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PETITIONER: FOOD CORPORATION OF INDIA

       Vs.

RESPONDENT: SURENDRA, DEVENDRA & MOHENDRA TRANSPORT CO.

DATE OF JUDGMENT10/12/1987

BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) RANGNATHAN, S.

CITATION:  1988 AIR  734            1988 SCR  (2) 327  1988 SCC  (1) 547        JT 1988 (1)    57  1988 SCALE  (1)21  CITATOR INFO :  R          1990 SC1340  (14,16,17)

ACT:      Arbitration  Act,   1940  Challenge  to  award  of  the arbitration under section 30, 33-of.

HEADNOTE: %      The respondent  was appointed  a transport and handling Contractor  by  the  appellant  subject  to  the  terms  and conditions mentioned  in three successive written agreements entered into  by both  the  parties.  After  disputes  arose between the  parties, an arbitrator was appointed as per the arbitration clause  to adjudicate  upon  the  disputes.  The arbitrator made  and published an award which was a speaking one. He  did not  allow the  appellant’s claim for demurrage and wharfage  charges paid  to  the  Railways  amounting  to Rs.15,63,863.02 by reason of the alleged wrongful conduct of the respondent  but awarded  only  25%  of  the  claim.  The arbitrator also  did not  allow the  appellant’s  claim  for shortage in transit but reduced the claim by 40% and allowed only 60%  of it  amounting to  Rs.52,971.99. The  arbitrator awarded to  the respondent Rs.12,64,175.97 and pendente lite interest at 6% per annum.      The appellant  filed objections in the High Court under sections 30  and 33 of the Arbitration Act, 1940 (’The Act’) for setting  aside the  award. The High Court (Single Judge) set aside  the award.  The respondent filed an appeal to the Division Bench  of the  High Court  which allowed  the same, setting aside  the judgment  of the learned single judge and upholding the  award. Being aggrieved by the decision of the High Court,  the appellant appealed to This Court for relief by special leave under Article 136 of the Constitution.      Disposing of the appeal, this Court, ^      HELD: While  issuing notice  on the  application  under Article 136  of the Constitution, it was indicated that only three questions  would be  adjudicated upon  in this appeal, viz, Rs.13,94,982.46  being the amount allowed on account of demurrage and  wharfage  charges  mentioned  in  the  award, secondly, the sum of Rs.2,35,769.46 and lastly, the question

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of interest. [332G] 330      So far  as the  second question  was concerned, counsel for the  appellant did  not make  any submission  before the Court. The  Court also  could not find any substance in this aspect. Therefore,  it was  not necessary  to deal with this aspect of the matter. [332H; 333A]       So  far as the amount of Rs.13,94,982.46 on account of demurrage and  wharfage was concerned, which was allowed, it appeared that  the total demurrage and wharfage charges paid by the  Corporation to the Railways in respect of the wagons cleared by  the  claimant  firm,  respondent  herein,  after obtaining such waiver as the Railways were persuaded to make were Rs.15,63,863.21.  There was no dispute about the actual payment of the charges. The appellant’s case was that it was entitled to  recover the  entire amount  it had  to  pay  on account of  the demurrage  and  wharfage  charges  from  the respondent under clause 9(a) of the agreement. [333B-C]      Under clause 9(a) according to the appellant, the Agent was liable  to make good any compensation/demurrage/wharfage as per  Railway rates in force during the period of contract and other  charges or expenses that might be incurred by the Corporation on  account of  delay  in  loading/unloading  of trucks/carts and  unloading/loading  of  wagons  unless  the delay  was  for  reasons  beyond  the  Agent’s  control.  It appeared that  the appellant had periodically served notices upon the respondent of firm calling upon it to pay demurrage and wharfage  charges with  liberty prefer  objections. Such objections as the respondent-firm preferred were disposed of by the  District Manager.  This procedure continued till the end of  November, 1975. Then the respondent-firm went to the Civil Court  and obtained  discontinuance of all proceedings for the  recovery of  demurrage and  wharfage  charges.  The arbitrator noted  that as  a result  of the  hearings by the Corporation upto  November, 1975,  relief  to  the  tune  of Rs.1,21,884.55 was  granted to  the respondent-firm  and the recovery of Rs.45,996.20 was made from the respondent-firm’s bills.  The   Corporation,  therefore,  claimed  before  the arbitrator  recovery  of  the  remaining  or  the  claim  of Rs.13,94,982.46. Counsel for the appellant drew this Court’s attention to  clauses 9(a)  and (b)  of  the  agreement  and submitted that  the adjudication  made by  the  Manager  was final and there was no dispute thereafter. According to him, no further deduction was possible from what had been granted by the Manager for determination on account of demurrage and wharfage charges,  nor was  it  arbitrable  because  it  was final. [334B-E]      It appears  on the  facts as recorded by the arbitrator in his  award that  there was  adjudication  really  by  the Manager of the claims upto 331 November, 1975.  Thereafter, there  could be no adjudication as  a   result  of   injunction  obtained  from  the  Court. Therefore,  it   appeared  that   there  was   in  fact   no adjudication of  all the disputes. The remaining points were arbitrable because  of  the  amplitude  of  the  arbitration clause. It  was not  brought to the notice of the Court that there was  an adjudication  by the  Manager of the claim for the period beyond November, 1975, as mentioned hereinbefore. Therefore, the  arbitrator was not in error in proceeding in the manner  he did. There was no other aspect of law on this aspect of the matter to which the attention of the Court was drawn.  The   submission  on  this  aspect  was,  therefore, negatived and the challenge to the award on this aspect must fail. [337C-D; 338B]

