ivil Appeal No 1280  1281 of 1988
From the Judgment and Order dated 2141987 of the Calcutta High Court in Appeal from Original Order No 128 of 1985 Award Case No 151 of 1987
AK Sen Dr Shankar Ghosh Ajay K Jain Praveen Kumar and Pramod Dayal for the Appellant
MK Banerjee and GS Chatterjee for the Respondent
The Judgment of the Court was delivered by RANGANATHAN J
These are cross appeals by Ms Hind Builders hereinafter referred to as the contractors  and the Union of India
from an order of Division Bench of the Calcutta High Court in an arbitration matter
The contractors had been awarded a contract for the execution of certain civil works in connection with the Metro Railway Project in Calcutta
Certain disputes arose between the Union and the contractors
These disputes were referred for decision to two arbitrators appointed by the High Court of Calcutta
The arbitrators entered upon the reference on 27th June
The contractors had filed a claim before the arbitrators for a sum of Rs20567554
On 2631984 the arbitrators awarded a sum of Rs5747198 to the contractors
The claim of the contractors filed before the arbitra tors was an itemised claim in respect of various items of works executed by them
The body of the award made by the arbitrators reads as follows We   make and publish our Award as below 642 i That the Respondent   shall pay   the Contractors a sum of Rs5747198   only in full and final settlement of all their claims and dues under the above mentioned contract agreement
In addi tion the three Bank Guarantees   issued by Vijaya Bank Cuttack on behalf of the contractors in favour of Metro Railway Cuttack shall be released by the Respondent Railway as detailed in the Annexure to this Award
XXX XXX XXX The Award shall be complied with within 60 Sixty days from the date of publication of this Award failing which simple interest  11 per cent per annum on the amount of the Award excluding interest vide item 1 of the Annexure ie Rs676540 shall accrue till the date of payment or decree upon Award whichever is earlier
 In the annexure to the award the arbitrators tabulated the various items of the claim before them the amount claimed against each item and the amount awarded against each item
Under item 1 in the annexure the arbitrators had awarded an interest of Rs676540 and that is why the direction regarding interest by the arbitrators excluded this amount from the principal amount which was to bear interest
As stated earlier the total amount awarded was Rs5747198 in respect of items a to q of the award as against the claim of Rs20567554 made by the contractors
On an application being made to the High Court of Cal cutta on the Original Side for making the award a rule of court the learned single Judge sitting on the Original Side confirmed the award except to the extent of Rs520000
This is no longer in issue
The learned Judge
however concluded his judgment with the following words The principal sum awarded stands reduced by Rs520000 as mentioned above
The respondent will be entitled to interest at the rate of 11 per cent per annum from the date of refer ence till the date of the award
 The Union of India preferred an appeal from the order of the learned single Judge
The Division Bench was of the opinion that the arbitrators were not justified in awarding a sum of Rs2396000 to the contractors as against a claim of Rs4265957 made by them in respect of item cxii viz cost towards consolidation of earth by ramming and rolling and that they could have awarded under the 643 contract only a sum of Rs239600 in respect of this item
The amount awarded to the contractors was thus further reduced by the Division Bench by a sum of Rs2156400 Rs2396000 Rs239600
The Bench then observed that the principal sum to be awarded to the contractors would now stand at Rs3070798 and directed that the respondent contractor should be entitled to interest at the rate of 11 per cent per annum on the said amount from the date of the reference till the date of the award
The contractors have appealed from the order of the Division Bench being aggrieved by the reduction of the amount awarded under item cxii to Rs239600 from Rs2396000
The Union of India has preferred an appeal contending principally that since the principal amount on which the arbitrator awarded interest was not Rs5747198 but only Rs5070658 ie Rs5747198 Rs676540 the contractors would be entitled to interest after the judg ment of the Division Bench not on Rs3070798 as held by the Division Bench but only on Rs2394258
In addition at the tune of the hearing before us counsel for the Union of India raised two further points 1 that the Division Bench erred in awarding inter est to the contractors from the date of the reference till the date of the award
2 That though the arbitrators had also awarded interest on the principal sum till the date of payment the contractors should now be held entitled to interest only upto the date of the award because the learned single Judge and the Division Bench have held so and the contractors have preferred no appeal therefrom
Taking up the contractor s appeal first the point raised falls within a very narrow compass and turns on the interpretation of item No 09 of the annexure to the contract containing the schedule of rates
This item reads as follows
