Supreme Court rules no interest on excess withdrawn amount

The Supreme Court partly allowed the appeals, ruling that the appellant was not entitled to any interest on the awarded amount. The appellant had withdrawn an excess amount deposited by the respondent, which exceeded the award amount exclusive of interest. The respondent was instructed not to recover the excess amount withdrawn by the appellant. The appeals were disposed of without any order as to costs.

---

---

Issues Involved:
1. Legality and correctness of the Division Bench's judgment setting aside the Single Judge's order and the arbitral award.
2. Consideration of the arbitrability of the dispute by the Division Bench for the first time.
3. Issuance and implications of the 'No Claims Certificate' by the appellant.
4. Awarding of interest by the Arbitral Tribunal on delayed payments.

Detailed Analysis:

1. Legality and Correctness of the Division Bench's Judgment:
The appellant challenged the Division Bench's judgment dated 29.9.2011, which set aside the Single Judge's order and the arbitral award. The Division Bench directed a fresh reference by the Arbitral Tribunal. The appellant contended that the Division Bench failed to appreciate that the 'No Claims Certificate' was not raised in earlier proceedings.

2. Consideration of Arbitrability of the Dispute:
The first question was whether the Division Bench was justified in considering the arbitrability of the dispute for the first time in the appeal. The appellant had filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, for the appointment of an Arbitrator, which was allowed. The Arbitral Tribunal adjudicated the disputes and claims, and an award was passed on 20.9.2006. The respondent did not raise the issue of the 'No Claims Certificate' before the Chief Justice, the Arbitral Tribunal, or the Single Judge. The Supreme Court held that the Division Bench was not justified in considering the arbitrability of the disputes for the first time, particularly when the respondent had not raised the issue earlier.

3. Issuance and Implications of the 'No Claims Certificate':
The respondent contended that the appellant had issued a 'No Claims Certificate,' forfeiting the right to any claim. The appellant argued that this issue was not raised in the proceedings under Section 11(6) or before the Arbitral Tribunal or the Single Judge. The Supreme Court noted that the jurisdictional question should have been raised during arbitration proceedings or soon after initiation thereof, as per Mcdermott International Inc. vs. Burn Standard Co. Ltd. and Others (2006) 11 SCC 181. The intervention of the court is envisaged only in cases like fraud or bias by the Arbitrators, violation of natural justice, etc. The court cannot correct the errors of the Arbitrators.

4. Awarding of Interest by the Arbitral Tribunal:
The Arbitral Tribunal awarded interest of Rs. 12,44,546/-, including pre-reference and pendente lite interest. Section 31(7)(a) of the 1996 Act provides for payment of interest unless otherwise agreed by the parties. The General Conditions of the Contract (GCC) barred the payment of interest. The Supreme Court referred to various judgments, including Sayeed Ahmed and Company vs. State of Uttar Pradesh and Others (2009) 12 SCC 26, Sree Kamatchi Amman Constructions vs. Divisional Railway Manager (Works), Palghat and Others (2010) 8 SCC 767, and Union of India vs. Bright Power Projects (India) Private Limited (2015) 9 SCC 695, which held that if the agreement prohibits the award of interest, the Arbitrator cannot award interest for the pre-award period. The Supreme Court concluded that the appellant was not entitled to any interest on the amount awarded by the Arbitral Tribunal.

Conclusion:
The appeals were partly allowed. The appellant was not entitled to any interest on the awarded amount. The appellant had already withdrawn 50% of the amount deposited by the respondent, which was in excess of the award amount exclusive of interest. The respondent was directed not to recover the excess amount withdrawn by the appellant. The appeals were disposed of without any order as to costs.

---