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    So far  as the  grant of  interest pendente lite in the award  was   concerned,  reliance   was  placed  on  various decisions  of   this  Court.  In  deference  to  the  latest pronouncement of  this Court,  which is  a pronouncement  of three  learned  Judges,  in  Executive  Engineer  Irrigation Galimala &  Ors. v. Abaadute Jena, (J.T. 1987 4 S.C. 8), the Court held  that the grant of pendente lite interest in this case was  was not  justified. Though  the award in this case was a  speaking award,  it was  not made clear on what basis the interest  was awarded.  The arbitrator  was in  error in granting the  interest in  the manner  he did  . It was true that in  specific terms there was no denial on this right to grant interest,  but there  was  denial  as  to  get  it  in accordance with law.[338C-D; 340E-F]      In awarding  the interest  the arbitrator  committed an error of law. With this modification, the judgment and order of the High Court were affirmed. [340F-G]      Wadsworth v.  Smith, L.R.  Vol. VI  Q.B. 332;  State of Orissa and others, v. Construction India, J.T. [1987] 4 S.C. 588;  Executive  Engineer  Irrigation  Galimala  &  Ors.  v. Abaaduta Jena,  J.T. 1987 4 S.C. 8, Firm Madan lal Roshanlal Mahajan v.  Hukumchand Mills  Ltd., Indore,  [1987] 1 S.C.R. 105; State  of Madhya  Pradesh v.  M/s. Saith  & Skelton (P) Ltd., [1972]  3 S.C.R.  233; M/s. Ashok Construction Company v. Union of India, [1971] 3 S.C.C. 66 and M/s. Alopi Parshad JUDGMENT: referred to.

&      CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 4096 of 1987.      From the  Judgment and  order  dated  2.6.1987  of  the Calcutta High Court in Appeal NQ. 344 of 1980. 332      A.K. Sen,  S.k.  Gambhir  and  Vivek  Gambhir  for  the Appellant.      Dr. Shankar Ghosh and Rathin Das for the Respondent.      The Judgment of the Court was delivered by      SABYASACHI MUKHARJI, J. Special leave granted.      The respondent  was appointed  a transport and handling contractor  by  the  appellant  subject  to  the  terms  and conditions  mentioned  in  three  successive  agreements  in writing entered  into by  both the  parties. After  disputes arose between  the parties, as per the terrns of arbitration clause an  arbitrator was  appointed to  adjudicate upon the disputes. Both  the respondent and the appellant filed their respective claims  and counter-claims before the arbitrator. After considering  the documents  and evidence  filed before the arbitrator,  he made  and published an award which was a speaking one.  The arbitrator  did not allow the appellant’s claim for  demurrage and  wharfage charges  paid to Railways amounting  to  Rs.15,63,863.02  by  reason  of  the  alleged wrongful conduct  of respondent  but the  arbitrator awarded only 55% of the claim. The arbitrator also did not allow the appellant’s claim  for shortage  in transit  but reduced the claim by  40% and  allowed  only  60%  of  it  amounting  to Rs.52,971.99. By  the award  the arbitrator  awarded to  the respondent Rs.12,64,175.97  and pendente lite interest at 6% per annum.  The appellant filed objections in the High Court of Calcutta under sections 30 and 33 of the Arbitration Act, 1940 (hereinafter  called ’the  Act’) for  setting aside the award. On 18th September, 19.80, the learned single judge of the High  Court by  his judgment  and order  set  aside  the

