Andhra HC (Pre-Telangana)
State Of Andhra Pradesh vs V. Krishnaiah Naidu on 15 November, 1988
Equivalent citations: AIR1989AP309, AIR 1989 ANDHRA PRADESH 309, (1989) 1 APLJ 579, (1989) 1 ANDH LT 680, (1989) 1 LS 299
JUDGMENT Jeevan Reddy, J.
1. Arbitration Act is known for several knotty questions it gives rise (o. We are confronted with one such question herein. It is whether an arbitrator appointed under Section 8 or Section 12 of the Act has the power to award interest on the amount awarded by him from the date of his award to the date of realisation, or till the date of decree, as the case may be.
2. A contract was entered into between the respondent, Krishnaiah Naidu, and the appellants herein (Government of Andhra Pradesh) for construction of a bridge, at M. 10/4, Chittor-Aragonda Road, including forming of approaches, on 24-3-1977. It is Agreement No. 43/76-77. The contract contemplated work being completed within twelve working months, i.e., on or before 13-6-1978. Time was made the essence of contract. Site was handed over to the contractor on 14-6-1977. The work was not completed within the time stipulated. It was completed only sometime in 1981. The contractor raised a dispute claiming certain additional amounts in respect of the work done by him. The dispute was referred to the arbitrators designated in the contract; but, since they failed and neglected to enter upon the reference within the statutory period, the contractor filed O.P. No. 387/83 for removal of the said arbitrators and for appointment of a sole arbitrator. By its order dt, 18-1-1985 the Civil Court removed the arbitrators designated in the contract and appointed one Sri Purushotham as the sob arbitrator. The contractor submitted 15 claims, out of which six claims were rejected by the arbitrator. Claims 1, 2, 5, 7, 8, 9, 10 and 15 were, however, allowed. Claim 14 pertained to costs of arbitration. Claim 15 pertained to interest claimed by the contractor at the rate of 24% per annum on the a mount claimed by him, from the date of claim till realisation. The contractor claimed various amounts under each of the Claims 1 to 13. By his award dt. 15-11-1985 the arbitrator awarded various amounts under Claims 1, 2, 5, 7, 8, 9 and 10. Under Claim 15, he awarded simple interest at the rate of 15% per annum on the total amount awarded by him with effect from 16-12-1985 (30 days after the date of award) till the date of payment or the date of decree, whichever is earlier.
3. The contractor filed O.S. No. 1966/85 on the file of the II Additional Judge, City Civil Court, at Hyderabad to make the award the rub of the Court, The Government filed O.P. No. 3/1986 to set aside the award. The learned Judge of the City Civil Court by his Judgment and order dt. 27-8-1987 decreed O.S. 1566/85 and dismissed O.P.3/1986, against which the present appeal and Civil Rev is ion Petition are preferred by theState.
4. The learned Advocate-General raised three contentions, viz :--
(i) that the award made by the arbitrator is totally devoid of any reasons. Neither the award nor the proceedings before the arbitrator disclose as to why and how he allowed certain claims, and on what basis did he arrive at the amount awarded under each of the claims allowed. The award is, therefore, totally arbitrary;
(ii) that the award of certain amounts under Claims 8 and 9 is vitiated, inasmuch as there was absolutely no evidence or material before the arbitrator on the basis of which he could award any amount; and
(iii) that the arbitrator had no power to award interest which he did, as held by the Supreme Court in its recent decision in Executive Engineer, Irrigation, Galimala v. Abhaduta Jena (hereinafter referred to as "Abhaduta's case"), .
5. So far as the first contention is concerned, it is well settled by more than one decision of the Supreme Court that an award cannot be set aside on the grounds that it does not give reasons. The matter is now said to be pending before a larger Bench of the Supreme Court. But, until the Supreme Court rules to the contrary, we have to hold that an award cannot be set aside on the ground that it does not contain reasons. The first contention is, accordingly, rejected.
