STATE OF ORISSA versus B.N. AGARWALA

Citation: [1992] SUPP. 3 S.C.R. 221 · Decided: 24-11-1992 · Supreme Court of India · Bench: B.P. JEEVAN REDDY · Disposal: Case Partly allowed
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Judgment (excerpt)

STATE OF ORISSA 
v. 
B.N. AGARWALA 
NOVEMBER 24, 1992 
[B.P. JEEVAN REDDY At-.'D G.N. RAY, JJ.] 
Arbitration Act: Sections 14, 29, 30 and 33--Arbitrator-Jurisdiction to 
award interest for pre reference period. 
A 
B 
An agreement was entered· into between the appellant-State and the C 
respondent for the construction of an Irrigation Project. The work was 
completed on 11.9.69. On 8.8.1977, the respondent claimed certain 
amounts 011 account of extra work done by him, and the dispute was 
referred to the Superintending Engineer, as the sole Arbitrator, who maae 
a reasoned award on 25.2.1980 granting a total sum of Rs.1,59,298. This 
amount comprised of Rs. 61,086.61p. towards interest and Rs. 98,212.09p. D 
towards the extra work done by the respondent. The interest amount of 
Rs. 61,086.61p. represented interest for the period 10.10.69 to 24.2.80, ire. 
for the pre-reference period as well as for the period the Arbitration 
proceedings were pending (Pendente lite interest). The Arbitrator_ directed 
that the sum awarded be paid within a period of three months, and in E 
default thereof it shall carry interest at 9 per cent per annum till payment 
is made or till the passing t ~the decree by the Civil Court, whichever' is 
earlier. 
The appellant applied for setting aside the award while the respon-
dent applied for making it the Rule of the Court. The Subordinate Judge F 
over-ruled the objections raised by the appellant and made the award a 
rule of the court. So far as interest was concerned, it was directed, evidently 
under a mistake, that the amount awarded by the Arb1trator shall carry 
"interest at the rate of 6 per cent per annum", whereas the Arbitrator 
awarded interest at the rate of 9 per cent. 
G 
On appeal to the High Court a Single Judge affirmed the Judgment 
·of the Subordinate Judge, and corrected the aforesaid error relating to 
interest. 
In the appeal to this Court it was contended on behalf of the H 
221 
222 
SUPREME COURT REPORTS (1992] SUPP. 3 S.C.R. 
A 
appellant, that all the claims made by the respondent pertain to addition.al 
'fOrk, and that the decision of the Superintending Engineer was final with 
respect to the amount payable therefor. A claim with respect to additional 
work done cannot be the subject matter of arbitration in view of Clause 11 
of the Agreement read with Clause 23 thereof. Relying on the decision in 
B Executive Engineer (Irrigation) v. Abaaduta Jena, [1988] 1 S.C.C. 418 the 
power of the ~bitrator to award interest for the pre reference period was 
assailed. 
c 
Allowing the appeals in part and remitting the matter to the Subor-
dinate Judge, this Court, 
HELD: 1. In the event of dispute, the decision of the Superintending 
Engineer is made final. It is evident from the use of the words "as lastly 
hereinbefore mentioned", that the proviso applies to second part of Clause 
11 but not to the first part. The proviso contemplates a situation where 
additional work is done by the contractor before the rates are determined. 
D It is only in 'l°espect of the rates payable for such work that the decision of 
Superintending Engineer is made final. It is not the case of the appel-
lant/State that the items tor which the Arbitrator has awarded the 
aforesaid amount was a work of the nature contemplated by the proviso. 
If so, there is n,!> bar to the dispute relating to rates for the additional work 
E being referred to the Arbitration. [227 -E·F] 
F 
2. G.C. Roy's case was confined to the power of the Arbitrator to 
award interestpendente lite:It did not pertain to nor did it pronounce upon 
the power of the Arbitrator to award interest for the period prior to his 
entering upon the reference (pre-reference period). [228-A] 
3. The Arbitrator had no power to award interest for the pre-refer-
ence period in.this case inasmuch as the.award was made prior to coming 
into force of the Interest Act, 1978. So far as interest for the period during 
which the arbitration proceedings were pending (pendente lite interest) is 
concerned, the Arbitrator does have the power to award the same. 
G 
[228-B-C] 
· Executive Engineer (Irrigation) v. Abaaduta Jena, [1988) 1 S.C.C. 418, 
followed. 
Secretary Irrigation Department, Govt. of Orissa & Ors. v. G.C. Roy, 
H [1992] 1 S.C.C. 508, referred to. 
• 
STATEOFORISSA v. B.N.AGARWAI.:A[JEEVANREDDY,J.) 
223 
4. The interest awarded by the Arbitrator (Rs. 61,086.69p.) pertains A 
both to the pre-reference period as well as period during whic
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