1989 (10) TMI 237 - SC - Indian Laws

Summary

Issues:
1. Jurisdiction of arbitrator to grant interest.
2. Calculation of past interest.
3. Commencement of pendente lite interest period in arbitration proceedings.

Jurisdiction of arbitrator to grant interest:
The Supreme Court addressed the issue of whether the arbitrator exceeded jurisdiction by allowing interest to the respondent. The Court referred to previous judgments and the Interest Act, 1978, stating that arbitrators can award interest before proceedings but not pendente lite interest. The Court held that since the reference to arbitration was made in March 1982, the arbitrator was justified in awarding interest for the earlier period.

Calculation of past interest:
The appellant argued that the arbitrator allowed past interest twice over, claiming the principal sum included interest. However, the Court rejected this argument based on the clear language of the award, which specified the entitlement to interest separately. The Court upheld the award regarding past interest but granted relief to the appellant regarding pendente lite interest included in the award.

Commencement of pendente lite interest period in arbitration proceedings:
The Court analyzed the commencement of the pendente lite interest period in arbitration proceedings. The appellant contended that the period began when the arbitrator was deemed to have entered the reference, while the respondent argued for a later commencement date. The Court examined the Interest Act, 1978, and determined that the proceeding before an arbitrator commences when the arbitrator indicates willingness to act. Therefore, the Court held that the award allowing interest after a specific date was without jurisdiction and must be excluded, partially allowing the appeal. Each party was ordered to bear their own costs.

Conclusion:
The Supreme Court partially allowed the appeal by the State of Orissa, affirming the High Court's decision on most points but granting relief to the appellant regarding pendente lite interest. The Court clarified the arbitrator's jurisdiction to grant interest, addressed the calculation of past interest, and determined the commencement of the pendente lite interest period in arbitration proceedings.