judgement:
ivil Appeal No. 1280 & 1281 of 1988.
From the Judgment and Order dated 21.4.1987 of the Calcutta High Court in Appeal from Original Order No. 128 of 1985, Award Case No. 151 of 1987.
A.K. Sen, Dr. Shankar Ghosh, Ajay K. Jain, Praveen Kumar and Pramod Dayal for the Appellant.
M.K. Banerjee and G.S. Chatterjee for the Respondent.
The Judgment of the Court was delivered by RANGANATHAN, J.
These are cross appeals by M/s. Hind Builders (hereinafter referred to as 'the contractors ') and the Union of India.
from an order of Division Bench of the Calcutta High Court in an arbitration matter.
The contractors had been awarded a contract for the execution of certain civil works in connection with the Metro Railway Project in Calcutta.
Certain disputes arose between the Union and the contractors.
These disputes were referred for decision to two arbitrators appointed by the High Court of Calcutta.
The arbitrators entered upon the reference on 27th June.
The contractors had filed a claim before the arbitrators for a sum of Rs.2,05,67,554.
On 26.3.1984 the arbitrators awarded a sum of Rs.57,47,198 to the contractors.
The claim of the contractors filed before the arbitra tors was an itemised claim in respect of various items of works executed by them.
The body of the award made by the arbitrators reads as follows: "We . . make and publish our Award, as below: 642 (i) That the Respondent . . shall pay . . the Contractors a sum of Rs.57,47,198 . . only in full and final settlement of all their claims and dues under the above mentioned contract agreement.
In addi tion, the three Bank Guarantees . . issued by Vijaya Bank, Cuttack, on behalf of the contractors, in favour of Metro Railway, Cuttack, shall be released by the Respondent Railway, as detailed in the Annexure to this Award.
XXX XXX XXX The Award shall be complied with within 60 (Sixty) days from the date of publication of this Award, failing which simple interest @ 11 per cent per annum on the amount of the Award (excluding interest vide item (1) of the Annexure i.e. Rs.6,76,540) shall accrue till the date of payment or decree upon Award whichever is earlier.
" In the annexure to the award, the arbitrators tabulated the various items of the claim before them, the amount claimed against each item and the amount awarded against each item.
Under item (1) in the annexure, the arbitrators had awarded an interest of Rs.6,76,540 and that is why the direction regarding interest by the arbitrators excluded this amount from the principal amount which was to bear interest.
As stated earlier, the total amount awarded was Rs.57,47,198 in respect of items (a) to (q) of the award as against the claim of Rs.2,05,67,554 made by the contractors.
On an application being made to the High Court of Cal cutta on the Original Side for making the award a rule of court, the learned single Judge sitting on the Original Side confirmed the award except to the extent of Rs.5,20,000.
This is no longer in issue.
The learned Judge.
however, concluded his judgment with the following words: "The principal sum awarded stands reduced by Rs.5,20,000 as mentioned above.
The respondent will be entitled to interest at the rate of 11 per cent per annum from the date of refer ence till the date of the award.
" The Union of India preferred an appeal from the order of the learned single Judge.
The Division Bench was of the opinion that the arbitrators were not justified in awarding a sum of Rs.23,96,000 to the contractors (as against a claim of Rs.42,65,957 made by them) in respect of item (c)(xii) viz. "cost towards consolidation of earth by ramming and rolling" and that they could have awarded under the 643 contract only a sum of Rs.2,39,600 in respect of this item.
The amount awarded to the contractors was thus further reduced by the Division Bench by a sum of Rs.21,56,400 (Rs.23,96,000 Rs.2.39,600).
The Bench then observed that the principal sum to be awarded to the contractors would now stand at Rs.30,70,798 and directed that the respondent contractor should be entitled to interest at the rate of 11 per cent per annum on the said amount from the date of the reference till the date of the award.
The contractors have appealed from the order of the Division Bench being aggrieved by the reduction of the amount awarded under item (c)(xii) to Rs.2,39,600 from Rs.23,96,000.
The Union of India has preferred an appeal contending principally that, since the principal amount on which the arbitrator awarded interest was not Rs.57,47,198 but only Rs.50,70,658 (i.e. Rs.57,47,198 Rs.6,76,540), the contractors would be entitled to interest, after the judg ment of the Division Bench, not on Rs.30,70,798 as held by the Division Bench but only on Rs.23,94,258.
In addition, at the tune of the hearing before us, counsel for the Union of India raised two further points: (1) that the Division Bench erred in awarding inter est to the contractors from the date of the reference till the date of the award.
(2) That though the arbitrators had also awarded interest on the principal sum till the date of payment, the contractors should now be held entitled to interest only upto the date of the award because the learned single Judge and the Division Bench have held so and the contractors have preferred no appeal therefrom.
Taking up the contractor 's appeal first, the point raised falls within a very narrow compass and turns on the interpretation of item No. .09 of the annexure to the contract containing the schedule of rates.
This item reads as follows.
Item Brief description Approx Unit of Rate of No. of work imate payment payment in Qty.
"words" & "figures" Rs. P. 1 2 3 4 5 644 4.09 (a)Earthwork in open excava 235000 10 Rs.180 tion for forming garbage cubic cubic (Rupees tanks in all kinds and metres metres one conditions of soils upto hundred depth varying from 0 to 3 eighty 3 metres from the existing only) ground level and disposing of the spoils so as to raise land required for piling work, to fill up the existing low lying areas and ponds, to form embank ments for roads, etc of the Car Depot complex includ ing spreading in layers, breaking clods, levelling, dressing, all lifts/descents and all leads etc.
complete Note: No extra payments will be made if wet excavation is met with or for baling/ pumping out of water of all sorts including rain water.
(b) Extra over item (a) above, 135000 10 Rs.20 for consolidation of the Cubic Cubic (Rupees filled up areas or some of metres metres Twenty the top layers of the filled only).
up areas or road embank ment portions by watering and ramming/rolling as directed.
In respect of these items the statement of claim filed on behalf of the contractor was in the following terms: (b) Earthwork in excavation measured but not paid in full: That under agreement item No. 4.09 (a) the claimants as per instructions, specifications and agreement excavated 645 earthwork in open excavation for forming garbage tanks in all kinds of soil for a quantity of 2, 15,000 Cum and there after the contract was rescinded against which reduced quantity has been measured provisionally upto 17th CC bill for 2,09,523 Cum measured on 24.5.82 and as per the said measurements the claimants are yet to be paid for a quantity of 5,477 Cum over and above the payments already made upto 17th CC.
The claimants claim payment for 5,477 Cum of exca vation @ Rs. 18 per each Cum.
amounting to Rs.98,586.00.
CLAIM AMOUNT.
Rs. 98,586.00 (c)(xii) Cost towards consolidation of earth by ramming and rolling: That as per agreement item No. 4.09(b) the claimants are required to fill up the low lying areas etc., as specified under General Conditions of the Contract at para 3.05 with the excavated spoils obtained out of earthwork in excavation under agreement item No. 4.09(a).
The payment for earthwork in open excavation for work executed under agreement item No. 4.09(a) is to be made on sectional measurements calcu lated by level sections.
The excavated earth obtained from garbage excavation, a quantity of 2, 15,000 Cum as per provisions made in agreement item No. 4.09(b) was consoli dated in different areas as per instructions and approved plan.
The claimants claim payment for this quantity of consolidation at Rs.20 per Cum i.e. Rs.2 extra over Rs. 18 per Cum as specified in agreement item No. 4.09(a) & (b), amounting to Rs.43,00,000.00 against which payment has been made in CC bills for reduced quantity and amount of Rs.34,043.00.
The claimants claim payment for the balance amount of Rs.42,65,957.00 not paid for.
CLAIM AMOUNT Rs.42,65,957.00 In other words, the contractors claimed payment at the rate of Rs.18 per cubic metre in respect of the excavation work done by them under item No. 409(a).
Again, in respect of the same quantity.
of 2,15,000 cubic metres, the contractors made a claim at Rs.20 per cubic metre as the amount payable to them in respect of the consolidation of 646 excavated earth by ramming and rolling.
The Division Bench was of the view that under item No. 4.09(b), the contractors were entitled to an additional payment of Rs.2 only, since the contractors had already been paid at the rate of Rs.18 per cubic metre in respect of the excavation done by them.
The extra charges for ramming and rolling were payable only at the rate of Rs.2 per cubic metre instead of Rs.20 per cubic metre.
The Division Bench accordingly scaled down the amount awarded by the arbitrator in this regard to 1/10th of the amount awarded by him.
It is submitted on behalf of the contractors that the rate payable for the work under item 4.09(b) of the contract was not at all in dispute between the parties at any stage.
The Union had not raised any plea in this regard in its reply to the contractors ' claim, in the objections to the award filed in the High Court or in the arguments before the learned Single Judge.
Clearly, the Division Bench travelled beyond the limits permissible for the interference with an award by a court of law in reducing the amount awarded on this account.
It is pointed out that the award itself is a non speaking award.
The award does not refer to the terms of the contract or incorporate the details of the claims made by the contractors.
Though it is true that the arbitrators awarded a sum of Rs.23,96,000 against item (c)(xii), they have not given reasons therefore.
The award neither shows that the amount has been worked out at the rate of Rs.20 per cubic metre nor does it show the quantity in respect of which the amount has been worked out.
