JUDGMENT

SHARMA, J. :— This appeal by special leave by the State of Orissa is directed against the judgment of the Orissa High Court rejecting its appeal under S. 39 of the Arbitration Act. The respondent executed certain work under a written agreement with the appellant and a dispute arose thereunder which was referred to arbitration. The Arbitrator made an award which was filed in Court. On service of notice the appellant raised several objections which the trial Court overruled. The award was made a rule of the Court. After unsuccessfully moving the High Court in appeal, the appellant has approached this Court.

2. Except for the objection taken by the appellant on the question of the power of the Arbitrator to grant interest, we do not find any merit in the other points decided by the impugned judgment. The decision of the High Court is therefore affirmed on all the other points.

3. So far the question relating to interest is concerned, it has been contended by the learned Counsel for the appellant that the arbitrator exceeded his jurisdiction in allowing the respondents claim in view of the decision in Executive Engineer (Irrigation), Balimela v. Abhaduta Jena, (1988) 1 SCC 418. It was pointed out therein that this Court had in Seth Thawardas Pherurnal v. Union of India, (1955) 2 SCR-48, held that in case of direct reference to arbitration without the intervention of a Court, provisions of neither the Interest Act, 1839 nor the Civil Procedure Code applied to an arbitrator as he was not a Court, and interest could, therefore, be awarded only if there was an agreement to pay interest or a usage of trade having the force of law or some other provision of the substantive law which entitled the plaintiff to receive interest. On the coming in force of the Interest Act, 1978, although the position in regard to the arbitrators power to award pendente lite. interest continued to be the same, he was vested with the jurisdiction to allow interest prior to the proceeding in view of the definition of "Court" in the Act which includes the arbitrator. Accordingly, it was held that in cases in which the reference to arbitration was made after the commencement of the new Act, that is, August 19, 1981, the arbitrator may award prior interest, but in those cases also he cannot grant pendente lite interest. Since the reference in the case before us was made in, March 1982, no objection can be taken to that part of the award whereby the respondents has been allowed the claim of interest for the earlier period.

4. The learned Counsel for the appellant argued that the arbitrator allowed the past interest twice over. The award is a non- speaking one and in paragraph I it says that the appellant shall pay the claimant Rs. 1,29,000/- in full satisfaction of the claims. In paragraph 2 of the award it is held that the claimant is entitled to interest at the rate of 12 per cent per annum on the above principle sum of Rs. 1,29,000/- from 1-10-1978 till the payment of the decree. According to the learned Counsel for the appellant the sum of Rs. 1,29,000/- included the claim of interest also. In view of the clear language of paragraph 2 of the award, we reject the argument.

5. The appellant, however, is entitled to relief with respect to the pendente lite interest included in the award. The question is as to when this period commences. According to the appellant the period began on the 20th April, 1982 when the arbitrator must be deemed to have entered on reference. The respondent contends that this period must be held not to have commenced earlier than the 9th of July, 1982 when the parties filed their claim and counter-claim. The argument is that until the arbitrator applies his mind, he cannot be assumed to have entered on arbitration. Reliance has been placed on Gujarat Water Supply and Sewerage Board v. Unique Erectors (Gujarat) (P.) Ltd., (1989) 1 SCC 532.

6. Before proceeding further it will be helpful to examine the language of S. 3 of the Interest A