JUDGMENT
M.L. Singhal, J.
1. This is Civil Revision against the order of Additional District Judge, Faridkot dated 23.12.1980 affirming that of Subordinate Judge First Class, Muktsar dated 25.9.1979 whereby the latter had accepted the application of M/s Doshi Brothers, Chit Fund and Finance, Corporation (Regd.) through Shri Harbans Lal Verma-partner against Iqbal Sigh and others filed under Section 74 read” with Section 17 of the Arbitration Act and had ordered the award given by the arbitrator in their favour to be made rule of the Court and dismissed the objections of Iqbal Singh raised against the award.
2. Facts :-
M/s Doshi Brothers Chit and Finance Corporation (Regd.) filed application under Section 14/17 of the Indian Arbitration Act, 1940 against Iqbal Singh and others for award given by the arbitrator (Sh. Kashmiri Lal Saluja, Advocate, Muktsar) being made rule of the court. It was alleged in the application that this firm was advancing loans to various persons on interest. Iqbal Singh was a member of Chit Fund Scheme. This firm advanced loan of Rs.6,000/- on 19.6.1972 to Iqbal Singh. Mukand Lal and Kishan Singh stood sureties for Iqbal Singh and they guaranteed repayment of the loan amount together with interest. Bond dated 19.6.1972 was duly executed between the parties to this effect. It was stipulated in the bond that in case of any dispute between the parties regarding the loan in question, that dispute would be referred to the sole arbitration of Sh. Kashmiri Lal Saluja, Advocate, Muktsar. Iqbal Singh and the sureties did not repay the loan amount and the dispute arose between the parties regarding the loan amount. Matter was referred to Shri Kashmiri Lai Saluja, Advocate-sole arbitrator to decide the dispute who gave award dated 18.4.1977 against Iqbal Singh and the sureties. Applicant was given notice of the making of the award by the arbitrator along with its copy which was received on 11.9.1978.
3. Respondent-Iqbal Singh contested this application, urging that Iqbal Singh and four members of his family became members of M/s Doshi Brothers Chit Fund Scheme in 1970. They were required to pay Rs.25/- monthly and there was one lucky draw to be given to the members of the scheme. The members of Iqbal Singh family regularly paid the monthly instalments. In this respect, Rs.8,000/- was given by them to M/s Doshi Brothers Chit Fund and Finance Corporation, Muktsar. At the end of the scheme this amount was to be adjusted against any loan taken by the members but they did not adjust Rs.8,000/- against the loan advanced to Iqbal Singh. In their other scheme Rs.400/-was given to M/s Doshi Brothers Chit Fund & Finance Corporation by Iqbal Singh, which was also not adjusted. No notice or information was given by the arbitrator to him (Iqbal Singh) and no opportunity was given to him to produce his evidence. Arbitrator proceeded ex parte against him, which was illegal, against law and void. Before any decree or award was passed, principles of natural justice require that he should have been heard. He came to know of the award, when notice of the award was issued by the Court on 15.11.1978. Arbitrator has not filed any evidence or document produced by the first party with the award. Award was without jurisdiction. No arbitrator could be appointed by M/s Doshi Brothers Chit Fund & Finance Corporation, Muktsar-first party without the consent of Iqbal Singh-second party. Appointment of arbitrator was illegal, void and against law. There was no dispute between the parties. It was alleged that the award of the arbitrator be set aside and the same be not made rule of the Court.
4. Pleadings of the parties gave rise to the following issues:-
1. Whether the award is liable to be set aside on the grounds mentioned in Para No.3 of the objection petition? OPR
2. Whether the objections are within time? OPR
3. Relief.
5. Subordinate Judge First Class, Muktsar dismissed these objections and ordered the award to be made rule of the court in view of his finding that the award was passed by the arbitrator after going through the accounts of M/s Doshi Brothers-first party and was good in law. Objections were held to have been filed beyond the period of 30 days from the notice of the filing of the award.
6. Aggrieved from this order dated 25.9.1979 passed by the Subordinate Judge, First Class, Muktsar, Iqbal Singh went in appeal. Iqbal Singh’s appeal was dismissed by the Additional District Judge, Faridkot vide order dated 23.12.1980.
7. Still not satisfied, Iqbal Singh has assailed the orders passed by the courts below making award rule of the court and dismissing his objections to the award being made rule of the court through this revision.
8. It was submitted by the learned counsel for the petitioner that the award could not been made rule of the court because when M/s Doshi Brothers – first party made application to the arbitrator on 18.12.1976, the recovery of the loan amount said to have been advanced on 19.6.1972 had become barred by time. It was submitted that in application Ex.P2 through which reference was, sought to the arbitrator, it was alleged that Rs.6,000/- had been advanced as loan to Iqbal Singh on 19.6.1972 and Mukand Lal and Kishan Singh had stood sureties. It was submitted that arbitrator was not supposed to give award with regard to time barred claim.
