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Civil Appeal Nos. 1110 and 1111 of 2010

Decided On: 20.07.2018

Appellants: Reliance Cellulose Products Ltd. Vs. Respondent: Oil and Natural Gas Corporation Ltd.

Hon'ble Judges/Coram:
Rohinton Fali Nariman and Indu Malhotra


Rohinton Fali Nariman, J.

1. The present appeals relate to questions which arise qua the preference and pendente lite interest under the Arbitration Act, 1940. The ONGC floated a notice inviting tender for the supply of 1200 Metric Tons (hereinafter referred to as "MT") of Sodium Carboxyl Methyl Cellulose (hereinafter referred to as "CMC"). Reliance Cellulose Products Ltd. (hereinafter referred to as "Reliance") submitted its tender quoting a price of Rs. 14,999/- per MT for quantities above 900 MT. It is not disputed that the offer of Reliance was accepted for the supply of 1200 MT of CMC, and accordingly, a supply order dated 01.12.1988 was placed on Reliance. Since Reliance agreed to supply 1200 MT only if the price is higher than Rs. 14,999/- per MT, the parties ultimately went to arbitration in order to decide what should be the contract price for supply of 1200 MT of CMC. A separate order, referred to as the repeat order, was also placed for supply of 600 MT of CMC. It is undisputed that the supply was made on time and payments were received for both contracts at the rate of Rs. 14,999/- per MT.

2. In October 1990, the Petitioner filed a Special Civil Application before the Gujarat High Court in the course of which, by an order dated 11.10.1990, the disputes between the parties were referred to arbitration, which were with regard to the price for the supply of 1200 MT and 600 MT of CMC respectively. The original Arbitral Tribunal consisted of Justice V.S. Deshpande and Mr. S. Tibrewal. Shri Deshpande having died, Justice B.J. Divan was appointed in his place.

3. By an award dated 29.12.1993, the Arbitrators fixed the price of 1200 MT at Rs. 18,500/- per MT, and Rs. 20,500/- per MT insofar as 600 MT of CMC was concerned. The Arbitrators awarded pre-reference, pendente lite and future interest all at the rate of 18% per annum. Objections were filed to the award by the ONGC. The learned Civil Judge, by his judgment dated 30.07.1998, rejected these objections, but ultimately reduced the interest for all three periods to 10% per annum. Needless to state, this interest was payable on the difference between Rs. 14,999/- and Rs. 18,500/- and Rs. 20,500/- respectively. The appeals that were filed to the High Court yielded the same result vide the impugned judgment dated 23.08.2006. Both parties are in appeal before us.

4. Shri K.V. Viswanathan, who argued Civil Appeal No. 1110/2010, has argued before us that no good reason is given for reducing interest from 18% to 10%. Indeed, the only reason that is forthcoming from the impugned judgment is that interest has been reduced because ONGC is a Public Sector Undertaking. According to him, therefore, pre-reference, pendente lite and future interest at 18% all become payable from the date of the cause of action till 21.01.1999, when the ONGC had deposited an amount of Rs. 1,09,34,323/-, and an amount of Rs. 46,86,138/- on 30.04.2003, on account of principal and interest at the rate of 10% per annum, and differential interest till date.

5. In the ONGC appeal, the learned Additional Solicitor General, Shri Sandeep Sethi, has argued that though the plea that no pre-reference or pendente lite interest was payable, ........