praesenti or in the futuro. °Therefore, when the contractors were
    paid in excess of the amounts actually due, the appellants were
    fully justified in recovering the amount from the respondents by
E   exercising the lien over the future bills in terms of Clause No.
    2403. He submits that the sole arbitrator was wholly unjustified
    in awarding interest, as under Clause No. 2403(b), it is
    specifically provided that the contractors shall have no claim for
    interest or damages whatsoever, for the amount so retained
F   even in case the arbitration award or any other legal
    proceeding subsequently holds that the amount was withheld
    illegally. Mr. Jain submits that the learned Single Judge erred
    in holding that the award did not suffer from an error apparent
    on this short ground. In support of the submission, he relies on
G   judgment of this Court in the case of Himachal Pradesh
    Housing and Urban Development Authority & Anr. Vs. Ranjit
    Singh Rana 1•



H   1.   c2012) 4 sec 505.
 UNION OF INDIA v. MIS. CONCRETE PRODUCTS & 545
  CONST. CO. ETC. [SURINDER SINGH NIJJAR, J.]
      11. Mr. Jain further submitted that the principal amount       A
awarded was deposited in Court in 2007. This amount was
released to the contractors on 24th April, 2011 alongwith the
interest, but 30 per cent of the amount was duly withheld. This
was in agreement with the respondents. He also pointed out
that in fact the recovery of the amount was deferred after           B
discussions with the respondents. In view of the agreements,
the respondents had no justification for claiming any interest
and the award granting such relief suffer from an error apparent
as it was contrary to the contract. In support of this submission,
he relies on judgment of this Court in Sree Kainatchi Amman          c.
Construction Vs. Divisional Railway Manager (Works),
Pa/ghat & Ors. 2 He also relied on Sayeed Ahmed &
Company Vs. State of Uttar Pradesh & Ors. 3 and Union of
India Vs. !<rafters Engineering and Leasign Private Limited. 4

      12, Mr. C.S. Vaidyanathan, learned senior counsel D
appearing for the respondents, on the other hand, submitted
that the payments have been made to the contractors from
 1989 till November, 1994. The High Court judgment in the writ
petitions challenging the recovery notice were set aside by the
High Court. The respondents had agreed to the deduction of E
30 per cent only because the contractors required the money
for execution of further works. He submitted that the appellants
can not possibly be permitted to claim that the respondents had
agreed to the deduction of 30 per cent of the amount due. He
pointed out that the recovery was made against the supplies F
made under the agreements of 9th December, 1991 in relation
to the contracts which were being performed in the year 1996.
In such circumstances, the appellants had no authority to
exercise lien on the amounts that accrued due to the works
performed subsequent to 9th December, 1991 under Clause(s) G
2401 or 2403 of the Contract. Mr. Vaidyanathan emphasized
that such recovery of the time barred claims is clearly without
2.   (201d) a sec 767.
3.   (2009) 12 sec 26.
4.   c2011) 1 sec 279.                                               H
     546       SUPREME COURT REPORTS                 [2014] 3 S.C.R.


  A any justification. The appellants having failed to notify that 30
    per cent of the amount due had been withheld, the invocation
    of Clause No. 2401 or 2403 would be wholly illegal. Learned
    senior counsel further submitted that the appellant can not justify
    the recovery on the basis of the letter dated 22nd October, 1997
 a  as it was written without prejudice to the rights of the
    contractors. The counter claims made by the appellant were
    clearly time barred and hence, disallowed by the sole arbitrator.
    Mr. Vaidyanathan relied on a Constitution Bench decision of
    this Court in Executive Engineer, Dhenkanal Minor Irrigation
  c Division, Orissa & Ors. Vs. N.C. Budharaj (Deceased) by LRs.
    & Ors. 5 Reliance was also placed upon Secretary, Irrigation
                                                  •
    Department, Government of Orissa & Ors. Vs. G.C. Roy6 in
    support of the submission that a person deprived of his money
    is entitled to be compensated by way of interest, therefore, any
.   provision in the contract which seeks to take away such a right
  0
     has to be strictly construed. The ratio in the aforesaid judgment
     has been subsequently reiterated, according to Mr.
     Vaidyanathan, in the case of Sree Kamatchi Amman
     Construction (supra). Mr. Vaidyanathan submitted that the
     railway administration had no authority either under Clause
  E 2401 or 2403 of the contract to recover the amounts allegedly
     overpaid for the work done prior to 1991 from the amounts due
     to the contractors for the works done subsequently.

        13. We have considered the submissions made by the
 F learned counsel for the parties.

            14. Clause Nos. 2401 and 2403 are as under:-
            "2401. Whenever any claim or claims for payment of a sum
            of money arises out of or under the contract against the
 G          Contractor, the Purchaser shall be entitled to withhold and
            also have a lien to retain such sum or sums in whole or in
            part from the security, if any, deposited by the Contractor

    5.     c2001) 2 sec 721.
  H 6.     (1992) 1 sec 5oa.
UNION OF INDIA v. M/S. CONCRETE PRODUCTS & 547
 CONST. CO. ETC. [SURINDER SINGH NIJJAR, J.]
  and for the purpose aforesaid, the Purchaser shall be           A
  entitled to withhold the said cash security deposit or the
  security, if any, furnished as the case may be and also
  have a lien over the same pending finalization or
  adjudication of any such claim. In the event of the security
  being insufficient to cover the claimed amount or amounts       B
  or if no security has been taken from the Contractor, the
  Purchaser shall be entitled to withhold and have lien to
  retain to the extent of the such claimed amount or amounts
  referred to supra, from any sum or sums found payable or
  which at any time-thereafter may become payable to the          c
  Contractor under the same contract or any other contract
  with the Purchaser or the Government pending finalization
  or adjudication of any such claim.

