S. K. SEN, J. ( 1 ) THE Court :this is an application for setting aside the award dated 28th October, 1993 made and published by Shri Dharampal and Shri Hamza, Joint Arbitrators. It has been contended on behalf of the petitioner that the said award is based on proposition of law which is unsound. For proper appreciation of question involved it is necessary to mention the facts in short compass. ( 2 ) PURSUANT to an invitation for tender issued by the South-Eastern Railway for execution of left over work of earth work in formation, Pway linking including supplying, spreading and packing stone ballast, regarding of track, construction of signal cabins, pucca drain, barbed wire forcing, raising platform, walls ramp in connection with extension of loops to standard length 286 M at Garbeta Station on Adra-Nimpura Station, the petitioner submitted tender for the said work. ( 3 ) THE said tender of the petitioner was accepted by the respondent by its letter dated 5th October, 1990 whereby the petitioner was asked to complete the said work within four months from the date of issue of acceptance letter. ( 4 ) IT has been alleged by the petitioner that he made every effort to complete the said work within period stipulated in the agreement that said work could not be completed within the contractual period, due to default on the part of the respondent. The said alleged default on the part of the respondent as mentioned in paragraph 2 of the petition are inter alia as follows:-" (I) Non-delivery of all the works and work site including the works for loops. (ii) Work orders not issued in time and the same were issued just one day prior to the issue of 48 hours notice. (iii) Failure on the part of the Railway to issue departmental materials in time. ( 5 ) IT has further been alleged in the petition that with hardship and difficulties, the petitioner executed the work worth more than Rs. 4 lacs but the bill for the work done, was not paid on the ground that (i) estimate for work has not been approved by the highest authority and (b) nonexecution of the agreement. ( 5 ) IT has further been alleged in the petition that with hardship and difficulties, the petitioner executed the work worth more than Rs. 4 lacs but the bill for the work done, was not paid on the ground that (i) estimate for work has not been approved by the highest authority and (b) nonexecution of the agreement. ( 6 ) IT has further been alleged that on or about 3rd July, 1991 the railway authorities issued 7 days' notice requesting the petitioner to mobilise machinery as also to make out programme to complete the work in the target date. The petitioner gave a reply to the said letter dated 8th July, 1991 and explained the difficulties faced by the petitioner. Another letter was issued on about 19th July, 1991 by the Railways authority giving the petitioner 48 hours notice to mobilise the machinery as also to complete the work within the date mentioned. ( 7 ) BY letter dated 3rd October, 1991 the petitioner objected to the notice which according to the petitioner was illegal and wrong. The petitioner, however, agreed to execute the balance work provided the Railways would withdraw the said notice. On or about 6th November, 1991 the said Railway wrongfully and illegally rescinded the said contract and forfeited the security deposit. It has been submitted that the Railway authority has wrongfully and illegally terminated the contract and in consequence of delay in the execution of the said work due to lapses and negligence of the Railway, the petitioner suffered huge financial loss. ( 8 ) DISPUTES and differences arose out of the said circumstances between the parties. Clauses 63 and 64 of the agreement provide for settlement of such disputes between the parties arising out of or in relation to the said agreement by arbitration. The petitioner by letter addressed to the General Manager of the Railway requested the said General Manager to refer all disputes and/or claims arising out of and in course of execution of the work to arbitration in terms of the said agreement. The General Manager of the Railway however did not take any action in the matter of appointment of Arbitration. In the circumstances, the petitioner filed a Special Suit being Suit No. 52 of 1992 in this court. The General Manager of the Railway however did not take any action in the matter of appointment of Arbitration. In the circumstances, the petitioner filed a Special Suit being Suit No. 52 of 1992 in this court. The petitioner by an order dated 3rd June, 1992 passed by this court, the said disputes were referred to arbitration in terms of the arbitration agreement contained in the said contract. ( 9 ) PURSUANT to the said order dated 3rd June, 1992 the General Manager of the South Eastern Railway appointed Sri Dharampal. Deputy Chief Engineer (Bridge Line), South Eastern Railway and Sri C. Hamza Dy. FA and CA (W/s) KGP, S. E. Rly. as Joint Arbitrator to adjudicate upon the disputes and differences that have arisen between the parties. ( 10 ) THE statements of claim, counter statement of facts and rejoinder were filed by the parties before the Joint Arbitrators. The Joint Arbitrators held several meetings documents and papers were filed before the said Joint Arbitrator. ( 11 ) ON or about 28th October, 1993, a reasoned award was passed by the said Joint Arbitrators by giving brief reasons for making the said award. A copy of the said Award has been annexed with the petition and marked 'a'. ( 12 ) ON or about 7th June, 1994 the petitioner was served with a copy of Notice under section 14 (2) of the Arbitration Act, 1940 dated 