Arbitration interest under the Interest Act: pre-reference interest allowed, but pendente lite interest stopped at institution date.

Section 3 of the Interest Act, 1978 permits an arbitrator to award pre-reference interest because the inclusive definition of "court" brings arbitration within its scope, and the objection on that point failed. A nonspeaking award was also upheld against the contention that past interest had been allowed twice over, as the principal sum was not shown to include interest already. For pendente lite interest, arbitration proceedings were treated as commenced when the claimant filed the claim and the arbitrator indicated willingness to act; on the facts, that date was 20 April 1982. Interest granted beyond that date was without jurisdiction and had to be excluded.

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Issues: (i) Whether, under the Interest Act, 1978, the arbitrator could award interest for the period prior to commencement of the arbitration proceedings. (ii) Whether the award included past interest twice over. (iii) From what date the arbitration proceedings must be taken to have commenced for the purpose of pendente lite interest, and whether interest allowed after that date was without jurisdiction.

Issue (i): Whether, under the Interest Act, 1978, the arbitrator could award interest for the period prior to commencement of the arbitration proceedings.

Analysis: Section 3 of the Interest Act, 1978 permits interest for the past period up to the date of institution of the proceedings, and the inclusive definition of "court" in section 2(a) brings an arbitrator within its scope. In a reference made after the commencement of the Act, the arbitrator could award prior interest, though not pendente lite interest merely by virtue of the Act.

Conclusion: The award of pre-reference interest was upheld and the objection failed.

Issue (ii): Whether the award included past interest twice over.

Analysis: The award was nonspeaking, but its language separately awarded a principal sum in full satisfaction of the claim and then granted interest on that principal sum from an earlier date. On a plain reading, the principal amount was not shown to have included interest already.

Conclusion: The contention that past interest had been allowed twice over was rejected.

Issue (iii): From what date the arbitration proceedings must be taken to have commenced for the purpose of pendente lite interest, and whether interest allowed after that date was without jurisdiction.

Analysis: For purposes of section 3 of the Interest Act, 1978, proceedings commence when the claimant files the claim and the arbitrator indicates willingness to act, not when the arbitrator later applies his mind to the merits. On the facts, the arbitrator had accepted the reference by directing filing of statements of claim by 20 April 1982, and the proceeding was treated as instituted not later than that date.

Conclusion: Interest for the period after 20 April 1982 was without jurisdiction and had to be excluded.

Final Conclusion: The appeal succeeded only to the limited extent of disallowing pendente lite interest beyond 20 April 1982, while the remaining objections to the award were rejected.

Ratio Decidendi: For the purpose of section 3 of the Interest Act, 1978, arbitration proceedings commence when the claimant files the claim after the arbitrator has indicated willingness to arbitrate, and interest cannot be granted beyond that institution date for the pendente lite period.

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