Arbitral Tribunal – Award of Interest

Section 31(7) of the Arbitration and Conciliation Act, by using the words “unless otherwise agreed by the parties”, categorically specifies that the arbitrator is bound by the terms of the contract so far as award of interest from the date of cause of action to date of the award is concerned. Therefore, where the parties had agreed that no interest shall be payable, the Arbitral Tribunal cannot award interest.
In Union of India v. Saraswat Trading Agency, (2009) 16 SCC 504, the Hon’ble Apex Court has observed in the said case that if there is a bar against payment of interest in the contract, the arbitrator cannot award any interest for such period. Union of India v. Bright Power Projects (I) Pvt. Ltd., 2015 (4) AWC 3862.

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