When the Agreement expressly bars awarding of Pendente Lite interest, then Arbitrator “cannot” award it
Special Leave Petition (c) No. 11114/2009
Bench: Justice Ranjan Gogoi; Justice Arun Mishra: Justice Prafulla C. Pant
Case Brief: In the present case, the bench has observed a ‘chequered history’ in which the Respondent executed certain work in favour of Government, and in connection with the payments, they had some disputes, thus Respondent sought the appointment of Arbitrator, after certain months therefrom, as the present respondent- company felt serious financial difficulties it accepted the amount in full and final settlement, however, Government informed him that the matter was pending. But actually no Arbitrator was appointed. Thus the matter was taken to the High Court for referring the case to Arbitration. However, even after appointment of the arbitration some questions were raised and the authorities and intellectuals were challenged. After all such controversies, the fresh award was passed again by Arbitrator, which was challenged in the court, but to no effect. The Government again file recalling application, which was considered and order was recalled the Single Judge of High court set aside award as to interest for pre- reference period and 10 per cent interest was directed from the date on which the original Arbitrator was referred with the matter. Moreover, the Division bench has further partly allowed the challenge in appeal which was again challenged in Apex Court. This Bench is to consider only question i.e. ‘whether the Arbitrator has power to award pendente lite interest, in case contract bars the same in a case covered by Act and decisions of Apex Court’. The Court further, after analysing the various principles laid down by the Apex Court, observed that the issue would depend upon the nature of the ouster clause in each case. If there is an express stipulation which will debar the pendente lite interest, then obviously, such interest cannot be granted by Arbitrator. It is further observed that the award of pendente lite interest should be based upon the overall intention of the agreement. Further, the court sought to answer the reference as ‘if the contract expressly bars award of interest pendente lite, then the Arbitrator cannot award the same. Moreover, it is sought to be made clear by the bench that the bar for awarding interest on delayed payment by itself will not be readily inferred as express bar for awarding interest pendente lite by Arbitral Tribunal, as ouster of power of Arbitrator has to be considered on various relevant aspects referred to in the decisions of the Apex Court. Thus, the court considered it fit case that the Division bench can consider on merits.
Read the Judgement: Union of India Vs. M/S Ambika Construcion