There is no reference to the terms of the contract or to item No. 4.09, clause (a) or (b).
No reasons have been given by the arbitrators for determining that a sum of Rs.23,96,000 has to be paid to the contractors under item (c)(xii).
It is therefore submitted that there was no error apparent on the face of the record.
Learned counsel vehemently contended that it is now settled law that an award cannot be said to suffer from a manifest error unless the error appears on the face of the award or of some document incorporated in the award.
Reference is made to the decisions of this Court in the following cases: Firm Madanlal Roshanlal Mahajan vs Hukumchand Mills Ltd., Indore, ; ; Allen Berry & Co. Pvt. Ltd. vs Union oflndia, [1971] 3 SCR287;N. Chellappan vs Secretary, Kerala State Electricity Board & Anr., ; ; Hindustan Tea Co. vs K. Shashi Kant Co. & Ant., ; Hindustan Steel Works Construction Ltd.
C. Rajasekhar Rao, [1987] 4 SCC 93 and Sudarsan Trading Co. vs Government of Kerala & Anr., ; According to the contractors, what the Division Bench has done is to give its own interpretation to item Nos.
4.09(a) & (b) of the contract, to read an erroneous interpretation 647 of the said item into the award made by the arbitrators and to substitute its opinion in the place of that given by the arbitrators.
Thus, it is submitted, runs quite contrary to the principles enunciated in the above decisions and should, therefore, be set aside.
On the other hand, Shri Milon Banerjee, learned counsel for the Union of India submitted that the award is really a speaking award in so far as it does specify the amount granted in respect of each item of claim.
He submitted that the present case falls within the principle enunciated in M/s Alopi Prashad & Sons, Ltd. vs Union of India, ; , which has been taken note of in the case of M/S Sudarsan Trading Co. vs Government of Kerala & Anr., ; at p. 54 that an award which overlooks or ignores the terms of the contract is bad.
He also made a reference to the decision of the Delhi High Court in Bhagat Trading Co. vs Union, AIR 1984 Delhi 358 in this context.
He also referred to a decision of the Punjab High Court in Union of India vs Bakshi Ram, [1957] LIX P.L.R. 572, holding that "when there are pleadings in an arbitration and they are specifically referred to in the award so that it cannot be understood without reference to them, then those pleadings are incorporated in the award and they must be included in the consideration whether there is any error apparent on the face of the award" and that "if a lump sum is awarded by an arbitrator and it appears on the face of the award or is proved by extrinsic evidence that in arriving at the lump sum matters were taken into account which the arbitrator had no jurisdiction to consider, the award is bad." The conten tion of Shri Banerjee is that the annexure to the award clearly incorporates the statement of claim made by the contractors.
Since in turn the statement of claim refers to the clauses of the contract, the contract should also have been treated as incorporated in the award.
It is also appar ent on the face of the award, insofar as it relates to item (c)(xii), that the arbitrators have awarded payment at Rs.20 per cubic metres under item 4.09(b) whereas it must obvious ly be at Rs.2 per cubic metre.
According to the learned counsel, the decisions relied upon by him clearly show that an award which ignores or overlooks the express terms of a contract suffers from an error apparent on the face of the record and can be set aside by this Court.
He submitted that the award, read with the annexure, brings out the reasoning of the arbitrators and that an error therein can be recti fied by the court.
The arbitrators had no power to travel beyond the authority of the contract and, in order to deter mine whether they had exceeded their authority, the contract can be looked into by the court.
In support of this conten tion, the learned counsel also referred to a passage at p. 42 1 in the Law of Arbitration by Bachawat (Second Edition).
648 We have considered the respective contentions of the parties and we are of the opinion that the Division Bench erred in setting aside the award insofar as it relate to the sum of Rs.25,96,000.
Though the annexure sets out the award of the arbitrators as against various items of claims, the mere enumeration of the heads of claims cannot be equated to an incorporation of the statement of claim by the contrac tors into the award.
At any rate, the award does not relate the claims to the various clauses of the contract and the mere fact that the statement of claim refers to various items in the schedule to the contract does not result in the contract itself being incorporated as part of the award.
No error can be found in the award unless one reads into it first the statement of claim and then the relevant clauses of the contract.
But this cannot be done unless these docu ments are treated as incorporated in the award.
This cannot be done.
That apart even if the contract can be read into the award, we doubt whether this case can be treated as one of an error on the face of the award.
All that the award has stated is that for the extra work involved in ramming and rolling, the contractors were to be paid a sum of Rs.23,96,000.
The award does not mention how this amount is arrived at.
There is no mention of the quantity in respect of which this is awarded nor the rate at which the payment has been calculated.
It is, however, pointed out that con tractors had claimed payment at the rate of Rs.20 per cubic metres in respect of 2,15,000 cubic metres and that, even if it is assumed that the ramming and rolling had been done in respect of the entire volume of 2,15,000 cubic metres, the contractors could have, on a proper construction of the contract, been awarded only a sum of Rs.4,30,000 and nothing more.
Obviously, the award is calculated at Rs.20 per cubic metres in respect of 1,19,800 cubic metre.
It is clear, says counsel for the Union, that the volume of the item for which payment has to be made has been cut down but the amount has been calculated at Rs.20 per cubic metre which exceeds the amount of Rs.2 stipulated in the contract and this is erro neous on the face of it.
We are afraid that, in putting forward this contention, the respondents are really trying to analyse the reasons of the arbitrator for making the award under this head when no such reasons have been stated in this award.
In fact, it does not necessarily follow that the payment has been di rected at the rate of Rs.20 per cubic metre in respect of 1, 19,800 cubic metre.
Theoretically, it could have been award ed, in respect of the entire volume of 2, 15,000 cubic metre, at the rate of Rs.11 and odd per cubic metre.
It is, however, clear that the payment has been granted at a rate in excess of Rs.2 per cubic metre.
We shall, however, take it that the arbitrators have awarded at the rate 649 of Rs.20 per cubic metre in respect of this item of work for, as pointed out by Dr. Ghosh, the Union of India had never put forward the case either before the arbitrator or before the learned single Judge that the contractors were not entitled to payment at the rate of Rs.20 per cubic metre as claimed and it was before the Division Bench for the first time that a question arose that the payment for the item should be at Rs.2 and not Rs.20 per cubic metre.
Wheth er the payment should be made at the rate of Rs.20 per cubic metre or at Rs.2 per cubic metre will depend upon a proper interpretation of the contract.
It is argued that the main item of work viz. excavation and distribution of the exca vated work has been paid for under item No. 4.09(a) and that item 4.09(b) envisages an additional payment of Rs.2 per cubic metre if the excavated soil, instead of being loosely distributed, is rammed and rolled by applying some pressure.
This seems, prima facie, a plausible interpretation of clause 4.09(b).
But we cannot assume, in the absence of any evidence or expert knowledge, that the ramming and rolling was not an independent, heavy or cumbersome piece of work and merely involved a minor addition to the work under item 4.09(a).
On the other hand, in the grounds of appeal filed by the contractors it is contended: "The High Court failed to appreciate that the process of ramming and rolling is a very expensive specialised process as it has to be done layer by layer not exceeding six inches at a time and requires watering, breaking of clods and use of specialised road rollers, bulldozers and other equipment.
The work of ramming and rolling is much more expensive than that of earth excavation provided for in item 4.09 (a).
The High Court further failed to appreciate that in its reply to the statement of claim of the petitioner, the respondent No. 1 had not disputed that the rate applicable for ramming and rolling was Rs.20 per cubic metre.
The respondent No. 1 had only raised a dispute with regard to the quantity of the ramming and rolling done by the petitioner.
The High Court misinterpreted the contract and erred in reducing the award for ramming and rolling by erroneously applying the rate of Rs.2 per cubic metre.
" This may be fight or wrong but this is also a plausible view.
Unfortunately, this was an aspect not urged before, or considered by, the arbitrators.
There was no evidence before the arbitrators or material adduced before the Court as to the nature of these operations.
It is difficult to say, by merely reading the terms of contract that the 650 arbitrators have erroneously interpreted the terms of the contract.
It is not without significance that the departmen tal officers did not dispute the rate of the claim.
Equally, the arbitrators were experienced engineers and would not have passed, what is now said to be, an astounding claim without thought.
It is difficult to assume that all these persons have overlooked that the contractor had already been paid at Rs.18 under item 4.09(a) especially when it is so stated on the face of the claim.
This, therefore.
is not a case where tile arbitrators can be said to have ignored or overlooked a term of the contract; on the contrary, they have acted upon a particular interpretation of certain clauses of the contract on which two views are possible.
This case certainly cannot be brought under the principle that the arbitrators have ex facie exceeded the authority or jurisdiction conferred on them by the Contract.
At worst, what can be said is that they may have committed an error in deciding the issue referred to them but the error is not apparent on the face of the award even if the contract is read as part of it both because the arbitrators have not given their reasoning and because the view taken by them of the relevant terms of the contract cannot be said to be clearly erroneous.
In a matter on which the contract is open to two equally plausible interpretations, it is legitimate for the arbitrators to accept ' one or the other of the available interpretations and, even if the Court may think that the other view is preferable, the Court will not and should not interfere.
This view is too well settled to need any reference to any precedent other than Sudershan Trading Co 's case referred to earlier.
