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SC: Arbitrator cannot grant Interest for Pre-Award Period

The SC bench consisting Justices J. Chalemeshwar and Justice S. Abdul Nazeer held that interest will not be payable for the period between the date of cause of action and date of award.
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The Supreme Court in the case of Sri Chittaranjan Maity versus Union of India, referred to Section 37(1) of the Arbitration and Conciliation Act, 1996 to decide on the issue whether the arbitrator can grant interest after deciding the award and whether interest can be paid for pre-award period when the parties had already stipulated the terms relating to payment of interest.

The SC bench consisting Justices J. Chalemeshwar and Justice S. Abdul Nazeer held that interest will not be payable for the period between the date of cause of action and date of award.

In this case, the railways awarded a contract to the appellant and dispute arose when the contract was terminated by the railways. The contractor invoked the arbitration clause and was awarded the amount payable along with the interest for the pre-award period.

An application filed to set aside the award was rejected by the single bench of Calcutta HC. Thereafter, an appeal was made to the Division Bench, where it relied on ‘no claims certificate’ to set aside the award stating there was no arbitral dispute.

The contractor approached the Supreme Court against the decision of the Division Bench. It relied on Mcdermott International Inc. vs. Burn Standard Co. Ltd. and others where it was held that the party questioning the jurisdiction of the Arbitrator has an obligation to raise the said question before the Arbitrator. Hence, in this case, it was not open for the HC to consider the plea of non-arbitrability for the first time in appeal.

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Reviewed by:
Shivi Gupta
Published on 05-Oct-17
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