Item Brief description Approx Unit of Rate of No of work imate payment payment in Qty
words  figures Rs P 1 2 3 4 5 644 409 aEarthwork in open excava 235000 10 Rs180 tion for forming garbage cubic cubic Rupees tanks in all kinds and metres metres one conditions of soils upto hundred depth varying from 0 to 3 eighty 3 metres from the existing only ground level and disposing of the spoils so as to raise land required for piling work to fill up the existing low lying areas and ponds to form embank ments for roads etc of the Car Depot complex includ ing spreading in layers breaking clods levelling dressing all liftsdescents and all leads etc
complete Note No extra payments will be made if wet excavation is met with or for baling pumping out of water of all sorts including rain water
b Extra over item a above 135000 10 Rs20 for consolidation of the Cubic Cubic Rupees filled up areas or some of metres metres Twenty the top layers of the filled only
up areas or road embank ment portions by watering and rammingrolling as directed
In respect of these items the statement of claim filed on behalf of the contractor was in the following terms b Earthwork in excavation measured but not paid in full That under agreement item No 409 a the claimants as per instructions specifications and agreement excavated 645 earthwork in open excavation for forming garbage tanks in all kinds of soil for a quantity of 2 15000 Cum and there after the contract was rescinded against which reduced quantity has been measured provisionally upto 17th CC bill for 209523 Cum measured on 24582 and as per the said measurements the claimants are yet to be paid for a quantity of 5477 Cum over and above the payments already made upto 17th CC
The claimants claim payment for 5477 Cum of exca vation  Rs 18 per each Cum
amounting to Rs9858600
CLAIM AMOUNT
Rs 9858600 cxii Cost towards consolidation of earth by ramming and rolling That as per agreement item No 409b the claimants are required to fill up the low lying areas etc as specified under General Conditions of the Contract at para 305 with the excavated spoils obtained out of earthwork in excavation under agreement item No 409a
The payment for earthwork in open excavation for work executed under agreement item No 409a is to be made on sectional measurements calcu lated by level sections
The excavated earth obtained from garbage excavation a quantity of 2 15000 Cum as per provisions made in agreement item No 409b was consoli dated in different areas as per instructions and approved plan
The claimants claim payment for this quantity of consolidation at Rs20 per Cum ie Rs2 extra over Rs 18 per Cum as specified in agreement item No 409a  b amounting to Rs430000000 against which payment has been made in CC bills for reduced quantity and amount of Rs3404300
The claimants claim payment for the balance amount of Rs426595700 not paid for
CLAIM AMOUNT Rs426595700 In other words the contractors claimed payment at the rate of Rs18 per cubic metre in respect of the excavation work done by them under item No 409a
Again in respect of the same quantity
of 215000 cubic metres the contractors made a claim at Rs20 per cubic metre as the amount payable to them in respect of the consolidation of 646 excavated earth by ramming and rolling
The Division Bench was of the view that under item No 409b the contractors were entitled to an additional payment of Rs2 only since the contractors had already been paid at the rate of Rs18 per cubic metre in respect of the excavation done by them
The extra charges for ramming and rolling were payable only at the rate of Rs2 per cubic metre instead of Rs20 per cubic metre
The Division Bench accordingly scaled down the amount awarded by the arbitrator in this regard to 110th of the amount awarded by him
It is submitted on behalf of the contractors that the rate payable for the work under item 409b of the contract was not at all in dispute between the parties at any stage
The Union had not raised any plea in this regard in its reply to the contractors  claim in the objections to the award filed in the High Court or in the arguments before the learned Single Judge
Clearly the Division Bench travelled beyond the limits permissible for the interference with an award by a court of law in reducing the amount awarded on this account
It is pointed out that the award itself is a non speaking award
The award does not refer to the terms of the contract or incorporate the details of the claims made by the contractors
Though it is true that the arbitrators awarded a sum of Rs2396000 against item cxii they have not given reasons therefore
The award neither shows that the amount has been worked out at the rate of Rs20 per cubic metre nor does it show the quantity in respect of which the amount has been worked out
There is no reference to the terms of the contract or to item No 409 clause a or b
No reasons have been given by the arbitrators for determining that a sum of Rs2396000 has to be paid to the contractors under item cxii
It is therefore submitted that there was no error apparent on the face of the record
Learned counsel vehemently contended that it is now settled law that an award cannot be said to suffer from a manifest error unless the error appears on the face of the award or of some document incorporated in the award
