Summary
Leaving the local-currency interest-rate space blank did not exclude a contractual entitlement to interest on delayed payment. The arbitral tribunal’s construction and rejection of waiver were reasonable; the courts below impermissibly treated the blank as zero and speculated about bidding advantage. The Court restored interest entitlement but replaced the excessive compounded rate with eight per cent simple interest per annum, using the award’s prescribed computation periods.
Issues
- Whether a blank interest-rate entry cancelled an express contractual right to interest on delayed payments.
- Whether the tribunal’s rejection of waiver and contract interpretation justified interference for patent illegality.
- What rate of interest should apply where the contract specified entitlement but omitted the rate.
Provisions considered
- Sections 34 and 31(7)(a), Arbitration and Conciliation Act, 1996Protected the tribunal’s reasonable contractual interpretation while applying the compensatory principle to reduce the interest rate in this appeal. (¶ 10-17)
Held
- Clause 60.8 expressly provided interest on delayed payments. Omission of a rate for local currency in the bid appendix did not mean nil interest or cancel that entitlement; an exclusion required an affirmative contractual basis. (¶¶ 3-5, 11-14)
- Contract construction primarily belongs to the arbitrator. A reasonable interpretation does not become patent illegality merely because a reviewing court prefers another view. Reading zero into the blank rewrote the contract and exceeded permissible Section 34 scrutiny. (¶¶ 10, 14, 16-17)
- The tribunal’s conclusion that the correspondence did not waive the interest claims was a factual assessment supported by the circumstances, the restricted payment context and continued demands. That reasoning was neither perverse nor improbable. (¶¶ 5-8, 13-14)
- The suggestion that leaving the rate blank made the contractor’s bid more competitive was unsupported by material about this or competing bids and was speculative. (¶¶ 9, 15)
- Interest compensates deprivation of money lawfully due. Although entitlement was sustained, the awarded one per cent monthly compounded rate was excessive. Eight per cent simple annual interest was just and equitable, computed otherwise on the basis of award paragraphs 1.6, 1.7 and 1.8. (¶¶ 14, 17)
Result
Appeal allowed: lower-court decisions invalidated on local-currency delayed-payment interest; award sustained on entitlement with interest substituted at eight per cent simple per annum, computed as directed. No costs.