That is why we think that this case does not fall within the principle referred to by Shri Banerjee and that Dr. Ghosh is right in his submission that the Division Bench exceeded its jurisdiction in inter fering with this part of the award.
Turning now to the appeal of the Union of India, there is really no dispute about the first contention regarding the amount on which interest is payable to the contractors.
The correct computation should stand as follows in the light of our findings in the contractors ' appeal: Compensation awarded 57,47,198 by arbitrator Less: Interest element therein [item (1)] 6,76,540 Net principal amount awarded 50,70,658 651 Less:Amount deleted by learned Single Judge 5,20,000 45,50,650 The contractors will be entitled to interest on this amount.
What is the period with reference to which interest would be payable on the above amount? The arbitrators had allowed interest on the amount awarded by them from 5.10.82 to 26.3.84 under item (1) and had also allowed interest from the date of the award till the date of payment or decree, whichever is earlier.
Of this, the learned Single Judge had deleted the interest for the period 5.10.82 to 6.5.83 and what remains is the award of interest from 6.5.83 till the date of payment.
There are two disputes as to this.
The first objection raised on behalf of the Union is that the contractors will not be entitled to any interest for the period from the date of reference to arbitration (6.5.1983) till the date of the award (26.3.1984).
On behalf of the contractors, Dr Ghosh refutes this contention.
He relies upon the decision of this Court in Executive Engineer vs Abhaduta Jena.
[1988] 1 SCC 418 and contends that, in all cases where, as in this case, arbitrators are appointed by Court and disputes referred to them for arbitration, pen dente lite interest can and should be awarded by the arbi trator.
He points out that, though initially in Seth Thawar das ' case some doubts were raised about the competence of the arbitrator to award interest, this Court has subsequently consistently held that an arbitrator can do this: vide, Nachiappa vs Subramaniam, ; ; Satinder vs Arnrao, ; ; Firm Madanlal vs Hukamchand Mills Ltd.; , ; Union vs Bungo Steel Furniture P. Ltd., ; ; Ashok Construc tion Co. Ltd. vs Union, and State vs Saith & Skelton P. Ltd., ; After referring to these and other cases, Chinnappa Reddy, J. in Abhaduta Jena, (supra) summed up the position thus: "15.
As a result of the discussion of the various cases, we see that Bengal Nagpur Railway Co. Ltd. vs Ruttanji Ranjit, 65 IA 66; Union of India vs West Punjab Factories, ; and Union of India vs Watkins & Co., AIR 1966 SC 275 were cases of award of interest not by an arbitrator, but by the court.
It was laid down in those three cases that 652 interest could not be awarded for the period prior to the suit in the absence of an agreement for the payment of interest or any usage of trade having the force of law or any provision of the substantive law entitling the plaintiff to recover interest.
Interest could also be awarded by the court under the Interest Act if the amount claimed was a sum certain payable at a certain time by virtue of a written instrument.
In regard to pendente lite interest, the provi sions of the Civil Procedure Code governed the same.
The question of award of interest by an arbitrator was considered in the remaining cases to which we have referred earlier.
Nachiappa Chettiar vs Subramaniam Chettiar, ; ; Satinder Singh vs Amrao Singh, ; ; Firm Madanlal Roshanlal Mahajan vs Hukumchand Mills Ltd., ; ; Union of India vs Bungo Steel Furniture Pvt. Ltd., [1967] I SCR 324; Ashok Construction Co. vs Union of India, and State of Madhya Pradesh vs M/s. Saith & Skelton Pvt. Ltd., ; were all cases in which the reference to arbitration was made by the court, of all the disputes in the suit.
It was held that the arbitrator must be assumed in those circumstances to have the same power to award interest as the court.
It was on that basis that the award of pendente lite interest was made on the principle of Section 34 Civil Procedure Code in Nachiappa Chettiar vs Subramaniam Mills Ltd., (supra); Firm Madanlal Roshanlal Mahajan vs Hukumchand Mills Ltd., (supra); Union of India vs Bungo Furniture Pvt. Ltd., (supra) and State of Madhya Pradesh vs M/s Saith & Skelton Pvt. Ltd., (supra).
In regard to interest prior to the suit, it was held in these cases that since the Interest Act, 1839, was not applicable, interest could be awarded if there was an agreement to pay interest or a usage of trade having the force of law or any other provision of substantive law entitling the claimant to recover interest.
Illustrations of the provisions of substantive law under which the arbitrator could award interest were also given in some of the cases.
It was said, for instance, where an owner was deprived of his property, the right to receive interest took the place of the right to retain possession, and the owner of immova ble property who lost possession of it was, therefore, entitled to claim interest in the place of right to retain possession.
It was further said 653 that it would be so whether possession of immovable property was taken away by private treaty or by compulsory acquisi tion.
Another instance where interest could be awarded was under Section 61(2) of the Sale of Goods Act which provided for the award of interest to the seller or the buyer, as the case may be, under the circumstances specified in that section.
XXX XXX XXX 18.
While this is the position in cases which arose prior to the coming into force of the , in cases arising after the coming into force of the Act, the position now is that though the award of pendente lite interest is still governed by the same principles, the award of interest prior to the suit is now governed by the .
Under the , an arbitrator is by defini tion, a court and may now award interest.
in all the cases to which the applies.
" Sri Milon Banerjee, appearing for the Union of India, however, contends that the above principle is applicable only in cases where an arbitrator is appointed on interven tion of count as contemplated in Chapter IV of the Arbitra tion Act.
It is only in these cases that the arbitration proceedings can be considered to be a continuation of the court proceedings, empowering the arbitrator to do all that the court could do.
For, even in cases arising after the , the award of pendente lite interest can only be in terms of the provisions of section 34 of the Code of Civil Procedure and this cannot be invoked in cases of arbitration except in cases falling under Chapter IV merely on the ground that the appointment of the arbitrator is made under section 8, 12 or 20 of the said Act.
Counsel submits that Chinnappa Reddy, J. has pointed out in Abhadhuta Jena 's case [ [1988] 1 SCC at pp.
434 5] that in all cases whether arising before or after the , the claimants would not be entitled to interest from the date of reference to the date of the award for the simple reason that "the arbitrator is not a court nor were the references to arbi tration made in the course of suits".
It is this principle that has been reiterated in Food Corporation of India vs Surendra, Devendra & Mohendra Transport Co., (at pp.
554 et seq) and Gujarat Water Supply & Sewage Board vs Unique Erectors, ; There is force in the contention urged by Sri Banerjee.
There are 654 passages in Abhaduta Jena which indicate that the grant of pendente lite interest would be justified only when the reference to arbitration is made in the course of a suit: vide, the last sentence on p. 428, the first sentence on p. 429, the emphasis added in the extracts from earlier judg ments on pp.
430 1, and the summings up at p. 433 and 435.
The principle indicated in these passages apparently is that since a Court has, under section 34, of the C.P.C., power to grant pendente lite interest in a suit, an arbitrator to whom a reference to arbitration is made in the course of the suit would be clothed with all the powers of the Court including the one to grant such interest.
This is how this Court has also looked at the matter in a subsequent case.
In State of Rajasthan vs Sharrna & Co., ; , the parties had entered into a compromise in certain proceedings in Court agreeing that their disputes would be settled by arbitration but the arbitrators were appointed subsequently by the parties themselves and a reference made to them.
A Bench of this Court (of which one of us was a member) re viewed the earlier cases and explained the decision in Abhaduta Jena thus: "12.
This was awarding interest pendente lite.
This is in violation of the principles enunciated by this Court in Executive Engineer (Irrigation), Balimela vs Abhaduta Jena.
Our attention was drawn by Shri Soli J. Sorabjee, counsel for the respondent, to the decision of this Court in Food Corporation of India vs M/s Surendra, Devendra & Mohendra Transport Co., where at pages 555 556 of the report, the Court referred to certain decisions cited by Chinnappa Reddy, J. in Executive Engineer (Irrigation) in which he had expressed the view that those were cases in which the refer ences to arbitration were made by the court or in court proceedings of the disputes in the suit.
In that context it was held in those cases that the arbitrator had power to grant interest.
It was contended before us that this was a similar case.
There was a court proceeding in this case regarding the appointment of the arbitrator and, as such, on the same analogy it should be treated that the arbitrator had power to grant interest.
We are unable to accept this.
What Mr. Justice O. Chinnappa Reddy meant to say by the latter judgment in Executive Engineer (Irrigation) case, referred to in Food Corporation of India was where the disputes regarding the merit of the case were pending in the court and such disputes instead of being decided by the 655 court, adjudication had been referred to an arbitrator by the court, in such cases the arbitrators deciding in the place of court, would have the same powers to grant interest pendente lite as the courts have under Section 34 of the Civil Procedure Code.
Instant case is not such a proceeding.
" This principle would logically be applicable, as rightly contended by Shri Banerjee, only to cases where the refer ence to arbitration arises in the course of a suit.
Dr. Ghosh, however, submits that, except for Nachiappa vs Subramaniam, ; and Hukumchand Mills; , , the other cases referred to by Chinnappa Reddy, J. were all only cases in which an arbitrator had been appointed under section 8 or 20 of the Arbitration Act.
The principle enunciated, he submits, was actually a little wider than that contended for by Shri Banerjee.
