TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
Use comma for multiple locations.
---------------- For section wise search only -----------------
Accuracy Level ~ 90%
of 
Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
Join Channel
Note
Bookmark
Share
Don't have an account? Register Here
of Press 'Enter' after typing page number.
Issues: (i) whether compound interest could be awarded on the arbitral claim and interest component under the Arbitration and Conciliation Act, 1996; (ii) whether the Memorandum of Understanding merged into the Implementation Agreement so that disputes under both documents were referable to arbitration; and (iii) whether the High Court could interfere with the arbitral award on the interpretation of the contract and the finding of premature termination.
Issue (i): whether compound interest could be awarded on the arbitral claim and interest component under the Arbitration and Conciliation Act, 1996.
Analysis: The earlier view that an arbitral tribunal had no power to award interest on interest stood overruled. The governing principle accepted by the Court was that Section 31(7)(b) permits post-award interest on the sum directed to be paid by the award, which may include the interest component. The arbitral award granting interest on the awarded sum was therefore in conformity with the law as declared in the later three-Judge Bench decision.
Conclusion: The disallowance of compound interest was set aside and the award on this aspect was restored in favour of the appellant.
Issue (ii): whether the Memorandum of Understanding merged into the Implementation Agreement so that disputes under both documents were referable to arbitration.
Analysis: The recitals of the Implementation Agreement expressly referred to the earlier Memorandum of Understanding as an appendix, and the contractual definition of "Agreement" included its appendices and annexures. On a combined reading of the relevant clauses, the earlier document was treated as having merged into the later agreement, and the arbitration clause in the Implementation Agreement covered disputes arising from both instruments.
Conclusion: The finding that the Memorandum of Understanding merged into the Implementation Agreement was affirmed.
Issue (iii): whether the High Court could interfere with the arbitral award on the interpretation of the contract and the finding of premature termination.
Analysis: The scope of interference under Sections 34 and 37 is narrow, and a court does not sit in appeal over an arbitral award. Where the arbitrator adopts one of two plausible interpretations of the contract, that view cannot be substituted merely because another interpretation is possible. Applying this restraint, the Court upheld the arbitral tribunal's construction of the contractual clauses and its conclusion that the State terminated the agreement before expiry of the permissible period.
Conclusion: The interference by the Single Judge was held to be unwarranted, and the award on premature termination was restored.
Final Conclusion: The appeal of the contractor succeeded on the interest issue, while the State's challenge to the arbitral findings on contractual construction and premature termination failed. The arbitral award was substantially restored.
Ratio Decidendi: An arbitral award based on a plausible construction of the contract will not be interfered with under Sections 34 and 37, and post-award interest may be granted on the sum directed to be paid by the award, including the interest component, where the governing statute so permits.
TaxTMI 
