Supreme Court upholds award of interest by the arbitrators

In a dispute between Reliance Cellulose Products Ltd and Oil and Natural Gas Corporation (ONGC), the Supreme Court has upheld the rate of interest of 18 per cent awarded by the arbitrators before, during the arbitration and future interest. ONGC had objected to the rate of interest and moved the civil judge against the award, but it was rejected, though the rate of interest was reduced to 10 per cent. Both parties moved the Supreme Court against the order. Reliance argued the civil judge reduced the rate of interest on the ground that ONGC was a public sector company. It contended that there was no good reason to reduce the interest.

ONGC argued that it was not liable to pay interest according to the contact. The court rejected ONGC stand and emphasised that the agreement on the supply of chemicals by Reliance did not reduce the power of the arbitrators to order interest. It also agreed with Reliance stating that ONGC being a public sector undertaking was not sufficient to depart from its liability. It was asked to pay the full interest of 18 per cent prevailing in 1993 the time of the award.