It is this that where an arbitrator is appointed by the Court and a reference is made to him, he has all the powers of the Court.
He invites attention to the observations in Hukum chand Mills, case ; , reiterated (in the context of post award interest) in Union vs Bungo Furniture Co., ; at p. 329) that it is "an implied term of the reference that the arbitrator will decide the dispute according to law and would give such relief with regard to pendente lite interest as a Court could give if it decided the dispute".
He urges that Abhaduta Jena related to a batch of cases, arising out of references made prior to, and later than, the commencement of the , but by the parties themselves under the terms of the contract, without reference to court and so it was held that pendente lite interest could not be granted.
But that is not so in the present case.
He says that this decision was simply followed in State vs Construction India, ; , in the Food Corporation case and in State vs Sharma and Co., ; The Gujarat Water Supply case [1989] ISCC 532 was, he urges, also a similar case (see para 5) though in that case there appear to have been some proceedings in Court earlier.
In short, he virtually submits that Abhaduta Jena and Sharma 's case have unduly restricted the grant of pendente lite interest and require reconsideration and that pendente lite interest should be awarded in all cases where the intervention of Court is sought for the appointment of arbitrators, directly or indirectly, at any stage.
Generally speaking, it would only seem reasonable that the power to grant interest pendente lite should be treated as ancillary to the award of damages or compensation which, but for the delay in the 656 litigation (whether in Court or by way of arbitration), the claimant should have received much earlier.
However, though pendente lite interest has been made available in Court proceedings, its extension to arbitration law appears to have acquired some technical limitations resulting in denial of pendente lite interest in most cases of arbitration.
Even if we accept the contention of Dr. Ghosh, pendente lite interest cannot still be awarded by an arbitrator appointed by the parties under a private agreement for which there may be no justification in equity.
These anomalies have arisen because formerly an arbitrator could not be treated as a Court to which the Code of Civil Procedure applied and because now the , while including arbitra tion proceedings within its ambit, has, apart from a refer ence to section 34, omitted to provide specifically for pendente lite interest.
This has been clearly brought out by Chinnap pa Reddy, J. We have earlier referred to passages from Abhaduta Jena which outline the principle the learned Judge had in mind for permitting pendente lite interest by an arbitrator.
It is interesting, in fact, to notice that the present contentions of Dr. Ghosh (based on certain earlier decisions of this Court) appear to have been advanced by him in the Food Corporation case to support a wider contention that pendente lite interest should be awarded even in an arbitration by private agreement (as in that case) so long as the terms of the arbitration agreement did not exclude the jurisdiction of the arbitrator to enter tain such a claim.
But the Court did not accept the conten tion and followed Abhaduta Jena.
Abhaduta Jena has been followed in later cases also and its scope has been recently explained in Sharma 's case ; We may point out that in the latter case, a specific point was raised that since the Court had been concerned with the appointment of the arbitrator at some stage it should be treated as a reference to arbitration by court warranting the grant of pendente lite interest but this contention was negatived and the principle confined only to cases where a reference to arbitration is made in the course of suits.
The position was similar in the Gujarat Water Supply case ; but pendente lite interest was denied.
In view of Abhaduta Jena and the clarification specifically set out in para 13 of Shartna 's case, we are unable to accede to the contention of Dr. Ghosh, attractive as it is an equitable proposition.
The Division Bench of the High Court had no occasion to consider the above recent pronouncements of this Court.
Further, it is seen that, before the Division Bench, the Union took an objection that under clause 16(2) of the general conditions of contract, the contractors could claim no interest on the amounts that may be determined as 657 payable to them.
The Division Bench met this contention by relying on a circular issued by the Government of India making the claim for interest entertainable in arbitration "if notice had been issued in this behalf by the arbitrator".
There is, however, no finding and nothing on record brought to our notice to show that any specific notice, claiming interest, had been given as contemplated by the contract.
Having regard to all these considerations, we are unable to uphold the order of the Division Bench on this issue.
This takes us to the second point urged on behalf of the Union in regard to interest.
The contention is that the learned Single Judge had restricted it to the date of the award, and that this has become final as the contractors have preferred no appeal therefrom.
The grounds of appeal before us by the Union are confined only to the mistake in not taking into account the sum of Rs.6,76,540 and do not raise any question regarding post award interest.
It is, therefore, not open to Shri Banerjee to raise this question.
That apart, on merits also the contention raised that post award interest has been declined by the High Court is not correct.
The contention overlooks the course of pleadings between the parties.
The arbitrators had, in the annexure to the award, computed interest from 5.10.82 to 26.3.84 i.e. from the date of the termination of the contract till the date of the award and in the award, had granted interest on the amount awarded from the date of award till the date of decree or payment.
A point had been raised before the High Court in the memo of objections that the arbitrators had erred in awarding interest in the manner mentioned in the award but the objection urged by the Union before the learned Single Judge was a different one viz. that the arbitrators ought not to have granted interest for the period prior to the date of reference without any agreement or right in law to claim such interest.
It is this conten tion that was accepted by the learned Single Judge who deleted the interest award prior to the date of the refer ence and held that the arbitrators had jurisdiction to award interest from the date of the reference till the date of the award.
This did not affect the arbitrator 's direction in the main part of the award, that interest will accrue on the amount of the award (if the said amount was not paid within 60 days) till the date of payment or decree, whichever is earlier.
This part of the award was not questioned.
In fact, the decree drawn up in consequence of the order of the learned Single Judge, specifically directs (a) interest on the awarded amount from 6.5.83 (date of reference) to 26.3.84 (date of the award ); (b) "thereafter, interest on the amount ' awarded at 11% from 27.3.84 to 11.12.84" (date of the decree); and (c) interest thereafter at 658 9% per annum.
The objection of the Union in the LPA on the question of interest was only that the arbitrators had erred in awarding interest from 6.5.1983 to 26.3.1984.
It is this contention that was accepted by the Division Bench.
The High Court had, therefore, not decided that the contractors were not entitled to interest beyond the date of the award.
This contention of the Union, therefore, fails and is rejected.
In the result C.A. 1280/88 is allowed and C.A. 128 1/88 is allowed in part.
There will be no order as to costs.
R.N.J. Appeals allowed.

summary:
Certain disputes having arisen between the Union of India and the Contractors in respect of the Contract awarded to the letter for the execution of certain civil works pertaining to the Metro Railway Project in Calcutta, the same were referred for decision to two Arbitrators appointed by the High Court of Calcutta.
The Contractors filed their itemised claim before the Arbitrators for a total sum of Rs.2,05,67,554.
The Arbitrators awarded a sum of Rs.57.47,198 to the contractors in full and final settlement of all their claims which included a sum of Rs.6.76,540 as interest vide item (1).
They directed that the award shall be complied with within sixty days of its publication fail ing which simple interest @ 11 percent per annum shall accrue thereon (excluding interest amount of Rs.6.76,540) till the date of payment or decree upon award which ever is earlier.
On an application being made to the High Court for making the Award a rule of the Court.
the learned single judge confirmed the award except that the principal sum awarded was reduced by Rs.5,20,000 with the direction that the amount so awarded will carry interest @ 11% per annum from the date of reference till the date of the award.
639 The Union of India preferred an appeal to the Division Bench, which reduced the amount awarded under item (c)(xii) from Rs.23.96.000 to Rs.2.39,000.
Thus the principal amount to be awarded to the contractors was finally put at Rs.30.70,798 and this amount was directed to carry interest @ 11% per annum from the date of the reference till the date of the award.
Aggrieved by the order of the Division Bench reducing the amount awarded under item (c)(xii) from Rs.23,96,000 to 239,600 the contractors preferred an appeal to this Court.
The Union of Indian on the other hand preferred a cross appeal praying (i) that interest should not be payable on the amount of Rs.30,70,798 fixed by the High Court but only on Rs.23,94,258 left after deducting therefrom the amount of Rs.6,76,540 awarded by the Arbitrators in respect of item No. (L) and (ii) that.
though the arbitrators had also awarded interest on the principal sum till the date of payment or decree on award in case payment was not done within sixty days of the publication of the award.
the contractors should be held entitled to interest upto the date of the award only and not beyond it because both the learned single judge and the Division Bench have held so and the contractors have preferred no appeal therefrom.
Taking up the contractor 's appeal first, this Court came to the conclusion that the Division Bench had exceeded its jurisdiction in interfering with this part of the award and restored the amount awarded by the arbitrators under item (c)(xii).
Dealing with the appeal of the Union of India this Court ruled that there was really no dispute left about Union of India 's first contention as to what was the correct amount on which interest was payable to the contractors after its findings in the contractor 's appeal and placed the figure at Rs.45,50,658.
Dealing with the second contention as to what was the period with reference to which interest would be payable to the contractors on the above amount it was noticed that the arbitrators had allowed interest from 5.10.82 (date of termination of contract) to 26.3.84 (date of award) under item (L) and had also allowed interest from the date of the award till the date of payment or decree whichever is earli er.
The learned single judge had deleted the interest for the period 5.10.82 to 6.5.83 (date of reference) but held that the arbitrators had jurisdiction to award interest from the date of the reference till the date of award and also post award interest.
