Summary
The Court set aside pendente lite and future interest awarded contrary to the parties’ express contractual bar. Clause 16(2) separately excluded interest on amounts payable under the contract, as well as earnest money and security deposits. The broader words could not be confined to deposits through ejusdem generis. Neither an asserted concession by counsel contrary to binding law nor the employer’s own interest counterclaim created an entitlement to prohibited interest.
Issues
- Whether Clause 16(2) barred interest on contractual dues other than deposits.
- Whether equitable arbitral powers, a legal concession or the employer’s counterclaim overcame that bar.
Provisions considered
- Section 31(7)(a), Arbitration and Conciliation Act, 1996The contractual agreement controlled the arbitrator’s power to award pre-award interest; contrary equitable reasoning could not override it. (¶¶ 7, 8, 8.1)
Held
- Clause 16(2) used the disjunctive word or to cover earnest money, security deposits and amounts payable under the contract independently. The last category was not limited to deposit-like amounts through ejusdem generis, and included contractual damages and sums found payable in arbitration. (¶¶ 6.2, 6.3, 7, 10)
- The binding three-Judge authority controlled. Decisions under the 1940 Act did not overcome the 1996 Act’s express contractual priority, and the reliance on Pradeep Vinod Construction could not displace the larger-Bench decisions. The arbitrator, as a creature of the contract, could not award the interest contrary to the agreed bar. (¶¶ 7, 8, 8.1, 11)
- A concession inconsistent with binding law does not bind the parties. The employer’s demand for interest in its counterclaim likewise supplied no estoppel against law; even a prohibited interest award in its favour would have been challengeable. (¶ 12)
- On this contract and award, the Court held both pendente lite and future interest on the contractual amounts impermissible and set aside that interest component. (¶¶ 13, 14)
Result
Union appeal allowed. The arbitral award and the High Court orders were set aside to the extent of pendente lite and future interest on the amounts due under the contract; no costs.