ELP Arbitration Update – Garg Builders v. Bharat Heavy Electricals Limited

Dear Reader,

For this week’s update, we analyze the Hon’ble Supreme Court’s decision in Garg Builders v. Bharat Heavy Electricals Limited.

The Court while analysing Section 31(7)(a) of the Arbitration and Conciliation Act, 1996 held that the law relating to award of pendente lite interest by the Arbitrator under the Act, is no longer res integra. The provisions of the Arbitration and Conciliation Act, 1996 give paramount importance to the contract entered into between the parties and categorically restricts the power of the arbitrator to award pre-reference and pendente lite interest when the parties have themselves agreed to the contrary.

While Garg Builders argued that the arbitrator had taken a plausible view under the contract by granting pendente lite interest, the Court rejected the said contention by holding that when the contract contains a specific clause which expressly bars payment of interest, then it is not open for the arbitrator to grant pendente lite interest.

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