Arbitrator's Jurisdiction to Award Interest Upheld

The Court held that the Arbitrator had the jurisdiction to award interest pendent lite despite a contract clause seemingly prohibiting such payments. It was determined that the Arbitrator's power to interpret the contract and decide on interest payment issues was within the scope of their authority. The appeal was dismissed as the Arbitrator's decision on awarding interest was deemed valid and in accordance with the agreement's terms and general law principles.

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Issues involved: Interpretation of contract clause regarding payment of interest by Arbitrator, jurisdiction of Arbitrator to award interest pendent lite.

Interpretation of Contract Clause: The appellant argued that the Arbitrator awarded interest pendent lite despite a contract clause prohibiting interest on delayed payments. The clause in question, Clause 13(g), explicitly stated that "No claim for interest will be entertained by the Commissioners" in case of disputes or delays in payments. The appellant contended that this clause constituted an absolute prohibition against interest payment for delays by the Commissioner.

Legal Position on Arbitrator's Power: The legal position on the Arbitrator's power to award interest pendent lite was discussed, citing the decision in Secretary, Irrigation Department, Government of Orissa & Others Vs. G.C. Roy. The Constitution Bench summarized principles including the right to compensation for deprivation of money, the Arbitrator's authority to decide disputes, and the inference of power to award interest pendent lite in the absence of prohibition in the agreement.

Arbitrator's Jurisdiction: The Court emphasized that the Arbitrator, as a creature of the agreement, must act in accordance with the general law and the agreement's terms. It was clarified that interest pendent lite is not a matter of substantive law, and the Arbitrator has the discretion to award interest if not prohibited by the agreement. The Court concluded that the Arbitrator was not prohibited from awarding interest pendent lite under the contract clause in question.

Decision: The Court held that the Arbitrator was within jurisdiction to award interest pendent lite, as interpreting the contract clause fell under the Arbitrator's purview. Even if there was a dispute on the interpretation, it was deemed within the Arbitrator's authority to decide on interest payment. Consequently, the appeal was dismissed for lack of merit.

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