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award. There was an appeal to the Division Bench of the High Court. On  2nd June,  1987 the  Division Bench  of the  High Court allowed  the respondent’s  appeal by  its judgment and order and set aside the judgment of the learned single judge and upheld  the award. Being aggrieved thereby the appellant has come up before this Court by special leave under Article 136  of  the  Constitution.  While  issuing  notice  on  the application under  Article 136  of the  Constitution it  was indicated that only three questions will be adjudicated upon in this  appeal viz.  Rs.13,94,982.46 which  was the  amount allowed  on   account  of  demurrage  and  wharfage  charges mentioned  in   the  award   and  secondly,   the   sum   of Rs.2,35,769.46 and lastly on the question of interest.      So  far  as  the  second  question  of  the  matter  is concerned Sree A.K. Sen, counsel appearing for the appellant has not made any sub 333 mission before us. We also cannot find any substance in this aspect. Therefore,  it is  not necessary for us to deal with this aspect of the matter.      So far  as the amount of Rs. 13,94,982.46 on account of demurrage and  wharfage is concerned, which was allowed, the award dealt  with the question as set out in the paper-book. It appears  that the  total demurrage  and wharfage  charges paid by  the Corporation  to the Railways, in respect of the wagons cleared  by the  claimant  firm,  respondent  herein, after obtaining  such waiver  as the Railways were persuaded to make was for Rs.15,63,863.21. The charges were alleged to have been paid under Credit Notes which were produced before the arbitrator.  There  was  no  dispute  about  the  actual payment of the charges. The appellant’s case was that it was entitled to  recover the  entire amount  it had  to  pay  on account of  the demurrage  and  wharfage  charges  from  the respondent under clause 9(a) of the agreement.      Clauses 9,  9(a) and  9(b)  of  the  agreement  are  as follows:           9. The  Agent shall commence to load and/or unload           all  the   wagons  and   trucks  as  well  as  all           streamers, flats,  barges and  boats or  any other           conveyance on  the day  of these arrival and shall           carry out the orders and directions of the Manager           with  all   possible   despatch   and   shall   be           responsible for  and make  good all  demurrage  or           other waiting charges and expenses that may accrue           and all  other charges  that may in the opinion of           the Manager  be payable  because of or through any           reasonable detention or delay."           "9(a)  The   Agent  shall   be   responsible   for           unloading/loading  the   wagons  within  the  free           period  allowed  by  the  Railways  and  also  for           loading/unloading for  trucks/carts or  any  other           transport vehicles  expeditiously. The Agent shall           be     liable      to      make      good      any           compensation/demurrage/wharfage  as   per  Railway           rules in force during the period of contract other           charges or  expenses that  may be  incurred by the           Corporation    on     account    of    delay    in           loading/unloading     of      truck/carts      and           unloading/loading of  Wagons unless  the delay  is           for  reason   beyond  the   Agents’  control.  The           decision of  the manager  in this respect shall be           final and binding on the Agent."           "9(b) The  Agent be  present himself  or send  his           duly 334

