SECRETARY TO THE GOVT. OF ORISSA & ANR.versusSARBESWAR ROUT

A
          SECRETARY TO THE GOVT. OF ORISSA & ANR.
                                        v.
                            SARBESWAR ROUT

                              OCTOBER 4, 1989

        [LAUT MOHAN SHARMA, M.N. VENKATACHALIAH
                  AND KULDIP SINGH, JJ.]

         Arbitration Act, 1940--Sections 30, 33 & 39--Arbitrator-Power
    to grant interest prior to the proceeding-Proceedings held to com-
    mence when arbitrator indicates willingness to act.
c       The Respondent executed certain works under a written agree-
  ment with the appellant and a dispute arose thereunder which was
  referred to arbitration. The arbitrator made an award which was filed
  in Court. The appellant raised several objections which were all over-
  ruled by the Trial Court, and the award was made a rule of the Court.
D The appellant thereupon appealed to the High Court under section 39 of
  the Arbitration Act which was rejected. Hence this appeal by the
  appellant.

        The Court did not find any substance in the objections raised by
  the appellant except the one taken by him regarding the power of the
E arbitrator to grant interest. Therefore the question that arosi for
  determination by the Court was whether the arbitrator was competent
  to award interest and if so in respect of which period, and further in the
  circumstances of the case, from which date the proceedings before the
  Arbitrator should be deemed to have commenced.

F         Partly allowinng the appeal_o.nthat question, this Court,

          HELD: Since the reference in this case was made in March 1982,
    no objection can be taken to that part of the award whereby the respon-
    dent has been allowed the claim ofuiterest for the earlier perlod. [368F]

G         See: Executive Engineer (Irrigation) Ba/imela and Ors. v. Al>ha-
    duta Jena and Others, [1988] l SCC 418 and Seth Thawardas Pherumal
    v. The Union of India, [1955] 2 SCR 48.

          The arbitrator in the present case was appointed on 16.3.1982.
   · He after being informed about his appointment, directed the parties to
Ii submit their statements of claim by the 20th April, 1982. The actual
                                       366
          SECY., GOVT. OF ORISSA v. S. ROUT (SHARMA, J.J              367

date when this order was made is not known. [369E]                           A
       So for as an action in a Court of law is concerned, it must be held
that it commences on the filing of a proper claim in accordance with the
presecribed procedure before the authority empowered to receive the
same. No reason is seen to apply a different approach in the case of
arbitration proceedings. As soon as the arbitrator indicates bis willing-    B
ness to act as such, the proceeding must"!' held to commence. [370A~C]

      The arbitrator in the present case, by directing on 20.4.82 the
parties to file their statements of claim, clearly indicated that he
accepted the· offer to arbitrate. The proceeding must, therefore, be
deemed to have been instituted not later than this date. I370D]
                                                                             c
      The award so far as it allowed interest for the period after 20.4.82
is without jurisdiction and must be excluded. The appeal is accordingly
allowed in part. [370E]

      Gujarat Water Supply and Sewerage Board v. Unique Erectors             D
(Gujarat;" {P) Lt£ &-:.for., [Fis9r-1 sec. 532; fOssifoglu v.
Coumaniaros, it941] i KB396 and Hari Shankar Lal v. Shambhunath
Prasad & Ors., [i962] 2 SCR 720, referred to.

      CIVIL APPELLATE JURISDfCTION: Civil Appeal No. 2472
of 1989.                                                                     E

     From the Judgment and Order dated 23.4.1987 of the Orissa
High Court in M.A. No. 332 of 1984.

      A.K. Panda for the Appellant.
                                                                             F
      R.K. Sahoo for the Respondent.

      The Judgment of the Court was delivered by

        SHARMA, J. This appeal by special leave by the State of Orissa
-is directed against the judgment of the Orissa High Court rejecting its     G
 appeal under s. 39 of the Arbitration Act. The respondent executed
c_ertain w_ork under a written agreement with the_ appellant and a dis-
pute arose thereunder which was referred to arbitration. The Arbitra-
tion made an award which was filed in <;:gurt. On service of notice the
apellant raised several objections which tb_e t_r!~ court overruled. The
award w~s made a rule of the court. After unsuccessfully movin_g_ the        H
    368          SUPREME COURT REPORTS                 [1989] Supp. 1 S.C.R.

    High Court in appeal, the appellant has approached this Court.
A
          Except for the objection taken by the appellant on the question
    of the power of the Arbitrator to grant interest, we do not find any
    merit in the other points decided by the impugned judgment. The
    decision of the High Court is therefore affirmed on all the other
B   points.

         3. So far the question- relating to interest is' concerned, it has
  been contended by the learned counsel for the appellant that the
  arbitrator exceeded his jurisdiction in allowing the respondent's claim
  in view of the decision in Executive Engineer (Irrigation), Balimela and
  others v. Abhaduta Jena and Others, [1988] 1SCC418. It was pointed
c out therein that this Court had in Seth Thawardas Pherumal v. The
  Union of India, [ 1955] 2 SCR 48, held that in case of direct reference to
  arbitration without the intervention of a court, provisions of neither
  the Interest Act, 1839 nor the Civil Procedure Code applied to an
  arbitrator as he was not a court, and interest could, therefore, be
D awarded only if there was an agreement to pay interest or a usage of
  trade having the force of law or some other provision of the substan-
  tive law which entitled the plaintiff to receive interest. On the coming
  in force of the Interest Act, 1978, although the position in regard to
  the arbitrator's power to award pendente lite interest continued to be
  the same, he was vested with the jurisdiction to allow interest pior to
E the proceeding in view of the definition of "court" in the Act which
  includes the arbitrator. Accordingly, it was held that in cases in which
  the reference to arbitration was made after the commencement of the
  new Act, that is, Augsut 19, 1981, the arbitrator may award prior
  interest, but in those cases also he cannot grant pendente lite interest.
  Since the reference in the case before us was made in March 1982, no
F objection  can be taken to that part of the award w.hereby the respon-
  dent has been allowed the claim of interest for the earlier period.

