ELP Arbitration Weekly Alert

This week, we take a look at the Supreme Court’s recent judgment in Jaiprakash Associates Ltd. (JAL) v. Tehri Hydro Development Corporation India Ltd. (THDC).

 In this case, the dispute between the two parties was referred to a panel of three arbitrators, under the Arbitration and Conciliation Act, 1996 (“1996 Act”). The arbitral tribunal ruled in favour of JAL and awarded it certain sums, along with pendente liteinterest at 10% per annum, and future interest at 18% per annum. THDC challenged the award of pendente lite interest in the face of express provisions in the contract between the parties barring levy of interest on delayed payments. This challenge was successful before the Delhi High Court, and the award of pendente lite interest was set aside, and therefore JAL appealed before the Supreme Court.

 The Supreme Court compared the provisions and previous decisions under the Arbitration Act, 1940 (“1940 Act”) to those under the 1996 Act, and concluded that, under the latter, when the contract between the parties bars payment of pende liteinterest, the arbitral tribunal would have no jurisdiction to grant the same. Holding thus, the Supreme Court declined to interfere with the High Court’s judgment.

 Simultaneously, we also note that THDC did not challenge the award of ‘future interest’, as the 1996 Act does not give parties the right to contractually bar the granting of interest for a post-award period till date of payment. This is to avoid undue delays in payment by the award-debtor.

 Trust you will find this an interesting read. For any queries or comments on this update, please feel free to contact us at insights@elp-in.com.

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