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         authorised representative  to be  present  at  all           weighments A  with which  the Agent  is  concerned           under this  Agreement and  in  case  he  fails  or           chooses not  to do  so, no claim what soever shall           lie against the Corporation in this regard."       Under  clause 9(a),  according to  the appellant,  the Agent    was         liable     to     make     good     any compensation/demurrage/wharfage  as  per  Railway  rates  in force during  the  period  of  contract,  other  charges  or expenses that  might  be  incurred  by  the  Corporation  on account of  delay in  loading/unloading of  trucks/carts and unloading/loading or wagons unless the delay was for reasons beyond the  Agent’s control.  It appears  that the appellant and periodically  served notices  upon the  respondent  firm calling upon  it to  pay demurrage and wharfage charges with liberty  to   prefer  objections.  Such  objections  as  the respondent-firm preferred  were heard and disposed of by the District Manager.  This procedure  continued till the end of November, 1975.  Then the  respondent-firm went to the Civil Court and  obtained discontinuance  of all  proceedings  for recovery of  demurrage and  wharfage charges. The arbitrator noted that  as a  result of  the hearings by the Corporation upto November, 1975 relief to the tune of Rs.1,21,884.55 was granted to  the respondent-firm and recovery of Rs.46,996.20 was made  from the respondent-firm’s bills. The Corporation, therefore,  claimed   before  the   arbitrator  recovery  of remaining of the claim of Rs.13,94,982.46.      The respondent  on the other hand claimed refund of the amount already deducted from the bills on the ground that it was not  liable for  any part  of the demurrage and wharfage charges. The  claim of the respondent was that the demurrage and wharfage  charges accrued  invariably  in  circumstances beyond its  control and accordingly under clause 9(a) of the agreement it  could not be made liable for such charges. The arbitrator noted  that the  respondent-firm  had  impressive documentary evidence in support of its case. It had produced numerous  letters   in  which  it  fully  explained  to  the authorities concerned  the difficulties  it was experiencing in timely  clearance of goods from railway wagons and sheds. It was claimed that it had produced month-wise report of its work accounting  for  nearly  all  cases  of  demurrage  and wharfage.  On  9th  of  October,  1975  the  respondent  had informed the  Corporation by  a  letter  Exhibit  128  which inadvertently was  not marked  exhibit that  it was resuming work (there  had been  a  break  in  his  contract)  on  the condition that  it would  not be required to clear more than 10 c.c.  Or 4 box wagons, i.e. 200 m.t. approximately daily. This is  a belated  and rather  grudging acceptance  of this condition by  the letter,  Exhibit 44  dated 3rd  of August, 1976. 335      The Arbitrator  noted that from the letters and reports it appeared  that timely  clearance was  hampered, and often made impossible  by arrival  of too  many wagons  at a time, congestion at  the sidings  and  at  the  weighbridges  with consequent detention  of lorries,  labour unrest and chronic want of  space in  the Corporation’s  godowns and by others. The arbitrator  noted that  there  was  insistent  complaint about this  want of space in the Corporation’s godown, which led to  the goods  being left  in railways  sheds  for  days together incurring  unusually heavy  wharfage  charges.  The Corporation sometimes  prepared over ambitious programmes of work for  the contractors,  as if  unaware. Of  the existing situation. The  arbitrator  noted  that  the  appellant  had examined several  witnesses from  the sidings.  But they did

