IMPORTANT POINTS
1. In arbitration cases, the correct procedure which should be adopted by the arbitrator is to award future interest till the date of the decree or the date of payment, whichever is earlier.
2. The arbitrator has the jurisdiction to award pre-reference interest in cases which arose after the Interest Act, 1978 has become applicable and also pendente lite interest and future interest.

JUDGMENT

Kirpal, J.-The main question which arises for consideration in these cases relates to the power of the Arbitrator to award interest.

2. The contention on behalf of the appellants against whom interest has been awarded by the arbitrators, is that this Court held in Executive Engineer (Irrigation) v. Abhaduta Jena1, that the arbitrator has no power to award interest in respect of pre reference period in the absence of the claimant having a right under the contract or a provision of substantive law, to get interest. On the other hand, it is the submission on behalf of the claimants/respondents that the aforesaid decision in the case of Abhaduta Jena (supra) has been overruled by a Constitution Bench of this Court in the case of Secretary, Irrigation Department, Government of Orissa and Others v. G.C. Roy2, and it has been held that the arbitrator could award pre reference, pendente lite and future interest.

3. Before dealing with the facts of each case it will be appropriate to examine the relevant decisions of this Court in order to determine the correct legal position with regard to the jurisdiction of the arbitrator to award interest in respect of the periods for which interest can be awarded namely- (i) for the period commencing from the date of dispute till the date Arbitrator entered upon the reference, or the pre-reference period: (ii) for the period commencing from the date the Arbitrator entered upon reference till the date of making the award (pendente lite interest) and: (iii) for the period commencing from the date of making of the award till the date the award is made the rule of the court or till the date of realisation, or the post award interest.

4. The question with regard to power of the Arbitrator to award interest was considered at great length by this Court in Abhaduta Jena s (supra). Two questions which arose for consideration of the Court in Abhaduta Jena s case (supra) were (i) the power of the Arbitrator to award interest for the period prior to his entering upon reference and; (ii) the power of the Arbitrator to award interest for the period the dispute remained pending before him.

5. Chinnappa Reddy, J., speaking for the Court, considered all the earlier decisions of this Court including that of Seth Thawardas Pherumal v. Union of India3, and, with regard to pendente lite interest, concluded the as the arbitrator was not a court within the meaning of Section 34 of Code of Civil Procedure, therefore, he could not award pendente lite interest. With regard to claim of interest for the period before the reference, it was held that the arbitrator could not award interest for pre-reference period in cases which arose prior to the commencement of the Interest Act, 1978 unless the claimant had a substantive right to get interest under the terms of a contract or under a provision of any law.

In coming to this conclusion with regard to interest for pre-reference period, it was observed as follows :

"It is important to notice at this stage that both the Interest Act of 1839 and the Interest Act of 1978 provide for the award of interest up to the date of the institution of the proceedings. Neither the Interest Act of 1839 nor the Interest Act of 1978 provides for the award of pendente lite interest. We must look elsewhere for the law relating to the award of interest pendente lite. This, we find, provided for in Section 34 of the Civil Procedure Code in the case of courts. Section 34, however, applies to arbitrations in suit for the simple reason that where a matter is referred to arbitration in a suit, the arbitrator will have all the powers of the court in deciding the dispute. Section 34 does not otherwise apply to arbitrations as arbitrators are not courts within the meaning of Section 34 Civil Procedure Code. Again, we must look elsewhere to discover the right of the arbitrator to award interest before the institution of the proceedings, in cases where the proceedings had concluded before the commencement o