2015 (7) TMI 256

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....ision in the contract that no interest should be paid on the amount payable to the contractor. The facts which are relevant for the purpose of deciding the issue, in a nutshell, are as under. 2. The appellant and the respondent had entered into a contract whereby the respondent had to construct certain structures, which had been more particularly described in the agreement entered into by the parties on 20th January, 1997. 3. In the course of execution of the contract, a dispute had arisen between the appellant and the respondent contractor and as agreed by the parties, the dispute had been referred to the Arbitral Tribunal. After hearing the concerned parties, the Arbitral Tribunal declared an award on 17th May, 2005, whereby it also awa....

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....s recorded by the High Court while dismissing the appeal. 7. According to the learned counsel appearing for the appellant, it was not open to the Arbitral Tribunal to award any interest to the contractor in view of a specific condition incorporated in the contract entered into between the parties that no interest would be paid to the contractor. 8. On the other hand, the learned counsel appearing for the respondent contractor submitted that the Division Bench of the High Court had rightly upheld the order passed by the learned Single Judge as well as the Arbitral Tribunal. 9. On the aforesaid contentions, this Court has to decide whether the contract between the parties contained an express bar regarding award of interest and if so, whet....

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....fore a civil court or before an Arbitral Tribunal. 13. Section 31(7) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') is clear to the effect that unless otherwise agreed by the parties, the Arbitral Tribunal can award interest at reasonable rate for a period commencing from that date when the cause of action arises till the date of the award. Section 31(7) of the Act, reads as under: "31(7) (a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the Arbitral Tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period betwe....

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....ed in this behalf: Where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (along with the claim for principal amount or independently) is referred to the arbitrator, he shall have the power to award interest pendente lite. This is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and therefore when the parties refer all their disputes - or refer the dispute as to interest as such - to the arbitrator, he shall have the power to award interest. This does not mean that in every case the arbitrator should necessarily award interest pendente lite. It is a matter within his discretion to be exercised ....