Ferro Concrete Construction (India) Pvt. Ltd. vs State Of Rajasthan 2025 INSC 429 - Arbitration - Grant Of Interest
Arbitration and Conciliation Act 1996 - Section 31 - Arbitration Act 1940 -Under the 1940 Act, a stricter approach is followed that requires a clear and express clause against the payment of interest in case of difference, dispute, or misunderstanding, in case of delay of payment, or any other case whatsoever, to constitute a bar on the arbitrator from granting interest. A clause that only provides that interest shall not be granted on amounts payable under the contract would not be sufficient. On the other hand, under the 1996 Act wherein Section 31(7)(a) sanctifies party autonomy, interest is not payable the moment the contract provides otherwise-(Para 10) The arbitrator’s power to grant interest would depend on the contractual clause in each case, and whether it expressly takes away the arbitrator’s power to grant pendente lite interest. This would have to be determined based on the phraseology of the agreement, clauses conferring powers relating to arbitration, the nature of claim and dispute referred to the arbitrator, and on what items the power to award interest is contractually barred and for which period. Further, a bar on award of interest for delayed payment would not be readily inferred as an express bar to the award of pendente lite interest by the arbitrator. (Para 13)
Precedent - It is just as necessary to follow a precedent as it is to make a precedent.(Para 2) It is not sufficient to lay down a precedent, but it is equally important to follow and apply them as well. (Para 14)
