Arbitrator cannot award pre-reference interest when contract specifically prohibits it under Section 31(7)

SC dismissed appeal regarding arbitrator's power to award pre-reference interest under contract clauses. The arbitrator lacked jurisdiction to grant pendente lite interest where contract specifically prohibited it through Clauses 50 and 51 of General Conditions of Contract. Under 1996 Arbitration Act Section 31(7), arbitrators cannot award interest for pre-award period when agreement expressly prohibits it, unlike 1940 Act which was silent on this aspect. HC correctly declined interest award as arbitrators must act within contractual bounds and cannot override specific contractual prohibitions on interest.

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Issues Involved:
1. Jurisdiction of Arbitrators to Award Interest
2. Interpretation of Contract Clauses 50 and 51 of GCC
3. Conflict Between Judgments
4. Applicability of Ejusdem Generis Rule

Detailed Analysis:

1. Jurisdiction of Arbitrators to Award Interest:
The core issue was whether the arbitrators had the jurisdiction to award interest given the clauses in the General Conditions of Contract (GCC). The arbitration was conducted under the Arbitration and Conciliation Act, 1996. The arbitral tribunal awarded interest despite Clauses 50 and 51 of the GCC, which barred interest on money due to the contractor. The High Court quashed the interest awarded by the arbitrators, holding that these clauses barred the arbitrators from granting interest. The Supreme Court upheld this view, noting that under the 1996 Act, arbitrators could not award pendente lite interest if expressly barred by the contract.

2. Interpretation of Contract Clauses 50 and 51 of GCC:
Clauses 50 and 51 of the GCC explicitly stated that no interest would be payable to the contractor on any money due. The Supreme Court agreed with the High Court's interpretation that these clauses precluded the arbitrators from awarding interest. The Court emphasized that an arbitrator must act in accordance with the agreement between the parties, and where the contract explicitly prohibits interest, the arbitrator lacks jurisdiction to award it. This interpretation was consistent with the legal position under the 1996 Act, which sanctifies agreements that bar the payment of interest.

3. Conflict Between Judgments:
The appellant argued that the judgment in Tehri Hydro Development Corporation (THDC) Limited v. Jai Prakash Associates Limited conflicted with an earlier judgment in State of Uttar Pradesh v. Harish Chandra and Company. The Supreme Court clarified that the judgment in Harish Chandra was under the 1940 Act, whereas the present case was under the 1996 Act. The Court noted that the 1996 Act contains specific provisions that prohibit arbitrators from awarding interest if the contract bars it, a distinction not present under the 1940 Act. The Court also highlighted that the clauses in the present case were similar to those in the THDC judgment, which held that no interest was payable.

4. Applicability of Ejusdem Generis Rule:
The appellant contended that the words "or any other respect whatsoever" in Clause 51 should be read ejusdem generis, implying that the prohibition on interest should be limited to specific contexts. The Supreme Court rejected this argument, agreeing with the High Court that the rule of ejusdem generis was not applicable. The Court explained that this rule applies only when there is a distinct genus or category, which was absent in this case. The wide wording of the clause indicated a broad prohibition on interest, not limited to specific instances.

Conclusion:
The Supreme Court upheld the High Court's judgment, concluding that the arbitrators did not have jurisdiction to award interest due to the express prohibition in Clauses 50 and 51 of the GCC. The Court also clarified that the interpretation of these clauses was consistent with the legal principles under the 1996 Act and that the rule of ejusdem generis did not apply in this context. The appeal was dismissed.

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