Comments
Arbitrator must be mindful of what is contained in the contract of his appointment. If there is a clause in the agreement that forbids him from awarding interest to either side on the amounts found due, there is no way he can award interest even if warranted in fairness and equity. This was the sum and substance of what the Bombay High Court said in Union of India (Central Railway) vs. Shyam Constructions where the arbitrator went out of the way and awarded interest of around Rs 13 lakh despite being aware of a clear-cut clause forbidding this in the contract.
Arbitration stems out of contract. It is therefore necessary for the arbitrator to curb his instincts and act only in terms of the contract. He should not substitute his own judgment of right and wrong for what is contained in the contract so long as it is legit. It is for the contracting parties to decide whether they want to pay each other interest on amount found due or outstanding. Neither the parties can press for such interest later on in an arbitration proceeding nor can the arbitrator himself suo motu award interest on equitable considerations.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.