Arbitrator Has Substantial Discretion In Awarding Interest U/S 31(7)(A) Arbitration Act

Key Takeaways

• An arbitrator has substantial discretion in awarding interest under Section 31(7)(c) of the Arbitration and Conciliation Act, 1996.

Background

• The Arbitrator had granted interest at 18% per annum from 01.01.2003 till the date of realization.
• Disposing of the petition under Section 34 of the Arbitration and Conciliation Act, 1996 (Arbitration Act), the rate of interest was reduced by the District Court to 12% per annum
• In Arbitration appeal, the High Court further reduced the interest rate to 9% per annum, referring to a Supreme Court judgment in A.P. State Trading Corporation Ltd. Vs. G.V. Malla Reddy and Company

Observations

• The court noted that the judgment relied upon by the High Court pertained to arbitration proceedings under the Arbitration Act of 1940. In contrast, the present dispute relates to arbitration under the Arbitration Act 1996.
• The court, therefore, restored the rate of interest as awarded by the judgment passed by the District Judge.

Questions

• Do you agree with the judgement?
• What are your takeaways?

Let us know your views on the issue in the comment section below!