Larsen Air Conditioning and Refrigration Company vs Union of India

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2023 Supreme(SC) 713

S. RAVINDRA BHAT, DIPANKAR DATTA
Larsen Air Conditioning and Refrigration Company – Appellant
Versus
Union of India – Respondent

Advocates appeared:
For the Appellant(s) : Mr. R. K. Singh, Adv. Mrs. Neeraj Singh, Adv. Mr. Kumar Gaurav, Adv. Mr. Aman Rastogi, Adv. Mr. Sanjay Rastogi, AOR
For the Respondent(s) Mr. Vikramjeet Banerjee, A.S.G. Mr. Nachiketa Joshi, Adv. Mr. A K Kaul, Adv. Mr. Bhuvan Mishra, Adv. Mr. Akshit Pradhan, Adv. Mr. Sachin Sharma, Adv. Mr. Arvind Kumar Sharma, AOR

Judgement Key Points

The arbitrator exercised discretion under Section 31(7) of the Arbitration and Conciliation Act, 1996 (pre-2015 amendment) to award 18% compound interest per annum for the past, pendente lite, and future periods on the principal sums awarded under Claims 1 to 8. (!) [1000780910001][1000780910002][1000780910005][1000780910006] (!) (!) (!) (!) (!) (!) [1000780910010][1000780910011][1000780910012] This was considered reasonable and within the arbitrator's powers, particularly as Section 31(7)(b) prescribed 18% as the default post-award rate (absent any direction otherwise in the award itself), while pre-award and pendente lite interest fell within the tribunal's discretionary authority to determine the rate and mode.[1000780910005][1000780910006] (!) (!) (!) (!) (!) (!) [1000780910010][1000780910011][1000780910012] The contract was silent on the rate or compounding of interest. (!) [1000780910007][1000780910008] (!)

JUDGMENT :

S. RAVINDRA BHAT, J.

1. Aggrieved by the impugned judgment¹ [Judgment dated 17.07.2019 passed by Allahabad High Court in First Appeal from Order No. 1227/2003] of the Allahabad High Court, the appellant has approached this court with a simple question of law, as to whether the High Court erred in modifying the arbitral award to the extent of reducing the interest, from compound interest of 18% to 9% simple interest per annum.

Facts

2. The dispute between the appellant and Union of India (hereafter ‘respondent-state’) arose from a contract entered into pursuant to being awarded the tender. In the course of work, certain disputes arose. On 22.04.1997, the respondent-state referred the dispute to arbitration, and the proceedings closed on 24.10.1998. The tribunal published its award on 21.01.1999 and directing the first four respondents to pay 18% pendente lite and future compound interest on the award in respect of Claim Nos. 1-8.

3. The respondent-state challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter ‘the Act’). The district court² [Judgment dated 06.03.2003 passed by the District Judge, Kanpur Nagar in Misc. Case No. 64/70 of 199

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2023 Supreme(SC) 713

S. RAVINDRA BHAT, DIPANKAR DATTALarsen Air Conditioning and Refrigration Company – AppellantVersusUnion of India – Respondent

Cases Referred (12)

S. RAVINDRA BHAT, DIPANKAR DATTA
Larsen Air Conditioning and Refrigration Company – Appellant
Versus
Union of India – Respondent