Pre-reference interest in arbitration claims outside Interest Act 1839 denied without contract, trade usage, or legal basis

The dominant issue was whether an arbitrator has jurisdiction to award interest for the pre-reference period under general law or equitable principles where the claim does not fall within the Interest Act, 1839. The SC held that an arbitrator lacks competence to grant pre-reference interest unless at least one enabling basis exists: a contractual term authorising interest, a trade usage having the force of law, or a substantive law provision permitting such interest. As none was shown, the SC answered the reference in the negative and allowed the appeal to the extent it set aside the award of pre-reference interest.

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Issues: (i) Whether an arbitrator appointed with or without intervention of a court has jurisdiction to award interest for the pre-reference period in cases arising prior to the commencement of the Interest Act, 1978, where the arbitration agreement does not specifically prohibit or provide for such interest.

Analysis: The judgment analyses prior decisions distinguishing interest for three periodspre-reference, pendente lite and post-awardand reviews authorities including a Constitution Bench decision addressing pendente lite interest. The majority reasons that where the agreement is silent and does not prohibit interest, principles permitting an arbitrator to apply the general law and to decide all disputes referred imply power to award interest for the pre-reference period; reliance is placed on consistency with recognized English authorities and on avoiding anomalous or discriminatory consequences for parties choosing arbitration. The majority overrules earlier contrary precedent prospectively. The dissenting view, by contrast, holds that pre-reference interest is a matter of substantive law and that absent an express contractual provision, usage or other substantive legal basis an arbitrator lacks power to award such interest; it stresses adherence to earlier authorities and cautions against judicial extension of arbitrator powers.

Conclusion: The arbitrator has jurisdiction to award interest for the pre-reference period in the absence of any specific contractual stipulation or prohibition against claiming or granting such interest; the contrary precedent is overruled prospectively.

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