Summary
In an arbitration governed by the 1940 Act, the Supreme Court restored pendente lite interest awarded on damages for losses arising from a railway contract. Clause 16(3), barring interest on earnest money, security deposits and amounts payable under the contract, did not expressly bar the arbitrators’ power to award interest during arbitration on the damages determined. The High Court’s interference with Claim No. 12 was set aside.
Issues
- Whether Clause 16(3) of the railway contract expressly excluded the arbitrators’ power to award pendente lite interest on damages.
Provisions considered
- Clauses 16(1) and 16(3), Railway General Contract ClausesRead in their contractual context, the provisions governing deposits and interest on contractual amounts did not clearly and specifically exclude pendente lite interest on the damages determined in arbitration. No interest had been awarded on the security deposit. (¶¶ 8, 9, 10, 11, 12)
Held
- An arbitrator’s power to award pendente lite interest may be excluded by an express contractual bar, which must be clear and specific. A prohibition on interest on contractual payments is not, without examination of its wording, the claims and the period involved, necessarily such an exclusion. (¶¶ 12, 13, 14, 16, 17)
- Clause 16(3) did not deal expressly with pendente lite interest. The awarded sums compensated losses determined in arbitration, rather than payments due under the contract of the kind covered by that clause. Interest addressed the claimant being kept out of those dues while arbitration remained pending. (¶¶ 10, 11)
- The arbitrators had excluded the security deposit from the interest calculation. Their award of 12 percent pendente lite interest on Rs. 30 lakh in damages, amounting to Rs. 44,92,800 under Claim No. 12, was restored. (¶¶ 4, 5, 8, 18)
- The Court expressly left undecided whether parties could agree not to claim pendente lite interest even on unascertained damages determined during arbitration. (¶ 12)
Result
Appeals allowed; High Court judgment set aside and the arbitral award under Claim No. 12 for pendente lite interest restored.