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not according  to the  Arbitrator, prove anything beyond the procedure of  work generally  adopted at  the  sidings.  The arbitrator further  noted about  the foregoing  explanations that the  very often the objection of the railway shed staff to the  claimant regarding not clearing of the wagons timely from the  railway shed  because of  non-space there owing to heavy stock  kept therein  remaining uncleared,  and further that the  claimant under  the direction  and  order  of  the respondent being  given limited  programme because  of  non- space in the receiving depots/ godowns were causes of delay. The arbitrator  noted that  it would  be fair  to  make  the claimant firm  liable for  only 25%  of  the  demurrage  and wharfage charges  sought to be recovered by the Corporation, leaving the  remaining 75%  to be  borne by  the Corporation itself. Therefore,  out of  Rs.13,94,982.46 the Corporation, according   to    the   arbitrator,   could   recover   only Rs.3,48,745.61. The  appellant felt  aggrieved  thereby  and challenges this  grant of  25%. So far as respondent’s claim for refund of Rs.46.996.20 already recovered, the arbitrator felt  that   there  was  no  ground  for  interference.  The arbitrator noted  that after  hearing  the  claimant  firm’s objections the  deductions had  been made. The claimant firm had been  granted relief  in respect  of Rs.1,21,884.55. The arbitrator had  not been  able to  ascertain  precisely  the total claim  of the appellant till the end of November, 1975 but he  noted that  the sum  of Rs.46,996.20 represented not much more  than 25%  of  the  total  claim.  Therefore,  the arbitrator noted  that the  claimant, namely, the respondent was not  entitled to any refund and that the appellant could recover only  Rs.3,48,745.61 on  account  of  demurrage  and wharfage charges. As mentioned hereinbefore that is the main contention  in   this  challenge   before  this  Court.  The appellant claimed  that it  should have been entitled to the benefit of Rs.13,94,982.46 and not to 25% of the same.      Sree Sen,  counsel for the appellant drew out attention to clauses 336 9(a) and  (b) as set out hereinbefore and submitted that the respondent was  only entitled to the amount as determined by the Manager which was described as final. Sree Sen submitted that according  to clause  9(a) aforesaid  the  adjudication made by  the manager  was final  and there  was  no  dispute thereafter and  therefore, there  could be  no determination beyond 25%.  He drew  our attention  to that  part of the 13 clause 9(a)  to the  following effect  "the decision  of the manager in  this respect  shall be  final and binding on the Agent." So  according to  Sree Sen  apart from what had been granted by  the Manager  for  determination  on  account  of demurrage and  wharfage charges,  no further  deduction  was possible nor was it arbitrable because it was final. He drew our attention  to certain observation in Wadsworth v. Smith, L.R. Vol.  . Vl  Q.B. 332.  There by a written agreement the plaintiff therein had agreed to build four houses on land of defendant and  the defendant to grant plaintiff a lease when the houses  were completed;  the architects of the defendant for the time being were to certify as to the progress of the work, and  if there  should  be  any  unnecessary  delay  or unsatisfactory conduct  on the  part of  the plaintiff  with regard to  the erection  of the  buildings, on any matter or thing  connected  therewith  "the  fact  of  such  delay  or unsatisfactory conduct  to be  ascertained  and  decided  in writing by  the architects,  against  whose  decision  there shall be  no appeal", then it should be lawful for defendant to employ  other persons  to execute  the works, and to sell the buildings  and lease  the land  to other  persons. On an

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application to  make the  agreement a  rule of  court  under section 17 of the Common Law Procedure Act, 1854 of England, it was  held by  Cockburn, C.J.,  Blackburn and  Mellor, JJ. that  assuming   the  agreement   to  be  "an  agreement  or submission to  arbitration" within  the section,  the clause that there  was to  be no appeal against the decision of the architects amounted  to "words  purporting that  the parties intended that  it should  not be  made a rule of court." The question  was   raised  whether  the  agreement  was  not  a submission to arbitration. Cockburn, C.J. Observed that this clause was  certainly more like a submission to arbitration’ it was  on the confines of the two classes’ but on the whole it  seems   to  His  Lordship  to  savour  more  of  a  mere architect’s  certificate  than  of  a  judicial  proceeding. Moreover, even  if this were a submission within section 17, the Chief  Justice thought  that it could not be made a rule of court,  because it  was clear  that the  parties intended that the  matter should  be left  to  the  decision  of  the architects without  appeal; but  to make  it a rule of court would be  to submit  the decision to the jurisdiction of the Court. Blackburn,  J. agreed.  His  Lordship  observed  that where by  an agreement  the right  of one  of the parties to have or  to do  a particular thing was made to depend on the determination of a third person, that 337 was  not   a  submission   to  arbitration,   nor  was   the determination an  award; but  where there  was an  agreement that any  dispute about  a particular thin shall be enquired into and  determined by a person named, that might amount to a submission to arbitration, and the determination though in the form  of a  certificate, be  an award. Hannen, J. was of the view  that this  is not  an agreement  or submission  to arbitration; the  clause in  question appeared to be no more than  an  extension  of  the  ordinary  clause  in  building contracts, that  the certificate  of the architect should be conclusive as to work done and the mode of doing it.      If we proceed on this basis then the logical conclusion of this  would be  that where  there is  a decision  by  the manager as  in the instant case that would be final. Where a dispute has  been adjudicated  by the manager in this aspect there was  nothing for  the arbitrator to decide. It appears to us  on the  facts as  recorded by  the arbitrator  in his award that  there was  adjudication really by the Manager of the claims upto November, 1975. Thereafter there could be no adjudication as  a result  of injunction  obtained from  the court. Therefore, it appears to us that there was really, in fact, no  adjudication of  all the  disputes. The  remaining points were  arbitrable because  of  the  amplitude  of  the arbitration clause.  The relevant arbitration clause in this case contained, inter alia, as follows: .           "In the  event of  any question or dispute arising           under this  Agreement regarding  the  construction           thereof or  any clause herein or in respect of any           act, matter  or thing  relating to  this agreement           the same shall be referred to the Sole Arbitration           of any  person appointed  by the Managing Director           of the  Food Corporation  of India  ..............           The Award  of such  Arbitrator shall  be final and           binding on the parties to this Agreement ....."      The  point   there  having  been  decision  before  the Manager, that  disallowance of  the  claim  beyond  25%  was beyond the  jurisdiction of  arbitration  was  not  agitated before the  High Court.  Prabir Kumar  Majumdar, J. speaking for the  Division  Bench  of  the  High  Court  of  Calcutta observed at page 24 of the paper book as follows:

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         "It has  not been  brought to  our notice  whether           there has  been any  such decision by the Manager.           Further, taking  all the  relevant materials  into           consideration, the  learned arbitrator  has made a           finding in respect of the appellant’s 338           claim and respondent’s counter-claim in respect of           demur rage and wharfage charges."       It  has not  been brought to our notice that there has been any  such decision  by the Manager beyond the claim for the period  of November,  1975  as  mentioned  hereinbefore. Therefore, in  our opinion,  the arbitrator was not in error in proceeding  in the  manner as  he did. There was no other aspect of  law on  this aspect  of the  matter to  which our attention was  drawn. The  submission  on  this  aspect  is, therefore, negatived.  The challenge  to the  award on  this aspect must, therefore, fail.      So far  as the  grant of  interest pendente lite in the award is concerned, reliance was placed on various decisions of this  Court. Reliance  was placed  on State of Orissa and others v.  Construction India,  (J.T. 1987 4 S.C. 588) where the  award   of  interest   from  the  commencement  of  the proceedings before  the Arbitrator  to the date of the award was disallowed  in consonance  with the  views expressed  by this Court  in the  case of  Executive  Engineer  Irrigation Galimala & Ors. v. Abaaduta Jena,) J.T. 1987 4 S.C. 8).       Our  attention was  drawn by Dr. Ghosh counsel for the respondent firstly,  to the  decision in  the case  of  Firm Madanlal Roshanlal Mahajan v. Hukumchand Mills Ltd., Indore, [1967] 1  S.C.R. 105.  There the respondent had filed a suit against the appellant claiming two sums as losses in respect of two  items and  interest on  the same.  The disputes were referred to  an arbitrator,  before whom  the respondent did not press for interest prior to the institution of the suit, but pressed  its claim  for the  two sums and interests from the date  of the  institution of  the  suit  till  recovery. Bachawat, J.  speaking for  the three learned Judges of this Court held  that though  in terms, section 34 of the Code of Civil Procedure  did 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,  it was  held,  was  not  fettered either by  the arbitration  agreement or  by the Arbitration Act, 1940.      Our attention  was also  drawn to  the decision  in the case of  State of Madhya Pradesh v. M/s. Saith & Skelton (P) Ltd., [1972] 3 S.C.R. 233. There disputes had arisen between the appellant  and the  respondent  with  reference  to  the performance of  a contract  which provided  for arbitration. Steps were taken to appoint arbitrators and an umpire. 339 The appellant  filed a  petition  in  the  District  Judge’s Court, having jurisdiction over the matter for Setting aside the nominations.  When the  matter came  up to this Court in appeal, this  Court appointed a sole arbitrator with consent of the  parties. Thereafter  in the  presence of counsel for both the  parties, this  Court gave directions in the appeal that the  arbitration records be sent to the sole arbitrator and later  extended the  time for  making the award and gave directions regarding  the venue.  The  arbitrator  gave  his award, directing  the  payment  of  a  certain  sum  by  the appellant to  the respondent with simple interest at 9% from the date  anterior to  the reference  and filed the award in

