Shiva Udyog Mandal Vs. Haryana Urban Development Authority and anr. - Court Judgment

Excerpt:

.....if state enters into a contract in consonance with article 299 rights of the parties shall be determined by terms of such contract irrespective of fact that one of the parties to it is a state or a statutory authority. for these precise reasons the equitable doctrine of promissory estoppel has been made applicable against the government, as against any other private individual, even in cases where no valid contract in terms of article 299 was entered into between the parties. hence, if government makes a representation or a promise and an individual alters his position by acting upon such promise, the government may be required to make good that promise and shall not be allowed to fall back upon the formal defect in the contract, though subject to well known limitations like larger public interest. the state, thus, has no dominus status to dictate unilateral terms and conditions when it enters into contract and its actions must be reasonable, fair and just and in consonance with rule of law. as a necessary corollary thereto state cannot refuse to confirm highest bid without assigning any valid reason and/or by giving erratic, irrational or irrelevant reasons. -- consumer..........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. 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'. 3. for the reasons recorded above, this revision petition is allowed. the impugned order of the lower appellate court is set aside. the petitioner shall be entitled to the interest pendente lite as well as the future interest till the payment of the amount awarded. the rate of interest is fixed at rs. 12% p.a. no costs.

Judgment:

ORDER

Ashok Bhan, J.

1. This revision petition has been filed on a limited point, that is regarding the grant of interest during the pendency of the proceedings before the arbitrator. Lower appellate court has denied the interest pendente lite on the basis of the decision of the supreme Court in State of Orissa v. Dandasi Sahu, A.I.R. 1988 S.C. 1791, in which it was held that interest pendente lite is not within the jurisdiction of the arbitrator.

2. In the later judgment by Constitution Bench of the Supreme Court in Secretary, Irrigation Department Government of Orissa v. G.C. Roy, J.T. 1991(6) S.C. 349 it has been held that arbitrator can grant both the interest pendente lite and for future as well. Impliedly the judgment in Dandasi's case (supra) stands overruled. I do not find any logic in the argument of the counsel for the respondents that the impugned order of the lower appellant Court cannot be set aside because it does not suffer from any material irregularity as it has applied the law as it stood on the date, the order was passed by the lower appellant Court. It is correct that the lower appellate Court had applied the law as it stood on the date, it rendered the judgment but the judgment on which reliance was placed by the lower appellate Court stood impliedly overruled and the law is to be applied as it stood declared by the Supreme Court of India. In G.C. Roy's case (supra), the Supreme Court held as Under: -

'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.

Having regard to the above considerations, 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 (alongwith 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. 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'.

3. For the reasons recorded above, this revision petition is allowed. The impugned order of the lower appellate Court is set aside. The petitioner shall be entitled to the interest pendente lite as well as the future interest till the payment of the amount awarded. The rate of interest is fixed at Rs. 12% P.A. No costs.