As the objection of the Union of India 640 before the Division Bench in the LPA on the question of interest was only that the arbitrators had erred in awarding interest from 6.5.1983 to 26.3.1984 the High Court had not decided that the contractors were not entitled to interest beyond the date of award and therefore this contention of the Union of India failed and was rejected.
The Court.
HELD: The grant of pendente lite interest would be justified only when reference to arbitration is made in the course of a suit.
The principle indicated is that since a court has.
under section 34 of power to grant pendente lite interest in a suit.
an arbitra tor to Whom a reference to arbitration is made in the course of the suit would be clothed with all the powers of the court including one to grant such interest.
Generally speak ing.
it would only seem reasonable that the power to grant interest pendente lite should be treated as ancillary to the award of damages or compensation which.
but for the delay in the litigation (Whether in court or by way of arbitration).
the claimant should have received much earlier.
However.
though pendente interest has been made available in court proceedings.
its extension to arbitration law appears to have acquired some technical limitations resulting in denial of pendente lite interest in most arbitration cases.
Pendent lite interest cannot still be awarded by an Arbitrator appointed by the parties under a private agreement for which there may be no justification in equity.
Anomalies have arisen because formerly an Arbitrator could not be treated as a court to which the code of civil procedure applied and because now the Interest act, 1978, while including arbitration proceed ings within its ambit, has, apart from a reference to section 34 omitted to provide specifically for pendente lite interest.
This has been clearly brought out by Chinnappa Reddy, J., in Abhaduta Jena which outline the principle the learned judge had in mind for permitting pendente lite interest by arbi trator.
Abhaduta Jena has been followed in later cases also and its scope has been recently explained in Sharma 's Case , and the Gujarat Water Supply case where pendente lite interest was denied.
[655H; 656A F] Gujarat Water Supply & Sewage Board vs Unique Erectors, ; ; Firm Madan Lal Roshan Lal Mahajan vs Hukumchand Mills Ltd., lndore; , ; Allen Berry & Co. Pvt. Ltd vs Union of India, ; N. Chellappan vs Secretary, Kerala State Electricity Board & Anr., ; ; Hindustan Tea Co. vs
K. Shashi Kant Co. & Anr., ; Hindustan Steel Works Construction Ltd. vs C. Rajasekhar Rao, [1987] 4 S.C.C. 93; Sudarsan Trading Co. vs Government off Kerala & Anr. ; M/s. Alppi Prashad & Sons, Ltd. vs 641 Union of India; , ; Bhagat Trading Co. vs Union of India, AIR 1984 Delhi 358; Union of India vs Bakshi Ram, [1957] LIX P.L.R. 572; Executive Engineer vs Abhaduta Jena, [1988] 1 S.C.C. 418; Nachiappa vs Subramaniam, ; Satinder vs Amrao, ; ; Union vs Bungo Steel Furniture P. Ltd., ; ; Ashok Construction Co. Ltd. vs Union, ; State vs Saith & Skelton P. Ltd., ; ; Food Corpora tion of India vs Surendra, Devendra & Mohendra Tansport Co., and State of Rajasthan vs Sharma & Co., ; , referred to.


judgement:
ivil Appeal No. 1135 of 1981.
From the Judgment and Order dated 15.12.1980 of the Allahabad High Court in Civil Writ Petition No. 1096 of 1974.
R.N. Trivedi, R. Ramachandran and Ms. Sadhna Ramachan dran (N.P.) for the Appellant.
Anil Deo Singh, Gopal Subramanium, Ms. section Dikshit, S.S. Hussain, S.A. Syed, R.S.M. Verma and Shakil Ahmed Syed for the Respondents.
The Judgment of the Court was delivered by KULDIP SINGH, J.
Karamat Husain Muslim Girls College, Luc know (hereinafter called the 'College ') is being managed by Anjuman Muslimat e Hind which is a society registered under the .
The avowed object of the society is to advance the cause of education among the women of India.
The College has been recognised by the State of Uttar Pradesh as a religious 701 minority institution within the meaning of Article 30(1) of the Constitution of India and is an affiliated associate of Lucknow University.
The post of lady Principal in the degree section of the college was advertised on April 5, 1974 indicating the following qualifications/ requirements: (1) First or good second class Masters Degree in any of the subject taught in the institution; (2) At least five years experience of teaching degree classes as also administrative experience; (3) Must possess working knowledge of Urdu; (4) Willing to reside in the college premises.
In response to the advertisement the appellant along with others applied for the post.
The appellant did not fulfil the qualification of five years experience.
She alone appeared for the interview and the Selection Committee relaxed the qualification of experience in her favour and selected her.
The Management thereafter sought the approval of the University to appoint the appellant as required under Section 31(11) of the Uttar Pradesh State Universities Act, 1973 (hereinafter called the 'Act ').
The University, howev er, declined to approve and directed the management to re advertise the post.
The appellant challenged the decision of the University by way of a writ petition under Article 226 of the Constitution of India before the Lucknow Bench of the Allahabad High Court on the ground that the college being a minority institution any interference by the University under the Act is violative of Article 30(1) of the Constitu tion.
It was also contended that there was no basis or justification to withhold the approval.
The High Court rejected the attack on the ground of Article 30 of the Constitution of India by holding that the provisions of the Act are regulatory and are primarily for the purpose of maintaining uniformity, efficiency and stand ards of education in the minority institutions.
On the merits the High Court held that the Selection Committee was not justified in relaxing the qualification without reserv ing that fight to itself in the advertisement.
The High Court also found that the qualification "possessing working knowledge of Urdu" was unjust On the above findings the writ petition was dismissed.
This 702 is how the appellant is before us via Article 136 of the Constitution of India.
The High Court has tightly held the relaxation granted by the Selection Committee to be arbitrary.
In the absence of statutory rules providing power of relaxation, the adver tisement must indicate that the Selection Committee/Appoint ing Authority has the power to relax the qualifications.
Regarding "Working knowledge of Urdu" we do not agree with the High Court that the said qualification is unjust.
The college being a Muslim minority institution prescribing the said qualification for the post of Principal, is in conform ity with the object of establishing the institution.
In the view which we are taking in this case it is not necessary to go into the argument based on Article 30(1) of the Constitution of India.
We heard the arguments in this case on February 23, 1990 and adjourned the case with the following order: "It is admitted by the parties that as a result of the Court orders the appellant Ms. Shainda Hasan is continuing to work as Principal in the Karamat Husain Muslim Girls College, Lucknow since 1974.
Having served the institution for over 16 years it would be unjust to make her leave the post.
Under the circumstances let the University reconsider the whole matter sympathetically.
" The case was taken up in Chambers on April 20, 1990 when Mrs. Shobha Dixit learned counsel for the State after ob taining instructions from the University agreed with us that asking the appellant to leave the job after sixteen years would be doing injustice to her.
Keeping in view the facts and circumstances of the case and in the interest of justice we direct the Lucknow Univer sity and its Vice Chancellor to grant the necessary approval to the appointment of the appellant as Principal of Karamat Husain MusIim Girls College, Lucknow, with effect from the date she is holding the said post.
We further direct that the appellant shall be entitled to the salary,allowances and all other consequential benefits to which a regular princi pal of the said college would have been and is entitled.
We dispose of the appeal with the above directions.
There shall be no order as to costs.
T.N.A. Appeal dis missed.

dataset_name: IN-Abs

summary:
The respondent college, a religions minority institu tion, invited application for the post of Principal from candidates possessing First or Second class Master 's Degree, five years teaching experience and possession of working knowledge of Urdu.
The Selection Committee selected the appellant by relaxing the qualification of experience in her favour but the University declined its approval to the appointment under Section 31(11) of the Uttar Pradesh State Universities Act, 1973 and directed the Management Committee to readvertise the post.
The appellant challenged the University 's decision before the High Court contending that the college being a minority institution any interference by the University under the Act was violative of Article 30(1) of the Consti tution and that there was no justification to withhold the approval.
The High Court rejected the attack on the ground of Article 30 by holding that the provisions of the Act were regulatory but held that the Selection Committee was not justified in relaxing the qualification and that the quali fication 'possessing working knowledge of Urdu ' was unjust.
Hence this appeal by special leave.
700 Dismissing the appeal, this Court, HELD: 1.
In the absence of statutory rules providing power of relaxation, the advertisement must indicate that the Selection Committee/Appointing Authority has the power to relax the qualifications.
The High Court has rightly held the relaxation granted by the Selection Committee to be arbitrary.
[702B] 2.
The college being a Muslim minority institution, the prescribing of the qualification of possession working knowledge of Urdu for the post of Principal, is in.
conform ity with the object of establishing the institution.
The said qualification is not unjust.
[702B] [In the interest of justice and in view of the facts and circumstances of the case, the Lucknow University and its Vice Chancellor are directed to grant the necessary approval to the appointment of the appellant to the post of Principal of College, which the appellant is holding as a result of the Court orders, with effect from the date she is holding the said post, and the appellant shah be entitled to salary, allowances and all other consequential benefits to which a regular Principal of the said college would have been enti tled.] [702G]


judgement:
ivil Appeal No. 3566 of 1989.
712 From the Judgment and Order dated 17.2.1989 of the Gauhati High Court in F.A. No. 7 of 1972.
K.N. Bhatt, H.N. Salve, A.K. Sil and G. Joshi for the Appel lant.
section Parekh for the Respondent.
