High Court of Delhi

Delhi Development Authority vs. M/s Watcon Water Specialists Pvt. Ltd. & Anr.

MANU/DE/1250/2022

19.04.2022

Arbitration

Arbitral tribunal has power to award future interests on the awarded amounts, which as expressly provided under Section 31(7)(a), may include interests on the amounts awarded

The Petitioner has issued a Notice Inviting Tender for three construction projects. The Respondent being the successful bidder entered into an agreement with Petitioner. Under the terms of the Agreements, the Petitioner agreed to reimburse Respondent for the service tax payable/applicable contingent upon the submission of proof of payment to the concerned department by Respondent. The Petitioner also agreed to pay the charges for airlifting of equipment to Respondents. Certain dispute arose between the parties regarding the payment of airlift bills. Pursuant to the application filed by Respondent under Section 11 of Arbitration and Conciliation Act, the matter has been referred to Arbitral Tribunal. The Arbitral Tribunal allowed all the claims of Respondent in respect of airlift charges and service tax and granted interest on all claims and also allowed interest on the amount awarded as interest on other claims.

The Petitioner has challenged the Award passed by Arbitral Tribunal by way of present petition on three grounds. Firstly, the reimbursement of airlift charges is subject to submission of proof of payment by Respondent and in absence of the same, Petitioner is not liable to reimburse the charges. Secondly, the impugned award results in unjust enrichment and the same is contrary to the fundamental policy of Indian Law. Lastly, the Arbitral Tribunal has awarded interest on the interest and the Arbitral Tribunal had no jurisdiction to do so.

The Court observed that the view of the Arbitral Tribunal is a plausible view. Given the fact that the airlifting charges were included in the evaluation of the bids and the bid of Respondent was found to be the lowest; it would stand to reason that the airlifting charges are included as a part of the agreed consideration. Payment of the same was subject to Respondent producing the relevant documents. In these circumstances, it would be plausible to hold that ‘relevant documents’ would mean such documents so as to establish that, in fact, the goods had been transported by air. In addition, the Arbitral Tribunal also accepted the view that it was not feasible for Respondent to separately indicate the airlifting charges as they were included in the bills and so the Petitioner’s challenge in said respect has been rejected.

So far as awarding of future interests at the rate of 12% per annum on the entire awarded amount including interests is concerned, the Court finds no infirmity with the award of future interests, even though it includes interest on pre-award interests. In terms of Section 31(7)(a) of the Arbitration & Conciliation Act, an arbitral tribunal is empowered to include interests on any sum awarded in the arbitral award. Further, in terms of Section 31(7)(b) of Act, the amount awarded is also liable to carry interests unless the award indicates otherwise. Thus, an arbitral tribunal would also have the power to award future interests on the awarded amounts, which as expressly provided under Section 31(7)(a) of Act, may include interests on the amounts awarded. In this view, there is no infirmity in the impugned award inasmuch as, the Arbitral Tribunal has awarded future interests at the rate of 12% per annum on the awarded amounts. However, interest awarded in respect of two claims has been set aside. The petition was accordingly disposed of.

Tags : Interest on award Arbitral Tribunal

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