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Issues: Whether an arbitrator, where the arbitration agreement is silent and does not prohibit interest, has jurisdiction to award interest for the pre-reference period in disputes arising before the commencement of the Interest Act, 1978.
Analysis: The earlier line of authority had treated pre-reference interest, in pre-1978 disputes, as recoverable only if supported by agreement, trade usage having the force of law, or some other substantive law. The later Constitution Bench decision on pendente lite interest rested on broader principles that a party deprived of money lawfully due is entitled to compensation, that arbitration is an alternative forum intended to decide all disputes between the parties, and that an arbitrator must act in accordance with the general law and the agreement. Those principles were held to apply with equal force to pre-reference interest, because the distinction between the two periods did not justify denying the arbitrator power to grant interest where the contract contained no prohibition. The Court also treated the arbitrator's power to award such interest as consistent with complete justice between the parties and with the approach adopted in arbitration law generally, while overruling the contrary view prospectively.
Conclusion: The arbitrator has jurisdiction to award pre-reference interest where the agreement does not prohibit it and the claim is otherwise maintainable; the contrary view was overruled prospectively.
Final Conclusion: The reference was answered in favour of the respondents, and the appeals challenging the award of pre-reference interest failed.
Ratio Decidendi: In arbitration governed by a silent contract, the arbitrator may award pre-reference interest on sums found due and payable unless the contract contains a specific prohibition to claim or grant such interest.
Dissenting Opinion: D.P. Mohapatra, J. and G.B. Pattanaik, J. dissented on the ground that, for pre-reference periods in pre-1978 disputes, the arbitrator lacks such power unless agreement, trade usage, or substantive law confers it.
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