Pre-reference interest in arbitration remains awardable under the Interest Act, 1978; contrary disallowance was incorrect.

An arbitrator can award interest for the pre-reference period in references made after the commencement of the Interest Act, 1978. The distinction between pendente lite interest and pre-reference interest is material: the earlier Constitution Bench ruling on pendente lite interest did not decide the pre-reference question. Subsequent authority confirmed that the 1978 regime preserves competence to grant pre-reference interest for the relevant period, and the contrary view was incorrect. The disallowance of that interest component was therefore set aside and the award was restored to that extent.

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Issues: Whether an arbitrator has jurisdiction to award interest for the pre-reference period in references made after the commencement of the Interest Act, 1978.

Analysis: The controversy turned on the distinction between pendente lite interest and pre-reference interest. The earlier Constitution Bench decision addressing pendente lite interest did not decide the power to grant interest for the period before the arbitrator entered upon the reference. Subsequent authority clarified that the earlier ruling did not displace the settled position under the Interest Act, 1978 in respect of pre-reference interest. In the post-1978 regime, an arbitrator is competent to award interest for the period from the making of the reference until entering upon it.

Conclusion: The arbitrator had jurisdiction to award pre-reference interest for the relevant period, and the contrary view was erroneous. The disallowance of that component was set aside and the award was restored to that extent.

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