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TMI Blog2021 (10) TMI 250X X X X Extracts X X X X X X X X Extracts X X X X ..... t its 2x750 MW Pragati III Combined Cycle Power at Bawana, Delhi (hereinafter referred to as 'the project'). The appellant submitted its bid for the project which was accepted by the respondent. Pursuant to which, the respondent issued a Letter of Intent (LOI) to the appellant dated 09.09.2008. Subsequently, on 24.10.2008 the parties entered into a contract which, inter alia, contained the interest barring clause which is reproduced hereunder: "Clause 17: No interest shall be payable by BHEL on Earnest Money Deposit, Security Deposit or on any moneys due to the contractor." 4. The disputes arose between the parties with respect to the aforesaid contract and subsequently the appellant filed a petition under Section 11 of the Arbitration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce interest and not pendente lite interest. As stated earlier, in terms of Section 31(7)(a) of the Act, the power of the arbitral tribunal to award pre award interest is contingent to the parties not agreeing to the contrary. Preaward interest includes both prereference interest as well as pendente lite interest. Thus, the conclusion of the Arbitrator that award of pendente lite interest was not prescribed by clause 17 of the Agreement is not sustainable. Accordingly, the impugned award to the extent of award of pendente lite interest is set aside. The petition is disposed of. No orders as to costs." 6. As noticed above, the Division Bench of the High Court has upheld the judgment and order of the Learned Single Judge in the impugned ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave agreed to the contrary. He argued that if the contract itself contains a specific clause which expressly bars the payment of interest, then it is not open for the arbitrator to grant pendente lite interest. It was further argued that Ambica Construction (supra) is not applicable to the instant case because it was decided under the Arbitration Act, 1940 whereas the instant case falls under the 1996 Act. It was further argued that Section 3 of the Interest Act confers power on the Court to allow interest in the proceedings for recovery of any debt or damages or in proceedings in which a claim for interest in respect of any debt or damages already paid. However, Section 3(3) of the Interest Act carves out an exception and recognizes the ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rbitrator cannot award interest for the said period. In the present case, clause barring interest is very clear and categorical. It uses the expression "any moneys due to the contractor" by the employer which includes the amount awarded by the arbitrator. 12. In Sayeed Ahmed and Company v. State of Uttar Pradesh & Ors. (2009) 12 SCC 26 this Court has held that a provision has been made under Section 31(7)(a) of the 1996 Act in relation to the power of the arbitrator to award interest. As per this section, if the contract bars payment of interest, the arbitrator cannot award interest from the date of cause of action till the date of award. 13. In Sree Kamatchi Amman Constructions v. Divisional Railway Manager (Works), Palghat & Ors. (2010) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 323, the learned Senior Counsel for the appellant submits that mere bar to award interest on the amounts payable under the contract would not be sufficient to deny payment on pendente lite interest. Therefore, the arbitrator was justified in awarding the pendente lite interest. However, it is not clear from Ambica Construction (supra) as to whether it was decided under the Arbitration Act, 1940 (for short "the 1940 Act") or under the 1996 Act. It has relied on a judgment of Constitution Bench in State of Orissa v. G.C. Roy, (1992) 1 SCC 508. This judgment was with reference to the 1940 Act. In the 1940 Act, there was no provision which prohibited the arbitrator from awarding interest for the prereference, pendente lite or postaward period, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to refer to arbitration dispute that may arise. - This section shall not render illegal a contract, by which two or more persons agree that any dispute which may arise between them in respect of any subject or class of subjects shall be referred to arbitration, and that only the amount awarded in such arbitration shall be recoverable in respect of the dispute so referred." 20. Exception I to Section 28 saves contracts where the right to move the Court for appropriate relief is restricted but where the parties have agreed to resolve their dispute through arbitration. Thus, a lawful agreement to refer the matter to arbitration can be made a condition precedent before going to courts and it does not violate Section 28. No cause of action t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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