Bangladesh Water Development Board and Another and Appellants: Bangladesh Water Development Board vs. Respondent: M/S. Bux Shipping Line and Another

IN THE SUPREME COURT OF BANGLADESH
(APPELLATE DIVISION)

Civil Appeal No. 195 of 2000 and Civil Petition No. 1181 of 2000

Decided On: 10.12.2001

Appellants: M/s. Bux Shipping Line
Vs.
Respondent: Bangladesh Water Development Board and another

And

Appellants: Bangladesh Water Development Board
Vs.
Respondent: M/s. Bux Shipping Line and another

**Hon’ble Judges:**Mahmudul Amin Chowdhury, C.J., Mainur Reza Chowdhury, Md. Ruhul Amin and Mohammad Fazlul Karim, JJ.

Subject: Arbitration

Catch Words

Mentioned IN

Counsels:
For Appellant/Petitioner/Plaintiff: Dr. Kamal Hossain, Senior Advocate with Oazir Farooq, Senior Advocate instructed by Md. Ataur Rahman Khan, Advocate-on-Record, (In CA No. 195/2000), Abdul Wadud Bhuiyan, Senior Advocate, instructed by Sharifuddin Chaklader, Advocate-on-Record, (In CA No. 1181/2000)

For Respondents/Defendant: Abdul Wadud Bhuiyan, Senior Advocate, instructed by Sharifuddin Chaklader, Advocate-on-Record, (In CA No. 195/2000), Ozair Farooq, Senior Advocate, instructed by Ataur Rahman, Advocate-on-Record, (In C.P. No. 1181/2000)

Disposition:
Petition Dismissed

Citing Reference:

Discussed

 1

Case Note:
Arbitration Act 1940 (X of 1940)
Section - 29
It is not within the jurisdiction or power of an arbitrator or umpire, in the absence of an agreement, to grant future interest on the awarded amount till realization thereof. Such power is within the jurisdiction of the Court, which, in its discretion, may or may not grant interest on the amount of the award or part thereof as decreed till realization thereof.****
Case referred: Bangladesh Agricultural Development Corporation v. Kibria & Associates Ltd. 46DLR(AD)97

Industry: Shipping

JUDGMENT

Md. Ruhul Amin, J.

1. The Civil Appeal No. 195 of 2000 and the Civil Petition No. 1181 of 2000 are from the judgment and decree of 1st February, 2000 of a Division Bench of the High Court Division dismissing the First Appeal No. 296 of 1999 filed against the judgment and decree dated 11th January, 1999 of the 5th Court of Subordinate Judge, Dhaka in Title Suit No. 106 of 1994 decreeing the same upon making the Award dated 22nd August, 1994 Rule of the court and dismissing the Miscellaneous Case No. 8 of 1994 filed by the defendants questioning legality of the award as mentioned herein above. The Court of Subordinate Judge decreed the title suit for the award amount of Tk. 2,01,52,289.84. It may be mentioned the Umpire upon making the award of the aforesaid amount ordered the 2nd party, i.e the respondents in the appeal, to pay to the 1st party in the arbitration proceeding, i.e. the appellant, interest on the award amount “at Bank Rate of Sonali Bank till realization from the date of intimation of signing of the award…” Facts in the background of which the arbitration proceeding commenced, in brief, are that Executive Engineer, Serajgong of the Bangladesh Water Development Board (BWDB) floated tender on 27th October, 1995 inviting bid for carrying 500 metric tons (M.T) of Cement from Chittagong Cement Clinker and Grinding Factory to the Godown at Serajgong. The charge of carrying of Cement per M.T. on negotiation with bidders (two) was fixed at Tk. 640/- per M.T. The other bidder backed out and finally work order was issued in favor of the appellant. But before undertaking the work of carrying the tendered quantity of cement the respondents raised the quantity of cement to be carried to 1000 M.T.s and thereafter in quick succession raised the quantity of cement to be carried to 6000 M.T.s. Since the quantity of cement to be carried to the Serajgong Godown was raised to 6000 M.T.s, the appellant carried the same by vessels from Chittagong to Dhaka at a place 16 Kilometer down to Sadarghat and therefrom the appellant carried by truck 5961.60 M.T.s of cement to the godown of the BWDB at Sirajgonj. After submission of bills for carrying the aforesaid quantity of cement, the respondents made the final order of payment fixing the rate at Tk. 640/- per M.T. for the 500 M.T.s of cement and at Tk. 978.44 per M.T. for the balance quantity of cement. It may be mentioned that for carrying the 6000 M.T.s of cement no carrying rate was decided inspite of the representations of the appellant It is seen from the materials on record that BWDB analyzed the carrying cost at Tk. 1406.70 per M.T. and that upon deducting 30.468 ‘as per accepted Board’s rate’ finally fixed the carrying rate at Tk. 978.44. The contractor in his representations for fresh fixation of rate of carrying per M.T. of cement assigned grounds that quantity of cement being bulk could not be carried by truck from Chittagong but was carried by vessels and by truck and for that there were transshipments at different places and that he was to pay other charges because of carrying the cement by large vessels. It was also represented by the appellant that initial quantity of 500 M.T.s of cement was also not carried by truck from Chittagong as because before execution of the first work order the same was replaced by raising the quantity of cement to 1000 M.T.s.