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the Court  the next  day. One  of the  question  that  arose before  this  Court  was  whether  the  arbitrator  had  any jurisdiction to  award the  interest from a date anterior to the date  of award  or reference.  This Court  held that the claim for  the payment  of interest had been referred to the arbitrator. The  contract did  not provide  that no interest was  payable   on  the  amount  that  might  be  found  due. Therefore, the  respondent was  entitled under section 61(2) of the  Sale of  Goods Act, 1930, to claim interest from the date  on  which  the  price  became  due  and  payable.  The arbitrator had  found that the price had become payable from a date  anterior to  the date  of the  award. Therefore, the award of  interest from the anterior date was justified. The Court further held that the award of interest at 9% was also not  exorbitant   because  the  parties  themselves  claimed interest at 12%.      Our attention was also drawn to M/s. Ashok Construction Company v.  Union of lndia, [1971] 3 S.C.C. 66 where a bench of three  learned Judges  at page 68 of the report held that the terms  of the  arbitration agreement did not exclude the jurisdiction of  the arbitrator  to entertain  a  claim  for interest, on  the amount  due under the contract and on this ground this Court upheld the grant of interest.      Our  attention   was  drawn   by  Dr.   Ghosh  to   the observations in  the case of M/s. Alopi Parshad & Sons, Ltd. v. The  Union of  India, [1960]  2 S.C.R.  793.  This  Court reiterated the  well-settled principle  that  an  award  was liable to  be set  aside because of an error apparent on the face of  the award. An arbitration award may be set aside on the   ground of  an error on the face of it when the reasons given for  the C,  decision, either  in the  award or in any document incorporated  with it,  are based  upon  any  legal proposition which is erroneous.      In a  recent decision, Chinnappa Reddy, J. speaking for a bench  of  three  learned  Judges  in  Executive  Engineer Irrigation Galimala’s  case (supra)  at paragraph  15 of the judgment considered the ques- ll 340 tion of  award of  interest by  an arbitrator.  The  learned Judge noted the decisions in Firm Madanlal Roshanlal Mahajan v. Hukamchand  Hills Ltd. (supra) Ashok Construction Company v. Union  of India,  (supra. and the State of Madhya Pradesh v.  M/s.  Saith  &  Skelton  Private  Limited,  (supra)  and expressed the  view that  these  were  cases  in  which  the references to arbitration were made by the court or in court proceedings of  the disputes  in the  suit. It was held that the arbitrator  must be  assumed in  these cases to have the same power  to award  interest as  the court. Therefore, the grant of pendente lite interest on the analogy of section 34 of the  Civil Procedure  Code was  permissible. In regard to interest prior  to the  suit, it  was held  in most of these cases that  since the Interest Act, 1839 was not applicable, interest could  be awarded  if there was an agreement to pay interest or  a usage  of trade having the force of law. This Court held  in the  last mentioned  case that  they are  not entitled to  claim interest  for the  period  prior  to  the commencement of  the arbitration  proceedings for the reason that the  Interest Act did not apply to their case and there was no  agreement to  pay interest or any usage of trade. It was further  held that  the claimants  were not  entitled to claim pendente  lite interest  as the  arbitrator was  not a court nor were the references to arbitration made in suits.      In deference  to the latest pronouncement of this Court which is  a pronouncement  of three  learned Judges, we must hold that  the grant  of pendente lite interest in this case

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was not  justified. Though  the award  in  this  case  is  a speaking award,  it was  not made  clear on  what basis  the interest was  awarded.  We  are  of  the  opinion  that  the arbitrator was  in error  in granting  the interest  in  the manner he did. It is true that in specific term there was no denial of  this right to grant interest but there was denial as to get it in accordance with law.      In the  aforesaid view  of the  matter so  far  as  the interest of  the award  is concerned  we are  of the opinion that in  awarding the  interest the  arbitrator committed an error of  law. With this modification the judgment and order of the  High Court  are confirmed. The appeal is disposed of in these terms without any order as to costs. S.L.                                     Appeal disposed of. 341