9. In this case, however, there is Clause No.3 in the bond which reads as follows:
“And whereas the creditor has agreed to advance to the borrower a loan of Rs.6,000/- only repayable after a period of 50 months with the interest at the rate hereinafter specified on the security of the sureties.”
There is Clause 5 in the bond which reads as follows :-
“(1) In pursuance of the said agreement and in consideration of the sum of Rs.6,000/- only advanced by the creditor to the borrower, through Punjab National Bank, Muktsar cheque No.781686 dated 19.6.1972 the receipt of which is hereby acknowledged the borrower hereby covenants with the creditor that he will repay the said sum of Rs.6,000/- only to the creditor within 50 months from this dated and will in the meantime and for so long as any part of the said principal sum or any money to be treated as principal hereunder remains unpaid, pay interest on the said sum or on so much thereof as shall for the time being remains unpaid at the rate of 2 per cent per month on the 20th day of every month.”
10. It is, thus, clear that the loan was repayable within 50 months of its advancement, while the interest was to be paid every month. On 18.12.1976, when reference to arbitrator was sought, the claim was within time as per the terms of the bond. On 30.12.1976, Shri Kashmiri Lal Saluja, Advocate – sole arbitrator gave notice of the application of Harbans Lal dated 18.12.1976 for reference to him as arbitrator to Iqbal Singh etc. and called upon them to appear before him on 8.1.1977 at 9.00 AM in his office. On 17.1.1977 Iqbal Singh appeared before the arbitrator. Mukand Lal and Kishan Singh sureties appeared before the arbitrator. Harbans Lal Verma also appeared before the arbitrator. Parties sought adjournment for compromise and to show accounts and produce receipts, case was adjourned to 29.1.1977. On 29.1.1977 Iqbal Singh did not appear. Sureties also did not appear. Harbans Lal Verma appeared and made statement. Tek Chand, who is attesting witness of the bond Ex.P3 also appeared. Arbitrator gave award Ex.P9 on 18.4.1977 on consideration of evidence produced before him.
11. Learned counsel for the petitioner submitted that the award should be set aside as the arbitrator misconducted himself as Harbans Lal Verma had prayed through application dated 18.12.1976 which was request for reference to the arbitrator that a sum of Rs.4,564.36 paise was due towards principal and interest while arbitrator gave award for the amount of Rs.6,000/- as principal and Rs.4,106/- as interest. It was submitted that the arbitrator could not have awarded amount more than what had been asked for by Harbans Lal Verma, who had sought reference to the arbitrator.
12. Suffice it to say, the arbitrator is not bound by the strict rules of pleadings. We have to read the entire application together given to the arbitrator for entered upon the reference. In Para 1 it has been clearly alleged that on 19.6.1972 a sum of Rs.6,000/-was advanced as loan to Iqbal Singh and Mukand Lal and Kishan Singh stood sureties for the repayment of the loan. There is no mention about any repayment towards loan amount in the application. Even otherwise, arbitrator is not bound by the strict rules of pleadings.
13. In his statement before the arbitrator, Harbans Lal Verma stated that loan of Rs.6,000/- was advanced to Iqbal Singh on 19.6.1972 through cheque No.781686 dated 19.6.1972 drawn at Punjab National Bank, Muktsar. Mukand Lal and Kishan Singh stood sureties. Iqbal Singh executed bond in their favour, loan was to be repaid after 50 months. Loan amount was to carry interest at the rate of 2 per cent per month but if interest was paid till 20th of the month, rate of interest would be 1.20 per cent month. He stated that Iqbal Singh Had paid him interest to the tune of Rs.144/- for two months. He produced before the arbitrator khata and rokar. He stated that a sum of Rs.6,000/- as principal plus Rs.4,106/- as interest calculated at the rate of 1.20% per month, total Rs.10,106/- was due.
14. It was submitted by the learned counsel for the petitioner that the award should be set aside because arbitrator gave interest for the period when reference had not been made to him and he awarded interest pendente-lite also. It was submitted that the arbitrator could not have awarded pre-reference interest and he could not have awarded pendente-lite interest. In support of this submission, he drew my attention to Executive Engineer (Irrigation) Galimala and others v. Abnaduta Jena, A.I.R. 1988 S.C. 1520 where the Hon’ble Supreme Court observed that in regard to pendente lite interest, that is, interest from the date of reference to the date of the award, the claimants would not be entitled to the same for the simple reason that the arbitrator is not a court within the meaning of Section 34 of the Code of Civil Procedure nor were the references to arbitration made in the course of suits. In the cases which arose before the commencement of the Interest Act, 1978, the claimants are not entitled to claim interest either before the commencement of the proceedings or during the pendency of the arbitration. They are not entitled to claim interest for the period prior to the commencement of the arbitration proceedings for the reason that the Interest Act, 1939 does not apply to their cases and there is no agreement to pay interest or any usage of trade having the force of law or any other provision of law under which the claimants were entitled to recover interest. They are not entitled to clajm pendente-lite interest as the arbitrator is not a court nor were the reference to arbitration made in suits.” It was submitted that the arbitrator could award interest from the date when he entered.upon the reference till the date of payment of the awarded amount. Suffice it to say, the arbitrator had before him bond which had been executed by Iqbal Singh and the sureties in favour of M/s Doshi Brothers-first party and the arbitrator was to give effect to every clause of the bond including Clauses 2, 3, 5 and 6. Harbans Lal Verma appeared before the arbitrator and made statement. His statement is complete answer to what the arbitrator has awarded. Arbitrator could award future interest also in view of the said clauses of the bond.
