- (1.) SUDHIR Narain, J. The Union of India has filed this appeal against the order passed by the Court below dated 30-5-1997 by which the award has been made rule of the Court and the application filed on behalf of the appellant has been rejected.
(2.) BRIEFLY stated the facts are that the appellant invited tender for constructing buildings at New Cantonment, Allahabad in the year 1989. The respondent submitted tender which was accepted by the appellant. The work was to be completed within the time specified in the agreement. The respondent got the time extended and completed the work on 10-1-1990. On completion of the work the respondent claimed that they were entitled to the prices of the material which he used for construction purposes and certain other things. This was not accepted by the appellant. The dispute was referred to the sole arbitrator, Sri B. M. Kohli, on 13-10-1994. He entered into reference on 1st November, 1994. The appellant also made various claims before the arbitrator, particularly in regard to the materials supplied to the respondent but neither the material so supplied was returned nor its amount was adjusted. The arbitrator gave award on 30-12-1995 and awarded Rs. 4,40,182. 44 to the respondent and further 18% interest on such amount for the period between 25-3-1991 to 30-12-1995. The arbitrator also accepted certain claims of the appellant and awarded a sum of Rs. 1,02,450. 73 to it, but no interest was awarded on this amount. The respondent filed application before the Court below under Section 14 read with Section 17 of the Arbitration Act, 1940 for making the award dated 30-12-1995 rule of the Court. The appellant filed objection under Section 30/33 of the Arbitration Act for setting aside the award. The application was registered as suit No. 75 of 1996. The Court below dismissed the objection of the appellant and made the award rule of the Court with further direction that the respondent shall be entitled to 6% interest on the amount awarded by the arbitrator to the respondent from the date of award dated 31-12-1995 till 30-5-1997. The question involved in the present appeal is whether respondents were entitled to amount of interest and if so what should be rate of interest which should be awarded to the parties. The period of interest can be divided in three parts; (i) the power of the arbitrator to award interest for the period prior to the date the reference was made to him, (ii) the period the proceedings remained pending before the arbitrator (pendente lite) and (iii) the period after the award is made till the date of payment of the amount. The controversy as to whether an arbitrator has a power to award interest prior to the date of making reference to him, the Supreme Court in Executive Engineer, Irrigation, Galimala v. Abnaduta Jena, AIr 1988 SC 1520, held that after the enforcement of Interest Act, 1978 the arbitrator is entitled to award interest prior to the date of making reference to him. The arbitrator could not award interest under the Interest Act, 1939 for the period prior to making the reference to him but in view of the provisions of Interest Act, 1978 such interest can be awarded. Section 2 (a) of the Interest Act, 1978 defines the Court as it includes Tribunal and Arbitrator. Section 3 (1) (b) of the said Act confers power on the Court to award interest from the date of making the claim to the date of institution of the proceedings. This decision was considered in State of Orissa v. Lal Chand Kapani, AIR 1993 SC 2464, and followed the view taken in Executive Engineer, Irrigation, Galimala v. Abnaduta Jena (supra ). The matter again came up for consideration before the Supreme Court in State of Orissa v. B. N. Agarwal (1997) 2 JT (SC) 51: (AIR 1997 SC 925) where the argument was raised that Jena's case (supra) was overruled in Secretary, Irrigation Department, Government of Orissa v. G. C. Roy, AIR 1992 SC 732, and therefore, the said decision was no longer good law. The Supreme Court explained that the said case was not overruled in its entirety by the decision in G. C. Roy's case (supra) but it was overruled only in respect of pendente lite interest. Their Lordships of the Supreme Court summarised the views as follows (at p. 930, para 18 of AIR):- "in view of the aforesaid decisions there can now be no doubt with regard to the jurisdiction of the arbitrator to grant interest. The principles which can now be said to be well settled are that the arbitrator has the jurisdiction to award pre-reference interest in cases which arose after the Interest Act, 1978 has become applicable. With regard to those cases pertaining to period prior to the applicability of the Interest Act, 1978, in the absence of any substantive law, contract or usage, the arbitrator has no jurisdiction to award interest. For the period during which the arbitration proceedings were pending in view of the decision in G. C. Roy's case (AIR 1992 SC 732) (supra) and Hindustan Constructions Limited case (AIR 1992 SC 2192) (supra), the arbitrator has the power to award interest. The power of the arbitrator to award interest for the post award period also exists and this aspect has been considered in the discussion relating to Civil Appeal No. 9234 of 1994 in the later part of this judgment. "
(3.) IN this case the reference was made on 17th October, 1994 i. e. after the enforcement of 1978 Act. The arbitrator, therefore, had jurisdiction to award interest prior to the date of making reference to him. The second question is whether the pendente lite interest can be awarded by the arbitrator. In Abnaduta Jena's case (AIR 1988 SC 1530) (supra) the Supreme Court had taken the view that the arbitrator is not a Court and therefore Section 34 of the Code of Civil Procedure was not applicable. The arbitrator has no power to award any interest pendente lite. This decision was overruled in Secretary, Irrigation Department, Government of Orissa, (AIR 1992 SC 732) (supra ). The Supreme Court took the view that even Section 34 of Code of Civil Procedure in terms may not apply but the principle contained in Section 34 is applicable to the proceedings pending before the arbitrator. The reasons were summarised by the Supreme Court itself in State of Orissa v. B. N. Agarwal, (1997) 2 JT (SC) 51: (AIR 1997 SC 925 ). In paragraph 9 of the said judgment it has been summarised as follows (para 9 of AIR): "a careful reading of G. C. Roy's (1992 (1) SCC 508: AIR 1992 SC 732) (supra) clearly shows that, insofar as award of interest is concerned, this Court was only required to consider whether the arbitrator had jurisdiction to award pendente lite interest. This is so stated in the judgment at more places than one. Apart from nothing that the appellants has challenged the validity of the award on two grounds, one of which was that "arbitrator had no jurisdiction to award pendente lite interest", it was noted that the case had been referred by order dated 15-3-1991 by the Division Bench to the Constitution Bench as "the learned Judges were of the view that the correctness of the view taken by this Court in Abhaduta Jena's case (supra), insofar as it held that arbitrator has no power to award pendente lite interest, required consideration by a larger Bench. ";