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.

JUDGMENT

Vibhu Bakhru, J.

1. The appellant has filed the present appeal under Section 37(1)(c) of the Arbitration & Conciliation Act, 1996 (hereafter `the A&C Act') impugning a judgment dated 17.02.2021 (hereafter `the impugned judgment') passed by the learned Commercial Court (hereafter `the Court') in ARBTN. No.5173/2018. By the impugned judgment, the Court has partly allowed the respondent's application under Section 34 of the A&C Act seeking to set aside the arbitral award dated 19.06.2018 (hereafter `the impugned award').

2. Whilst the Court rejected the respondent's challenge to the amounts awarded against substantive claims, it set aside the impugned award to the extent of pre-award interest on the claims awarded to the appellant.

3. The Court accepted the submissions that the contract between the parties proscribed payment of any pre-award interest, in terms of Clauses 16(2) and 64.5 of the General Conditions of Contract (hereafter `the GCC'), as applicable to the contract in question.

4. The principal question to be addressed in the present appeal is whether the finding of the Court that Clause 16(3) of GCC and/or Clause 64.5 of the GCC, bars pre-award interest, is erroneous.

5. Mr. Vivekanand, learned counsel appearing for the appellant, contended that Clause 64.5 of the GCC, referred to by the respondent, was not part of the GCC, as applicable to the contract in question. He submitted that the Northern Railway General Conditions of Contract 1989 (hereafter `GCC-1989') was applicable to the contract in question and the same did not include Clause 64.5 of the GCC, which proscribed the Arbitral Tribunal to award any interest for the period prior to the date of the award. He submitted that the said clause was introduced in the General Conditions of Contract 1999 (hereafter `GCC-1999'), which was published in Handbook-I and Handbook-II in the month of May, 1999.

6. He also submitted that the respondent had not raised any ground that the contract in question proscribed payment of interest and thus, the Court had erred in setting aside the award of pre-award interest. He referred to the decision of the Supreme Court in J.G. Engineer's Pvt. Ltd. v. Calcutta Improvement Trust & Anr.: (2002) 2 SCC 664 and on the strength of the said decision, contended that it was not open for the appellant to raise a fresh dispute and urge grounds to contest the claims that were not urged before the Arbitral Tribunal.

7. Next, he contended that the impugned judgment to the extent it finds that Clause 16(2) of the GCC [incorrectly mentioned as Clause 16(3) of the GCC in the impugned judgment] bars payment of interest on the claims awarded in favour of the appellant, is ex facie erroneous. He submitted that the said clause provides that no interest would be payable on earnest money, security deposit or the amounts payable under the contract; it does not proscribe payment of interest on claims in the nature of damages. He submitted that the claims allowed by the Arbitral Tribunal relate to reimbursement of expenditure and compensation for expenses. Such sums were not payable under the contract and therefore, do not fall within the sweep of Clause 16(2) of the GCC.

8. He submitted that this issue was squarely covered by the decision of the Supreme Court in Raveechee and Co. v. Union of India: (2018) 7 SCC 664. In that case, the Supreme Court had considered the import of Clause 16(2) of the GCC [which was numbered as Clause 16(3) of the GCC in that case] and found that the interest awarded by the arbitrators on the amount awarded on account of the loss suffered by the appellant was not covered under the said clause.

9. He also relied upon the decision of the Supreme Court in Union of India v. M/s Pradeep Vinod Construction Co.: Civil Appeal No.2099/2017, decided on 03.08.2017 as well as the decision of the larger bench (three Judges) of the Supreme Court in Union of India v. Ambica Construction: (2016) 6 SCC 36, (hereafter `Ambica Const