The Judgment of the Court was delivered by K. JAGANNATHA SHETT, J.
The question of law which is concerned in this appeal is whether in the circumstances of the case, the appellant ("Bank") was required to act as agent of the respondent or as bailee in respect of goods entrusted for delivery to the respondent against payment.
In 1945 the respondent was carrying on the business of wholesome and retail dealership in textile yarn and cloth at Agartala and in the course of that business he was appointed as a Government nominee to indent for and lift the quanti ties of cloth and yarn to Agartala from different mills situated in Bengal, Bombay, Ahmedabad and other places.
For the purpose of that business, the respondent had maintained Current Account No. 391 with the Agartala Branch of the United Commercial Bank Limited which has since been styled as 'UCO Bank ', the appellant in this appeal.
The case of the respondent plaintiff was that there was an oral agreement with the Bank on September 2, 1950 under which the latter inter alia was to receive bills, documents and air receipts sent by or on behalf of the plaintiff from his agents or suppliers and would release and/or take delivery of goods sent by them, as and when the goods arrive at Agartala.
The Bank would hold or keep the said goods stored in its godown for and on behalf of and on account of the plaintiff for his benefit etc.
It was also alleged that payment of the bills in respect of goods dispatched to the Bank should be made by the plaintiff.
He should be given delivery of the goods and air receipts by the Bank according to his convenience and requirement.
It was further stated that under the said terms and conditions, the Banker consti tuted himself and acted as an express trustee and/or agent of the plaintiff in relation to the said goods and air receipts and thus stood in fiduciary relationship with the plaintiff.
713 Complaining non delivery of goods even after receiving payment thereof, the plaintiff brought a suit for accounts, damages, compensation and delivery of goods or their equiva lent in money valued at Rs.2,68,198.97.
The Bank has denied all the allegations and asserted that it never acted as an agent, trustee or depositee of the plaintiff in respect of the goods and documents.
The exist ence of fiduciary relationship between the parties was also denied.
It was however stated that certain parties from Calcutta were supplying goods to various parties in Agartala including the plaintiff and they used to send bills with air receipts Covering the goods to the Bank for presentation to the drawees and the Bank would deliver the same against payment.
The Bank collected bill amounts on behalf of those parties in the usual course of business.
It was further admitted that some parties from Calcutta engaged the Bank to collect the amounts of the bills drawn on the plaintiff, to clear the goods dispatched by them from the Airways on their behalf, to store them in Bank 's godown and to allow the drawee (plaintiff) to take delivery of the goods against payment of their costs and charges including the salaries of the godown staff, handling and insurance charges etc.
Those charges and costs were recovered from the plaintiff by the Bank on behalf or ' the parties sending the goods to the plaintiff.
The Bank maintained that it had dealt with such goods of the Calcutta parties, recovered monthly charges at the instructions of the drawers and the drawee (plaintiff) and debited to the account of the plaintiff.
When there was no amount available in the plaintiff 's account or when the plaintiff defaulted in retiring the bills, the said charges were recovered from the drawers.
The goods in the custord of the Bank on behalf of the Calcutta parties which were paid for by the plaintiff would be delivered to the plaintiff and the goods for which no payment was made by the plaintiff would be returned to the drawers of the bills.
The trial court framed among others, the following three issues: (9) Was there any agreement and/or arrangements between the parties as alleged in the plaint? 10) Was the defendant a trustee and/or agent of the plaintiff as alleged in the plaint? and (11) Was there any fiduciary relationship between the parties as alleged by the plaintiff? 714 The trial court recorded findings on all these issues in the affirmative and in favour of the plaintiff.
On Issue No. (9) as to the existence of agreement, it was observed: "The evidence on record shows that regular accounts of goods for the plaintiff would be maintained by the defendant Bank.
Although the purpose of current account No. 391 of the plaintiff cannot alter the nature being that of debtor and creditor attributable to the account, the factum of the account and its operation also indicate that there was an agreement between the parties.
This does not however exclude necessary agreement or arrangement by the bank with the Calcutta parties.
Debits in the account of the plaintiff started to be made from 13.9.50 in connection with transac tions of the plaintiff, whereas the alleged agreement be tween the bank and S.T. Bros, occured in March, 1951.
All these factors lead to the inference that there was an agree ment or arrangement between the bank and the plaintiff regarding payment of bills and charges for the account of the plaintiff and otherwise and regarding storing of those goods received by the Bank in its godowns, of which the plaintiff came to be owner and for delivery of those goods as and when required by the plaintiff.
These are the minimum terms deducible from the evidence on record.
To this extent the issue is answered in favour of the plaintiff." Issue No. (10) was determined as follows: "It is in evidence that the Bank collected bills, made remittances to mills, applied for purchasing drafts on behalf of the plaintiff, met expenses of storing the goods by debiting account No. 391 of the plaintiff, collected treasury bills of the plaintiff and vide Ext.
P 56 series made adjustment of bills by debiting account No. 391 without cheques issued by the plaintiff and did similar other works.
All this leads to the reasonable inference that the bank also acted as agent of the plaintiff.
In this suit, such agency of the defendant involved a relation of trust and confidence and the goods which came to be owned by the plaintiff on payment of value thereof and which remained in the hands of the bank were impressed with trust for the benefit of the plaintiff.
As matter of fact, the defendant bank 's position 715 was that of an intermediary owing duties to both the Cal cutta parties and the plaintiff." Issue No. (11) as to the fiduciary relationship between the Bank and plaintiff, it was remarked: "The bank collected cheques issued in its favour and under advice of the plaintiff remitted the money to the mills and the Calcutta parties to meet the value of the bills drawn by the mills and the agents of the plaintiff (Calcutta parties).
It has to be noted in this connection that the Calcutta parties acted as agents of the plaintiff in so far as they acted on behalf of the plaintiff in lifting the controlled commodities from the mills and arranging for their dispatch to Agartala.
The bank also made adjustment of bills by debiting account No. 391 without any cheques being issued by the plaintiff, vide Ext.
P 56 series, and met the expenses of storing the goods by debiting from the account No. 391 of the plaintiff.
From Ext.
P 61, stock register, it is seen that the bank stocked goods on account of the plain tiff in its godowns on those premises, according to the learned counsel for the plaintiff, there is no escape from the conclusion that the bank stood in a fiduciary relation ship with the plaintiff.
Learned counsel for the defendant bank urged that save and except relationship of banker and customer there was no other relationship between the plain tiff and defendant bank.
But in view of the materials on record I find that there was fiduciary relationship between the plaintiff and the defendant bank.
This issue is decided in favour of the plaintiff." Accordingly, the suit was decreed in part directing delivery of goods or the value equivalent to Rs.1,26,500.
A Commis sioner was also appointed to take accounts with regard to the transactions.
The High Court of Calcutta has affirmed the decree of the trial court.
As to the question of relationship between the Bank and customer, the High Court observed: "In our opinion if we find that the plaintiff paid the value of the goods and the appellant bank neither delivered the goods nor rendered accounts, a fiduciary relationship could exist between the plaintiff and the bank in respect of the 716 goods for which value was paid by the plaintiff." The Bank by obtaining leave has now appealed to this court.
In opening the appeal, Counsel for the appellant urged that the case of the plaintiff based on oral agreement which is expressly contrary to banking transactions ought not to be relied upon.
It was claimed that the Bank was a collect ing agent for the supplier of goods and not an agent or trustee for the respondent.
Adjustment of bills by debiting to the current account without cheques from the respondent would not change the ordinary relationship of bank and customer.
There was no 'special relationship ' created either by opening the current account or storing the goods meant for delivery to the plaintiff and there was nothing to take the parties outside the usual course of banking business.
It was further argued that the Bank received and took charge of the goods only as bailee and any inference of fiduciary relationship between parties was unwarranted and unjusti fied.
Counsel for the appellant appears to be very particular to get rid of the finding recorded by the Courts below as to the fiduciary relationship in bank and customer relation ship.
We agree with him that the High Court and the trial court were not justified in holding that a fiduciary rela tionship could exist between the parties in respect of goods for which the suit claim was based.
This inference was drawn primarily from the debit entries in the plaintiff 's current account.
Reference was made to collection of bills, remit tances to mills, meeting expenses of storing the goods and debiting the same to the current account even without cheques from the plaintiff.
These acts according to the trial court would lead to an inference that the Bank acted as agent of the plaintiff and there was thus fiduciary relationship between parties.
But we do not find anything in this method of operation to take the parties outside the ordinary relationship of banker and customer.
Lord Chorley says that "the main mass of daily banking activity in branch banks is concerned with the operations of current accounts which thus provide a sort of hub round which the wheels of the whole set up of commercial banking revolve . .
There is no accepted definition of a current account; though in its normal form it is easily recognised in practice.
The principal feature of such an account is the fact that the customer gets his money repaid from it, or any advances which he is receiving from his banker by way of loan: and this is so whether the repayment is to himself or to a third party.
Normally the repayment is made through the machinery of the cheque and conversely unless otherwise indicated by the customer it is implied that 717 cheques paid in are for the credit of the current account, and that they will be so credited . .
We have seen that overdrawings by the customer when allowed by the banker are treated as loans. ' They will be debited to the current account.
Indeed it is through the current account, and by means of overdrafts on it that loans and advances are nor mally made by bankers to their customers".