6. So far as the second contention is concerned, the learned Advocate-General has taken us through the claim-statement filed by the contractor, and the counter filed by the Government before the arbitrator. We have also taken note of the recital in the preamble to the award that the arbitrator has not only heard the parties, but has also gone through, and studied all documents, exhibits, etc., filed by both the parties, and has also considered carefully the oral and documentary evidence adduced by them. We are not satisfied that there is any substance in this contention. In its application to set aside the award, O.P. No. 3/1986, it was not averred by the Government that there is no evidence in support of the said claims. The award under the said claims was attacked on merits, but at no stage was it suggested that there is no evidence or material to support the award under the said claims. We cannot, therefore, entertain the said contention for the first time in this appeal.
7. We shall now consider the main and thorny question relating to the power of the arbitrator to award interest for the period subsequent to the date of his award. The contract between the parties does not provide for interest. There is no special law also providing for award of interest in such a situation. The contractor did claim interest in his claim-statement filed before the arbitrator, and the Government had disputed the basis of, and the right to the said claim. Though the contractor had claimed interest from the date of his claim, the arbitrator chose to award interest only from the date of award, that too from the expiry of 30 days after the date of award.
8. Shorn of authority, one would think that the arbitrator has the power to award interest on the amount awarded by him to a party. After all, interest represents compensation for depriving a person of the money due to him. But, as we shall presently show, this question has become enmeshed beyond recall in a number of legal propositions. A dispute can be referred to arbitration in three ways, viz., (i) arbitration without the intervention of the Court, which is governed by the provisions in Chap. II of the Arbitration Act-- Sections 3 to 19; (ii) arbitration with intervention of the Court where there is no suit pending. This is governed by Chap. III, which contains only one Section, i.e., Section 20; and (iii) arbitration in pending suit, which is governed by Chap. IV, containing Sections 21 to 25. However, a further distinction needs be made in the first category. A dispute can be referred to an arbitrator by the parties themselves without approaching the Court for any purpose. The occasion for going to Court would arise only after the award is made and when it is sought to be made the rule of the Court, or is sought to be set aside/remitted, as the case may be. But, in some cases, a resort to Court may be necessary for a limited purpose, which is provided, inter alia, by Sections 8 and 11 and 12. Section 8 provides in cases (a) where the arbitration agreement provides for reference of dispute to one or more arbitrators to be appointed i with the consent of the parties but the parties do not, after differences have a risen, concur in the appointment of the arbitrator/ arbitrators; (b) if any appointed arbitrator or umpire neglects or refuses to act, or is incapable of acting, or dies, and the arbitration agreement does not show that it was intended that the vacancy should not be supplied, and the parties or the arbitrator, as the case may be, do not supply the vacancy; and (c) where the parties or the arbitrators are required to appoint an umpire and do not appoint him, either party may, after following the prescribed procedure, apply to the Court for appointing an arbitrator or arbitrators, or umpire, as the case may be. Sub-section (2) of Section 8 says that the arbitrator/arbitrators, or umpire, so appointed by the Court "shall have like power to act in the reference and to make an award as if he or they had been appointed by consent of all parties". Section 11 empowers the Court to remove arbitrator/arbitrators or umpire in certain circumstances, and where it directs removal under Section 11, it can appoint one or more arbitrators in their place under Section 12. In this case, we are concerned with this sub-category, inasmuch as in this case, as stated above, the Court appointed an arbitrator under Section 8 of the Act, for the reason that the designated arbitrators failed and neglected to enter upon the reference within the statutory period. For the sake of convenience, we shall refer to this sub-category as category 1(b). Category l(a) represents cases where the arbitrator designated in the agreement, or appointed by the parties, as the case may be, makes the award.
