- 1 - NC: 2025:KHC:11988 MFA No. 6026 of 2017 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 21ST DAY OF MARCH, 2025 BEFORE THE HON'BLE MR JUSTICE HANCHATE SANJEEVKUMAR MISCELLANEOUS FIRST APPEAL NO. 6026 OF 2017 (AA) BETWEEN: 1. CENTRAL WARE HOUSING CORPORATION (GOVERNMENT OF INDIA UNDERTAKING) REPRESENTED BY THE EXECUTIVE ENGINEER, CENTRAL WAREHOUSING CORPORATION, CONSTRUCTION CELL, NO.9, PALLAVI COMPLEX, MISSION ROAD, BANGALORE-560 027. 2. THE MANAGING DIRECTOR CENTRAL WAREHOUSING CORPORATION, WARE HOUSING BHAVAN, 4/1, SIRI INSTITUTIONAL AREA, HAUZ KHAS, KHEL GAON AREA, NEW DELHI-110 016, REPRESENTED BY AUTHORIZED SIGNATORY, EXECUTIVE ENGINEER, THE 1ST PETITIONER HEREIN. …APPELLANTS (BY SRI. M ASWATHA NARAYANA REDDY, ADVOCATE) AND: 1. M/S. RAVI CONSTRUCTIONS CIVIL ENGINEERING CONTRACTORS 4/1, 5TH MAIN ROAD, GANDHINAGAR, BANGALORE- 560 009, REPRESENTED BY ITS PARTNER, SRI. C. CHANDRASEKHAR. Digitally signed by RAMYA D Location: HIGH COURT OF KARNATAKA - 2 - NC: 2025:KHC:11988 MFA No. 6026 of 2017 2. THE ARBITRAL TRIBUNAL OF DR. WOODAY P. KRISHNA, SOLE ARBITRATOR, AT ARBITRATION CENTER- KARNATAKA, (DOMESTIC & INTERNATIONAL), BENGALURU-560 001. …RESPONDENTS (BY SRI. P HARICHANDRA REDDY, ADVOCATE FOR R1, R2-SERVED AND UNREPRESENTED) THIS MFA IS FILED UNDER SECTION 37(1)(b) OF ARBITRATION AND CONCILIATION ACT, AGAINST THE JUDGMENT AND DECREE DT.27/4/2017 PASSED IN A.S.NO.100/2016 ON THE FILE OF XXXVII ADDITIONAL CITY CIVIL JUDGE (CCH-38), BENGALURU, DISMISSING THE PETITION FILED U/SEC.34(2) OF ARBITRATION AND CONCILIATION ACT, TO SET ASIDE THE AWARD IN A.C.NO.127/2015, DT.19.05.2016. THIS APPEAL COMING ON FOR HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE HANCHATE SANJEEVKUMAR ORAL JUDGMENT The plaintiff in the suit A.S.No.100/2016, being aggrieved by the dismissal of the said suit dated 27.04.2017, has preferred this appeal under Section 37(1)(b) of Arbitration and Conciliation Act, 1996. 2. It is not in dispute that the plaintiff had engaged respondent No.1 for construction of godown and accordingly, - 3 - NC: 2025:KHC:11988 MFA No. 6026 of 2017 respondent No.1 completed the construction of godown work on 18.07.2000. As per the agreement in the work order, if any dispute arise, the same shall be referred to an Arbitrator. Accordingly, the proceedings were conducted before the learned Arbitrator - 2nd respondent herein. The Arbitrator by the award dated 19.05.2016, has allowed the claim of respondent No.1, directing the plaintiff herein to pay Rs.13,03,700/- to the respondent No.1, with statutory interest at 18% p.a. from the date of award, till the date of payment. Also the learned Arbitrator has levied interest at the rate of 12% p.a. on the above said amount payable from the date of completion of work (18.07.2000) till the date of the award. 3. Though the appellant has averred many grounds in the memorandum of appeal, learned counsel for the appellant confines its grievance only against levying interest at the rate of 12% p.a. on the above said amount payable from the date of completion of work, till the date of the award, by raising specific grounds at Para-33 in the memorandum of appeal. 4. Learned counsel for the appellant submitted that respondent No.1-Contractor has caused delay in approaching - 4 - NC: 2025:KHC:11988 MFA No. 6026 of 2017 the then Arbitrator to adjudicate the dispute in pursuance of the order passed by this Court in CRP.No.240/2011, dated 04.07.2012. The respondent No.1 after lapse of two years from the date of the order passed by this Court, has approached the then Arbitrator on 02.07.2014, but the learned Arbitrator expressed his inability to take up the arbitration proceedings on the ground that he has discontinued his professional activities after crossing the age of 80 years. Thereafter, respondent No.1 has not filed separate application for appointment of new Arbitrator in the place of old Arbitrator. On the other hand, respondent No.1 has filed IA.No.1/2015 in CMP.No.16/2004 for modification of the order dated 16.04.2004, passed in the said CMP.No.16/2004. In this view of the matter, there is delay of two years on the part of respondent No.1 in seeking appointment of an Arbitrator. Learned counsel further submitted that for the delay of two years in appointing the Arbitrator, the appellants cannot be held responsible for payment of interest at the rate of 12% p.a. from the date of completion of work, till the date of the award. 5. Learned counsel for the appellant further submits that the learned Arbitrator has not discussed anything with regard - 5 - NC: 2025:KHC:11988 MFA No. 6026 of 2017 to levying of interest at the rate of 12% p.a. in the body of the arbitral award. Therefore, he prays for allowing of the appeal by setting aside the award passed by the learned Arbitrator in so far as it relates to levying of interest at the rate of 12% p.a. on the amount of Rs.13,03,700/-, from the date of completion of the work, till the date of the award. 6. On the other hand, learned counsel for respondent No.1 vehemently submitted that it is a commercial transaction and respondent No.1 has raised loan and he is liable to pay interest to the Bank. Therefore, in the commercial transaction, levying of interest is correct and accordingly, justified the levying of interest as ordered by the learned Arbitrator. 