ORDER

In this batch of civil appeals the principal question that arises for consideration is as to whether the Arbitrator has got jurisdiction to award interest for the pre-reference period in cases which arose prior to commencement of the Interest Act, 1978. The Interest Act, 1978 came into force w.e.f. 19.8.1981. Before enforcement of this Act, the Interest Act, 1839 was holding the field. Under the impugned judgment, the High Court has awarded interest for the pre-reference period and this is how the State of Orissa has filed all these appeals.

2. Mr. Raj. Kumar Mehta, learned Advocate appearing in support of these appeals urged that the question of payment of interest for the pre-reference period is no more res integra as the said question has been answered in the negative by this Court in catena of judgments. However, Mr. Anil Diwan, the learned Senior Counsel appearing for the respondents, urged that in view of judgment of this Court in State of Orissa v. G.C. Roy1, the judgment in Executive Engineer (Irrigation) Balimela & Ors. v. Abhaduta Jena & Ors.2 and State of Orissa v. B.N. Agarwalla3 require reconsideration. Some English decisions as well as decisions of this Court were also relied upon.

3. Mr. Mehta drew our attention to various judgments of this Court including the Privy Council to support his submission. A strong reliance has been placed by him on two decisions rendered by the three-Judge Bench, (1) Executive Engineer (Irrigation) Balimela & Ors v. Abhaduta Jena & Ors. (supra), (2) State of Orissa v. G.C. Roy (supra) and State of Orissa v. B.N. Agarwalla (supra). He also drew our attention to the following decisions and urged that cases governed by the Interest Act, 1839 the arbitrator has no jurisdiction to award pre-reference interest in the absence of any custom or usage of trade having the force of law or any other provision of substantive law entitling the claimant to recover interest.

1. Bengal Nagpur Railway Co.4

2. Seth Thawardas Pherumal v. UOI5.

3. UOI v. A.L. Rallia Ram6.

4. UOI v. Watkins Mayor & Co.7

5. UOI v. West Punjab Factories Ltd.8

4. In Executive Engineer v. Abhaduta Jena & Ors., the 3-Judge Bench has held that the Arbitrator has no jurisdiction to award interest for the preference period where provisions of the Interest Act, 1839 apply as also pendente lite. Later on the Constitution Bench of this Court in the State of Orissa v. G.C. Roy (supra), was required to consider the correctness of the view taken by this Court in Jena s case so far it held that the Arbitrator has no power to award pendente lite interest.

5. Reverting back to the judgment in Abhaduta Jena, a three-Judge Bench judgment held that the interest is not payable either for the pre-reference period or pendente lite. There the question arose under the Interest Act of 1839. It is true that the Constitution Bench in G.C. Roy s case was principally concerned as to whether the decision in Abhaduta Jena s case rejecting the claim of pendente lite interest was correctly decided or not. The Constitution Bench in paragraph 44 and 45 held as under :

"44. Having regard to the above consideration, we think that the following is the correct principle which should be followed in this behalf :

Where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (along with the claim for principal amount or independently) is referred to the arbitrator, he shall have the power to award interest pendente lite. This is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and therefore when the parties refer all their disputes - or refer the dispute as to interest as such - to the arbitrator, he shall have the power to award interest. This does not mean that in every case