13th June 1994. It appears from the said notice that the petitioner was intimated that the said Award was filed in this court on 9th June, 1994 and this court would pronounce judgment on 22nd July, 1994. The petitioner being aggrieved with the said Award filed this application. ( 13 ) THE petitioner not having been satisfied with the legally of the said Award has challenged the same in this application. The Award is a reasoned Award. The petitioner has challenged the rejection of the claim with regard to the claim Nos. 6 and 7. Claim No. 6 is a claim for Rs. 59,250/- on account of loss suffered due to establishment continued more period and remained idle for rent of railway materials, handing over site etc. The particulars have been mentioned with regard to the said claim. Claim No. 7 is a claim for Rs. 6 and 7. Claim No. 6 is a claim for Rs. 59,250/- on account of loss suffered due to establishment continued more period and remained idle for rent of railway materials, handing over site etc. The particulars have been mentioned with regard to the said claim. Claim No. 7 is a claim for Rs. 86,300/- on account of loss suffered due to labour, skilled staff remained idle for non-handing full site approved drawing, not allowed for spreading of ballast and moorum, non-payment of account bill non-availability of P. Wavmaterials on linking etc. ( 14 ) BOTH the said claims were rejected on account of extension of time being granted as per the claimant's request. It has been submitted by learned advocate for the petitioner that the aforesaid reason mentioned in the Award for rejection of claim Nos. 6 and 7 is contrary to the principle laid down by the Supreme Court in the case of P. M. Paul v. Union of India reported in AIR 1989 SC 1034 . The further contention of the learned advocate for the petitioner is that in the said decision the contention of Union of India was that in the absence of any escalation clause it is not permissible for the Arbitrator to grant any escalation price as sought by the petitioner but the Arbitrator awarded 20% compensation which was not proper. The argument of Union of India was that if the work could not be completed within the specific time, he had right to ask for extension of time and difference of price but could not claim compensation or escalation, since the contention of the petitioner was rejected. Learned advocate for the petitioner referred to the observation of the Supreme Court is the aforesaid decision which is as follows :-"once it was found that the Arbitrator had jurisdiction to find that there was delay in execution of the contract due to the conduct of the respondent, the respondent was liable for the consequence of delay, namely, increase in prices. " ( 15 ) THE learned advocate has submitted referring to the said observation that the Arbitrator should have considered the effect of delay namely what was the increase in price and what was the difference in price. " ( 15 ) THE learned advocate has submitted referring to the said observation that the Arbitrator should have considered the effect of delay namely what was the increase in price and what was the difference in price. The reason given by the Arbitrator for disallowing the compensation according to the learned advocate for the petitioner, is not correct and contrary to the principle land down in the Supreme Court's decision. The learned advocate committed an error in law on the basis of the record and as such the same Is not amenable to Interference by the court. In the aforesaid decision it was held by the Supreme Court that "it was found that the Arbitrator had jurisdiction to find that there was delay in execution of the contract due to the conduct of the respondent. the respondent was liable for the consequence of delay, namely, increase in price. " The Arbitrator had jurisdiction to go into that question and in fact he has gone into the said question. Mere act that the time was extended therefore was not a ground for not taking into account the escalation in price. Reasoning of the Arbitrator in the instant case since time has been extended al the request of the respondent that does not, in my view, take away the jurisdiction of the Arbitrator to consider the question of escalation in price if the default or delay Is on the part of the respondent. The Arbitrator ought to have considered the question due to the lapse on the part of the respondent, Union of India, and what is the difference in price and/or escalation in price. ( 16 ) IT was incumbent upon the Arbitrator to take into account the aforesaid factors and to make his finding thereon merely because the time has been granted at the instance of the petitioner that does not prevent the Arbitrator from considering this aspect of the matter. The Supreme Court in the case of Trustees of the Port of Madras v. Engineering Constructions Corporation Limited reported in AIR 1995 SC 2423 held that "in case of a reasoned award the court can interfere if the award is based upon a proposition of law which is unsound in law. " ( 17 ) WITH regard to Claim No. 8 which was for Rs. 36,000 due to increased cost of materials, wages of labour, transport charges etc. " ( 17 ) WITH regard to Claim No. 8 which was for Rs. 36,000 due to increased cost of materials, wages of labour, transport charges etc. which was rejected by the Joint Arbitrators was also assailed fn this application. The reason for such rejection as appears from the award is as follows: "claim is rejected as there is no provision of escalation in the contract between the parties. " The said reasoning as has been submitted by the learned advocate