ORDER

These appeals arise out of a judgment dated 1st August, 2001, passed by a Division Bench of the High Court of Delhi in FAO (OS) No. 78 of 1996, whereby and whereunder the pre-interest reference and pendente lite interest has been denied and the post-interest reference was reduced from 18% to 10% per annum.

2. The appellant s tender has been accepted by the respondent and an agreement was executed between the parties for raising 308 dwelling units. The agreement provided for resolution of dispute by arbitration. It is not disputed that the appellant completed the work. However, certain disputes arose. As per the arbitration agreement, the matter was referred to the sole Arbitrator, who entered into the reference. Before the Arbitrator, the appellant herein claimed pre-interest reference as also future interest at the rate of 24% per annum. On 18th December, 1992, the Arbitrator gave an Award for a sum of Rs. 24,64,424/- against the appellant s claim of Rs. 46,92,461/-. The Arbitrator allowed the claim of interest raised by the appellant herein and directed that interest @ 18% per annum should be paid on the awarded amount in respect of pre-reference, pendente lite and post Award. The appellant filed the said Award for being made Rule of the Court. Before the learned Single Judge of the Delhi High Court, the respondent filed an objection. However, the said objection was rejected and the learned Single Judge of the High Court by judgment dated 5th February, 1996 made the Award as Rule of the Court and granted the decree in terms of the Award. It also further directed that future interest be payable at 18% per annum till payment is made. The Division Bench, although upheld the other part of the Award, inter alia, directed that the appellant would not be entitled to interest prior to the date of the Award. As regards the interest granted from the date of the Award till the date of decree @ 18% per annum was considered to be excessive and the same was reduced to 10%. It was directed as follows:

"Consequently, decree shall stand modified to the extent that the claim of respondent to interest prior to 18th December, 1992 stands rejected. Respondents shall be entitled to future interest @ 10% per annum on the amount of award under claim no. 1 from 18th December, 1992 till the date of decree and from the date of decree till date of payment on the amount payable by the society to the respondent in terms of the award."

It is against the said judgment of the High Court, the appellant is in appeal before us.

3. Learned counsel appearing for the appellant urged that the view taken by the High Court in deleting the pre-reference interest and pendente lite is contrary to the decision of this Court in the case of Executive Engineer, Dhenkanal Minor Irrigation Division, Orissa and Ors. vs. N.C. Budharaj (Deceased) by Lrs. and Ors., reported in 2001 (2) SCC 721. In view of the decision of the Constitution Bench in N.C. Budharaj s case (supra), the said argument has to be accepted.

4. The contention of the learned counsel for the respondent, however, is that as the appellant has not made any demand for grant of interest, no interest was payable in terms of Interest Act, 1978. It was further urged that grant of pendente lite interest being discretionary in terms of Section 34 of the Code of Civil Procedure, 1908, the High Court cannot be said to have committed any error in refusing to exercise the discretion. The submission of the learned counsel appearing for the respondent cannot be accepted for more than one reason. Firstly, no such case was made out before the Arbitrator or before the High Court and secondly, the parties entered into an agreement in terms whereof it was agreed that as regards the delayed payment, the interest @ 1% per month will be paid on the bills that are paid after three months, which comes to 12% per annum. The appellant, therefore, was entitled to pre-reference interest @ 12% per annum. Furthermore, the Arbitrator exercis