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PETITIONER: SECRETARY TO THE GOVT. OF ORISSA & ANR.

       Vs.

RESPONDENT: SARBESWAR ROUT

DATE OF JUDGMENT04/10/1989

BENCH: SHARMA, L.M. (J) BENCH: SHARMA, L.M. (J) VENKATACHALLIAH, M.N. (J) KULDIP SINGH (J)

CITATION:  1989 AIR 2259            1989 SCR  Supl. (1) 366  1989 SCC  (4) 578        JT 1989 (4)    86  1989 SCALE  (2)756

ACT:     Arbitration  Act, 1940---Sections 30, 33 &  39--Arbitra- tor--Power  to grant interest prior to the  proceeding--Pro- ceedings held to commence when arbitrator indicates willing- ness to act.

HEADNOTE:     The  Respondent executed certain works under  a  written agreement with the appellant and a dispute arose  thereunder which  was referred to arbitration. The arbitrator  made  an award which was filed in Court. The appellant raised several objections which were all overruled by the Trial Court,  and the award was made a rule of the Court. The appellant there- upon  appealed  to the High Court under section  39  of  the Arbitration Act which was rejected. Hence this appeal by the appellant.     The  Court did not find any substance in the  objections raised by the appellant except the one taken by him  regard- ing the power of the arbitrator to grant interest. Therefore the  question that arose for determination by the Court  was whether  the arbitrator was competent to award interest  and if so in respect of which period, and further in the circum- stances of the case, from which date the proceedings  before the Arbitrator should be deemed to have commenced. Partly allowing the appeal on that question, this Court,     HELD: Since the reference in this case was made in March 198L  no  objection can be taken to that part of  the  award whereby the respondent has been allowed the claim of  inter- est for the earlier period. [368F]     See:  Executive Engineer (Irrigation) Balimela and  Ors. v.  Abliaduta  Jena and Others, [1988] 1 SCC  418  and  Seth Thawardas Pherumal v. The Union of India, [1955] 2 SCR 48.     The  arbitrator  in the present case  was  appointed  on i6.3.1982.  He after being informed about  his  appointment, directed the parties to submit their statements of claim  by the 20th April, 1982. The actual 367 date when this order was made is not known. [369E]     So  for as an action in a Court of law is concerned,  it must  be  held that it commences on the filing of  a  proper

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claim in accordance with the prescribed procedure before the authority  empowered to receive the same. No reason is  seen to  apply  a different approach in the case  of  arbitration proceedings.  As soon as the arbitrator indicates his  will- ingness  to  act  as such, the proceeding must  be  held  to commence. [370A-C]     The  arbitrator  in the present case,  by  directing  on 20.4.82  the  parties  to file their  statements  of  claim, clearly indicated that he accepted the’ offer to  arbitrate. The  proceeding  must,  therefore, be deemed  to  have  been instituted not later than this date. [370D]     The  award so far as it allowed interest for the  period after 20.4.82 is without jurisdiction and must be  excluded. The appeal is accordingly allowed in part. [370E]     Gujarat Water Supply and Sewerage Board v. Unique  Erec- tors (Gujarat)  (P) Ltd.  & Anr.,  [1989]  1 SCC 532; lossi- foglu  v. Coumantaros, [1941] 1 KB 396 and Hari Shankar  Lal v. Shambhunath Prasad & Ors., [1962] 2 SCR 720, referred to.

JUDGMENT:     CIVIL  APPELLATE JURISDICTION: Civil Appeal No. 2472  of 1989.     From  the  Judgment  and Order dated  23.4.1987  of  the Orissa High Court in M.A. No. 332 of 1984. A.K. Panda for the Appellant. R.K. Sahoo for the Respondent. The Judgment of the Court was delivered by     SHARMA, J. This appeal by special leave by the State  of Orissa  is directed against the judgment of the Orissa  High Court  rejecting its appeal under s. 39 of  the  Arbitration Act.  The respondent executed certain work under  a  written agreement with the appellant and a dispute arose  thereunder which  was referred to arbitration. The Arbitration made  an award  which  was filed in Court. On service of  notice  the appellant  raised several objections which the  trial  court overruled.  The  award was made a rule of the  court.  After unsuccessfully moving the 368 High  Court  in appeal, the appellant  has  approached  this Court.     Except  for the objection taken by the appellant on  the question  of the power of the Arbitrator to grant  interest, we do not find any merit in the other points decided by  the impugned judgment. The decision of the High Court is  there- fore affirmed on all the other points.     3.  So  far the question relating to  interest  is  con- cerned, it has been contended by the learned counsel for the appellant  that the arbitrator exceeded his jurisdiction  in allowing  the respondent’s claim in view of the decision  in Executive  Engineer  (irrigation), Balimela  and  others  v. Abhaduta  Jena and Others, [1988] 1 SCC 418. It was  pointed out  therein that this Court had in Seth Thawardas  Pherumal v. The Union of India, [1955] 2 SCR 48, held that in case of direct reference to arbitration without the intervention  of a  court, provisions of neither the Interest Act,  1839  nor the Civil Procedure Code applied to an arbitrator as he  was not a court, and interest could, therefore, be awarded  only if  there  was an agreement to pay interest or  a  usage  of trade having the force of law or some other provision of the substantive  law  which entitled the  plaintiff  to  receive interest. On the coming in force of the Interest Act,  1978, although the position in regard to the arbitrator’s power to award  pendente lite interest continued to be the  same,  he

