Blog

When the parties to the contract have agreed that no proof would be required for payment of per diem allowance, the question of furnishing proof of deputation from one home office of the claimant to the two offices of the projects does not arise at all as held by the Hon’ble Court of J&K and Ladakh through a learned bench of Hon’ble Mr. Justice Tashi Rabstan in the case of J&K Economic Reconstruction Agency Vs Intercontinental Consultants Technocrats Pvt. Ltd. [AA No.37/2012].

The facts-in-short are that the petitioner-ERA and respondent-claimant entered into an agreement in respect of two contracts. As per the agreement, the fieldwork was to commence by the respondent-claimant not later than 31.01.2006 and was to be completed by 31.12.2009. However, somewhere in 2011 that the differences appear to have arisen between the parties regarding payment of per diem allowance to local support staff which the respondent-ERA disallowed from the invoices from the month of March, 2010 to December, 2011. Accordingly, a meeting under the Chairmanship of Chief Executive Officer was held on 01.08.2011 and it was decides that the dispute regarding payment of per diem allowance to local support staff be settled through arbitration and that the decision of arbitration shall be acceptable to both the parties. Accordingly, the parties participated in the arbitration proceedings, respondent-claimant filed the statement of claims and the petitioner-ERA countered the same. The learned arbitrators after completion of arbitration proceedings passed the award dated 20.09.2012 in favour of respondent-claimant and against the petitioner ERA. Against the said award, the petitioner-ERA has filed the present arbitration application seeking setting aside of the award.

The Hon’ble court observed that the stand of petitioner-ERA was that per diem allowance becomes payable only when support staff goes out of home office at Delhi for rendering services at Jammu/Srinagar; therefore, the respondent-claimant had to show and furnish proof that the support staffs were actually deputed from its home office to the project offices of respondent-ERA for rendering services at Srinagar and Jammu; meaning thereby the petitioner-ERA has not denied that the support staffs from home office at Delhi have been rendering their services in the project offices of respondent-ERA at Srinagar and Jammu.

The Hon’ble Court in conclusion stated that “So far as awarding interest @ 12% is concerned, the Apex Court in Punjab State Civil Supplies Corporation Limited vs Ganpati Rice Mills, SLP (C) No.36655/2016, decided on 20.10.2021, while observing that the High Court was not justified and correct in reducing the rate of interest to 9% per annum has held that Section 31(7) of the Arbitration Act, 1996 grants substantial discretion to the arbitrator in awarding interest. The learned Arbitrators have rightly appreciated the documents on record; terms and conditions of the contract in a perspective manner and provisions of the Arbitration and Conciliation Act. In the absence of any patent illegality being pointed out there is no scope for interference. There is no material on record to hold that by granting the claim as made, the award as passed was against the public policy of India.”

Click here to read the Judgment

Judgment reviewed by – Aryan Bajaj