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PETITIONER: STATE OF ORISSA

       Vs.

RESPONDENT: SHR. B.K.ROUTRAY

DATE OF JUDGMENT:       12/01/1999

BENCH: Sujata V.  Manohar, R.C.  Lahoti.

JUDGMENT:

D E R         The only question which  has  been  raised  in  this appeal  pertains  to the award of interest by the Arbitrator for the pre-reference period.  The pre-refcrence period,  in the present  case,  is  from  31.3.1977  to 20.3.1980.  This entire period is prior to coining into force of the interest Act, 1978.  The interest Act, 1978 came  into  force  during the  pendency  of  the  reference  and  the award is made on 12.10.1982 when the Interest Act, 1978 was in force.

       The short question  is  whether  the  Arbitrator  in 1982,  could  have  awarded  interest  for the pre-reference period in view of the provisions of the Interest Act,  1978, although  the  entire  pre-reference  period is prior to the coming into force of the Interest Act, 1978.

       In this connection, our attention has been drawn  to the   decision   of  this  Court  in  State  of  Orissa  vs. B.N.Agarwalla reported in (1997) 2 SCO 469.    In  paragraph 18,  this  Court  has held that interest cannot be given for the period prior to the coming into force  of  the  Interest Act, 1973.    This  Court has also held that the decision in the case of Executive Engineer (Irrigation)  vs.    Abhaduta Jena reported in (1938) 1 SCO 418 has not been over-ruled in so  far  as  it  deals  with  interest for the pre-reference period.  This Court has upheld the view  taken  in  Abhaduta Jena’s  case  to the effect that in respect of pre-reference period, interest cannot be awarded in respect of the  period not covered  by  the  Interest Act, 1978.  Our attention was also drawn to a decision in the case of State of Orissa  vs. Niranian  Swain reported in (1989) 4 SCC 269 where also this Court said that where  reference  to  arbitration  was  made prior  to  the  commencement  of  the  Interest  Act,  1978, Arbitrator is not empowered to grant interest for the period upto the date of submission of claim to arbitration.

       In this connection, we would also like to  refer  to Section  6(2)  of  the  Interest Act, 1978 which provides as follows:

       Section                 6(1) .................

       Section 6(2?  :  The  provisions  of  this         Act  shall  not apply to any suit or other         legal   proceeding    pending    at    the         commencement   of   this   Act   and   the         provisions  of   the   corresponding   law

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       applicable    immediately    before   such         commencement  shall  notwithstanding   the         repeal  of  such  law  by sub-section (1),         continue to apply to such  suit  or  other         legal proceeding.

       This   section   also   clearly  provides  that  the provisions of the Interest Act, 1978 shall not apply to  any legal  proceeding  pending  at  the commencement of the said Act.  Since the definition of  "Court"  under  Section  2(a) includes  a  Tribunal  or Arbitrator, the proceedings before the Arbitrator would also be covered by the expression legal proceedings in Section 6(2).  Therefore interest  Act,  1978 does not apply to pending arbitration proceedings.

       In  the  premises, the present appeal is allowed and the award of interest for the pre-reference period,  namely, 31.3.1977 to  20.3.1.980  is  disallowed.  The award and the decree are modified accordingly to this effect,