Reference is made to the decisions of this Court in the following cases Firm Madanlal Roshanlal Mahajan vs Hukumchand Mills Ltd Indore   Allen Berry  Co Pvt Ltd vs Union oflndia 1971 3 SCR287N Chellappan vs Secretary Kerala State Electricity Board  Anr   Hindustan Tea Co vs K Shashi Kant Co  Ant  Hindustan Steel Works Construction Ltd
C Rajasekhar Rao 1987 4 SCC 93 and Sudarsan Trading Co vs Government of Kerala  Anr  According to the contractors what the Division Bench has done is to give its own interpretation to item Nos
409a  b of the contract to read an erroneous interpretation 647 of the said item into the award made by the arbitrators and to substitute its opinion in the place of that given by the arbitrators
Thus it is submitted runs quite contrary to the principles enunciated in the above decisions and should therefore be set aside
On the other hand Shri Milon Banerjee learned counsel for the Union of India submitted that the award is really a speaking award in so far as it does specify the amount granted in respect of each item of claim
He submitted that the present case falls within the principle enunciated in Ms Alopi Prashad  Sons Ltd vs Union of India   which has been taken note of in the case of MS Sudarsan Trading Co vs Government of Kerala  Anr  at p 54 that an award which overlooks or ignores the terms of the contract is bad
He also made a reference to the decision of the Delhi High Court in Bhagat Trading Co vs Union AIR 1984 Delhi 358 in this context
He also referred to a decision of the Punjab High Court in Union of India vs Bakshi Ram 1957 LIX PLR 572 holding that when there are pleadings in an arbitration and they are specifically referred to in the award so that it cannot be understood without reference to them then those pleadings are incorporated in the award and they must be included in the consideration whether there is any error apparent on the face of the award and that if a lump sum is awarded by an arbitrator and it appears on the face of the award or is proved by extrinsic evidence that in arriving at the lump sum matters were taken into account which the arbitrator had no jurisdiction to consider the award is bad The conten tion of Shri Banerjee is that the annexure to the award clearly incorporates the statement of claim made by the contractors
Since in turn the statement of claim refers to the clauses of the contract the contract should also have been treated as incorporated in the award
It is also appar ent on the face of the award insofar as it relates to item cxii that the arbitrators have awarded payment at Rs20 per cubic metres under item 409b whereas it must obvious ly be at Rs2 per cubic metre
According to the learned counsel the decisions relied upon by him clearly show that an award which ignores or overlooks the express terms of a contract suffers from an error apparent on the face of the record and can be set aside by this Court
He submitted that the award read with the annexure brings out the reasoning of the arbitrators and that an error therein can be recti fied by the court
The arbitrators had no power to travel beyond the authority of the contract and in order to deter mine whether they had exceeded their authority the contract can be looked into by the court
In support of this conten tion the learned counsel also referred to a passage at p 42 1 in the Law of Arbitration by Bachawat Second Edition
648 We have considered the respective contentions of the parties and we are of the opinion that the Division Bench erred in setting aside the award insofar as it relate to the sum of Rs2596000
Though the annexure sets out the award of the arbitrators as against various items of claims the mere enumeration of the heads of claims cannot be equated to an incorporation of the statement of claim by the contrac tors into the award
At any rate the award does not relate the claims to the various clauses of the contract and the mere fact that the statement of claim refers to various items in the schedule to the contract does not result in the contract itself being incorporated as part of the award
No error can be found in the award unless one reads into it first the statement of claim and then the relevant clauses of the contract
But this cannot be done unless these docu ments are treated as incorporated in the award
This cannot be done
That apart even if the contract can be read into the award we doubt whether this case can be treated as one of an error on the face of the award
All that the award has stated is that for the extra work involved in ramming and rolling the contractors were to be paid a sum of Rs2396000
The award does not mention how this amount is arrived at
There is no mention of the quantity in respect of which this is awarded nor the rate at which the payment has been calculated
It is however pointed out that con tractors had claimed payment at the rate of Rs20 per cubic metres in respect of 215000 cubic metres and that even if it is assumed that the ramming and rolling had been done in respect of the entire volume of 215000 cubic metres the contractors could have on a proper construction of the contract been awarded only a sum of Rs430000 and nothing more
Obviously the award is calculated at Rs20 per cubic metres in respect of 119800 cubic metre
