State Of Orissa vs Sudhakar Das (Dead) By Lrs

The Supreme Court held that an Arbitrator cannot award escalation charges in the absence of an escalation clause in the arbitration agreement, rendering that part of the award unsustainable. However, the Court affirmed the Arbitrator's authority to grant pendente lite interest, referencing Secretary, Irrigation Department, Government of Orissa & Others v. G.C. Roy, [1992] 1 SCC 508, which settled the issue in favor of the claimant. The Court also directed that pre-reference interest can be executed only upon the respondent providing a bank guarantee, ensuring the State's rights are protected pending a related Constitution Bench decision.