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Judgment
Arindam Sinha, J
Mr. Sahu, learned advocate appears on behalf of applicants and submits, the application is for review of order dated 5th May, 2022 dealing with his clients’ arbitration appeal. At the outset he submits, there was Special Leave Petition (SLP) preferred against said order to the Supreme Court. Said Court by order dated 13th February, 2023 dismissed the SLP.
He submits, the contract did not provide for interest. Referring to clause-(a) in sub-section (7) under section 31 in Arbitration and Conciliation Act, 1996 he submits, award of interest was illegal. He relies on judgment of the Supreme Court in Union of India v. Bright Power Projects (India) (P)(Ltd.), reported in (2015) 9 SCC 695, paragraphs 13 and 18. The paragraphs are reproduced below.
“13. 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, where the parties had agreed that no interest shall be payable, the Arbitral Tribunal cannot award interest.
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Section 31(7)(a) of the Act ought to have been read and interpreted by the Arbitral Tribunal before taking any decision with regard to awarding interest. The said Section, which has been reproduced hereinabove, gives more respect to the agreement entered into between the parties. If the parties to the agreement agree not to pay interest to each other, the Arbitral Tribunal has no right to award interest pendente lite.”
(emphasis supplied)
He submits further, it follows that where there was no agreement for payment of interest, future interest could also not be awarded. He refers to clause-(b) under section 31(7) to submit without prejudice, rate of future interest cannot be more than 2% above the current rate and current rate stands defined in clause-(b) under section 2 in Interest Act, 1978.
Mr. Kanungo, learned senior advocate appears on behalf of award holder and submits, this Court’s order dated 5th May, 2022, since had not been interfered with by the Supreme Court, the review is not maintainable.
Without prejudice he submits further, no ground regarding interest was taken in the challenge under section 34. There was also no ground in the appeal preferred under section 37. Moreover, present clause (b) in section 31(7) was inserted by amendment, to have retrospective effect from 23rd October, 2015. The award was passed earlier on 8th August, 2012. At that time the provision was for 18 %.
Keeping in mind submissions made on behalf of award holder, inter alia, that there was no ground taken in the challenge, Court has perused grounds taken in the appeal. By ground no.5 it was said there was absolutely no condition for payment of interest on the cost of steel. By ground no.8 applicant had said it was aggrieved, implying there could not be award of interest as award holder was not entitled to the claim itself. As such, the point urged now based on sub-section (7) in section 31 appears not to have been taken and, therefore, not urged in the reference, challenge thereafter and appeal.
Nevertheless, applicant has relied on Bright Power Projects (supra). Relied upon paragraphs 13 and 18 stand reproduced above.
Paragraph 9 is reproduced below.
“9. 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.”
(emphasis supplied)
The judgment is of no aid to applicant since, in the case before the Supreme Court there was clear agreement between the parties regarding no interest being payable. No such agreement clause could be brought to notice in applicants’ case. Therefore, it was not otherwise agreed to prevent the arbitrator from granting interest.
For reasons aforesaid, no ground for review of said order dated 5th May, 2022 has been made out. The application is dismissed.
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