Summary
The Court upheld denial of pendente lite interest under an express contractual clause excluding interest on deposits and any money due to the contractor. Section 31(7)(a) of the Arbitration and Conciliation Act makes the arbitrator’s pre-award interest power subject to the parties’ agreement. The broad clause covered the awarded amount and was not confined to deposits. The Court rejected the challenge under Section 28 of the Contract Act and distinguished authorities under the 1940 Arbitration Act. The dispute concerned pendente lite interest, not a fresh determination of post-award interest.
Issues
- Whether the express interest-barring clause prevented the arbitrator from awarding pendente lite interest under the 1996 Act.
- Whether the clause was invalid under Section 28 of the Contract Act.
- Whether decisions under the Arbitration Act, 1940 displaced the contractual bar in this case.
Provisions considered
- Section 31(7)(a), Arbitration and Conciliation Act, 1996The pre-award interest power is subject to contrary agreement, including a valid express prohibition covering pendente lite interest. (¶¶ 10, 11, 12, 13, 14, 15, 16, 18, 20, 22)
- Section 28 and Exception 1, Indian Contract Act, 1872The challenge to the agreed interest exclusion failed; the Court recognised the validity of agreed arbitration and the statutory permission to waive interest without vitiation of consent. (¶¶ 19, 20, 22)
- Sections 2(a) and 3(3)(a)(ii), Interest Act, 1978The definition includes an arbitrator, while the express-agreement exception recognises contracts barring interest. It supported the validity of the parties’ interest exclusion. (¶¶ 21, 22)
Held
- Under Section 31(7)(a), an arbitrator cannot award pre-reference or pendente lite interest contrary to an express contractual prohibition. Clause 17 barred interest on any money due to the contractor, covering the awarded sum and not merely earnest-money or security deposits. (¶¶ 3, 10, 11, 12, 13, 14, 15, 18)
- Ambica Construction and Raveechee concerned the 1940 Act and did not govern the distinct statutory position under the 1996 Act. They did not authorise the pendente lite award contrary to this agreement. (¶¶ 16, 17)
- The statutory framework permitted an express agreement excluding interest. In the absence of vitiated free consent, Clause 17 was not ultra vires Section 28 of the Contract Act, and the arbitrator could not override it. (¶¶ 19, 20, 21, 22)
- The High Court’s rejection of pendente lite interest was upheld. The appeal concerned that pre-award component; the judgment did not set aside the entire monetary award or announce a new ruling on post-award interest. (¶¶ 2, 4, 5, 6, 18, 23, 24)
Result
Appeal dismissed; denial of pendente lite interest upheld. Parties to bear their own costs; pending applications disposed of.