Summary
In an appeal confined to interest, the Court restored the arbitrator’s award of 18% interest and set aside the High Court’s substitution of 9% simple interest. Applying the pre-amendment statutory scheme, it held that the limited setting-aside and appellate jurisdictions did not authorise such modification. Decisions reducing interest through the Supreme Court’s Article 142 powers did not justify the High Court’s intervention.
Issues
- Whether the High Court could reduce the interest awarded in arbitration.
- Whether the pre-amendment interest provision and decisions under Article 142 justified the reduction.
Provisions considered
- Section 31(7), before the 2015 amendment, Arbitration and Conciliation Act, 1996The applicable provision permitted pre-award interest and prescribed 18% post-award interest unless the award otherwise directed. The arbitration commenced in 1997 and the award was made in 1999. (¶¶ 11, 12, 13)
- Sections 34 and 37, Arbitration and Conciliation Act, 1996The Court applied the restricted review scheme and rejected a judicial power to substitute a different interest award. (¶¶ 13, 15, 16)
- Section 15, Arbitration Act, 1940The former express power to modify or correct an award was contrasted with its omission from the 1996 Act. (¶ 15)
- Article 142, Constitution of IndiaEarlier Supreme Court reductions of interest under this exceptional power did not supply modification authority to the High Court. (¶ 14)
Held
- The dispute was governed by the 1996 Act because arbitration commenced after its entry into force. Under the version of Section 31(7) applicable to the 1999 award, 18% was the default post-award rate absent a different direction. The High Court lacked justification for replacing the arbitrator’s interest determination. (¶¶ 11, 12, 13)
- Applying the law stated in M. Hakeem, the Court held that Sections 34 and 37 did not confer a power to modify an award. Statutory grounds could support setting aside wholly or in part, with remittal in the circumstances permitted by Section 34; they did not permit rewriting the award’s interest component merely because a lower rate appeared preferable. (¶¶ 13, 15)
- Kalsi Construction and Oriental Structural Engineers involved the Supreme Court’s Article 142 jurisdiction and their particular circumstances. The decision on a High Court’s inherent power to recall its orders likewise did not authorise modification of arbitral interest. (¶ 14)
- The appeal concerned only the interest modification. The arbitrator’s 18% rate for past, pendente lite and future interest under Claim 9 was reinstated, with payment of the resulting dues required within eight weeks. (¶¶ 5, 16, 17)
Result
Appeal disposed of; High Court judgment set aside to the extent of the interest modification and the arbitrator’s 18% rate reinstated. Respondent-State to pay dues within eight weeks. No order as to costs.