Justice BR Gavai, Judge, Supreme Court of India authored the judgment for the bench of him and Justice BV Nagarathna which held that the Arbitration Act casts a duty upon the Arbitral Tribunal to give reasons as to how it has determined the rate of interest.

The Bench also held that the delay caused by the "award holder" at every stage of proceedings constraints the court to reduce the rate of interest and the court observed that while awarding interest the Arbitrator/ Arbitral Tribunal has power to award interest at all the three stages i.e. pre­reference period,  pendente lite  and post award period"

The Apex Court then observed that "taking into consideration the conduct of the respondent in delaying the proceedings at every stage which led to a long pendency of the dispute, we are of the view that, though it will not be in the interest of justice to interfere with the principal award, this is a fit case wherein the interest at all the three stages, that is pre­reference period,  pendente  lite  and post­award period, requires to be reduced."

The Division Bench of the Apex Court considered the judgment passed by it in the cases of Rajendra Construction Co. v. Maharashtra Housing & Area Development Authority and Others reported in (2005) 6 SCC 678, Mcdermott International Inc. v. Burn Standard Co. Ltd. and   Others (2006) 11 SCC 181 and Krishna Bhagya Jala Nigam Ltd. v. G. Harischandra Reddy and Another reported in  (2007) 2 SCC 720 and came to the conclusion that the Supreme Court has wider power under Article 142 to reduce the rate of interest as awarded by the discretionary power of the Arbitral Tribunal and the Supreme Court has done the same on earlier occasions while deciding these cases.

The Court considered the law laid down by the Apex Court in the case of Mcdermott International Inc. and noted that "The power of the arbitrator to award interest for pre­award period, interest pendente lite and interest post­award period is not in dispute. Section 31(7)(a) provides that the Arbitral Tribunal may award interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which award is made i.e. pre­award period. This, however, is subject to the agreement as regards the rate of interest on unpaid sums between the parties. The question as to whether interest would be paid on the whole or part of the amount or whether it should be awarded in the pre­award period would depend upon the facts and circumstances of each case. The Arbitral Tribunal in this behalf will have to exercise its discretion as regards (i) at what rate interest should be awarded;   (ii) whether interest should be awarded on the whole or part of the award money; and (iii) whether interest should be awarded for the whole or any part of the pre­award period."

Case Details:-

CIVIL APPEAL NO. 8990 OF 2017
EXECUTIVE ENGINEER (R AND B)  AND OTHERS           ...APPELLANT(S)
VERSUS
GOKUL CHANDRA KANUNGO (DEAD)  THR. HIS LRS. ...RESPONDENT(S)

Read the Complete Judgment on the Link below:-

https://main.sci.gov.in/supremecourt/2012/25573/25573_2012_12_1503_38711_Judgement_30-Sep-2022.pdf