2. The dispute relating to rate carrying of per M.T. of cement was referred to as per agreement between the parties to the arbitrators. The arbitrators having differed the matter was referred to the umpire selected by the arbitrators. The Umpire passed award span fixing the rate of carrying per M.T. of cement at Tk. 1705.20 inclusive of profit transshipment cost Tk. 1113.86 inclusive of profit and also award pendente file interest from 6-8-1990 to 28-6-1994 at the me of 158 and finally awarded the sum of Tk. 2,01,52,289.94 with interest from the date of intimation by the umpire at the bank rate of Sonali Bank till realization.

3. In due come the award was taken by the contractor-appellant to the court for making the same Rule of the Court. The respondents, the 2nd parties in the arbitration proceeding, filed application under Section 33 read with section 30 of the Arbitration Act, 1940 for setting aside the award taking number of grounds including that the award was made beyond the terms of the Agreement. The 5th Court of Subordinate Judge, Dhaka by the judgment and decree as mentioned herein above made the award Rule of the court for the amount of Tk. 2,01,52,289.84. No future interest was awarded by the learned Subordinate Judge in respect of the awarded amount A against the judgment and decree of the learned Subordinate Judge, respondents preferred appeal as mentioned herein before the High Court Division and the said Division by the aforementioned judgment and decree maintained the judgment and decree of the Court of Subordinate Judge.

4. The appellant took exception to the judgment and decree of the High Court Division contending mainly that the High Court Division was in error in not holding that interest awarded by the umpire on the award money formed part of the decree of the court while making the award Rule of the Court and that it ought to have been held that trial court allowed the interest in as much as that the said court decreeing the suit by making the award Rule of the Court made the award as a whole a part of the decree. It was also the contention of the appellant that High Court Division erred in interpreting and applying the law enunciated in the case reported in 46 DLR (AD)97 recognizing power of the arbitrator/umpire to grant interest on the awarded amount till realization thereof.

5. It is seen from the judgment and decree of the Court of the Subordinate Judge that while making the award dated 22nd August, 1984 Rule of the court the said court passed the decree for the awarded amount i.e. for Tk. 2,01,52,289.84 only and that did not grant any interest, which was within his discretion, on the awarded amount till realization thereof. The High Court Division by the judgment under appeal affirmed the judgment and decree of the Court of Subordinate Judge. So it is distinctly clear that interest as was granted by the umpire on the awarded amount till realization thereof was not allowed by the Court of Subordinate Judge as well as by the High Court Division.

