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SANJAY KAROL, VIPUL M. PANCHOLI
Union of India – Appellant
Versus
Larsen & Tubro Limited (L&T) – Respondent
Key Points: - An appeal against an arbitral award regarding post-award interest is conditional and acts as a deterrent for delayed payment rather than an automatic punitive measure (!) . - The grant of post-award interest is a distinct legal regime operating independently from pre-award or pendente lite interest (!) . - Arbitral Tribunals are not justified in awarding pre-award or pendente lite interest by way of compensation if the contract explicitly prohibits it (!) . - The Supreme Court modified the post-award interest rate from 12% per annum to 8% per annum from the date of the award till realization (!) . - The rule of ejusdem generis is a tool of interpretation applicable only when general words follow a specific class forming a genus (!) . - Clause 16(3) of the General Conditions of Contract (GCC) was interpreted to bar interest on all amounts payable to the contractor, not just deposits (!) . - Section 31(7)(a) of the Act mandates that pre-award interest awards must respect the terms agreed upon in the contract (!) . - Section 31(7)(b) of the Act allows for post-award interest unless the award specifically directs otherwise, and this provision is not subject to the contract's bar on pre-award interest (!) . - Courts retain the power to modify the rate of post-award interest under Section 31(7)(b) where facts justify such modification to ensure just compensation (!) . - The impugned judgment and Arbitral Award were set aside to the extent of the grant of pre-award/pendente lite interest for specific claims (!) .
JUDGMENT :
VIPUL M. PANCHOLI, J.
1. Leave granted.
2. This is an appeal challenging the final judgment and order dated 25.05.2023 passed by the High Court of Judicature at Allahabad in Appeal No. 433 of 2023 under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”) titled as “Union of India and 2 others v. Larsen & Tubro Limited (L and T)”.
3. Vide the impugned judgment, the High Court dismissed the appeal filed by the appellants herein and upheld the Order dated 15.09.2022 passed by the Commercial Court, Jhansi, and thereby upheld the Arbitral Award dated 25.12.2018 passed by the learned Arbitral Tribunal.
FACTUAL MATRIX
4. The brief facts of the case are that the underlying dispute originates from the Agreement dated 27.01.2011, bearing No. CME/NCR/JHSW/MOD/2010 (Turnkey), executed between the appellants (Union of India & North Central Railway Administration) and the respondent (Larsen & Tubro Limited [L&T]).
5. The contract stipulated the execution of work related to the modernization of Jhansi Workshop of North Central Railways, valued at a negotiated rate of Rs. 93,08,07,696/-. The original date for the completion of the work was 18.07.20
(1) Appeal against Arbitral Award – Grant of post-award interest is conditional in nature and operates as a deterrent against delayed payment, rather than as an automatic or punitive imposition of po....
The Arbitral Tribunal's authority to award interest is governed by the arbitration agreement, with specific provisions for pre-award and post-award interest under the Arbitration Act.
(1) Arbitrator in arbitration proceedings being creature of contract has no power to award interest, contrary to terms of agreement/contract between parties.(2) There cannot be estoppel against law.
The Court can entertain challenges based on contract terms, and the applicability of contract clauses can influence the decision to set aside an arbitral award.
The arbitral tribunal can award pendente lite interest unless expressly prohibited by the contractual agreement.
(1) If contract contains a specific clause which expressly bars payment of interest, then it is not open for Arbitrator to grant pendente lite interest.(2) Lawful agreement to refer the matter to arb....
Arbitrability of claims hinges on adherence to procedural agreements; claimants can seek interest despite contractual prohibitions, reflecting arbitral authority.
(1) Post-award interest – If agreement stipulates that no interest is payable, Arbitral Tribunal cannot award interest for the period and an award contrary to terms of contract would be vulnerable to....
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