(Law of Banking by Lord Chorley 6th ed.
at 167 168).
In Paget 's Law of Banking, 9th ed.
at 82 83, it is stated that "the current or drawing account may be either a credit or an overdrawn account.
A credit account is made up of moneys paid in by the customer, the proceeds of cheques and bills collected for him, coupons collected, interest and dividends paid direct to the banker and from various other sources, less any money properly paid out.
Moneys from different sources, once they have found their way into the current account, are treated as one entire debt.
" This is the normal method of banking operation and the maintenance of the current account in this case appears to be not outside this principle and therefore, no inference could be drawn that the Bank stood in fiduciary relationship with the plaintiff.
Next question for consideration is whether the Bank acted as agent of the plaintiff in respect of the goods in question? Here also Counsel appears to be right in his submission.
Banks take charge of goods, articles, securities as bailee and not as trustee or agent.
Bailment is the delivery or transfer of possession of a chattel (or other item of personal property) with a specific mandate which requires the identical res either to be returned to the bailor or to be dealt with in a particular way by the bailee as per directions of the bailor.
One important distinguish ing feature between agency and bailment is that the bailee does not represent the bailor.
He merely exercises, with the leave of the bailor (under contract or otherwise), certain powers of the bailor in respect of his property.
Secondly, the bailee has no power to make contracts on the bailor 's behalf; nor can he make the bailor liable, simply as bailor, for any acts he does.
(See Fridman 's Law of Agency 5th ed.
p. 23).
In the instant case, there is nothing to indicate that the Bank represented the Calcutta parties or the plain tiff with authority to change the contractual or legal relationship of parties and therefore, there is no justifi cation to hold that the Bank acted as agent of the plain tiff.
But that however, does not mean that the Bank could succeed in this appeal.
Having regard to the finding of fact recorded by the Courts below, it is immaterial whether the Bank acted as bailee or in any other capacity.
On the evi dence adduced by the parties it has been 718 established that the plaintiff did pay the price of the goods in respect of which he based his claim in the suit.
The Bank, however, took the plea that the goods were deliv ered to one Shishu Ranjan Sen, who was the authorised agent of the plaintiff.
But at the relevant time the plaintiff had his own agent called Dhani Ram and he did not receive the goods.
The Bank has neither examined Shishu Ranjan Sen nor Dhani Ram.
The Bank examined one Dhawan (DW 2) to prove some initials of Shishu Ran jan Sen on certain documents but his evidence has not been accepted.
The fact, therefore, remains that the Bank having received the price of the goods from the plaintiff has failed to deliver the same to him.
This finding has not been seriously disputed and indeed cannot be disputed since the Bank having chosen not to call Shishu Ranjan Sen or Dhani Ram to give evidence.
The evidence adduced by the Bank was thus insufficient to establish the factum of delivery of goods to the plaintiff.
The banker bailee gratuitous or for reward is bound to take the same care of the property entrusted to him as a reasonably pru dent and careful man may fairly be expected to take of his own property of the like description.
(See: Halsbury 's Laws of England 4th ed.
3 para 93).
In fact a paid bailee must use the greatest possible care and is expected to employ all precautions in respect of the goods deposited with him.
If the property is not delivered to the true owner, the banker cannot avoid his liability in conversion.
(See: (i) The Law Relating to Banking by T.G. Reeday 4th ed.
p. 81; (ii) Law And Practice relating to Banking by F.E. Ferry 5th ed.
p. 21).
In the light of these principles the Bank could not avoid the liability to return the goods as agreed upon or to pay an equivalent amount to the plaintiff.
Even if we assume that the goods were delivered to a wrong person, the Bank has to own the responsibility to pay the plaintiff.
The liability of banker to customer in such a case is absolute even if no negligence is proved.
In Hals bury 's Laws of England (supra, para 94), it is stated "where the bank delivers the goods to the wrong person, whereby they are lost to the owner, the liability of the bank is absolute, though there is no element of negligence, as where delivery is obtained by means of an artfully forged order.
In law the banker could contract out of this liability, but he would be unlikely to do so in practice.
" Before parting with the case, we may also state that in practice, bankers do not set up the statute of limitations against their customers or their legal representatives, and we see no reason why this case should be an exception to that practice.
In the result, the appeal is dismissed with costs, but not for all the reasons stated by the trial court and the High Court.
N.P.V. Appeal dis missed.

summary:
The respondent, who was indenting and lifting goods from textile mills situated in different places, and was main taining a current account with the appellant Bank for this purpose, filed a suit against the Bank for accounts, dam ages, compensation and delivery of goods or their equivalent in money, for non delivery of goods despite receiving pay ment thereof, contending that there was an oral agreement with the appellant Bank, regarding receipt and payment of bills, etc.
and receipt and storage of goods on his behalf, and delivery of goods to him as and when required.
and that under the said terms and conditions.
the Banker constituted himself and acted as an express trustee and/or agent of the respondent in relation to the said goods and documents and thus stood in fiduciary relationship with the respondent.
The appellant.
denying the allegations, contended that it had never acted as an agent, trustee or depositee of the respondent in respect of the goods and documents and that no fiduciary relationship existed between the parties.
The trial court decreed the suit holding that from the evidence and entries in the current account, it could be inferred that there was agreement or arrangement between the parties, and the appellant acted as agent/trustee of the respondent.
and that there was fiduciary relationship be tween the parties.
The High Court, affirming the decree of the trial court.
held that 710 if the respondent had paid the value of the goods and the appellant Bank neither delivered the goods nor rendered accounts.
a fiduciary relationship could exist between the respondent and the Bank in respect of the goods for which value was paid by the respondent.
In the appeal, by special leave, on behalf of the appel lant Bank it was contended that the Bank was only a collect ing agent for the supply of goods, and not an agent or trustee for the respondent; adjustment of bills by debiting to the current account without cheques from the respondent would not change the ordinary relationship of bank and customer; no special relationship was created either by opening the current account or storing the goods meant for delivery to the respondent and there was nothing to take the parties outside the usual course of banking business; and the bank received and took charge of the goods only as bailee and any inference of fiduciary relationship between.
parties was unwarranted and unjustified.
Dismissing the appeal.
this Court.
HELD: 1.
The courts below were not justified in holding that a fiduciary relationship could exist between the par ties in respect of goods for which the suit claim was based.
This inference was drawn primarily from the debit entries in the respondent 's current account.
Collection of bills.
remittances to mills.
meeting expenses of storing the goods and debiting the same to the current account even without cheques from the respondent could not lead to an inference that the Bank acted as agent of the respondent and that there was fiduciary relationship between parties.
There is nothing in this method of operation to take the parties outside the ordinary relationship of banker and customer.
This is the normal method of banking operation and the maintenance of the current account in the instant case is not outside this principle.
[716D G] Law of Banking by Lord Chorley 10th ed.
at 167 168 and Paget 's Law of Banking, 9th ed.
at8.2 83.
referred to.
2.1 Banks take charge of goods, articles, securities as bailee and not as trustee or agent.
Bailment is the delivery or transfer of possession of a chattel or other item of personal property with a specific mandate which required the identical res either to be returned to the bailor or to be dealt with in a particular way by the bailee as per direc tions of the bailor.
One important ' distinguishing feature between agency and bailment is that the bailee does not represent the bailor.
He merely exercises.
with the leave of the bailor under contract or otherwise, certain 711 powers of the bailor in respect of his property and the bailee has no power to make contracts on the bailor 's be half: nor can he made the bailor simply as bailor liable for any acts he does.
[717D F] Fridman 's Law of Agency 5th ed.
p. 23, referred to.
In the instant case, there is nothing to indicate that the Bank represented some of the parties or the respondent with authority to change the contractual or legal relation ship of parties.
It cannot, therefore.
be held that the Bank acted as agent of the respondent.
[717G] 2.2 The banker bailee, gratuitous or for reward.
is bound to take the same care of the property entrusted to him as a reasonable, prudent and careful man may fairly be expected to take of his own property of the like descrip tion.
A paid bailee must use the greatest possible care and is expected to employ all precautions in respect of the goods deposited with him.
If the property is not delivered to the true owner the banker cannot avoid his liability in conversion.
[718C D] Having regard to the finding of fact recorded by the courts below, it is immaterial whether the Bank acted as bailee or in any other capacity.
On the evidence adduced by the parties it has been established that the respondent did pay the price of the goods in respect of which he based his claim in the suit.
The Bank having received the price of the goods from the respondent has failed to deliver the same.
This finding has not been seriously disputed and the evi dence adduced by the Bank was insufficient to establish the factum of delivery of goods to the respondent.
Therefore the bank could not avoid the liability to return the goods as agreed upon or to pay an equivalent amount to the respond ent.
Even if it is assumed that the goods were delivered to a wrong person, the Bank has to own the responsibility to pay the respondent.
The liability of the banker to customer in such a case is absolute even if no negligence is proved.
[717H; 718A; B, E] Halsbury 's Laws of England 4th ed.
3 paras 93 and 94.
The Law Relating to Banking by T.G. Reeday 4th ed.
p. 81 and Law and Practice relating to Banking by F.E. Ferry 5th ed.
p. 21, referred to.
In practice, the bankers do not set up the statute of limitations against their customers or their legal represen tatives.
There is no reason for making an exception to this practice in the instant case.


