The main legal point established in the judgment is that the contract between the parties will prevail over the provisions of Section 31(7)(a) of the Arbitration & Conciliation Act, 1996, and the arbitral tribunal has the discretion to award interest in accordance with the contract, subject to the provisions of the Act.

Sanjeev Sachdeva, J.

1. The Petitioner, Union of India has filed this petition under Section 34 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as ‘the said Act’) seeking setting aside of the award dated 30.9.2013 read with additional award dated 8.10.2013.

2. The Respondents had bid for the tender invited by the Petitioner for supply of 305 metric tons paper. The Respondent was found to be L–1 and by acceptance dated 19.02.2010, the contract was awarded to the Respondents. As per the contract, the Petitioner could accept the goods to the extent of 305 metric tons (+/-) 5%. The Respondent delivered 307.89 metric tons paper to the Petitioner. The Petitioner released the payment though belatedly for 305 metric tons paper but did not release payment for 2.89 metric tons paper. The payments made for 305 metric tons was also delayed.

3. The Respondent invoked the arbitration clause for payment for the balance 2.89 metric tons and interest for the delay in payment for 305 metric tons paper supplied. As per the Respondent, the supplies were made during the period 16.03.2010 to 23.03.2010 and the payment for the said supplies was made on 30.11.2010. The Respondent claimed interest for the delay in release of the payment. The Under Secretary, Government of India, Ministry of Urban Development, vide letter dated 29.04.2013 appointed the arbitral tribunal to determine the four claims of the claimant, there being no counter claim. The four claims of the claimant are as under:-

(i) Price of unpaid goods for Rs. 1,46,531/-

(ii) Interest on delayed payment of Rs. 28,94,162/-

(iii) Interest on unpaid goods Rs. 1,04,865/- and;

(iv) Litigation costs Rs.5,00,000/-

4. The arbitral tribunal vide the impugned award dated 30.09.2013, awarded in favour of the Respondent/claimant a sum of Rs.1,22,617/- towards the price of the unpaid goods and Rs.10,04,687/- as interest on the delayed payments including the interest on unpaid goods plus Rs.50,000/- as litigation costs. By correction of the award dated 8.10.2103, the tribunal has noticed that though against claim No.1 the amount awarded was Rs.1,26,617/-. In the calculations, the same had been written as 1,22,617/-. The said error was corrected by the supplementary award dated 8.10.2013.

5. The Petitioner has impugned the award only on the ground that the arbitrator relying upon Section 31(7)(a) of the said Act has awarded the interest by holding that the interest was payable as there was no clause in the contract prohibiting the payment of interest on the money due to the contractor.

6. It is contended by the Petitioners that arbitrator has misconstrued the terms of the contract inasmuch as there were different contractual stipulations that prohibited payment of interest. Accordingly, there was an implied prohibition in the contract prohibiting payment of interest under any circumstance.

7. Learned counsel for the Petitioner has relied on Clause 7 of the Contract pertaining to Security Deposit that stipulates that no claim shall lie against the Petitioner either in respect of interest or in depreciation in value of any security. Further he has relied on Clause 18 pertaining to Withholding and Lien in respect of sums claimed that stipulates that any sum withheld or retained under lien by the purchaser (Petitioner) would be kept withheld and retained and the contractor (Respondent) would have no claim for interest or damages whatsoever in respect of any such amount withheld or retained.

8. Learned counsel for the Petitioner has relied on the judgment of the Supreme Court in M/S SHREE KAMATACHI AMMAN CONSTRUCTIONS V. DIVISIONAL RAILWAY MANAGER (WORKS), PALGHAT & ORS. AIR 2010 SC 3337 to contend that the arbitral tribunal cannot award interest from the date of cause of action to the date of contract, on amounts awarded to the contractor under a contract that contained a stipulation specifically barring payment of interest. He submitted that there was an implied bar in the contract betwe