1993 (1) TMI 288 - SC - Companies Law

Summary

Issues:
- Dispute over interest awarded in arbitration proceedings.
- Interpretation of the Interest Act of 1978.
- Entitlement to interest during the pre-reference period.
- Applicability of interest pendente lite.
- Consideration of interest awarded by the arbitrator.

Analysis:
The Supreme Court heard an appeal filed by the State of Orissa against a High Court judgment regarding interest awarded in arbitration proceedings. The arbitrator had awarded Rs 63,186 as interest, although the claim was for Rs 2,74,230. The Subordinate Judge and the High Court upheld the award. The State of Orissa argued that the interest awarded should be struck down as it was passed before the 1978 Interest Act came into force. The Court referred to the Executive Engineer (Irrigation), Balimela case, stating that before the 1978 Act, arbitrators had no power to award interest for the pre-reference period. The Court also clarified that interest pendente lite is not applicable if the reference was not by a court in a pending suit. However, this view was reversed in a subsequent case, Secretary, Irrigation Department v. G.C Roy. The Court held that interest during the pre-reference period can be awarded if the 1978 Interest Act was in force at the time of the award.

The State argued that since the arbitration proceedings began in 1977 and the award was given in 1979 before the 1978 Act, interest for the pre-reference period should not be awarded. The Court noted that the award did not specify if the interest included pre-reference or pendente lite interest. The Subordinate Judge had mentioned that the arbitrator allowed Rs 63,186 without indicating the period or rate of interest. The Court concluded that it was unclear if the awarded interest covered the pre-reference period or the time during arbitration proceedings. Remanding the case to the arbitrator was deemed unnecessary due to the lack of clarity. The Court also considered the age of the agreement in question, dating back to 1971, and decided against setting aside the award in the interest of justice. Consequently, the appeal was dismissed with no order as to costs.