O R D E R
Leave granted.
The only issue involved in this appeal relates to 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 (prereference period) after the coming into force of The Interest Act, 1978 (post Interest Act era).
A reference to brief facts for deciding the issue would be apropos. The first respondent - Delhi Development Authority - awarded certain work of construction of middle income group houses at Pitam Pura, New Delhi to the appellant and entered into a contract with him. Differences and disputes arose between the parties relating to the execution of the contract on 1.4.1984, when a reference to arbitration was sought by the appellant and in terms of Clause 25 of the General Conditions of Contract, the same were referred to arbitration of the second respondent. The arbitrator entered upon the reference on 8.2.1985. He made an award on 15.7.1987. The award together with the proceedings was filed in the court by the learned arbitrator. The award was substantially in favour of the appellant. The arbitrator also awarded 12% simple interest on the amount awarded from 1.4.1984 to the date of payment. The appellant filed an application under Section 14 and 17 of the Arbitration Act for making the Award a Rule of the Court. On notice being issued to respondent No. 1, objections were filed to the award being made a Rule of the Court. On 21.12.1990, the learned Single Judge of the Delhi High Court made the award Rule of he Court except in respect of claims under Clauses 1, 3 and 4. The court also rejected the claim of the appellant relating to both the award of pendente-lite interest as well as the pre-reference interest and set aside the award to that extent. On appeal before the division bench, pendente-lite interest, (between 8.2.1985 and 15.7.1987) as awarded by the arbitrator, was restored but the order of the learned Single Judge refusing the prereference interest as well as the claims under Clauses 1, 3 and 4 amounting to Rs. 23,685/- was upheld. The division bench opined :
"In view of the decision of the Supreme
Court in Secretary, Irrigation
Department, Government of Orissa and
Others Vs. G.C. Roy JT 1991 (6) SC, 349,
the Arbitrator had the jurisdiction to
award interest during the pendency of
the reference before him i.e. from 8th
February, 1985 till 15th July, 1987 when
he gave the Award. However, the
Arbitrator had no jurisdiction to award
interest from 1st April, 1984 till
before 8th February, 1985, the date when
he entered into reference".
This order of the Division Bench has been put in issue in this appeal.
Learned counsel for the appellant submitted that the division bench fell in error in interpreting the judgment in G.C. Roy’s case (supra) to have laid down that the arbitrator had no jurisdiction to award interest from 1.4.1984 to 8.2.1985 (pre-reference period) because no such proposition of law was either under consideration or decided in G.C. Roy’s case (supra). In our opinion, the grievance projected by Dr. Singhvi is well founded.
In Executive Engineer (Irrigation), Balimela And Others Vs. Abhaduta Jena & Others (1988 (1) SCC, 418), a three Judge Bench of this Court while dealing with pre-reference interest observed :
"Out of the remaining cases, we find
that in all cases except two (Civil
Appeal Nos.6019-22 of 1983 and Civil
Appeal No. 2257 of 1984, the reference
of arbitration were made prior to the
commencement of the new Act which was on
August 19, 1981. In the cases to which
the Interest Act, 1978 applies, it was
argued by Dr. Chitale, learned counsel
for the respondents, that the amount
claimed was a sum certain payable at a
certain time by virtue of a written
instrument and, therefore, interest was
payable under the Interest Act for the
period before the commencement of the
proceedings. In support of his
contention that the amount claimed was a
sum certain payable at a certain time by
virtue of a written instrument, the
learned counsel relied upon the decision
of this Court in State of Rajasthan Vs.
Raghubir Singh. The case certainly
supports him and in the cases to which
the 1978 Interest Act applies the award
of the interest prior to the proceeding
is not open to question"
(Emphasis ours)
The Constitution Bench in G.C. Roy’s Case (supra) was dealing with the question relating to the award of interest pendente-lite and not with the question of the award of interest for the pre-reference period and it was in that context that the Constitution Bench held that the view expressed in Jena’s Case with regard to award of pendentelite interest could not be said to have laid down good law. The Constitution Bench did not deal with the question of pre-reference interest in cases coming after the enforcement of Interest Act, 1978, which came into force from 19.8.1981. IN G.C. Roy’s case itself, it is stated that the reference to the Constitution Bench had been necessitated only for deciding the question whether the decision in Jena’s case was correct in so far as it held that arbitrator had no power to award interest pendente lite. On a doubt being raised whether the Constitution Bench in G.C. Roy’s case had over-ruled the law laid down in Jena’s case relating to the power of the arbitrator to award interest for the prereference period in the post Interest Act, 1978 era, the position was clarified by a three Judge Bench in Jugal Kishore Prabhatilal Sharma & Ors. Vs. Vijayendra Prabhatilal Sharma & Anr. [1993 (1) SCC 114], wherein it was specifically held that the decision in G.C. Roy’s case was concerned only with the power of arbitrator to award interest pendente-lite and that it was not concerned with his power to award interest for the pre-reference period.
Again, ’in State of Orissa Vs. B.N. Agarwala [1993 (1) SCC 140], Jeevan Reddy, J. clarified the matter and speaking for the Bench observed :
"The next contention of learned counsel
for the appellant/State relates to the
power of the arbitrator to award
interest for the pre-reference period.
Reliance is placed upon the decision of
this Court in Executive Engineer
(Irrigation) Vs. Abhaduta Jena, Shri
Bhagat, learned counsel appearing for
the respondent, however, submits that
the said decision is no longer good law
in view of the Constitution Bench
decision in Secretary, Irrigation
Department, Govt. of Orissa Vs. G.C.
Roy. We cannot agree with Shri Bhagat.
Both of us were members of the
Constitution Bench which decided G.C.
Roy. It was confined to the power of the
arbitrator to award interest pendente
lite. It did not pertain to nor did it
pronounce upon the power of the
arbitrator to award interest for the
period prior to his entering upon the
reference (pre-reference period). This
very aspect has been clarified by one of
us, (B.P. Jeevan Reddy, J.) in his
concurring order in Jugal Kishore
Prabhatilal Sharma Vs. Vijayendra
Prabhatilal Sharma. Accordingly, we hold
following the decision in Jena that the
arbitrator had no power to award
interest for the pre-reference period in
this case inasmuch as the award was made
prior to coming into force of the
Interest Act, 1978. (The Interest Act,
1978 came into force with effect from
August 19, 1981)."
Thus, 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 Rs. 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.
We accordingly set aside the order of the division Bench in so far as it disallows the award of interest to the appellant for the pre-reference period i.e. w.e.f. 1.4.84 to 8.2.1985 and restore the award of the arbitrator in that behalf.
The appeal, accordingly succeeds to the above extent and is allowed. No costs.