IMPORTANT POINT
The capacity of the arbitrator to award interest would depend on the contractual agreement.

ORDER :

1. Heard learned counsel for the rival parties.

2. The arbitral award dated 16.08.2005, which is a subject matter of consideration, awarded interest to the contractor on account of delayed payment. The orders which came to be passed during the course of the challenge to the above award dated 16.08.2005, clearly depict, that interest was not awarded by the arbitrators either on earnest money or on security deposit. Yet, it is sought to be asserted on behalf of the appellant, that the grant of interest in the arbitral award fell foul of two judgments rendered by this Court.

3. We may refer to the two judgments relied upon by the learned counsel for the appellant (to assail the impugned order passed by a Division Bench of the Delhi High Court on 03.04.2006 affirming the view taken by the learned Single Judge on 30.11.2005). In the first instance, reliance was placed on Union of India v. Bright Power Projects (India) Private Limited, (2015) 9 SCC 695. The dispute in the cited case has been summarised in paragraph 1 thereof, which is extracted below :

"Being aggrieved by the judgment delivered in Union of India v. Bright Power Projects (I)(P) Ltd. dated 7-8-2006, by the High Court of Judicature of Bombay, this appeal has been filed wherein the issue is whether the appellant is liable to pay interest to the respondent though there was a provision in the contract that no interest should be paid on the amount payable to the contractor." (emphasis is ours)

The contractual obligation, dealt with in the above judgment, was extracted in paragraphs 8 and 9 of the judgment. Paragraphs 8 and 9 are accordingly reproduced below :

"8. On the aforesaid contentions, this Court has to decide whether the contract between the parties contained an express bar regarding award of interest and if so, whether the Arbitral Tribunal was justified in awarding interest for the period commencing from the date of reference till the date of the award.

9. Clause 13 (3) of the contract entered into between the parties reads as under :

"13(3). No interest will be payable upon the earnest money and the security deposit or amounts payable to the contractor under the contract, but government securities deposited in terms of sub-clause(1) of this clause will be repayable with interest accrued thereon." (emphasis is ours)

While interpreting the aforestated clause, this Court arrived at the conclusion, that no interest was payable under the above clause to the contractor, even on account of delayed payment under the contract, namely payments other than earnest money and security deposit would also not earn any interest.

4. The second judgment relied upon by the learned counsel for the appellant was Union of India v. Ambica Construction, (2016) 6 SCC 36. The question arising for consideration was extracted in paragraph 1 of the above judgment, which is extracted below :

"The issue involved in the reference is in regard to the power of the Arbitrator to award pendente lite interest when contract contains bar for grant of interest in a case covered by the Arbitration Act, 1940 (hereinafter referred to as "the Act"). A Division Bench of this Court had doubted the correctness of the decisions in Port of Calcutta v. Engineers-De-Space-Age (1996) 1 SCC 516; and Madnani Construction Corporation (P) Ltd. v. Union of India (2010) 1 SCC 549. In view of the decisions of the Constitution Bench judgments in Irrigation Department, State of Orissa v. G.C. Roy (1992) 1 SCC 508 and Dhenkanal Minor Irrigation Division v. N.C. Budharaj (2001) 2 SCC 721 which held that the arbitrator had the jurisdiction and authority to award interest for pre-reference period, pendente lite and future period if there was no express bar in the contract regarding award of interest. A doubt was expressed about the correctness of the decisions in Engineers-De-Space Age (supra) in Sayeed Ahmed & Co. v. State of U.P. (2009) 12 SCC 26 and Sree Kamatchi Amman Constructions v. Railways, (2010) 8 SCC 767. Hence the mat