Case: Firm Madanlal Roshanlal Mahajan Vs. Hukumchand Mills Ltd., Indore

1. The appellant and the respondent entered into three contracts whereby the appellant agreed to buy and the respondent agreed to sell 352 bales of cloth. Originally the contracts provided for delivery of the goods in May/June, 1948. The parties subsequently agreed that part of the goods would be delivered in June, 1948 and the balance goods would be delivered in July, 1948. The dispute between the parties concerns an item of 176 bales and another item of 461/2 bales. The respondent claimed from the appellant a sum of Rs. 1,72,856 made up, of (1) Rs. 84,006-2-0 for loss in respect of 176 bales resold by the respondent with the consent of the appellant, and (2) Rupees 88,849-14-0 for the balance of the price of 461/2 bales bargained and sold but not taken delivery of by the appellant. On February 6, 1950, the respondent instituted against the appellant Civil Suit No. 10-A of 1950 in the Court of the District Judge Indore, claiming the aforesaid sum of Rs. 1,72,856, interest thereon from July 1, 1948 up to January 30, 1950, godown rent, interest from the date of the institution of the suit and costs. On or about May 15, 1950, the disputes in the suit were referred to the sole arbitration of Sri S. N. Samvatsar, Advocate. Before the arbitrator, the respondent did not press its claim for godown rent and for interest prior to the institution of the suit, but pressed its claim for the aforesaid sum of Rs. 1,72,856 and for interest from the date of the institution of the suit till recovery of the amount and costs. One of the submissions of the appellant before the arbitrator was that in view of a certain control order it could not take delivery of 461/2 bales, and in case it was held liable for the contract price, it should be allowed a rebate for the current market price on its giving up its claim to the bales. After hearing the parties, the arbitrator made his award on November 30, 1961. The award recited the disputes between the parties and their respective contentions and submissions and then directeddefendant should pay Rupees 1,17,108-7-9 in all to the plaintiff and to give up claim to 461/2 bales. The defendant should pay interest on the above sum to the plaintiff at the rate of six annas per cent per month from this day till the day of payment. Both the parties to bear their own costs. The plaintiff to deposit arbitration fees which amount to Rs. 1,740 and to recover half of its amount, Rs. 870 from theaward was filed in Court. The appellant filed an application to set aside the award. By its order, dated December 22, 1952, the District Judge, Indore, dismissed the application, and passed a decree on the award. An appeal from this order preferred by the appellant was dismissed by the High Court of Madhya Pradesh, Jabalpur. The correctness of the judgment of the High Court is challenged in this appeal by special leave.

Court's reasoning:
In the present case, the arbitrator gave no reason for the award. We do not find in the award any legal proposition which is the basis of the award, far less a legal proposition which is erroneous. It is not possible to say from the award that the arbitrator was under a misconception of law. The contention that there are errors of law on the face of the award isarbitrator awarded interest on unliquidated damages for a period before the reference to arbitration and also for a period subsequent to the reference. The High Court set aside the award regarding interest on the ground that the claim for interest was not referred to arbitration and the arbitrator had no jurisdiction to entertain the claim. In this Court, counsel for the claimant contended that the arbitrator had statutory power under the Interest Act of 1839 to award the interest and, in any event, he had power to award interest during the pendency of the arbitration proceedings under S. 34 of the Code of Civil Procedure, 1908. Bose, J. rejected this contention. It will be noticed that the judgment of this Court in Thawardass case, 1955-2 SCR 48  : (AIR 1955 SC 468  ), is silent on the question whether the arbitrator can award interest during the pendency of arbitration proceedings if the claim regarding interest is referred to arbitration. In the present case, all the disputes in the suit were referred to the arbitrator for his decision. One of the disputes in the suit was whether the respondent was entitled to pendente life interest. The arbitrator could decide the dispute and he could award pendente lite interest just as a Court could do so under S. 34 of the Code of Civil Procedure. Though, in terms, S. 34 of the Code of Civil Procedure does not apply to arbitrations, it was an implied term of the reference in the suit that the arbitrator would decide the dispute according to law and would give such relief with regard to pendente life interest as the Court could give if it decided the dispute. This power of the arbitrator was not fettered either by the arbitration agreement or by the Arbitration Act, 1940.