15. In State of Orissa v. B.N. Agarwalla,2 A.I.R. 1997 S.C. 925, the Hon’ble Supreme Court observed that the arbitrator has the jurisdiction to award pre-reference interest in cases which arose after the Interest Act, 1978 has become applicable. With regard to those cases pertaining to period prior to the applicability of the Interest Act, 1978 in the absence of any substantive law. Contract or usage, the arbitrator has no jurisdiction to award interest. For the period during which the arbitration proceedings were pending, the arbitrator has the power to award interest. The power of the arbitrator to award interest for the post award period also exists. In Secretary, Irrigation Department, Government of Orissa and Ors. v. G.C. Roy, A.I.R. 1992 S.C. 732, the Hon’ble Supreme Court observed that a person deprived of the use of money of which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name. It may be called interest, compensation or damages. This basic consideration is as valid for the period the dispute is pending before the arbitrator as it is for the period prior to the arbitrator entering upon the reference. This is the principle of Section 34 CPC and there is no reason or principle to hold otherwise in the case of arbitrator. An arbitrator is an alternative forum for resolution of disputes arising between the parties. If so, he must have the power to decide all the disputes or differences arising between the parties. If the arbitrator has no power to award interest pendente-lite, the party claiming it would have to approach the court for that purpose, even though he may have obtained satisfaction in respect of other claims from the arbitrator. This would lead to multiplicity of proceedings. An arbitrator is the creature of an agreement. It is open to the parties to confer upon him such powers and prescribe such procedure for him to follow, as they think fit, so long as they are not opposed to law. (The proviso to Section 41 and Section 3 of Arbitration Act illustrate this point). All the same the agreement must bee in conformity with law. The arbitrator must also act and make his award in accordance with the general law of the land and the agreement. Over the years, the English and Indian courts have acted on the assumption that where the agreement does not prohibit and a party to the reference makes a claim for interest, the arbitrator must have the power to award interest pendente-lite. Interest pendente-lite is not a matter of substantive law, like interest for the period anterior to reference (pre-reference period). For doing complete justice between the parties, such power has always been inferred.
16. In A.I.R. 1992 S.C. 732 (supra), A.I.R. 1988 S.C. 1520 (supra) was overruled. It is thus clear that the award of pre-reference interest, pendente-lite interest and future interest by the arbitrator was not bad in law. Arbitrator was justified in awarding pre-reference interest, pendente-lite interest and future interest keeping in view the principle that the respondent must be compensated for the deprivation for the use of money by the petitioner for the period during which money belonging to the respondent remains with the petitioner. If the claim had been before the civil court, the civil court could award pre-suit interest, pendente-lite interest and future interest. There is no good reason why the arbitrator should be held to have no power to award interest for this period when he is an alternative forum for resolution of disputes.
17. Learned counsel for the petitioner submitted that it was a time barred claim which the arbitrator should not have allowed. Suffice it to say, no such plea was taken in the objections which had been put in by the petitioner. It was submitted that the petitioner could not be allowed to take up this plea now as this plea is based on consideration of both law and fact. As has been observed earlier, limitation did not start in this case on 18.6.1972 but it started afterwards when interest for 2 months period had been paid as stated by Harbans Lal Verma in his statement before the arbitrator. Even otherwise, arbitrator could allow time barred claim. In Jagdish Chander Bhatia v. Lachhman Dass Bhatia, 1993(1) Recent Revenue Reports 438 it was observed by the Hon’ble Supreme Court that erroneous conclusion on a disputed issue is not misconduct on the part of the arbitrator. If assuming the arbitrator allowed time barred claim, that is not misconduct on his part because “limitation” was dependent upon fact also.
18. Learned counsel for the petitioner submitted that the arbitrator failed to make award within 4 months of the date when reference was made to him without seeking extension of time. Suffice it to say, arbitrator embarked upon the reference on 17.1.1977 and he gave-award on 18.4.1977. Application was made before him on 18.12.1976. Award was thus made within time.
19. Objections were filed to the award on 27.1.1.1978. Application was made by the respondent on 13.9.1978 under Section 14 read with Section 17 of the arbitration Act for getting the award filed in court for being made rule of the court. In the award there is mention that a copy of the award be delivered to the parties and notice of the same be given. There is, however, nothing to suggest that the arbitrator had given notice of the award to the petitioner, and therefore, petitioner could filed objections within 30 days of the date when notice of this application was given to him. Objections were thus filed within time.
20. For the reasons given above, I am of the opinion that this revision is without any merit. It is accordingly dismissed. order as to costs.