Pre-reference and decretal interest in arbitration turn on strict contract wording and post-1978 statutory power.

After the Interest Act, 1978, an arbitrator may award pre-reference interest where the claim arose after the Act commenced, and that objection failed. Clause 1.9 of the contract was construed as applying to interest or damages on sums retained by the Government, not to unpaid work bills, so it did not bar the interest claim. Objections attacking the merits of the award were not open under Section 30 of the Arbitration Act, 1940. The court also held that a clause limiting the arbitrator's power did not curtail judicial discretion to award decretal interest, so reduction from 15.5% to 6% was unjustified.

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Issues: (i) Whether the arbitrator had power to award interest for the pre-reference period. (ii) Whether clause 1.9 of the contract barred the claim for interest and whether objections going to the merits of the arbitrator's interpretation and award were open under Section 30 of the Arbitration Act, 1940. (iii) Whether the High Court was justified in reducing the rate of interest from 15.5% to 6% from the date of the decree till satisfaction of the decree.

Issue (i): Whether the arbitrator had power to award interest for the pre-reference period.

Analysis: The applicable legal position was that, after the Interest Act, 1978, an arbitrator could award interest even for the period before the reference where the cause of action arose after the commencement of that Act. The Court noted that the governing principles had already been affirmed in earlier authority and that, on the facts, the claim arose after the Interest Act, 1978 had come into force.

Conclusion: The arbitrator had the power to award pre-reference interest, and this objection failed.

Issue (ii): Whether clause 1.9 of the contract barred the claim for interest and whether objections going to the merits of the arbitrator's interpretation and award were open under Section 30 of the Arbitration Act, 1940.

Analysis: Clause 1.9 was construed as relating to interest or damages on money or balances lying with the Government owing to a dispute, difference, or misunderstanding, such as security deposit, retention money, or similar withheld sums. It did not bar a claim for interest on amounts due for work done but not paid for. The Court also held that the challenge to the award on hardrock-cutting claims concerned the merits of the award and could not be re-agitated in objections under Section 30, which is not an appellate forum for reappraisal of the evidence or the quantum awarded.

Conclusion: Clause 1.9 did not bar the interest claim, and the merits-based objections were not open under Section 30.

Issue (iii): Whether the High Court was justified in reducing the rate of interest from 15.5% to 6% from the date of the decree till satisfaction of the decree.

Analysis: The Court held that the provision relied upon by the State restricted the arbitrator's power, not the court's discretion in decreeing interest. The arbitrator could not be treated as having positively determined that 6% was the only reasonable rate. The trial court's award of 15.5% interest from the date of decree till payment lay within its discretionary jurisdiction and was not liable to be interfered with in appeal.

Conclusion: The reduction to 6% was unjustified, and the higher decretal interest was restored.

Final Conclusion: The challenge to pre-reference interest and the contractual bar failed, while the decretal interest was restored to 15.5% per annum, leaving the award substantially upheld with limited modification in favour of the contractor.

Ratio Decidendi: After the Interest Act, 1978, an arbitrator may award pre-reference interest where the claim arises after the Act's commencement, a contractual clause barring interest must be strictly construed by its terms, and a court's discretionary power to award interest on a decree is not curtailed by a provision limiting only the arbitrator's authority.

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