        4. The learned counsel for the appellant argued that the
  arbitrator allowed the past interest twice over. The award is a non-
  speaking one and in paragraph 1 it says that the appellant shall pay the
G claimant Rs.1,29,000 in full satisfaction of the claims. In paragraph 2
  of the award it. is held that the claimant is entitled to interest at the rate
  of 12 per cent per annum on the above principal sum of Rs.1,29,000
  from 1.10.1978 till the payment of the decree. According to the
  learned counsel for the appellant the sum of Rs.1,29,000 included the
  claim of interest also. In view of the clear language of paragraph 2 of
H the award, we reject the argument.
           SECY., GOVT. OF ORISSA v. S. ROUT [SHARMA, J.J             369

      5. The appellant, however, is entitled to relief with respect to the
                                                                             A
pendente lite interest included in the award. The question is as to
when this period commences. According to the appellant the period
began on the 20th April, 1982 when the arbitrator must be deemed to
have entered on reference. The respondent contends that this period
must be held not to have·commenced earlier than the 9th of July, 1982
when the parties filed their claim and counter-claim. The argument is        B
that until the arbitrator applies his mind, he cannot be assumed to
have entered on arbitration. Reliance has been placed on Gujarat
Water Supply and Sewerage Board v. Unique Erectors (Gujarat) (P)
Ltd. and another, [1989] 1SCC532.

      6. Before proceeding further it will be helpful to examine the
language of s. 3 of the Interest Act, 1978 which states that in cases        c
where the conditions mentioned in clauses (a) and (b) of sub-section
( 1) are satisfied the Court may allow interest for the past period
terminating on "the date of institution of the proceedings". By reason
of.the inclusive definition of "court" ins. 2(a) the Act is applicable to
arbitration. The question, therefore, is as to when the proceeding           D
before an arbitrator is deemed to commence. It has not been suggested
before us that the necessary conditions for the application of s. 3 are
not satisfied in the present case and so the respondent is not entitled to
the benefit under 1978 Act; and we, therefore, proceed on the assump-
tion that the provisions of the Act govern the case.
                                                                             E
        7. The arbitrator in the present case was appointed on
  16.3.1982. He after being informed about his appointment, directed
  the parties to submit their statements of claim by the 20th April, 1982.
  The actual date when this order was made is not known. The
  contractor-respondent filed his statement on 5.5.1982 and the appel-
  lant on 9.7.1982. Relying on the observation in Iossifoglu v.              F
  Coumantaros, [1941] l K.B. 396, and those of Raghubar Dayal, J. in
  Hari Shankar Lal v. Shambhunath Prasad and others, [1962] 2 SCR
· 720 at page 732, Mr. Panda, learned cousel for the appellant, con-
  tended that the arbitrator cannot be said to have entered on the refe-
  rence earlier than April 20, 1982. According to the learned counsel for
  the respondent it could not be before 9. 7 .1982 when the arbitrator       G
  applied his mind to thje cases of the parties. Reference was made to
  the decisions of several High Courts. In our view none of these cases is
  helpful to resolve the present controversy. They all deal with the point
  as to when an arbitrator is said to enter on reference. They were not
  concerned with the question as to when a proceeding before an
  arbitrator is deemed to commence.                                          H
    370         SUPREME COURT REPORTS                [1989] Supp. 1 S.C.R.

A          8. So far an action in a court of law is concerned, it must be held·
    that it commences on the filing of a proper claim in accordance with
    the prescribed procedure before the authority empowered to receive
    the same. If a plaint, drawn up in accordance with the prescribed law,
    is filed before a civil court, the suit must be deemed to have been
    instituted on the date, and not on a later date when the court takes up
B   the plaint and applies its mind. Ordinarily the plaint is examined by
    the stamp reporter of the coutt who scrutinises whether proper court
    fee has been paid or not, and then makes a report. The court generally
    takes up the plaint only later. Similar is the position with respect to
    other applications and memoranda of appeals. It must, therefore, be
    held that the proceeding is instituted when the claimant files his claim.
c   We do not see any reason to apply a different approach in the case of
    an arbitration proceeding. As soon as the arbitrator indicates his wil-
    lingness to act as such, the proceeding must be held to have com-
    menced. This aspect did not arise for decision in the cases Executive
    Engineer (Irrigation) v. Abhaduta Jena, (1988] 1 SCC 418 or Gujarat
    Water Supply and Sewerage Board v. Unique Erectors (Gujarat) (P)
D   Ltd., [ 1989] 1 SCC 532 and no assistance from them can be taken in the
    present appeal. The learned counsel for the appellant is, therefore,
    right in saying that the arbitrator in the present case, by directing on
    20.4.1982 the parties to file their statements of claim, clearly indicated
    that he accepted the offer to arbitrate. The proceeding must, there-
    fore, be deemed to have instituted not later than this date. We accord-
E   ingly hold that the award so far it allowed interest for the period after
    20.4.1982 is without jurisdiction and must be excluded. The appeal is
    accordingly allowed in part. The parties shall bear their own costs.

    Y. Lal                                            Appeal partly allowed.

F