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PETITIONER: SUDHIR BROTHERS

       Vs.

RESPONDENT: DELHI DEVELOPMENT AUTHORITY & ANR.

DATE OF JUDGMENT16/11/1995

BENCH: ANAND, A.S. (J) BENCH: ANAND, A.S. (J) MUKHERJEE M.K. (J)

CITATION:  1996 SCC  (1)  32        1995 SCALE  (6)546

ACT:

HEADNOTE:

JUDGMENT:                          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  (pre- reference  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

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but the  order of the learned Single Judge refusing the pre- reference 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 pendente- lite interest  could not be said to have laid down good law.

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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  pre- reference 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.

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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.