It is clear says counsel for the Union that the volume of the item for which payment has to be made has been cut down but the amount has been calculated at Rs20 per cubic metre which exceeds the amount of Rs2 stipulated in the contract and this is erro neous on the face of it
We are afraid that in putting forward this contention the respondents are really trying to analyse the reasons of the arbitrator for making the award under this head when no such reasons have been stated in this award
In fact it does not necessarily follow that the payment has been di rected at the rate of Rs20 per cubic metre in respect of 1 19800 cubic metre
Theoretically it could have been award ed in respect of the entire volume of 2 15000 cubic metre at the rate of Rs11 and odd per cubic metre
It is however clear that the payment has been granted at a rate in excess of Rs2 per cubic metre
We shall however take it that the arbitrators have awarded at the rate 649 of Rs20 per cubic metre in respect of this item of work for as pointed out by Dr Ghosh the Union of India had never put forward the case either before the arbitrator or before the learned single Judge that the contractors were not entitled to payment at the rate of Rs20 per cubic metre as claimed and it was before the Division Bench for the first time that a question arose that the payment for the item should be at Rs2 and not Rs20 per cubic metre
Wheth er the payment should be made at the rate of Rs20 per cubic metre or at Rs2 per cubic metre will depend upon a proper interpretation of the contract
It is argued that the main item of work viz excavation and distribution of the exca vated work has been paid for under item No 409a and that item 409b envisages an additional payment of Rs2 per cubic metre if the excavated soil instead of being loosely distributed is rammed and rolled by applying some pressure
This seems prima facie a plausible interpretation of clause 409b
But we cannot assume in the absence of any evidence or expert knowledge that the ramming and rolling was not an independent heavy or cumbersome piece of work and merely involved a minor addition to the work under item 409a
On the other hand in the grounds of appeal filed by the contractors it is contended The High Court failed to appreciate that the process of ramming and rolling is a very expensive specialised process as it has to be done layer by layer not exceeding six inches at a time and requires watering breaking of clods and use of specialised road rollers bulldozers and other equipment
The work of ramming and rolling is much more expensive than that of earth excavation provided for in item 409 a
The High Court further failed to appreciate that in its reply to the statement of claim of the petitioner the respondent No 1 had not disputed that the rate applicable for ramming and rolling was Rs20 per cubic metre
The respondent No 1 had only raised a dispute with regard to the quantity of the ramming and rolling done by the petitioner
The High Court misinterpreted the contract and erred in reducing the award for ramming and rolling by erroneously applying the rate of Rs2 per cubic metre
 This may be fight or wrong but this is also a plausible view
Unfortunately this was an aspect not urged before or considered by the arbitrators
There was no evidence before the arbitrators or material adduced before the Court as to the nature of these operations
It is difficult to say by merely reading the terms of contract that the 650 arbitrators have erroneously interpreted the terms of the contract
It is not without significance that the departmen tal officers did not dispute the rate of the claim
Equally the arbitrators were experienced engineers and would not have passed what is now said to be an astounding claim without thought
It is difficult to assume that all these persons have overlooked that the contractor had already been paid at Rs18 under item 409a especially when it is so stated on the face of the claim
This therefore
is not a case where tile arbitrators can be said to have ignored or overlooked a term of the contract on the contrary they have acted upon a particular interpretation of certain clauses of the contract on which two views are possible
This case certainly cannot be brought under the principle that the arbitrators have ex facie exceeded the authority or jurisdiction conferred on them by the Contract
At worst what can be said is that they may have committed an error in deciding the issue referred to them but the error is not apparent on the face of the award even if the contract is read as part of it both because the arbitrators have not given their reasoning and because the view taken by them of the relevant terms of the contract cannot be said to be clearly erroneous
In a matter on which the contract is open to two equally plausible interpretations it is legitimate for the arbitrators to accept  one or the other of the available interpretations and even if the Court may think that the other view is preferable the Court will not and should not interfere
This view is too well settled to need any reference to any precedent other than Sudershan Trading Co s case referred to earlier
That is why we think that this case does not fall within the principle referred to by Shri Banerjee and that Dr Ghosh is right in his submission that the Division Bench exceeded its jurisdiction in inter fering with this part of the award
