Case Note & Summary
The dispute arose from a construction contract between the appellant and the State of U.P., with work completed in 1996 and subsequent claims leading to arbitration in 1997. The Arbitrator awarded a total of Rs.24,18,586/- along with varying interest rates on different components. The civil court upheld the award, but the High Court partially set it aside, ruling that the contract's clause G1.09 barred interest awards. The appellant challenged this decision, arguing that the Arbitrator had the authority to award interest despite the contractual prohibition. The Supreme Court analyzed the contract's language and relevant provisions of the Arbitration and Conciliation Act, 1996, concluding that the Arbitrator could not award interest for the pre-reference period but could for the period post-award. The court affirmed the High Court's decision on pre-award interest but reinstated the Arbitrator's interest rates post-award, finding the High Court's reduction to 6% per annum unjustified. The appeal was allowed in part, modifying the High Court's judgment accordingly.
Headnote
A) Arbitration - Authority of Arbitrator - Award of Interest - Arbitration and Conciliation Act, 1996, Section 31(7) - The court clarified that the Arbitrator could not award interest for the pre-reference period due to an express bar in the contract, but could award interest from the date of award to the date of payment as per the award terms. Held that the High Court's reduction of interest was not justified (Paras 18-19).
Issue of Consideration
Whether the Arbitrator can award interest for pre-reference period and pendente lite when the contract prohibits the employer from entertaining any claim for interest.
Final Decision
The Supreme Court allowed the appeal in part, affirming the High Court's decision on the award of interest up to the date of the award but reinstating the Arbitrator's interest rates from the date of award to the date of payment as per the original award.
Law Points
- Arbitration
- Interest
- Pre-reference period
- Pendente lite
- Contractual prohibition
