The Supreme Court in a recent ruling in the case of Indian Oil Corporation Ltd. V/s U.B Engineering Ltd. and Anr.1 set aside the Order of the High Court reducing interest on an Award passed in arbitration from 18% per annum to 9% per annum.
- The Ld. Arbitrator had awarded in favour of the Claimant, a sum of Rs. 3,08,32,448.30 towards the principal claim and sum of Rs. 2,27,58,137.08 towards interest. Thus, the total sum awarded was Rs. 5,35,91,262. In appeal before the High Court that was filed by the Original Respondent it was held that the Claimant shall be entitled to the interest only on the principal amount and that the claimant shall not be entitled to interest on interest that is 18% per annum on the sum of Rs. 2,27,58,137.08.
- The High Court also reduced the rate of interest from 18% per annum to 9% per annum even with respect to the principal amount awarded by the Arbitrator.
- Being aggrieved by the order of the High Court, the Claimant filed a Civil Appeal before the Hon’ble Supreme Court. The Supreme Court set aside the order of the High Court and restored the Award of the Ld. Arbitrator. The Hon’ble Supreme Court held that the order of the High Court in reducing the interest from 18% per annum to 9% per annum was not sustainable in view of the statutory provision contained in section 31 (7) (b) of the Arbitration and Conciliation Act,1996 which prescribes that unless the Award directs otherwise an Award shall carry interest at the rate of 18% per annum from the date of the Award till the date of payment. In the present case, the Ld. Arbitrator had specifically provided interest at the rate of 18% per annum from the date of the Award till payment.
- While doing so the Hon’ble Supreme Court relied upon the judgment of the Supreme Court in Bharat Heavy Electricals Limited Vs. Globe Hi-Fabs Limited (2015) 5 SCC 718 where it was held that when the Arbitration Act itself provides for 18% per annum interest and the Arbitrator has accepted and awarded interest at that rate, a lesser rate of interest could not be awarded by the High Court. Supreme Court had also held that judges cannot legislate or amend the law by judicial decisions. They have to maintain judicial discipline and give their decisions in accordance with law. Hence a lesser rate of interest cannot be awarded as that would be amending the law, which is not within the powers of judiciary.
By - Chaitanyaa Bhandarkar
- Supreme Court of India, Civil Appeal Nos. 2921-2922 of 2022 dated 12th April 2022.