EXECUTIVE ENGINEER IRRIGATION GALIMALA & ORS. versus ABAADUTA JENA

Citation: [1988] 1 S.C.R. 253 · Decided: 22-09-1987 · Supreme Court of India · Bench: O. CHINNAPPA REDDY · Disposal: Disposed off

Cited by 5 judgment(s) · cites 4 · see the full citation network in Lexace

Judgment (excerpt)

EXECUTIVE ENGINEER IRRIGATION GALIMALA & ORS. 
v. 
ABAADUTA JENA 
SEPTEMBER 22, 1987 
[O. CHINNAPPA REDDY, M.H. KANIA AND 
K. JAGANNATHA SHETTY, JJ.] 
Arbitration Act, 1940: Sections 14, 15, 30 and 33-Arbitra-
tor-Competency of-To award interest on reference made without 
intervention of Court-Court whether entitled to go behind the award 
A 
B 
and decide whether award of interest justifiable. 
C 
Interest Act 1839/lnterest Act 1978. 
Civil Procedure Code 1908, Section 34. Award of pendente lite 
interest by arbitrator. 
D 
In the appeals by Special Leave to this Court the question for 
consideration was: whether an arbitrator to whom a reference was 
made without the intervention of the Court could award interest during 
the period prior to the reference and during the pendency of the E 
arbitration: 
HELD: I. The general statutory prov1s10ns in regard to the 
award of interest by the Court are contained in the Interest Act and 
the Civil Procedure Code. [258F] 
2. The Interest Act of 1839 was repealed and a new Interest Act 
incorporated in 1978. Both these Acts provide for the award of interest 
upto the date of the institution of the proceedings. Neither the Interest 
Act of 1839 nor the Interest Act of 1978 provides for the award of 
pendente lite interest. [2600] 
3. The award of pendente lite interest is provided for in Section 
34 of the Civil Procedure Code. Section 34 however, applies to arbitra-
tions in suits for the simple reason that where a matter is referred to 
arbitration in a suit, the arbitrator will have all the powers of the Court 
F 
G 
in deciding the dispute. Section 34 does not otherwise apply to arbitra-
tions as arbitrators are not courts within the meaning of s. 34 Civil 
H 
Procedure Code. [260E] 
253 
254 
SUPREME COURT REPORTS 
[!988] I S.C.R. 
A 
4. While under the Interest Act of 1978 the expression 'court' was 
defined to exclude an arbitrator, under the Interest Act of 1839 it was 
not so defined. The result is that while in cases arising after the comm-
encement of the Interest Act of 1978 an arbitrator has the same power 
to award interest upto the date of institution of proceedings, in cases 
which arose prior to commencement of the 1978 Act the arbitrator has 
B 
no such power under the Interest Act of 1839. [260G] 
c 
5. Since the arbitrator is required to conduct himself and make 
the award in accordance with law, the substantive law has to be looked 
into for the power of the arbitrator to award interest before the comm-
encement of the proceedings. [260H-261A] 
6. If the agreement between the parties entitles the arbitrator to 
award interest no further question arises and the arbitrator may award 
interest. Similarly, if there is a usage of trade having the force of law the 
arbitrator must award interest. [261B] 
D 
7. Again, there are other provisions of the substantive law enabl-
ing the award of interest by the arbitrator. Section 80 of the Negotiable 
Instruments Act under which the court may award interest even in a 
case where no rate of interest Is specified in the promissory note or bill of 
exchange, and Section 61(2) of the Sale of Goods Act which provides for 
the award of interest to the seller or the buyer under certain circum-
E 
stances in suits tiled by them. [261C] 
),-
8. There is also the instance of non-performance of a contract of 
which equity could give specific performance and to award interest. [261C] 
9. Where one of the parties is forced to pay interest to a third 
F 
party say on an overdraft, consequent on the failure of the other party 
to the contract not fultilling the obligation of paying the amount due to 
them, equity may compel the payment of interest. [261C] 
J.-
10. Loss of interest in the place of the right to remain in posses-
sion may be rightfully claimed in equity by the owner of a property who 
G 
has been dispossessed from it. [2610] 
11. In the instant appeals, in those cases in which the references 
to arbitration were made prior to the commencement of the new Act 
which was on August 19, 1981 and the amount claimed was a certain 
sum payable at a certain time by virtue of a written instrument, interest 
H is payable under the Interest Act for the period before the commence-
ment of the proceeding. [269H-270A] 
•
.... 
-
EXECUTIVE ENGINEER IRRIGATION v. A. JENA 
255 
12. In regard to pendente lite interest, that is, interest from the 
A 
date of reference to the date of the award, the claimants would not be 
entitled to the 

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