The court established that an arbitrator has the authority to award interest as an implied term of reference in monetary claims, applicable to both pre-reference and post-reference periods.

1A dispute having arisen between M/s. Anand Prakash and Brothers, Ujjain, a firm of Contractors (hereinafter referred to as the 'appellant') and the State of Madhya Pradesh (hereinafter referred to as the 'respondent - State') with regard to certain matters arising out of construction of the main earthen Bandh of Komcha Project in district Guna, the matter was referred to a sole arbitrator, who gave his award on April 9, 1982.

2. The appellants had claimed a total amount of Rs. 14,10,406/- The break - up of this figure is as under : -

It is the case of the appellant that a claim for interest at the rate of 12 per cent per annum on the aforementioned amount was made and it was duly referred to the arbitrator. This is, however, disputed by respondent - State. The arbitrator passed a non - speaking award on 9th of April, 1982 holding that the respondent - State of Madhya Pradesh, was liable to pay a sum of Rs. 8,82,319.85 p. only. The arbitrator also allowed interest at the rate of
12 per cent per annum on the aforementioned amount. This interest was payable on the principal amount from 10th of April, 1974 being the date of completion of work by claimants to 9th of April, 1982, the date of making of the award.

3. An application was filed by the appellant before the District Judge, Guna, for making the award Rule of the Court. On the other hand, objections were filed by the respondent - State. The District Judge, Guna gave his decision on August 8, 1984 and he formed a view that the amount of Rupees 8,82,319.85 p. was rightly given but came to the conclusion that the appellant was not entitled to interest from April 10, 1974 to April 9, 1982. He, however, awarded future interest at the rate of 6 per cent per annum.

4. The respondent - State of Madhya Pradesh felt satisfied with the decision given by the District Judge, Guna, whereas the appellant formed a view that the interest from April 10, 1974 to April 9, 1982 was wrongly denied. Accordingly, the present appeal was preferred before this Court.

5. The controversy in this appeal is very narrow. Broadly speaking, it is with regard to the power of the arbitrator to grant interest. This can be divided into two parts, that is, pre - reference period and the period after the arbitrator entered into reference. These two aspects are being dealt with separately. However, before we do so, the finding recorded by the District Judge with regard to the claim relating to interest be noticed. While deciding issue No. 1 - A, the District Judge, came to the conclusion that when the matter was referred to the arbitrator there was no claim made with regard to the payment of interest and, therefore, interest could not be claimed by the appellant.

6. In this appeal, the learned Counsel for the appellant has argued that notwithstanding the finding recorded by the District Judge, Guna that claim qua interest was not made, his client is entitled to the same, as, according to him, the matter is squarely covered by a decision of the Supreme Court in the case of Secretary Irrigation Department v. G. C. Roy , AIR 1992 SC 732 . According to him in the above case, it has been held that arbitrator has power to award interest pendente lite, as claim regarding interest is an implied term of reference. The counsel for the State has, however, contended that the judgment given by the Supreme Court in the aforementioned case is distinguishable.

7As the District Judge has recorded a positive finding that in the reference which was subject - matter of adjudication before the arbitrator, the appellant had not claimed any interest, we are proceeding on the assumption that in the claim petition no claim for interest was made. We, however, agree with the contention of the learned Counsel for the appellant that whenever an