6. In the background of the contention of the appellant question that needs be answered or decided is whether it is within the jurisdiction of the arbitrator/umpire to grant interest on the awarded amount from the date of making the award till realization of the money thereunder. Section 29 of the Arbitration Act gives power to the court, which is of course discretionary, to grant interest from the date of decree in respect of the decretal amount or in other words on the amount of Award or part thereof as has been decreed.

7. The question of awarding interest in respect of the awarded amount by the arbitrator/umpire till realization thereof came up for consideration before this court in the case of Bangladesh Agricultural Development Corporation Vs. Kibria & Associates Ltd. reported in 46 DLR (AD)97. In the said decision this Court on detail consideration of the different provisions of Arbitration Act, 1940 and the ratio decidendi of the cases of the Superior courts of different countries and also this Court referred to from the Bar for and against the jurisdiction of the arbitrator/umpire to award interest on the awarded amount till realization of the money thereunder has observed as follows:

As to interest from the date of the award till realization of the money there under, 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 realization many 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 realization of the money there under. This period partially coincides with the period from the date of the award till realization. Therefore interest from the date of the award till realization, 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 realization, 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 realization. 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 to 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.

8. From the aforesaid observations of this Court in the reported case it is seen that Arbitrator’s/Umpire’s jurisdiction or power to grant interest on the awarded amount till realization thereof has not been recognized by this court in the said decision as contended by the learned Counsel for the appellant, rather it has been held that matter of awarding of interest on the awarded amount till realization, in the absence of agreement between the parties, falls within the discretionary jurisdiction of the court when the award is brought before the court for making the same Rule of the Court and for a decree.

9. 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 realization 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 well founded one since it has already been noticed by us 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 realization thereof, but granting of interest on the Awarded amount, when the award in 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 realization thereof, but said power or in other words granting of interest on the awarded money or part thereof, as has been decreed, till realization 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 Court, when the 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 realization thereof.

10. From the respondents' side the award was challenged primarily on the ground that the same was made beyond the terms of the contract contending that in Clause 26 of the Tender Document it was clearly stated “the quantity of work as contained in the tender schedule of work may increase or decrease, for which no claim whatsoever will be entertained but the accepted rate will not be changed”. This contention of the learned Counsel for the respondents is of no merit as because before execution of the initial contract for carrying 500 M.T.s of cement by road @ Tk. 640/- per M.T. could be executed, the respondents issued work order for carrying 1000 M.T.s of cement and that thereafter in quick succession raised the quantity of cement to be carried to 6000 M.T.s. This being the position the finding that has been arrived at by the High Court Division that initial contract for carrying 500 M.T.s of cement by road was not implemented or in other words was given a go-by the respondents cannot be considered unsustainable.

11. In the present case the court to which the award was taken for making the same rule of the court specifically mentioned the amount that has been decreed i.e. awarded amount of Tk. 2,01,52,289.84. The Court of Subordinate Judge did not grant any interest on the decretal amount and as such no error was committed by the High Court Division in affirming the decree of the court of first instance in not holding that the said court decreeing the suit made the award in its entirety part of the decree.

12. Civil Petition No. 1181 of 2000 has been filed by the respondent No. 1 of the Civil Appeal No. 195 of 2000 against the judgment appealed contending, inter alia, that the High Court Division was in error in upholding the award of 22nd August, 1994 on account of the claims (a) cost of transshipment, (b) demurrage for detention of vessels and (3) port dues, river dues, terminal charges and others which were illegal and beyond the terms of contract, particularly in view of the simulations contained in Clause 6, 8, 9, 19, 26 and 29 of the Tender conditions and consequent thereupon the award being beyond the terms of contract was unsustainable in law, that High Court Division was in error upholding the award for carriage of cement @ Tk. 1705.20 per M.T. of cement when the contractor agreed to carry first 500 M.T. @ Tk. 640/- per M.T. and the balance 5461.60 M.T.s @ Tk. 978.44 per M.T. by accepting which rate he entered into contract agreements and received payment of running bills and withdrew security deposit by signing waiver clause and as such the award being contrary to the terms of contract is not sustainable in law, that the learned Judges of the High Court Division erred in law in not holding that arbitrator committed legal misconduct in awarding Tk. 74,31,223.10 as pendente lite interest (interest from 6-8-1992 to 28-6-1994 @ of 15% per annum) which is palpably illegal and without jurisdiction inasmuch as the instant case is not an appropriate case for award of interest against the 2nd party in the arbitration and as such judgment of the High Court Division as well as the award of Tk. 74,31,223.10 as pendent lite interest is liable to be set aside.

