An arbitrator's authority is confined to the terms of the contract, and interest cannot be awarded if explicitly barred, reaffirming limited grounds for judicial review of arbitral awards.

JUDGMENT

1. The backdrop leading to these appeals under Section 39 of the Arbitration Act, 1940 (hereinafter referred as the Act) is that the State of Rajasthan through Irrigation Department entered into a work agreement with M/s. Ferro Concrete Construction (India) Pvt. Ltd. (hereinafter referred as the 'contractor') on 6.2.1988. The contract work was for designing and constructing upstream and downstream coffer dams including referred work at Bisalpur dam site.

2. With the progress of work, the contractor raised different bills and part payment was made. After conclusion of the work, the contractor raised the final bill and on non payment of full demand, addressed a letter dated 14.5.91, raising the grievance and requested for appointment of an arbitrator as per clause 23 of the agreement between the parties. Accordingly, a retired Chief Engineer of Irrigation Department was appointed as the sole arbitrator on 23.11.91. The learned Arbitrator after giving opportunity to the parties to put forward objections, lead evidence and after hearing the parties, made award dated 7.3.1995 that the contractor would be entitled to Rs. 1,78, 17,146 (one crore seventy eight lacs seventeen thousand one hundred forty six) along with 15% interest from 18.12.1991 till date of payment or date of decree whichever is earlier. The award was filed in the Court under Section 31 of the Act of 1940. The department raised objections before the Court in view of provisions of Section 33 of the Act and after hearing the parties, the Court of the learned District Judge affirmed the arbitral award by order dated 16.8.2005 with modification that interest awarded by the arbitrator w.e.f. 18.12.91 to the tune of 15% was set aside and 9% simple interest was awarded from the date of decree till the date of actual payment for the reason that 9% was just and prevailing rate of interest.

3. S.B. Civil Misc. Appeal No. 373/2006 has been brought by the Department challenging the arbitral award as well as order of the Court, above referred.

4. S.B. Civil Misc. Appeal No. 3175/2006 has been filed by the contractor aggrieved by reduction of interest by the Court.

5. Ms. Sheetal Mirdha, learned counsel for the appellant /Department contends that the award suffers from misconduct of the proceedings in as much as the learned Arbitrator has gone against the terms and conditions of the agreement rather ignored the specific provisions of the agreement while making the award. The court concerned did not consider that there was misconduct by the arbitrator in making the award hence it was a fit case to set aside the award.

6. Mr. G.P. Sharma, learned counsel for the contractor besides supporting the arbitral award contends that the learned court has wrongly reduced the quantum of interest and made it applicable from the date of decree though the arbitrator was competent enough to award interest after the enforcement of the Interest Act, 1978. Learned counsel submits that the cause of action arose only after the Interest Act came into force.

7. Thus, the point for consideration is whether the impugned award suffers from misconduct of the arbitrator or the proceedings?

8. Ms. Sheetal Mirdha, learned Additional Advocate General, for the Department contends that clause 22 of the contract between the parties stipulates that 'the contractor shall not be entitled to claim any interest upon any payment, any arrears or upon any balance, which may be found due to him at any time.' Learned counsel has placed reliance on the judgment of the Hon'ble Supreme Court in Sayeed Ahmed and Company v. State of Uttar Pradesh and Ors. reported in (2009) 12 SCC 26 for submission that the Arbitrator could not have awarded interest not only for pre reference period rather for the period pendente lite arbitration.

9. In the aforesaid judgment, the Hon'ble Supreme Court said that the aforesaid bar of payment of interest in the event of any provision in the contract, operates only till the date of award and not the