Pendente lite interest in arbitration may be awarded when the agreement is silent and no prohibition on interest exists.

Where an arbitration agreement is silent and does not prohibit interest, an arbitrator has jurisdiction to award pendente lite interest on a referred claim. The Court applied the principle underlying Section 34 of the Code of Civil Procedure by analogy, reasoning that an arbitrator is intended to resolve the entire dispute and may grant the relief a court could have granted in the circumstances. It rejected any absolute rule that earlier decisions deny such power, noted that parties may confer wider authority by agreement, and treated denial of interest power as likely to create multiplicity of proceedings. The award of interest remains subject to the arbitrator's discretion on the facts.

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Issues: Whether an arbitrator, where the arbitration agreement is silent and does not prohibit interest, has jurisdiction to award pendente lite interest on a claim referred to arbitration.

Analysis: The Arbitration Act, 1940 regulates arbitral proceedings but does not expressly confer or deny power to award pendente lite interest. The Court reviewed prior decisions and explained that the earlier view denying such power was not to be read as laying down an absolute rule. It held that an arbitrator is an alternative forum intended to resolve all disputes between the parties, and that a claimant deprived of the use of money legitimately due is entitled in principle to compensation for that deprivation. The principle underlying Section 34 of the Code of Civil Procedure, 1908 was treated as applicable by analogy where the agreement does not exclude interest and the dispute as to interest is referred to arbitration. The Court also emphasised that parties may confer wider powers on the arbitrator, and that denying such power would promote multiplicity of proceedings.

Conclusion: Where the arbitration agreement does not prohibit grant of interest and a claim for interest is referred to the arbitrator, the arbitrator has jurisdiction to award pendente lite interest, subject to discretion on the facts of the case.

Ratio Decidendi: In a consensual arbitration where the agreement is silent on interest, a claim for interest referred to the arbitrator carries an implied term authorising award of pendente lite interest, because the arbitrator must decide the dispute according to law and may grant the same relief that a court could have granted in the circumstances.

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