LexMANALAL PRABHUDAYAL versus ORIENTAL INSURANCE CO. LTD.
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A B MANALALPRABHCDAYAL v. ORIENTAL INSURANCE CO. LTD. AUGUST 18, 2006 [C.K. THAKKER AND MARKANDEY KA TJU, JJ.] Arbitration-Power of arbitrator to award interest--Arbitrator awarding interest (a) 12% per annum for pre-reference period, pendente lite and post award perioJ.--High Court reducing interest rate from 12% to 6% C from dace of award till date of payment--Currectness of-Held: Arbitrator has power tu grant interest at all three stages viz. pre-reference period, pendente lite and post award period provided the rate is reasonable---Award ww made rule of the Court and was upheld by civil cuurt, thus direction of arb1tratur not arbitrary or unreasunable--Hence, order uf High Court set D aside. Arbitrator passed an award and allowed the claim of the appellant-firm against respondent-insurance company and granted interest at the rate of 12% per annum all throughout-pre-reference period, pendenle lite and after the award till the date of payment. Award was made rule of the court. High E Court upheld the award granting interest@ 12 per cent per annum for pre- reference period, however, reduced the rate of interest from 12% to 6% from date of award till date of realization. Hence the present appeal. Allowing the appeal, the Court HELD: I. The order of High Court reducing the rate of interest from F the date of award till the amount is paid/deposited in the court from 12 % to 6 % per annum is set aside an.d the order passed by the arbitrator in the award granting interest at the rate of 12 % per annum all throughout, that is, for pre-reference period, pendente lite and post award period is upheld. (671-F-GJ G 2.1. The award of interest is in the discretion of court. Normally, when interest is granted, appellate, ri!visional or writ court would not interfere with exercise of discretion unless the discretion has been exercised arbitrarily or capriciously. The rate of interest is also in the discretion of the court and in the absence of any agreement between the parties, usually, the court would not interfere with rate of interest unless it is convinced that the direction of I-I 666 ·. MANALAL PRABHUDA Y AL v. ORIENTAL INSURANCE CO.LTD. [THAKKER,l] 667 the lower court was exfacie bad in law.1670-C-EI A 2.2. An arbitrator has power to grant reasonable rate of interest at all the three stages-pre-reference period,pendente lite and post award period, in absence of any prohibition in an arbitration agreement, though arbitrator is not a "court" within the meaning of section 34 CPC.1670-E-FI 2.3. Once it is conceded that an arbitrator has power to grant interest and has also discretion in granting interest at a particular rate provided it is reasonable, the award of the arbitrator cannot be held to be bad in law or interfered with on the ground that he could not have granted interest or could not have awarded it at a particular rate unless the court is convinced that the grant of interest was not at a 'reasonable rate'. In the instant case, the arbitration proceedings s~arted in 1995 and the award was passed in 1999. The arbitrator had g.ranted uniform interest @ 12 % per annum all throughout Award was made rule of the court. The direction of the arbitrator cannot be termed as arbitrary or unreasonable and when it was upheld by the B c trial court, it ought not to hav!! been interfered with by the High Court. D 1671-A-D] Bhagwati Oxygen Ltd. v. Hindustan Copper Ltd., 12005] 6 SCC 462, relied on. Mis Channa Bros & Co. v. Union of India, JT (2002) 2 Supreme Court 643, distinguished. E CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3537/2006. From the Judgment and Order dated 3.8.2004 in Review Petition No. I II 2004 in A.R.B.A. No. 30/2003 and Order dated 21.1.2004 in A.R.B.A. No. 30/ 2003, of the High Court of Orissa at Cuttack. Aparna Bhat (SCLSC) and P. Ramesh Kumar for the Appellant. M.J. Paul for the Respondent. The Judgment of the Court was delivered by C.K. THAKKER, J. Delay condoned. Leave granted. The present appeals arise out of an order dated January 21, 2004 passed F G by the High Court ofOrissa at Cuttack in ARBA No. 20 of2003 and an order dated August 3, 2004 passed in Review Petition No. 11 of2004. By the said H 668 SUPREME COURT REPORTS f2006] SUPP. 4 S.C.R. A orders, the High Court partly allowed the appeal filed by the Oriental Insurance Co. Ltd. - respondent herein and reduced the rate of interest from 12 per cent per annum to 6
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