The main legal point established in the judgment is that the interest specified in the agreement shall be that which is applicable to 46 days deposit, which is between 6% to 8%, and the court has the authority to reduce the rate of interest based on legal principles and precedents.

(PRABHA SRIDEVAN. J,)

1. This Original Suit Appeal has been filed against the order of the learned Single Judge upholding the award in so far as the Item Nos. I to IV in para 13.0 of the award is concerned and setting aside the award in so far as the Item Nos. V to VIII in para 13.0 are concerned and is restricted only to the rate of interest awarded and future interest.

2. The Tribunal made the following award :

"13. 0 AWARD OF TRIBUNAL:

Under the circumstances and considering all arguments by both the parties and on the basis of the conclusions as stated above, the Tribunal finds that Section 5 relating to whole of the works substantially completed on 01.06.2001. Accordingly, the award of the Tribunal on Claim No.6 is as under:

i. Claimant is entitled for the Taking Over Certificate for whole of the work i.e. Section 5 with effect from 01.06.2001. Accordingly, the date of taking over certificate shall be 01.06.2001.

ii. Respondent shall pay to Claimant the retention money and also release the Retention money Bank Guarantee in excess of 50% retention money pertaining to whole of the works effect from the date of substantial completion i.e. 01.06.2001.

iii. Respondent shall release the domestic preference security provided under the contract with effect from date of substantial completion i.e. 01.06.2001.

iv. Respondent shall also pay simple interest at 12% p.a. on the awarded amount at item (ii) above, from 56 days after the date of substantial completion till the date of this award.

v. Respondent shall issue Defect Liability Certificate with effect from 31.05.2002.

vi. Respondent shall release the remaining 50% of the retention money/bank guarantee with him with effect from the date of expiry of defect liability period.

vii. Respondent shall pay simple interest at 12% p.a. on amount (money) under item vi above from 56 days after the date of expiry of defect liability period till the date of this award.

viii. Respondent, shall release performance Bank Guarantee provided under the contract with effect from the date of expiry of defect liability period i.e. 31.5.2002."

3. Learned Counsel appearing for the appellant and the Senior Counsel appearing for the 1st respondent admitted and confirmed that the appeal is only in respect of Clause iv above and future interest. Therefore, we will refer to the facts only in so far as it is necessary for us to deal with the issues.

4. The parties entered into an agreement on 22.8.1997 for the construction of the Break Waters. The work to be executed comprised of the construction of the North and South Break Waters. The entire works were divided into five sections. Originally, the date of completion was 15.8.2000. It was extended and finally, the taking over certificate was issued by the appellant herein at the request of the 1st respondent. There were disputes relating to what is the date of the taking over certificate. We will deal with that later. The amount payable to the 1st respondent by the appellant included the retention money which was with the appellant herein. According to the 1st respondent, since they had been deprived of the use of the money, they were entitled to interest on the retention money and according to them, they had borrowed funds from the bank for which they had to repay with interest. The appellant herein resisted the claim for interest contending that the interest if any payable shall be at the current annual rate on 46 days deposit by the State Bank of India or as per the provisions of the Interest Act, 1978. In the present case, the dispute arose in 2000-2001 and the rate of interest on 46 days deposit at the relevant point of time was in the range of 6% to 8%, The Dispute Review Board before which the parties made their grievance, before moving the Arbitrary Tribunal, had recommended the rate of interest at 18% which according to the appellant was in accordance with the terms of the contract.

5 The Arbitral Tribunal held as follows:

"It is a settled posi