Award of interest in arbitration conditional

If the General Conditions of Contract in Construction Works prohibits demand of interest, arbitrators do not get jurisdiction to award interest, the Supreme Court held in its judgment in Jaiprakash Associates Vs Tehri Hydro Development Corporation. The contracting company was given a project, but disputes arose over certain claims. They were referred to arbitration by a three-member panel. It gave an award largely in favour of Jaiprakash and also granted interest on the dues. Then the jurisdiction of the arbitral panel to grant interest when the General Conditions barred it became another point of conflict.

The matter was taken to the Delhi High Court, which held that relevant clauses categorically provided that no interest would be payable to the contractor on the money due to him. No interest was payable as Clauses 50 and 51 of the General Conditions barred arbitrators from granting interest, though they claimed the power. The appeal of the company was rejected by the Supreme Court. The precedents cited by the firm were under the Arbitration Act of 1940, the judgment explained, and the new Arbitration and Conciliation Act as interpreted by the Supreme Court has changed the law.