Supreme Court Dismisses State's Objections to Arbitration Award Filing and Interest Award in Arbitration Act Case. Arbitrator's Suo Motu Filing and Pre-Reference Interest Award Upheld Under Sections 14(2), 2(c) of Arbitration Act, 1940 and Section 61(2) of Sale of Goods Act, 1930.

Arbitration proceedings arising from a contract dispute between the State of Madhya Pradesh and a private company regarding supply and erection of penstocks; applications filed in the Supreme Court to pass a judgment and decree according to the arbitral award and to set aside or modify the award.

The respondent firm sought a judgment and decree according to the arbitrator's award under Sections 17 and 29 of the Arbitration Act, 1940, with interest from the date of decree. The appellant State sought an order declining to take the award on file or to set aside or modify the award regarding pre-award interest and refund of Rs. 15,414.19.

Disputes arose over the performance of the contract; after arbitral proceedings and an award, the appellant challenged the validity of suo motu filing, the jurisdiction of the Supreme Court as the filing court, and the arbitrator's power to award pre-reference interest.

The Additional District Judge, Mandsaur, by order dated October 19, 1963, held the appointments of the arbitrator and umpire invalid. The Madhya Pradesh High Court, by order dated August 6, 1970, modified that order and appointed a sole arbitrator under Section 12(2) of the Arbitration Act. The Supreme Court, on January 29, 1971, granted special leave, allowed the appeal, set aside the High Court's appointment of the sole arbitrator by consent of parties, and appointed Mr. V. S. Desai as sole arbitrator.

Whether the arbitrator had power to file his award suo motu under Section 14(2) of the Arbitration Act, 1940. Whether the Supreme Court is the court contemplated by Sections 2(c) and 14(2) of the Arbitration Act, 1940 for filing the award. Whether the arbitrator had jurisdiction to award interest from a date anterior to the date of award or reference. Whether the arbitrator committed a manifest error in directing refund of Rs. 15,414.19 when that amount had already been taken into account in arriving at the principal sum.

The appellant State contended that the arbitrator had no power to file the award suo motu; under Section 14(2) an arbitrator can cause the award to be filed only upon request of parties or application to court. The appellant State contended that the Supreme Court was not the court under Sections 2(c) and 14(2) of the Arbitration Act, and filing the award in the Supreme Court was illegal and ineffective. The appellant State contended that the arbitrator had no jurisdiction to award interest for the period anterior to the date of the award or reference. The appellant State contended that the arbitrator committed a manifest error in directing refund of Rs. 15,414.19 when this amount had already been accounted for in the principal figure of Rs. 1,79,653.18. The respondent firm argued that the arbitrator had authority to file the award, that the Supreme Court had retained jurisdiction over the arbitration proceedings and was the proper court, and that the interest claim was referred to arbitration and payable under Section 61(2) of the Sale of Goods Act, 1930.

An arbitrator under Section 14(2) of the Arbitration Act, 1940 may file the award suo motu; no request by parties or application to court is necessary. The expression 'Court' in Section 14(2) includes an appellate court and the word 'suit' includes appellate proceedings; therefore the Supreme Court was the proper court for filing the award as it retained full control over the arbitration proceedings. The arbitrator has jurisdiction to award interest for a period anterior to the reference or award where the dispute including the interest claim was referred to arbitration and the contract did not prohibit interest; interest is payable under Section 61(2) of the Sale of Goods Act, 1930 from the date the price became due.

There is nothing in s. 14(2) of the Act which precludes the arbitrator from filing the award suo motu and it is not correct to say that the award should be filed only if the parties make a request to the arbitrator to file it, or make an application to the Court for that purpose. The word 'Court' would include 'an appellate court' and the word 'suit' would include 'appellate proceedings'. The arbitrator had found that the price had become payable from a date anterior to the date of the award. Therefore, the award of interest from the anterior date was justified. The award of interest at 9% is also not exorbitant because the parties themselves claimed interest at 12%.

Contract dated June 5, 1956 between erstwhile State of Madhya Bharat and M/s. Saith & Skelton (P) Ltd. for supply and erection of penstocks. Disputes arose; the firm nominated an arbitrator on December 31, 1959; the State nominated arbitrators through Directorate General of Supplies and Disposals but later challenged validity. The two arbitrators appointed an umpire on September 6, 1960, but disagreed and referred the matter to the umpire on October 20, 1961. The appellant State filed Civil Miscellaneous Case No. 16 of 1962 under Section 5 of the Arbitration Act in the Court of Additional District Judge, Mandsaur, seeking to set aside the nominations. By order dated October 19, 1963, the Additional District Judge held the appointments invalid. The respondent firm appealed to the Madhya Pradesh High Court; the appeal was treated as Civil Revision No. 415 of 1969. The High Court by order dated August 6, 1970 appointed Shri R. C. Soni as sole arbitrator under Section 12(2) of the Act. The appellant filed Special Leave Petition No. 2370 of 1970 in the Supreme Court. On January 29, 1971, the Supreme Court granted special leave, allowed the appeal, set aside the appointment of Shri R. C. Soni by consent of parties, and appointed Mr. V. S. Desai as sole arbitrator. On February 1, 1971, the Supreme Court directed that arbitration records be sent to the sole arbitrator. On April 30, 1971, the Court extended the time for making the award by four months and permitted holding arbitration proceedings at Bombay. The arbitrator made the award on August 24, 1971 and filed it in the Supreme Court the next day. The respondent firm filed C.M.P. No. 5801 of 1971 under Sections 17 and 29 of the Arbitration Act for judgment and decree according to the award; the appellant State filed C.M.P. No. 5802 of 1971 seeking to decline taking the award on file or to set aside or modify it.

• Arbitration Act, 1940: 2(c), 5, 12(2), 14(2), 17, 29
• Sale of Goods Act, 1930: 61(2)