CHAJJU RAM Vs. NATIONAL INSURANCE CO LTD

JUDGEMENT

(1.) THIS appeal is directed against the judgment of Single Judge dated 03 -11 -1988 passed in CMP No. 419/1986.

(2.) THE short question for determination is, whether an arbitrator has the power to direct payment of interest pendente -lite and future. It is contended by Sh. B.S. Mannas, learned counsel for the appellant, that learned Single Judge has committed an error by modifying the award, so for as it allowed pendente lite and future interest to the appellant. Learned Judge has placed reliance on AIR 1988, SC 1520, (Executive Engineer, Irrigation, Galimala and others V/S Abnaduta Jena), which is not correct law, in view of decision of the Apex Court on this question. This contention appears to be correct, if reference is made to AIR 1992, SC 732 (Secretary Irrigation Department, Government of Orissa and others V/S G.C. Roy and others). After dealing with the question, the Apex Court stated the position in para 43 (page 748) as under: - "43. The question still remains whether arbitrator has the power to award interest pendente lite, and if so what principle. We must reiterate that we are dealing with the situation where the agreement does not provide for grant of such interest nor does it prohibit such grant. In other words, we are dealing with a case where the agreement is silent as to award of interest. On a conspectus of aforementioned decisions, the following principles emerge: (i) A person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name. It may be called interest, compensation or damages. This basic consideration is as valid for the period the dispute is pending before the arbitrator as it is for the period prior to the arbitrator entering upon the reference. This is the principle of S. 34 C.P.C., and there is no reason or principle to hold otherwise in the case of arbitrator, (ii) An arbitrator is an alternative form for resolution of disputes arising between the parties. If so, he must have the power to decide all the disputes or differences arising between the parties. If the arbitrator has no power to award interest pendente lite, the party claiming it would have to approach the Court for that purpose, even though he may have obtained satisfaction in respect of other claims from the arbitrator. This would lead to multiplicity of proceedings. (iii) An arbitrator is the creature of an agreement, ft is open to the parties to confer upon him such powers and prescribe such procedure for him to follow, as they think fit so long as they are not opposed to law. (The proviso to S. 41 and S. 3 of Arbitration Act illustrate this point), All the same, the agreement must be inconfirmity with law. The arbitrator must also act and make his award in accordance with the general law of the land and the agreement. (iv) Over the years, the English and Indian Courts have acted on the assumption that where the agreement does not prohibit and a party to the reference makes a claim for interest, the arbitrator must have the power to award interest pendente lite. The award as (AIR, 1955 SC 468) has not been followed in the later decisions of this court. It has been explained and distinguished on the basis that in that case there was no claim for interest but only a claim for unliquidated damages. It has been said repeatedly that observations in the said judgment were not intended to lay down any such absolute or universal rule as they appear to, on first impression. Until Jenas case (AIR 1988 SC 1520) almost all the courts in the country had upheld the power of the arbitrator to award interest pendente lite. Continuity and certainty is a highly desirable feature of law. (v). Interest pendente iite is not a matter of substantive law, like interest for the period interior to reference (pre -reference period). For doing complete justice between the parties, such power has always been inferred."

(3.) SAME view has been taken in AIR 1993 SC, 864 (Jugal Kishore Prabhati Lal Sharma and ors. Vs. Vijendra Prabhati lal Sharma and others) wherein the court has held: "Where the reference to arbitration is not only of all the disputes in the suits pending between the partners but also of all the disputes arising out of the deed of dissolution and the deed of dissolution envisages the payment of interest and also specifies the point of time from which interest is payable, the arbitrator is competent to grant interest on the amount becoming payable under the pending adjudication in a suit have been referred for arbitrator in the instant case and therefore the arbitrator had all the powers which the court itself would have in deciding the Issuer In the suit."