13. The jurisdiction of the arbitrator/umpire as to awarding of pendente lite interest has been set at rest by this court in the case reported in 46 DLR (AD)97. As such the contention that awarding of pendente lite interest by the umpire was illegal merits no consideration. The other contention that the contracts agreed to carry initial quantity of 500 M.T of cement @ Tk. 640/- per M.T. and that the balance quantity of 5461.60 @ Tk. 978.44 per M.T. is not correct since the initial contract for carrying 500 M.T.s by road could not be undertaken for execution by the contractor, as the petitioner changed the quantity of cement to be carried to 1000 M.T.s and that thereafter in quick succession raised the quantity of cement to be carried to 6000 M.T.s In this background of the undisputed fact it has rightly been held by the High Court Division that initial contract for carrying 500 M.T.s of cement by road could not be executed because of the action of petitioner and in place thereof the contract of carrying 6000 M.T.s. cement was executed. It may be mentioned that not a single ton of cement was carried by road from Chittagong to Sirajgonj as per initial contract of carrying 500 M.Ts. cement by road. It is on record that in the course of execution of the contract of carrying 6000 M.T.s of cement the contractor represented on several occasions for fixation of the rate of carrying of per M.T. cement in the light of his mode of carrying the total quantity of cement and that at one stage the petitioner analyzed the cost of carrying of cement per M.T. at Tk. 1406.70 and that there from deducted Tk. 428.26 (@ 30.46% ‘as per accepted Board rate’) and fixed the rate of carrying of per M.T. of cement @ Tk. 978.44. The petitioner could not place before the court any material in support of fixing the aforesaid rate of carrying the cement @ Tk. 978.44 per M.T. and as such the umpire upon taking Tk. 1406.70 as the basis for fixing the rate of carrying of per M.T. of cement and that after taking into consideration the transshipment cost at various places and stages fixed carrying rate Tk. 1705.20 per M.T. It was not disputed that while the petitioner analyzed the cost of carrying of per M.T. of cement at Tk. 1,406.70 did not include transshipment cost. The umpire fixed the cost of carrying per M.T. of cement at Tk. 1, 705.20 inclusive of transshipment cost. In the aforesaid background the contention that the contractor agreed to carry the initial quantity of 500 M.T. at Tk. 640/- per M.T. and the additional quantity at Tk. 978.44 per M.T. is of no merit The undenied position is that no cement was carried by track from Chittagong to Serajgong by road, rather the entire quantity i.e. 5961.60 M.T.s cement was carried by the vessels that could sail to a distance of 16 kilometers away from Sadarghat and that there from on transshipment the cement was carried to the godown of the petitioner at Serajgong. In this background it could not be said that the award was made contrary to the terms of the contract The last contention that award was not sustainable because the same was made inclusive of transshipment, demurrage for detention of vessels, port dues, river dues, terminal charges and other which were beyond the terms of the contract is also not correct as because the total quantity of 5961.60 M.Ts of cement was carried from the factory to the port and then loaded in the ship and that unloaded at a distance of 16 kilometers off Sadarghat in both ways and that there from the cement was transported to the godown of the petitioner at Serajgong. In the result the Appeal as well as the Civil Petition are dismissed without any order as to cost.