judgement:
No. 1275 of 1989 etc.
(Under Article 32 of the Constitution of India).
Ms. Rani Chhabra, K. Ramkumar, Govind Mukhoty and Vimal Dave for the Petitioners.
M.K. Ramamurthy (NP), K.K. Venugopal, H.S. Gururaj Rao, Ms. Chandan Ramamurthi, M.A. Krishnamurthi, T.V.S.N. Chaff, section Markandeya, W.A. Nomani, G.S. Giri Rao and A.K. Raina for the Respondents.
The Judgment of the Court was delivered by RANGANATH MISRA, J.
These are petitions under article 32 of the Constitution.
Petitioners are promotee Engineers of the Roads & Buildings Wing of the Andhra Pradesh Engineering Service and challenge mainly is to certain earlier decisions of this Court resolving similar disputes by judgments ren dered in writ petitions and to the guidelines formulated by the State Government in the matter or ' the drawing up of the seniority list by way of implementation of this Court 's directions.
705 Facts are not in dispute.
Shortly stated, under the Rules substantive vacancies in the category of Assistant Engineers have to be filled up from two sources 37 I/2 per cent by direct recruitment and the remainder of 62 1/2 per cent by transfer of Supervisors and Draughtsmen and by promotion of Junior Engineers.
Regular direct recruitment had not been made as and when due and promotees beyond the limit had been put in in the place of direct recruits.
While disposing of a group of petitions in a contest of this type in K. Siva Reddy & Ors.
vs State of A.P. & Ors.
, ; , a two Judge Bench of this Court instead of disturbing the entire group of promotee Engineers in excess of the quota, made the following direction: "Reopening the question of inter se seniority on the basis of non enforcement of the rules from the very beginning may create hardship and that would be difficult to mitigate but we see no justification as to why the benefit of the scheme under the rules should not be made available to direct recruits at least from 1982.
When the State Government by rules duly framed prescribed the method of recruitment and put the scheme into operation it had the obligation to comply with it.
The explanation offered by the State Govern ment for non compliance of the requirements of the rules does not at all impress us.
We, therefore, direct that as on December 31, 1982, the State Government must ascertain the exact substantive vacancies in the category of Assistant Engineers in the service.
On the basis that 37 1/2 per cent of such vacancies were to be filled up by direct recruit ment, the position should be worked out.
Promotees should be confined to 62 1/2 per cent of the substantive vacancies and in regard to 371/2 per cent of the vacancies the shortfall should be filled up by direct recruitment.
General Rules shall not be applied to the posts within the limits of 37 1/2 percent of the substantive vacancies and even if promo tees are placed in those posts, no seniority shall be count ed.
The State Government shall take steps to make recruitment of the shortfail in the direct recruitment vacancies within the limit of 37 1/2 per cent of the total substantive vacan cies up to December 31, 1987 within four months from today by following ,the normal method of recruitment for direct recruits.
The seniority list in the cadre of Assistant Engineers shall be redrawn up, as directed by the Tribunal, by the end of September 1988, keeping the directions re ferred to above in view.
There 706 shall be a direction issued to the State of Andhra Pradesh to make recruitment to the category of Assistant Engineers by strict compliance of Special Rules henceforth.
" The State Government came forward to implement the direction and published the draft seniority list drawn up on the basis of discussed guidelines.
Keeping the directions in view the draft list placed the 1982 direct recruits from serial nos.
234 to 269 without disturbing promotees upto serial No. 233 and the remainder of promotees given promo tion prior to 1982 were placed against serial nos.
270 to 300.
Writ petition No. 369 of 1989 C. Radhakrishna Reddy & Ors.
vs State of A. P. & Ors., had earlier raised the same dispute.
By judgment dated November 10, 1989, while dismiss ing the said writ petition a two Judge Bench of this Court said: "In Siva Reddy 's case this Court found that promotees had exceeded the quota and even got regularised in respect of the posts in excess of the limit.
Taking into consideration the fact that regularisation had been done after the promo tees had put in some years of service and disturbing regu larisation would considerably affect the officers concerned, regularisation was not interfered with.
This Court 's inten tion obviously was not to take away the benefit of regulari sation in respect of the officers belonging to the promotee group in excess of their quota but the Court did not intend to allow such regularised officers in excess of the quota to also have the benefit of such service for purposes of sen iority.
A reading of the judgment in Siva Reddy 's case clearly indicates that this Court intended what the Govern ment have laid down by way of guideline.
We see no justifi cation to interfere with the Government direction.
A draft seniority list on the basis of such direction has already been drawn up and has been circulated.
We are told that objections have been received and would be dealt with in usual course by the appropriate authorities.
This writ petition had been entertained in view of the allegation that the Government direction was on a misconception of what was indicated in the judgment and in case there was any such mistake the same should be rectified at the earliest.
Now that we have found that the Government order is in accord with the Court direction, this writ petition must be dis missed and individual grievances, if any, 707 against the draft seniority list would, we hope, be consid ered on the basis of objections filed by the competent authority.
" At the hearing Mr. Mukhoty, appearing in support of the main petition, vehemently contended that serious injustice had been done to the promotees and accrued rights of theirs had been disturbed.
He submitted that some of the direct recruits had been given the benefit of seniority by counting service prior to their actual recruitment and relied upon observations made by this Court in some cases to the effect that for computation of length of service the period prior to selection was being counted by a deeming position of employment prior to recruitment.
When called upon to sub stantiate his allegation, he has not been able to do so.
On the other hand, the Court had taken a very equitable view in not disturbing the regularisation contrary to the quota and had taken every care to ensure that the cause of justice was not made to suffer and a balance was maintained by an appro priate admixture of relief by confining the reconsideration for a period after 1982.
The year 1982 was fixed, as the reasonings indicate, on account of two features (i) that regular disputes had been raised from that time; and (ii) a period of 5 6 years was not too long a period to give rise to a sense of conclusiveness generated by long lapse of time.
The promotee Engineers should have been happy and thankful to their lot that their regularisation was not disturbed and even seniority prior to 1982 was not being affected.
Oblivious of these benefits which they have re tained though acquired out of turn, they have proceeded on the footing that their cause has been affected and justice to them has been denied by placing a group of them below the 1982 recruits.
We do not think that for dismissing this group of petitions anything more should be said excepting to quote with approval what this Court had said in Dr. G. Marulasiddaiah vs Dr. T.G. Siddapparadhya & Ors., ; "The canker of litigiousness has spread even to a sphere of life where discipline should check ambition concerning personal preferment.
" A government servant is justified in taking legal action when he feels that a stigma or punishment is undeserved but he is expected to bear with fortitude and reconcile himself to his lot suppressing disappointment when he finds a co worker raised to a position which he himself aspired after.
708 Ordinarily, we would have awarded exemplary costs but with a view to allowing an appropriate reconciliation of the petitioners to their lot and not to give them a feeling of infliction of any new injury, we refrain from doing so.
P.S.S. Petitions dis missed.

summary:
Sub rule 3(a) of rule 3 of the Andhra Pradesh (Roads and Buildings) Engineering Service Rules, 1965 prescribes that the substantive vacancies in the category of Assistant Engineers 37 1/2 per cent shall be filled up by direct recruitment and the remaining 62 1/2 per cent by transfer and promotion of junior officers.
In K. Siva Reddy vs State of Andhra Pradesh, ; , filed by direct recruits, the Court had directed the State Government to ascertain the exact sub stantive vacancies in the category of Assistant Engineers in the service as on December 31, 1982, work out the quota prescribed under rule 3(3)(a) of the Rules and draw up a seniority list accordingly.
In the draft seniority list drawn up by the State Gov ernment on the basis of the guidelines, it placed the 1982 direct recruits from serial Nos.
234 to 269 without disturb ing promotees upto serial No. 233 and the remainder of promotees given promotion prior to 1982 were placed against serial Nos. 270 to 300.
In C. Radhakrishna Reddy vs State of A.P., W.P. No. 369 of 1989 decided on November 10, 1989 the Court found the said list in accord with the directions.
In these writ petitions preferred by the promotee As sistant Engineers, it was contended for them that serious injustice had been done to them as the accrued rights of theirs had been disturbed and some of the direct recruits had been given the benefit of seniority above them by count ing service prior to their actual recruitment.
Dismissing the writ petitions, the Court, HELD: 1.
A Government servant is justified in taking legal action 704 when he feels that a stigma or punishment is undeserved but he is expected to bear with fortitude and reconcile to his lot suppressing disappointment when he finds a co worker raised to a position which he himself aspired after.
[707G] Dr. G. Marulasiddaiah vs Dr. T.G. Siddapparadhya & Ors., ; , referred to.
In K. Siva Reddy 's case, the Court had taken a very equitable view in not disturbing the regularisation contrary to the quota and had taken every care to ensure that the cause of justice was not made to suffer and a balance was maintained by an appropriate admixture of relief by confin ing the reconsideration for a period after 1982.
The year 1982 was fixed on account of two features, (i) that regular disputes had been raised from that time, and (ii) a period of 5 6 years was not too long a period to give rise to a sense of conclusiveness generated by long lapse of time.
The promotee engineers should have been happy and thankful to their lot that their regularisation was not disturbed and even seniority prior to 1982 was not being affected though they had acquired these benefits out of turn.
[707C E]