9. The second category governed by Chap. III of the Arbitration Act deals with arbitration with intervention of the Court where there is no suit pending. Section 20 -- the only Section in the Chapter -- provides that where any persons have entered into an arbitration agreement before the institution of any suit with respect to the subject-matter of the agreement or any part of it, and where a difference has arisen to which the agreement applies, they or any of them, instead of proceeding under Chap. II, may apply to a Court having jurisdiction in the matter to which the agreement relates, that the agreement be filed in Court. On such application being filed, the Court will give notice to the parties, and after hearing them and on being satisfied that there is such an agreement, shall make an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise, or where the parties cannot agree upon an arbitrator, to an arbitrator appointed by it.
10. The third category pertains to arbitration in pending suits. This is governed by the provisions in Chap. IV. This Chapter provides that where in a suit all the parties interested agree that any matter indifference between them in the suit shall be referred to arbitration, they may, at any time before the judgment is pronounced, apply in writing to the Court for an order of reference. The arbitrator shall be appointed in such case in such manner as may be agreed upon between the parties. On such application being filed, the Court shall make a reference to such arbitrator, and after receiving the award, proceed to deal with it in accordance with the provisions of the Act.
11. The question of awarding interest by the arbitrator may arise with respect to three periods, viz., (a) period prior to the date of reference of dispute to the arbitrator; (b) period during which the dispute was pending before the arbitrator; and (c) period subsequent to the date of the arbitrator's award. So far as the period prior to the reference is concerned, the matter was governed by the Interest Act, 1839, and now by the Interest Act, 1978, which has replaced the 1839 Act. Under the Act of 1839, an arbitrator was not included within the definition of 'Court'. But the 1978 Act, which has been brought into force on 19-8-1981, does include the arbitrator within the definition of 'Court'. Accordingly, an arbitrator can now award interest in all the cases to which the Interest Act, 1978 applies. Besides the Interest Act, if there is any special statutory provision providing for award of such interest, the arbitrator can award interest. Instances of such special statutory provisions are Section 80 of the Negotiable Instruments Act, and Section 61(2) of the Sale of Goods Act. We are, however, not concerned with the period prior to the date of reference.
12. Though we are not concerned with the power of the arbitrator to award interest during the period of pendency of arbitration proceedings, the position of law with respect to this period, as well as the period subsequent to the date of award, is the same. It is here that the distinction between reference to arbitration without the intervention of the Court, with the intervention of the Court, and in a pending suit, arises. It is in this context that the categorisation made by us hereinbefore, namely, categories l(a), l(b), 2, and 3, is relevant. So far as category-3 cases are concerned, i.e., cases where reference to arbitration is made in pending suits, there is no dispute that the arbitrator has the power to award interest for both the periods, i,e., period during which the proceedings were pending before him, as well as the period subsequent to the date of his award, inasmuch as the reference to arbitrator is in a pending suit. In such cases, the power to award interest vested in the Court by Section 34 of the Civil P.C., avails the arbitrator as well He can, therefore, award interest under Section 34, C.P.C. This, however, does not help us, inasmuch as in the case before us the reference to arbitration was not in a pending suit.
13. The second category pertains to cases where the Court orders the agreement to be filed, and makes an order of reference to the arbitrator (arbitrator appointed by the parties, whether in the agreement or otherwise, or where the parties cannot agree upon an arbitrator, to an arbitrator appointed by the Court). But, this is a case of arbitration with the intervention of Court where there is no suit pending. Since we are not concerned herein with this situation, we prefer not to express any opinion on the power of the arbitrator in such a case to award interest for the two periods namely, during the pendency of the proceedings before the arbitrator, and for the period subsequent to the date of the arbitrator's award.
14. Now coming to the first category, we may first put out of consideration category l(a). Category l(a) pertains to arbitration where the arbitrator designated by agreement, or by mutual consent of the parties, makes an award. In other words, in these cases, assistance of the Court is not sought, whether under Section 8 or under Section 12. The matter, of course, comes to the Court only after the award is made when a party applies for making it the rule of the Court, or for setting it aside, as the case may be. In such a situation, it is clear from the decision of the Supreme Court in Abhaduts, that the arbitrator has no power to award interest for the period during which the arbitration proceedings were pending before him, and also for the period subsequent to the date of his award. Though it would appear from an earlier decision of the Supreme Court in Union of India v. Bungo Steel Furniture Pvt. Ltd., that even in such cases the arbitrator has power to award interest on the principle of Section 34 of the Civil P.C., this decision has been explained by the Supreme Court in Abhaduta, as a case where the arbitration was in a suit, i.e., a case falling within category-3, mentioned above; (vide para 14, at page 1527).
