Supreme Court modifies interest award, restores rates set by arbitrator. Each party bears own costs.

The Supreme Court allowed the appeal in part and modified the High Court's judgment by affirming the decision to set aside the award of interest up to the date of the award. The Court set aside the High Court's reduction of the interest rate to 6% per annum from the date of the award and restored the interest rates as awarded by the Arbitrator from the date of the award till the date of payment. Each party was directed to bear their respective costs.

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Issues Involved:
1. Whether the Arbitrator can award interest for pre-reference period and pendente lite when the contract prohibits the employer from entertaining any claim for interest.
2. Interpretation and applicability of clause G 1.09 of the contract.
3. Applicability of Section 31(7) of the Arbitration and Conciliation Act, 1996.
4. Validity of the High Court's judgment reducing the interest rate from the date of the award.

Issue-wise Detailed Analysis:

1. Arbitrator's Power to Award Interest Despite Contractual Prohibition
The primary issue in this appeal is whether the Arbitrator can award interest for the pre-reference period and pendente lite when the contract explicitly prohibits the employer from entertaining any claim for interest. The contract clause in question, G 1.09, states that no claim for interest or damages will be entertained by the Government regarding any money or balance lying with the Government or due owing to any dispute, delay, or other reasons.

2. Interpretation and Applicability of Clause G 1.09
Clause G 1.09 of the contract explicitly bars the payment of interest on any amount due to disputes, delays, or other issues. The Supreme Court analyzed this clause and concluded that it is comprehensive and bars interest under any head in clear and categorical terms. Therefore, the Arbitrator could not award interest up to the date of the award, as the agreement between the parties barred the payment of interest. This bar operates during both the pre-reference period and the pendente lite period.

3. Applicability of Section 31(7) of the Arbitration and Conciliation Act, 1996
Section 31(7) of the Arbitration and Conciliation Act, 1996, deals with the Arbitrator's power to award interest. Subsection (7)(a) allows the Arbitrator to award interest from the date on which the cause of action arose to the date of the award unless otherwise agreed by the parties. Subsection (7)(b) provides that the awarded sum shall carry interest at 18% per annum from the date of the award to the date of payment unless otherwise directed by the award. The Supreme Court noted that the contractual prohibition on interest applies only until the date of the award and not thereafter. Therefore, the Arbitrator's award of interest at different rates for different amounts from the date of the award is valid and not contrary to Section 31(7)(b) of the Act.

4. Validity of the High Court's Judgment Reducing the Interest Rate
The High Court had set aside the award of interest up to the date of the award and reduced the interest rate from the date of the award to 6% per annum. The Supreme Court affirmed the High Court's decision to set aside the award of interest up to the date of the award, citing the contractual prohibition. However, the Supreme Court found that the High Court did not provide any reasons for reducing the interest rate to 6% per annum from the date of the award. The Supreme Court held that unless the award of interest is found to be unwarranted for specific reasons, the court should not alter the rate of interest awarded by the Arbitrator. Therefore, the Supreme Court set aside the High Court's reduction of the interest rate and restored the interest rates as awarded by the Arbitrator.

Conclusion
The Supreme Court allowed the appeal in part and modified the High Court's judgment as follows:
- Affirmed the High Court's decision to set aside the award of interest up to the date of the award.
- Set aside the High Court's reduction of the interest rate to 6% per annum from the date of the award.
- Restored the interest rates as awarded by the Arbitrator from the date of the award till the date of payment.
- Directed that each party bear their respective costs.

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