for the petitioner is contrary to the well settled principles of law. In support of his contention learned advocate for the petitioner has relied upon the judgment and decision in the case of Tarapore and Company v. Cochin Shipyard Ltd. reported in AIR 1984 SC 1072 . He has also submitted that unless there is a specific prohibition against price escalation, the Arbitrator has power to allow escalation of price. ( 18 ) IN support of his contention he has also relied upon the judgment and decision in the case of Continental Construction Go. Ltd v. State of Madhya Pradesh reported in AIR 1988 SC 1166 . In my view, the argument advanced on behalf of the petitioner cannot be said to be without any substance. ( 19 ) IN the case of Tarapore and Company (supra) reported in AIR 1984 SC 1072 it was held by the Supreme Court:-"when an agreement is predicated upon an agreed fact situation, if the letter ceased to exist, the agreement to that extent becomes irrelevant or otiose. The rates payable to the contractor were related to the investment of Rs. 2 crores under this head by the contractor. Once the rates become irrelevant on account of circumstances beyond the control of the contractor. It was open to the contractor to make a claim for compensation. " ( 20 ) IN the case of Continental Construction (supra) reported in AIR 1988 SC 1166 it was held by the Supreme Court as follows:"it has to be borne in mind that in the instant case there are specific clauses referred to hereinbefore which barred consideration of extra claims in the event of price escalation. That was not so in Tarapore Company's case. That made all the difference. That was not so in Tarapore Company's case. That made all the difference. " ( 21 ) IN the instant case the Joint Arbitrators did not hold that there is clause in the agreement which barred consideration of extra claims in the event of price escalation, but rejected the claim on the ground that "there is no provision of escalation in the contract. " The said reasoning, in my view, appears to be contrary to the principle laid down by the Supreme Court. ( 22 ) WITH regard to the petitioner's claim for interest as contained in Claim No. 10, the same was rejected by the Joint Arbitrators for the reason as follows: "claim is not admitted since it is not permissible as per law. " ( 23 ) IT is well settled if the agreement between the parties does not prohibit grant of Interest and where a party claims interest and that dispute is referred to the Arbitrator, he shall have the power to award interest pendente lite. ( 24 ) IN this connection the judgment and decision in the case of Secretary. Irrigation Department, Gout of Orissa and Others v. G. C. Roy reported in AIR 1992 SC 732 may be taken note of ( 25 ) IN the aforesaid decision the Supreme Court held as follows:"where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (along with the claim for principal amount or independently) is referred to the Arbitrator, he shall have the power to award interest pendente lite. The Supreme Court further observed : "it is a matter within his discretion to be exercised to the light of all the facts and circumstances of the case, keeping the ends of justice in view. " ( 26 ) THE discretion is left to the Arbitrator, the Arbitrator is vested with the discretion. The award of interest however has to be exercised judicially, and not arbitrarily capriciously or unreasonably. ( 27 ) IN the instant case, the Joint Arbitrators did not even exercise their discretion, but illegally rejected the claim for interest on the ground that interest "is not permissible as per law", which is contrary to the principle laid down by the Supreme Court. ( 27 ) IN the instant case, the Joint Arbitrators did not even exercise their discretion, but illegally rejected the claim for interest on the ground that interest "is not permissible as per law", which is contrary to the principle laid down by the Supreme Court. ( 28 ) JUDGMENT and decision in the case of Santosh Singh Arora v. Union of India reported in AIR 1992 SC 1809 relied upon by the learned advocate for the petitioner may also be taken note of. In the aforesaid decision the Supreme Court held in para 8 at page 1812 as follows :"we are of the opinion that the appellant is entitled to be compensated (by way of interest) for denial of his legitimate dues during the period for December 18, 1968 (the date of which Arbitrator was appointed) fill the date of the award of the learned Arbitrator. The appellant is also entitled to be compensated for the costs incurred in prosecuting his remedies before the Arbitrators as well as in the court below and before this court. ( 29 ) JUDGMENT and decision in the case of Board of Trustees for the port of Calcutta v. Engineer-De-Space Age reported in (1996) 1 SCC 516 relied upon by the learned advocate for the petitioner may also be taken note of. In the aforesaid decision it was held by the Supreme Court as follows:"a person who has a legitimate claim is entitled to payment in reasonable time and if the payment has been delayed beyond reasonable time, he can legitimately claim to be compensated for the delay whatever nomenclature one many give to his claim in that behalf, held that the Arbitrator has jurisdiction to decide the question regarding payment of Interest pendentelite. " ( 30 ) THE finding of the Arbitrator rejecting the claim on account of interest, therefore, is contrary to law and, accordingly, is an error which is liable to be set aside. For the reasons aforesaid, the Award made by the joint Arbitrators stands set aside. There will be no order as to costs. Award set asid.