14A. The Supreme Court held in Abhaduta, , relying upon certain observations in Bungo Steel, , that it was a case of reference to arbitration in a suit. We are bound by the said understanding and, accordingly, must hold that Bungo Steel does not empower the arbitrator, in cases falling under category l(a), to award interest for the duration of arbitration proceedings, or for the period subsequent to the date of arbitrator's award.
15. Now we come to category l(b) cases. This sub-category deals with cases where the reference to arbitration is without the intervention of the Court but the assistance of the Court is obtained for a limited purpose, i.e., either under Section 8, or under Section 11 and 12.
Mr. N.V.B. Sankara Rao contends, relying upon a Bench decision of this Court in O.P. Nos. 1 and 2 of 1988 and O.S. Nos. 1 and 2 of 1988, disposed of on 29-4-1988 (reported in 1989(1) Andh LT 666), that the cases where the Court appoints an arbitrator under Section 8 must also be treated as cases of arbitration with the intervention of a Court. He seeks to equate this sub-category with category-2, and again to equate both of them, i.e., category 1(b) and category-2, with category-3 cases.
His contention is that even in cases where the arbitrator is appointed by the Court under Section 8, it must be deemed to be an arbitration with the intervention of the Court, which has been treated on the same par, and equated with arbitration in a pending suit by the Supreme Court. According to him, the Supreme Court has clearly held that in all such cases the arbitrator has power to award interest for both the said periods. Besides the Bench decision referred to above, the learned counsel relies upon certain observations in the decision of the Supreme Court in Food Corporation of India v. Surendra, Devendra and Mohendra Transport Company, , besides certain observations in Abhaduta, .
16. On the other hand, the learned Advocate-General contends that both Sections 8 and 12 occur in Chapter II, dealing with arbitration without the intervention of the Court and, therefore, it would be a contradiction in terms to say that they are cases of arbitration with the intervention of the Court. According to him, the Supreme Court has not termed them as arbitration with the intervention of the Court, nor it has equated them with arbitration in a pending suit.
17. Both Sections 8 and 12 occur in Chap. II, which is entitled "arbitration without intervention of a Court". Chapter III deals intervention of a Court". Chapter III deals with arbitration with intervention of a Court; but, it deals with a case where no suit is pending, while Chap. IV deals with arbitration in pending suits. Whatever may be the position with respect to arbitration under Chap. III, so far as arbitrations under Chap. II are concerned, they are undoubtedly cases of arbitration without intervention of a Court. The mere fact that an arbitrator is appointed under Section 8, or replaced under Section 11 and 12 by the Court, does not make it an arbitration with the intervenion of the Court. Under Section 8 the Court does not refer the dispute to the arbitrator. It's role and function is a limited one. In cases where the parties do not agree upon an arbitrator, or an arbitrator neglects or refuses to act, or dies, the Court appoints an arbitrator. Sub-section (2) of Section 8 itself declares specifically that the arbitrator so appointed by the Court "shall have like power to act in the reference and to make an award as if he or they had been appointed by consent of all parties". Similarly, under Section II and 12 also the Court performs a limited function. It removes an arbitrator/umpire and appoints another in his place. Sub-section (3) of Section 12, just like Sub-section (2) of Section 8, specifically declares that the arbitrator or umpire so appointed "shall have the like power to act in the reference and to make an award as if he had been appointed in accordance with the arbitration agreement". Notwithstanding such appointment by Court, the arbitration is one without the intervention of the Court under Chap. II. The arbitrator appointed under Section 8 or under Section 12 cannot be equated with, or treated on same par with an arbitrator appointed under Section 20 (Chap. Ill), much less with an arbitrator appointed under Chap. IV. This distinction is also pointed out by two learned single Judges of Orissa and Madhya Pradesh High Courts in Fertiliser Corpn. of India v. Ravi Kumar, and Union of India v. Krishnarao,. , respectively.
