Arbitral Tribunal has the power to Award interest unless specifically barred from awarding
The Supreme Court has again reiterated that an arbitrator has the power to award interest unless specifically barred from awarding it; and the bar must be clear and specific.
This was so held in the matter titled as Raveechee and Co. vs. Union of India in Civil Appeal Nos. 5964-5965 of 2018 decided on 3rd July, 2018.
Challenge:
The Arbitrators awarded the Appellant interest pendente lite at 12% on the award for damages to M/s. Raveechee and Co. against Union of India. The question before the Supreme Court was whether Clause 16(3) of the General Contract Clauses restricted the power of the arbitrator to award interest pendente lite though the said clause restricted the Arbitral Tribunal to award interest on earnest money, security deposit and amounts payable to the Appellant.
Held:
Arbitrators have awarded amounts to the claimant on account of the losses suffered by them for various reasons and have not been awarded on account of any payment due under the contract but are awarded on losses determined in the course of arbitration or the ‘lis’.
Relying on the three Judge Bench judgment in Union of India v. Ambica Construction and in Irrigation Deptt., State of Orissa the Court held that the bar to award interest on the amounts payable under the contract would not be sufficient to deny the payment of interest pendente lite.
Thus when a dispute is referred to for adjudication to an arbitrator, a term of such a nature as contained in the Clause 16(3) of General Contract Clauses, that is binding on the parties cannot be extended to bind an Arbitrator. The Arbitrator has the power to award interest pendente lite where justified. The Court observed that it essentially depends upon the ouster in each clause, which means that unless there is an express bar that provides that the arbitrator cannot award interest pendente lite, the grant of interest pendente lite will predominantly be based on the arbitrator’s discretion to award the same.