Award of interest in arbitration

The Delhi High Court recently asserted that if there is no provision in a work contract for paying interest for delay, the arbitrators cannot award it. The court was dealing with the recurring theme of demand of interest for delay in projects in the case, Tehri Hydroelectic Development Corporation vs Jaiprakash Associates. The letter was given a contract related to spillways on Tehri dam. Disputes arose and those were referred to a three-member arbitration tribunal. The award was mainly in favour of Jaiprakash Associates.

The corporation appealed to the high court under the Arbitration and Conciliation Act. The court upheld the award on most issues but not on the question of interest. For this, the judgment relied on last month’s Supreme Court judgment in another arbitration case between the same parties.