2019 (9) TMI 1706 - SC - Indian Laws

Legality of Award passed by the Arbitrator - rate of interest awarded by the arbitrator at the rate of 18% per annum - HELD THAT - In the absence of agreement to the contrary between the parties, Section 31(7)(a) of the said Act confers jurisdiction upon the Arbitral Tribunal to award interest unless otherwise agreed by the parties at such rate as the Arbitral Tribunal considers reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arises and the date on which the award is made - In the present case, the parties have agreed for the rate of interest at 18% per annum. However, since the award is of the year 1999 and considering the facts that the learned Senior Counsel had left the matter to the discretion of the court - in exercise of the power Under Article 142 of the Constitution of India, the interest at the rate of 18% awarded by the Arbitral Tribunal is to be reduced. Considering the fact that the contract relates to construction of Advanced Pediatrics Centre of the Post Graduate Institute of Medical Research and Education, Chandigarh and also other facts and circumstances of the case, in exercise of the power Under Article 142 of the Constitution of India, the orders of the learned Arbitrator as affirmed by the High Court so far as the rate of interest is concerned is modified and the same is reduced from 18% to 10% per annum simple interest. The award amount along with the accrued interest at the rate of 10% per annum simple interest shall be payable to the Respondent-Company within eight weeks from today failing which the entire award amount will carry interest at the rate of 18% as awarded by the Tribunal. Appeal disposed off.

Summary

Issues:
1. Dismissal of appeal under Section 37 of the Arbitration and Conciliation Act by the High Court.
2. Award of interest at the rate of 18% per annum by the Arbitrator.
3. Request for reduction of the rate of interest by the Appellant-Institution.
4. Consideration of the rate of interest by the Supreme Court under Article 142 of the Constitution of India.
5. Modification of the rate of interest from 18% to 10% per annum by the Supreme Court.

Issue 1: Dismissal of appeal under Section 37 of the Arbitration and Conciliation Act by the High Court
The appeal arose from the High Court's judgment and order dismissing the appeal of the Appellant under Section 37 of the Arbitration and Conciliation Act. The High Court affirmed the Award passed by the Arbitrator, including the rate of interest awarded at 18% per annum. The dispute between the parties arose from a construction contract, which led to arbitration. The learned Arbitrator awarded an amount against the claim made by the Respondent-Company, which was challenged through the appeal under Section 34 of the Act, ultimately leading to the appeal under Section 37.

Issue 2: Award of interest at the rate of 18% per annum by the Arbitrator
The Arbitrator, in the Award dated 31.12.1999, awarded interest at the rate of 18% per annum, relying on Section 31(7) of the Arbitration and Conciliation Act. This section empowers the Arbitral Tribunal to award interest, unless otherwise agreed by the parties, at a reasonable rate. The Respondent-Company was yet to receive the award amount, leading to a request for reduction of the interest rate by the Appellant-Institution.

Issue 3: Request for reduction of the rate of interest by the Appellant-Institution
During the proceedings, the Appellant-Institution, through its counsel, submitted that it was not pressing other grounds of appeal and was only seeking a reduction in the rate of interest. The Respondent-Company, through its senior counsel, left the decision on the rate of interest to the discretion of the Court, emphasizing the need for a reasonable rate due to the long duration since the award was passed in 1999.

Issue 4: Consideration of the rate of interest by the Supreme Court under Article 142 of the Constitution of India
The Supreme Court, in the absence of an agreement between the parties on the rate of interest, considered the facts and circumstances of the case. It invoked its power under Article 142 of the Constitution of India to modify the rate of interest awarded by the Arbitral Tribunal. The Court noted the agreement for 18% interest but reduced it to 10% per annum simple interest, considering the nature of the contract and the time elapsed since the award.

Issue 5: Modification of the rate of interest from 18% to 10% per annum by the Supreme Court
In the exercise of its power under Article 142, the Supreme Court modified the rate of interest from 18% to 10% per annum simple interest. The Court directed the Appellant-Institution to pay the award amount along with the accrued interest at the revised rate to the Respondent-Company within eight weeks. Failure to comply would result in the award amount carrying interest at the original rate of 18% per annum as awarded by the Tribunal. The appeal was disposed of with no order as to costs.