18. Now let us see whether the Supreme Court has held otherwise, as contended by Mr. N.V.B. Sankara Rao. Before, however, referring to the observations in the decisions relied upon by Mr. N.V.B. Sankara Rao, it would be appropriate to point out that in a very recent decision in State of Orissa v. Dandasi Sahu, , the Supreme Court has held, following the decision in Abhaduta, , that has held, following the decision in Abhaduta, , that the arbitrator has no power to award interest pendente lite, which would also mean that he has no power to award interest subsequent to the date of his award. Dandasi Sahu was a case where the Court had, on the application of the contractor, removed the arbitrator designated by the Chief Engineer (representing the State of Orissa -- a party to the contract) and appointed one Sri Patnaik as the sole arbitrator. In para 13 of the judgment the Supreme Court observed :
"It is now well settled that the interest pendente lite is not a matter within the jurisdiction of the arbitrator. In this connection reference may be made to the observations of this Court in Exucutive Engineer (Irrigation), Balimela v. Abhaduta Jena, where this Court held that the arbitrator could not grant interest pendente lite. In the aforesaid view of the matter this direction in the award for the payment of such interest must be deleted from the award. So, we delete the following portion from the award-- "The award amount shall bear interest at 10% per annum from 9-9-1975 to the date of decree or payment, whichever is earlier". The order of the High Court is modified to the extent that the award is confirmed subject to deletion of the interest as aforesaid. We make it clear that in the facts of this case interest for the period from 26-9-81 to 18-3-83, the date of the award be deleted. The High Court has, however, granted interest from the date of the decree. That is sustained".
Indeed, this paragraph clearly shows that not only the arbitrator has no power to award interest pendente lite, he has not also no power to award interest from the date of his award till the date of payment, or till the date of decree, as the case may be. It may be noticed that the award of interest in the case before us is from thirty days of the expiry of the award till the date of payment or the date of decree, whichever is earlier -- practically in the same terms as the award in Dandasi Sahu, .
19. Now we proceed to consider the decisions relied upon by Mr. N.V.B. Sankara Rao. The Bench decision of this Court in O.P. Nos. 1 and 2 of 1988, dt. 29-4-1988 (reported in 1989(1) Andh LT 666) was a case where the arbitrator was appointed by the Civil Court under Section 8 of the Arbitration Act. The Bench treated the said case as one of arbitration with the intervention of the Court and, accordingly, held that the arbitrator was empowered to grant interest both pending the proceedings before him, and also from the date of award tin the date of decree. This is what the Bench said :
"Thus on a conspectus of all the decisions referred to above, we hold that in the present case since the arbitrator was appointed through the intervention of the Court and in Court proceedings, on the principle of Section 34, C.P.C. he is competent to grant interest from the date of institution of the suit till the date of the award and from the date of the award tiB the date of the decree on merits".
It is evident that the Bench did not have the advantage of the latest decision of the Supreme Court in Dandasi Sahu, . Further, it also appears that the Bench did not advert its attention to the fact that Section 8 occurs in Chap. II, dealing with arbitration without the intervention of a Court, and must, accordingly, be treated as 'in curium'. For the said two reasons, particularly in view of the later decision of the Supreme Court in Dandasi Sahu, , we do not think it necessary to refer the matter to a Full Bench. With great respect, we must point out that the Bench was. Not right in holding that because an arbitrator was appointed under Section 8, it becomes an arbitration with the intervention of the Court. Mr. N.V.B. Sankara Rao, however, points out that the Bench arrived at the said opinion on the basis of certain observations in Abhaduta, AIR 1988 SC 1528 and also in F.C.I. v. Surendra, Devendra & Mohendra Transport Company, , and that we too must arrive at the same conclusion in view of the said observations.
