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North Delhi Municipal Corporation vs. Suresh Singhal - (High Court of Delhi) (02 Jun 2023)

Interest is compensatory in nature and is parasitic on the principal amount



The present appeal has been insinuated under Section 37 of the Arbitration and Conciliation Act, 1996 seeking setting aside of the judgment whereby objections filed by the Appellant were dismissed and the Arbitral Award was upheld.

The scope of interference under Section 37 of the Arbitration Act is narrow. Before interfering with an Award passed by the Arbitral Tribunal, which in fact has been concurred with by the First Appellate Court, this Court shall circumspect and refrain from reassessment or re-examination of the merits of the case, as though it were a Court of Appeal against the Award.

In the present appeal, learned counsel for the appellant while pressing the contention relating to non-completion of work extensively relied upon the Measurement Book ('MB'). Admittedly, the entire MB was not placed before the learned Tribunal. Though learned counsel while referring to the MB contended that the respondent had accepted the Bill as well as the measurements on 05.11.2007 and again on 11.12.2007, a reading of the said entry would show that the same was a running bill and not the final bill. It is also worthwhile to note that the impugned order records that the appellant failed to lead any evidence before the Tribunal. Considering the narrow scope of Section 37 of the Act, this Court finds no merit in the contention raised by the appellant and the same is rejected.

The power of Arbitral Tribunal to award interest for all the three periods namely, pre-reference, pendente-lite and post award, is settled in terms of the decision of Supreme Court in Reliance Cellulose Products Ltd v. ONGC that interest is compensatory in nature and is parasitic on the principal amount. The Tribunal noted that the underlying Agreement did not bar even the parties to claim interest.

In view thereof, the award of interest by the Arbitral Tribunal is neither contrary to the terms of contract nor is in breach of Section 31(7). The impugned Award is upheld. Appeal dismissed.


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