1995 (11) TMI 431 - SC - Indian Laws

Power and jurisdiction of an Arbitrator to award interest for the period between the making of the reference to the arbitrator and his entering upon the reference (prereference period) after the coming into force of The Interest Act, 1978? Held that - The law is now well settled that the arbitrator has the power and jurisdiction to grant pre-reference interest in references made after the coming into force of the Interest Act, 1978. The division Bench of the High Court was thus clearly in error in holding that the arbitrator had no jurisdiction to award interest from 1.4.84 till 8.2.1985 (pre-reference period ) in the post Interest Act, 1978 era. So far as the grievance of the appellant pertaining to the dis-allowance of the claim of ₹ 23,685/- under Clauses 1, 3 4 is concerned, we do not find any error to have been committed by the High Court. The above view of the division Bench therefore, cannot be sustained.

Summary

Issues:
Jurisdiction of an Arbitrator to award interest for the pre-reference period after the implementation of The Interest Act, 1978.

Analysis:
The appeal in question dealt with the power and jurisdiction of an Arbitrator to award interest for the period between the making of the reference to the arbitrator and his entering upon the reference (pre-reference period) post the implementation of The Interest Act, 1978. The case involved a construction contract dispute between the first respondent, Delhi Development Authority, and the appellant. Differences arose, leading to arbitration proceedings. The arbitrator made an award in favor of the appellant, including 12% simple interest from 1.4.1984 to the date of payment. The High Court initially rejected the pre-reference interest claim but later restored pendente-lite interest. The division bench's decision was challenged in this appeal.

The appellant argued that the division bench misinterpreted a previous judgment regarding the arbitrator's jurisdiction to award interest for the pre-reference period. The Supreme Court agreed with the appellant's contention, citing precedents to clarify the issue. The Court referred to previous cases to establish that an arbitrator does have the power to grant pre-reference interest in cases post the implementation of The Interest Act, 1978. The Court emphasized that the arbitrator's authority to award interest for the pre-reference period was not affected by previous judgments on interest awards during the pendency of arbitration proceedings.

The Court highlighted that the division bench erred in holding that the arbitrator lacked jurisdiction to award interest for the pre-reference period in the post-Interest Act, 1978 era. The Court clarified that the arbitrator indeed had the power to award such interest in cases following the enactment of The Interest Act, 1978. Consequently, the Court set aside the division bench's decision disallowing the pre-reference interest and restored the arbitrator's award in that regard. However, the Court found no error in the High Court's decision disallowing a specific claim under Clauses 1, 3, and 4, thereby upholding that part of the division bench's ruling.

In conclusion, the Supreme Court allowed the appeal, overturning the division bench's decision regarding pre-reference interest and upholding the award of the arbitrator in that aspect. The Court clarified the arbitrator's jurisdiction to grant pre-reference interest post the implementation of The Interest Act, 1978, settling the issue raised in the appeal.