Case Note & Summary
The Petitioner, IMC Limited (formerly United Storage & Tank Terminals Ltd.), filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, seeking modification of an arbitral award dated 23rd February 2011. The dispute arose from an agreement dated 4th December 1996 between the Petitioner and the Respondent, INEOS ABS (India) Limited (formerly ABS Industries Limited and Bayer ABS Limited). The Arbitral Tribunal had allowed certain claims in favor of the Petitioner but awarded interest at 10% per annum from the date of the statement of claim until payment, whereas the contract provided for interest at 24% per annum on the principal sum. Additionally, the Tribunal awarded a sum of Rs.34,12,315/- without interest, despite a contractual clause providing for interest at 22% per annum. The Petitioner contended that the award was contrary to the terms of the contract and that the Tribunal failed to give reasons for rejecting the claim for interest. The Respondent argued that the Tribunal had discretion in awarding interest and that the petition was not maintainable under Section 34. The Court noted that the Respondent had filed a separate petition (Arbitration Petition No. 619 of 2011) challenging the same award, which was rejected, and an appeal (Appeal No. 610 of 2011) was pending. The Court held that the Arbitral Tribunal has discretion to award interest and the rate and period are within its domain. The Court found no ground under Section 34 to modify the award and dismissed the petition.
Headnote
A) Arbitration - Interest Award - Section 34 of Arbitration and Conciliation Act, 1996 - Modification of Award - Petitioner sought modification of arbitral award to grant interest at contractual rate of 24% per annum from due date instead of 10% per annum from date of statement of claim, and interest on awarded sum of Rs.34,12,315/- - Court held that the Arbitral Tribunal has discretion to award interest and the rate and period are within its domain; no ground under Section 34 to modify the award - Petition dismissed (Paras 1-5).
Issue of Consideration
Whether the Arbitral Tribunal erred in awarding interest at 10% per annum from the date of statement of claim instead of 24% per annum from the due date as per contract, and whether the Tribunal failed to award interest on the sum of Rs.34,12,315/- despite a contractual clause providing for interest.
Final Decision
The Court dismissed the Arbitration Petition No. 170 of 2012, holding that the Arbitral Tribunal has discretion to award interest and the rate and period are within its domain. No ground under Section 34 of the Arbitration and Conciliation Act, 1996 was made out to modify the award.
Law Points
- Arbitral Tribunal's discretion on interest rate and period
- Section 34 of Arbitration and Conciliation Act
- 1996
- modification of award
- contractual interest clause
Case Details
2012 LawText (BOM) (09) 53
Arbitration Petition No. 170 of 2012
Ms. Fereshete Sethna, Ms. Anuradha Dutt, Mr. Ram Kakkar i/b Duttmenon Dunmorrsett for Petitioner; Mr. Pradip Sancheti (Senior Counsel), Mr. Chakrapani Misra, Mr. Ameya Gokhale, Ms. Nayantara Sanyal i/b Khaitan & Co. for Respondent
IMC Limited (erstwhile United Storage & Tank Terminals Ltd.)
INEOS ABS (India) Limited (erstwhile ABS Industries Limited & Bayer ABS Limited)
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Nature of Litigation
Petition under Section 34 of the Arbitration and Conciliation Act, 1996 seeking modification of an arbitral award regarding interest.
Remedy Sought
Petitioner sought modification of the award to grant interest at contractual rates (24% and 22% per annum) from the due date instead of 10% per annum from the date of statement of claim, and to award interest on the sum of Rs.34,12,315/-.
Filing Reason
The Arbitral Tribunal awarded interest at 10% per annum from the date of statement of claim instead of 24% per annum from the due date as per contract, and did not award interest on the sum of Rs.34,12,315/- despite a contractual clause providing for interest.
Previous Decisions
The Respondent had filed Arbitration Petition No. 619 of 2011 challenging the same award, which was rejected on 5th August 2011. An appeal (Appeal No. 610 of 2011) was admitted on 22nd February 2012, but the award was not stayed.
Issues
Whether the Arbitral Tribunal erred in awarding interest at 10% per annum from the date of statement of claim instead of 24% per annum from the due date as per contract?
Whether the Arbitral Tribunal erred in not awarding interest on the sum of Rs.34,12,315/- despite a contractual clause providing for interest?
Submissions/Arguments
Petitioner submitted that under Clause (3) of the agreement, it was entitled to recover interest at 24% per annum on the principal sum, but the Tribunal awarded only 10% per annum from the date of statement of claim. Also, the sum of Rs.34,12,315/- awarded in paragraph (44) was not awarded with interest despite Clause (11) providing for 22% per annum. The award is contrary to contract and unreasoned.
Respondent argued that the Arbitral Tribunal has discretion to award interest and the rate and period are within its domain. The petition under Section 34 does not permit modification of the award on this ground.
Ratio Decidendi
The Arbitral Tribunal has discretion to award interest, and the rate and period of interest are within its domain. A petition under Section 34 of the Arbitration and Conciliation Act, 1996 cannot be used to modify an award on the ground that the Tribunal did not award interest at the contractual rate or from the due date, as the Tribunal's discretion is not subject to interference unless it falls within the limited grounds under Section 34.
Judgment Excerpts
By this Petition under Section 34 of the Arbitration and Conciliation Act, 1996 (for short ‘The Arbitration Act, 1996’), the Petitioner (Original Claimant) seeks modification of the Award dated 23rd February, 2011 to the extent that the interest as claimed by the Petitioner is not awarded by the Arbitral Tribunal.
The Learned Counsel appearing for the Petitioner submits as under :- (a) Under Clause (3) of the Agreement dated 4th December, 1996 though the Petitioner was entitled to recover interest at the rate of 24% per annum on the principal sum, the Arbitral Tribunal in paragraph (42) of the impugned order has awarded interest at the rate of 10% per annum from the date of the statement of claim till payment and not from the date when the amount was due.
Procedural History
The matter was referred to arbitration under an arbitration agreement. The Arbitral Tribunal passed an award on 23rd February 2011. The Petitioner filed Arbitration Petition No. 170 of 2012 under Section 34 of the Arbitration and Conciliation Act, 1996 seeking modification of the award regarding interest. The Respondent had filed Arbitration Petition No. 619 of 2011 challenging the same award, which was rejected on 5th August 2011. An appeal (Appeal No. 610 of 2011) was admitted on 22nd February 2012, but the award was not stayed. The present petition was heard and dismissed on 24th September 2012.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 34