  It is an agreed term of the contract th.at the sum of money
  or moneys so withheld or retained under the lien referred       D
  to above, by the Purchaser will be kept withheld or retained
  as such by the Purchaser till the claim arising out of or
  under the contract is determined by the Arbitrator (if the
  contract is governed by the arbitration clause) or by the
  competent court as prescribed under Clause 2703                 E
  hereinafter provided, as the case may be, and that the
  Contractor will have no claim for interest or damages
  whatsoever on any account in respect of such withholding
  or retention under the lien referred to supra and duly
  notified as such to the contractor."                            F;

   "2403.     Lien in respect of Claims in other Contracts:

   (a)   Any sum of money due and payable, to the
         Contractor (including the security deposit, returnable
         to him) under the contract may withhold or retain by     G
         way of lien by the Purcha~er or Government against
         any claim of the Purchaser or Government in
         respect of payment of a sum of money arising out
         of or under any other contract\ made by the
         Contractor with the Purchaser or Government.             H
    548     SUPREME COURT REPORTS                  [2014] 3 S.C.R.

A         (b)   It is an agreed term of the contract that the sum of
                money so withheld or retained under this clause by
                the Purchaser or Government will be kept withheld
                or retained as such by the Purchaser or
                Government till his claim arising out of the same
B               contract or any other contract is either mutually
                settled or determined by the arbitrator, if the
                contract is governed by the arbitration clause or by
                the competent court under Clause 2703 hereinafter
                provided, as the case may be, and that the
c               Contractor shall have no claim for interest or
                damages whatsoever on this account or on any
                other ground in respect of any sum of money
                withheld or retained under this clause and duly
                 notified as such to the Contractor."
D      15. Clause 2401 provides that the railways shall be entitled
  to withhold and also have a lien to retain any amount deposited
  as security by the contractor to satisfy any claims arising out
  of or in the contract. In such circumstances, the railways can
  withhold the amount deposited by the contractors as security
E and also have lien over the same pending finalization or
  adjudication of the claim. In case, the security deposit is
  insufficient to cover the claim of the railways, it is entitled to
  withhold and have lien to the extent of the amount claimed from
  any sum payable for any works done by the contractor thereafter
F under the same contract or any other contract. This withholding
  of the money and the exercise of the lien is pending finalization
  or adjudication of any claim. This clause further provided that
  the amount withheld by the railways over which it is exercising
  lien will not entitle the contractor to claim any interest or
G damages for such withholding or retention under lien by the
  railways.
         16. Clause 2403 again provides that any sum of money
    due and payable to the contractor under the contract may be
    withheld or retained by way of lien by the railway authorities or
H
 UNION OF INDIA v. M/S. CONCRETE PRODUCTS & 549
  CONST. CO. ETC. [SURINDER SINGH NIJJAR, J.]
the Government in respect of payment of a sum of money                 A
arising out of or under any other contract made by the
contractor with the railway authority or the Government.

      17. Clause 2403(b) further_pr.ovides that it is an agreed
term of the contract that against the sum of money withheld or
                                                                       8
retained under lien,,the contractor shall have no claim for interest
or damages ~hatsoever provided the claim has been duly
notified to the contractor.

     18. We are of the opinion that the sole arbitrator in
awarding interest to the contractors has failed to take into           C
account the provisions contained in the aforesaid two clauses.
We find merit in the submission made by learned Additional
Solicitor General that award of interest at-least from the date
when the amount was deposited in Court was wholly
unwarranted. Therefore, the High Court as well as the arbitrator,      D
in our opinion, have committed an error of jurisdiction in this
respect. This view of ours will find support from the judgment
of this Court in the case of Sayeed Ahmed & Company
(supra), wherein it has been held as follows:-
                                                                       E
    "16. In view of clause (a) of sub-section (7) of Section 31
    of the Act, it is clear that the arbitrator could not have
    awarded interest up to the date of the award, as .the
    agreement between the parties barred payment of interes.t.
    The bar against award of interest would operate not only
    during the pre-reference period, that is, up to 13-3-1997          F
    but also during the pendente lite period, that is, from 14-
    3-1997 to 31-7-2001."

     19. This view has been reiterated by this Court in Sree
Kamatchi Amman Construction (supra), wherein it has been               G
held as follows:-

    "19. Section 37(1) of the new Act by using the words
    "unless otherwise agreed by the parties" categorically
    clarifies that the arbitrator is bound by the terms of the         H
    550       SUPREME COURT REPORTS                [2014] 3 S.C.R.


A         contract insofar as the award of interest from the date of
          cause of action to the date of award. Therefore, where the
          parties had agreed that no interest shall be payable, the
          Arbitral Tribunal cannot award interest between the date
          when the cause of action arose to the date of award."
B
       20. From the aforesaid it becomes apparent that the
  arbitrator could not have awarded any interest from the date
  when the recovery was made till the award was made.
  However, interest would have been payable from the date when
  the award was made till the money was deposited in the High
C Court and thereafter converted to fixed deposit receipts. Upon
  the amount being deposited in the High Court, no further interest
  could be paid to the respondents.

         21. In view of the aforesaid, the appeals are allowed and
D it is directed that the respondents shall not be entitled to any
  interest on the amo.unt which was recovered by the appell~nt,
  till the date of award and thereafter till the date when the amount
  awarded was deposited in the High Court, i.e. from 12th July,
  1997.
E
         22. The appeals are allowed in the aforesaid terms.

    D.G.                                          Appeals allowed.