Skip to main content

Arbitrator has to abide by the contract while dealing with pendente lite interest

In GARG BUILDERS vs BHARAT HEAVY ELECTRICALS LIMITED, appeal was filed against Order of the Division Bench of the High Court of Delhi, resulting in denial of pendente lite interest on the award amount to the appellant.

The appellant as project contractors had a dispute with the Respondents which was placed before the Arbitrator. Learned Arbitrator after hearing the contentions of both the parties concluded that there is no prohibition in the contract about payment of interest for the pre­suit, pendente lite and future period. The Respondents appeal before the Delhi High Court that the learned Arbitrator being creature of the arbitration agreement travelled beyond the terms of the contract in awarding pendente lite interest on the award amount as the same was expressly barred in terms of the contract. The single judge concluded that As stated earlier, in terms of Section 31(7)(a) of the Act, the power of the arbitral tribunal to award pre award interest is contingent to the parties not agreeing to the contrary. Pre­award interest includes both pre­ reference interest as well as pendente lite interest. Thus, the conclusion of the Arbitrator that award of pendente lite interest was not prescribed by clause 17 of the Agreement is not sustainable. Division Bench agreed.

On appeal, the Supreme Court held that the law relating to award of pendente lite interest by Arbitrator under the 1996 Act is no longer res integra. The provisions of the 1996 Act under Section 31(7)(a), give paramount importance to the contract entered into between the parties and categorically restricts the power of an arbitrator to award pre­reference and pendente lite interest when the parties themselves have agreed to the contrary. If the contract prohibits pre­reference and pendente lite interest, the arbitrator cannot award interest for the said period.

It is pertinent to note that interest payments are governed in general by the Interest Act, 1978 in addition to the specific statutes that govern an impugned matter. Section 2 (a) of the Interest Act defines a “Court” which includes both a Tribunal and an Arbitrator. In turn, Section 3 allows a “Court” to grant interest at prevailing interest rates in various cases. The provisions of Section 3 (3) of the Interest Act, 1978 explicitly allows the parties to waive their claim to an interest by virtue of an agreement. Section 3(3)(a)(ii) states that the Interest Act will not apply to situations where the payment of interest is “barred by virtue of an express agreement”.

Comments

Post a Comment

Most viewed this month

The recovery of vehicles by the financier not an offence - SC

Special Leave Petition (Crl.) No. 8907  of 2009 Anup Sarmah (Petitioner) Vs Bhola Nath Sharma & Ors.(Respondents) The petitioner submitted that  respondents-financer had forcibly taken away the vehicle financed by them and  illegally deprived the petitioner from its lawful possession  and  thus,  committed  a crime. The complaint filed by the petitioner had been  entertained  by  the Judicial Magistrate (Ist Class), Gauhati (Assam) in Complaint Case  No.  608 of 2009, even directing the interim custody of the vehicle (Maruti  Zen)  be given to the petitioner vide order dated  17.3.2009.  The respondent on approaching the Guwahati High  Court against this order, the hon'ble court squashed the criminal  proceedings  pending   before  the  learned Magistrate. After hearing both sides, the Hon'ble Supreme Court decided on 30th...
7 comments
Read more

When debt is bona fide disputed and the defence is a substantial one, the court will not wind up the company

In SHITAL FIBERS LTD.  vs  INDIAN ACRYLICS LIMITED, as per the respondent, appellant had made a payment of Rs.61,83,218/­. However, there was an outstanding balance of Rs.8,92,723/­ as on 28.7.2008. Since despite repeated requests, balance amount was not paid, the respondent issued a statutory notice to the appellant. The same was duly responded to. As the payment was not made despite notice being duly served on the appellant, the respondent filed the aforesaid Company Petition seeking winding up of the present appellant for its inability to pay admitted debts. The learned Company Judge vide order dated 28.9.2015 admitted the Company Petition. However, while doing so, the learned Company Judge observed, that since the appellant was an on­going concern, an opportunity should be granted to it to settle the accounts with the respondent by 31.12.2015. Only in case of failure of the settlement, the citation was directed to be published. On appeal, the Division Bench of the High Cou...
Post a Comment
Read more

Abusing in-laws a ground for divorce: SC

Abusing in-laws and not allowing them to reside in the matrimonial home by a woman amounts to cruelty to her spouse, ground enough for grant of divorce, the Supreme Court has ruled while allowing an NRI's plea for legal separation from his wife. A bench of Justices Vikaramajit Sen and A M Sapre said such incidents could not be termed as "wear and tear" of family life as held by Madras High Court which had said that a couple must be prepared to face such situations in matrimonial relationship. The NRI had filed a divorce petition alleging that his wife was abusive to his family members and did not allow his parents and siblings to stay in his house when they visited the US. Referring to an incident, the husband told the court that his wife had once locked him and his sister out of the house and abused them saying they belonged to a 'prostitute family'. She refused to allow her sister-in-law to enter the house and even lodged a police complaint against her hu...
4 comments
Read more