Arbitral interest on delayed-payment claims upheld where the claim crystallised into principal and limitation lacked foundation.

An arbitral award of interest on delayed-payment claims was upheld because the claim had crystallised as part of the principal amount, so it was not treated as a bare claim for interest upon interest; Section 3 of the Interest Act was therefore held irrelevant. The limitation objection also failed because it was not properly pleaded before the arbitrators and lacked the necessary factual foundation in the pleadings or evidence, particularly in the context of running bills and staggered payments. The award and decree were sustained, and the appeal was dismissed without costs.

---

---

Issues: (i) Whether interest could be awarded on a claim that itself included interest for delayed payment. (ii) Whether the claim for interest on delayed payment was barred by limitation.

Issue (i): Whether interest could be awarded on a claim that itself included interest for delayed payment.

Analysis: The power of an arbitrator to grant interest was treated as akin to the court's power under Section 34 of the Code of Civil Procedure, 1908, in the context of Section 29 of the Arbitration Act, 1940. The claim before the arbitrators was not treated as a bare claim for interest upon interest, but as a crystallised claim for delayed payment which had become part of the principal claim. On that footing, Section 3 of the Interest Act was held to have no relevance.

Conclusion: The objection to the award of interest was rejected and the award of interest was upheld.

Issue (ii): Whether the claim for interest on delayed payment was barred by limitation.

Analysis: The plea of limitation was found to be inadequately pleaded before the arbitrators and unsupported by the necessary foundation in pleadings or evidence. In the circumstances of running bills and payments from time to time, the question when amounts became due required proper adjudication, and the record did not justify acceptance of the limitation objection at the appellate stage.

Conclusion: The limitation objection failed and the claim was held not to be barred on the material available.

Final Conclusion: The award and the decree passed in terms of it were sustained, and the appeal was dismissed without costs.

Ratio Decidendi: An arbitral award of interest on delayed-payment claims is permissible where the claim has crystallised as part of the principal amount, and a limitation defence cannot succeed without a proper factual foundation in the arbitration proceedings.

---