The amount of interest determined as payable for the pre-reference/past period cannot be added in principal amount for calculation of interest in arbitration award – National Projects Constructions Corporation Ltd. Vs. M/s Interstate Construction – Delhi High Court

Hon’ble High Court held that: (i) Section 31(7) of the Arbitration Act, 1996 constitutes a clear departure from the interest regime which prevailed under the Arbitration Act, 1940 and where three distinct periods- pre-reference/past period, pendente lite and future period were recognized to exist. (ii) The interest awarded for that period clearly could not have been subjected to a further levy of interest running through the period during which proceedings remained pending before the AT or for that matter being merged with the principal amount awarded. The AT has thus clearly committed a manifest illegality in proceeding to include the amount of interest determined as payable for the pre-reference/past period to be added to the principal amount. (iii) In terms of the statutory scheme underlying Section 31(7) of the Act, the principal amount remains static and as determined by the AT. Interest on the same is thereafter open to be prescribed to be payable in terms of Clauses (a) and (b) of Section 31(7) of the Act. That interest, as we have held above, would commence from the date when the cause of action arose and would run up to the date when the AT rendered the Award.

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