20. In para 15 of the judgment in Abhaduta it is observed:
"In Ahok Construction Company v. Union of India, , there was an arbitration on the intervention of the Court (Deputy Commissioner)....".
Again, in paragraph 18 this decision is also referred to as a case in which reference [o arbitration was made by the Court of all the disputes in the suit. Similarly in para 16 of the judgment, while referring to the decision of the Supreme Court in State of Madhya Pradesh v. Saith & Skelton Pvt. Ltd, , it is observed that the Court appointed on arbitrator with the consent of the parties and referred all the disputes to him. Towards the end of the para it is observed that, since all the disputes were referred to arbitration by the Court, the arbitrator must be held to have the power to award interest under Section 34, C.P.C. We have seen the reports of both the cases in Ashok Construction Company v. Union of India, and State of M.P. v. Saith & Skelton Pvt. Ltd. In the former the Court appointed an arbitrator under Section 8 of the Act, while in the latter case the appoint merit of arbitrator was under Section 12(2). In our opinion, however, the said observations cannot be treated as a decision laying down thai where an arbitrator is appointed under Section 8 or Section 12, it should be deemed to be an arbitration with the intervention of the Court, or an arbitration governed by Chap. IV of the Act. The decision in Abhadula, is that where the reference to arbitration is in a suit, or through the intervention of the Court, the arbitrator gets the power to award interest under Section 34.
C.P.C. In Abhaduta, AIR 1988 SC 1320 it was not urged, nor was it laid down that appointment of arbitrator under Section 8 or Section 12 should be treated as appointment of an arbitrator through the intervention of the Court, notwithstanding the fact that the said provisions occur in Chap. II, relating to arbitration without the intervention of the Court. A decision is an authority for the proposition it decides. A decision ought not to be read as a statute and principles inferred which were never intended to be enunciated. That our understanding is correct is borne out by the later decision of the Supreme Court in Dandasi Sahu, where the Court disallowed the interest pendente lite, as also for the period subsequent to the date of the arbitrator's award, applying the principle of Abhaduta, , though Dandasi Sahu, was a case where the arbitrator was appointed by the Court under Section 12 of the Act after removing the arbitrator appointed by the Chief Engineer in terms of the contract.
21. Now corning to the decision in F.C.1. v. Surendra, Devendra & Mahendra Transport, the observations relied upon by Mr. Sankara Rao occur in para 18. It was a case of reference to arbitration by the parties themselves. In other words, it was not a case where the arbitrator was appointed by the Court under Section 8, or Section 12. The arbitrator awarded interest for the period during which the proceedings were pending before him, which was questioned by the other party. Following the decision in Abahaduta, , the Court disallowed the interest pendenle lite. However, the observations relied upon in para 18 read thus :
"In a recent decision, Chnnappa Reddy, J. speaking for a Bench of three learned Judges in Executive Engineer, Irrigation, Galimala's case, of the judgment, considered the question of award of interest by an arbitrator. The learned Judge noted the decisions in Firm Madanlal Roshanlal Mahajan v. Hukamchand Mills Ltd., , Ashok Construction Company v. Union of India, and the State of Madhya Pradesh v. Saith & Skelton Private Ltd., 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 anabgy of Section 34 of the Civil P.C. was permissible....".
According to Mr. N.V.B. Sankara Rao, the above observations mean that where the Court appoints an arbitrator under Section 8 or Section 12, it must be deemed to be a reference to arbitration by the Court. We are unable to agree, for the reasons recorded in the preceding paragraph. We need not reiterate that under Section 8 or Section 12 the Court does not refer the dispute to arbitrator, but merely appoints an arbitrator in certain specified circumstances, and that, in such cases, reference to arbitration is without the intervention of the Court, i.e., by the parties 'themselves, and not by the Court.
