1966 (8) TMI 61 - SC - Companies Law

Whether the respondent was entitled to pendente lite interest? Held that - In the present case, all the disputes in the suit were referred to the arbitrator for his decision. One of the disputes in the suit was whether the respondent was entitled to pendente lite interest. The arbitrator could decide the dispute and he could award pendente lite interest just as a Court could do so under s. 34 of the Code of Civil Procedure. Though, in terms, s. 34 of the Code of Civil Procedure does not apply to arbitrations, it was an implied term of the reference in the suit that the arbitrator would decide the dispute according to law and would give such relief with regard to pendente lite interest as the Court could give if it decided the dispute. This power of the arbitrator was not fettered either by the arbitration agreement or by the Arbitration Act, 1940. The contention that in an arbitration in a suit the arbitrator had no power to award pendente lite interest must be rejected. In the result, the appeal is dismissed with costs.

Issues:
1. Validity of the arbitration award based on errors of law apparent on the face of the award.
2. Allegation of misconduct by the arbitrator for amending an issue without the appellant's knowledge.
3. Jurisdiction of the arbitrator to award interest during the pendency of the suit.

Analysis:

1. Validity of the arbitration award based on errors of law apparent on the face of the award:
The dispute arose from contracts for the sale of cloth between the appellant and the respondent. The respondent claimed a sum of Rs. 1,72,856/- for loss on resale of 176 bales and the balance price of 46-1/2 bales. The appellant argued that it should not be held liable for the full price of the bales due to a freezing order issued by the Textile Commissioner. The arbitrator made an award directing the appellant to pay the claimed amount and give up its claim to the bales. The appellant contended that there were errors of law in the award, but the Supreme Court held that the arbitrator's decision, being final on both fact and law, could not be reviewed unless there was an apparent error of law on the face of the award. As the award did not contain any erroneous legal proposition, the contention was rejected.

2. Allegation of misconduct by the arbitrator for amending an issue without the appellant's knowledge:
The appellant alleged that the arbitrator was guilty of misconduct by amending an issue without its knowledge. The arbitrator corrected an issue to reflect the claim for the price of 46-1/2 bales instead of a loss claim. The Supreme Court found that this correction did not prejudice the appellant as both parties were aware of the nature of the claim, and the case was presented accordingly. Therefore, the allegation of misconduct was dismissed.

3. Jurisdiction of the arbitrator to award interest during the pendency of the suit:
The appellant argued that the arbitrator had no power to award interest during the pendency of the suit. Citing previous judgments, the appellant contended that arbitrators lacked the authority to award pendente lite interest. However, the Supreme Court clarified that when all disputes in a suit are referred to arbitration, the arbitrator can decide on pendente lite interest as a court would under the Civil Procedure Code. The Court held that the arbitrator had the power to award interest during the pendency of the arbitration proceedings, rejecting the appellant's contention. Consequently, the appeal was dismissed, affirming the validity of the arbitration award and upholding the arbitrator's jurisdiction to award interest during the suit's pendency.

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