Turning now to the appeal of the Union of India there is really no dispute about the first contention regarding the amount on which interest is payable to the contractors
The correct computation should stand as follows in the light of our findings in the contractors  appeal Compensation awarded 5747198 by arbitrator Less Interest element therein item 1 676540 Net principal amount awarded 5070658 651 LessAmount deleted by learned Single Judge 520000 4550650 The contractors will be entitled to interest on this amount
What is the period with reference to which interest would be payable on the above amount The arbitrators had allowed interest on the amount awarded by them from 51082 to 26384 under item 1 and had also allowed interest from the date of the award till the date of payment or decree whichever is earlier
Of this the learned Single Judge had deleted the interest for the period 51082 to 6583 and what remains is the award of interest from 6583 till the date of payment
There are two disputes as to this
The first objection raised on behalf of the Union is that the contractors will not be entitled to any interest for the period from the date of reference to arbitration 651983 till the date of the award 2631984
On behalf of the contractors Dr Ghosh refutes this contention
He relies upon the decision of this Court in Executive Engineer vs Abhaduta Jena
1988 1 SCC 418 and contends that in all cases where as in this case arbitrators are appointed by Court and disputes referred to them for arbitration pen dente lite interest can and should be awarded by the arbi trator
He points out that though initially in Seth Thawar das  case some doubts were raised about the competence of the arbitrator to award interest this Court has subsequently consistently held that an arbitrator can do this vide Nachiappa vs Subramaniam   Satinder vs Arnrao   Firm Madanlal vs Hukamchand Mills Ltd   Union vs Bungo Steel Furniture P Ltd   Ashok Construc tion Co Ltd vs Union and State vs Saith  Skelton P Ltd  After referring to these and other cases Chinnappa Reddy J in Abhaduta Jena supra summed up the position thus 15
As a result of the discussion of the various cases we see that Bengal Nagpur Railway Co Ltd vs Ruttanji Ranjit 65 IA 66 Union of India vs West Punjab Factories  and Union of India vs Watkins  Co AIR 1966 SC 275 were cases of award of interest not by an arbitrator but by the court
It was laid down in those three cases that 652 interest could not be awarded for the period prior to the suit in the absence of an agreement for the payment of interest or any usage of trade having the force of law or any provision of the substantive law entitling the plaintiff to recover interest
Interest could also be awarded by the court under the Interest Act if the amount claimed was a sum certain payable at a certain time by virtue of a written instrument
In regard to pendente lite interest the provi sions of the Civil Procedure Code governed the same
The question of award of interest by an arbitrator was considered in the remaining cases to which we have referred earlier
Nachiappa Chettiar vs Subramaniam Chettiar   Satinder Singh vs Amrao Singh   Firm Madanlal Roshanlal Mahajan vs Hukumchand Mills Ltd   Union of India vs Bungo Steel Furniture Pvt Ltd 1967 I SCR 324 Ashok Construction Co vs Union of India and State of Madhya Pradesh vs Ms Saith  Skelton Pvt Ltd  were all cases in which the reference to arbitration was made by the court of all the disputes in the suit
It was held that the arbitrator must be assumed in those circumstances to have the same power to award interest as the court
It was on that basis that the award of pendente lite interest was made on the principle of Section 34 Civil Procedure Code in Nachiappa Chettiar vs Subramaniam Mills Ltd supra Firm Madanlal Roshanlal Mahajan vs Hukumchand Mills Ltd supra Union of India vs Bungo Furniture Pvt Ltd supra and State of Madhya Pradesh vs Ms Saith  Skelton Pvt Ltd supra
In regard to interest prior to the suit it was held in these cases that since the Interest Act 1839 was not applicable interest could be awarded if there was an agreement to pay interest or a usage of trade having the force of law or any other provision of substantive law entitling the claimant to recover interest
Illustrations of the provisions of substantive law under which the arbitrator could award interest were also given in some of the cases
It was said for instance where an owner was deprived of his property the right to receive interest took the place of the right to retain possession and the owner of immova ble property who lost possession of it was therefore entitled to claim interest in the place of right to retain possession
It was further said 653 that it would be so whether possession of immovable property was taken away by private treaty or by compulsory acquisi tion
Another instance where interest could be awarded was under Section 612 of the Sale of Goods Act which provided for the award of interest to the seller or the buyer as the case may be under the circumstances specified in that section
XXX XXX XXX 18
While this is the position in cases which arose prior to the coming into force of the  in cases arising after the coming into force of the Act the position now is that though the award of pendente lite interest is still governed by the same principles the award of interest prior to the suit is now governed by the 
