The appointment of an Arbitrator with the consent of the parties is valid even in the absence of a written arbitration agreement. An Arbitrator has the power to award interest if not prohibited by the arbitration agreement, and such an award cannot be set aside under Section 34 of the Arbitration and Conciliation Act, 1996.

1. The petitioners, who suffered an award in the hands of the Arbitrator, appointed by this Court, have filed this petition to set aside the same under Section 34 of the Arbitration and Conciliation Act, 1996.

2. The parties herein are referred as per the ranking in this petition.

3. The brief facts leading to the appointment of the Arbitrator, passing of the award, followed by this petition are as follows:

(a) The respondent herein was carrying on cotton business (ginning and pressing), procuring cotton from small and marginal farmers in and around Guntur District. The cotton procured were ginned and pressed into bales and supplied to various spinning mills not only in the State of Andhra Pradesh, but also in Tamil Nadu. At the request of the fourth petitioner, the respondent had supplied cotton to their utmost satisfaction from the year 1995. However, there was no prompt payment by the 4th petitioner and upto 1.7.1996, there was an arrears of Rs. 30 lakhs.

(b) At the instance of the Government of Tamil Nadu, to settle the dues, after discussion on 23.12.1997, guidelines were framed and the respondent opted the second guideline/option and thereafter, continued to supply cotton. As per the account maintained and as admitted by the 4th petitioner, the total amount due including the arrears upto September 2000 is Rs. 140 lakhs. The 4th petitioner, though settled the amounts payable in June, July and August 2000, has failed to honour his commitment to pay Rs. 35 lakhs in September, thereby leaving the balance of Rs. 55 lakhs. Thus complaining, the respondent herein filed W.P. No. 6898 of 2001 on the file of this Court against the petitioners arraying them as respondents under Article 226 of the Constitution of India, seeking direction to the petitioners herein to pay Rs. 55 lakhs, which was opposed by the petitioners.

(c) On 6.8.2001, this Court considering the guidelines formulated by the Government of Tamil Nadu as well as the above option exercised by the respondent herein, disposed of the writ petition recording the stand of the 4th petitioner herein, since they agreed to implement the undertaking without any reservation.

(d) The respondent herein aggrieved by the dismissal of W.P. preferred W.A. No. 1642 of 2001, wherein he had also sought for interim direction to the 4th petitioner herein to pay a sum of Rs. 50 lakhs pending disposal of the writ appeal. A Division Bench of this Court as per the order dated 22.1.2002, directed the 4th petitioner to pay Rs. 25 lakhs within six weeks, of course without prejudice to the contention. The above said order came to be modified on 25.4.2002, which reads:

“We have heard both the learned counsel. Having regard to the fact that summer vacation is fast approaching and the liability being not disputed and only hardship is projected that some more time is needed for liquidating the immovable assets enabling payment of Rs. 52,00,000/- among the eligible persons, pending further orders respondents 1 to 3 shall forthwith release an amount of Rs. 4,00,000/- (Rupees Four Lakhs only) enabling the fourth respondent to pay the said amount by a crossed demand draft in favour of the petitioner/appellant herein, who in turn shall disburse the said amount to the farmers who had supplied the cotton. This order shall be complied with by 10.5.2002. Post the matter after vacation.

(e) The 4th petitioner, aggrieved by the direction, approached the Honble Supreme Court. The Honble Supreme Court considering the nature of the dispute and other attending circumstances, maintaining the interim order passed, directed this Court to dispose of the matter as expeditiously as possible, but not later than three months from the date of order.

(f) Thereafter, pursuant to the direction given by the Honble Supreme Court, the First Division Bench of this Court disposed of the appeal, referring the matter to arbitration, appointing one Mr. Vedantam Srinivasan, Advocate as Arbitrator. The said order dated 4.1.2005 r