Case Note & Summary
The appellant, M/s. Qureshi Brothers, a firm engaged in contracting, was awarded compensation by an Arbitrator in an award dated 31.05.1999, which included interest at the rate of 18% per annum. The respondent, the State of Maharashtra, challenged the award before the trial Court, which upheld the award on merits but reduced the interest rate from 18% per annum to 6% per annum from the date of filing of the suit till realization. The appellant appealed against this reduction. The High Court noted that the trial Court itself observed in paragraph 21 that the arbitrator's award on interest could not be set aside, and in paragraph 23 that the decision on interest was not erroneous. The High Court held that the transaction was commercial, and the delay in compensating losses should attract the commercial rate of interest. There was no justification for reducing the interest merely because the arbitrator had awarded a huge amount of interest. Accordingly, the appeal was allowed, the trial Court's order reducing interest was set aside, and the appellant was held entitled to interest at the rate awarded by the Arbitrator. No order as to costs.
Headnote
A) Arbitration - Interest Rate - Commercial Transaction - The trial Court reduced the arbitrator's award of 18% interest to 6% per annum from the date of suit till realization, despite finding the award not erroneous. The High Court held that in a commercial transaction, delay in compensating losses attracts commercial rate of interest, and the trial Court had no reason to reduce it. The order reducing interest was set aside and the arbitrator's rate of 18% per annum was restored. (Paras 1-4)
Issue of Consideration
Whether the trial Court was right in reducing the rate of interest awarded by the Arbitrator from 18% per annum to 6% per annum.
Final Decision
Appeal allowed. The order of the trial Court reducing the rate of interest from 18% per annum to 6% per annum is set aside. The appellant-claimant shall be entitled to interest at the rate awarded by the Arbitrator in the award dated 31.05.1999. No order as to costs.
Law Points
- Arbitral award interest rate
- commercial transaction interest
- court's power to reduce interest
- interference with arbitrator's discretion
Case Details
2016 LawText (BOM) (02) 107
First Appeal No. 174 of 2002
Shri Abhijeet Khare for Appellant; None for respondent
M/s. Qureshi Brothers, Akhada Balapur, Taluka Kalamnuri, District Hingoli, Firm, through its G.P.A. Holder Abdul Latif S/o. Abdul Rahim
The State of Maharashtra, Irrigation Department, represented by the Executive Engineer, Upper Painganga Project, Division No. 2 at Umarkhed, Tq. Umarkhed, District Yavatmal
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Nature of Litigation
Appeal against trial Court's reduction of interest rate awarded by Arbitrator in a commercial dispute.
Remedy Sought
Appellant sought restoration of 18% per annum interest awarded by Arbitrator.
Filing Reason
Trial Court reduced interest from 18% to 6% per annum despite upholding the award.
Previous Decisions
Arbitrator awarded 18% interest per annum; trial Court reduced it to 6% per annum from date of suit till realization.
Issues
Whether the trial Court was right in reducing the rate of interest awarded by the Arbitrator from 18% per annum to 6% per annum.
Submissions/Arguments
Appellant argued that the transaction was commercial and the trial Court had no reason to reduce the interest rate as it had upheld the award on merits.
Ratio Decidendi
In a commercial transaction, delay in compensating losses attracts commercial rate of interest. The trial Court, having found the arbitrator's award on interest not erroneous, had no reason to reduce the interest from 18% to 6% per annum.
Judgment Excerpts
In paragraph 21 of the judgment, the trial Court has clearly observed that, 'I find that the Arbitrator's award even on the point of interest cannot be set aside'.
In paragraph 23, it is observed that the decision of the Arbitrator about the interest of compensation is not erroneous.
Undisputedly, it was a commercial transaction and the delay in compensating losses shall attract the commercial rate of interest which could not have been denied for the reason that the Arbitrator has awarded huge amount of interest.
Procedural History
Arbitrator passed award on 31.05.1999 granting 18% interest. The award was challenged before the trial Court, which upheld the award but reduced interest to 6% per annum from date of suit till realization. The appellant filed First Appeal No. 174 of 2002 before the Bombay High Court against the reduction of interest.