Under the  an arbitrator is by defini tion a court and may now award interest
in all the cases to which the applies
 Sri Milon Banerjee appearing for the Union of India however contends that the above principle is applicable only in cases where an arbitrator is appointed on interven tion of count as contemplated in Chapter IV of the Arbitra tion Act
It is only in these cases that the arbitration proceedings can be considered to be a continuation of the court proceedings empowering the arbitrator to do all that the court could do
For even in cases arising after the  the award of pendente lite interest can only be in terms of the provisions of section 34 of the Code of Civil Procedure and this cannot be invoked in cases of arbitration except in cases falling under Chapter IV merely on the ground that the appointment of the arbitrator is made under section 8 12 or 20 of the said Act
Counsel submits that Chinnappa Reddy J has pointed out in Abhadhuta Jena s case  1988 1 SCC at pp
434 5 that in all cases whether arising before or after the  the claimants would not be entitled to interest from the date of reference to the date of the award for the simple reason that the arbitrator is not a court nor were the references to arbi tration made in the course of suits
It is this principle that has been reiterated in Food Corporation of India vs Surendra Devendra  Mohendra Transport Co at pp
554 et seq and Gujarat Water Supply  Sewage Board vs Unique Erectors  There is force in the contention urged by Sri Banerjee
There are 654 passages in Abhaduta Jena which indicate that the grant of pendente lite interest would be justified only when the reference to arbitration is made in the course of a suit vide the last sentence on p 428 the first sentence on p 429 the emphasis added in the extracts from earlier judg ments on pp
430 1 and the summings up at p 433 and 435
The principle indicated in these passages apparently is that since a Court has under section 34 of the CPC power to grant pendente lite interest in a suit an arbitrator to whom a reference to arbitration is made in the course of the suit would be clothed with all the powers of the Court including the one to grant such interest
This is how this Court has also looked at the matter in a subsequent case
In State of Rajasthan vs Sharrna  Co   the parties had entered into a compromise in certain proceedings in Court agreeing that their disputes would be settled by arbitration but the arbitrators were appointed subsequently by the parties themselves and a reference made to them
A Bench of this Court of which one of us was a member re viewed the earlier cases and explained the decision in Abhaduta Jena thus 12
This was awarding interest pendente lite
This is in violation of the principles enunciated by this Court in Executive Engineer Irrigation Balimela vs Abhaduta Jena
Our attention was drawn by Shri Soli J Sorabjee counsel for the respondent to the decision of this Court in Food Corporation of India vs Ms Surendra Devendra  Mohendra Transport Co where at pages 555 556 of the report the Court referred to certain decisions cited by Chinnappa Reddy J in Executive Engineer Irrigation in which he had expressed the view that those were cases in which the refer ences to arbitration were made by the court or in court proceedings of the disputes in the suit
In that context it was held in those cases that the arbitrator had power to grant interest
It was contended before us that this was a similar case
There was a court proceeding in this case regarding the appointment of the arbitrator and as such on the same analogy it should be treated that the arbitrator had power to grant interest
We are unable to accept this
What Mr Justice O Chinnappa Reddy meant to say by the latter judgment in Executive Engineer Irrigation case referred to in Food Corporation of India was where the disputes regarding the merit of the case were pending in the court and such disputes instead of being decided by the 655 court adjudication had been referred to an arbitrator by the court in such cases the arbitrators deciding in the place of court would have the same powers to grant interest pendente lite as the courts have under Section 34 of the Civil Procedure Code
Instant case is not such a proceeding
 This principle would logically be applicable as rightly contended by Shri Banerjee only to cases where the refer ence to arbitration arises in the course of a suit
Dr Ghosh however submits that except for Nachiappa vs Subramaniam  and Hukumchand Mills   the other cases referred to by Chinnappa Reddy J were all only cases in which an arbitrator had been appointed under section 8 or 20 of the Arbitration Act
The principle enunciated he submits was actually a little wider than that contended for by Shri Banerjee
It is this that where an arbitrator is appointed by the Court and a reference is made to him he has all the powers of the Court
He invites attention to the observations in Hukum chand Mills case   reiterated in the context of post award interest in Union vs Bungo Furniture Co  at p 329 that it is an implied term of the reference that the arbitrator will decide the dispute according to law and would give such relief with regard to pendente lite interest as a Court could give if it decided the dispute