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was  vested with the jurisdiction to allow interest pior  to the  proceeding in view of the definition of "court" in  the Act which includes the arbitrator. Accordingly, it was  held that in cases in which the reference to arbitration was made after  the commencement of the new Act, that is, August  19, 1981, the arbitrator may award prior interest, but in  those cases also he cannot grant pendente lite interest. Since the reference  in the case before us was made in March 1982,  no objection can be taken to that part of the award whereby the respondent  has been allowed the claim of interest  for  the earlier period.     4. The learned counsel for the appellant argued that the arbitrator  allowed the past interest twice over. The  award is  a  nonspeaking one and in paragraph 1 it says  that  the appellant shall pay the claimant Rs. 1,29,000 in full satis- faction  of  the claims. In paragraph 2 of the award  it  is held  that the claimant is entitled to interest at the  rate of  12 per cent per annum on the above principal sum of  Rs. 1,29,000  from  1.10.1978 till the payment  of  the  decree. According  to the learned counsel for the appellant the  sum of Rs. 1,29,000 included the claim of interest also. In view of the clear language of paragraph 2 of the award, we reject the argument. 369     5.  The appellant, however, is entitled to  relief  with respect to the pendente lite interest included in the award. The question is as to when this period commences.  According to  the appellant the period began on the 20th  April,  1982 when the arbitrator must be deemed to have entered on refer- ence. The respondent contends that this period must be  held not  to  have commenced earlier than the 9th of  July,  1982 when  the parties filed their claim and  counter-claim.  The argument  is that until the arbitrator applies his mind,  he cannot  be assumed to have entered on arbitration.  Reliance has  been placed on Gujarat Water Supply and Sewerage  Board v. Unique Erectors (Gujarat) (P) Ltd. and another, [1989]  1 SCC 532.     6.  Before  proceeding  further it will  be  helpful  to examine the language of s. 3 of the Interest Act, 1978 which states  that  in  cases where the  conditions  mentioned  in clauses  (a)  and (b) of sub-section (1) are  satisfied  the Court may allow interest for the past period terminating  on "the  date  of institution of the  proceedings".  By  reason of.the inclusive definition of "court" in s. 2(a) the Act is applicable to arbitration. The question, therefore, is as to when  the proceeding before an arbitrator is deemed to  com- mence.  It has not been suggested before us that the  neces- sary conditions for the application of s. 3 .are not  satis- fied in the present case and so the respondent is not  enti- tled  to  the  benefit under 1978 Act;  and  we,  therefore, proceed  on  the assumption that the provisions of  the  Act govern the case.     7.  The arbitrator in the present case was appointed  on 16.3.  1982. He after being informed about his  appointment, directed the parties to submit their statements of claim  by the  20th April, 1982. The actual date when this  order  was made  is  not  known. The  contractor-respondent  filed  his statement on 5.5. 1982 and the appellant on 9.7.1982.  Rely- ing on the observation in lossifoglu v. Coumantaros,  [1941] 1 K.B. 396, and those of Raghubar Dayal, J. in Hari  Shankar Lal  v. Shambhunath Prasad and others, [1962] 2 SCR  720  at page  732,  Mr. Panda, learned counsel  for  the  appellant, contended that the arbitrator cannot be said to have entered on  the reference earlier than April 20, 1982. According  to the  learned  counsel  for the respondent it  could  not  be

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before 9.7. 1982 when the arbitrator applied his mind to the cases of the parties. Reference was made to the decisions of several  High  Courts. In our view none of  these  cases  is helpful  to resolve the present controversy. They  all  deal with the point as to when an arbitrator is said to enter  on reference.  They were not concerned with the question as  to when  a  proceeding before an arbitrator is deemed  to  com- mence. 370     8.  So far an action in a court of law is concerned,  it must  be  held that it commences on the filing of  a  proper claim in accordance with the prescribed procedure before the authority empowered to receive the same. If a plaint,  drawn up in accordance with the prescribed law, is filed before  a civil court, the suit must be deemed to have been instituted on the date, and not on a later date when the court takes up the  plaint and applies its mind. Ordinarily the  plaint  is examined by the stamp reporter of the court who  scrutinises whether  proper  court fee has been paid or  not,  and  then makes a report. The court generally takes up the plaint only later. Similar is the position with respect to other  appli- cations  and  memoranda of appeals. It must,  therefore,  be held  that  the proceeding is instituted when  the  claimant files his claim. We do not see any reason to apply a differ- ent  approach in the case of an arbitration  proceeding.  As soon  as the arbitrator indicates his willingness to act  as such,  the proceeding must be held to have  commenced.  This aspect  did  not arise for decision in the  cases  Executive Engineer (Irrigation) v. Abhaduta Jena, [1988] 1 SCC 418  or Gujarat  Water Supply and Sewerage Board v. Unique  Erectors (Gujarat) (P) Ltd., [1989] 1 SCC 532 and no assistance  from them can be taken in the present appeal. The learned counsel for  the appellant is, therefore, right in saying  that  the arbitrator  in the present case, by directing on 20.4.  1982 the  parties  to file ’their statements  of  claim,  clearly indicated  that  he  accepted the offer  to  arbitrate.  The proceeding must, therefore, be deemed to have instituted not later than this date. We accordingly hold that the award  so far  it allowed interest for the period after 20.4. 1982  is without  jurisdiction  and must be excluded. The  appeal  is accordingly  allowed in part. The parties shall  bear  their own costs. Y.  Lal                                      Appeal   partly allowed. ? 371