7. Learned counsel further submitted that the appellant has accepted the delay in making the payment of the amount and therefore the respondent No.1 is constrained to pay interest to the Bank. Hence, levying of interest is as per the terms of the contract and work order. Learned counsel further submitted that the scope of interference in the order passed under Section 34 of Arbitration & Conciliation Act, is very - 6 - NC: 2025:KHC:11988 MFA No. 6026 of 2017 minimal and he places reliance on the following judgments of Hon'ble Apex Court : (1) J.G.Engineers Pvt. Ltd., -vs- Union of India and another, reported in MANU/SC/0527/2011, (2) Welspun Specialty Solutions Limited and others, -vs- Oil and Natural Gas Corporation Ltd., and others, reported in MANU/SC/1059/2021, (3) Jaiprakash Associates Ltd., -vs- Tehri Hydro Development Corporation India Ltd.,, reported in MANU/SC/0157/2019, (4) Morgan Securities and Credits Pvt. Ltd., -vs- Videocon Industries Ltd., reported in MANU/SC/1084/202, (5) Punjab State Civil Supplies Corporation Limited and others -vs- Sanman Rice Mills and others, reported in MANU/SC/1070/2024, (6) Somdatt Builders - NCC - NEC(JV) -vs- National Highways Authority of India and others, reported in MANU/SC/0109/2025, (7) C.C. Constructions Ltd., -vs- IRCON International Ltd.,, reported in MANU/SC/0128/2025. Therefore, he justifies the order passed by the learned Arbitrator under Section 34 of Arbitration and Conciliation Act. - 7 - NC: 2025:KHC:11988 MFA No. 6026 of 2017 8. While considering the order passed under Section 37 of Arbitration and Conciliation Act, the Hon'ble Supreme Court in Paragraphs-27 and 28 has held as follows : " 27. As far as scope of interference in an appeal under Section 37 of Arbitration Act is concerned, the law is well settled. In the case of Larsen Air Conditioning and Refrigeration Company v. Union of India and Ors.MANU/SC/0876/2023: (2023) 15 SCC 472 in paragraph 15, this court held thus: “ 15. The limited and extremely circumscribed jurisdiction of the court under Section 34 of the Act, permits the court to interfere with an award, sans the grounds of patent illegality i.e. that “illegality must go to the root of the matter and cannot be of a trivial nature”; and that the Tribunal “must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground” [ref : Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , SCC p. 81, para 42]. The other ground would be denial of natural justice. In appeal, Section 37 of the Act grants narrower scope to the appellate court to review the findings in an award, if it has been upheld, or substantially upheld under Section 34.” (emphasis added) 28. In the case of Konkan Railway Corporation Limited v. Chenab Bridge Project Undertaking, (2023) 9 SCC 85, in paragraph 18, this court held thus: - 8 - NC: 2025:KHC:11988 MFA No. 6026 of 2017 “ 18. At the outset, we may state that the jurisdiction of the court under Section 37 of the Act, as clarified by this Court in MMTC Ltd. v. Vedanta Ltd. [MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163 : (2019) 2 SCC (Civ) 293] , is akin to the jurisdiction of the court under Section 34 of the Act. [Id, SCC p. 167, para 14:“14. As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the court under Section 34 has not exceeded the scope of the provision.”] Scope of interference by a court in an appeal under Section 37 of the Act, in examining an order, setting aside or refusing to set aside an award, is restricted and subject to the same grounds as the challenge under Section 34 of the Act.” 9. Admittedly, in the present case, the contract work between the appellant and respondent No.1 is a commercial transaction. Admittedly, the respondent No.1 had completed the work of contract on 18.07.2000. The respondent No.1 had submitted the bill to the appellant. It is not disputed that respondent No.1 has raised loan from the Bank for the purpose of construction of godown as per the work order issued by the appellant. Therefore, the respondent No.1 is liable to be charged with interest as imposed by the Bank. Due to the dispute arose between the appellant and respondent No.1, the - 9 - NC: 2025:KHC:11988 MFA No. 6026 of 2017 appellant had not sanctioned the amount in time. Therefore, the delay has been caused in getting the appointment of the Arbitrator by filing the petition before this Court. Due to some circumstances, there may be some delay caused, but the same cannot be attributed to respondent No.1-claimant. 10. Therefore, considering the scope of Section 37 of Arbitration and Conciliation Act, the interference by this Court is minimal as per the principles laid down by the Hon'ble Supreme Court in catena of decisions. Though the Arbitrator has not discussed as to why interest at the rate of 12% p.a. be levied, but in the operative portion of the award, such levying of interest is mentioned. It is submitted by learned counsel for respondent No.1 that now the appellant is receiving the rents of Rs.2,20,000/- per month from the godown and when the appellant has started commercial activities, then it is improper to contend that the appellant is not liable to pay interest as ordered by the learned Arbitrator. 11. Therefore, considering all the aspects and the scope of interference by this Court in the impugned order, I am of - 10 - NC: 2025:KHC:11988 MFA No. 6026 of 2017 the opinion that no grounds are made out in the appeal. Therefore, the appeal is liable to be dismissed. Accordingly, the Appeal is dismissed. The respondent No.1 shall withdraw the amount deposited by the appellant. SD/- (HANCHATE SANJEEVKUMAR) JUDGE BK List No.: 1 Sl No.: 47