He urges that Abhaduta Jena related to a batch of cases arising out of references made prior to and later than the commencement of the  but by the parties themselves under the terms of the contract without reference to court and so it was held that pendente lite interest could not be granted
But that is not so in the present case
He says that this decision was simply followed in State vs Construction India   in the Food Corporation case and in State vs Sharma and Co  The Gujarat Water Supply case 1989 ISCC 532 was he urges also a similar case see para 5 though in that case there appear to have been some proceedings in Court earlier
In short he virtually submits that Abhaduta Jena and Sharma s case have unduly restricted the grant of pendente lite interest and require reconsideration and that pendente lite interest should be awarded in all cases where the intervention of Court is sought for the appointment of arbitrators directly or indirectly at any stage
Generally speaking it would only seem reasonable that the power to grant interest pendente lite should be treated as ancillary to the award of damages or compensation which but for the delay in the 656 litigation whether in Court or by way of arbitration the claimant should have received much earlier
However though pendente lite interest has been made available in Court proceedings its extension to arbitration law appears to have acquired some technical limitations resulting in denial of pendente lite interest in most cases of arbitration
Even if we accept the contention of Dr Ghosh pendente lite interest cannot still be awarded by an arbitrator appointed by the parties under a private agreement for which there may be no justification in equity
These anomalies have arisen because formerly an arbitrator could not be treated as a Court to which the Code of Civil Procedure applied and because now the  while including arbitra tion proceedings within its ambit has apart from a refer ence to section 34 omitted to provide specifically for pendente lite interest
This has been clearly brought out by Chinnap pa Reddy J We have earlier referred to passages from Abhaduta Jena which outline the principle the learned Judge had in mind for permitting pendente lite interest by an arbitrator
It is interesting in fact to notice that the present contentions of Dr Ghosh based on certain earlier decisions of this Court appear to have been advanced by him in the Food Corporation case to support a wider contention that pendente lite interest should be awarded even in an arbitration by private agreement as in that case so long as the terms of the arbitration agreement did not exclude the jurisdiction of the arbitrator to enter tain such a claim
But the Court did not accept the conten tion and followed Abhaduta Jena
Abhaduta Jena has been followed in later cases also and its scope has been recently explained in Sharma s case  We may point out that in the latter case a specific point was raised that since the Court had been concerned with the appointment of the arbitrator at some stage it should be treated as a reference to arbitration by court warranting the grant of pendente lite interest but this contention was negatived and the principle confined only to cases where a reference to arbitration is made in the course of suits
The position was similar in the Gujarat Water Supply case  but pendente lite interest was denied
In view of Abhaduta Jena and the clarification specifically set out in para 13 of Shartna s case we are unable to accede to the contention of Dr Ghosh attractive as it is an equitable proposition
The Division Bench of the High Court had no occasion to consider the above recent pronouncements of this Court
Further it is seen that before the Division Bench the Union took an objection that under clause 162 of the general conditions of contract the contractors could claim no interest on the amounts that may be determined as 657 payable to them
The Division Bench met this contention by relying on a circular issued by the Government of India making the claim for interest entertainable in arbitration if notice had been issued in this behalf by the arbitrator
There is however no finding and nothing on record brought to our notice to show that any specific notice claiming interest had been given as contemplated by the contract
Having regard to all these considerations we are unable to uphold the order of the Division Bench on this issue
This takes us to the second point urged on behalf of the Union in regard to interest
The contention is that the learned Single Judge had restricted it to the date of the award and that this has become final as the contractors have preferred no appeal therefrom
The grounds of appeal before us by the Union are confined only to the mistake in not taking into account the sum of Rs676540 and do not raise any question regarding post award interest
It is therefore not open to Shri Banerjee to raise this question
That apart on merits also the contention raised that post award interest has been declined by the High Court is not correct
The contention overlooks the course of pleadings between the parties
The arbitrators had in the annexure to the award computed interest from 51082 to 26384 ie from the date of the termination of the contract till the date of the award and in the award had granted interest on the amount awarded from the date of award till the date of decree or payment
