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2023 (3) TMI 793 - SC - Indian Laws


Issues Involved:
1. Forfeiture of security deposits (Claim Nos. 33 and 34).
2. Award of interest on advances, specifically on hypothecation of equipment (Counter Claim No. 3).

Summary:

Issue 1: Forfeiture of Security Deposits (Claim Nos. 33 and 34)
The Arbitral Tribunal rejected NBCC's claims for the refund of two security deposits, despite finding that IRCON's termination of the contract under Clause 60.1 was unjustified. The Tribunal justified the termination under Clause 17.4. The Single Judge set aside this decision, arguing that once the Tribunal found Clause 60.1 termination unjustified, it could not rely on Clause 17.4 to justify forfeiture. The Division Bench of the High Court upheld the Single Judge's decision. The Supreme Court, however, noted that the Tribunal's finding on Clause 17.4 had attained finality and that both Clauses 17.4 and 60.1 justified IRCON's rescission of the contract and forfeiture of security deposits. Consequently, the Supreme Court quashed the High Court's decisions and restored the Tribunal's award rejecting Claim Nos. 33 and 34.

Issue 2: Award of Interest on Advances (Counter Claim No. 3)
The Arbitral Tribunal awarded IRCON interest at 18% per annum on advances, including those for hypothecation of equipment. The Single Judge and Division Bench set aside this award, citing the lack of a contractual stipulation for such interest. The Supreme Court noted that under Section 31(7)(a) of the Arbitration Act, arbitrators have the authority to award interest unless explicitly barred by the contract. Referencing the case of Raveechee and Company, the Court held that the Tribunal was justified in awarding interest. However, the Supreme Court found the 18% interest rate excessive and modified it to 12%.

Conclusion:
The Supreme Court allowed the appeal, restoring the Arbitral Tribunal's award rejecting Claim Nos. 33 and 34 and modifying the interest rate on advances for hypothecation of equipment to 12%. No order as to costs was made.

 

 

 

 

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