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2015 (7) TMI 256 - SUPREME COURT

2015 (7) TMI 256 - SUPREME COURT - TMI - Validity of Arbitral award - whether the appellant is liable to pay interest to the respondent though there was a provision in the contract that no interest should be paid on the amount payable to the contractor - Held that:- Section 31(7) of the Act, by using the words "unless otherwise agreed by the parties", categorically specifies that the arbitrator is bound by the terms of the contract so far as award of interest from the date of cause of action to .....

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e to the Arbitral Tribunal till the date of the award. - We set aside the impugned judgment and the award so far as it pertains to payment of interest pendente lite and direct that no interest would be paid on the amount payable under the contract to the respondent from the date of the reference till the date of the award. - Impugned order is set aside - Decided in favour of Appellant. - CIVIL APPEAL NO. 2404 OF 2008 - Dated:- 2-7-2015 - ANIL R. DAVE, VIKRAMAJIT SEN & PINAKI CHANDRA GHOSE, J .....

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ch are relevant for the purpose of deciding the issue, in a nutshell, are as under. 2. The appellant and the respondent had entered into a contract whereby the respondent had to construct certain structures, which had been more particularly described in the agreement entered into by the parties on 20th January, 1997. 3. In the course of execution of the contract, a dispute had arisen between the appellant and the respondent contractor and as agreed by the parties, the dispute had been referred t .....

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is Court had considered the provisions of Section 29 of the Arbitration Act, 1940, which dealt with payment of interest pendente lite. After analyzing the scheme of the said Act, various earlier decisions and after considering the very same issue, namely, whether an arbitrator has power to award interest pendente lite and, if so, on what principles, this Court had observed that the Arbitral Tribunal had power to award interest. 5. Being aggrieved by the Award and especially because of interest b .....

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97, delivered in the case of Union of India v. Anand Builders was relied upon and except for stating the above reason, no other reason was recorded by the High Court while dismissing the appeal. 7. According to the learned counsel appearing for the appellant, it was not open to the Arbitral Tribunal to award any interest to the contractor in view of a specific condition incorporated in the contract entered into between the parties that no interest would be paid to the contractor. 8. On the other .....

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ll the date of the award. 10. Clause 13 (3) of the contract entered into between the parties reads as under: 13(3). No interest will be payable upon the earnest money and the security deposit or amounts payable to the contractor under the contract, but Government Securities deposited in terms of sub-clause(1) of this clause will be repayable with interest accrued thereon. 11. Thus, it had been specifically understood between the parties that no interest was to be paid on the earnest money, secur .....

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aid thereon. 12. When parties to the contract had agreed to the fact that interest would not be awarded on the amount payable to the contractor under the contract, in our opinion, they were bound by their understanding. Having once agreed that the contractor would not claim any interest on the amount to be paid under the contract, he could not have claimed interest either before a civil court or before an Arbitral Tribunal. 13. Section 31(7) of the Arbitration and Conciliation Act, 1996 (hereina .....

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, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made. 14. Section 31(7) of the Act, by using the words "unless otherwise agreed by the parties", categorically specifies that the arbitrator is bound by the terms of the contract so far as award of interest from the date of cause of action to date of the award is concerned. Therefore, .....

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we are of the view that the Arbitral Tribunal was not justified in awarding interest from the date of entering upon the reference to the Arbitral Tribunal till the date of the award. 16. The Arbitral Tribunal had mainly relied upon the judgment delivered by this Court in G C Ro y s case (supra). In the said case, the situation was different. The contract between the parties did not contain any condition that interest would not be paid. In para 44 of the said judgment, it has been observed as und .....

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s an implied term of the agreement between the parties and therefore when the parties refer all their disputes - or refer the dispute as to interest as such - to the arbitrator, he shall have the power to award interest. This does not mean that in every case the arbitrator should necessarily award interest pendente lite. It is a matter within his discretion to be exercised in the light of all the facts and circumstances of the case, keeping the ends of justice in view. 17. Relying upon the afore .....

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