22. After we completed this judgment, the learned Advocate-General brought to our notice a still later decision of the Supreme Court in State of Rajasthan v. R.S. Sharma and Company, Civil Appeal No. 3054/1988, decided on 16th Aug., 1988, reported in 1988(111) SVLR(C) 420 : 1988(2) SCALE644.
This was a case where disputes arose between the State of Rajasthan and a contractor with respect to a work entrusted to the latter, "After some litigation between the parties when the Civil Revision was pending in the High Court of Rajasthan at Jodhpur, a compromise between the parties was arrived at on 13th April, 1982. It was agreed that the dispute would be settled through arbitration.
By an agreement dt. 13th June, 1982 the parties named their arbitrators". The arbitrators entered upon the reference and made their award on 8-12-1982. The arbitrators, inter alia, awarded interest pendente lite on the amount awarded by them. The validity of the award was questioned in Civil Court and the matter ultimately came to Supreme Court. While upholding the award in other respects, the Supreme Court had this to say on the power of the arbitrator to award interest pendente lite:--
11. There is, however, one infirmity in the award as sanctioned by the High Court, that is to say, the grant of interest pendente lite. The arbitrators have observed as follows: --
"By adjustment of interest held to be due to the respondents with that held to be due to the claimants on their items of claims which were not in the nature of claim for damages for breach, we hold that the respondents do pay Rs. 17,92,957/- (Rupees seventeen lacs ninety two thousand nine hundred f iftyseven only) as interest, to the claimants upto the date of the Award Claimants further do pay to the respondents Rs. Nil.
12. This was awarding interest pendente lite. This is in violation of the principles enunciated by this Court in Executive Engineer (Irrigation). Balimela v. Abhaduta Jena, . Our attention was drawn by Shri Soli J. Sorabjee, counsel for the respondent, to the decision of this Court in Food Corporation of India v. Surendra, Devendra & Mohendra Transport Co., where at pages 555-556 : of the report referring to certain decisions cited by Chinnappa Reddy, J. in Executive Engineer (Irrigation) (supra), he expressed the view that these were cases in which the reference to arbitration were made by the Court or in Court proceedings of the disputes in the suit. In that context it was held that the arbitrator had power to grant interest. It was contended before us that this was a similar case. There was a Court proceeding in this case regarding the appointment of the arbitrator, and as such on the same anabgy it should be treated that the arbitrator had power to grant interest. We are unable to accept this.
13. What Mr. Justice O. Chinnappa Reddy meant ot say by the latter judgment in Food Corporation of India (supra) was where the disputes regarding the merit of the case were pending in the court and such disputes instead of being decided by the Court adjudication had been referred to an arbitrator by the Court, in such cases the arbitrators deciding in the place of the Court, would have the same powers to grant interest pendente lite as the Courts have under Section 34 of the Civil Procedure Code. Instant case is not such a proceeding.
14. In that view of the matter this part of the award, which was affirmed by the High Court of granting of interest, must be deleted. We do so accordingly.....".
23. It is clear from para 13 that the Supreme Court has understood the decision of Chinnappa Reddy, J., in Abhaduta, (reference to Food Corporation of India is evidently a mistake for Abhaduta) as laying down that where disputes regarding the merits of the case are pending in Court and such disputes, instead of being adjudicated by the Court, are referred to arbitration for decision, the arbitrator does have the power to award interest pendente lite under Section 34, C.P.C., a power inhering in the Civil Court. This understanding of Abhaduta (supra) accords with, and affirms our understanding of Abhaduta.
24. For the above reasons, we are of the opinion that the award of interest for the period subsequent to his award by the arbitrator was incompetent. Accordingly, the appeal and the Civil Revision Petition are allowed to the limited extent indicated above, viz., that the interest awarded by the arbitrator under claim 15, is deleted. In other respects the award shall stand. There shall be no order as to costs, in the circumstances.