The main legal point established in the judgment is the arbitrator's jurisdiction to award interest prior to the date of making reference, pendente lite interest, and interest till the date of decree, as determined by the provisions of the Interest Act, 1978 and U.P. Civil Laws (Reforms and Amendment) Act, 1976.

( 1 ) THE Union of India has filed this appeal against the order passed by the Court below dated 30-5-1997 by which the award has been made rule of the Court and the application filed on behalf of the appellant has been rejected.

( 2 ) BRIEFLY stated the facts are that the appellant invited tender for constructing buildings at New Cantonment, Allahabad in the year 1989. The respondent submitted tender which was accepted by the appellant. The work was to be completed within the time specified in the agreement. The respondent got the time extended and completed the work on 10-1-1990. On completion of the work the respondent claimed that they were entitled to the prices of the material which he used for construction purposes and certain other things. This was not accepted by the appellant. The dispute was referred to the sole arbitrator, Sri B. M. Kohli, on 13-10-1994. He entered into reference on 1/11/1994. The appellant also made various claims before the arbitrator, particularly in regard to the materials supplied to the respondent but neither the material so supplied was returned nor its amount was adjusted. The arbitrator gave award on 30-12-1995 and awarded Rs. 4,40,182. 44 to the respondent and further 18% interest on such amount for the period between 25-3-1991 to 30-12-1995. The arbitrator also accepted certain claims of the appellant and awarded a sum of Rs. 1,02,450. 73 to it, but no interest was awarded on this amount. The respondent filed application before the Court below under Section 14 read with Section 17 of the Arbitration Act, 1940 for making the award dated 30-12-1995 rule of the Court. The appellant filed objection under Section 30/33 of the Arbitration Act for setting aside the award. The application was registered as suit No. 75 of 1996. The Court below dismissed the objection of the appellant and made the award rule of the Court with further direction that the respondent shall be entitled to 6% interest on the amount awarded by the arbitrator to the respondent from the date of award dated 31-12-1995 till 30-5-1997.

( 3 ) THE question involved in the present appeal is whether respondents were entitled to amount of interest and if so what should be rate of interest which should be awarded to the parties. The period of interest can be divided in three parts; (i) the power of the arbitrator to award interest for the period prior to the date the reference was made to him, (ii) the period the proceedings remained pending before the arbitrator (pendente lite) and (iii) the period after the award is made till the date of payment of the amount.

( 4 ) THE controversy as to whether an arbitrator has a power to award interest prior to the date of making reference to him, the Supreme Court in Executive Engineer, Irrigation, Galimala v. Abnaduta Jena, AIR 1988 SC 1520, held that after the enforcement of Interest Act, 1978 the arbitrator is entitled to award interest prior to the date of making reference to him. The arbitrator could not award interest under the Interest Act, 1939 for the period prior to making the reference to him but in view of the provisions of Interest Act, 1978 such interest can be awarded. Section 2 (a) of the Interest Act, 1978 defines the Court as it includes Tribunal and Arbitrator. Section 3 (1) (b) of the said Act confers power on the Court to award interest from the date of making the claim to the date of institution of the proceedings. This decision was considered in State of Orissa v. Lal Chand Kapani, AIR 1993 SC 2464, and followed the view taken in Executive Engineer, Irrigation, Galimala v. Abnaduta Jena (supra ). The matter again came up for consideration before the Supreme Court in State of Orissa v. B. N. Agarwal (1997) 2 JT (SC) 51 : (AIR 1997 SC 925) where the argument was raised that Jenas case (supra) was overruled in Secretary, Irrigation Department, Government of Orissa v. G. C. Roy, AIR 1992 SC 732, and therefore, the said decision was no longer good law. The