A point had been raised before the High Court in the memo of objections that the arbitrators had erred in awarding interest in the manner mentioned in the award but the objection urged by the Union before the learned Single Judge was a different one viz that the arbitrators ought not to have granted interest for the period prior to the date of reference without any agreement or right in law to claim such interest
It is this conten tion that was accepted by the learned Single Judge who deleted the interest award prior to the date of the refer ence and held that the arbitrators had jurisdiction to award interest from the date of the reference till the date of the award
This did not affect the arbitrator s direction in the main part of the award that interest will accrue on the amount of the award if the said amount was not paid within 60 days till the date of payment or decree whichever is earlier
This part of the award was not questioned
In fact the decree drawn up in consequence of the order of the learned Single Judge specifically directs a interest on the awarded amount from 6583 date of reference to 26384 date of the award  b thereafter interest on the amount  awarded at 11 from 27384 to 111284 date of the decree and c interest thereafter at 658 9 per annum
The objection of the Union in the LPA on the question of interest was only that the arbitrators had erred in awarding interest from 651983 to 2631984
It is this contention that was accepted by the Division Bench
The High Court had therefore not decided that the contractors were not entitled to interest beyond the date of the award
This contention of the Union therefore fails and is rejected
In the result CA 128088 is allowed and CA 128 188 is allowed in part
There will be no order as to costs
RNJ Appeals allowed


Summary:
Two persons B and C formed a partnership firm on April 20 1936 and the firm was dissolved on March 31 1948
I and C along with R formed a second firm on July 30 1941 and it was dissolved on March 31 1949
B and C along with five others formed a third firm on December 1 1941 and it was dissolved on January 1 1949
All the three firms were carrying on business in yarn and cloth and all of them were registered under section 26 A of the Income tax Act
For the years 1943 44 and 1944 45 tile said firms were treated as separate entities and separate assessment orders were passed in respect of the income of each one of them for the said years
Subsequently the Income tax Officer served notices under section 34 Of the Act on C on behalf of the firms and after hearing the parties he held that the firms were fictitious and so cancelled their registration under r 6B of the Income tax Rules and passed fresh orders of assessment against them on the basis that they were unregistered firms
One Y who was a partner in the third firm and C filed four writ petitions under article 226 of the Constitution in the High Court challenging the validity of the orders passed
The High Court dismissed the petitions but granted certificates of fitness to appeal 190 under article 133
The appellants contended that r 6B was inconsistent with section 234 of the Act and was ultra vires that consequently the cancellation of registration of the firms was without jurisdiction and was void and that the proceedings taken under section 34 Of the Act were invalid as the required notice was not issued against the individual partners who were the assesses
Held that r 6B of the Income tax Rules was not inconsis tent with section 234 Of the Act and was not ultra vires
Rule 6B dealt with cancellation of registration in cases where the certificate of registration had been granted without there being a genuine firm in existence while section 234 dealt with cancellation of registration on account of failure to comply with the requirements of law though the registered firm was genuine
Rule 6B was obviously intended to carry out the purpose of the Act and was valid
The fact that no appeal had been provided against an order made under r 6B was no ground for challenging its validity
It was also not open to the appellants to contend that the orders passed under section 6B were invalid on the ground that the rule did not require the giving of any notice before the can cellation of registration as in the present case notice had actually been given and the appellants had been afforded an opportunity of being heard
Held further that in the cases of registered firms the firms themselves were the assessees and as such the notices issued under section 34 against the firms and served upon C were valid and proper notices and it was not necessary to serve notices upon the individual partners of the firms
The notice prescribed by section 34 was not a mere procedural requirement
If no notice was issued or if the notice issued was shown to be invalid then the proceedings taken by the Income tax Officer would be illegal and void
Commissioner of Income tax Bombay City vs Ramsukh Motilal and R K Das  Co vs Commissioncy of Income tax West Bengal  approved
The contention that the assessments were completely illogical and therefore illegal could not be urged in a petition under article 226 of the Constitution since it did not raise any question of jurisdiction