Contractual interest on delayed payment survives a blank rate column, but an excessive arbitral rate may be judicially moderated.

Where a contract expressly provided for interest on delayed payment but left the rate column blank, the omission did not negate the contractor's entitlement to interest, and a reasonable arbitral construction could not be set aside as patent illegality. Alleged waiver letters were treated as factual material limited to the relevant payment context and not as a relinquishment of the entire claim, so the interest entitlement was restored. The rate fixed by the tribunal was nevertheless found excessive, and the court moderated it on a just and equitable basis consistent with the compensatory nature of interest and Section 31(7)(a), substituting simple interest at 8% per annum.

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Issues: (i) Whether the contractor was entitled to interest on delayed payment for the local currency component under the contract despite the blank interest column in the appendix to bid and the alleged waiver letters. (ii) Whether the rate of interest awarded by the arbitral tribunal required interference and modification.

Issue (i): Whether the contractor was entitled to interest on delayed payment for the local currency component under the contract despite the blank interest column in the appendix to bid and the alleged waiver letters.

Analysis: The contract expressly provided for payment of interest on delayed payment. The omission to fill in the rate column did not amount to an exclusion of the contractual entitlement to interest, and there was no express term barring such payment. The tribunal's finding that the waiver letters were issued in the relevant payment context and did not amount to a relinquishment of the entire claim was a factual determination based on the materials before it. Interference under Section 34 on the theory of patent illegality was unwarranted because the tribunal's construction of the contract was a reasonable one and the courts below effectively rewrote the contract by treating the blank column as meaning nil or zero interest.

Conclusion: The contractor was entitled to interest on delayed payment for the local currency component, and the setting aside of that entitlement was not justified.

Issue (ii): Whether the rate of interest awarded by the arbitral tribunal required interference and modification.

Analysis: Although the contractual entitlement to interest stood, the rate fixed by the tribunal was considered excessive. Since the agreement did not specify the rate, the court applied a just and equitable standard consistent with the principle that interest is compensatory in nature and with the statutory approach under Section 31(7)(a) of the Arbitration and Conciliation Act, 1996. On that basis, the award was modified to substitute a simple rate of 8% per annum for the higher compounded rate directed by the tribunal.

Conclusion: The rate of interest was modified and fixed at 8% simple interest per annum.

Final Conclusion: The appeal succeeded in part: the contractor's entitlement to interest on delayed payment was restored, while the quantum of interest was reduced to a simple rate of 8% per annum.

Ratio Decidendi: Where a contract expressly provides for interest on delayed payment but omits the rate, the omission does not negate the entitlement to interest, and an arbitral award based on a reasonable contractual construction cannot be set aside as patent illegality; however, the rate may be judicially moderated if it is found excessive.

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